ANNUAL FINANCIAL STATEMENTS - Ccl group · of each of the Funds for the years then ended in...

• CC&L Core Income and Growth Fund

• CC&L Equity Income and Growth Fund

• CC&L Global Alpha Fund

• CC&L High Yield Bond Fund

ANNUAL FINANCIAL

STATEMENTSDecember 31, 2017

TABLE OF CONTENTS

CONNOR, CLARK & LUNN FUNDS INC. Annual Financial Statements for the year ending December 31, 2017

Independent Auditors’ Report .................................................................................................. 3

CC&L Core Income and Growth Fund........................................................................................ 5

CC&L Equity Income and Growth Fund ................................................................................... 17

CC&L Global Alpha Fund ........................................................................................................ 26

CC&L High Yield Bond Fund.................................................................................................... 39

Notes to Financial Statements ................................................................................................ 53

2

PricewaterhouseCoopers LLP 18 York Street, 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 23, 2018

Independent Auditor’s Report

To the Unitholders and Trustee of

CC&L Core Income and Growth Fund CC&L Equity Income and Growth Fund CC&L High Yield Bond Fund CC&L Global Alpha Fund (collectively the Funds)

We have audited the accompanying financial statements of each of the Funds, which comprise the statements of financial position as at December 31, 2017 and December 31, 2016 and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units and cash flows for the years 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 the financial statements of each of the Funds 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 each of 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 the Funds as at December 31, 2017 and December 31, 2016 and the financial performance and the cash flows of each of the Funds for the years then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants

CC&L Core Income and Growth FundStatements of Financial Position

As at December 31

2017 2016

Assets

Current assetsShort-term investments 2,394,636$ 4,794,403$Financial assets at fair value through profit or loss 152,962,940 141,758,842Subscriptions receivable 5,350 642,333Dividends receivable 341,990 277,050Interest receivable 175,937 179,151

155,880,853 147,651,779

Liabilities

Current liabilitiesBank indebtedness 93,990 177,227Management fees payable 59,844 70,032Accrued expenses 129,365 100,606Due to broker - 1,368,011Distributions payable 77 2,020Redemptions payable 141,714 74,585

424,990 1,792,481

Net Assets attributable to holders of redeemable units 155,455,863$ 145,859,298$

Net Assets attributable to holders of redeemable units for each seriesSeries A 76,443,737$ 76,625,004$

Series C 19,953,010$ 23,044,429$

Series F 59,059,116$ 46,189,865$

Redeemable units outstanding (note 6)

Series A 2,479,366 2,493,863

Series C 629,911 733,641

Series F 1,796,106 1,428,251

Net Assets attributable to holders of redeemable units per unitSeries A 30.83$ 30.73$

Series C 31.68$ 31.41$

Series F 32.88$ 32.34$

Approved by the Manager

Director Director

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

5

CC&L Core Income and Growth FundStatements of Comprehensive IncomeFor the years ended December 31

2017 2016

Income

Other income 14,673$ 11,156$

Realized foreign exchange gain (loss) on currency (15) -

Change in unrealized foreign exchange gain (loss) on currency 194 (708)Net gain (loss) on investments

Dividends 3,353,678 2,405,604Interest for distribution purposes 755,530 728,202Income from income trusts 622,250 804,629Net realized gain (loss) on investments 6,121,340 1,078,634Change in unrealized appreciation (depreciation) of investments (159,964) 13,728,776

Total net gain (loss) on investments 10,692,834 18,745,845

Total income (loss), net 10,707,686 18,756,293

Expenses (note 8)

Management fees 1,565,696 1,250,422Trailer fees (note 8) 875,817 756,435Audit fees 20,367 17,290Custodial fees 133,409 117,531Filing fees 26,300 22,865Fundserv fees 5,734 4,371

Independent Review Committee fees 7,241 6,042

Independent Review Committee insurance 864 720

Interest expense 1,050 924

Legal fees 3,191 10,936Securityholder reporting fees 205,656 175,286

Transaction costs (note 9) 96,610 104,379

Total operating expenses 2,941,935 2,467,201

Withholding taxes - (58)

Increase (decrease) in Net Assets attributable to holders of

redeemable units from operations 7,765,751$ 16,289,034$

Increase (decrease) in net assets attributable to holders of redeemable units for each seriesSeries A 3,534,270$ 8,590,536$

Series C 1,064,981$ 3,216,830$

Series F 3,166,500$ 4,481,668$

Weighted average units1

Series A 2,585,079 2,242,276

Series C 689,559 787,568

Series F 1,693,096 1,059,207

Increase (decrease) in net assets attributable to holders of redeemable units per unit1

Series A 1.37$ 3.83$

Series C 1.54$ 4.08$

Series F 1.87$ 4.23$

1 based on weighted average number of units outstanding during the year.


6

CC&L Core Income and Growth FundStatements of Changes in Net Assets Attributable to Holders of Redeemable UnitsFor the years ended December 31

Series A Series C Series F Total

2017 2017 2017 2017

Net Assets attributable to holders of redeemable units - Beginning of year 76,625,004$ 23,044,429$ 46,189,865$ 145,859,298$


redeemable units from operations 3,534,270 1,064,981 3,166,500 7,765,751

Redeemable unit transactions

Proceeds from redeemable units issued 15,617,855 301,105 24,069,075 39,988,035Reinvestments of distributions to holders of redeemable units 2,516,793 68,806 1,346,009 3,931,608Redemption of redeemable units (18,473,810) (3,629,636) (13,481,407) (35,584,853)

Net increase (decrease) from redeemable unit transactions (339,162) (3,259,725) 11,933,677 8,334,790

Distributions to holders of redeemable unitsFrom net investment income (751,266) (199,516) (496,396) (1,447,178)

Return of capital (2,625,109) (697,159) (1,734,530) (5,056,798)

Total distributions to holders of redeemable units (3,376,375) (896,675) (2,230,926) (6,503,976)


redeemable units during the year (181,267) (3,091,419) 12,869,251 9,596,565

Net Assets attributable to holders of redeemable units - End of year 76,443,737$ 19,953,010$ 59,059,116$ 155,455,863$

Series A Series C Series F Total

2016 2016 2016 2016



redeemable units from operations 8,590,536 3,216,830 4,481,668 16,289,034


Proceeds from redeemable units issued 24,887,754 293,080 28,842,452 54,023,286

Reinvestments of distributions to holders of redeemable units 2,171,192 55,654 799,517 3,026,363

Redemption of redeemable units (13,740,345) (3,981,902) (7,266,859) (24,989,106)

Net increase (decrease) from redeemable unit transactions 13,318,601 (3,633,168) 22,375,110 32,060,543

Distributions to holders of redeemable unitsFrom net investment income (716,148) (248,761) (344,623) (1,309,532)

Return of capital (2,233,713) (775,903) (1,074,900) (4,084,516)

Total distributions to holders of redeemable units (2,949,861) (1,024,664) (1,419,523) (5,394,048)


redeemable units during the year 18,959,276 (1,441,002) 25,437,255 42,955,529



7

CC&L Core Income and Growth FundStatements of Cash FlowsFor the years ended December 31

2017 2016

Cash flows from (used in) Operating activitiesIncrease (decrease) in Net Assets attributable to holders of redeemable units from operations 7,765,751$ 16,289,034$

Adjustments to reconcile to operating cash flows:

Change in unrealized foreign exchange (gain) loss on currency (194) 708

Net realized (gain) loss on investments (6,121,340) (1,078,634)Change in unrealized (appreciation) depreciation on investments 159,964 (13,728,776)

Purchase of investments (99,797,446) (113,329,777)Proceeds from investments sold 95,586,480 85,596,117(Increase) decrease in dividends receivable (64,940) (39,880)(Increase) decrease in interest receivable 3,214 8,213Increase (decrease) in management fees payable (10,188) 22,412Increase (decrease) in accrued expenses 28,759 19,447

Net cash flows from (used in) operating activities (2,449,940) (26,241,136)

Cash flows from (used in) Financing activitiesProceeds from redeemable units issued 34,490,816 49,099,863Redemption of redeemable units (29,383,522) (20,664,821)Distributions paid to holders of redeemable units, net of reinvestments (2,574,311) (2,365,945)

Net cash flows from (used in) financing activities 2,532,983 26,069,097

Increase (decrease) in cash (bank indebtedness)Change in unrealized foreign exchange gain (loss) on currency 194 (708)Net increase (decrease) in cash 83,043 (172,039)Bank indebtedness, beginning of year (177,227) (4,480)

Bank indebtedness, end of year (93,990)$ (177,227)$

Dividends received, net of withholding taxes* 3,288,738$ 2,365,666$

Interest received* 758,744 736,415

Interest paid* 1,050 924

*included in operating activities


8

CC&L Core Income and Growth FundSchedule of Investment Portfolio

As at December 31, 2017

Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Short-Term Investments

Treasury Bills (December 31, 2016: 3.29%)

Canadian Treasury Bill 0.884% 08-Mar-18 2,000,000 1,995,600 1,995,600

Canadian Treasury Bill 0.958% 22-Mar-18 400,000 399,036 399,036

2,394,636 2,394,636 1.54

Total Short-Term Investments 2,394,636 2,394,636 1.54

Bonds

Corporate Bonds (December 31, 2016: 15.43%)

Bank of Nova Scotia 2.620% 02-Dec-26 4,110,000 4,088,518 4,035,227

Bell Canada 3.350% 22-Mar-23 4,221,000 4,334,436 4,323,301

CU Inc. 4.085% 02-Sep-44 1,962,000 2,135,158 2,162,580

Enbridge Pipelines Inc. 4.450% 06-Apr-20 2,538,000 2,786,391 2,659,729

Hydro One Inc. 2.770% 24-Feb-26 3,128,000 3,148,606 3,124,334

Manufacturers Life Insurance Co. 3.181% 22-Nov-27 2,800,000 2,900,344 2,859,537

Rogers Communications Inc. 4.000% 06-Jun-22 2,725,000 2,865,912 2,879,331

Royal Bank of Canada 2.980% 07-May-19 1,833,000 1,864,800 1,856,137

Toronto-Dominion Bank 2.045% 08-Mar-21 2,218,000 2,235,339 2,199,171

Transcanada Trust 4.650% 18-May-77 1,750,000 1,757,525 1,748,140

Total Bonds 28,117,029 27,847,487 17.91

Canadian Common Stocks

Energy (December 31, 2016: 15.92%)

ARC Resources Ltd. 162,700 2,861,705 2,399,825

Crescent Point Energy Corp. 196,800 2,989,956 1,885,344

Enbridge Inc. 46,000 2,332,519 2,261,360

Enbridge Income Fund Holdings Inc. 79,400 2,257,950 2,366,914

Inter Pipeline Ltd. 53,300 1,363,496 1,387,399

Keyera Corp. 79,116 3,054,912 2,802,289

Suncor Energy Inc. 46,300 1,636,603 2,136,745

TransCanada Corp. 58,200 3,508,052 3,560,676

Vermilion Energy Inc. 13,300 584,735 607,544

Whitecap Resources Inc. 198,300 1,980,013 1,774,785

22,569,941 21,182,881 13.63

Capital Goods (December 31, 2016: 4.23%)

CAE Inc. 51,400 1,149,581 1,200,190

Finning International Inc. 58,300 1,508,776 1,849,276

SNC-Lavalin Group Inc. 61,200 3,385,943 3,491,460

WSP Global Inc. 33,460 1,285,695 2,004,589

7,329,995 8,545,515 5.50

Commercial Services & Supplies (December 31, 2016: 1.06%)

Transportation (December 31, 2016: 3.17%)

Canadian National Railway Co. 44,500 3,535,970 4,612,425 2.97

Consumer Services (December 31, 2016: 0.78%)

Materials (December 31, 2016: Nil%)

Agrium Inc. 16,300 2,229,618 2,356,654 1.52


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Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Media (December 31, 2016: 1.91%)

Shaw Communications Inc. 42,100 1,165,629 1,207,849

Thomson Reuters Corp. 38,000 2,069,667 2,082,020

3,235,296 3,289,869 2.12

Food & Staples Retailing (December 31, 2016: 6.60%)

Cott Corp. 177,875 3,174,800 3,731,818

Loblaw Cos. Ltd. 48,700 2,845,209 3,322,314

6,020,009 7,054,132 4.54

Financials (December 31, 2016: 16.23%)

Bank of Nova Scotia 91,171 6,061,317 7,395,792

Brookfield Asset Management Inc. 21,000 1,032,461 1,149,120

Royal Bank of Canada 96,200 7,079,890 9,874,930

TMX Group Ltd. 16,800 1,127,544 1,183,392

Toronto-Dominion Bank 141,057 7,112,449 10,388,848

22,413,661 29,992,082 19.29

Insurance (December 31, 2016: 7.02%)

Intact Financial Corp. 27,200 2,111,225 2,855,728

Manulife Financial Corp. 186,100 3,709,039 4,879,542

Sun Life Financial Inc. 41,000 1,619,138 2,127,080

7,439,402 9,862,350 6.34

Real Estate (December 31, 2016: 1.67%)

First Capital Realty Inc. 59,800 1,270,947 1,239,056 0.80

Software & Services (December 31, 2016: 1.64%)

Open Text Corp. 36,600 1,488,966 1,636,386 1.05

Telecommunication Services (December 31, 2016: 4.75%)

Rogers Communications Inc. 44,500 2,292,853 2,850,225

TELUS Corp. 48,700 2,261,774 2,319,094

4,554,627 5,169,319 3.33

Utilities (December 31, 2016: 1.09%)

Algonquin Power & Utilities Corp. 100,387 1,173,861 1,411,441

Northland Power Inc. 34,200 803,276 798,570

1,977,137 2,210,011 1.42

Total Canadian Common Stocks 84,065,569 97,150,680 62.51

Income Trusts (December 31, 2016: 8.76%)

Allied Properties REIT 93,900 3,525,771 3,951,312

Canadian Apartment Properties REIT 157,300 4,884,658 5,870,436

Chartwell Retirement Residences (REIT) 373,586 4,709,816 6,074,508

H&R REIT 57,700 1,309,221 1,232,472

RioCan REIT 51,200 1,372,156 1,247,232

Smart REIT 39,725 1,094,031 1,227,900

Total Income Trusts 16,895,653 19,603,860 12.60

Limited Partnerships (December 31, 2016: 6.93%)

Brookfield Infrastructure Partners LP 94,253 2,912,280 5,313,984

Brookfield Property Partners LP 109,405 2,742,756 3,046,929

Total Limited Partnerships 5,655,036 8,360,913 5.38


10



Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Embedded Broker Commissions (note 3) (86,775)

Total Investments 137,041,148 155,357,576 99.94

Other Assets Less Liabilities 98,287 0.06

Net Assets Attributable to Holders of Redeemable Units 155,455,863 100.00


11

CC&L Core Income and Growth FundNotes to Financial Statements – Fund Specific InformationDecember 31, 2017 and 2016

These fund specific notes shall be read in conjunction with the accompanying notes to the financial statementswhich are an integral part of these financial statements.

