semi-annual financial statements e.pdf · printing and stationary fees 2 4 118 128 net investment...

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

BMO Harris Private PortfoliosJune 30, 2009

FS06-3043 E

BMO Harris Opportunity Bond Portfolio


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

June 30, 2009 December 31, 2008

AssetsCash 2,607 6,446Cash Collateral 5,710 10,580Investments at fair value (note 2) 225,112 224,302Subscriptions receivable 50 38Due from broker 11,308 418Interest receivable 1,587 1,822Interest rate swap contracts at fair value — 102Unrealized gain on forward currency contracts 456 2,327Unrealized gain on to-be-announced securities 53 17,236Unrealized gain on forward bonds 1,670 10,456

Total assets 248,553 273,727

LiabilitiesDistribution payable to unitholders 13 —Due to broker — 768Redemptions payable 433 132Accrued expenses 20 20Interest rate swap contracts at fair value 861 19,238Unrealized loss on forward currency contracts 7,519 1,479Unrealized loss on to-be-announced securities 117 15,906Unrealized loss on forward bonds 328 521

Total liabilities 9,291 38,064

Net assets representing unitholders' equity (note 2) 239,262 235,663

Net assets per unit (note 2) $9.87 $9.39

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

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

June 30, 2009 June 30, 2008

Investment IncomeInterest 5,031 6,487Net income (loss) from derivative contracts (8,507) 2,500

(3,476) 8,987

ExpensesAudit fees 9 12Independent Review Committee fees 2 5Custodian fees (note 5) 46 32Legal and filing fees 8 18Unitholder servicing fees (note 5) 51 57Printing and stationary fees 2 4

118 128

Net investment income (loss) for the period (3,594) 8,859Realized gain on sale of investments 5,192 1,150Gain (loss) on foreign exchange 16,420 (449)Change in unrealized appreciation (depreciation) in value of investments 4,129 (873)Change in unrealized depreciation in value of forward currency contracts (7,911) (2,789)Change in unrealized depreciation in value of to-be-announced securities (1,394) (635)

Increase in net assets from operations 12,842 5,263

Increase in net assets from operations per unit (note 2) $0.52 $0.18


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

June 30, 2009 June 30, 2008

Net assets, beginning of period (note 2) 235,663 272,202

Increase in net assets from operations 12,842 5,263

Unit Transactions:Proceeds from sale of units 21,024 40,394Reinvested distributions 955 4,646Amounts paid on units redeemed (30,247) (26,028)

Total unit transactions (8,268) 19,012

Distributions to Unitholders from:Net income (975) (4,724)

Net assets, end of period (note 2) 239,262 291,753

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

Units issued and outstanding, beginning of period 25,098 28,720Issued for cash 2,206 4,215Issued on reinvestment of distributions 99 485

27,403 33,420Redeemed during the period (3,152) (2,713)

Units issued and outstanding, end of period 24,251 30,707


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Money Market Investments – 13.6%Federal Home Loan Bank 9,900 11,237 11,515United States Government 18,100 20,834 21,053

32,071 32,568

Total Money Market Investments – 13.6% 32,071 32,568

Money market investments which are grouped by issuer earn interest rates ranging from 0.10% to 0.13% and mature between July 2,2009 and July 23, 2009.

Bonds & DebenturesGovernment Bonds – 13.9%Government of Canada, 3.500% Jun 1, 2013 2,900 2,996 3,034Government of Canada, 3.000% Jun 1, 2014 700 739 717Government of Canada, 4.250% Jun 1, 2018 400 458 432Government of Canada, 3.750% Jun 1, 2019 12,300 13,215 12,698Government of Canada, Series A55, 8.000% Jun 1, 2023 8,300 12,323 12,075Government of Canada, Series VW17, 8.000% Jun 1, 2027 2,100 3,166 3,177Government of Canada, Series WL43, 5.750% Jun 1, 2029 130 153 162Government of Canada, 5.000% Jun 1, 2037 800 961 955

34,011 33,250Provincial Bonds – 22.7%Province of British Columbia, Unsecured, 4.700% Jun 18, 2037 3,100 3,100 3,067Province of Ontario, 4.400% Mar 8, 2016 19,700 19,897 20,547Province of Ontario, Series HP, 8.100% Sep 8, 2023 1,950 2,734 2,615Province of Ontario, 6.200% Jun 2, 2031 1,700 2,057 1,970Province of Quebec, Debentures, Unsecured, 4.500% Dec 1, 2016 9,800 9,947 10,199Province of Quebec, Medium Term Notes, 4.500% Dec 1, 2017 6,500 6,543 6,681Province of Quebec, Series OS, 6.000% Oct 1, 2029 8,215 9,472 9,155

53,750 54,234Municipal Bonds – 1.4%City of Chicago, O'Hare International Airport, General Airport Third Lien Revenue Bonds, Sinking Fund, Callable, 5.000% Jan 1, 2033 US$ 50 49 56Golden State Tobacco Securitization Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2007 A-2, Convertible, Sinking Fund, Jun 1, 2037 US$ 50 31 24King County, Washington, Limited Tax General Obligation Refunding Bonds, Sinkable, Callable, 4.750% Jan 1, 2034 US$ 50 50 57Los Angeles California Unified School District, 2007 General Obligation Refunding Bonds, Series A-1, Callable, Sinkable, 4.500% Jan 1, 2028 US$ 1,000 843 1,041Los Angeles Community College District, 2003 Election General Obligation Bonds, 2006 Series E, Sinkable, Callable, 5.000% Aug 1, 2031 US$ 500 461 566Los Angeles Unified School District (County of Los Angeles, California) 2007 General Obligation Refunding Bonds, Series A-1, Callable, 4.500% Jul 1, 2025 US$ 300 256 323

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

Par Value Cost Fair ValueSecurity (in thousands) ($) ($)


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Municipal Bonds (cont’d)New York City Municipal Finance Authority, Water & Sewer System Second Generation Resolution Revenue Bonds, Fiscal 2008, Series AA, 5.000% Jun 15, 2037 US$ 200 185 228State of California, General Obligation Unlimited, Build America Bonds, Extraordinary Redemption Option, 7.500% Apr 1, 2034 US$ 500 625 532State of California, General Obligation Unlimited, Build America Bonds, Extraordinary Redemption Option, 7.550% Apr 1, 2039 US$ 300 377 318State of California, Various Purpose General Obligation Bonds, Sinking Fund, Callable, 5.000% Dec 1, 2037 US$ 50 47 49Tobacco Settlement Financing Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2007-1, Sinkable, Callable, 5.000% Jun 1, 2041 US$ 60 49 38

