DFS GUARANTEED INVESTMENT FUNDS Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company. Financial Information as of June 30, 2016 2016 Semi-Annual Report SEPTEMBER 2016 DFS Guaranteed Investment Funds are established by Desjardins Financial Security Life Assurance Company .
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2016 Semi-Annual Report - Desjardins Life Insurance€¦ · Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the
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DFS GUARANTEED INVESTMENT FUNDS
Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company.
Financial Information as of June 30, 2016
2016 Semi-Annual Report
SEPTEMBER 2016
DFS Guaranteed Investment Funds are established by Desjardins Financial Security Life Assurance Company.
A Guaranteed Investment Fund (GIF), commonly known as “segregated fund“ is an investment fund created and issued exclusively by life insurance companies. It is offered through Contracts which provide maturity and death benefit guarantees.
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Yes, at desjardinslifeinsurance.com/ GIFreports.
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NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 11,502,971 6,025,623
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 268,050 21,634
Adjustments for:Net realized gain (loss) (2,108) (7,987)Net unrealized gain (loss) (249,338) 2,765
Proceeds from sale/maturity of investments 1,438,385 258,992
Investments purchased (4,241,427) (3,451,488)Receivable for securities sold 31,167 (2,642)Accrued expenses 5,894 6,823 Payable for securities purchased 77,650 7,024
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (2,671,727) (3,164,879)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 5,115,783 3,552,697 Amounts paid on withdrawals (2,382,898) (390,488)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 2,732,885 3,162,209
Increase (Decrease) in cash/bank overdraft 61,158 (2,670)
Cash (bank overdraft), beginning of period 70,175 527
CASH (BANK OVERDRAFT), END OF PERIOD 131,333 (2,143)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
* Beginning of operations in October 2015.
6 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUNDS (99.5%)BlackRock Active Canadian Equity DC Fund 10,424 317,564 308,574 BlackRock CDN US Equity Index Fund, Class D 39,002 664,387 686,620 Desjardins Enhanced Bond Fund, I-Class 238,508 2,685,090 2,759,541 Desjardins Overseas Equity Growth Fund, I-Class 18,984 353,287 334,504 Desjardins Overseas Equity Value Fund, I-Class 25,170 357,047 348,125 DGIA Canadian Bond Fund 610,078 6,257,646 6,401,087 Fidelity True North® Fund, Series O 6,710 301,741 304,568 Franklin Bissett Canadian Equity Fund, Series O 2,278 296,362 307,436
TOTAL INVESTMENTS 11,233,124 11,450,455
OTHER NET ASSETS (0.5%) 52,516
NET ASSETS (100%) 11,502,971
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited
Security Name Percentage of Portfolio
DGIA CANADIAN BOND FUND 55.6%Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%
DESJARDINS ENHANCED BOND FUND 23.9%Government of Canada, 2 .25%, June 1, 2025 8 .4%Province of Quebec, 3 .50%, December 1, 2048 2 .7%Desjardins IBrix Global Bond Fund 2 .5%Province of British Columbia, 2 .70%, December 18, 2022 2 .4%Canada Housing Trust, 2 .25%, December 15, 2025 2 .4%
BLACKROCK CDN US EQUITY INDEX FUND 5.9%Apple 2 .9%Microsoft Corporation 2 .2%Exxon Mobil Corporation 2 .1%Johnson & Johnson 1 .8%General Electric Company 1 .6%
DESJARDINS OVERSEAS EQUITY VALUE FUND 3.0%Novartis AG 4 .2%Roche Holding AG 4 .1%British American Tobacco 3 .6%Nestlé 3 .6%Japan Tobacco 3 .5%
DFS GIF – CONSERVATIVE (cont.)
7DFS GUARANTEED INVESTMENT FUNDS
Security Name Percentage of Portfolio
DESJARDINS OVERSEAS EQUITY GROWTH FUND 2.9%Tencent Holdings 5 .2%Inditex 5 .0%Baidu, ADR 4 .8%AIA Group 4 .2%Softbank Corporation 3 .8%
BLACKROCK ACTIVE CANADIAN EQUITY DC FUND 2.7%Royal Bank of Canada 6 .7%Toronto-Dominion Bank 5 .4%Scotiabank 5 .2%BCE 3 .9%Canadian National Railway Company 3 .6%
FRANKLIN BISSETT CANADIAN EQUITY FUND 2.7%Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%
FIDELITY TRUE NORTH® FUND 2.6%Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited (cont.)
8 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo generate a consistent flow of income with an emphasis on the preservation of capital by investing in a number of different fixed income and equity underlying funds .
Investment StrategyTo invest in a wide array of underlying funds managed by using a multi-manager approach provided by acclaimed fund managers and sub-advisors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 4,054,174 7,396,281 — 11,450,455 TOTAL 4,054,174 7,396,281 — 11,450,455
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 2,945,828 5,450,139 — 8,395,967 TOTAL 2,945,828 5,450,139 — 8,395,967
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Funds Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks . Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification . Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying funds . Detailed disclosure about the currency risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying funds . Detailed disclosure about the interest rate risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
DFS GIF – CONSERVATIVE (cont.)
9DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying funds . Detailed disclosure about the concentration risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying funds . Detailed disclosure about the price risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying funds . Detailed disclosure about the credit risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying funds . Detailed disclosure about the liquidity risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
10 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 480,618 453,973 Investments at fair value through profit
or loss (FVTPL) 18,371,591 13,580,031 Premiums receivable 356,874 18,755 Receivable for securities sold 134,512 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 18,938,259 9,285,483
* Beginning of operations in October 2015.