Reporting entity and investment objective (Note 1)

The CC&L Core Income and Growth Fund was originally established as a closed-end investment trust under thelaws of Ontario pursuant to a trust agreement (the “Core Income Trust Agreement”) between Aston Hill CapitalMarkets Inc. (formerly known as Connor, Clark & Lunn Capital Markets Inc.), the then manager of the Core IncomeFund, and RBC Investor Services Trust (formerly known as RBC Dexia Investor Services Trust) (“RBC IS”) datedNovember 29, 2001, as amended on June 8, 2010 and May 31, 2012.

On December 12, 2001, the Fund completed its initial public offering raising in excess of $100 million. On June 14,2010 (the “Merger Date”), the Fund merged with the Connor, Clark & Lunn Conservative Income Fund II(“Conservative II”), with the Fund as the continuing Fund (the “Merger”). The continuing Fund was renamed theConnor, Clark & Lunn Conservative Income & Growth Fund.

On February 1, 2011 (the “Second Merger Date”), the Fund merged with the Connor, Clark & Lunn ConservativeIncome Fund (“CCQ”) (the “Second Merger”). The Fund was also the continuing Fund.

The initial units of the Fund, each subsequently redesignated as Series C units, were delisted from the Toronto StockExchange on May 31, 2012 and the Fund converted to an open-end mutual fund trust on May 31, 2012, inaccordance with the provisions of the Trust Agreement (the “Conversion”). The Trust Agreement was amended onMay 31, 2012 to (i) to redesignate the outstanding units as Series C units and (ii) to create the Series A units andSeries F units. On May 31, 2012 the Fund changed its name to the CC&L Core Income and Growth Fund inconnection with the conversion.

Pursuant to an assignment and assumption agreement dated August 14, 2013 between Connor, Clark & Lunn FundsInc. (“CFI”) and Aston Hill Capital Markets Inc., management of the Fund and its related agreements, including theCore Income Trust Agreement, were assigned to CFI by Aston Hill Capital Markets Inc., an affiliate of CFI at thetime of the assignment. As a result of this assignment CFI became the manager of the Fund effective August 14,2013. The address of the Fund’s registered office is 2300 – 1111 West Georgia Street, Vancouver, British Columbia,V6E 4M3.

The investment objective of the Fund is to deliver an attractive and sustainable yield and growth to outpace inflationby investing in a diversified mix of dividend paying Canadian equities, REITs and equity securities of real estatecompanies, and corporate bonds.

The Fund seeks to achieve its investment objectives by diligently selecting and actively managing a diversifiedportfolio of high income investments across a broad range of income-oriented securities.

Fair value of financial instruments (Note 5)

Classification and measurement of investments and application of the fair value option

The tables below illustrate the classification of the Fund’s financial instruments measured at fair value at thereporting date. The amounts are based on the values recognized in the Statements of Financial Position.

12


As at December 31, 2017:

Assets at Fair Value Level 1 Level 2 Level 3 TotalShort-term investments -$ 2,394,636$ -$ 2,394,636$Bonds - 27,847,487 - 27,847,487Equities 97,150,680 - - 97,150,680Income trusts 19,603,860 - - 19,603,860Limited partnerships 8,360,913 - - 8,360,913

125,115,453$ 30,242,123$ -$ 155,357,576$


Assets at Fair Value Level 1 Level 2 Level 3 TotalShort-term investments -$ 4,794,403$ -$ 4,794,403$Bonds - 22,499,408 - 22,499,408Equities 96,383,960 - - 96,383,960Income trusts 12,770,620 - - 12,770,620Limited partnerships 10,104,854 - - 10,104,854

119,259,434$ 27,293,811$ -$ 146,553,245$

There were no transfers of financial assets between Level 1, Level 2 and Level 3 for the years ended December 31,2017 and 2016. All fair value measurements above are recurring.

Redeemable units of the Fund (Note 6)

The Fund has three series of units available for issue, namely Series A, C and F. Series A units were created on June13, 2012 and are available to all investors who purchase through dealers and who invest the minimum amount. OnMay 31, 2012 and following the Conversion mentioned in Note 1 above, the units of the Fund were delisted on theTSX and 2,157,741 units were redesignated as Series C units as the Fund was converted into an open-ended mutualfund. Series F units were created on June 19, 2012 and are available to investors who participate in fee basedprograms through their dealer.

For the years ended December 31, 2017 and 2016, changes in outstanding units were as follows:

Balance - Beginning Redeemable units Redeemable units Redeemable units Balance -2017 of year issued reinvested redeemed End of yearSeries A 2,493,863 507,167 82,285 (603,949) 2,479,366Series C 733,641 9,522 2,194 (115,446) 629,911

Series F 1,428,251 741,270 41,516 (414,931) 1,796,106

2016Series A 2,050,725 835,588 72,974 (465,424) 2,493,863Series C 855,826 9,424 1,834 (133,443) 733,641Series F 710,124 926,200 25,478 (233,551) 1,428,251

13


Taxation of Fund (Note 7)

As at December 31, 2017 the Fund had unused capital losses of $10,719,648 (2016 - $12,933,781), which may becarried forward indefinitely to reduce future realized capital gains. The Fund had unused non-capital losses of $Nil(2016 - $Nil).

Related party transactions and other expenses (Note 8)

Management fees

The Fund pays a management fee, which is accrued daily and paid monthly. The annual management fee rates,exclusive of taxes, are 1.90% for Series A, 1.50% for Series C, and 0.90% for Series F. The Fund pays the trailerfees (detailed below) and the Investment Manager out of these management fees.

The total management fees charged to the Fund during the year ended December 31, 2017, net of the trailer fees,were $1,565,696 including applicable taxes (2016 - $1,250,422).

Trailer fees

The Fund pays trailer fees to dealers whose clients hold the Series A and Series C units in the Fund. The trailer feesare paid by the Investment Manager out of management fees (detailed above) charged to the Fund. The trailer feesare calculated and payable each calendar quarter in arrears and are equal to 1.0% annually of the NAV of the SeriesA units and 0.40% annually of the NAV of Series C units. No trailer fees are charged to Series F units.

The total trailer fees paid by the Fund during the year ended December 31, 2017 were $875,817 (2016 - $756,435).

Brokerage commissions and other transaction costs (Note 9)

The Fund paid $96,610 (2016 - $104,379) in brokerage commissions and other transactions costs for portfoliotransactions during the year. The soft dollars paid during the year were $12,342 (2016 - $6,896).

Financial risk management (Note 10)

Currency risk

As at December 31, 2017 and 2016, currency risk was negligible as the Fund had no significant exposure to foreigncurrencies.

Interest rate risk

As at December 31, 2017, the Fund had direct exposure to interest rate risk through its investment in fixed incomeand short-term debt. The tables below summarize the Fund’s exposure to interest rate risk as at December 31, 2017and 2016. Amounts shown are based on the carrying values of debt instruments and exclude cash and preferredshares.

14



Total % ofDebt Instruments Grouped by Maturity Date $ Net Assets

Less than 1 year 2,394,636 1.51 to 3 years 4,515,866 2.93 to 5 years 5,078,502 3.3Greater than 5 years 18,253,119 11.7Total 30,242,123 19.4


Total % ofDebt Instruments Grouped by Maturity Date $ Net Assets


As at December 31, 2017, had prevailing interest rates raised or lowered by 1.0%, with all other variables heldconstant, net assets would have decreased or increased, respectively, by approximately $1,632,000 (2016 -$1,352,000). In practice, actual results may differ from this sensitivity analysis and the difference could be material.

Other price risk

As at December 31, 2017 and 2016, the Fund was exposed to other price risk primarily through its equityinvestments. Approximately 80.5% (2016 – 81.8%) of the Fund’s net assets were exposed to other price risk becauseof exposure to market fluctuations (not caused by other factors mentioned previously). If stock prices of theportfolio held increased or decreased by 10%, all other variables held constant, the net assets of the Fund wouldhave increased or decreased, respectively, by approximately $12,512,000 (2016 - $11,926,000). In practice, actualresults may differ from this sensitivity analysis and the difference could be material.

Credit risk

The tables below summarize the Fund’s exposure to credit risk as at December 31, 2017 and 2016. Amounts shownare based on the carrying values of debt instruments and the unrealized gain on derivative instruments outstandingwith counterparties. Credit ratings are determined from a composite of bond rating services such as Standard &Poor’s, Moody’s and Dominion Bond Rating Services.


Total % of

Debt and Counterparty Credit Ratings $ Net Assets

AAA 2,394,636 1.5%

AA 4,055,308 2.6%

A 12,181,678 7.8%

BBB 11,610,501 7.4%Total 30,242,123 19.4%

15



Total % of


AAA 4,794,403 3.3%

AA 5,075,434 3.5%

A 6,851,195 4.7%

BBB 10,572,779 7.2%Total 27,293,811 18.7%

Liquidity risk

The liquidity of some securities held by the Fund, which may need to be disposed of in order to meet immediate orshort-term obligations, are susceptible to rapid negative movements in credit markets; in particular non-governmentissued fixed income securities found on the Schedule of Investments Portfolio. Like all fixed income securities, themarket value of these securities is based on a credit risk premium or ‘spread’. The greater the credit risk associatedwith a security, the greater the spread demanded by holders. There is a negative correlation between the size of thespread and the value or price of the underlying security.

To mitigate this risk, the Fund retains sufficient cash, cash equivalents and marketable securities that can be readilydisposed of to maintain liquidity. Liquidity risk is considered negligible. The Fund’s financial liabilities are allshort-term in nature and are expected to mature within three months of the December 31, 2017 financial statementdate, with the exception of redeemable units, which are due on demand. All of the Fund’s financial liabilities as atDecember 31, 2016 matured within three months of the financial statement date.

Concentration risk

The Schedule of Investment Portfolio provides detailed information on the Fund’s concentration risk exposure as atDecember 31, 2017 and 2016.

16

CC&L Equity Income and Growth FundStatements of Financial Position

As at December 31

2017 2016

Assets

Current assetsShort-term investments 5,736,488$ 10,188,201$

Financial assets at fair value through profit or loss 293,016,571 248,418,563

Subscriptions receivable 352,619 1,599,617

Dividends receivable 774,919 537,291

Interest receivable 3,149 3,610

299,883,746 260,747,282

Liabilities

Current liabilitiesBank indebtedness 193,796 162,633

Management fees payable 207,878 194,864

Accrued expenses 90,852 44,055

Due to broker - 3,001,198

Distributions payable 808 4,027

Redemptions payable 240,367 385,585

733,701 3,792,362



Series F 218,297,570$ 178,465,513$


Series A 5,779,280 5,677,943

Series F 14,784,905 12,364,037

Net Assets attributable to holders of redeemable units per unitSeries A 13.99$ 13.82$

Series F 14.76$ 14.43$


Director Director


17

CC&L Equity Income and Growth FundStatements of Comprehensive IncomeFor the years ended December 31

2017 2016

Income

Other income 55,042$ 127,541$

Realized foreign exchange gain (loss) on currency (688) (2,741)

Change in unrealized foreign exchange gain (loss) on currency 268 (1,342)

Net gain (loss) on investments

Dividends 8,144,381 5,152,695

Interest for distribution purposes 56,313 45,914

Income from income trusts 766,824 892,021

Net realized gain (loss) on investments 6,389,845 1,160,598

Net change in unrealized appreciation (depreciation) on investments 6,093,190 28,889,511



Expenses (note 8)

Management fees 3,720,672 2,625,745

Audit fees 20,446 17,500

Custodial fees 79,114 60,966

Filing fees 30,668 30,494



Legal fees 3,191 14,008

Fundserv fees 10,288 6,444

Interest expense 519 939

Securityholder reporting fees 332,451 230,428



Withholding taxes - (41)



Increase (decrease) in Net Assets attributable to holders of redeemable units for each seriesSeries A 4,192,847$ 10,988,877$

Series F 12,923,537$ 22,091,843$


Series A 5,938,437 5,148,111

Series F 14,270,041 9,299,088

Increase (decrease) in Net Assets attributable to holders of redeemable units per unit1

Series A 0.71$ 2.13$

Series F 0.91$ 2.38$



18

CC&L Equity Income and Growth FundStatements of Changes in Net Assets Attributable to Holders of Redeemable UnitsFor the years ended December 31

Series A Series F Total

2017 2017 2017

Net Assets attributable to holders of redeemable units - Beginning of year 78,489,407$ 178,465,513$ 256,954,920$

Increase (decrease) in Net Assets attributable to holders of redeemable

units from operations 4,192,847 12,923,537 17,116,384


Proceeds from redeemable units issued 20,963,564 91,715,209 112,678,773Reinvestments of distributions to holders of redeemable units 2,912,157 5,564,255 8,476,412Redemption of redeemable units (22,434,884) (62,070,498) (84,505,382)

Net increase (decrease) from redeemable unit transactions 1,440,837 35,208,966 36,649,803

Distributions to holders of redeemable unitsFrom net investment income (1,067,412) (2,708,968) (3,776,380)From return of capital (2,203,204) (5,591,478) (7,794,682)

Total distributions to holders of redeemable units (3,270,616) (8,300,446) (11,571,062)


redeemable units during the year 2,363,068 39,832,057 42,195,125

Net Assets attributable to holders of redeemable units - End of year 80,852,475$ 218,297,570$ 299,150,045$

Series A Series F Total

2016 2016 2016

Net Assets attributable to holders of redeemable units - Beginning of year 56,692,982$ 85,761,301$ 142,454,283$


units from operations 10,988,877 22,091,843 33,080,720


Proceeds from redeemable units issued 29,211,138 109,992,653 139,203,791Reinvestments of distributions to holders of redeemable units 2,334,419 3,577,101 5,911,520Redemption of redeemable units (18,042,785) (37,808,074) (55,850,859)

Net increase (decrease) from redeemable unit transactions 13,502,772 75,761,680 89,264,452

Distributions to holders of redeemable unitsFrom net investment income (889,588) (1,699,587) (2,589,175)From return of capital (1,805,636) (3,449,724) (5,255,360)