2,973 3,232Asset-Backed Securities – 3.8%Bear Stearns Adjustable Rate Mortgage Trust, Series 2003-4, Class 2A1, Floating Rate, Jul 25, 2033 US$ 454 464 479Bears Stearns Asset-Backed Securities, Inc. Series 2006-HE8,Class 1A1, Floating Rate Bonds, Oct 25, 2036 US$ 136 133 143Chase Issuance Trust, Series 2008-A13, Class A13, Floating Rate, Sep 15, 2015 US$ 400 428 465Countrywide Asset-Backed Certificates, Series 2005-14, Class 2A1, Mortgage Bonds, Floating Rate, May 25, 2035 US$ 385 412 201First Franklin Mortgage Loan Asset-Backed Certificates, Series 2006-FF12, Class A2, Floating Rate, Sep 25, 2036 US$ 132 154 150Ford Auto Securitization Trust, Series 2009-R1A, Class A1, Asset-Backed Security, 3.396% Nov 15, 2011 1,000 1,000 997Ford Credit Auto Owner Trust, Series 2008-C, Class A2B, Floating Rate, Jan 15, 2011 US$ 782 781 910Ford Credit Auto Owner Trust, Series 2008-C, Class A3, Floating Rate, Jun 15, 2012 US$ 1,400 1,400 1,634Residential Asset Securities Corporation, Floating Rate Mortgage Bond, Series 2007-KS3, Class A1A, Feb 25, 2030 US$ 365 424 369SLM Student Loan Trust, Series 2008-9, Class A, Mortgage Bonds, Floating Rate, Apr 25, 2023 US$ 3,143 3,282 3,729

8,478 9,077Collateral Mortgage Obligations – 2.3%Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-1, Class A-4, 5.451% Jan 15, 2049 US$ 200 179 174Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-3, Class A-4, Floating Rate, Jun 10, 2049 US$ 400 363 329Citigroup Mortgage Loan Trust Inc., Series 2005-6 Class A3, Callable, Floating Rate, Aug 25, 2035 US$ 1,082 1,088 912CS First Boston Mortgage Securities Corp., Series 2003-AR15, Class 2A1, Floating Rate, Jun 25, 2033 US$ 123 130 119

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



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Collateral Mortgage Obligations (cont’d)GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 2007-GG10, Class A-4, Floating Rate, Aug 10, 2045 US$ 2,100 1,861 1,846Indymac Indx Mortgage Loan Trust, Series 2004-AR11, Class 2A, Floating Rate, Dec 25, 2034 US$ 103 106 91Merrill Lynch Mortgage Investors Trust, Series 2003-A3, Class 1A, Floating Rate, May 25, 2033 US$ 104 109 98ML-CFC Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-9, Class A4, 5.700% Sep 12, 2049 US$ 2,100 1,823 1,685Wells Fargo Mortgage Backed Securities Trust, Series 2004-CC, Class A1, Floating Rate, Jan 25, 2035 US$ 303 308 294

5,967 5,548Corporate Bonds & Debentures – 35.1%American Express Centurion Bank, Series BKN1, Medium Term Notes, 6.000% Sep 13, 2017 US$ 1,200 1,260 1,273American Express Company, Senior Notes, 6.150% Aug 28, 2017 US$ 600 637 644American Express Credit Corporation, Medium Term Notes, Senior, Unsecured, Floating Rate, May 27, 2010 US$ 300 297 345American International Group, Inc., 4.900% Jun 2, 2014 500 328 175American International Group, Inc., Series 144A, 8.250% Aug 15, 2018 US$ 800 836 548American International Group, Inc., Series 144A, Fixed to Floating, Junior Subordinated, Callable, 8.175% May 15, 2058 US$ 900 902 299AT&T Corp., Unsecured Senior Notes, Multi-Coupon, 8.000% Nov 15, 2031 US$ 800 1,040 1,074Bank of America Corporation, Series L, Medium Term Notes, Senior, 5.650% May 1, 2018 US$ 1,400 1,409 1,439Bank of America NA, Global Bank Notes, Floating Rate, May 12, 2010 US$ 800 802 922Bank of America, Series L, Medium Term Notes, Senior, Unsecured, Unsubordinated, 3.125% Jun 15, 2012 US$ 4,200 5,450 5,038Bank of Nova Scotia, Senior Deposit Notes, Unsecured, 4.580% Feb 15, 2011 1,400 1,400 1,463Bank of Nova Scotia, Senior Deposit Notes, Floating Rate, Jun 23, 2011 1,400 1,400 1,392Bank of Nova Scotia, Deposit Notes, Senior Unsecured, 3.030% Jun 4, 2012 600 600 602Barclays Bank Plc, Series 144A, Subordinated, 10.179% Jun 12, 2021 US$ 1,120 1,407 1,346Bear Stearns Companies Inc., Senior Unsecured Notes, Floating Rate, Oct 2, 2009 1,000 985 998Caelus RE Ltd., Series 144A, Catastrophe Notes, Floating Rate, Jun 7, 2011 US$ 300 305 317Caisse Nationale des Caisses D'Epargne et de Prevoyance, Fixed to Floating, Subordinated Callable, Perpetual, 4.750% Feb 1, 2016 € 600 816 440Caisse Nationale des Caisses D'Epargne et de Prevoyance, Fixed to Floating, Subordinated, Callable, Perpetual, 6.117% Oct 30, 2017 € 100 139 83Canadian Natural Resources Ltd., Senior Notes, Callable, 5.450% Oct 1 2012 US$ 700 760 853Citigroup Finance Canada Inc., Series 2007-03, Medium Term Notes, Unsecured, 5.500% May 21, 2013 1,200 1,198 1,112Citigroup Funding Inc., Series D, Medium Term Notes, Senior, Floating Rate, May 7, 2010 US$ 600 604 683