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 347,036 67,645
Adjustments for:Net realized gain (loss) (6,700) (18,117)Net unrealized gain (loss) (319,640) (32,881)
Proceeds from sale/maturity of investments 1,340,341 460,873
Investments purchased (5,805,561) (4,232,091)Receivable for securities sold (134,512) (5,949)Accrued expenses 9,520 8,296 Payable for securities purchased 11,677 87,808
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (4,557,839) (3,664,416)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 5,963,297 4,265,642 Amounts paid on withdrawals (1,378,813) (567,431)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 4,584,484 3,698,211
Increase (Decrease) in cash/bank overdraft 26,645 33,795
Cash (bank overdraft), beginning of period 453,973 29,728
CASH (BANK OVERDRAFT), END OF PERIOD 480,618 63,523
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
12 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUNDS (97.0%)BlackRock Active Canadian Equity DC Fund 29,635 914,581 877,287 BlackRock CDN US Equity Index Fund, Class D 110,522 1,870,749 1,945,699 Desjardins Enhanced Bond Fund, I-Class 310,356 3,494,816 3,590,819 Desjardins Overseas Equity Growth Fund, I-Class 53,101 992,884 935,643 Desjardins Overseas Equity Value Fund, I-Class 70,503 1,009,673 975,130 DGIA Canadian Bond Fund 793,808 8,134,144 8,328,828 Fidelity True North® Fund, Series O 18,817 848,638 854,143 Franklin Bissett Canadian Equity Fund, Series O 6,402 835,922 864,042
TOTAL INVESTMENTS 18,101,407 18,371,591
OTHER NET ASSETS (3.0%) 566,668
NET ASSETS (100%) 18,938,259
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited
Security Name Percentage of Portfolio
DGIA CANADIAN BOND FUND 44.0%Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%
DESJARDINS ENHANCED BOND FUND 19.0%Government of Canada, 2 .25%, June 1, 2025 8 .4%Province of Quebec, 3 .50%, December 1, 2048 2 .7%Desjardins IBrix Global Bond Fund 2 .5%Province of British Columbia, 2 .70%, December 18, 2022 2 .4%Canada Housing Trust, 2 .25%, December 15, 2025 2 .4%
BLACKROCK CDN US EQUITY INDEX FUND 10.2%Apple 2 .9%Microsoft Corporation 2 .2%Exxon Mobil Corporation 2 .1%Johnson & Johnson 1 .8%General Electric Company 1 .6%
DESJARDINS OVERSEAS EQUITY VALUE FUND 5.1%Novartis AG 4 .2%Roche Holding AG 4 .1%British American Tobacco 3 .6%Nestlé 3 .6%Japan Tobacco 3 .5%
DFS GIF – MODERATE (cont.)
13DFS GUARANTEED INVESTMENT FUNDS
Security Name Percentage of Portfolio
DESJARDINS OVERSEAS EQUITY GROWTH FUND 4.9%Tencent Holdings 5 .2%Inditex 5 .0%Baidu, ADR 4 .8%AIA Group 4 .2%Softbank Corporation 3 .8%
BLACKROCK ACTIVE CANADIAN EQUITY DC FUND 4.6%Royal Bank of Canada 6 .7%Toronto-Dominion Bank 5 .4%Scotiabank 5 .2%BCE 3 .9%Canadian National Railway Company 3 .6%
FRANKLIN BISSETT CANADIAN EQUITY FUND 4.6%Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%
FIDELITY TRUE NORTH® FUND 4.5%Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited (cont.)
14 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo generate income while leaving room for some capital appreciation by investing in a number of different fixed income and equity underlying funds .
Investment StrategyTo invest in a wide array of underlying funds managed by using a multi-manager approach provided by acclaimed fund managers and sub-advisors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 7,219,777 11,151,814 — 18,371,591 TOTAL 7,219,777 11,151,814 — 18,371,591
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 5,259,929 8,320,102 — 13,580,031 TOTAL 5,259,929 8,320,102 — 13,580,031
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Funds Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying funds . Detailed disclosure about the currency risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying funds . Detailed disclosure about the interest rate risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
DFS GIF – MODERATE (cont.)
15DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying funds . Detailed disclosure about the concentration risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying funds . Detailed disclosure about the price risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying funds . Detailed disclosure about the credit risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying funds . Detailed disclosure about the liquidity risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
16 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 296,825 329,916 Investments at fair value through profit
or loss (FVTPL) 41,256,888 30,993,618 Premiums receivable 175,606 59,798 Receivable for securities sold 36,889 3,797
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 41,548,253 16,630,800
* Beginning of operations in October 2015.
