md family of funds 2016 annual financial statements · pdf fileaudited annual financial...

MD Family of Funds

2016 ANNUALFINANCIAL STATEMENTS

Audited Annual Financial Statements for the Year Ended December 31, 2016These audited Annual Financial Statements do not contain the Annual Management Report of Fund Performance (“MRFP”) of the investment fund. If you have not received a copy of the Annual MRFP with this report, you may obtain a copy of the Annual MRFP at your request, and at no cost, by calling the toll-free number 1 800 267-2332, by writing to us at MD Financial Management Inc., 1870 Alta Vista Dr., Ottawa ON K1G 6R7, by visiting our website at md.cma.ca or by visiting the SEDAR website at sedar.com. Securityholders may also contact us using one of these methods to request a copy of the invest-ment fund’s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure.

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

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

A Message About Your Financial Statements

Dear MD Family of Funds Investor:

As part of our commitment to keeping you informed about your MD fund investments, please find attached the 2016 Annual Financial Statements.

The Annual Financial Statements are produced on a fund-by-fund basis, and your report only includes informa-tion on the funds you owned as of December 31, 2016.

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

MD Family of FundsManagement’s Responsibility for Financial Reporting

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

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

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

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

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

Signed on behalf of MD Growth Investments Limited.

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

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

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

PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2 T: +1 416 863 1133, F: +1 416 365 8215 “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

March 10, 2017 Independent Auditor’s Report To the Unitholders and Trustee of: MD American Growth Fund MD Select Fund MD American Value Fund MD Short-Term Bond Fund MD Balanced Fund MD Strategic Opportunities Fund MD Bond Fund MD Strategic Yield Fund MD Dividend Growth Fund MDPIM Canadian Equity Pool MD Dividend Income Fund MDPIM US Equity Pool MD Equity Fund MD Precision Moderate Balanced Portfolio MD Fossil Fuel Free Bond Fund* MD Precision Balanced Growth Portfolio MD Fossil Fuel Free Equity Fund* MD Precision Balanced Income Portfolio MD International Growth Fund MD Precision Conservative Portfolio MD International Value Fund MD Precision Maximum Growth Portfolio MD Money Fund MD Precision Moderate Growth Portfolio *For the period May 11 – December 31, 2016 And To the Shareholders of: MD Growth Investments Limited (collectively, the Funds) We have audited the accompanying financial statements of the Funds, which comprise the statements of financial position as at the dates indicated in the accompanying financial statements and the statements of comprehensive income, statements of changes in net assets attributable to holders of redeemable shares/units and statements of cash flow for the periods then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as at December 31, 2016 and 2015 and their financial performance and their cash flows for the periods then ended in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants

MD Balanced FundSchedule of Investment Portfolio as at December 31, 2016

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

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

MaturityDate

Coupon(%)

Principal Amountin Currency of

Issue

AverageCost($)

FairValue

($)

DOMESTIC BONDSCorporate Bonds (12.84%)407 International Inc. 05/21/2047 3.60% 250 250 241407 International Inc. 05/04/2027 2.43% 290 284 281Algonquin Power Co. 02/15/2022 4.65% 220 220 235Algonquin Power Co. 07/25/2018 5.50% 50 53 52Alimentation Couche-Tard Inc. 06/02/2025 3.60% 300 300 308Alimentation Couche-Tard Inc. 08/21/2020 4.21% 210 210 226Allied Properties Real Estate Investment Trust 05/13/2020 3.75% 220 221 226Allied Properties Real Estate Investment Trust 11/14/2022 3.93% 226 227 229AltaGas, Ltd. 09/28/2021 3.72% 310 318 327Altalink, LP 12/03/2046 3.72% 68 68 67Arrow Lakes Power 04/05/2041 5.52% 50 50 56Artis Real Estate Investment Trust 03/27/2019 3.75% 210 211 213Bank of Montreal 03/31/2021 1.88% 1,610 1,614 1,608Bank of Montreal 10/06/2020 2.10% 690 692 698Bank of Montreal, Floating Rate Note 06/01/2026 3.32% 910 917 925Bank of Montreal, Floating Rate Note 12/08/2025 3.34% 790 806 805Bank of Montreal 10/28/2021 1.61% 880 876 864Bell Canada 03/02/2026 3.55% 155 155 159Brookfield Asset Management Inc. 04/09/2019 3.95% 350 357 365Brookfield Renewable Energy Partners ULC 06/02/2025 3.75% 600 597 608Brookfield Renewable Partners ULC 01/15/2027 3.63% 280 280 274Bruce Power L.P. 06/23/2021 2.84% 350 351 356Bruce Power L.P. 06/23/2026 3.97% 110 110 113Caisse Centrale Desjardins 11/19/2018 2.80% 610 619 626Canadian Commercial Mortgage Origination Trust 1 11/12/2017 2.66% 170 170 171Canadian Commercial Mortgage Origination Trust 1 11/12/2018 2.75% 208 208 210Canadian Credit Card Trust II 03/24/2022 1.83% 520 520 521Canadian Imperial Bank of Commerce 10/09/2018 1.70% 480 481 483Canadian Imperial Bank of Commerce 04/26/2021 1.90% 320 320 320Canadian Imperial Bank of Commerce 06/24/2019 2.35% 55 55 56Canadian Imperial Bank of Commerce, Floating Rate Note 10/28/2024 3.00% 380 386 383Canadian Imperial Bank of Commerce, Floating Rate Note 01/26/2026 3.42% 590 604 601Canadian National Railway Company 09/22/2025 2.80% 470 469 480Canadian Real Estate Investment Trust 01/15/2021 4.32% 150 150 158CARDS II Trust 10/16/2023 2.16% 580 580 589CHIP Mortgage Trust 04/29/2040 2.33% 100 100 99CHIP Mortgage Trust 11/15/2041 2.98% 130 130 129Choice Properties Limited Partnership 09/20/2019 3.00% 60 62 62Choice Properties Limited Partnership 09/20/2021 3.60% 280 281 293Choice Properties Real Estate Investment Trust 09/14/2020 2.30% 230 228 231CI Financial Corp. 12/07/2020 2.65% 200 200 201Cominar Real Estate Investment Trust 06/21/2019 3.62% 410 410 418Cominar Real Estate Investment Trust 07/27/2020 4.94% 60 61 63Crombie Real Estate Investment Trust 02/10/2020 2.78% 35 35 35Crosslinx Transit Solutions General Partnership 09/30/2046 4.65% 330 329 323CU Inc. 11/19/2046 3.76% 180 180 179Daimler Canada Finance Inc. 08/19/2019 1.78% 280 280 281Daimler Canada Finance Inc. 12/16/2021 2.23% 290 290 290Eagle Credit Card Trust 09/17/2020 2.15% 220 220 223Enbridge Gas Distribution Inc. 08/22/2024 3.15% 200 201 209Enbridge Income Fund 11/19/2024 3.95% 270 270 285Enbridge Income Fund 02/22/2019 4.10% 230 230 241