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Corporate Bonds & Debentures (cont’d)Citigroup Inc., Senior Notes, 5.500% Apr 11, 2013 US$ 2,000 2,008 2,180Companie de Financement Foncier, Series 394, Euro Medium Term Notes, Callable, 4.550% Apr 28, 2017 500 500 498Consumers Energy Company, Series L, First Mortgage Bonds, 5.000% Feb 15, 2012 US$ 600 648 709Consumers Energy Company, Series B, First Mortgage Bonds, 5.375% Apr 15, 2013 US$ 700 753 836Credit Suisse, Senior Notes, Unsecured, Callable, 5.000% May 15, 2013 US$ 1,400 1,424 1,665Deutsch Telekom International Finance B.V., Multi-Couponed Bonds, 8.500% Jun 15, 2010 US$ 300 362 367Deutsch Telekom International Finance B.V., Multi-Couponed Bonds, 8.750% Jun 15, 2030 US$ 600 775 817Dexia Credit Local, Series 144A, Government Guaranteed Notes, Floating Rate, Sep 23, 2011 US$ 1,100 1,248 1,275Duke Energy Corporation, Unsecured Notes, Unsubordinated, 6.250% Jan 15, 2012 US$ 600 684 750Electricite de France S.A., Series 144A, 6.950% Jan 26, 2039 US$ 300 387 392EnCana Corporation, Senior Notes, Unsecured, Unsubordinated, Callable, 4.750% Oct 15, 2013 US$ 700 724 821Exelon Corporation, Senior Notes, Callable, 4.900% Jun 15, 2015 US$ 500 519 541GE Capital Canada Funding Company, Series A, Medium Term Notes, 5.730% Oct 22, 2037 2,400 2,399 2,069General Electric Capital Corporation, Series A, Global Medium Term Notes, Senior Unsecured, Floating Rate, May 11, 2016 US$ 2,300 2,146 2,130Golden Credit Card Trust, Series 2008-1, Credit Card Receivable Backed Notes, 5.106% Apr 15, 2011 1,800 1,800 1,882Goldman Sachs Group Inc., The, Senior Unsecured Notes, Unsubordinated, Floating Rate, May 18, 2015 € 500 608 692Goldman Sachs Group, Inc., The, Series B, Medium Term Notes, Senior, Unsecured, Floating Rate, Jul 22, 2015 US$ 300 257 300Goldman Sachs Group, Inc., The, Senior Unsecured Notes, Floating Rate Mar 22, 2016 US$ 500 413 492Goldman Sachs Group, Inc., Senior Unsecured Notes, Unsubordinated, Floating Rate, Apr 12, 2016 AU$ 1,500 1,107 1,101Goldman Sachs Group Inc., The, Senior Notes, 6.150% Apr 1, 2018 US$ 200 203 226Greater Toronto Airports Authority, Series 2002-2, Medium Term Notes, Secured, Callable, 6.250% Dec 13, 2012 800 867 873Greater Toronto Airports Authority, Series 2002-3, Medium Term Notes, Secured, Callable, 6.980% Oct 15, 2032 700 840 763Hewlett-Packard Company, Senior Notes, Floating Rate, May 27, 2011 US$ 300 341 353Honda Canada Finance Inc., Euro Medium Term Notes, Unsecured, Unsubordinated, Floating Rate, Mar 26, 2012 1,600 1,600 1,483HSBC Finance Capital Trust IX, Fixed to Floating, Callable, 5.911% Nov 30, 2035 US$ 200 220 123




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Corporate Bonds & Debentures (cont’d)JPMorgan Chase & Co., Series C, Medium Term Notes, Floating Rate, May 7, 2010 US$ 900 999 1,043Kinder Morgan Energy Partners, L.P., Senior Notes, Unsecured, Unsubordinated, 6.950% Jan 15, 2038 US$ 300 331 338Lehman Brothers Holdings Inc., Euro Medium Term Notes, Senior, Unsecured, 7.875% May 8, 2018 £ 400 796 111Lehman Brothers Holdings Inc., Series I, Medium Term Notes, Senior, Unsecured, Floating Rate, May 25, 2010 US$ 800 763 137Lloyds Banking Group Plc, Series 144A, Fixed to Floating Rate, Junior Subordinated, Unsecured, Tier 1, Perpetual, 5.920% Oct 1, 2015 US$ 300 319 122Macquarie Bank Ltd., Series 144A, Series B, Medium Term Notes, 2.600% Jan 20, 2012 US$ 1,400 1,755 1,638Macquarie Bank Ltd., Series RegS, 2.600% Jan 20, 2012 US$ 1,300 1,628 1,524Merna Reinsurance Ltd., Series 144A, Series A, Catastrophe Notes, Senior Secured, Floating Rate, Jul 7, 2010, Extendible to Jun 30, 2012 US$ 900 892 974Merrill Lynch & Co., Euro Medium Term Notes, Senior, Unsecured, Unsubordinated, Floating Rate, Jul 22, 2014 € 200 231 250Merrill Lynch & Co., Inc. Medium Term Notes, Floating Rate, May 12, 2010 US$ 1,600 1,603 1,851Morgan Stanley, Series F, Medium Term Notes, Floating Rate, May 14, 2010 US$ 800 804 928Morgan Stanley, Series F, Global Medium Term Notes, Senior, Unsecured, Floating Rate, Jan 9, 2012 US$ 400 418 419Morgan Stanley, Series G, Global Medium Term Notes, Senior, Unsecured, Floating Rate, Jan 16, 2017 € 400 410 511Morgan Stanley, Medium Term Note, Senior, Unsecured, 6.625% Apr 1, 2018 US$ 300 343 348NAV Canada, Series MTN 2007-1, Medium Term Notes, Floating Rate, May 3, 2010 1,250 1,250 1,238New York Life Global Funding, Maple Bond, 4.300% Mar 19, 2014 1,000 998 948Ohio Edison Company, Exchange Notes, Senior Notes, 5.450% May 1, 2015 US$ 700 745 801Pacific Gas & Electric Co., Unsecured Bonds, 6.050% Mar 1, 2034 US$ 500 549 603Rogers Communications, Inc., Senior Unsecured Note, Unsubordinated, 5.800% May 26, 2016 1,300 1,297 1,333Royal Bank of Scotland Group plc, Series 2851-1, Euro Medium Term Notes, Fixed to Floating, Callable, Perpetual, 6.666% Oct 5, 2017 1,500 1,500 600Royal Bank of Canada, Fixed to Floating, Medium Term Notes, Unsecured, Subordinated, Callable, 4.840% Mar 11, 2018 1,100 1,100 1,139Santander Perpetual Sa Unipersonal, Series 144A, Fixed to Floating, Perpetual, Subordinated, 6.671% Oct 29, 2049 US$ 400 389 344SG Capital Trust III, Fixed to Floating, Junior Unsecured Bond, Subordinated, Perpetual, Callable, Tier 1, 5.419% Nov 13, 2010 € 400 319 366Sprint Capital Corp., Senior Unsecured Notes, 8.375% Mar 15, 2012 US$ 900 1,115 1,031Suncor Energy Inc., Series 2, Medium Term Notes, Unsecured, Callable, 6.700% Aug 22, 2011 700 770 754Suncor Energy Inc., Senior Unsecured Notes, 6.850% Jun 1, 2039 US$ 1,100 1,123 1,263Swedbank AB, Series 144A, Government Guaranteed Notes, Floating Rate, Jan 14, 2013 US$ 3,900 4,411 4,521