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 623,035 160,601
Adjustments for:Net realized gain (loss) 3,946 (22,566)Net unrealized gain (loss) (582,370) (114,685)
Proceeds from sale/maturity of investments 1,787,828 425,431
Investments purchased (11,472,674) (7,271,075)Receivable for securities sold (33,092) —Accrued expenses 21,500 15,519 Payable for securities purchased 61,976 39,670
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (9,589,851) (6,767,105)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 10,886,849 7,278,350 Amounts paid on withdrawals (1,330,089) (486,992)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 9,556,760 6,791,358
Increase (Decrease) in cash/bank overdraft (33,091) 24,253
Cash (bank overdraft), beginning of period 329,916 57,786
CASH (BANK OVERDRAFT), END OF PERIOD 296,825 82,039
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
18 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUNDS (99.3%)BlackRock Active Canadian Equity DC Fund 94,222 2,877,694 2,789,247 BlackRock CDN US Equity Index Fund, Class D 350,995 6,015,398 6,179,149 Desjardins Enhanced Bond Fund, I-Class 536,931 6,040,684 6,212,292 Desjardins Overseas Equity Growth Fund, I-Class 170,835 3,212,512 3,010,112 Desjardins Overseas Equity Value Fund, I-Class 226,752 3,248,235 3,136,217 DGIA Canadian Bond Fund 1,373,384 14,065,954 14,409,875 Fidelity True North® Fund, Series O 60,461 2,734,643 2,744,426 Franklin Bissett Canadian Equity Fund, Series O 20,566 2,669,009 2,775,570
TOTAL INVESTMENTS 40,864,129 41,256,888
OTHER NET ASSETS (0.7%) 291,365
NET ASSETS (100%) 41,548,253
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited
Security Name Percentage of Portfolio
DGIA CANADIAN BOND FUND 34.7%Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%
DESJARDINS ENHANCED BOND FUND 15.0%Government of Canada, 2 .25%, June 1, 2025 8 .4%Province of Quebec, 3 .50%, December 1, 2048 2 .7%Desjardins IBrix Global Bond Fund 2 .5%Province of British Columbia, 2 .70%, December 18, 2022 2 .4%Canada Housing Trust, 2 .25%, December 15, 2025 2 .4%
BLACKROCK CDN US EQUITY INDEX FUND 14.9%Apple 2 .9%Microsoft Corporation 2 .2%Exxon Mobil Corporation 2 .1%Johnson & Johnson 1 .8%General Electric Company 1 .6%
DESJARDINS OVERSEAS EQUITY VALUE FUND 7.5%Novartis AG 4 .2%Roche Holding AG 4 .1%British American Tobacco 3 .6%Nestlé 3 .6%Japan Tobacco 3 .5%
DFS GIF – BALANCED (cont.)
19DFS GUARANTEED INVESTMENT FUNDS
Security Name Percentage of Portfolio
DESJARDINS OVERSEAS EQUITY GROWTH FUND 7.2%Tencent Holdings 5 .2%Inditex 5 .0%Baidu, ADR 4 .8%AIA Group 4 .2%Softbank Corporation 3 .8%
BLACKROCK ACTIVE CANADIAN EQUITY DC FUND 6.7%Royal Bank of Canada 6 .7%Toronto-Dominion Bank 5 .4%Scotiabank 5 .2%BCE 3 .9%Canadian National Railway Company 3 .6%
FRANKLIN BISSETT CANADIAN EQUITY FUND 6.7%Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%
FIDELITY TRUE NORTH® FUND 6.6%Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited (cont.)
20 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with an attractive balance of current income and capital appreciation by investing in a number of different fixed income and equity underlying funds .
Investment StrategyTo invest in a wide array of underlying funds managed by using a multi-manager approach provided by acclaimed fund managers and sub-advisors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments at Fair Value MeasurementThe following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 17,878,617 23,378,271 — 41,256,888 TOTAL 17,878,617 23,378,271 — 41,256,888
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 13,356,447 17,637,171 — 30,993,618 TOTAL 13,356,447 17,637,171 — 30,993,618
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Funds Risk ManagementMonthly, the investment strategy team compares the Funds’ performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Funds’ performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Funds’ investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Funds’ managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying funds . Detailed disclosure about the currency risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying funds . Detailed disclosure about the interest rate risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
DFS GIF – BALANCED (cont.)
21DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying funds . Detailed disclosure about the concentration risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying funds . Detailed disclosure about the price risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .As at June 30, 2016 and December 31, 2015, the Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying funds . Detailed disclosure about the credit risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying funds . Detailed disclosure about the liquidity risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
22 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 110,798 Investments at fair value through profit
or loss (FVTPL) 24,853,877 18,843,250 Premiums receivable 183,374 105,745 Receivable for securities sold 174,992 34,057
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 25,023,436 10,294,022
* Beginning of operations in October 2015.
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 274,722 92,820
Adjustments for:Net realized gain (loss) 22,098 (9,627)Net unrealized gain (loss) (282,473) (72,734)
Proceeds from sale/maturity of investments 1,810,362 231,320
Investments purchased (7,560,614) (5,108,966)Receivable for securities sold (140,935) —Accrued expenses 10,633 12,373 Payable for securities purchased 31,221 9,082
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (5,834,986) (4,845,732)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 8,187,838 5,239,594 Amounts paid on withdrawals (2,493,789) (399,187)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 5,694,049 4,840,407
Increase (Decrease) in cash/bank overdraft (140,937) (5,325)
Cash (bank overdraft), beginning of period 110,798 21,720
CASH (BANK OVERDRAFT), END OF PERIOD (30,139) 16,395
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
24 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUNDS (99.3%)BlackRock Active Canadian Equity DC Fund 73,603 2,240,157 2,178,870 BlackRock CDN US Equity Index Fund, Class D 274,089 4,713,796 4,825,242 Desjardins Enhanced Bond Fund, I-Class 226,755 2,550,747 2,623,557 Desjardins Overseas Equity Growth Fund, I-Class 133,742 2,529,060 2,356,532 Desjardins Overseas Equity Value Fund, I-Class 177,644 2,550,632 2,457,000 DGIA Canadian Bond Fund 579,947 5,941,430 6,084,944 Fidelity True North® Fund, Series O 47,391 2,139,410 2,151,173 Franklin Bissett Canadian Equity Fund, Series O 16,128 2,086,467 2,176,559
TOTAL INVESTMENTS 24,751,699 24,853,877
OTHER NET ASSETS (0.7%) 169,559
NET ASSETS (100%) 25,023,436
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited
Security Name Percentage of Portfolio
DGIA CANADIAN BOND FUND 24.1%Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%
BLACKROCK CDN US EQUITY INDEX FUND 19.4%Apple 2 .9%Microsoft Corporation 2 .2%Exxon Mobil Corporation 2 .1%Johnson & Johnson 1 .8%General Electric Company 1 .6%
DESJARDINS ENHANCED BOND FUND 10.5%Government of Canada, 2 .25%, June 1, 2025 8 .4%Province of Quebec, 3 .50%, December 1, 2048 2 .7%Desjardins IBrix Global Bond Fund 2 .5%Province of British Columbia, 2 .70%, December 18, 2022 2 .4%Canada Housing Trust, 2 .25%, December 15, 2025 2 .4%
DESJARDINS OVERSEAS EQUITY VALUE FUND 9.8%Novartis AG 4 .2%Roche Holding AG 4 .1%British American Tobacco 3 .6%Nestlé 3 .6%Japan Tobacco 3 .5%
DFS GIF – GROWTH (cont.)