Total distributions to holders of redeemable units (2,695,224) (5,149,311) (7,844,535)


redeemable units during the year 21,796,425 92,704,212 114,500,637

Net Assets attributable to holders of redeemable units - End of year 78,489,407$ 178,465,513$ 256,954,920$


19

CC&L Equity Income and Growth FundStatements of Cash FlowsFor the years ended December 31

2017 2016


Adjustments to reconcile to operating cash flows:Change in unrealized foreign exchange (gain) loss on currency (268) 1,342Net realized (gain) loss on investments (6,389,845) (1,160,598)Net change in unrealized (appreciation) depreciation on investments (6,093,190) (28,889,511)

Proceeds from investments sold 176,415,520 170,052,293Purchase of investments (207,079,978) (253,652,545)(Increase) decrease in dividends and interest receivable (237,167) (145,740)Increase (decrease) in management fees payable 13,014 85,292Increase (decrease) in accrued expenses 46,797 12,343


Cash flows from (used in) Financing activitiesProceeds from redeemable units issued 106,348,043 133,615,164Redemption of redeemable units (77,072,872) (51,092,065)Distributions paid to holders of redeemable units, net of reinvestments (3,097,869) (1,930,906)


Increase (decrease) in cash (bank indebtedness)Change in unrealized foreign exchange gain (loss) on currency 268 (1,342)Net increase (decrease) in cash (31,431) (24,211)Bank indebtedness, beginning of year (162,633) (137,080)

Bank indebtedness, end of year (193,796)$ (162,633)$

Dividends received, net of withholding taxes* 7,906,753$ 5,007,698$

Interest received* 56,774 45,130

Interest paid* 519 939



20

CC&L Equity Income and Growth FundSchedule of Investment Portfolio


Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%



Canadian Treasury Bill 1.090% 25-Jan-18 100,000 99,773 99,773

Canadian Treasury Bill 0.869% 08-Feb-18 350,000 349,293 349,293

Canadian Treasury Bill 0.872% 22-Feb-18 1,350,000 1,346,892 1,346,892



Canadian Treasury Bill 1.057% 05-Apr-18 700,000 698,034 698,034


Canadian Common Stocks

Energy (December 31, 2016: 20.66%)

ARC Resources Ltd. 433,800 7,637,615 6,398,550

Crescent Point Energy Corp. 510,000 7,874,318 4,885,800

Enbridge Inc. 121,600 6,261,889 5,977,856

Enbridge Income Fund Holdings Inc. 205,100 5,931,005 6,114,031

Inter Pipeline Ltd. 138,000 3,530,058 3,592,140

Keyera Corp. 223,713 8,681,326 7,923,914

Suncor Energy Inc. 138,600 5,010,948 6,396,390

TransCanada Corp. 154,500 9,340,861 9,452,310

Vermilion Energy Inc. 34,400 1,512,396 1,571,392

Whitecap Resources Inc. 513,900 5,189,139 4,599,405

60,969,555 56,911,788 19.01

Capital Goods (December 31, 2016: 5.52%)

CAE Inc. 135,800 3,037,202 3,170,930

Finning International Inc. 157,200 4,031,410 4,986,384

SNC-Lavalin Group Inc. 158,600 8,769,658 9,048,130

WSP Global Inc. 88,264 3,542,419 5,287,896

19,380,689 22,493,340 7.52

Commercial Services & Supplies (December 31, 2016: 1.52%)

Transportation (December 31, 2016: 4.08%)

Canadian National Railway Co. 117,800 9,471,332 12,209,970 4.08

Consumer Services (December 31, 2016: 1.01%)

Materials (December 31, 2016: Nil%)

Agrium Inc. 43,300 5,922,794 6,260,314 2.09

Media (December 31, 2016: 2.47%)

Shaw Communications Inc. 110,900 3,074,730 3,181,721

Thomson Reuters Corp. 102,800 5,632,756 5,632,412

8,707,486 8,814,133 2.95

Food & Staples Retailing (December 31, 2016: 8.57%)

Cott Corp. 469,125 8,359,505 9,842,243

Loblaw Cos. Ltd. 128,400 8,029,797 8,759,448

16,389,302 18,601,691 6.22

Banks (December 31, 2016: 21.69%)

Bank of Nova Scotia 243,450 16,703,328 19,748,664

Royal Bank of Canada 256,700 19,810,876 26,350,255

Toronto-Dominion Bank 391,306 21,116,946 28,819,687

57,631,150 74,918,606 25.04

The accompanying notes are an integral part of these financial statements. 21

CC&L Equity Income and Growth FundSchedule of Investment Portfolio


Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Diversified Financials (December 31, 2016: Nil%)

Brookfield Asset Management Inc. 58,400 2,873,203 3,195,648

TMX Group Ltd. 44,400 2,978,974 3,127,536

5,852,177 6,323,184 2.11

Insurance (December 31, 2016: 9.42%)

Intact Financial Corp. 73,950 6,221,282 7,764,011

Manulife Financial Corp. 491,950 10,058,557 12,898,929

Sun Life Financial Inc. 109,300 4,512,951 5,670,484

20,792,790 26,333,424 8.80

Real Estate (December 31, 2016: 0.74%)

Software & Services (December 31, 2016: 2.13%)

Open Text Corp. 107,100 4,395,996 4,788,441 1.60

Telecommunication Services (December 31, 2016: 6.17%)

Rogers Communications Inc. 142,100 7,437,039 9,101,505

TELUS Corp. 128,700 5,977,128 6,128,694

13,414,167 15,230,199 5.09

Utilities (December 31, 2016: 1.48%)

Algonquin Power & Utilities Corp. 268,567 3,145,417 3,776,052

Northland Power Inc. 95,700 2,250,562 2,234,595

5,395,979 6,010,647 2.01

Total Canadian Common Stocks 228,323,417 258,895,737 86.52

Income Trusts (December 31, 2016: 3.55%)

Allied Properties REIT 75,500 2,817,667 3,177,040

Canadian Apartment Properties REIT 105,800 3,513,476 3,948,457

Chartwell Retirement Residences (REIT) 492,458 6,643,452 8,007,367

Total Income Trusts 12,974,595 15,132,864 5.07

Limited Partnerships (December 31, 2016: 7.67%)

Brookfield Infrastructure Partners LP 258,771 9,433,396 14,589,508

Brookfield Property Partners LP 157,934 4,233,466 4,398,462

Total Limited Partnerships 13,666,862 18,987,970 6.36






CC&L Equity Income and Growth FundNotes to Financial Statements – Fund Specific InformationDecember 31, 2017 and 2016


Reporting entity and investment objective

The CC&L Equity Income and Growth Fund (the “Fund”) is an open-ended mutual fund trust established under thelaws of Ontario and is governed by the Declaration of Trust dated May 1, 2012 (the Declaration of Trust), asamended from time to time. The Fund commenced operations on May 1, 2012. The address of the Fund’s registeredoffice is 1400 – 130 King St. West, P.O. Box 240, Toronto, Ontario, Canada, M5X 1C8.

The investment objective of the Fund is to construct a diversified portfolio of primarily income oriented equityinstruments listed on a Canadian stock exchange with a view to maximize long-term total returns. The Fund seeksto generate returns in excess of the return of the S&P/TSX Composite Index.





Assets at Fair Value Level 1 Level 2 Level 3 TotalShort-term investments -$ 5,736,488$ -$ 5,736,488$Canadian equities 258,895,737 - - 258,895,737Limited partnerships 18,987,970 - - 18,987,970Income trusts 15,132,864 - - 15,132,864

293,016,571$ 5,736,488$ -$ 298,753,059$


Assets at Fair Value Level 1 Level 2 Level 3 TotalShort-term investments -$ 10,188,201$ -$ 10,188,201$Canadian equities 219,603,037 - - 219,603,037Limited partnerships 19,696,442 - - 19,696,442Income trusts 9,119,084 - - 9,119,084

248,418,563$ 10,188,201$ -$ 258,606,764$



The Fund has two series of units available for issue, namely Series A and F. Series A units are available to allinvestors who purchase through dealers and who invest the minimum amount. Series F units are available toinvestors who participate in fee based programs through their dealer.

23



Balance - Beginning Redeemable units Redeemable units Redeemable units Balance -2017 of year issued reinvested redeemed End of yearSeries A 5,677,943 1,513,892 211,143 (1,623,698) 5,779,280Series F 12,364,037 6,320,148 383,971 (4,283,251) 14,784,905

2016Series A 4,653,484 2,235,118 177,876 (1,388,535) 5,677,943Series F 6,815,739 8,089,122 261,336 (2,802,160) 12,364,037


As at December 31, 2017 the Fund had unused capital losses of $Nil (2016 - $Nil). There were $Nil (2016 - $Nil)unused non-capital losses available for tax purposes.


Management fees

The Fund pays a management fee, which is accrued daily and paid monthly. The annual management fee rates,exclusive of taxes, are 1.90% for Series A and 0.90% for Series F.


The Fund paid $183,316 (2016 – $190,150) in brokerage commissions and other transactions costs for portfoliotransactions during the year. The soft dollars paid during the year were $16,083 (2016 – $10,785).


Currency risk

As at December 31, 2017 and 2016, currency risk was negligible as the Fund had no significant exposure to foreigncurrencies.

Interest rate risk

As at December 31, 2017 and 2016, the Fund was exposed to interest rate risk through its investment in short-termdebt instruments. If prevailing interest rates had been raised or lowered by 1.0%, assuming a parallel shift in theyield curve, with all other factors remaining constant, net assets attributable to holders of redeemable units wouldhave decreased or increased by approximately $11,000 (2016 - $18,000). In practice, actual results may differ fromthis sensitivity analysis and the difference could be material.

24


Other price risk

As at December 31, 2017 and 2016, the Fund was exposed to other price risk primarily through its equityinvestments. Substantially all of the Fund’s net assets were exposed to other price risk because of exposure tomarket fluctuations (not caused by other factors mentioned previously). If stock prices of the portfolio heldincreased or decreased by 10%, with all other factors remaining constant, net assets attributable to holders ofredeemable units would have increased or decreased by approximately $29,302,000 (2016 - $24,842,000). Inpractice, actual results may differ from this sensitivity analysis and the difference could be material.

Credit risk

As at December 31, 2017 and 2016, the Fund was exposed to credit risk through its investment in short-term debtinstruments that comprised approximately 1.92% (2016 – 3.96%) of the Fund’s net assets attributable to holders ofredeemable units. All of the short-term investments were rated “AA” or better by Dominion Bond Rating Services(DBRS).

Liquidity risk

The Fund retains sufficient cash, cash equivalents and marketable securities that can be readily disposed of tomaintain liquidity. Liquidity risk is considered negligible. The Fund’s financial liabilities are all short-term in natureand are expected to mature within three months of the December 31, 2017 financial statement date, with theexception of redeemable units, which are due on demand. All of the Fund’s financial liabilities as at December 31,2016 matured within three months of the financial statement date.

Concentration risk


25

CC&L Global Alpha FundStatements of Financial Position

As at December 31

2017 2016

Assets

Current assetsCash 10,745,348$ 1,829,971$Financial assets at fair value through profit or loss 423,244,744 257,790,855Withholding taxes receivable 56,252 84,482Subscriptions receivable 665,301 1,071,940Dividends receivable 345,195 161,261Due from broker - 1,660,617

435,056,840 262,599,126

Liabilities

Current liabilitiesManagement fees payable 432,479 273,321Accrued expenses 33,420 17,995Due to broker 4,347,726 1,536,827Distributions payable 27,425 3,368Redemptions payable - 13,382

4,841,050 1,844,893


Net Assets attributable to holders of redeemable units for each seriesPrivate Client Series 366,083,902$ 243,430,957$

Series A 7,982,085$ 3,759,408$

Series F 12,986,515$ 2,801,830$

Series I 43,163,288$ 10,762,038$

Redeemable units outstanding (note 6)Private Client Series 20,864,770 14,440,695

Series A 744,971 361,308

Series F 1,189,951 266,459

Series I 4,045,524 1,049,836

Net Assets attributable to holders of redeemable units per unit

Private Client Series 17.55$ 16.86$Series A 10.71$ 10.40$Series F 10.91$ 10.52$Series I 10.67$ 10.25$


Director Director

26

CC&L Global Alpha FundStatements of Comprehensive IncomeFor the years ended December 31

2017 2016

Income

Realized foreign exchange gain (loss) on currency 373,011$ (99,552)$

Change in unrealized foreign exchange gain (loss) on currency (175,026) 11,875Net gain (loss) on investments

Interest for distribution purposes 5,306 621Dividends 4,270,961 3,070,003Income from income trusts 870,455 311,300Net realized gain (loss) on investments 35,523,313 16,376,763Change in unrealized appreciation (depreciation) of investments 4,258,578 2,396,380



Expenses (note 8)

Management fees 1,852,041 1,299,940

Audit fees 20,749 17,799Custodial fees 101,161 75,324Filing fees 2,161 4,139



Interest expense 19,595 7,733Securityholder reporting fees 25,523 26,742



Withholding taxes (607,827) (364,132)



Increase (decrease) in Net Assets attributable to holders of redeemable units for each seriesPrivate Client Series 37,273,498$ 18,363,255$Series A 569,505$ 281,229$Series F 655,401$ 303,173$Series I 3,418,526$ 762,041$


Private Client Series 16,191,712 13,388,866Series A 504,293 385,486Series F 550,898 298,655Series I 2,323,094 1,000,000


Private Client Series 2.30$ 1.37$Series A 1.13$ 0.73$Series F 1.19$ 1.02$Series I 1.47$ 0.76$


27

CC&L Global Alpha FundStatements of Changes in Net Assets Attributable to Holders of Redeemable UnitsFor the years ended December 31

2017 2016

Net Assets attributable to holders of redeemable units - Beginning of year 243,430,957$ 231,125,315$


redeemable units from operations 37,273,498 18,363,255


Proceeds from redeemable units issued 90,909,638 26,519,015Reinvestments of distributions to holders of redeemable units 30,442,857 12,442,256Redemption of redeemable units (5,331,562) (32,571,435)

Net increase (decrease) from redeemable unit transactions 116,020,933 6,389,836

Distributions to holders of redeemable unitsFrom net investment income (2,282,282) (1,556,237)

From net realized capital gains (28,359,204) (10,891,212)

Total distributions to holders of redeemable units (30,641,486) (12,447,449)