5MD Family of Funds | Annual Financial Statements 2016




MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

Enbridge Pipelines Inc. 09/29/2025 3.45% 430 439 447EPCOR Utilities Inc. 11/24/2039 5.75% 600 599 775EQUITABLE BANK 05/01/2021 1.52% 689 689 684Fairfax Financial Holdings Limited 12/16/2026 4.70% 290 289 293Fairfax Financial Holdings Limited 10/14/2022 5.84% 220 223 246Fairfax Financial Holdings Limited 05/25/2021 6.40% 260 259 294Ford Credit Canada Limited 05/07/2020 2.45% 320 320 320Fortified Trust Series 16-1 07/23/2021 1.67% 370 370 366Fortis Inc. 12/12/2023 2.85% 220 220 221FortisAlberta Inc. 09/30/2024 3.30% 120 120 126FortisAlberta Inc. 09/21/2046 3.34% 80 80 72FortisBC Energy Inc. 10/02/2037 6.00% 500 498 658Gaz Metro Inc. 05/25/2020 1.52% 130 130 129Genesis Trust II 09/17/2018 1.68% 340 340 342Genesis Trust II 04/15/2020 1.70% 340 340 340Genesis Trust II 05/15/2019 2.43% 340 340 347Glacier Credit Card Trust 09/20/2020 2.24% 280 280 283Granite REIT Holdings Limited Partnership 11/30/2023 3.87% 300 300 301Granite REIT Holdings LP 07/05/2021 3.79% 240 242 246Greater Toronto Airports Authority 04/17/2018 5.26% 650 681 684Health Montreal Collective LP 09/30/2049 6.72% 190 190 236Hollis Receivables Term Trust II 02/26/2020 1.79% 440 441 441Hollis Receivables Term Trust II 06/26/2019 2.43% 830 841 848Honda Canada Finance Inc. 08/12/2019 1.63% 390 388 390Honda Canada Finance Inc. 02/18/2021 2.16% 270 270 272HSBC Bank Canada 07/07/2020 1.82% 430 432 428HSBC Bank Canada 11/26/2018 2.08% 1,020 1,021 1,030HSBC Bank Canada 01/29/2021 2.45% 140 140 142HSBC Bank Canada 09/29/2021 2.91% 540 543 556Hydro One Inc. 11/18/2047 3.72% 160 160 157Hydro One Inc. 02/23/2046 3.91% 250 256 255Hydro One Inc. 10/09/2043 4.59% 230 268 260Hydro-Quebec 02/15/2024 0.00% 370 315 310Industrial Alliance Insurance and Financial Services Inc., Floating Rate Note 02/23/2027 2.64% 90 90 89Industrial Alliance Insurance and Financial Services Inc., Floating Rate Note 05/16/2024 2.80% 420 424 424Inter Pipeline, Ltd. 09/13/2023 2.61% 450 453 446Inter Pipeline, Ltd. 12/16/2026 3.48% 110 110 112Laurentian Bank of Canada 04/22/2021 2.75% 290 289 293Lower Mattagami Energy LP 10/21/2026 2.31% 50 50 48Lower Mattagami Energy LP 06/20/2024 3.42% 140 140 149Manulife Bank of Canada 09/01/2021 1.92% 330 330 326MCAP Commercial LP 03/11/2019 3.96% 220 220 217MCAP Service 03/01/2018 1.85% 97 97 98Merrill Lynch 08/01/2021 1.30% 698 694 688Merrill Lynch 11/01/2021 1.37% 708 700 698Merrill Lynch Mortgage Investors Trust 05/01/2021 1.40% 597 593 592National Bank of Canada 03/18/2022 2.11% 600 600 599NBC Asset Trust, Floating Rate Note 12/29/2049 7.45% 800 800 919Nissan Canada Financial Services Inc. 10/07/2019 1.58% 80 80 80North Battleford Power LP 12/31/2032 4.96% 232 232 256OMERS Realty Corporation 05/09/2022 1.82% 200 200 196OMERS Realty Corporation 02/23/2024 2.86% 330 330 336OMERS Realty Corporation 11/12/2024 3.33% 570 570 596Ontario Electricity Financial Corporation 05/26/2025 0.00% 300 237 239Ontario Hydro Residual Strip 11/27/2020 0.00% 590 558 552

6 MD Family of Funds | Annual Financial Statements 2016




MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

Pembina Pipeline Corporation 08/11/2026 3.71% 270 271 273Pembina Pipeline Corporation 06/15/2027 4.24% 630 630 656PSP Capital Inc. 11/22/2023 2.09% 130 130 129Reliance LP 09/15/2020 3.81% 180 180 181Reliance LP 03/15/2019 5.19% 500 500 522Rogers Communications Inc. 03/22/2021 5.34% 450 513 507Royal Bank of Canada 09/13/2021 1.58% 600 600 588Royal Bank of Canada 07/15/2021 1.65% 1,670 1,657 1,645Royal Bank of Canada 12/05/2023 2.33% 830 830 824Royal Bank of Canada, Floating Rate Note 06/04/2025 2.48% 550 549 545Royal Bank of Canada, Floating Rate Note 01/20/2026 3.31% 1,260 1,281 1,279Saputo Inc. 11/21/2023 2.83% 120 120 120Sea To Sky Highway Investment Limited Partnership 10/31/2030 2.63% 364 364 352Spy Hill Power LP 03/31/2036 4.14% 178 176 181Sun Life Financial Inc., Floating Rate Note 09/25/2025 2.60% 530 530 535Sun Life Financial Inc., Floating Rate Note 09/19/2028 3.05% 340 340 340Sun Life Financial Inc., Floating Rate Note 02/19/2026 3.10% 410 415 420TD Capital Trust IV, Floating Rate Note 06/30/2108 6.63% 320 320 370TD Securities Inc. 12/01/2021 1.45% 270 267 266The Bank of Nova Scotia 09/09/2020 2.09% 670 674 677The Bank of Nova Scotia 12/02/2021 1.90% 1,160 1,157 1,152The Manufacturers Life Insurance Company, Floating Rate Note 01/05/2026 2.39% 270 270 271The Manufacturers Life Insurance Company, Floating Rate Note 01/15/2025 2.64% 190 190 193The Manufacturers Life Insurance Company, Floating Rate Note 02/21/2024 2.81% 680 687 691The Standard Life Assurance Company of Canada, Floating Rate Note 09/21/2022 3.94% 190 201 193The Toronto-Dominion Bank 06/08/2021 1.68% 280 281 278The Toronto-Dominion Bank 07/18/2023 1.91% 710 711 691The Toronto-Dominion Bank 12/01/2022 2.05% 164 159 164The Toronto-Dominion Bank, Floating Rate Note 06/24/2025 2.69% 720 720 719The Toronto-Dominion Bank, Floating Rate Note 09/30/2025 2.98% 480 480 483The Toronto-Dominion Bank, Floating Rate Note 03/04/2031 4.86% 200 223 219Thomson Reuters Corporation 11/12/2021 3.31% 270 270 281TMX Group Limited 10/03/2023 4.46% 410 464 447Toronto Hydro Corporation 11/14/2017 5.15% 500 499 517Toyota Credit Canada Inc. 02/19/2020 1.80% 420 419 421Toyota Credit Canada Inc. 02/25/2021 2.20% 320 323 323TransCanada PipeLines Limited 07/17/2025 3.30% 400 399 415Trillium Windpower LP 02/15/2033 5.80% 194 194 215Union Gas Limited 06/01/2026 2.81% 400 402 400Union Gas Limited 09/17/2025 3.19% 260 278 270Union Gas Limited 06/01/2046 3.80% 60 60 59Vancouver Airport Authority 11/10/2045 3.86% 50 50 52Wells Fargo Canada Corporation 01/29/2021 3.04% 370 391 386WTH Car Rental, ULC 07/20/2020 1.91% 100 100 98Total for Corporate Bonds 56,332 57,196

Government of Canada Bonds (4.06%)Canada Housing Trust No. 1 09/15/2026 1.90% 1,630 1,571 1,584Government of Canada 03/01/2021 0.75% 10,371 10,394 10,237Government of Canada 12/01/2047 1.25% 2,063 2,389 2,502Government of Canada 03/01/2019 1.75% 600 618 612Government of Canada 12/01/2048 2.75% 1,130 1,214 1,241Government of Canada 06/01/2022 2.75% 870 969 938Government of Canada 06/01/2021 3.25% 30 34 33





MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

Government of Canada 06/01/2020 3.50% 890 993 966Total for Government of Canada Bonds 18,182 18,113

Municipal Bonds (0.29%)City of Montreal 09/01/2026 2.75% 1,320 1,314 1,309Total for Municipal Bonds 1,314 1,309