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Corporate Bonds & Debentures (cont’d)Toronto-Dominion Bank, The, Senior Unsecured Deposit Notes, 4.854% Feb 13, 2013 1,800 1,800 1,903TransAlta Corporation, Medium Term Notes, Multi-Couponed Notes, 6.900% Nov 15, 2030 700 784 613TransCanada PipeLines Limited, Medium Term Notes, Putable, Multi-Coupon Notes, Callable, 7.340% Jul 18, 2028 700 849 796TransCanada PipeLines Limited, Senior Notes, Unsecured, 7.625% Jan 15, 2039 US$ 900 1,228 1,222UBS AG, Medium Term Notes, Senior, Unsecured, Subordinated, Callable, Floating Rate, May 5, 2010 US$ 1,700 1,733 1,983USB Capital IX, Fixed to Floating, Junior Notes, Subordinated, Perpetual, Callable, 6.189% Apr 15, 2011 US$ 250 279 196Verizon Communications Inc., Senior Notes, 5.350% Feb 15, 2011 US$ 900 984 1,092Verizon Communications Inc., Senior Notes, 6.400% Feb 15, 2038 US$ 900 901 1,025Wachovia Capital Finance of Canada, Medium Term Notes, Senior, Unsecured, 4.000% Feb 1, 2010 3,400 3,313 3,435Wells Fargo Finance Canada Corp., Medium Term Notes, Unsecured, Floating Rate, Dec 29, 2009 1,000 1,000 991XTO Energy Inc., Senior Unsecured Notes, 6.250% Apr 15, 2013 US$ 700 784 863YPG Holdings Inc., Series 4, Medium Term Notes, Unsecured, Callable, 5.250% Feb 15, 2016 400 390 354

86,311 83,992Mortgage Backed Securities – 1.3%Claregold Trust, Series 2006-1, Class A, 4.712% May 15, 2033 1,220 1,224 1,216Harborview Mortgage Loan Trust, Series 2003-1, Class A, Floating Rate, May 19, 2033 US$ 574 601 568Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2002-Canada 7, Class A1, 5.530% Apr 12, 2024 328 334 330Merrill Lynch Canada Financial Asset Inc., Series 2004-CA14, Class A1, 4.596% Oct 12, 2036 205 202 205Merrill Lynch Financial Assets Inc., Series 2006-CA20, Class A1, Mortgage Bonds, 4.510% Oct 12, 2039 266 266 264Schooner Trust, Series 2004-CCF1, Class A1, 4.580% Jun 12, 2037 633 637 628

3,264 3,211

Total Bonds & Debentures – 80.5% 194,754 192,544





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Total Investment Portfolio – 94.1% 226,825 225,112

Interest rate swap contracts – (0.4)% (861)

Unrealized Gain on Forward Currency Contracts – 0.2% 456

Unrealized Loss on Forward Currency Contracts – (3.1)% (7,519)

Unrealized Gain on Forward Bond Purchases – 0.7% 1,670

Unrealized Loss on Forward Bond Purchases – (0.1)% (328)

Unrealized Gain on To-Be-Announced Security – (0.0)% 53

Unrealized Loss on To-Be-Announced Security – (0.1)% (117)

Other Assets Less Liabilities – 8.7% 20,796

NET ASSETS – 100.0% 239,262

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

June 30, December 31, 2009 2008

Money Market Investments 13.6% 7.7%Government Bonds 13.9% 9.2%Provincial Bonds 22.7% 24.9%Municipal Bonds 1.4% 1.1%Asset-Backed Securities 3.8% 12.5%Collateral Mortgage Obligations 2.3% 2.6%Corporate Bonds 35.1% 33.3%Mortgage Backed Securities 1.3% 3.9%Total Swaps and Swaptions Agreements (0.4)% (8.1)%Unrealized Gain on To-Be-Announced Securities — 7.3%Unrealized Loss on To-Be-Announced Securities (0.1)% (6.8)%Unrealized Gain on Forward Currency Contracts 0.2% 1.0%Unrealized Loss on Forward Currency Contracts (3.1)% (0.6)%Unrealized Gain on Forward Bond Purchases 0.7% 4.4%Unrealized Loss on Forward Bond Purchases (0.1)% (0.2)%Other Assets Less Liabilities 8.7% 7.8%

100.0% 100.0%





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AU$ Interest Rate Swap Receive a fixed rate equal to 5.000% and pay floating rate based on a 6-month AU$-LIBOR Deutsche Bank AG A+ 15-Dec-15 1,080 (58)US$ Interest Rate Swap Pay a fixed rate equal to 4.000% and receive floating rate based on a 3-month US$-LIBOR JP Morgan Chase Bank, N.A. AA- 17-Jun-19 5,100 (123)US$ Interest Rate Swap Pay a fixed rate equal to 5.000% and receive floating rate based Merrill Lynch on a 3-month US$-LIBOR Capital Services Inc. A 17-Dec-38 4,100 (680)

Total Interest Rate Swap Contracts Value (861)

*Credit rating provided by Standard & Poor’s.

To-Be-Announced SecuritiesAs at June 30, 2009, the Portfolio had the following open positions:

Credit Par Value Market Unrealized Counterparty Rating)* (in thousands) Cost Value Gain

Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,200) (1,200) 1Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,201) (1,201) —Ginnie Mae, TBA, 5.500% Jul 20, 2039 Credit Suisse Securities (USA) LLC A 3,000 3,551 3,603 52

Total Unrealized Gain on To-Be-Announced Securities 1,202 53

Credit Par Value Market Unrealized Counterparty Rating)* (in thousands) Cost Value Loss

Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (8,400) (9,978) (10,085) (107)Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (400) (473) (480) (7)Fannie Mae, TBA, 5.500% Jul 13, 2039 Credit Suisse Securities (USA) LLC A (1,000) (1,198) (1,201) (3)

Total Unrealized Loss on To-Be-Announced Securities (11,766) (117)


Interest Rate Swap ContractsAs at June 30, 2009, the Portfolio had the following open positions:

Credit Expiry Notional FairSwap Counterparty Rating)* Date Amount Value

*Credit rating provided by Standard & Poor's.