Increase (decrease) in Net Assets attributable to holders of redeemable units during the

year 122,652,945 12,305,642

Net Assets attributable to holders of redeemable units - End of year 366,083,902$ 243,430,957$

2017 2016



redeemable units from operations 569,505 281,229


Proceeds from redeemable units issued 5,345,823 1,013,488Reinvestments of distributions to holders of redeemable units 450,859 157,715Redemption of redeemable units (1,510,971) (1,336,418)

Net increase (decrease) from redeemable unit transactions 4,285,711 (165,215)

Distributions to holders of redeemable unitsFrom net realized capital gain (632,539) (170,096)

Total distributions to holders of redeemable units (632,539) (170,096)


year 4,222,677 (54,082)


Private Client Series

Series A

28


2017 2016



redeemable units from operations 655,401 303,173


Proceeds from redeemable units issued 11,118,011 1,949,062Reinvestments of distributions to holders of redeemable units 619,669 128,358Redemption of redeemable units (1,148,538) (1,989,562)

Net increase (decrease) from redeemable unit transactions 10,589,142 87,858

Distributions to holders of redeemable unitsFrom net investment income (25,744) (9,326)

From net realized capital gain (1,034,114) (126,087)

Total distributions to holders of redeemable units (1,059,858) (135,413)


year 10,184,685 255,618


2017 2016

Net Assets attributable to holders of redeemable units - Beginning of year 10,762,038$ -$


redeemable units from operations 3,418,526 762,041


Proceeds from redeemable units issued 30,086,177 10,000,000Reinvestments of distributions to holders of redeemable units 3,673,457 510,878Redemption of redeemable units (1,103,451) -


Distributions to holders of redeemable unitsFrom net investment income (329,323) (27,415)

From net realized capital gain (3,344,136) (483,466)

Total distributions to holders of redeemable units (3,673,459) (510,881)


year 32,401,250 10,762,038


Series F

Series I

29


2017 2016


41,916,930 19,709,698


Proceeds from redeemable units issued 137,459,649 39,481,565Reinvestments of distributions to holders of redeemable units 35,186,842 13,239,207Redemption of redeemable units (9,094,522) (35,897,415)


Distributions to holders of redeemable unitsFrom net investment income (2,637,349) (1,592,978)

From net realized capital gain (33,369,993) (11,670,861)

Total distributions to holders of redeemable units (36,007,342) (13,263,839)


year 169,461,557 23,269,216



redeemable units from operations

Total

30

CC&L Global Alpha FundStatements of Cash FlowsFor the years ended December 31

2017 2016


Adjustments to reconcile to operating cash flows:Change in unrealized foreign exchange (gain) loss on currency 175,026 (11,875)Net realized (gain) loss on investments (35,523,313) (16,376,763)Change in unrealized (appreciation) depreciation of investments (4,258,578) (2,396,380)

Purchase of investments (241,531,263) (124,844,584)

Proceeds from investments sold 120,330,781 122,087,383(Increase) decrease in dividends receivables (183,934) 85,559(Increase) decrease in withholding taxes receivable 28,230 (26,914)Increase (decrease) in management fees payable 159,158 25,158Increase (decrease) in accrued expenses 15,425 (7,353)


Cash flows from (used in) Financing activities

Proceeds from issue of redeemable units 136,964,830 38,324,343Redemption of redeemable units (8,206,446) (35,526,937)Distributions paid to holders of redeemable units, net of reinvestments (796,443) (31,302)


Increase (decrease) in cash (bank indebtedness)Change in unrealized foreign exchange gain (loss) on currency (175,026) 11,875Net increase (decrease) in cash 9,090,403 1,010,033

Cash, beginning of year 1,829,971 808,063

Cash, end of year 10,745,348$ 1,829,971$

Dividends received, net of withholding taxes* 3,507,430$ 2,764,516$Interest received* 5,306 621Interest paid* 19,595 7,733


31

CC&L Global Alpha FundSchedule of Investment Portfolio


Number of

Shares

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Global Common Stocks

Canada - Canadian Dollar (December 31, 2016: 3.10%)

Boardwalk Real Estate Investment Trust 99,959 4,531,991 4,307,233

Extendicare Inc. 1,166,482 10,207,610 10,673,310

14,739,601 14,980,543 3.47

Australia - Australian Dollar (December 31, 2016: 3.92%)

Alumina Ltd. 1,412,935 2,416,093 3,364,724

Greencross Ltd. 1,762,320 10,609,485 10,863,167

Perpetual Ltd. 68,315 2,982,787 3,236,932

16,008,365 17,464,823 4.05

Austria - European Euro (December 31, 2016: 1.07%)

Palfinger AG 92,282 5,134,740 4,726,839

Schoeller-Bleckmann Oilfield Equipment AG 39,370 4,096,873 5,034,830

9,231,613 9,761,669 2.27

Finland - European Euro (December 31, 2016: 1.01%)

Outotec OYJ 538,931 4,220,943 5,756,944 1.34

France - European Euro (December 31, 2016: 1.82%)

LISI 79,119 4,716,544 4,773,376

Paris Orleans SA 114,738 5,405,277 5,271,153

10,121,821 10,044,529 2.33

Germany - European Euro (December 31, 2016: 2.44%)

Carl Zeiss Meditec AG 125,867 5,571,676 9,801,817 2.28

Hong Kong - Hong Kong Dollar (December 31, 2016: 1.45%)

Vitasoy International Holdings Ltd. 2,078,529 3,678,001 6,662,870 1.55

Israel - US Dollar (December 31, 2016: 5.29%)

Caesarstone Sdot-Yam Ltd. 246,572 9,461,669 6,796,702

NICE Systems Ltd. 93,591 6,744,045 10,777,764

SodaStream International Ltd. 36,400 1,395,173 3,208,009

17,600,887 20,782,475 4.83

Italy - European Euro (December 31, 2016: 3.04%)

Salini Impregilo SpA 873,548 4,203,737 4,229,347

Autogrill SpA 546,940 5,801,175 9,463,199

10,004,912 13,692,546 3.18

Japan - Japanese Yen (December 31, 2016: 11.34%)

Advance Residence Investment Corp. (REIT) 2,168 6,598,994 6,681,845

CyberAgent Inc. 160,254 4,347,031 7,842,638

Fuji Seal International Inc. 190,700 5,658,371 7,816,076

Horiba Ltd. 96,836 4,606,397 7,313,196

Internet Initiative Japan Inc. 237,000 5,945,081 5,427,568

Lintec Corp. 221,468 6,331,229 7,746,977

Mabuchi Motor Co. Ltd. 69,700 4,786,991 4,736,686

THK Co. Ltd. 115,600 4,090,447 5,438,746

42,364,541 53,003,732 12.32

Jersey - British Pound (December 31, 2016: 2.36%)

IWG PLC 2,864,299 11,398,501 12,496,111 2.90

Dutch Guilder - NLG (December 31, 2016: 1.22%)

Cimpress NV 21,097 1,788,515 3,168,832 0.74

Luxembourg - Hong Kong Dollar (December 31, 2016: 1.72%)

L'Occitane International SA 3,791,851 9,539,067 8,703,011 2.03


32



Number of

Shares

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Norway - Norwegian Krone (December 31, 2016: 2.66%)

Opera Software ASA 835,439 4,702,680 3,352,967

Tomra Systems ASA 325,078 4,086,095 6,548,269

8,788,775 9,901,236 2.31

Spain - European Euro (December 31, 2016: 1.56%)

Melia Hotels International SA 345,516 5,677,342 5,978,145 1.39

Sweden - Swedish Krona (December 31, 2016: 0.95%)

Hemfosa Fastigheter AB 335,649 4,568,007 5,644,993 1.31

Switzerland - Swiss Franc (December 31, 2016: 1.28%)

Schweiter Technologies AG 3,128 3,153,912 5,083,498 1.18

United Kingdom - British Pound (December 31, 2016: 8.17%)

BTG PLC 464,673 5,004,652 6,005,308

Jardine Lloyd Thompson Group PLC 516,423 8,506,587 12,175,329

Savills PLC 397,200 4,399,995 6,685,078

17,911,234 24,865,715 5.78

United States of America - US Dollar (December 31, 2016: 44.46%)

ACI Worldwide Inc. 366,715 9,083,038 10,416,265

ATN International Inc. 87,946 7,637,591 6,089,180

Cambrex Corp. 107,357 7,067,181 6,456,593

Carriage Services Inc. 128,947 4,481,369 4,153,796

Customers Bancorp Inc. 94,827 3,098,996 3,087,949

Daseke Inc. 132,800 2,260,760 2,377,728

Envestnet Inc. 82,669 4,012,931 5,163,446

Ethan Allen Interiors Inc. 126,657 4,885,791 4,538,654

Farmland Partners Inc. 659,027 8,564,456 7,167,286

Gentherm Inc. 154,892 6,718,758 6,161,756

Globus Medical Inc., Class A 122,767 4,726,120 6,322,011

Kerry Logistics Network Ltd. 3,761,292 6,680,299 6,679,625

Limoneira Co. 511,851 13,341,621 14,365,587

Lindsay Corp. 47,800 5,311,549 5,282,364

MarineMax Inc. 120,609 2,651,674 2,856,099

Motorcar Parts of America Inc. 252,263 9,444,104 7,898,627

Omnicell Inc. 154,298 7,132,436 9,376,351

ORBCOMM Inc. 334,371 3,878,215 4,264,893

Ormat Technologies Inc. 99,661 4,779,641 7,986,666

PRA Group Inc. 251,661 10,820,900 10,468,533

Rayonier Inc. 160,166 5,212,330 6,347,480

RLI Corp. 71,181 4,345,742 5,410,013

SolarEdge Technologies Inc. 43,674 1,308,169 2,054,777

Summit Materials Inc. 134,672 4,389,315 5,305,092

The Boston Beer Co., Inc. 12,976 2,620,102 3,106,943

Titan Machinery Inc. 120,118 2,605,613 3,186,110

UMB Financial Corp. 114,827 9,176,512 10,347,263

Unit Corp. 196,693 4,726,472 5,421,799

US Physical Therapy Inc. 35,349 2,588,695 3,197,762

US Silica Holdings Inc. 69,500 3,087,433 2,835,313

VeriFone Systems Inc. 321,109 7,838,694 7,125,294

174,476,507 185,451,255 43.12

Total Global Common Stocks 370,844,220 423,244,744 98.38


33



Number of

Shares

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%



Other Assets Less Liabilities 6,971,046 1.62

Net Assets Attributable To Holders Of Redeemable Units 430,215,790 100.00


34

CC&L Global Alpha FundNotes to Financial Statements – Fund Specific InformationDecember 31, 2017 and 2016



The CC&L Global Alpha Fund was originally established as an open-end investment trust, called Private ClientGlobal Small Cap Portfolio, under the laws of British Columbia pursuant to a supplemental trust agreementbetween Connor, Clark & Lunn Private Capital Ltd. (“CC&L PC”), the then manager of the CC&L Global AlphaFund, and RBC Investor Services Trust (“RBC IS”) dated July 15, 2008, which incorporated by reference amaster trust agreement between CC&L PC and RBC IS dated January 1, 2005, as amended from time to time(together, “Prior Global Alpha Trust Agreement”). On March 14, 2014 the name of the fund changed from PrivateClient Global Small Cap Portfolio to the CC&L Global Alpha Fund.

Pursuant to an assignment and assumption agreement dated March 14, 2014 between Connor, Clark & LunnFunds Inc. (“CFI”) and CC&L PC, an affiliate of CFI, management of the CC&L Global Alpha Fund and itsrelated agreements, including the Prior Global Alpha Trust Agreement, were assigned to CFI by CC&L PC. As aresult of this assignment CFI became the manager of the CC&L Global Alpha Fund effective March 14, 2014.Contemporaneous with the assignment, CFI and RBC IS entered into a supplemental trust agreement dated March14, 2014 in order to, inter alia, (i) amend and restate the Prior Global Alpha Trust Agreement in its entirety, (ii)continue the CC&L Global Alpha Fund under the laws of Ontario, (iii) incorporate by reference the CFI MasterTrust Agreement, (iv) redesignate the then existing Series A units of the CC&L Global Alpha Fund to PrivateClient Series units, which are not offered under the simplified prospectus and (v) create the Series A and Series Funits, which are offered under the simplified prospectus. The CC&L Global Alpha Fund, prior to obtaining areceipt for the simplified prospectus, existed as a non-public mutual fund. The address of the Fund’s registeredoffice is 1400 – 130 King St. West, P.O. Box 240, Toronto, Ontario, Canada, M5X 1C8.

The investment objective of the Fund is to provide unitholders with long term capital appreciation by investing ina portfolio of global small capitalization equity securities of issuers in countries and industries throughout theworld. The Fund may make such investments directly, or indirectly through other funds, including funds managedby the Manager.





Assets at Fair Value Level 1 Level 2 Level 3 Total

Global common stocks 423,244,744$ -$ -$ 423,244,744$

423,244,744$ -$ -$ 423,244,744$



Global common stocks 257,790,855$ -$ -$ 257,790,855$

257,790,855$ -$ -$ 257,790,855$

There were no transfers of financial assets between Level 1, Level 2 and Level 3 for the years ended December31, 2017 and 2016. All fair value measurements above are recurring.

35



The Fund has four series of redeemable units available for issue, namely Series A, Series F, Series I and PrivateClient Series. Series A and Series F redeemable units are offered to the public by way of prospectus. Series I andPrivate Client Series redeemable units are issued pursuant to statutory exemptions from registration andprospectus requirements.

The different rights and obligations of the outstanding series are detailed below:

Private Client Series:

Private Client Series units are only available through CC&L PC and are offered primarily to individual investors.Income and capital gains distributions are reinvested by issuing additional Private Client Series units.Management fees of 0.50% are charged by the Manager to the Fund. Unitholders may also pay a separate fee toCC&L PC.

Series A:

Series A units are available to all investors who purchase through dealers and who invest the minimum amount.Income and capital gains distributions are reinvested by issuing additional Series A units. Management fees of2.20% are charged by the Manager to the Fund.

Series F:

Series F units are available to investors who participate in fee based programs through their dealer, whose dealerhas signed a Series F agreement with the Manager and who invest the minimum amount. Income and capital gainsdistributions are reinvested by issuing additional Series F units. Management fees of 1.20% are charged by theManager to the Fund. Series F unitholders may pay a separate fee to their dealer.

Series I:

Series I units are not available by prospectus and are only available to institutional and other comparable investorsas the Manager may determine from time to time. Income and capital gains distributions are reinvested by issuingadditional Series I units. Management fees for Series I are negotiable and charged to unitholders directly outsidethe Fund.