Provincial Bonds (5.61%)Province of Alberta 12/01/2046 3.30% 1,530 1,532 1,527Province of British Columbia 06/18/2048 2.80% 960 947 897Province of Manitoba 09/05/2046 2.85% 1,330 1,289 1,196Province of Ontario 06/02/2026 0.00% 380 303 293Province of Ontario 07/13/2022 0.00% 200 169 178Province of Ontario 12/02/2023 0.00% 1,100 895 935Province of Ontario 06/02/2024 0.00% 920 779 768Province of Ontario, Floating Rate Note 10/27/2021 1.16% 180 180 180Province of Ontario 06/02/2026 2.40% 7,150 7,298 7,098Province of Ontario 06/02/2048 2.80% 80 75 74Province of Ontario 12/02/2046 2.90% 830 842 778Province of Ontario 06/02/2021 4.00% 500 564 551Province of Quebec 04/01/2026 0.00% 400 319 306Province of Quebec 09/01/2026 2.50% 5,190 5,345 5,185Province of Quebec 12/01/2045 3.50% 3,050 3,070 3,185Province of Quebec 12/01/2048 3.50% 1,754 1,903 1,848Total for Provincial Bonds 25,510 24,999Total for Domestic Bonds (22.80%) 101,338 101,617

FOREIGN BONDSAustralia (0.62%)APT Pipelines, Ltd. 03/23/2025 4.20% 290 USD 370 389APT Pipelines, Ltd. 07/24/2019 4.25% 340 341 355Commonwealth Bank of Australia 04/09/2020 5.15% 1,060 1,089 1,164Sydney Airport Finance Company Property Limited 04/28/2026 3.63% 380 USD 483 503Transurban Finance Company Property, Ltd. 03/06/2019 3.37% 350 350 360Total for Australia 2,633 2,771

Belgium (0.09%)Anheuser-Busch Inbev Finance Inc. 02/01/2023 3.30% 290 USD 413 397Total for Belgium 413 397

Denmark (0.07%)Danske Bank A/S 03/10/2021 2.80% 230 USD 306 311Total for Denmark 306 311

Jersey (0.08%)Heathrow Funding Limited 05/21/2027 3.25% 340 348 345Total for Jersey 348 345

United Kingdom (0.29%)Aviva PLC 05/10/2021 4.50% 200 199 211BP Capital Markets PLC 11/09/2020 3.50% 610 622 641HSBC Holdings PLC 12/05/2023 3.20% 440 440 439Total for United Kingdom 1,261 1,291





MaturityDate

Coupon(%)


Issue

AverageCost($)

FairValue

($)

United States (1.85%)Citigroup Inc. 11/18/2021 3.39% 110 110 114Citigroup Inc. 06/09/2025 4.09% 480 480 490JPMorgan Chase & Co. 09/19/2017 2.92% 350 357 354JPMorgan Chase & Co. 03/05/2021 3.19% 310 314 322Metropolitan Life Global Funding I 04/16/2020 1.88% 230 229 230Metropolitan Life Global Funding I 04/16/2019 2.68% 150 150 153Metropolitan Life Global Funding I 04/16/2021 3.11% 80 85 83Molson Coors International LP 07/15/2023 2.84% 290 290 287Northgroup Preferred Capital Group, Floating Rate Note 01/29/2049 6.38% 170 USD 231 228The Goldman Sachs Group, Inc. 02/12/2021 3.55% 790 811 828The Goldman Sachs Group, Inc. 05/03/2018 5.00% 400 436 418United States Treasury Inflation Index Bonds 02/15/2045 0.75% 359 USD 433 455United States Treasury Inflation Index Bonds 02/15/2046 1.00% 1,408 USD 2,009 1,900Verizon Communications Inc. 08/15/2026 2.63% 550 USD 725 681Wells Fargo & Company 03/15/2021 2.22% 810 810 810Wells Fargo & Company 10/27/2023 2.51% 300 300 295Wells Fargo & Company 05/19/2026 2.98% 340 340 332Wells Fargo & Company 05/21/2025 3.87% 240 248 246Total for United States 8,358 8,226Total for Foreign Bonds (3.00%) 13,319 13,341

Numberof Shares

AverageCost($)

FairValue

($)

DOMESTIC EQUITIESConsumer Discretionary (3.67%)Alimentation Couche-Tard Inc. Cl. B 95,300 1,070 5,802Canadian Tire Corporation, Limited Cl. A 27,750 1,775 3,865Corus Entertainment Inc. Cl. B 58,921 1,199 742Dorel Industries Inc. Cl. B Sub. Voting 26,804 844 1,040Magna International Inc. 83,752 2,253 4,883Total for Consumer Discretionary 7,141 16,332

Consumer Staples (1.40%)Empire Company Limited Cl. A 117,745 1,781 1,851Loblaw Companies Limited 62,000 2,368 4,392Total for Consumer Staples 4,149 6,243

Energy (8.66%)ARC Resources, Ltd. 80,100 1,903 1,851Canada Energy Services & Technology Corporation 264,693 816 2,028Canadian Natural Resources, Ltd. 156,300 3,651 6,688Cenovus Energy Inc. 102,912 2,881 2,089Crescent Point Energy Corp. Cl. A 58,600 959 1,069Enbridge Inc. 186,495 5,901 10,537EnCana Corporation 91,002 1,693 1,434Precision Drilling Corporation 158,200 1,292 1,158ShawCor, Ltd. 68,300 1,356 2,448Suncor Energy Inc. 51,140 1,193 2,245Tourmaline Oil Corp. 53,438 2,015 1,919TransCanada Corporation 84,587 2,922 5,121Total for Energy 26,582 38,587





Numberof Shares

AverageCost($)

FairValue

($)

Financials (17.50%)Bank of Montreal 86,979 5,239 8,400Boardwalk Real Estate Investment Trust 35,900 1,868 1,746Canaccord Genuity Group Inc. 248,800 1,009 1,187Canadian Imperial Bank of Commerce 79,700 5,141 8,732Canadian Western Bank 42,140 993 1,278CT Real Estate Investment Trust 64,668 630 970Dream Office Real Estate Investment Trust 126,211 2,971 2,467ECN Capital Corp. 733,752 2,363 2,421Genworth MI Canada Inc. 74,825 1,829 2,519Industrial Alliance Insurance and Financial Services Inc. 67,039 1,925 3,579Manulife Financial Corporation 258,674 4,892 6,185Royal Bank of Canada 117,820 4,579 10,706Sun Life Financial Inc. 107,326 3,904 5,533The Bank of Nova Scotia 146,400 8,261 10,945The Toronto-Dominion Bank 170,214 5,495 11,272Total for Financials 51,099 77,940

Industrials (6.39%)CAE Inc. 296,177 2,851 5,562Canadian National Railway Company 97,900 3,457 8,846Canadian Pacific Railway Company 30,600 3,900 5,862Linamar Corporation 41,589 802 2,399SNC-Lavalin Group Inc. Cl. A 46,500 1,882 2,687WestJet Airlines, Ltd. 134,000 3,016 3,088Total for Industrials 15,908 28,444

Materials (5.07%)Agrium Inc. 28,500 1,628 3,846Barrick Gold Corporation 158,513 4,611 3,406Goldcorp Inc. 146,804 4,328 2,683Kinross Gold Corp. 142,900 1,657 599Methanex Corporation 27,978 619 1,648Potash Corporation of Saskatchewan Inc. 197,237 5,514 4,791Teck Resources, Ltd. Cl. B Sub. Voting 168,500 4,375 4,528West Fraser Timber Co., Ltd. 22,765 532 1,093Total for Materials 23,264 22,594

Telecommunication Services (1.48%)Rogers Communications Inc. Cl. B 58,593 1,996 3,034TELUS Corporation 83,015 1,712 3,549Total for Telecommunication Services 3,708 6,583

Utilities (2.32%)Capital Power Corp. 132,492 3,091 3,078Northland Power Inc. 183,117 2,977 4,267TransAlta Corporation 401,136 2,081 2,980Total for Utilities 8,149 10,325Total for Domestic Equities (46.49%) 140,000 207,048

FOREIGN EQUITIESAustralia (0.39%)Cochlear, Ltd. 6,300 427 750





Numberof Shares

AverageCost($)

FairValue

($)