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

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

2-Jul-09 £ 488 US$ (747) 0.6531 JP Morgan Chase Bank, N.A. AA- 652-Jul-09 US$ 481 CA$ (557) 0.8641 JP Morgan Chase Bank, N.A. AA- 32-Jul-09 US$ 300 £ (182) 1.6494 Royal Bank of Canada AA- 16-Jul-09 INR 168 US$ (3) 52.1200 Deutsche Bank AG A+ —6-Jul-09 US$ 3 INR (133) 0.0209 Citibank NA A+ —6-Jul-09 US$ 1 INR (35) 0.0209 Citibank NA A+ —23-Jul-09 AU$ 126 US$ (99) 1.2764 JP Morgan Chase Bank, N.A. AA- 323-Jul-09 US$ 1,000 AU$ (1,235) 0.8097 Royal Bank of Canada AA- 730-Jul-09 SG$ 210 US$ (139) 1.5063 JP Morgan Chase Bank, N.A. AA- 630-Jul-09 SG$ 250 US$ (170) 1.4678 Citibank NA A+ 34-Aug-09 US$ 2,699 CA$ (2,958) 0.9123 Royal Bank of Canada AA- 1804-Aug-09 US$ 1,847 CA$ (2,091) 0.8834 JP Morgan Chase Bank, N.A. AA- 574-Aug-09 US$ 3,507 CA$ (4,025) 0.8713 Citibank NA A+ 534-Aug-09 US$ 972 CA$ (1,100) 0.8837 JP Morgan Chase Bank, N.A. AA- 304-Aug-09 US$ 442 CA$ (500) 0.8848 JP Morgan Chase Bank, N.A. AA- 154-Aug-09 US$ 2,160 CA$ (2,500) 0.8638 JP Morgan Chase Bank, N.A. AA- 114-Aug-09 US$ 1,041 CA$ (1,200) 0.8678 JP Morgan Chase Bank, N.A. AA- 114-Aug-09 US$ 245 CA$ (281) 0.8713 Citibank NA A+ 44-Aug-09 US$ 259 CA$ (300) 0.8643 JP Morgan Chase Bank, N.A. AA- 26-Aug-09 US$ 14 PHP (688) 0.0209 Citibank NA A+ —27-Nov-09 MXN 579 US$ (39) 14.9050 Citibank NA A+ 5

Total Unrealized Gain on Forward Currency Contracts 456

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

Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buys (in $000s) Sells (in $000s) Rates Counterparty Rating)** Loss

2-Jul-09 CA$ 682 US$ (618) 1.1031 JP Morgan Chase Bank, N.A. AA- (37)2-Jul-09 £ 1,171 US$ (1,934) 0.6055 JP Morgan Chase Bank, N.A. AA- (9)2-Jul-09 US$ 21 £ (13) 1.6448 JP Morgan Chase Bank, N.A. AA- —2-Jul-09 US$ 296 £ (193) 1.5311 JP Morgan Chase Bank, N.A. AA- (26)2-Jul-09 US$ 2,687 £ (1,650) 1.6284 JP Morgan Chase Bank, N.A. AA- (32)15-Jul-09 CNY 289 US$ (45) 6.4180 Barclays Bank PLC AA- (3)15-Jul-09 CNY 289 US$ (45) 6.4160 HSBC BANK USA, N.A. AA (3)15-Jul-09 CNY 489 US$ (76) 6.4290 Deutsche Bank AG A+ (5)15-Jul-09 CNY 733 US$ (114) 6.4291 Barclays Bank PLC AA- (8)15-Jul-09 CNY 1,009 US$ (157) 6.4475 JP Morgan Chase Bank, N.A. AA- (10)15-Jul-09 CNY 937 US$ (146) 6.4160 Deutsche Bank AG A+ (10)15-Jul-09 CNY 1,008 US$ (157) 6.4425 JP Morgan Chase Bank, N.A. AA- (11)15-Jul-09 CNY 1,212 US$ (188) 6.4480 JP Morgan Chase Bank, N.A. AA- (12)15-Jul-09 CNY 1,698 US$ (260) 6.5292 HSBC BANK USA, N.A. AA (13)15-Jul-09 CNY 2,325 US$ (360) 6.4590 Deutsche Bank AG A+ (23)



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Unrealized Loss On Forward Currency Contracts (cont’d)As at June 30, 2009, the Portfolio had the following open positions:

Settlement Currency Position Currency Position Contract Credit UnrealizedDate Buys (in $000s) Sells (in $000s) Rates Counterparty Rating)* Loss

15-Jul-09 US$ 18 CNY (131) 0.1375 JP Morgan Chase Bank, N.A. AA- (1)15-Jul-09 US$ 39 CNY (287) 0.1374 JP Morgan Chase Bank, N.A. AA- (3)15-Jul-09 US$ 65 CNY (470) 0.1375 JP Morgan Chase Bank, N.A. AA- (5)15-Jul-09 US$ 79 CNY (573) 0.1375 JP Morgan Chase Bank, N.A. AA- (6)15-Jul-09 US$ 1,238 CNY (8,527) 0.1452 Barclays Bank PLC AA- (12)27-Jul-09 US$ 1,991 € (1,424) 1.3978 JP Morgan Chase Bank, N.A. AA- (9)30-Jul-09 US$ 2 KRW (2,038) 0.0007 Deutsche Bank AG A+ —30-Jul-09 US$ 2 KRW (2,012) 0.0007 Citibank NA A+ —30-Jul-09 US$ 295 SG$ (449) 0.6567 Citibank NA A+ (18)4-Aug-09 CA$ 557 US$ (481) 1.1570 JP Morgan Chase Bank, N.A. AA- (3)4-Aug-09 CA$ 915 US$ (806) 1.1355 JP Morgan Chase Bank, N.A. AA- (22)4-Aug-09 CA$ 2,625 US$ (2,285) 1.1488 JP Morgan Chase Bank, N.A. AA- (32)4-Aug-09 CA$ 8,944 US$ (7,992) 1.1192 Royal Bank of Canada AA- (350)4-Aug-09 CA$ 18,741 US$ (16,619) 1.1277 Royal Bank of Canada AA- (585)4-Aug-09 CA$ 101,243 US$ (92,450) 1.0951 JP Morgan Chase Bank, N.A. AA- (6,270)6-Aug-09 US$ 20 PHP (968) 0.0207 Citibank NA A+ —12-Aug-09 US$ 16 MYR (59) 0.2759 Deutsche Bank AG A+ (1)6-Oct-09 INR 35 US$ (1) 48.2900 Citibank NA A+ —6-Oct-09 INR 133 US$ (3) 48.2899 Citibank NA A+ —

Total Unrealized Loss on Forward Currency Contracts (7,519)



15


36,000 Government of Canada, 3.750% Jun 1, 2012 TD Securities (USA) LLC AA- 16-Jul-09 265 50,000 Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 161 17,100 Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 55 800 Government of Canada, 4.250% Jun 1, 2018 TD Securities (USA) LLC AA- 16-Jul-09 11 1,400 Province of Ontario, 4.300% Mar 8, 2017 TD Securities (USA) LLC AA- 16-Jul-09 21 7,000 Province of Ontario, 5.850% Mar 8, 2033 TD Securities (USA) LLC AA- 16-Jul-09 266 8,700 Province of Ontario, 4.700% Jun 2, 2037 TD Securities (USA) LLC AA- 16-Jul-09 274 1,600 Province of Quebec, Debentures, Unsecured, 4.50% Dec 1, 2016 TD Securities (USA) LLC AA- 16-Jul-09 31 5,400 Province of Quebec, Medium Term Notes, 4.50% Dec 1 2017 TD Securities (USA) LLC AA- 16-Jul-09 119 8,800 Province of Quebec, 5.000% Dec 1, 2038 TD Securities (USA) LLC AA- 16-Jul-09 467