Balance - Redeemable Redeemable Redeemable Balance -2017 Beginning of year units issued units reinvested units redeemed End of yearPrivate Client Series 14,440,695 4,985,273 1,730,927 (292,125) 20,864,770Series A 361,308 477,509 42,079 (135,925) 744,971Series F 266,459 968,475 56,720 (101,703) 1,189,951Series I 1,049,836 2,748,858 343,448 (96,618) 4,045,524

2016Private Client Series 14,166,344 1,672,676 742,203 (2,140,528) 14,440,695Series A 374,779 104,609 15,160 (133,240) 361,308Series F 249,547 200,828 12,254 (196,170) 266,459Series I - 1,000,000 49,836 - 1,049,836

As at December 31, 2016, one unitholder held 100% of the Fund’s Series I outstanding redeemable units.

36



As at December 31, 2017, the Fund had unused capital losses of $Nil (2016 - $Nil), which may be carried forwardindefinitely to reduce future net realized capital gains. There were $Nil (2016 - $Nil) unused non-capital lossesavailable for tax purposes.


Management fees

Management fees are charged either to the Fund or to unitholders directly by the Manager as detailed in Note 6above.


The Fund paid $572,536 (2016 – $555,121) in brokerage commissions and other transaction costs for portfoliotransactions during the year. There were no soft dollars paid during the year (2016 - $Nil).


Currency risk

The tables below summarize the Fund’s exposure to foreign currencies as at December 31, 2017 and 2016 inCanadian dollars. Amounts shown are based on the carrying values of monetary assets (including cash) as well asthe underlying principal amounts of forward foreign currency contracts, as applicable. Other financial assets suchas interest and dividends receivable and amounts due to or from broker that are denominated in foreign currenciesdo not expose the fund to significant currency risk.

The tables also illustrate the potential impact on Net Assets attributable to holders of redeemable units as a resultof 5% change in these currencies relative to the Canadian dollar, with all other factors remaining constant. Inpractice, actual results may differ from this sensitivity analysis and the difference could be material.


Monetary Assets % of Impact onCurrency (Liabilities) ($) Net Assets Net Assets ($)Australian Dollar 1,476,557 0.3 73,828British Pound 2,992,286 0.7 149,614European Union Euro (106,046) - (5,302)Danish Krone 9,072 - 454Japanese Yen 523,561 0.1 26,178Norweigan Krone 32 - 2Singapore Dollar 336 - 17Swedish Krona 36,548 - 1,827Swiss Franc 148 - 7US Dollar 6,582,349 1.5 329,117Total 11,514,843 2.6 575,742

37



Monetary Assets % of Impact onCurrency (Liabilities) ($) Net Assets Net Assets ($)Australian Dollar 640 - 32British Pound 40,427 - 2,021European Union Euro 64,703 - 3,235Hong Kong Dollar (135,912) (0.1) (6,796)Danish Krone 8,641 - 432Japanese Yen (420,525) (0.2) (21,026)Norweigan Krone 1,185,831 0.5 59,292Singapore Dollar 333 - 17Swedish Krona 94 - 5Swiss Franc 471,083 0.2 23,554US Dollar 1,125,281 0.4 56,264Total 2,340,596 0.8 117,030

Interest rate risk

As at December 31, 2017 and 2016, interest rate risk was negligible as the Fund had no significant exposure tolong-term interest-bearing investments.

Other price risk

As at December 31, 2017 and 2016, the Fund was exposed to other price risk primarily through its equityinvestments. Substantially all of the Fund’s net assets were exposed to other price risk because of exposure tomarket fluctuations (not caused by other factors mentioned previously). If stock prices of the portfolio heldincreased or decreased by 10%, with all other factors remaining constant, net assets would have increased ordecreased by approximately $42,324,000 (2016 - $25,779,000). In practice, actual results may differ from thissensitivity analysis and the difference could be material.

Credit risk

As at December 31, 2017 and 2016, credit risk was negligible as the Fund had no significant exposure to debt orderivative instruments.

Liquidity risk

The Fund retains sufficient cash, cash equivalents and marketable securities that can be readily disposed of tomaintain liquidity. Liquidity risk is considered negligible. The Fund’s financial liabilities are all short-term innature and are expected to mature within three months of the December 31, 2017 financial statement date, withthe exception of redeemable units, which are due on demand. All of the Fund’s financial liabilities as at December31, 2016 matured within three months of the financial statement date.

Concentration risk

The Schedule of Investment Portfolio provides detailed information on the Fund’s concentration risk exposure asDecember 31, 2017 and 2016.

38

CC&L High Yield Bond FundStatements of Financial Position

As at December 31

2017 2016

Assets

Current assetsCash 49,063$ 40,427$Short-term investments 1,196,196 4,194,483Financial assets at fair value through profit or loss 74,802,206 96,539,563Daily variation margin 58,426 126,375Unrealized appreciation on currency forward contracts 649,385 72,649Unrealized appreciation on futures contracts 74,499 16,801Subscriptions receivable 6,879 46,402Due from broker - 3,050Interest receivable 961,109 1,343,212

77,797,763 102,382,962

Liabilities

Current liabilitiesManagement fees payable - 4,807Accrued expenses 26,774 27,780Distributions payable - 497Unrealized depreciation on currency forward contracts 73,376 683,704Unrealized loss on futures contracts 1,311 -Redemptions payable 84,013 57,863

185,474 774,651



Series F 888,378$ 6,807,522$

Series I 75,035,794$ 85,699,322$


Series A 194,655 1,019,303

Series F 101,162 760,614

Series I 7,937,486 8,925,778

Net Assets attributable to holders of redeemable units per unit

Series A 8.67$ 8.93$

Series F 8.78$ 8.95$

Series I 9.45$ 9.60$


Director Director


39

CC&L High Yield Bond FundStatements of Comprehensive IncomeFor the years ended December 31

2017 2016

Income

Other income 7,519$ 200$

Realized foreign exchange gain (loss) on currency (49,215) (220,357)

Change in unrealized foreign exchange gain (loss) on currency (222) 218

Net gain (loss) on investmentsInterest for distribution purposes 4,422,088 5,333,868Income from income trusts - 33,572Net realized gain (loss) on investments (215,192) 1,787,020Net realized gain (loss) on currency forward contracts 454,165 2,728,247Net realized gain (loss) on futures contracts 32,051 76,375Net change in unrealized appreciation (depreciation) on investments (2,825,164) (2,612,607)Net change in unrealized appreciation (depreciation) on currency forward contracts 1,187,064 305,169Net change in unrealized appreciation (depreciation) on futures contracts 56,387 16,801



Expenses (note 8)

Management fees 166,405 235,674Audit fees 20,258 17,116Custodial fees 77,720 74,405Legal fees 3,191 10,182Filing fees 20,951 18,543

Fundserv fees 570 539



Interest expense 2,442 1,059Securityholder reporting fees 20,809 19,419

Transaction costs (note 9) 328 7,027

Total operating expenses 320,749 390,726

Withholding taxes (13,646) (20,389)



Increase (decrease) in Net Assets attributable to holders of redeemable units for each seriesSeries A 98,042$ 621,083$

Series F 76,531$ 348,447$

Series I 2,560,513$ 6,067,861$


Series A 712,538 1,097,068

Series F 533,403 573,624

Series I 8,561,631 8,681,936


Series A 0.14$ 0.57$

Series F 0.14$ 0.61$

Series I 0.30$ 0.70$



40

CC&L High Yield Bond FundStatements of Changes in Net Assets Attributable to Holders of Redeemable UnitsFor the years ended December 31

Series A Series F Series I Total

2017 2017 2017 2017



units from operations 98,042 76,531 2,560,513 2,735,086


Proceeds from redeemable units issued 210,773 1,378,554 25,124,156 26,713,483Reinvestments of distributions to holders of redeemable units 204,113 109,192 3,698,928 4,012,233Redemption of redeemable units (7,684,373) (7,303,791) (38,330,908) (53,319,072)

Net increase (decrease) from redeemable unit transactions (7,269,487) (5,816,045) (9,507,824) (22,593,356)

Distributions to holders of redeemable unitsFrom net investment income (241,693) (179,472) (3,712,955) (4,134,120)From return of capital (212) (158) (3,262) (3,632)

Total distributions to holders of redeemable units (241,905) (179,630) (3,716,217) (4,137,752)


redeemable units during the year (7,413,350) (5,919,144) (10,663,528) (23,992,390)

Net Assets attributable to holders of redeemable units - End of year 1,688,117$ 888,378$ 75,035,794$ 77,612,289$

Series A Series F Series I Total

2016 2016 2016 2016



units from operations 621,083 348,447 6,067,861 7,037,391


Proceeds from redeemable units issued 3,130,382 3,729,189 17,235,687 24,095,258

Reinvestments of distributions to holders of redeemable units 391,610 193,099 4,290,037 4,874,746

Redemption of redeemable units (3,242,308) (708,909) (38,301,221) (42,252,438)

Net increase (decrease) from redeemable unit transactions 279,684 3,213,379 (16,775,497) (13,282,434)

Distributions to holders of redeemable unitsFrom net investment income (473,264) (281,904) (4,295,930) (5,051,098)

Total distributions to holders of redeemable units (473,264) (281,904) (4,295,930) (5,051,098)


redeemable units during the year 427,503 3,279,922 (15,003,566) (11,296,141)



41

CC&L High Yield Bond FundStatements of Cash FlowsFor the years ended December 31

2017 2016


Adjustments to reconcile to operating cash flows:Change in unrealized foreign exchange (gain) loss on currency 222 (218)Net realized (gain) loss on investments 215,192 (1,787,020)Net change in unrealized (appreciation) depreciation on investments 2,825,164 2,612,607Net change in unrealized (appreciation) depreciation on currency forward contracts (1,187,064) (305,169)Net change in unrealized (appreciation) depreciation on futures contracts (56,387) (16,801)

Proceeds from investments sold 148,786,012 223,905,385Purchase of investments (127,087,674) (213,429,376)(Increase) decrease in daily variation margin 67,949 (126,375)(Increase) decrease in interest receivable 382,103 433,114Increase (decrease) in management fees payable (4,807) 2,905Increase (decrease) in accrued expenses (1,006) (21)

Net cash flows from (used in) operating activities 26,674,790 18,326,422

Cash flows from (used in) Financing activitiesProceeds from redeemable units issued 25,617,803 21,648,822Distributions paid to holders of redeemable units, net of reinvestments (126,016) (175,855)Redemption of redeemable units (52,157,719) (39,896,078)

Net cash flows from (used in) financing activities (26,665,932) (18,423,111)

Increase (decrease) in cashChange in unrealized foreign exchange gain (loss) on currency (222) 218Net increase (decrease) in cash 8,858 (96,689)Cash, beginning of year 40,427 136,898

Cash, end of year 49,063$ 40,427$

Interest received, net of withholding taxes* 4,790,545$ 5,746,593$

Interest paid* 2,442 1,059



42

CC&L High Yield Bond FundSchedule of Investment Portfolio


Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%



Canadian Treasury Bill* 0.849% 25-Jan-18 100,000 99,805 99,805 0.13

Bankers' Acceptances (December 31, 2016: 4.03%)

Bank of Montreal 1.402% 19-Mar-18 300,000 299,001 299,001

Bank of Nova Scotia 1.339% 22-Jan-18 100,000 99,671 99,671

Bank of Nova Scotia 1.239% 25-Jan-18 150,000 149,547 149,547

Bank of Nova Scotia 1.420% 19-Mar-18 100,000 99,682 99,681

Royal Bank of Canada 1.300% 05-Jan-18 100,000 99,723 99,723

Royal Bank of Canada 1.449% 27-Mar-18 350,000 348,768 348,768

1,096,392 1,096,391 1.41


Bonds

Canada - Canadian Dollar (December 31, 2016: 39.22%)

407 International Inc. 5.750% 14-Feb-36 600,000 780,023 776,644

Air Canada 4.750% 06-Oct-23 400,000 401,500 414,667

AutoCanada Inc. 5.625% 25-May-21 930,000 930,432 954,800

Baytex Energy Corp. 6.625% 19-Jul-22 360,000 346,500 351,151

Bell Canada Inc. 2.900% 12-Aug-26 715,000 713,091 691,187

Bell Canada Inc. 4.750% 29-Sep-44 490,000 523,740 529,398

Brookfield Residential Properties Inc. 6.125% 15-May-23 365,000 365,000 379,783

Capital Power Corp. 4.284% 18-Sep-24 415,000 417,897 422,005

Cascades Inc. 5.500% 15-Jul-21 530,000 547,588 544,575

Choice Properties LP 3.600% 20-Sep-21 1,785,000 1,904,095 1,832,845

Choice Properties REIT 4.903% 05-Jul-23 250,000 286,175 271,737

Choice Properties REIT 4.293% 08-Feb-24 955,000 1,049,971 1,008,140

Cominar Real Estate Investment Trust 4.164% 01-Jun-22 1,000,000 986,110 994,721

Crew Energy Inc. 6.500% 14-Mar-24 235,000 234,413 230,324

Enbridge Gas Distribution Inc. 4.000% 22-Aug-44 83,000 90,074 90,235

Enbridge Inc. 3.940% 30-Jun-23 1,353,000 1,433,775 1,409,977

Enbridge Inc. 3.200% 08-Jun-27 187,000 178,379 180,685

Enbridge Inc. 4.240% 27-Aug-42 449,000 421,561 430,744

Enbridge Inc. 5.375% 27-Sep-77 375,000 375,000 373,736

First Capital Realty Inc. 4.790% 30-Aug-24 660,000 726,759 712,527

Gibson Energy Inc. 5.250% 15-Jul-24 410,000 409,948 413,075

H&R Real Estate Investment Trust 3.369% 30-Jan-24 915,000 917,141 906,223

H&R REIT 2.923% 06-May-22 185,000 185,178 182,427

Inter Pipeline Ltd. 3.776% 30-May-22 728,000 778,786 756,101

Inter Pipeline Ltd. 2.608% 13-Sep-23 1,385,000 1,364,046 1,352,909

Inter Pipeline Ltd. 2.734% 18-Apr-24 985,000 996,062 959,855

Iron Mountain Canada Operations ULC 5.375% 15-Sep-23 410,000 430,500 432,550

Loblaw Cos. Ltd. 6.540% 17-Feb-33 358,000 468,819 454,278

Mattamy Group Corp. 6.500% 01-Oct-25 220,000 220,000 229,831

North West Redwater Partnership / NWR Financing Co. Ltd. 4.250% 01-Jun-29 1,107,000 1,219,121 1,201,158