CSL Limited 10,100 340 984Total for Australia 767 1,734

Bermuda (1.53%)Brookfield Property Partners LP 122,300 2,821 3,587Bunge Limited 17,000 1,452 1,649Jardine Matheson Holdings Limited 11,500 835 853RenaissanceRe Holdings, Ltd. 4,000 221 732Total for Bermuda 5,329 6,821

Curacao (0.20%)Schlumberger Limited 8,000 614 902Total for Curacao 614 902

Denmark (0.33%)Coloplast A/S Series B 6,574 559 597Novo Nordisk A/S Cl. B 11,000 141 534Novozymes A/S Series B 7,900 447 367Total for Denmark 1,147 1,498

Finland (0.20%)Kone OYJ Series B 14,400 504 869Total for Finland 504 869

France (1.23%)Air Liquide SA 7,143 923 1,069DANONE SA 9,335 564 796Essilor International SA 5,561 195 846L'Oréal SA 3,400 336 836LVMH Moet Hennessy Louis Vuitton SA 4,000 873 1,028Total SA 13,317 837 920Total for France 3,728 5,495

Germany (0.47%)Adidas AG 4,800 274 1,021SAP SE 9,200 439 1,080Total for Germany 713 2,101

Hong Kong (1.04%)AIA Group Limited 125,600 565 952China Mobile Limited 48,500 335 690CLP Holdings Limited 55,000 351 679CNOOC Limited 495,000 562 831Hang Lung Properties, Ltd. 248,000 881 706Hong Kong & China Gas Company Limited 333,887 309 794Total for Hong Kong 3,003 4,652

Ireland (0.28%)Medtronic Public Limited Company 13,000 623 1,243Total for Ireland 623 1,243

Japan (2.48%)Daikin Industries, Ltd. 11,700 357 1,444Daito Trust Construction Company, Ltd. 5,800 286 1,172DENSO Corporation 13,400 387 780FANUC Corporation 4,300 459 980





Numberof Shares

AverageCost($)

FairValue

($)

INPEX Corporation 49,200 1,013 662Keyence Corporation 1,584 320 1,461Komatsu, Ltd. 3,400 78 104Murata Manufacturing Company, Ltd. 2,500 395 450Rakuten, Inc. 42,400 848 558Shimano Inc. 2,100 422 443Shin-Etsu Chemical Co., Ltd. 11,100 608 1,157SMC Corporation 2,500 805 802Tokio Marine Holdings, Inc. 18,800 629 1,037Total for Japan 6,607 11,050

Jersey (0.31%)Experian PLC 37,200 657 970Shire PLC ADR 1,778 445 407Total for Jersey 1,102 1,377

Spain (0.23%)Industria de Diseno Textil, SA 22,500 206 1,034Total for Spain 206 1,034

Sweden (0.13%)Hennes & Mauritz AB Series B 15,700 302 588Total for Sweden 302 588

Switzerland (1.12%)Givaudan SA 350 797 863Kuehne & Nagel International AG 2,900 420 516Nestlé SA 9,400 305 907Novartis AG 7,900 482 774Roche Holding AG 2,300 539 707SGS SA 290 420 794Syngenta AG Registered 768 270 408Total for Switzerland 3,233 4,969

Taiwan (0.30%)Taiwan Semiconductor Manufacturing Company, Ltd. ADR 34,100 438 1,316Total for Taiwan 438 1,316

United Kingdom (1.07%)Aggreko PLC 13,500 408 205Compass Group PLC 36,600 563 910Diageo PLC 23,600 806 825Intertek Group PLC 7,400 394 427Reckitt Benckiser Group PLC 8,300 318 947Smith & Nephew PLC 38,700 568 783Whitbread PLC 10,900 850 682Total for United Kingdom 3,907 4,779

United States (10.67%)Abbott Laboratories 21,784 790 1,123AbbVie Inc. 17,784 681 1,495Amgen Inc. 2,000 109 393Bank of America Corporation 77,000 1,125 2,285Baxter International Inc. 10,000 235 595Berkshire Hathaway Inc. Cl. B 10,650 744 2,331Bloomin' Brands, Inc. 45,000 1,189 1,089





Numberof Shares

AverageCost($)

FairValue

($)

Cabot Oil & Gas Corporation 31,000 1,049 972Caterpillar Inc. 5,700 505 710CenturyLink, Inc. 1,500 51 48Chevron Corporation 8,000 1,001 1,264Cisco Systems, Inc. 29,000 710 1,177Citigroup Inc. 21,000 1,089 1,676Comcast Corporation Cl. A 11,000 1,003 1,020Commercial Metals Company 286 4 8Concho Resources Inc. 8,500 1,078 1,513FedEx Corp. 6,000 1,291 1,500Freeport-McMoRan Inc. 29,738 979 527General Electric Company 21,216 699 900General Motors Co. 9,000 260 421Hewlett Packard Enterprise Company 22,500 438 699HP Inc. 22,500 959 448Humana Inc. 2,000 472 548Intel Corporation 17,200 362 838International Business Machines Corporation 5,000 963 1,114iShares MSCI EAFE ETF 43,948 2,949 3,407JPMorgan Chase & Co. 18,000 804 2,086Lexington Realty Trust 53,200 467 771Lockheed Martin Corporation 4,000 278 1,342Merck & Co., Inc. 15,000 560 1,186Microsoft Corporation 8,000 533 667Motorola Solutions, Inc. 1,195 85 133Outfront Media Inc. 38,722 1,111 1,293Parker-Hannifin Corporation 8,000 554 1,504PepsiCo, Inc. 9,000 869 1,264Regal Entertainment Group 53,500 1,124 1,480SPDR S&P 500 ETF Trust 2,181 571 655The Goldman Sachs Group, Inc. 3,000 615 965Verizon Communications Inc. 23,000 1,003 1,649Visa Inc. Cl. A 17,500 315 1,833Walgreens Boots Alliance, Inc. 10,000 1,103 1,111Wal-Mart Stores, Inc. 16,181 1,273 1,502Total for United States 32,000 47,542Total for Foreign Equities (21.98%) 64,223 97,970Total for Long-Term Investments (94.27%) $318,880 $419,976

MaturityDate

Yield(%)


Issue

AverageCost($)

FairValue

($)

SHORT-TERM INVESTMENTSGovernment of Canada 08/24/2017 0.58% 19,800 19,726 19,726Total for Short-term Investments (4.43%) $19,726 $19,726Total for Investments (98.70%) $338,606 $439,702Cash and Other Net Assets (1.30%) 5,774Total Net Assets Attributable to Holders of Redeemable Units (100.00%) $445,476



(in $000's)