Total Unrealized Gain on Forward Bonds 1,670

Par Credit Settlement Unrealized Value Description Counterparty Rating* Date Loss

(25,900) Government of Canada, 3.500% Jun 1, 2013 TD Securities (USA) LLC AA- 16-Jul-09 (328)

Total Unrealized Loss on Forward Bonds (328)


Forward Bond PurchasesAs at June 30, 2009, the Portfolio had the following open positions:

Par Credit Settlement Unrealized Value Description Counterparty Rating* Date Gain



16

Notes to Financial Statements June 30, 2009

(All amounts in thousands of dollars) (unaudited)

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

established by Declaration of Trust under the laws of the

Province of Ontario. BMO Harris Investment Management

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

The information provided in these unaudited financial

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

and 2008 except for the comparative information presented

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

2008. Financial information for the Portfolio established

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

as noted in Note 8(a).

(b) Independent Review Committee

On May 1, 2007, the Independent Review Committee

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

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

Review Committee for Investment Funds. On September

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

independent oversight regarding actual and perceived

conflicts of interest involving the Portfolio and performs

all other functions required of an independent review

committee under NI 81-107.

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

accordance with Canadian generally accepted accounting

principles (“GAAP”), which include estimates and

assumptions by management that may affect the reported

amounts of assets, liabilities, income and expenses during

the reported periods. Actual results could differ from

estimates. The following is a summary of significant

accounting policies adopted by the Portfolio. Certain prior

balances have been re-classified to conform with the

current period presentation.

Adoption of new accounting policies –

Financial Instruments Disclosure and Presentation

On January 1, 2008, the Portfolio adopted the Canadian

Institute of Chartered Accountants (“CICA”) Handbook

Section 3862, “Financial Instruments – Disclosures” and

Section 3863, “Financial Instruments – Presentation”. The

new standards replaced Section 3861, “Financial Instruments

– Disclosure and Presentation”. The new disclosure

standards increase the emphasis on the disclosure of risks

associated with financial instruments and how those risks

are managed.

The previous requirements related to presentation of

financial instruments have been carried forward unchanged.

Adoption of the new standards does not impact the daily

price of the Portfolio’s securities for subscription and

redemption purposes, nor for the calculation of Net Assets.

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

adoption of the new requirements.

Capital Disclosure

On January 1, 2008 the Portfolio adopted CICA Handbook

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

for disclosing information about an entity’s capital and how

it is managed. This standard applies to financial

statements relating to fiscal years beginning on or after

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

additional disclosures relating to the redeemable units of

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

financial position. The disclosure requirements

pertaining to Section 1535 are contained in Note 3.

Valuation of investments

The CICA Handbook Section 3855, “Financial Instruments

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

the fair value of financial instruments traded in active

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

The Canadian Securities Administrators (“CSA”) allows

investment funds to calculate the daily net asset value for

the purpose of processing unitholder transactions (“Net

Asset Value”) using fair value measures as defined in

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

The net asset value calculated in accordance with Section

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

Investments are categorized as held for trading in accordance

with Section 3855. Investments are recorded at their fair

value with the difference between this amount and cost

being recorded as unrealized appreciation or depreciation

17

Notes to Financial Statements (cont’d)

June 30, 2009

in value of investments in the Statement of Operations. In

the case of securities listed on stock exchanges, the fair

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

asset-backed securities and other debt instruments, the

fair value means the bid price provided by independent

security pricing services. Short term investments are

included in the Statement of Investment Portfolio at their

cost including applicable foreign exchange translations.

This value, together with accrued interest approximates

fair value using current bid price. Unlisted warrants are

valued based on a pricing model which considers factors

such as the market value of the underlying security, strike

price and terms of the warrant. Investments for which

reliable quotations are not readily available are valued at

their fair value as determined by the Manager using a

valuation technique that requires the use of inputs and

assumptions based on observable market data including

volatility, comparable securities and other applicable

rates or prices.

Investment transactions

Investment transactions are accounted for on the trade date.

Realized gains and losses from the sale of investments and

unrealized appreciation (depreciation) in the value of

investments are calculated with reference to the average

cost of the related investments which exclude brokerage

commissions and other trading expenses. All net realized

gains (losses), unrealized appreciation (depreciation) in

value, and transaction costs are attributable to investments

and derivative instruments which are deemed held for trading.

Transaction Costs, such as brokerage commissions, incurred

in the purchase and sale of securities by the Portfolio are

expensed and included in “Commissions and other portfolio

transaction costs” in the Statement of Operations.

Cash

Cash is comprised of cash on deposit and cash equivalents

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

Other assets and liabilities

Interest and dividends receivable, subscriptions receivable,

receivable for margin on derivative contracts and due from

broker, are designated as loans and receivables and recorded

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

expenses and redemptions payable are designated as

financial liabilities and reported at amortized cost. Other

assets and liabilities are short-term in nature and amortized

cost approximates fair value.

Cost of investments

The cost of investments represents the amount paid for

each security and is determined on an average cost basis.

Income recognition

Interest income is recognized on the accrual basis. Dividend

income is recognized on the ex-dividend date.

Distributions received from trust units are recorded as

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

best information available to the Manager. Due to the nature

of these investments, actual allocations could vary from

this information. Amounts recorded as a return of capital

reduce the cost of the investment in the trust unit.

Translation of foreign currencies

The fair value of investments and other assets and

liabilities in foreign currencies are translated into the

Portfolio’s functional currency at the rates of exchange

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

investments, income and expenses are translated at the

rates of exchange prevailing on the respective dates of

such transactions. Foreign exchange gains (losses) on

completed transactions are included in “Realized gain

(loss) on sale of investments” and unrealized gains

(losses) are included in “Unrealized appreciation

(depreciation) in value of investments” in the Statement

of Operations. Realized and unrealized exchange gains

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

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

Statement of Operations.

Forward currency contracts

A forward currency contract is an agreement between two

parties (the Portfolio and the counterparty) to purchase or

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

future date. The Portfolio may enter into forward currency

contracts for hedging purposes which can include the

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

investment or group of investments, either directly or

18


June 30, 2009

indirectly. The Portfolio also may enter into these contracts

for non-hedging purposes which can include increasing

the exposure to a foreign currency or to shift exposure to

foreign currency fluctuations from one country to another.

The value of forward currency contracts entered into by

the Portfolio is recorded as the difference between the

value of the contract on the valuation date and the value

on the date the contract originated.

Changes in the value of open forward currency contracts

at every valuation date are recognized in the Statement of

Operations.