25DFS GUARANTEED INVESTMENT FUNDS
Security Name Percentage of Portfolio
DESJARDINS OVERSEAS EQUITY GROWTH FUND 9.4%Tencent Holdings 5 .2%Inditex 5 .0%Baidu, ADR 4 .8%AIA Group 4 .2%Softbank Corporation 3 .8%
BLACKROCK ACTIVE CANADIAN EQUITY DC FUND 8.8%Royal Bank of Canada 6 .7%Toronto-Dominion Bank 5 .4%Scotiabank 5 .2%BCE 3 .9%Canadian National Railway Company 3 .6%
FRANKLIN BISSETT CANADIAN EQUITY FUND 8.7%Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%
FIDELITY TRUE NORTH® FUND 8.6%Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited (cont.)
26 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo emphasize appreciation of capital while still generating some income by investing in a number of different fixed income and equity underlying funds .
Investment StrategyTo invest in a wide array of underlying funds managed by using a multi-manager approach provided by acclaimed fund managers and sub-advisors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair ValueThe following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 11,764,821 13,089,056 — 24,853,877 TOTAL 11,764,821 13,089,056 — 24,853,877
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 8,852,119 9,991,131 — 18,843,250 TOTAL 8,852,119 9,991,131 — 18,843,250
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Funds Risk ManagementMonthly, the investment strategy team compares the Funds’ performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Funds’ performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Funds’ investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Funds’ managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying funds . Detailed disclosure about the currency risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying funds . Detailed disclosure about the interest rate risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
DFS GIF – GROWTH (cont.)
27DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying funds . Detailed disclosure about the concentration risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying funds . Detailed disclosure about the price risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .As at June 30, 2016 and December 31, 2015, the Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying funds . Detailed disclosure about the credit risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying funds . Detailed disclosure about the liquidity risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
28 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 5,626 5,689 Investments at fair value through profit
or loss (FVTPL) 2,289,228 1,887,056 Premiums receivable 29,907 1,540
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (366,417) (489,856)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 635,529 520,633 Amounts paid on withdrawals (269,175) (12,506)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 366,354 508,127
Increase (Decrease) in cash/bank overdraft (63) 18,271
Cash (bank overdraft), beginning of period 5,689 1,757
CASH (BANK OVERDRAFT), END OF PERIOD 5,626 20,028
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
30 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUNDS (99.5%)BlackRock Active Canadian Equity DC Fund 8,301 258,073 245,740 BlackRock CDN US Equity Index Fund, Class D 30,914 510,419 544,228 Desjardins Enhanced Bond Fund, I-Class 11,962 134,691 138,396 Desjardins Overseas Equity Growth Fund, I-Class 15,228 284,249 268,322 Desjardins Overseas Equity Value Fund, I-Class 20,200 294,771 279,380 DGIA Canadian Bond Fund 30,589 312,592 320,949 Fidelity True North® Fund, Series O 5,389 240,870 244,630 Franklin Bissett Canadian Equity Fund, Series O 1,835 238,494 247,583
TOTAL INVESTMENTS 2,274,159 2,289,228
OTHER NET ASSETS (0.5%) 10,363
NET ASSETS (100%) 2,299,591
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited
Security Name Percentage of Portfolio
BLACKROCK CDN US EQUITY INDEX FUND 23.7%Apple 2 .9%Microsoft Corporation 2 .2%Exxon Mobil Corporation 2 .1%Johnson & Johnson 1 .8%General Electric Company 1 .6%
DGIA CANADIAN BOND FUND 13.8%Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%
DESJARDINS OVERSEAS EQUITY VALUE FUND 12.0%Novartis AG 4 .2%Roche Holding AG 4 .1%British American Tobacco 3 .6%Nestlé 3 .6%Japan Tobacco 3 .5%
DESJARDINS OVERSEAS EQUITY GROWTH FUND 11.5%Tencent Holdings 5 .2%Inditex 5 .0%Baidu, ADR 4 .8%AIA Group 4 .2%Softbank Corporation 3 .8%
DFS GIF – MAXIMUM GROWTH (cont.)