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

Schedule of Derivative InstrumentsFORWARD CURRENCY CONTRACTS

Contracts Pay ReceiveContract

Rate Due DateFair

Value ($) Counterparty

Rating ofthe

Counterparty*

1 481 Canadian Dollar 2,800 Hong Kong Dollar 5.824 03/06/2017 4 State Street Bank and Trust Co. AA-1 254 Canadian Dollar 730 Israeli Sheqel 2.879 02/28/2017 1 State Street Bank and Trust Co. AA-1 360 Canadian Dollar 31,695 Japanese Yen 88.019 02/28/2017 5 State Street Bank and Trust Co. AA-1 117 Canadian Dollar 10,230 Japanese Yen 87.215 02/28/2017 1 Royal Bank of Canada AA-1 70 Canadian Dollar 75 New Zealand Dollar 1.074 01/17/2017 - Toronto-Dominion Bank AA-1 94 Canadian Dollar 102 Singapore Dollar 1.080 03/20/2017 - Toronto-Dominion Bank AA-1 535 Canadian Dollar 3,740 Swedish Krona 6.985 01/24/2017 18 Goldman Sachs Bank USA A+1 67 Canadian Dollar 465 Swedish Krona 6.973 01/24/2017 2 Royal Bank of Canada AA-1 515 Danish Krone 101 Canadian Dollar 0.197 01/24/2017 3 State Street Bank and Trust Co. AA-1 735 Danish Krone 142 Canadian Dollar 0.194 01/24/2017 2 Bank of Montreal A+1 1,140 Danish Krone 218 Canadian Dollar 0.191 01/24/2017 - Royal Bank of Canada AA-1 500 Danish Krone 96 Canadian Dollar 0.191 01/24/2017 - Royal Bank of Canada AA-1 180 Euro Currency 263 Canadian Dollar 1.462 01/09/2017 8 State Street Bank and Trust Co. AA-1 410 Euro Currency 585 Canadian Dollar 1.427 01/09/2017 4 State Street Bank and Trust Co. AA-1 75 Euro Currency 110 Canadian Dollar 1.464 01/09/2017 4 Goldman Sachs Bank USA A+1 127 Euro Currency 182 Canadian Dollar 1.434 01/09/2017 2 Royal Bank of Canada AA-1 125 Euro Currency 179 Canadian Dollar 1.430 01/09/2017 2 State Street Bank and Trust Co. AA-1 17,638 Japanese Yen 214 Canadian Dollar 0.012 02/28/2017 11 State Street Bank and Trust Co. AA-1 49,622 Japanese Yen 579 Canadian Dollar 0.012 02/28/2017 7 State Street Bank and Trust Co. AA-1 10,450 Japanese Yen 121 Canadian Dollar 0.012 02/28/2017 1 State Street Bank and Trust Co. AA-1 10,170 Mexican Peso 702 Canadian Dollar 0.069 01/09/2017 41 Goldman Sachs Bank USA A+1 30,760 New Taiwan Dollar 963 U.S. Dollar 0.031 03/06/2017 16 State Street Bank and Trust Co. AA-1 140 Swiss Franc 187 Canadian Dollar 1.335 02/28/2017 1 Royal Bank of Canada AA-1 1,595 U.S. Dollar 110,780 Indian Rupee 69.465 03/02/2017 36 State Street Bank and Trust Co. AA-1 291 U.S. Dollar 18,715 New Russian Ruble 64.208 01/20/2017 18 State Street Bank and Trust Co. AA-1 64 U.S. Dollar 4,120 New Russian Ruble 64.105 01/20/2017 4 Goldman Sachs Bank USA A+

1911 212 Canadian Dollar 214 Australian dollar 1.012 03/13/2017 (4) Royal Bank of Canada AA-1 98 Canadian Dollar 500 Danish Krone 5.092 01/24/2017 (3) Royal Bank of Canada AA-1 66 Canadian Dollar 45 Euro Currency 0.681 01/09/2017 (2) Royal Bank of Canada AA-1 118 Canadian Dollar 80 Euro Currency 0.676 01/09/2017 (5) State Street Bank and Trust Co. AA-1 208 Canadian Dollar 140 Euro Currency 0.673 01/09/2017 (10) Royal Bank of Canada AA-1 450 Canadian Dollar 310 Euro Currency 0.689 01/09/2017 (11) State Street Bank and Trust Co. AA-1 543 Canadian Dollar 370 Euro Currency 0.681 01/09/2017 (18) Toronto-Dominion Bank AA-1 3,141 Canadian Dollar 2,130 Euro Currency 0.678 01/09/2017 (122) Bank of Montreal A+1 180 Canadian Dollar 515 Israeli Sheqel 2.863 02/28/2017 - State Street Bank and Trust Co. AA-1 253 Canadian Dollar 725 Israeli Sheqel 2.859 02/28/2017 (1) State Street Bank and Trust Co. AA-1 134 Canadian Dollar 11,460 Japanese Yen 85.606 02/28/2017 (2) State Street Bank and Trust Co. AA-1 310 Canadian Dollar 25,969 Japanese Yen 83.716 02/28/2017 (11) State Street Bank and Trust Co. AA-1 1,623 Canadian Dollar 24,100 Mexican Peso 14.851 01/09/2017 (55) Canadian Imperial Bank of Commerce A+1 276 Canadian Dollar 1,723 Norwegian Krone 6.240 01/24/2017 (8) Bank of Montreal A+1 730 Canadian Dollar 2,270 Polish Zloty 3.110 01/09/2017 - State Street Bank and Trust Co. AA-1 1,145 Canadian Dollar 685 Pound Sterling 0.598 02/28/2017 (10) State Street Bank and Trust Co. AA-1 599 Canadian Dollar 4,027 Swedish Krona 6.726 01/24/2017 (3) Bank of Montreal A+1 362 Canadian Dollar 270 U.S. Dollar 0.745 03/13/2017 - State Street Bank and Trust Co. AA-1 203 Canadian Dollar 150 U.S. Dollar 0.740 03/13/2017 (2) State Street Bank and Trust Co. AA-1 820 Danish Krone 156 Canadian Dollar 0.191 01/24/2017 - State Street Bank and Trust Co. AA-1 695 Danish Krone 131 Canadian Dollar 0.189 01/24/2017 (1) State Street Bank and Trust Co. AA-1 47 Euro Currency 67 Canadian Dollar 1.417 01/09/2017 - State Street Bank and Trust Co. AA-1 260 Euro Currency 362 Canadian Dollar 1.391 01/09/2017 (7) Goldman Sachs Bank USA A+



(in $000's)


Schedule of Derivative Instruments (continued)

Contracts Pay ReceiveContract

Rate Due DateFair

Value ($) Counterparty

Rating ofthe

Counterparty*

1 29,393 Hong Kong Dollar 5,070 Canadian Dollar 0.173 03/06/2017 (17) Bank of Montreal A+1 1,101 Israeli Sheqel 384 Canadian Dollar 0.349 02/28/2017 (1) Royal Bank of Canada AA-1 14,310 Japanese Yen 165 Canadian Dollar 0.012 02/28/2017 - State Street Bank and Trust Co. AA-1 78 Pound Sterling 129 Canadian Dollar 1.654 02/28/2017 - Goldman Sachs Bank USA A+1 93 Swiss Franc 123 Canadian Dollar 1.325 02/28/2017 - State Street Bank and Trust Co. AA-1 1,178 U.S. Dollar 1,579 Canadian Dollar 1.341 03/03/2017 (1) Royal Bank of Canada AA-1 340 U.S. Dollar 453 Canadian Dollar 1.333 03/13/2017 (3) State Street Bank and Trust Co. AA-1 160 U.S. Dollar 210 Canadian Dollar 1.315 03/13/2017 (4) Royal Bank of Canada AA-1 2,386 U.S. Dollar 3,193 Canadian Dollar 1.338 04/07/2017 (7) Canadian Imperial Bank of Commerce A+1 1,237 U.S. Dollar 1,636 Canadian Dollar 1.323 03/13/2017 (23) Bank of Montreal A+1 711 U.S. Dollar 9,589,153 Indonesian Rupiah 13,496.000 03/13/2017 (11) State Street Bank and Trust Co. AA-

(342)Total Forward Currency Contracts (151)

FUTURES CONTRACTS

Description Type Expiration dateNotionalAmount

FairValue ($)

S+P 500 E-Mini Index Futures Long 03/17/2017 USD 2,702 (22)Total Futures Contracts (22)Total for Schedule of Derivative Instruments (173)

* Source: Standard & Poor's Credit Rating Agency


MD Balanced FundFinancial Statements


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

December 31,2016

December 31,2015

AssetsCurrent assetsInvestments 439,702$ 395,741$Cash 4,243 3,662Dividends and interest receivable 1,545 1,620Financial derivative instruments 191 320Net margin due from broker on futures

contracts 188 101Receivable for investment transactions - 603Subscriptions receivable 220 39

446,089 402,086

LiabilitiesCurrent liabilitiesPayable for investment transactions 102 211Redemptions payable 147 246Financial derivative instruments 364 581

613 1,038

Net assets attributable to holders ofredeemable units 445,476$ 401,048$

Net assets attributable to holders ofredeemable units per seriesSeries A 444,596$ 400,297$Series T 880$ 751$

Number of redeemable units outstanding(see Supplementary Schedules)Series A 14,841,839 14,891,941Series T 96,245 87,973