Interest rate swap contracts

Interest rate swap contracts are agreements between two

parties to exchange periodic interest payments based on a

notional principal amount. The net periodic payments

received or paid from interest rate swap contracts are

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

in the Statement of Operations. Payments received or paid

when the Portfolio enters into the contract are recorded as

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

contract is terminated or expires, the payments received or

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

contracts” in the Statement of Operations. Payments

received or paid upon early termination are recorded as

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

Statement of Operations.

Interest rate swap agreements are valued based upon

quotations from independent sources. The change in

value is shown as unrealized appreciation (depreciation)

in value of investments in the Statement of Operations.

The Portfolio enters into interest rate swap agreements to

manage the exposure to interest rates.

Credit default swap contracts

A credit default swap contract is an agreement to transfer

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

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

seller of protection would be required to pay a notional or

other agreed upon value to the buyer of protection in the

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

would receive from the counterparty a periodic stream of

payments over the term of the contract provided that no

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

would keep the stream of payments and would have no

payment obligations.

The Portfolio as a buyer of protection would receive a

notional or other agreed upon value from the seller of

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

return, the Portfolio would be required to pay to the

counterparty a periodic stream of payments over the term

of the contract provided that no event of default occurs.

The credit default swap contract is fair valued daily based

upon quotations from independent market markers. Net

periodic payments are accrued daily and recorded as “Net

income (loss) from derivative contracts” in the Statement

of Operations. When credit default swap contracts expire or

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

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

Operations.

To-Be-Announced securities (“TBA”)

A TBA security is a forward contract for the purchase or

sale of mortgage backed securities in which the specified

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

securities are valued based upon quotations from indepen -

dent sources. The Portfolio may sell the security before it

is delivered. This will result in the Portfolio realizing a

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

derivative contracts” in the Statement of Operations.

Increase or decrease in net assets from operations per unit

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

in the Statement of Operations represents the increase

(decrease) in net assets from operations divided by the

average number of units outstanding during the period.

Short-term trading penalty

To discourage excessive trading, the Portfolio may, at the

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

penalty. This penalty is paid directly to the Portfolio.

19


June 30, 2009

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

basis and may be purchased or redeemed on any valuation

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

on which the Toronto Stock Exchange is open for business.

The Net Asset Value per unit for the purposes of subscription

or redemption is computed by dividing the Net Asset Value

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

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

units of the Portfolio outstanding at such time.

The capital of the Portfolio is represented by issued

redeemable units with no par value. The units are entitled

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

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

redemption. The Portfolio has no restrictions or specific

capital requirements on the subscriptions and redemptions

of units. The relevant movements are shown on the

Statement of Changes in Net Assets. In accordance with its

investment objectives and strategies, and the risk

management practices outlined in Note 6, the Portfolio

endeavours to invest the subscriptions received in

appropriate investments while maintaining sufficient

liquidity to meet redemptions, such liquidity being

augmented by short-term borrowing or disposal of

investments where necessary.

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

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

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

income for the tax year which ends in December, including

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

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

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

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

Income tax on net realized capital gains not paid or payable

is generally recoverable by virtue of refunding provisions

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

intention of the Portfolio to distribute all of its income and

sufficient net realized capital gains so that the Portfolio will

not be subject to income tax.

Non-capital losses that arose in taxation years before 2004

are available to be carried forward for seven years and

applied against future taxable income. Non-capital losses

that arose in 2004 and 2005 are available to be carried

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

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

Capital losses for income tax purposes may be carried

forward indefinitely and applied against capital gains

realized in future years.

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

income tax purposes as of the tax year ended December

2008 are included in Note 8.

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

transaction costs

The Portfolio is provided with certain facilities and

services by affiliates of the Manager. Expenses incurred in

the administration and custody of the Portfolio are paid to

BMO Trust Company (the Trustee and Custodian) and to

Jones Heward Investment Counsel Inc. (the Registrar) and

charged to the Portfolio. These expenses are included in

the unitholder servicing fees and custody fees in the

Statement of Operations. The Portfolio pays standard

brokerage commissions at market rates to BMO Nesbitt

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

amounts are included in commissions and other portfolio

transaction costs in the Statement of Operations.

(b) Other related party transactions

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

Portfolio enter into transactions or arrangements with or

involving other members of Bank of Montreal Group of

Companies, or certain other persons or companies that

are related or connected to the Manager of the Portfolio.

These transactions or arrangements may include

transactions or arrangements with or involving Bank of

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

Jones Heward Investment Counsel Inc., and may involve

the purchase or sale of portfolio securities through or from

a member of Bank of Montreal Group of Companies, the

purchase or sale of securities issued or guaranteed by a

member of Bank of Montreal Group of Companies,

entering into forward contracts with a member of Bank of

Montreal Group of Companies acting as counterparty, the

purchase or redemption of units of other BMO Harris

20


June 30, 2009

Private Portfolios or the provision of services to the

Manager.

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

A Portfolio’s exposure to financial risks is concentrated in

its investment holdings, including derivative instruments.

The Statement of Investment Portfolio groups securities

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

The Portfolio’s risk management practice includes the

monitoring of compliance to investment guidelines. The

Manager manages the potential effects of these financial

risks on the Portfolio’s performance by employing and

overseeing professional and experienced portfolio

advisors that regularly monitor the Portfolio’s positions,

market events and diversify investment portfolios within

the constraints of the investment guidelines.

(a) Currency risk

Currency risk is the risk that the value of investments

denominated in currencies, other than the functional

currency of the Portfolio, will fluctuate due to changes in

foreign exchange rates. Equities in foreign markets and

foreign bonds are exposed to currency risk as the prices

denominated in foreign currencies are converted to the

Portfolio’s functional currency in determining fair value.

The Portfolio may enter into forward currency contracts

for hedging purposes to reduce foreign currency exposure

or to establish exposure to foreign currencies. The

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

discussed in Note 8.

(b) Interest rate risk

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

interest-bearing investments will fluctuate due to changes

in market interest rates. The Portfolio’s exposure to

interest rate risk is concentrated in its investment in debt

securities (such as bonds, money market instruments and

debentures) and interest rate derivative instruments, if

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

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

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

(c) Other market risk

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

financial instrument will fluctuate as a result of changes

in market prices (other than those arising from interest

rate risk or currency risk), whether those changes are

caused by factors specific to the individual financial

instrument or its issuer, or factors affecting all similar

financial instruments traded in a market. Other assets and

liabilities are monetary items that are short term in nature

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

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

discussed in Note 8.