North West Redwater Partnership / NWR Financing Co. Ltd. 4.050% 22-Jul-44 230,000 243,306 240,291

Parkland Fuel Corp. 6.000% 21-Nov-22 535,000 536,967 559,632

Parkland Fuel Corp. 5.625% 09-May-25 445,000 448,375 450,423

Pembina Pipeline Corp. 3.540% 03-Feb-25 985,000 1,008,817 992,797

Pembina Pipeline Corp. 3.710% 11-Aug-26 757,000 757,244 761,755




Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Rogers Communications Inc. 6.110% 25-Aug-40 322,000 402,846 408,502

Russel Metals Inc. 6.000% 19-Apr-22 440,000 451,000 454,483

Shaw Communications Inc. 6.750% 09-Nov-39 1,434,000 1,805,855 1,849,619

Smart REIT 3.444% 28-Aug-26 600,000 574,339 585,567

Sobeys Inc. 3.520% 08-Aug-18 1,030,000 1,039,270 1,039,242

Sobeys Inc. 4.700% 08-Aug-23 815,000 837,869 848,332

Superior Plus LP 5.250% 27-Feb-24 495,000 496,050 505,209

TELUS Corp. 4.400% 01-Apr-43 218,000 220,396 217,749

TELUS Corp. 4.700% 06-Mar-48 500,000 518,870 524,767

Toromont Industries Ltd. 3.842% 27-Oct-27 129,000 129,000 132,068

Videotron Ltd. 5.625% 15-Jun-25 1,345,000 1,387,955 1,445,016

30,559,843 30,503,740 39.30

Canada - US Dollar (December 31, 2016: 4.81%)

Bank of Nova Scotia 4.650% 31-Dec-49 1,715,000 2,139,364 2,137,357

Bombardier Inc. 7.500% 15-Mar-25 167,000 203,013 211,920

Emera Inc. 6.750% 15-Jun-76 200,000 286,691 283,165

Norbord Inc. 5.375% 01-Dec-20 550,000 629,912 730,467

NOVA Chemicals Corp. 5.250% 01-Jun-27 260,000 329,694 325,766

Teck Resources Ltd. 3.750% 01-Feb-23 1,030,000 1,342,115 1,298,599

Valeant Pharmaceuticals International Inc. 7.000% 15-Mar-24 100,000 136,755 134,378

Videotron Ltd. 5.125% 15-Apr-27 230,000 306,740 301,866

5,374,284 5,423,518 6.99

Cayman Islands - US Dollar (December 31, 2016: 0.67%)

Finland - US Dollar (December 31, 2016: Nil%)

Nokia OYJ 4.375% 12-Jun-27 230,000 296,974 285,584 0.37

Italy - US Dollar (December 31, 2016: Nil%)

Telecom Italia SpA 5.303% 30-May-24 495,000 675,617 664,397 0.86

United Kingdom - British Pound (December 31, 2016: 0.28%)

International Game Technology PLC. 6.500% 15-Feb-25 350,000 491,150 492,251 0.63

United Kingdom - US Dollar (December 31, 2016: Nil%)

Sensata Technologies UK Financing Co. PLC 6.250% 15-Feb-26 250,000 351,810 342,210 0.44

United States of America - US Dollar (December 31, 2016: 49.86%)

ADT Corp. 3.500% 15-Jul-22 400,000 497,092 496,166

AECOM 5.125% 15-Mar-27 200,000 266,838 255,889

AES Corp. 5.500% 15-Apr-25 300,000 405,740 396,557

Alcoa Inc. 5.720% 23-Feb-19 111,000 159,717 144,180

Alcoa Inc. 5.125% 01-Oct-24 745,000 1,028,693 999,209

Ally Financial Inc. 5.125% 30-Sep-24 825,000 1,142,440 1,120,250

Ally Financial Inc. 8.000% 01-Nov-31 360,000 573,660 588,633

Altice US Finance I Corp 5.500% 15-May-26 210,000 274,600 268,710

AmeriGas Partners LP / AmeriGas Finance Corp. 5.750% 20-May-27 275,000 377,897 349,728

Antero Resources Corp. 5.125% 01-Dec-22 240,000 322,997 308,224

Ball Corp. 5.250% 01-Jul-25 340,000 483,423 464,874

Bank of America Corp. 6.300% 31-Dec-49 635,000 900,217 901,039

CCO Holdings LLC 5.750% 15-Feb-26 625,000 842,006 815,393

CCO Holdings LLC 5.500% 01-May-26 550,000 732,910 708,070

Centene Corp. 4.750% 15-Jan-25 320,000 427,294 408,961

CF Industries Inc. 5.375% 15-Mar-44 200,000 231,802 248,396




Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

Cheniere Corpus Christi Holdings LLC 5.125% 30-Jun-27 350,000 465,630 455,260

Citigroup Inc. 6.125% 31-Dec-49 775,000 917,475 1,034,149

Citigroup Inc. 6.250% 31-Dec-49 650,000 834,993 899,317

CommScope Technologies Finance LLC 5.000% 15-Mar-27 230,000 289,064 288,898

Continental Resources Inc. 4.900% 01-Jun-44 230,000 268,168 276,650

CSC Holdings LLC 5.500% 15-Apr-27 210,000 276,629 269,038

DCP Midstream LLC 4.750% 30-Sep-21 600,000 823,747 779,958

DCP Midstream Operating LP 3.875% 15-Mar-23 397,000 494,083 496,797

Dell Inc. 5.400% 10-Sep-40 230,000 264,504 264,403

Diamond 1 Finance Corp. / Diamond 2 Finance Corp. 5.875% 15-Jun-21 570,000 798,848 742,745

DISH DBS Corp. 7.750% 01-Jul-26 540,000 767,979 713,802

Embarq Corp. 7.995% 01-Jun-36 100,000 132,920 122,475

Energy Transfer Equity LP 5.875% 15-Jan-24 225,000 296,346 297,418

Equinix Inc. 5.375% 15-May-27 410,000 563,323 550,951

Freeport-McMoRan Inc. 3.550% 01-Mar-22 925,000 1,104,552 1,148,833

Freeport-McMoRan Inc. 5.450% 15-Mar-43 230,000 248,682 289,258

GLP Capital LP / GLP Financing II Inc. 4.875% 01-Nov-20 300,000 418,699 391,858

Goodyear Tire & Rubber Co. 5.125% 15-Nov-23 1,465,000 2,036,639 1,919,798

HCA Inc. 5.250% 15-Apr-25 68,000 90,892 90,312

HCA Inc. 4.500% 15-Feb-27 690,000 885,267 871,016

HCA Inc. 5.500% 15-Jun-47 430,000 571,025 538,766

Hughes Satellite Systems Corp. 5.250% 01-Aug-26 100,000 132,270 128,270

Icahn Enterprises LP / Icahn Enterprises Finance Corp. 5.875% 01-Feb-22 575,000 769,700 732,150

JC Penney Co. Inc. 5.650% 01-Jun-20 445,000 581,953 510,865

L Brands Inc. 6.875% 01-Nov-35 175,000 225,085 222,554

Lamar Media Corp. 5.750% 01-Feb-26 210,000 298,059 281,866

Lennar Corp. 4.750% 15-Nov-22 445,000 609,551 587,529

Level 3 Financing Inc. 5.375% 15-Jan-24 315,000 424,963 395,171

Mattel Inc. 6.750% 31-Dec-25 210,000 273,345 267,315

MGM Resorts International 6.000% 15-Mar-23 340,000 493,065 461,146

Micron Technology Inc. 5.500% 01-Feb-25 245,000 305,990 322,704

Murphy Oil Corp. 6.875% 15-Aug-24 615,000 875,397 824,500

Navient Corp. 5.875% 25-Oct-24 460,000 602,449 574,914

Newfield Exploration Co. 5.625% 01-Jul-24 380,000 511,780 514,208

Nielsen Finance LLC / Nielsen Finance Co. 5.000% 15-Apr-22 755,000 996,478 975,535

PulteGroup Inc. 5.500% 01-Mar-26 320,000 444,954 437,528

Quicken Loans Inc. 5.250% 15-Jan-28 195,000 246,288 241,808

Qwest Corp. 6.750% 01-Dec-21 515,000 708,744 696,488

Range Resources Corp. 4.875% 15-May-25 430,000 538,461 522,603

Rockies Express Pipeline LLC 6.875% 15-Apr-40 125,000 176,602 176,978

Sally Holdings LLC / Sally Capital Inc. 5.625% 01-Dec-25 200,000 273,135 250,589

Sealed Air Corp. 5.500% 15-Sep-25 205,000 291,644 280,613

Sirius XM Radio Inc. 5.375% 15-Jul-26 660,000 890,958 858,987

Southwestern Energy Co. 6.700% 23-Jan-25 255,000 323,440 333,479

Sprint Communications Inc. 7.000% 01-Mar-20 290,000 414,041 389,697

Standard Industries Inc. 6.000% 15-Oct-25 225,000 319,182 302,351

Targa Resources Partners LP / Targa Resources Partners 4.250% 15-Nov-23 275,000 348,515 341,976

Tenet Healthcare Corp. 6.000% 01-Oct-20 755,000 1,052,738 1,003,725

T-Mobile USA Inc. 6.500% 15-Jan-26 495,000 724,431 678,352

United Rentals North America Inc. 4.875% 15-Jan-28 225,000 285,256 284,027

WellCare Health Plans Inc. 5.250% 01-Apr-25 200,000 272,864 264,997

Western Digital Corp. 10.500% 01-Apr-24 610,000 910,377 887,539

Williams Cos. Inc. 3.700% 15-Jan-23 619,000 777,755 775,571




Coupon

Rate/

Yield

(%)

Maturity

Date

Number of

Shares or

Par Value

Average

Cost

$

Fair

Value

$

Percentage

of

Net Assets

%

ZF North America Capital Inc. 4.750% 29-Apr-25 405,000 547,709 539,158

37,863,970 36,981,174 47.64

Total Bonds 75,613,648 74,692,874 96.23

Exchange-Traded Funds (December 31, 2016: Nil%)

iShares iBoxx High Yield Corporate Bond ETF 1,000 112,002 109,332 0.14


Total unrealized appreciation on futures contracts (Schedule 1) 74,499 0.10

Total unrealized depreciation on futures contracts (Schedule 1) (1,311) -

Total unrealized appreciation on forward contracts (Schedule 2) 649,385 0.84

Total unrealized depreciation on forward contracts (Schedule 2) (73,376) (0.09)



* Security pledged as collateral for derivatives held by the Fund.


CC&L High Yield Bond FundFutures Contracts (Schedule 1)As at December 31, 2017

Description Maturity Date

Number

of

Contracts Fair Value

Unrealized

Appreciation/

(Depreciation)

$

MTL 10YR CANADIAN BOND FUT MAR 18 20-Mar-18 (43) (5,795,540) 74,499

(5,795,540) 74,499

CBOT 10YR US T-NOTE FUTURES MAR 18 20-Mar-18 6 932,547 (1,311)

932,547 (1,311)(4,862,993) 73,188

Foreign Currency Forward Contracts (Schedule 2)As at December 31, 2017

Counterparty*

Currency

Code

Amount

Sold

Currency

Code

Amount

Bought

Maturity

Date

Unrealized

Appreciation/

(Depreciation)

$

Royal Bank of Canada USD (18,110,000) CAD 23,268,271 20-Mar-18 598,638

Bank of Nova Scotia USD (1,301,000) CAD 1,671,226 20-Mar-18 42,669

Royal Bank of Canada USD (264,000) CAD 338,369 20-Mar-18 7,904

Royal Bank of Canada CAD (210,104) USD 168,000 20-Mar-18 174

649,385

Royal Bank of Canada CAD (137,687) USD 109,000 20-Mar-18 (1,252)

Royal Bank of Canada CAD (875,388) USD 682,000 20-Mar-18 (21,681)

T.D. Bank Corp. CAD (1,976,922) USD 1,539,000 20-Mar-18 (50,443)

(73,376)

576,009

*All counterparties have a rating of AA or better.


CC&L High Yield Bond FundNotes to Financial Statements – Fund Specific InformationDecember 31, 2017 and 2016



The CC&L High Yield Bond Fund (the “Fund”) is an open-ended mutual fund trust established under the laws ofOntario and is governed by the Declaration of Trust dated May 1, 2012 (the Declaration of Trust), as amended fromtime to time. The Fund commenced operations on May 1, 2012. The address of the Fund’s registered office is 1400– 130 King St. West, P.O. Box 240, Toronto, Ontario, Canada, M5X 1C8.

The investment objective of the Fund is to construct a diversified portfolio of primarily high-yield bonds or otherincome producing securities issued primarily by foreign issuers with an opportunity for capital appreciation over thelonger term.






Short-term investments -$ 1,196,196$ -$ 1,196,196$Canadian bonds - 35,927,258 - 35,927,258Foreign bonds - 38,765,616 - 38,765,616Exchange-traded funds 109,332 - - 109,332Currency forward contracts - 649,385 - 649,385Futures 74,499 - - 74,499

183,831$ 76,538,455$ -$ 76,722,286$

Liabilities at Fair Value Level 1 Level 2 Level 3 TotalCurrency forward contracts -$ 73,376$ -$ 73,376$Futures contracts 1,311 - - 1,311

1,311$ 73,376$ -$ 74,687$


Assets at Fair Value Level 1 Level 2 Level 3 TotalShort-term investments -$ 4,194,483$ -$ 4,194,483$Canadian bonds - 44,749,782 - 44,749,782Foreign bonds - 51,789,781 - 51,789,781Currency forward contracts - 72,649 - 72,649Futures contracts 16,801 - - 16,801

16,801$ 100,806,695$ -$ 100,823,496$

Liabilities at Fair Value Level 1 Level 2 Level 3 TotalCurrency forward contracts -$ 683,704$ -$ 683,704$

-$ 683,704$ -$ 683,704$


48


Financial instruments by category

The following table presents the net gains (losses) on financial instruments at FVTPL by category for the yearsended December 31:

Category

2017 2016

Financial Assets and Liabilities at FVTPL:

Held-for-Trading $ 1,729,667 $ 3,126,592

Designated at inception 1,381,732 4,541,853

Total $ 3,111,399 $ 7,668,445

Net gains (losses)


The Fund has three series of units available for issue, namely Series A, Series F and Series I. Series A units areavailable to all investors who purchase through dealers and who invest the minimum amount. Series F units areavailable to investors who participate in fee based programs through their dealer. Series I units are available toinstitutional and other comparable investors as the Manager may determine from time to time who invest $1 millionor such lesser amount as the Manager may agree.