Net assets attributable to holders ofredeemable units per unit, per seriesSeries A 29.96$ 26.88$Series T 9.15$ 8.54$

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

Director(Signed by John Riviere)

Director(Signed by Brian Peters)

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

2016 2015

IncomeNet gain (loss) on investments

Dividends 7,978$ 8,822$Interest for distribution purposes 3,558 3,953Net realized gain (loss) on sale of investments 13,511 25,073Change in unrealized appreciation (depreciation) of

investments 36,281 (34,882)Net gain (loss) on investments 61,328 2,966

Net gain (loss) on derivative instrumentsNet realized gain (loss) on derivative instruments 150 (216)Change in unrealized appreciation (depreciation) of

derivative instruments 88 (223)Net gain (loss) on derivatives instruments 238 (439)

Other IncomeForeign exchange gain (loss) on cash (163) 192Early redemption fee 3 14Securities lending (see Supplementary Schedules) 154 113

Total other income (6) 319Total income (loss) 61,560 2,846

ExpensesManagement fees (Note 4) 5,687 5,783Administration fees 591 601Interest expense 1 -Withholding tax on foreign income 288 513Transaction costs 122 144Total expenses 6,689 7,041

Increase (decrease) in net assets attributable toholders of redeemable units 54,871$ (4,195)$

Increase (decrease) in net assets attributable toholders of redeemable units, per seriesSeries A 54,803$ (4,188)$Series T 68$ (7)$

Increase (decrease) in net assets attributable toholders of redeemable units per unit, per seriesSeries A 3.73$ (0.28)$Series T 0.95$ (0.08)$




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

2016 2015

SERIES ANet assets - beginning of year 400,297$ 423,172$

Add (deduct) changes during the year:Operations

Increase (decrease) in net assets attributable toholders of redeemable units 54,803 (4,188)

Redeemable unit transactionsProceeds from issue of redeemable units 49,968 46,975Cash paid for redemption of redeemable units (60,170) (65,039)Units issued on reinvestment of distributions 9,382 17,994

(820) (70)Distributions

From net investment income (5,033) (6,239)From net realized gains on investments (4,651) (11,967)Return of capital - (411)

(9,684) (18,617)

Net assets - end of year 444,596$ 400,297$

SERIES TNet assets - beginning of year 751$ 832$


Increase (decrease) in net assets attributable toholders of redeemable units 68 (7)

Redeemable unit transactionsProceeds from issue of redeemable units 370 90Cash paid for redemption of redeemable units (273) (90)Units issued on reinvestment of distributions 2 3

99 3Distributions

From net investment income (8) (12)From net realized gains on investments - (23)Return of capital (30) (42)

(38) (77)

Net assets - end of year 880$ 751$

2016 2015

TOTAL FUNDNet assets – beginning of year 401,048$ 424,004$


Increase (decrease) in net assets attributable toholders of redeemable units 54,871 (4,195)

Redeemable unit transactionsProceeds from issue of redeemable units 50,338 47,065Cash paid for redemption of redeemable units (60,443) (65,129)Units issued on reinvestment of distributions 9,384 17,997

(721) (67)Distributions

From net investment income (5,041) (6,251)From net realized gains on investments (4,651) (11,990)Return of capital (30) (453)

(9,722) (18,694)

Net assets - end of year 445,476$ 401,048$




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

2016 2015

Cash flows from (used in) operating activities

Increase (decrease) in net assets attributableto holders of redeemable units 54,871$ (4,195)$

Adjustments for:Proceeds from sale of investments 386,264 352,317Purchase of investments (379,722) (338,479)Amortization Income (217) (68)Unrealized foreign exchange (gain) loss on cash (65) (36)Net realized (gain) loss on sale of investments (13,511) (25,073)Change in unrealized (appreciation) depreciation

of investments (36,281) 34,882Change in unrealized (appreciation) depreciation

of derivative instruments (88) 223

Net change in non-cash working capital (12) (310)

Net cash from (used in) operating activities 11,239 19,261

Cash flows from (used in) financing activities

Proceeds from issue of redeemable units 50,157 47,208Distributions to holders of redeemable units, net

of reinvested distribution (338) (697)Cash paid for redemption of redeemable units (60,542) (65,037)

Net cash from (used in) financing activities (10,723) (18,526)

Unrealized foreign exchange gain (loss) on cash 65 36

Net increase (decrease) in cash during the year 581 771

Cash, beginning of year 3,662 2,891

Cash, end of year 4,243$ 3,662$

Interest received 3,566 3,995Dividends received, net of withholding taxes 7,757 8,020


MD Balanced FundFinancial Statements – Supplementary Schedules


Redeemable Unit Transactionsfor the years ended December 31

2016 2015

SERIES AOutstanding, beginning of year 14,891,941 14,877,895Issued 2,079,416 2,294,243Redeemed (2,129,518) (2,280,197)Outstanding, end of year 14,841,839 14,891,941

SERIES TOutstanding, beginning of year 87,973 87,545Issued 41,366 9,813Redeemed (33,094) (9,385)Outstanding, end of year 96,245 87,973

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

2016 2015

Soft dollar commissions 14$ 7$

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

Securities on Loan

as at December 31 (in $000’s) 2016 2015

Fair value of securities loaned 19,670$ 25,794$Fair value of collateral (non-cash) 20,455$ 27,368$

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

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

for the years ended December 31 (in $000's) 2016 2015

Gross amount generated from the securitieslending transactions 191$ 143$

Amounts paid to State Street Bank and Trust Co. (37)$ (30)$Net securities lending income as reported in the

Statement of Comprehensive Income 154$ 113$

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

2016

Net capital loss carried forward -$

Non-capital losses expiring:2017 -$2018 -in 2019 and thereafter -Total -$

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

Since the Fund does not record income taxes, no benefit has been recorded by theFund in its financial statements in respect of its unused losses as at December 31,2016. As of the taxation year ended December 15, 2016, the Fund does not have anyaccumulated net realized capital losses or non-capital losses available for utilizationagainst net realized capital gains in future years. Capital losses have no expiry. Non-capital losses can be carried forward for up to 20 years.


MD Balanced FundFinancial Instruments Risks

(in $000's)


Financial InstrumentsMD Balanced Fund (the “Fund”) invests in domestic and foreign equities, domesticand foreign corporate and government bonds, as well as forward and futurescontracts as shown in the Schedule of Investment Portfolio. The Fund invests excesscash in high grade short-term notes with maturities of less than one year. Theseinvestments expose the Fund to risks associated with financial instruments. TheFund’s exposures and sensitivities to these risks are presented below. A descriptionof the risks and how the Fund manages these risks is discussed in Note 7 of theNotes to the Financial Statements.

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

As at December 31, 2016 and December 31, 2015, the Fund invested in preferredshares and short-term debt instruments with the following credit ratings:

Credit Rating

% of Net AssetsAttributable to

Holders ofRedeemable Units

December 31, 2016

% of Net AssetsAttributable to

Holders ofRedeemable Units

December 31, 2015

Debt InstrumentsAAA / R-1 (High) 11.0% 10.6%AA / R-1 (Mid) 7.1% 8.9%A / R-1 (Low) 8.8% 9.2%BBB 3.3% 3.4%Unrated - 0.1%Total 30.2% 32.2%

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

Currency RiskExposures to foreign currencies as at December 31, 2016 and December 31, 2015are presented in the table below. Short-term investments, which are monetary innature, are included in the Investments at Fair Value column.