31DFS GUARANTEED INVESTMENT FUNDS
Security Name Percentage of Portfolio
BLACKROCK ACTIVE CANADIAN EQUITY DC FUND 10.7%Royal Bank of Canada 6 .7%Toronto-Dominion Bank 5 .4%Scotiabank 5 .2%BCE 3 .9%Canadian National Railway Company 3 .6%
FRANKLIN BISSETT CANADIAN EQUITY FUND 10.6%Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%
FIDELITY TRUE NORTH® FUND 10.5%Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%
DESJARDINS ENHANCED BOND FUND 5.9%Government of Canada, 2 .25%, June 1, 2025 8 .4%Province of Quebec, 3 .50%, December 1, 2048 2 .7%Desjardins IBrix Global Bond Fund 2 .5%Province of British Columbia, 2 .70%, December 18, 2022 2 .4%Canada Housing Trust, 2 .25%, December 15, 2025 2 .4%
TOP FIVE HOLDINGS OF THE UNDERLYING FUNDS – unaudited (cont.)
32 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo maximize the appreciation of capital while still generating some income by investing in a number of different fixed income and equity underlying funds .
Investment StrategyTo invest in a wide array of underlying funds managed by using a multi-manager approach provided by acclaimed fund managers and sub-advisors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 1,178 311 1,110,917 — 2,289,228 TOTAL 1,178,311 1,110,917 — 2,289,228
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 963,301 923,755 — 1,887,056 TOTAL 963,301 923,755 — 1,887,056
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Funds Risk ManagementMonthly, the investment strategy team compares the Funds’ performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Funds’ performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Funds’ investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Funds’ managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying funds . Detailed disclosure about the currency risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying funds . Detailed disclosure about the interest rate risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
DFS GIF – MAXIMUM GROWTH (cont.)
33DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying funds . Detailed disclosure about the concentration risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying funds . Detailed disclosure about the price risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying funds . Detailed disclosure about the credit risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in underlying funds which are exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying funds . Detailed disclosure about the liquidity risk on the underlying funds can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
DFS GUARANTEED INVESTMENT FUNDS
Individual Funds
36 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 35,298 Investments at fair value through profit
or loss (FVTPL) 35,329,794 35,251,601 Premiums receivable 894,142 469,927
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ATTRIBUTABLE TO CONTRACT OWNERS 7,687 32,740
DATA PER SERIESSERIES 1Increase (Decrease) in Net Assets
from Operations (758) (216)- per unit (0.01) —
Average Number of Units 67,788 82,215 SERIES 3Increase (Decrease) in Net Assets
from Operations (5,055) (1,281)- per unit (0.01) —
Average Number of Units 416,358 450,370 SERIES 5Increase (Decrease) in Net Assets
from Operations (1,497) 23,883 - per unit — 0 .01
Average Number of Units 2,960,090 2,899,706 SERIES 6Increase (Decrease) in Net Assets
from Operations 12,421 5,688 - per unit 0.01 0 .01
Average Number of Units 1,814,192 760,016 SERIES 7Increase (Decrease) in Net Assets
from Operations 5,143 4,278 - per unit 0.02 0 .02
Average Number of Units 246,425 187,461 SERIES IGPIncrease (Decrease) in Net Assets
from Operations (2,567) 388 - per unit (0.01) —
Average Number of Units 182,011 169,430
The accompanying Notes are an integral part of these financial statements.
Income
DFS GIF – MONEY MARKET
STATEMENT OF FINANCIAL POSITION – unauditedAs at
STATEMENT OF COMPREHENSIVE INCOME – unauditedSix-month Periods Ended June 30
37DFS GUARANTEED INVESTMENT FUNDS
The accompanying Notes are an integral part of these financial statements.
2016$
2015$
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, BEGINNING OF PERIOD 35,116,746 28,154,690 Increase (Decrease) in Net Assets
from operations attributable to contract owners 7,687 32,740
PremiumsSeries 1 49,754 600 Series 3 567,983 461,998 Series 5 4,492,593 4,196,513 Series 6 4,728,020 4,704,081 Series 7 1,570,502 989,659 Series IGP 311,038 189,807
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 35,641,651 29,670,187
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 7,687 32,740
Adjustments for:Net realized gain (loss) (201,045) (173,668)Net unrealized gain (loss) 331,079 319,452
Proceeds from sale/maturity of investments 7,495,448 4,490,006
Investments purchased (7,703,675) (5,986,246)Receivable for securities sold — (20,821)Accrued expenses (800) 1,655 Payable for securities purchased 6,052 (112,980)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (65,254) (1,449,862)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 11,295,675 10,281,423 Amounts paid on withdrawals (11,451,868) (9,001,468)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (156,193) 1,279,955
Increase (Decrease) in cash/bank overdraft (221,447) (169,907)
Cash (bank overdraft), beginning of period 35,298 122,167
CASH (BANK OVERDRAFT), END OF PERIOD (186,149) (47,740)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
38 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (99.1%)DGIA Money Market Fund 3,662,536 34,559,026 35,329,794
TOTAL INVESTMENTS 34,559,026 35,329,794
OTHER NET ASSETS (0.9%) 311,857
NET ASSETS (100%) 35,641,651
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Daimler Canada Finance, 2 .28%, February 17, 2017 9 .3%Manufacturers Life Insurance Company, Floating Rate, November 18, 2021 8 .9%Lower Mattagami Energy Limited Partnership, Notes, July 14, 2016 6 .7%Toronto-Dominion Bank, Notes, May 4, 2017 5 .6%Scotiabank, 2 .74%, December 1, 2016 5 .4%Royal Bank of Canada, 2 .58%, April 13, 2017 5 .3%Industrial Alliance, 4 .75%, December 14, 2021 5 .2%Bank of Montreal, Floating Rate, March 29, 2018 4 .9%BMW Canada, Floating Rate, June 14, 2019 4 .5%Canadian Imperial Bank of Commerce, Floating Rate, August 8, 2016 4 .0%Scotiabank, 4,10%, June 8, 2017 3 .7%Gaz Métro, Notes, August 3, 2016 3 .6%Province of Nova Scotia, Stripped, June 1, 2017 2 .8%Bank of Montréal, 2 .39%, July 12, 2017 2 .7%Lower Mattagami Energy Limited Partnership, Notes, July 21, 2016 2 .7%Gaz Métro, Notes, August 17, 2016 2 .7%Hydro-Québec, Stripped, May 22, 2017 2 .7%Newfoundland & Labrador Treasury Bills, September 15, 2016 2 .2%Toyota Credit Canada, Floating Rate, February 25, 2019 1 .8%Royal Bank of Canada, Notes, September 8, 2016 1 .8%Toronto-Dominion Bank, Notes, February 10, 2017 1 .8%Province of Ontario, Stripped, August 7, 2017 1 .7%Toyota Credit Canada, Notes, January 5, 2017 1 .0%BMW Canada, 2 .39%, November 27, 2017 0 .9%Canadian Imperial Bank of Commerce, 2 .65%, November 8, 2016 0 .9%
Income
DFS GIF – MONEY MARKET (cont.)
39DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a higher level of interest income than can normally be obtained from savings accounts, combined with a high level of liquidity and safety of capital .
Investment StrategyTo invest primarily in Canadian government treasury bills and in bankers’ acceptances, which have a maximum maturity of 12 months . The Fund’s modified duration may not exceed 180 days .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair ValueThe following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 35,329,794 — 35,329,794 TOTAL — 35,329,794 — 35,329,794
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 35,251,601 — 35,251,601 TOTAL — 35,251,601 — 35,251,601
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
40 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Income
DFS GIF – MONEY MARKET (cont.)
41DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 28,641 —Investments at fair value through profit
or loss (FVTPL) 93,252,290 95,095,603 Investments at fair value through profit
or loss (FVTPL) pledged as collateral 11,540,632 12,171,098 Premiums receivable 98,442 49,071 Receivable for securities sold 2,458,224 —Cash guarantee received for repurchase
transactions 9,960,959 12,107,884 Interest, dividends and other receivables 444,088 521,404
117,783,276 119,945,060 LIABILITIESCurrent LiabilitiesBank overdraft — 10,221 Accrued expenses 177,358 182,647 Withdrawals payable 374,984 287,615 Payable for securities purchased 2,125,454 —Commitments related to repurchase
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 105,144,521 105,771,672
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 3,230,397 1,358,683
Adjustments for:Net realized gain (loss) (1,042,667) (2,361,082)Net unrealized gain (loss) (1,624,306) 1,594,927
Proceeds from sale/maturity of investments 142,955,744 125,517,025
Investments purchased (137,814,915) (118,639,939)Receivable for securities sold (2,458,224) (6,084,051)Cash guarantee received for
repurchase transactions 2,146,925 12,535,080 Interest, dividends and other
receivables 77,316 124,233 Accrued expenses (5,289) (7,512)Commitments related to repurchase
transactions (2,146,925) (12,535,080)Payable for securities purchased 2,125,454 3,556,398
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 5,443,510 5,058,682
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 6,787,568 5,540,602 Amounts paid on withdrawals (12,192,139) (10,671,494)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (5,404,571) (5,130,892)
Effect of exchange rate changes on foreign cash (77) 74
Increase (Decrease) in cash/bank overdraft 38,862 (72,136)
Cash (bank overdraft), beginning of period (10,221) (15,642)
CASH (BANK OVERDRAFT), END OF PERIOD 28,641 (87,778)
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Interest received 1,609,261 1,818,573 Interest paid 17 —
Six-month Periods Ended June 30
Six-month Periods Ended June 30
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Income
DFS GIF – INCOME – FIERA CAPITAL (cont.)
43DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Par Fair Value Cost Value $ $BONDS (89.2%)
Canadian Bonds (89.1%)
Government of Canada (16.4%))Broadcast Center Trust 7 .530%, 2027-05-01 CAD 180,081 177,692 241,654Gouvernement du Canada 0 .250%, 2018-05-01* CAD 5,435,000 5,406,489 5,408,691 2 .250%, 2025-06-01* CAD 52,000 56,622 57,787 Series E679, 1 .500%, 2026-06-01* CAD 8,301,000 8,586,350 8,643,298 Series WL43, 5 .750%, 2029-06-01* CAD 109,000 161,756 165,274PSP Capital Series 7, 3 .290%, 2024-04-04 CAD 345,000 330,135 383,081 Royal Office Finance Series A, 5 .209%, 2032-11-12 CAD 1,860,402 1,687,255 2,371,157
16,406,299 17,270,942
Provincial Governments and Crown Corporations (33.6%)New Brunswick (F-M) Project Company 6 .470%, 2027-11-30 CAD 460,108 481,950 586,766 Ontario Infrastructure 4 .700%, 2037-06-01 CAD 80,000 71,858 99,522Ontario School Boards Financing Corporation Series 00A1, 7 .200%, 2025-06-09 CAD 2,441,490 2,605,834 3,076,337 Series 01A3, 6 .550%, 2026-10-19 CAD 1,543 1,581 1,922 Private Placement, Series 06A1, 5 .070%, 2031-04-18 CAD 517,773 464,506 610,125 Ornge Issuer Trust 5 .727%, 2034-06-11 CAD 269,139 246,428 329,028 Province of Alberta 3 .900%, 2033-12-01 CAD 436,000 411,978 500,949 3 .300%, 2046-12-01 CAD 2,594,000 2,601,832 2,802,533 Province of British Columbia 3 .200%, 2044-06-18 CAD 640,000 565,375 705,866 Province of Newfoundland and Labrador Series 6Z, 3 .000%, 2026-06-02 CAD 765,000 764,113 800,623 Province of Ontario 3 .150%, 2022-06-02 CAD 1,694,000 1,721,602 1,863,771 2 .850%, 2023-06-02 CAD 7,544,000 6,809,058 8,190,777 3 .500%, 2024-06-02 CAD 3,625,000 3,612,133 4,111,102 2 .600%, 2025-06-02 CAD 919,000 949,914 977,189 2 .900%, 2046-12-02* CAD 3,498,000 3,433,530 3,613,096 2 .800%, 2048-06-02 CAD 182,000 180,893 184,617 Province of Québec 3 .500%, 2022-12-01 CAD 190,000 208,282 213,329 2 .750%, 2025-09-01 CAD 933,000 986,001 1,001,852 5 .750%, 2036-12-01 CAD 296,000 407,829 433,452 4 .250%, 2043-12-01 CAD 796,000 777,244 1,014,320 3 .500%, 2045-12-01 CAD 2,197,000 2,253,573 2,504,381 3 .500%, 2048-12-01* CAD 276,000 311,138 318,168 TCHC Issuer Trust 4 .877%, 2037-05-11 CAD 287,000 238,639 361,789 Series B, 5 .395%, 2040-02-22 CAD 690,000 637,841 946,613
30,743,132 35,248,127
*Securities pledged as collateral, in part or in whole, through the securities lending program.
FOR EASE OF COMPREHENSION TO THE READER, FOR THE DFS GIF – INCOME – FIERA CAPITAL, THE ENTIRE PORTFOLIO OF SECURITIES IN THE SCHEDULE OF INVESTMENT PORTFOLIO AS AT JUNE 30, 2016, HAS NOT BEEN DISCLOSED. INSTEAD, THE MAJOR CATEGORIES OF ASSETS ARE LISTED ALONG WITH THE PERCENTAGES THAT EACH OF THESE CATEGORIES HOLD. THE TOTAL COSTS, FAIR VALUES, NUMBER OF UNITS, TOTAL INVESTMENTS AND NET ASSETS ARE ALSO LISTED.
44 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Par Fair Value Cost Value $ $Corporations (39.1%)
Bank of Montreal 2 .390%, 2017-07-12 CAD 33,000 31,161 33,443 2 .240%, 2017-12-11 CAD 529,000 502,045 536,959 3 .340%, (floating rate from 2020-12-08), 2025-12-08* CAD 775,000 774,713 787,656 3 .320%, (floating rate from 2021-06-01), 2026-06-01 CAD 1,064,000 1,063,851 1,076,918 Blackbird Infrastructure 407 General Partners 1 .713%, (floating rate from 2020-01-08), 2021-10-08 CAD 229,000 227,216 229,217 Caisse centrale Desjardins 2 .443%, 2019-07-17 CAD 840,000 805,831 865,121 Canadian Imperial Bank of Commerce 2 .350%, 2017-10-18 CAD 2,743,000 2,621,107 2,784,277 2 .350%, 2019-06-24* CAD 56,000 53,675 57,620 3 .000%, (floating rate from 2019-10-28), 2024-10-28* CAD 88,000 88,208 88,343 3 .420%, (floating rate from 2021-01-26), 2026-01-26 CAD 762,000 764,687 776,080 Canadian Utilities 4 .543%, 2041-10-24 CAD 408,000 404,194 480,906 4 .722%, 2043-09-09 CAD 175,000 191,993 212,713 4 .085%, 2044-09-02 CAD 169,000 171,496 187,352 Capital City Link Series A, 4 .386%, 2046-03-31 CAD 847,000 759,585 910,025 Cominar Real Estate Investment Trust Series 9, 4 .164%, 2022-06-01 CAD 645,000 645,000 661,225 Series 10, 4 .247%, 2023-05-23 CAD 315,000 315,000 320,694 CSS (FSCC) Partnership 6 .915%, 2042-07-31 CAD 88,273 100,013 122,009 Enbridge 3 .940%, 2023-06-30* CAD 425,000 401,286 450,681 7 .220%, 2030-07-24 CAD 150,000 157,438 189,293 7 .200%, 2032-06-18 CAD 546,000 646,043 701,441 4 .570%, 2044-03-11 CAD 958,000 884,436 924,881 Grand Renewable Solar Series 1A, 3 .926%, 2035-01-31 CAD 286,000 286,000 294,718 Health Montréal Collective, Private Placement Series 144A, 6 .721%, 2049-09-30 CAD 1,370,000 1,575,576 1,886,529 Hospital Infrastructure Series A, 5 .439%, 2045-01-31 CAD 624,907 575,041 731,979 Integrated Team Solutions SJHC 5 .946%, 2042-11-30 CAD 200,676 185,483 254,646 Laurentian Bank of Canada 2 .750%, 2021-04-22 CAD 285,000 284,393 289,348 Melancthon Wolfe Wind 3 .834%, 2028-12-31 CAD 308,502 308,539 312,798 North West Redwater Partnership Series A, 3 .200%, 2024-07-22 CAD 505,000 484,491 526,987 3 .200%, 2026-04-24 CAD 263,000 262,440 271,038 Series F, 4 .250%, 2029-06-01 CAD 310,000 309,138 336,360 Northland Power Solar Finance Limited Partnership Series A, 4 .958%, 2032-12-31 CAD 387,671 369,540 450,330
*Securities pledged as collateral, in part or in whole, through the securities lending program.