For the years ended December 31, 2017 and 2016, changes in outstanding redeemable units were as follows:

Balance - Beginning Redeemable units Redeemable units Redeemable units Balance -2017 of year issued reinvested redeemed End of yearSeries A 1,019,303 23,483 22,947 (871,078) 194,655Series F 760,614 153,577 12,175 (825,204) 101,162Series I 8,925,778 2,607,180 385,220 (3,980,692) 7,937,486

2016Series A 980,744 353,718 43,776 (358,935) 1,019,303Series F 401,427 416,758 21,524 (79,095) 760,614Series I 10,764,191 1,788,605 449,927 (4,076,945) 8,925,778


As at December 31, 2017 the Fund has unused capital losses of $11,364,763 (2016 - $11,625,599). There were $Nil(2016 - $Nil) unused non-capital losses available for tax purposes.


Management fees

The Fund pays a management fee, which is accrued daily and paid monthly. The annual management fee rates,exclusive of taxes, are 1.85% for Series A and 0.85% for Series F. For Series I, fees are negotiable and chargedoutside the Fund, but may not exceed 1.85%.

49



The Fund paid $328 (2016 - $7,027) in brokerage commissions and other transactions costs for portfolio transactionsduring the year. The soft dollars paid during the year were $Nil (2016 - $Nil).


Currency risk

The tables below summarize the Fund’s exposure to foreign currencies as at December 31, 2017 and 2016 inCanadian dollars. Amounts shown are based on the fair value of monetary assets (including cash and cashequivalents) as well as the underlying principal amounts of forward foreign currency contracts, as applicable. Otherfinancial assets such as interest and dividends receivable and amounts due to or from broker that are denominated inforeign currencies do not expose the Fund to significant currency risk.

The tables also illustrate the potential impact on Net Assets attributable to holders of redeemable units as a result of 5%change in these currencies relative to the Canadian dollar, with all other factors remaining constant. In practice, actualresults may differ from this sensitivity analysis and the difference could be material.

As at December 31, 2017:Monetary Derivative Net % of Impact on

Currency Assets ($) Contracts ($) Exposure ($) Net Assets Net Assets ($)

US Dollar 44,298,850 (21,521,922) 22,776,928 29.3 1,138,846Total 44,298,850 (21,521,922) 22,776,928 29.3 1,138,846

As at December 31, 2016:Monetary Derivative Net % of Impact on

Currency Assets ($) Contracts ($) Exposure ($) Net Assets Net Assets ($)

US Dollar 56,678,944 (27,050,320) 29,628,624 29.2 1,481,431Total 56,678,944 (27,050,320) 29,628,624 29.2 1,481,431

Interest rate risk

As at December 31, 2017, the Fund had direct exposure to interest rate risk through its investment in fixed incomeand short-term debt. The tables below summarize the Fund’s exposure to interest rate risk as at December 31, 2017and 2016. Amounts shown are based on the carrying values of debt instruments and exclude cash and preferredshares.

December 31, 2017:Total % of

Debt Instruments Grouped by Maturity Date $ Net Assets


50



Debt Instruments Grouped by Maturity Date $ Net Assets


If prevailing interest rates had been raised or lowered by 1.0%, assuming a parallel shift in the yield curve, with allother factors remaining constant, net assets attributable to holders of redeemable units would have decreased orincreased by approximately $4,079,000 (2016 - $5,650,000). In practice, actual results may differ from thissensitivity analysis and the difference could be material.

Other price risk

As at December 31, 2017 and 2016, other price risk was negligible as the Fund had no significant exposure toinvestments subject to market fluctuations.

Credit risk

The tables below summarize the Fund’s exposure to credit risk as at December 31, 2017 and 2016. Amounts shownare based on the carrying values of debt instruments and the unrealized gain on derivative instruments outstandingwith counterparties. Credit ratings are determined from a composite of bond rating services such as Standard &Poor’s, Moody’s and Dominion Bond Rating Services.



AAA 1,845,582 2.4A 90,235 0.1BBB 28,474,204 36.7BB 41,707,848 53.7B 4,420,586 5.7Total 76,538,455 98.6



AAA 4,194,483 4.1AA 155,952 0.2A 16,697 -BBB 44,375,969 43.7BB 45,637,536 44.9B 5,375,144 5.3CCC 924,659 0.9Not rated 126,255 0.1Total 100,806,695 99.2

51


Liquidity risk

The liquidity of some securities held by the Fund, which may need to be disposed of in order to meet immediate orshort-term obligations, are susceptible to rapid negative movements in credit markets; in particular non-governmentissued fixed income securities found on the Schedule of Investments Portfolio (if any). Like all fixed incomesecurities, the market value of these securities is based on a credit risk premium or ‘spread’. The greater the creditrisk associated with a security, the greater the spread demanded by holders. There is a negative correlation betweenthe size of the spread and the value or price of the underlying security.

To mitigate this risk, the Fund retains sufficient cash, cash equivalents and marketable securities that can be readilydisposed of to maintain liquidity. Liquidity risk is considered negligible. The Fund’s financial liabilities are allshort-term in nature and are expected to mature within three months of the December 31, 2017 financial statementdate, with the exception of redeemable units, which are due on demand, and certain derivatives. All of the Fund’sfinancial liabilities as at December 31, 2016 matured within three months of the financial statement date.

Concentration risk


Offsetting of financial instruments (Note 11)

The following table presents the recognized financial instruments that may be offset, or subject to enforceablemaster netting agreements or other similar agreements, but that are not offset on the Statements of FinancialPosition, as at December 31, 2017 and 2016. The “Net” column shows what the impact on the Fund’s Statements ofFinancial Position would be if all set-off rights were exercised.

Financial assets and liabilities Net

Gross

assets/liabilites

Gross

assets/liabilities

offset

Net amounts

presented

Financial

instruments

Cash collateral

received

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

December 31, 2017

Derivative assets 649,385 - 649,385 (22,933) - 626,452

Derivative liabilities (73,376) - (73,376) 22,933 - (50,443)

December 31, 2016

Derivative assets 72,649 - 72,649 (1,633) - 71,016

Derivative liabilities (683,704) - (683,704) 1,633 - (682,071)

Amounts offsetAmounts not offset

The Fund is subject to enforceable master netting arrangements in the form of ISDA agreements with thecounterparties to its derivative contracts. Under the terms of certain of these agreements, offsetting of derivativecontracts is permitted for same day settlements when contracts with the same counterparty mature simultaneously,and in other cases only in the event of bankruptcy or default of either party to the agreement. The Fund’sarrangement with its broker also permits offset of amounts receivable and payable in respect of securities purchasedor sold in the normal course of business.

52

Connor, Clark & Lunn Funds Inc.Mutual FundsNotes to Financial StatementsDecember 31, 2017 and 2016

These notes shall be read in conjunction with the accompanying fund specific notes which are an integral part ofthese financial statements.

1 General information

The investment activities of the below funds, collectively the “Funds”, are managed by Connor, Clark & LunnFunds Inc. (the “Manager”):

• CC&L Core Income and Growth Fund• CC&L Equity Income and Growth Fund• CC&L Global Alpha Fund• CC&L High Yield Bond Fund

The Trustee of the Funds is RBC Investor Services Trust.

The financial statements were authorized for issue by the Manager on March 23, 2018.

2 Basis of presentation

(a) Statement of compliance:

These annual financial statements have been prepared in compliance with International Financial ReportingStandards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

(b) Functional and presentational currency:

The Funds’ subscriptions, redemptions and certain operating activities are denominated in Canadian dollars,which is also their functional and presentation currency.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financialstatements.

(a) Financial instruments:

The Funds’ investments in debt and equity securities are designated at fair value through profit or loss(“FVTPL”) at inception. The Funds’ derivatives and securities sold short, where applicable, are categorized asheld for trading. As a result of such designation and categorization, the Funds’ investments and derivatives aremeasured at FVTPL. The Funds’ obligation for Net Assets attributable to holders of redeemable units ispresented at the redemption amount. All other financial assets and liabilities are initially recognized at fair valueand subsequently measured for at amortized cost. Under this method, financial assets and liabilities reflect theamounts required to be received or paid, discounted when appropriate, at the financial instrument’s effectiveinterest rate. The fair values of the Funds’ financial assets and liabilities that are not carried at FVTPLapproximate their carrying amounts due to their short-term nature.

The Funds’ accounting policies for measuring the fair value of their investments and derivatives are identical tothose used in measuring their published Net Asset Value (NAV) for transactions with unitholders. The NAV perunit is determined by dividing the aggregate market value of the net assets of each Fund by the total number of

53


units outstanding of the corresponding Fund before giving effect to redemptions or subscriptions to units on thatday. As at December 31, 2017 and 2016, there were no differences between the Funds’ NAV per unit and theirnet assets per unit calculated in accordance with IFRS.

The interest for distribution purposes shown on the Statements of Comprehensive Income represents the couponinterest received by the Funds accounted for on an accrual basis. The Funds do not amortize premiums paid ordiscounts received on the purchase of fixed income securities except for zero coupon bonds which areamortized on a straight line basis. Dividends are recognized as income on the ex-dividend date. Distributionsfrom income trusts and pooled funds are recognized when the Fund has earned the right to receive payment ofthe distributions. The cost of investments is determined using the average cost method.

Financial assets and liabilities are offset and the net amount reported in the Statements of Financial Positionwhen there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on anet basis, or to realize the asset and settle the liability simultaneously. In the normal course of business, theFunds may enter into various master netting agreements or similar agreements that do not meet the criteria foroffsetting in the Statements of Financial Position but still allow for the related amounts to be set off in certaincircumstances, such as bankruptcy or termination of the contracts. In all other situations, they are presented on agross basis.

(b) Fair value measurement:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. The fair value of financial assets andliabilities traded in active markets (such as publicly traded derivatives and marketable securities) is based onquoted market prices at the close of trading on the reporting date. The Funds use the last traded market price forboth financial assets and financial liabilities where the last traded price falls within that day’s bid-ask spread. Incircumstances where the last traded price is not within the bid-ask spread, the Manager determines the pointwithin the bid-ask spread that is most representative of fair value based on the specific facts and circumstances.The Funds’ policy is to recognize transfers into and out of the fair value hierarchy levels as of the date of theevent or change in circumstances giving rise to the transfer.

The fair value of financial assets and liabilities that are not traded in an active market, including over-the-counter derivatives, is determined using valuation techniques. The Funds use a variety of methods and makesassumptions that are based on market conditions existing at each reporting date. Valuation techniques includethe use of comparable recent arm’s length transactions, reference to other instruments that are substantially thesame, discounted cash flow analysis, option pricing models and other models commonly used by marketparticipants and which make the maximum use of observable inputs.

(c) Redeemable units of the Funds:

Under International Accounting Standard (“IAS”) 32, “Financial Instruments: Presentation”, the Fundsclassified their redeemable units as liabilities. The Funds’ redeemable units do not meet the criteria in IAS 32for classification as equity as each Fund has more than one contractual obligation to its unitholders. The Funds’redeemable units are presented at the redemption amount. Investors have the right to require redemption,subject to available liquidity, for cash at a unit price based on the Funds’ valuation policies at each redemptiondate. Unitholders are entitled to distributions when declared. In addition, holders of redeemable units have theright to receive distributions in cash such that the ongoing redemption feature is not the only contractualobligation related to units.

(d) Increase (decrease) in Net Assets attributable to holders of redeemable units per series unit:

The increase (decrease) in Net Assets attributable to holders of redeemable units per unit is calculated bydividing the increase (decrease) in Net Assets attributable to holders of redeemable units by the weightedaverage number of units outstanding during the period.

54


(e) Cash:

Cash is comprised of current deposits with financial institutions.

(f) Short-term investments:

Short-term investments consist of debt investments with maturities of less than one year on acquisition.

(g) Foreign exchange:

Foreign denominated investments and other foreign denominated assets and liabilities are translated intoCanadian dollars using the exchange rates prevailing on each valuation date. Purchases and sales ofinvestments, as well as income and expense transactions denominated in foreign currencies, are translated usingexchange rates prevailing on the date of the transaction. Foreign currency gains and losses on foreigndenominated assets and liabilities other than investments are presented separately in the Statements ofComprehensive Income. Foreign currency gains and losses on investments are included in the net realized gain(loss) on investments and net change in unrealized appreciation (depreciation) on investments in the Statementsof Comprehensive Income.

(h) Income and expense allocation:

Realized gains/losses, changes in unrealized appreciation (depreciation) on investments, income and expensesare allocated daily to each series based on the proportionate share of the net asset value of the series. Theproportionate share of each series is determined by adding the current day's net unitholder subscriptions of theseries to the prior day's net asset value of the series. Any income or expense amounts that are unique to aparticular series (for example, management fees) are accounted for separately in that particular series so as notto affect the net asset value of the other series.

(i) Income taxes:

The Funds qualify as mutual fund trusts under the Income Tax Act (Canada). All of each Fund’s net income fortax purposes and sufficient net capital gains realized in any period are required to be distributed to unitholderssuch that no income tax is payable by each Fund. As a result, the Funds do not record income taxes. Since theFunds do not record income taxes, the tax benefit of capital and non-capital losses has not been reflected in theStatements of Financial Position as a deferred income tax asset.

(j) Transaction costs:

Transaction costs such as brokerage commissions incurred in the purchase and sale of securities are expensed asincurred and are recognized in the Statements of Comprehensive Income.

(k) Forward contracts:

The Funds may enter into foreign exchange forward contracts for economic hedging purposes or to establish anexposure to a particular currency. Unrealized gains and losses on foreign exchange forward contracts areincluded in Net change in unrealized appreciation (depreciation) on currency forward contracts in theStatements of Comprehensive Income, and upon closing of a contract, the gain or loss is included in Netrealized gain (loss) on currency forward contracts. Outstanding settlement amounts on the close out of foreignexchange forward contracts are included in Unrealized appreciation (depreciation) on currency forwardcontracts in the Statements of Financial Position.