Currency

Cash andOther Net

AssetsAttributableto Holders ofRedeemable

UnitsInvestmentsat Fair Value

DerivativeExposure

NetCurrencyExposure

% of NetAssets

Attributableto Holders

ofRedeemable

Units

December 31, 2016U.S. Dollar 3,116$ 59,507$ (8,848)$ 53,775$ 12.07%European Euro 24 9,498 2,624 12,146 2.73%Australian Dollar - 1,734 208 1,942 0.44%Danish Krone 6 1,497 (745) 758 0.17%Hong Kong Dollar - 4,652 (4,603) 49 0.01%Indian Rupee - - 2,176 2,176 0.49%Indonesian Rupiah - - 942 942 0.21%Israeli Shekel - - 303 303 0.07%Japanese Yen 3 11,051 (146) 10,908 2.45%Mexican Peso - - 906 906 0.20%New Russian Ruble - - 500 500 0.11%New Taiwan Dollar - - (1,275) (1,275) (0.29)%New Zealand Dollar - - 70 70 0.02%Norwegian Krone - - 269 269 0.06%Polish Zloty - - 730 730 0.16%British Pound - 5,750 1,006 6,756 1.52%Singapore Dollar - - 95 95 0.02%Swedish Krona - 588 1,219 1,807 0.41%Swiss Franc 121 4,969 (309) 4,781 1.07%Total 3,270$ 99,246$ (4,878)$ 97,638$ 21.92%

December 31, 2015U.S. Dollar 3,338$ 53,014$ (3,771)$ 52,581$ 13.11%European Euro 16 8,926 1,647 10,589 2.64%Australian Dollar - 1,669 253 1,922 0.48%Czech Koruna - - 658 658 0.16%Danish Krone 3 874 (100) 777 0.19%Hong Kong Dollar - 4,740 (4,259) 481 0.12%Indian Rupee - - 2,441 2,441 0.61%Indonesian Rupiah - - 1,613 1,613 0.40%Israeli Shekel - - (892) (892) (0.22)%Japanese Yen 6 10,145 186 10,337 2.58%New Russian Ruble - - 835 835 0.21%New Taiwan Dollar (51) - (936) (987) (0.25)%New Zealand Dollar - - 71 71 0.02%Norwegian Krone - - 250 250 0.06%Polish Zloty - - 645 645 0.16%British Pound - 5,320 938 6,258 1.56%Qatari Rial - - - - 0.00%Singapore Dollar - 721 (675) 46 0.01%Swedish Krona - 773 878 1,651 0.41%Swiss Franc 93 6,317 (3,831) 2,579 0.64%Total 3,405$ 92,499$ (4,049)$ 91,855$ 22.89%



(in $000's)


As at December 31, 2016, if the Canadian Dollar had strengthened against all othercurrencies by 10%, the Net Assets Attributable to Holders of Redeemable Units ofthe Fund could have decreased by approximately $9,764, or 2.19% of Net AssetsAttributable to Holders of Redeemable Units (December 31, 2015 - $9,186, or2.29%). Conversely, had the Canadian Dollar weakened against all other currenciesby 10%, the Net Assets Attributable to Holders of Redeemable Units of the Fundcould have increased by approximately $9,764, or 2.19% of Net Assets Attributableto Holders of Redeemable Units (December 31, 2015 - $9,186, or 2.29%). Thesesensitivities are estimates. Actual results may vary and the variance may bematerial.

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

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

As at December 31, 2016 and December 31, 2015 the Fund’s exposures to debtinstruments by maturity are presented in the table below:

Debt Instruments December 31, 2016 December 31, 2015by Maturity Date Fair Value % Fair Value %

Less than 1 year 20,768$ 4.7% 13,202$ 3.3%1 to 7 years 56,336 12.6% 55,748 13.9%7 to 12 years 35,619 8.0% 32,724 8.1%12 to 20 years 1,223 0.3% 675 0.2%More than 20 years 20,738 4.6% 26,946 6.7%Total 134,684$ 30.2% 129,295$ 32.2%Sensitivity (+/-) 2,175$ 0.5% 2,376$ 0.6%

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

Other Price RiskAs at December 31, 2016, 68.5% (December 31, 2015 – 66.4%) of the Fund’s NetAssets Attributable to Holders of Redeemable Units were invested in equity financialinstruments traded in active markets. If prices of securities traded on thesemarkets decrease by 10%, with all other factors remaining constant, Net AssetsAttributable to Holders of Redeemable Units could fall by approximately $30,502(December 31, 2015 - $26,645). Conversely, if prices increase by 10%, Net AssetsAttributable to Holders of Redeemable Units could rise by approximately $30,502(December 31, 2015 - $26,645). These sensitivities are estimates. Actual resultsmay vary and the variance may be significant.

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

Market Segment December 31, 2016 December 31, 2015*

Domestic BondsCorporate Bonds 12.84% 14.32%Government of Canada Bonds 4.06% 4.25%Municipal Bonds 0.29% 1.42%Provincial Bonds 5.61% 6.60%

Foreign BondsAustralia 0.62% 0.61%Belgium 0.09% -Denmark 0.07% -Jersey 0.08% 0.04%Norway - 0.13%South Korea - 0.07%United Kingdom 0.29% 0.13%United States 1.85% 1.74%

Domestic EquitiesConsumer Discretionary 3.67% 4.51%Consumer Staples 1.40% 1.18%Energy 8.66% 7.32%Financials 17.50% 16.88%Industrials 6.39% 5.65%Materials 5.07% 4.50%Telecommunication Services 1.48% 1.42%Utilities 2.32% 1.87%

Foreign EquitiesAustralia 0.39% 0.42%Bermuda 1.53% 1.49%Curacao 0.20% -Denmark 0.33% 0.22%Finland 0.20% 0.21%France 1.23% 1.22%Germany 0.47% 0.53%Hong Kong 1.04% 1.18%Ireland 0.28% 0.35%Israel - 0.31%Japan 2.48% 2.53%Jersey 0.31% 0.23%Singapore - 0.18%Spain 0.23% 0.27%Sweden 0.13% 0.19%Switzerland 1.12% 1.58%Taiwan 0.30% 0.27%United Kingdom 1.07% 1.09%United States 10.67% 10.84%Short Term Investments 4.43% 2.93%Cash and Other Net Assets (Liabilities) 1.30% 1.32%Total 100.00% 100.00%

*Comparative figures have been reclassified to conform with the presentation adopted for thecurrent year.



(in $000's)


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

Quoted Prices inActive Markets

for IdenticalAssets

SignificantOther

ObservableInputs

(Level 1) (Level 2) Total*

December 31, 2016Domestic Bonds -$ 101,617$ 101,617$Foreign Bonds - 13,341 13,341Domestic Equities 207,048 - 207,048Foreign Equities 97,970 - 97,970Short-Term Investments - 19,726 19,726Financial Derivative Instruments –

Assets - 191 191Financial Derivative Instruments –

Liabilities (22) (342) (364)Total 304,996$ 134,533$ 439,529$

December 31, 2015Domestic Bonds -$ 106,701$ 106,701$Foreign Bonds - 10,852 10,852Domestic Equities 173,816 - 173,816Foreign Equities 92,630 - 92,630Short-Term Investments - 11,742 11,742Financial Derivative Instruments –

Assets 35 285 320Financial Derivative Instruments –

Liabilities - (581) (581)Total 266,481$ 128,999$ 395,480$

*The Fund does not hold any Level 3 investments.

For the period from January 1, 2016 to December 31, 2016, equity investments ofapproximately $37,772 were transferred from Level 2 to Level 1. For the period fromJanuary 1, 2015 to December 31, 2015, there have been no significant transfersbetween Level 1 and Level 2. Transfers are primarily attributable to the valuationtechniques used for foreign equity securities, as discussed in the accompanyingNotes to Financial Statements.



Notes to Financial StatementsFor the years ended December 31, 2016 and 2015

1. Name and formation of the Funds

ESTABLISHMENT OF THE FUNDS

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

Series A Units Series I Units Series T Units Private Trust SeriesMD Balanced Fund September 9, 1992 October 25, 2010

MD Bond Fund April 6, 1988 October 30, 2009

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

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

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

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

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

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

MD Money Fund July 12,1983

MD Select Fund October 29, 1993 October 30, 2009 October 25, 2010

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

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

MD Strategic Yield Fund January 30, 2014 January 30, 2014

MD Strategic Opportunities Fund January 30, 2014 January 30, 2014

MD Precision Conservative Portfolio January 6, 2010

MD Precision Balanced Income Portfolio March 27, 2012

MD Precision Moderate Balanced Portfolio January 6, 2010

MD Precision Moderate Growth Portfolio March 27, 2012

MD Precision Balanced Growth Portfolio January 6, 2010

MD Precision Maximum Growth Portfolio January 6, 2010

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

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

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

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

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

Series A Series IMD Growth Investments Limited July 18, 1969 October 30, 2009

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

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

These financial statements were authorized for issue by the Manager on March 10, 2017.