(d) Credit risk

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

issuer or counterparty to a financial instrument not being

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

securities includes consideration of the credit worthiness

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

derivative instruments is based on the Portfolio’s unrealized

gain of the contractual obligations with the counterparty

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

is represented by its carrying amount. The Portfolio’s

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

(e) Liquidity risk

The Portfolio’s exposure to liquidity risk is concentrated

in the daily cash redemptions of units. The Portfolio

primarily invests in securities that are traded in active

markets and can be readily disposed. In addition, the

Portfolio retains sufficient cash and cash equivalent positions

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

enter into over-the-counter derivative contracts or invest

in unlisted securities, which are not traded in an

organized market and may be illiquid. Securities for

which a market quotation could not be obtained and may

be illiquid are identified on the Statement of Investment

Portfolio. The proportion of illiquid assets to the total Net

Assets of the Portfolio is monitored by the Manager to

ensure it does not exceed the regulatory limit and does

not significantly affect the liquidity required to meet the

Portfolio’s financial obligations.

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

(a) Portfolio Information and Significant Events

The Portfolio’s inception date was February 1, 2006.

On June 24, 2009, the Manager announced the Portfolio will

be merged into the BMO Harris Canadian Total Return

Bond Portfolio. The Independent Review Committee for

this Portfolio has provided its approval in respect of this

merger. On July 31, 2009, the Manager received regulatory

approval to proceed with the proposed change. Investor

approval is not required for the merger. Upon implemen -

tation of the merger, holders of units of the Portfolio will

become holders of units of the BMO Harris Canadian Total

Return Bond Portfolio, and the Portfolio will be terminated.

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

June 30, 2009 December 31, 2008

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

9.87 — 9.87 9.39 — 9.39

(c) Income taxes

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

the following available non-capital and capital losses for

income tax purposes:

TotalTotal Non- Non-capital Losses That Expire in

Capital Capital 2011 andLosses Losses 2009 2010 thereafter

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

8,531 7,858 — — 7,858

(d) Related party transactions

The related party fees charged relating to unitholder

servicing and custodian fees are as follows:

June 30, 2009 June 30, 2008

Unitholder Servicing ($) 24 26

Custodian ($) 13 14

21


June 30, 2009

7. Transition to International Financial Reporting Standards

Canadian publicly accountable enterprises, which include

mutual funds, will be required to prepare their financial

statements in accordance with International Financial

Reporting Standards (IFRS), as issued by the International

Accounting Standards Board, for financial years beginning

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

Portfolio will adopt IFRS as the basis for preparing its

financial statements. The Portfolio will issue its financial

results for the annual period ended December 31, 2011

prepared in accordance with IFRS. It will also provide

comparative data on an IFRS basis, including an opening

statement of net assets as at January 1, 2010.

In order to meet the requirement to changeover to IFRS,

the Manager is following an orderly transition plan. Due

to anticipated changes to IFRS prior to transition, the

Manager is not in a position to determine the impact on

the Portfolio’s financial statements.

22


June 30, 2009

(e) Financial instrument risk

The Portfolio’s objective was to generate a combination of

income and capital growth. The Portfolio invested

primarily in a diversified pool of fixed income securities

such as bonds and debentures issued by governments and

corporations or obtains exposure to such securities. The

Portfolio may also invest in inflation protected securities,

securities backed by mortgages or other financial assets

and instruments that provide exposure to these fixed

income securities.

No changes affecting the overall level of risk of investing

in the Portfolio were made during the period.

Currency risk

The table below summarizes the Portfolio’s exposure to

currency risk. Amounts shown are based on the carrying

value of monetary and non-monetary assets (including

derivatives and the underlying principle (notional)

amount of forward currency contracts, if any).

June 30, 2009 December 31, 2008

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

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

Euro 91 — 17 —

Pound sterling 206 0.1 1,987 0.8

Japanese yen 10 — (10) —

U.S. dollar (9,760) (4.1) 8,538 3.6

Other Pacific currencies 87 — (59) —

Other Emerging Market currencies (9) — (21) —

All amounts in CA$

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

or weakened by 5% in relation to all foreign currencies,

with all factors remaining constant, Net Assets could

possibly have decreased or increased by approximately

$469 (December 31, 2008 – $523). In practice, actual

results may differ from this sensitivity analysis and the

difference could be material.

Interest rate risk

The following table summarizes the Portfolio’s exposure

to interest rate risk, as categorized by the earlier of

contractual re-pricing or maturity dates.

Interest Rate Exposure ($) as at June 30, 2009

< I year 1-3 years 3-5 years 5-10 years >10 years Total

74,454 19,289 17,407 60,387 53,992 225,529

Interest Rate Exposure ($) as at December 31, 2008

< I year 1-3 years 3-5 years 5-10 years >10 years Total

55,413 11,194 22,562 43,410 82,997 215,576

As at June 30, 2009, if the prevailing interest rates had

been raised or lowered by 1%, assuming a parallel shift in

the yield curve, with all other factors remaining constant,

Net Assets could possibly have decreased or increased,

respectively, by approximately $11,099 (December 31,

2008 – $10,236). The Portfolio’s interest rate sensitivity

was determined based on portfolio weighted duration. In

practice, actual results may differ from this sensitivity

analysis and the difference could be material.

Other market risk

The Portfolio’s significant market risk exposures have been

discussed in Note 6. The Portfolio was not significantly

exposed to other market risk as at June 30, 2009 and

December 31, 2008.

Credit risk

The Portfolio’s credit risk exposure grouped by credit

ratings are listed in the following table:

As a % of Net Assets

Credit Rating June 30, 2009 December 31, 2008

AAA 37.6 39.3

AA 15.3 33.3

A 30.1 12.9

BBB 7.0 5.0

Below BBB 0.9 0.9

Unrated 0.4 0.3

Total 91.3 91.7

23


June 30, 2009

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

issued an amendment to CICA Handbook Section 3862:

Financial Instruments – Disclosures. The new financial

reporting standards are effective for annual financial

statements relating to fiscal years ending after

September 30, 2009.

The amendments to the existing standard require

classification of the Portfolio’s assets and liabilities into

three levels based on the method used to value the assets

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

active markets for identical securities. Level 2 values are

based on significant observable market inputs, such as

quoted prices for similar securities and quoted prices in

inactive markets. Level 3 values are based on significant

unobservable inputs that reflect the Portfolio’s

determination of assumptions that market participants

might reasonably use in valuing the securities. The

valuation levels are not necessarily an indication of the

risk or liquidity associated with the underlying

investment. For example, Canadian government bonds

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

be reflected as Level 2 because the inputs used to

determine fair value may not always be quoted prices in

an active market.

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

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

financial statements are prepared for December 31, 2009.

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

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

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

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

AuditorsPricewaterhouseCoopers LLP77 King Street WestToronto, Ontario M5K 1G8

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

www.bmoharrisprivatebanking.com

(6/0

9)

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

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

semi-annual financial statements e.pdf · printing and stationary fees 2 4 118 128 net investment...

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