(l) Futures:

The Funds may purchase standardized, exchange-traded futures contracts. Any outstanding futures contracts asat reporting period end date are listed in the Schedule of Investment Portfolio. Any difference between the valueat the close of business on the current valuation day and that of the previous valuation day is settled in cashdaily and recorded in the Statements of Comprehensive Income as Net change in unrealized appreciation

55


(depreciation) on futures contracts. Any amounts receivable (payable) from settlement of futures contracts arereflected in the Statements of Financial Position as Daily variation margin. Short-term debt instruments asindicated in the Schedule of Investment Portfolio have been segregated and are held as margin against thefutures contracts purchased by the Fund.

(m) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statements of Financial Positionwhen there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on anet basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not becontingent on future events and must be enforceable in the normal course of business and in the event ofdefault, insolvency or bankruptcy of the company or the counterparty.

(n) New standards and interpretations not yet adopted:

The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification andmeasurement, a single, forward-looking ‘expected loss’ impairment model and a substantially reformedapproach to hedge accounting. The new single, principle based approach for determining the classification offinancial assets is driven by cash flow characteristics and the business model in which an asset is held. The newmodel also results in a single impairment model being applied to all financial instruments, which will requiremore timely recognition of expected credit losses. It also includes changes in respect of the Funds’ own creditrisks in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of anentity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective forannual periods beginning on or after January 1, 2018. The Manager has determined the impact for the Fund willinclude additional disclosures related to changes to the classification of certain financial instruments to align tothe classifications under IFRS 9. Adoption of the standard will not impact Net Assets attributable to holders ofredeemable units.

4 Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the Manager to make judgments, estimatesand assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions arereviewed on an ongoing basis.

(a) In determining whether the Funds exhibit instances of control or significant influence, IFRS 10 “ConsolidatedFinancial Statements” provides an exception to any financial statement consolidation requirements for entitiesthat meet the definition of an “investment entity”. Amongst other factors, the Funds meet the definition ofinvestment entities as they obtain funds from one or more investors for the purpose of providing thoseinvestor(s) with professional investment management services and commit to the investor(s) that their businesspurpose is to invest funds solely for returns from capital appreciation, investment income or both. The Fundsmeasure and evaluate the performance of substantially all of their investments on a fair value basis.

(b) The Funds may hold financial instruments that are not quoted in active markets, including derivatives. Fairvalues of such instruments are determined using valuation techniques and may be determined using reputablepricing sources (such as pricing agencies) or indicative prices from market makers. Broker quotes as obtainedfrom the pricing sources may be indicative and not executable or binding. Where no market data is available,the Funds may value positions using its own models, which are usually based on valuation methods andtechniques generally recognized as standard within the industry. The models used to determine fair values arevalidated and periodically reviewed by experienced personnel of the Manager, independent of the party that

56


created them. The models used for private equity securities are based mainly on earnings multiples adjusted fora lack of marketability as appropriate.

Models use observable data, to the extent practicable. However, areas such as credit risk (both own andcounterparty), volatilities and correlations require the Manager to make estimates. Changes in assumptionsabout these factors could affect the reported fair values of financial instruments. The Funds consider observabledata to be market data that is readily available, regularly distributed and updated, reliable and verifiable, notproprietary, and provided by independent sources that are actively involved in the relevant market. Refer toNote 5 for further information about the fair value measurement of the Funds’ financial instruments.

(c) In classifying and measuring financial instruments held by the Funds, the Manager is required to makesignificant judgments about whether or not the business of each Fund is to invest on a total return basis for thepurposes of applying the fair value option for financial assets under IAS 39, “Financial Instruments –Recognition and Measurement” (IAS 39). The most significant judgments made include the determination thatcertain investments are held-for-trading and that the fair value option can be applied to those which are not.

5 Fair value of financial instruments

(a) Fair value hierarchy:

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurement date. The Funds classify fairvalue measurements within a hierarchy which gives the highest priority to unadjusted quoted prices in activemarkets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Thethree levels of the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity canaccess at the measurement date;

Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly orindirectly; and

Level 3: Inputs that are unobservable.

The fair values of financial assets and financial liabilities that are traded in active markets are based on quotedmarket prices or dealer price quotations. For all other financial instruments, the Funds determine fair valuesusing other valuation techniques.

Fair value measurement of derivatives and securities not quoted in an active market

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, andrequires varying degrees of judgment depending on liquidity, uncertainty of market factors, pricing assumptionsand other risks affecting the specific instrument.

The Funds use widely recognized valuation models for determining the fair value of financial instruments suchas future, option, forward and swap contracts that use only observable market data and require littlemanagement judgment and estimation. Observable prices and model inputs are usually available in the marketfor listed debt and equity securities, and exchange-traded derivatives, such as futures and options, and OTCderivatives such as forward contracts and swaps. The availability of observable market prices and model inputsreduces the need for management judgment and estimation and reduces the uncertainty associated with thedetermination of fair values.

If inputs of different levels are used to measure an asset’s or liability’s fair value, the classification within thehierarchy is based on the lowest level input that is significant to the fair value measurement.

57



Equity positions (including income trusts, exchange-traded funds and limited partnerships) are classified asLevel 1 when the security is actively traded and a reliable price is observable. If equities do not trade frequentlyand observable prices are not available, fair value is determined using observable market data (e.g. transactionsfor similar securities of the same issuer) and the fair value is classified as Level 2, unless the determination offair value requires significant unobservable data, in which case the measurement is classified as Level 3.

The pooled fund units (if any) held as investments are valued at their respective NAV per unit on the relevantvaluation dates and are classified as Level 2.

Bonds and mortgage backed securities include primarily government and corporate bonds and mortgage backedsecurities, which are valued using models with inputs including interest rate curves, credit spreads andvolatilities. The inputs that are significant to valuation are generally observable and therefore investments inbonds and mortgage backed securities have been generally classified as Level 2.

The short-term investments are classified as Level 2, since they are stated at amortized cost, whichapproximates fair value.

Derivative assets and liabilities consist of foreign currency forward contracts and forward rate agreementswhich are valued based primarily on the contract notional amount, the difference between the contract rate andthe forward market rate for the same currency, interest rates and credit spreads. Contracts for whichcounterparty credit spreads are observable and reliable, or for which the credit-related inputs are determined notto be significant to fair value are classified as Level 2.

Futures contracts are classified as Level 1, as a quoted price is used based on observable market information.

(b) Financial instruments measured at amortized cost:

The carrying values of cash and cash equivalents, balances due from broker, subscriptions receivable, interestreceivable, dividends receivable, balances due to broker, distributions payable, redemptions payable and otheraccrued liabilities approximates their fair value given their short-term nature.

6 Redeemable units of the Funds

The Funds have authorized an unlimited number of series of units and may issue an unlimited number of units ofeach series. All issued units are fully paid and have been recorded in the official listing of unitholders maintained bythe Funds’ trustee RBC Investor Services Trust. The Funds’ units are sold, and are redeemable at the holder’soption, in accordance with the provisions of the declaration of trust at the prevailing net asset value per unit. TheFunds have no restrictions or specific capital requirements on the subscription and redemption of units.

The relevant movements are shown on the Statements of Changes in Net Assets Attributable to Holders ofRedeemable Units. However, switches between series within each Fund are excluded from Proceeds fromredeemable units issued and Redemption of redeemable units in the Statements of Cash Flows. In accordance withthe objectives and risk management policies outlined in Note 10, the Funds endeavour to invest subscriptionsreceived in appropriate investments while maintaining sufficient liquidity to meet redemptions. Liquidity issupported by the disposal of marketable securities when necessary.

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7 Taxation of Funds

The Funds may have unused capital losses which may be carried forward indefinitely to reduce future net realizedcapital gains, and unused non-capital losses which may be applied against the future investment income, availablefor tax purposes, as detailed in the fund specific notes of each Fund.

Certain dividend and interest income received by the Funds is subject to withholding tax imposed in the country oforigin. Such income and gains are recorded on a gross basis and the related withholding taxes are shown separatelyin the Statements of Comprehensive Income.

As at December 31, 2017 and 2016, the Funds have considered uncertain tax liabilities and related interest andpenalties with respect to foreign capital gains taxes and determined that no amount need be accrued in respect ofsuch amounts. While this represents the Manager’s best estimate, the estimated value could differ significantly fromthe amount ultimately payable.

8 Related party transactions and other expenses

Management fees

Management fees may be charged by the Manager as detailed in the fund specific notes either to the Funds ordirectly to the unitholders. The Manager is responsible for managing the investment portfolio, providing investmentanalysis and recommendations, making investment decisions, making brokerage arrangements relating to thepurchase and sale of the investment portfolio and making arrangements with registered dealers for the purchase andsale of units of the Funds by investors.

Independent Review Committee fees

In accordance with National Instrument 81-107, the Fund has in place an Independent Review Committee (IRC).The IRC acts for all of the applicable CC&L funds. The Fund pays a share of expenses of the IRC, as the IRCprovides oversight for conflict of interest matters for the Fund. The cost of the IRC is shared amongst the funds forwhich the IRC provides governance.

Other expenses

The Funds are responsible for audit fees, custodial fees, securityholder reporting fees and other expenses incurreddirectly for the operations of the Funds.

9 Brokerage commissions and other transaction costs

The Manager may select brokers who charge commission in “soft dollars” if they determine in good faith that thecommission is reasonable in relation to the order execution and research services utilized. Soft dollars represent ameans of paying for products or services provided by brokerage firms (e.g., research reports) in exchange fordirection transactions (e.g., trade execution) to the brokerage. Funds’ managers may use soft dollars allocated bybrokerages to pay for a portion of the total commissions owed to the brokerage.

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10 Financial risk management

The Funds may be exposed to a variety of financial risks which are described below. The Funds’ exposure to theserisks is concentrated in their investment holdings. In determining the risks that apply, and the extent to which theyapply, reference should be made to the Schedules of Investment Portfolio and supporting schedules that groupsecurities by asset class, market segment and geographic region (when securities are held in multiple currencies).The Manager aims to manage the potential effects of these financial risks on the Funds’ performance by employingand overseeing professional and experienced portfolio managers that regularly monitor the Funds’ holdings, marketevents and overall economic conditions.

The portfolio managers use a variety of means to monitor the Funds including the measurement of specific financialand economic variables pertinent to the Funds. The Funds’ risk management program is based on monitoringcompliance against investment guidelines contained in the Statement of Investment Policy (“SIP”). The SIP is aninternal document that outlines how the Funds are managed. The SIP states the investment objective of each Fundand the investment guidelines. The guidelines include permitted investments, acceptable levels of diversification andthe permitted uses of derivatives.

Securities are selected with the intent of maximizing returns within the risk parameters defined in the SIP. On adaily basis, these guidelines and other restrictions are monitored against the positions in the Funds using anelectronic compliance system to confirm there are no violations and to ensure market movements do not leave theFunds’ portfolio holdings outside specified ranges. Corrective action is taken when necessary and any guidelineviolations are reported to the Manager.

Refer to the fund specific notes of each Fund for specific risk disclosures.

Currency risk

Currency risk is the risk that the value of monetary assets and liabilities denominated in currencies other than theCanadian dollar (the functional and presentational currency of the Funds) will fluctuate due to changes in foreignexchange rates. The Schedule of Investment Portfolio of each Fund and supporting schedules identify allinvestments and derivative instruments denominated in foreign currencies. Bonds and short-term investments issuedin foreign countries are exposed to that country’s currency unless otherwise noted. Bonds, short-term investmentsand derivatives denominated in foreign currencies are exposed to currency risk as prices are converted to the Funds’functional currency in determining fair value. Foreign equities are not exposed to currency risk since they areconsidered non-monetary investments. Changes in the market value of these securities due to fluctuations inexchange rates are considered a component of other price risk (see below).

Interest rate risk

Interest rate risk is the risk that the fair value of the Funds’ interest-bearing investments will fluctuate due to changesin prevailing interest rates. The longer the term to maturity, all else being equal, the more sensitive a security is tointerest rate risk. The Funds’ exposure to interest rate risk is concentrated in its investment in debt securities (such asbonds and short-term investments) and interest rate derivative instruments (if any). Other assets and liabilities areshort-term in nature and non-interest bearing.

Other price risk

Other price risk is the risk that the fair value of financial instruments will fluctuate as a result of changes in marketprices (other than those arising from currency risk or interest rate risk), whether those changes are caused by factorsspecific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments

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traded in a market. Other assets and liabilities are monetary items that are short-term in nature and not subject toother price risk.

Credit risk

Credit risk is the risk that a loss could arise when a security issuer or counterparty to a financial instrument is unableto meet its financial obligations. To maximize the credit quality of its investments, the Manager performs ongoingcredit evaluations of debt issuers. The fair value of debt securities includes consideration of the credit worthiness ofthe debt issuer. Credit risk can also arise with counterparties on forward contracts. Credit risk exposure for over-the-counter derivative instruments is based on the Funds’ unrealized gain of the contractual obligations with thecounterparty as at the reporting date. The credit exposure of other assets is represented by their carrying amount.

The Funds can also be exposed to credit risk to the extent that the Funds’ custodian may not be able to settle tradesfor cash. RBC Investor & Treasury Services, which is the custodian for the Funds, meets all Canadian SecuritiesAdministrators’ requirements to act as custodian.

Liquidity risk

Liquidity risk is the risk that a Fund may not be able to settle or meet its obligations on time or at a reasonable price.The Funds’ exposure to liquidity risk is concentrated in the daily cash redemptions of units, which are due ondemand.

The Funds may also be exposed to liquidity risk through their investments in underlying funds. The underlyingfunds invest the majority of their investments in securities that are traded in an active market and can be readilydisposed of to maintain liquidity.

Concentration risk

Concentration risk arises as a result of the concentration of exposures within the same category, whether it isgeographic region, asset type or sector.

Capital risk management

Units issued and outstanding are considered to be capital of the Funds. The Funds do not have any specific capitalrequirements on the subscription and redemption of units, other than certain minimum subscription requirements.Each unit is redeemable at the option of the unitholder in accordance with the Declaration of Trust and entitles theunitholder to a pro rata share of the corresponding Fund’s NAV. Unitholders are entitled to distributions whendeclared. Distributions on units of the Funds are reinvested in additional units of the corresponding Fund or at theoption of the unitholder, paid in cash.

11 Offsetting of financial instruments

In the normal course of business, the Funds may enter into various master netting arrangements or other similaragreements that do not meet the criteria for offsetting in the Statements of Financial Position but still allow for therelated amounts to be set off in certain circumstances, such as bankruptcy or termination of the contracts.

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ANNUAL FINANCIAL STATEMENTS - Ccl group · of each of the Funds for the years then ended in...

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Transcript of ANNUAL FINANCIAL STATEMENTS - Ccl group · of each of the Funds for the years then ended in...