SERIES OF UNITS

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

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

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

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

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

3. Significant accounting policies

FUNCTIONAL AND PRESENTATION CURRENCY

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

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

FINANCIAL INSTRUMENTS

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

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

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

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

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

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

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

OFFSETTING FINANCIAL INSTRUMENTS

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



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

FAIR VALUE MEASUREMENT

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

FINANCIAL DERIVATIVES INSTRUMENTS

A derivative is a financial contract between two parties, the value of which is derivedfrom the value of an underlying asset such as equity, bond, commodity, interestrate or currency. Certain Funds may use derivatives, such as options, futures,forward contracts, swap contracts, and other similar instruments, in a mannerconsidered appropriate to achieving the Fund’s investment objectives. Derivativesmay be used to protect a security price, currency exchange rate or interest rate fromnegative changes (hedging) or to provide exposure to securities, indices, orcurrencies without investing in them directly (non-hedging). Derivatives containvarious risks including the potential inability for the counterparty to fulfil theirobligations under the terms of the contract, the potential for illiquid markets andthe potential price risk which may expose the Funds to gains and/or losses in excessof the amounts shown on the Statement of Financial Position. Derivatives withunrealized gains are reported as financial derivative instruments under currentassets and derivatives with unrealized losses are reported as financial derivativeinstruments under current liabilities.

Forward Currency Contracts

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

Futures Contracts

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

Credit Default Swaps

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

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



Interest Rate Swaps

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

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

Cross Currency Swaps

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

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

Foreign Currency Option Contracts

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

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

CAPITAL RISK MANAGEMENT

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

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

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

SECURITIES LENDING TRANSACTIONS

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

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

REDEEMABLE UNITS

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

INVOLVEMENT IN UNCONSOLIDATED STRUCTURED ENTITIES

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



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

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

Certain Funds invest in mortgage-related and other asset-backed securities(“MBS”). These securities include mortgage pass-through securities, collateralizedmortgage obligations, commercial mortgage-backed securities, asset-backedsecurities, collateralized debt obligations and other securities that directly orindirectly represent a participation in, or are secured by and payable from, mortgageloans on real property. The debt and equity securities issued by these securitiesmay include tranches with varying levels of subordination. These securities mayprovide a monthly payment which consists of both interest and principal payments.Mortgage-related securities are created from pools of residential or commercialmortgage loans, including mortgage loans made by savings and loan institutions,mortgage bankers, commercial banks and others. Asset-backed securities arecreated from many types of assets, including auto loans, credit card receivables,home equity loans, and student loans. The Funds’ maximum exposure to loss fromtheir interest in MBS is equal to the fair value of their investments in such securitiesas disclosed on the Schedule of Investment Portfolio.

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

4. Expenses and other relatedparty transactionsThe management and administration fees are unique to each Fund and are uniqueto each series of units and are disclosed in the Funds’ Simplified Prospectus.

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

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

No management fees are charged in respect of units of the Private Trust Series orSeries T of the MDPIM Canadian Equity Pool and MDPIM US Equity Pool. Investors inthese series of units have agreed to pay a managed account fee directly to MDPrivate Investment Counsel. These managed account fees are charged directly toeach unitholder to a maximum rate of 1.56% per annum plus custodial fees. MDPIMCanadian Equity Pool and MDPIM US Equity Pool pay for all operating expenseswhich related to these particular series. Operating expenses include, but are notlimited to, brokerage fees on the buying and selling of securities, securitiescommission fees, transaction costs, audit fees, sales taxes, custodial fees, IRC feesand expenses, taxes, issue costs, all expenses related to the prospectus and tomeetings of unitholders as well as Fund servicing costs. Operating expenses whichrelate to the series of units as a whole are proportionately allocated among thoseFunds to which they relate. The Manager of the Funds can, at any time, waive orabsorb any operating expense for which the Fund is responsible.

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

INDEPENDENT REVIEW COMMITTEE

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

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

SHORT-TERM TRADING/EARLY REDEMPTION FEE

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

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

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

•



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

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

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

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

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

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

CLASSIFICATION AND MEASUREMENT OF INVESTMENTS AND APPLICATION OFTHE FAIR VALUE OPTION

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

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

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

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

CREDIT RISK

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

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

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

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



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

LIQUIDITY RISK

Liquidity risk is the risk that the Funds will encounter difficulty in meetingobligations associated with financial liabilities that are settled by delivering cash oranother financial asset. All Funds’ financial liabilities come due within one year. Inaddition, the Funds’ units are redeemable on demand. In accordance with NI81-102,the Funds must provide payment for redeemed units within three business days ofreceipt of a redemption order. To manage this liquidity requirement, the Fundsinvest primarily in liquid securities that can readily be sold in active markets andeach Fund may borrow up to 5% of its NAV. As at June 30, 2016, no Fund borrowedagainst its respective line of credit.

CURRENCY RISK

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

INTEREST RATE RISK

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

The Funds’ interest-bearing financial instruments that subject the Funds to interestrate risk include domestic and foreign bonds and mortgage related and other assetback securities. Short-term money market instruments are also interest bearingand therefore subject to interest rate risk. However, due to the short-term nature ofthe securities, the interest rate risk is generally not significant.

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

OTHER PRICE RISK

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

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

FINANCIAL RISKS FROM UNDERLYING MUTUAL FUNDS

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

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

for unadjusted quoted prices in active markets for identical assetsor liabilities;

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

Level 2 -

for inputs that are based on unobservable market data.Level 3 - The classification of a financial instrument is based on the lowest level of input that

is significant to the determination of fair value.



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

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

EQUITIES

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

BONDS AND SHORT-TERM INVESTMENTS

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

INVESTMENTS IN MUTUAL FUNDS AND EXCHANGE TRADED FUNDS

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

FINANCIAL DERIVATIVE INSTRUMENTS

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

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

FAIR VALUATION OF INVESTMENTS (INCLUDING UNLISTED SECURITIES)

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

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

9. Future Accounting Changes

IFRS 9 FINANCIAL INSTRUMENTS (“IFRS 9”)

The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 14and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS9 introduces a single model for classification and measurement for financial assetsthat reflects the business model in which they are managed and their cash flowcharacteristics. It also includes a forward-looking expected credit loss model thatwill result in more timely recognition of loan losses and is a single model applicableto all financial instruments subject to impairment accounting. It also includeschanges in respect of own credit risk in measuring liabilities elected to be measuredat fair value, so that gains caused by the deterioration of an entity’s own credit onsuch liabilities are no longer recognized in the profit or loss. IFRS 9 is effective forannual periods beginning on or after January 1, 2018, but is available for earlyadoption. The Manager is in the process of assessing the impact of IFRS 9 tothe Funds.

IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS (“IFRS 15”)

IFRS 15 will replace the existing IAS 18 - Revenue. The new standard provides asingle comprehensive model for entities to use in accounting for revenue arisingfrom contracts with customers. Under this standard, revenue may be recognizedover time in a manner that best reflects the entity’s performance or at a point intime, when control of the goods or services is transferred to customers. Thestandard is effective for reporting periods beginning on or after January 1, 2018and early adoption is permitted. The Manager is in the process of assessing theimpact of IFRS 15 to the Funds.



10. Comparative FiguresCertain comparative figures in the Statements of Cash Flows have been reclassifiedor adjusted to appropriately reflect the following non-cash items.

Amounts related to “Reinvested distributions from underlying funds” have beenreclassified from “Purchase of investments” to appropriately adjust profit or loss forthe effects of non-cash distributions from underlying funds that have beenreinvested and to exclude these non-cash amounts from “Purchase of investments”.There is no net impact on cash flows from operating activities within each Fund.

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