Income
DFS GIF – INCOME – FIERA CAPITAL (cont.)
45DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
The accompanying Notes are an integral part of these financial statements.
Income
DFS GIF – INCOME – FIERA CAPITAL (cont.)
TOP FIVE HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
FIERA ACTIVE SHORT TERM CANADIAN MUNICIPAL BOND FUND 8.7%Province of Quebec, 4 .50%, December 1, 2016 3 .2%City of Magog, 2 .00%, September 2, 2020 2 .7%City of Trois-Rivières, 2 .40%, October 21, 2020 2 .2%City of Belœil, 2 .00%, September 8, 2020 1 .7%City of Côte-Saint-Luc, 2 .00%, August 25, 2020 1 .7%
47DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide above-average interest income with some potential for capital growth by investing primarily in bonds and other interest-bearing instruments of Canadian federal and provincial governments and investment-grade corporations .
Investment StrategyTo place emphasis primarily on medium and long-term maturities . Such maturities normally provide higher returns and better potential for capital gains but also higher variability of performance during periods of rapidly changing interest rates .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Fund’s financial assets and liabilities are denominated in Canadian dollars . As a result, the Fund is not significantly exposed to currency risk .
48 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskThe following table summarizes the Fund’s exposure to interest rate risk . It includes the Fund’s financial assets and liabilities at fair value, categorized by the earlier of contractual re-pricing or maturity dates . The table also illustrates the impact on the Net Assets Attributable to Contract Owners, had prevailing interest rates changed by 0 .25%, assuming a parallel shift in the yield curve, with all other variables held constant .
Less than 1 Year
$1 to 5 Years
$5 to 10 Years
$
Greater than 10 Years
$Total
$
Impact on Net Assets Attributable to
Contract Owners$
June 30, 2016 2,719,997 28,517,394 32,378,730 32,110,200 95,726,321 1,794,081 December 31, 2015 4,627,791 36,027,633 28,039,485 29,623,249 98,318,158 1,616,019
In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Concentration RiskThe following table summarizes the concentration risk, as a percentage of the Net Assets Attributable to Contract Owners:
MARKET SEGMENT June 30, 2016%
Canadian BondsCorporations 39 .1 Provincial Governments and Crown Corporations 33 .6 Government of Canada 16 .4
U .S . Bonds 0 .1 Income Investment Fund 8 .7 Money Market Securities 0 .6 Asset-Backed Securities 0 .6 Mortgage-Backed Securities 0 .6 Other Net Assets 0 .3 TOTAL 100
MARKET SEGMENT December 31, 2015%
BondsCorporations 40 .9 Provincial Governments and Crown Corporations 32 .5 Government of Canada 15 .6
Income Investment Fund 8 .3 Mortgage-Backed Securities 1 .2 Money Market Securities 0 .8 Asset-Backed Securities 0 .6 Other Net Assets 0 .1 TOTAL 100
Income
DFS GIF – INCOME – FIERA CAPITAL (cont.)
Price RiskThe Fund may trade in financial instruments and take positions in over-the-counter instruments . The Manager's estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners December 31, 2015
$FTSE TMX Canada Universe 1 .00 970,637 1,021,326
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
49DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unaudited
as at June 30, 2016
Credit RiskThe Fund’s credit risk is mainly concentrated in fixed-income securities . Their fair values include consideration of the issuers' creditworthiness and accordingly, represent the Fund’s maximum exposure to credit risk .
Portfolio's Fixed-Income Securities by Credit Rating Category
Credit Rating Percentage of Fixed-Income Securities
June 30, 2016%
Percentage of Fixed-Income Securities
December 31, 2015%
AAA 22 20 AA 41 44 A 23 26 BBB 14 10 TOTAL 100 100
Securities Lending and Repurchase TransactionsAs part of its securities lending cash counter and repurchase transactions, the Fund is exposed to counterparty credit risk .The carrying amount of financial assets lent as part of repurchase transactions is:
$June 30, 2016 9,923,536 December 31, 2015 12,113,751
The fair value of the financial assets held as collateral that the Fund is permitted to sell or repledge in the absence of default totalled:
$June 30, 2016 6,591,949 December 31, 2015 5,988,222
The fair value of financial assets accepted as collateral which have been sold or repledged totalled:
$June 30, 2016 10,961 December 31, 2015 —
These financial assets were received as collateral as part of transactions involving reverse repurchase transactions .
Liquidity RiskFor further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
DERECOGNITION OF FINANCIAL ASSETS
Securities Lending and Repurchase TransactionsAs part of transactions involving securities lending or repurchase transactions, the Fund transfers financial assets under terms and conditions providing for their future repurchase . These financial assets remain recognized in the ”Investments at fair value through profit or loss pledged as collateral” of the Statement of Financial Position as the Fund retains substantially all the risks and rewards related to these assets .
June 30, 2016$
December 31, 2015$
Investments at FVTPL pledged as Collateral 11,540,632 12,171,098 Value of Collateral received 11,772,356 12,414,521
The Funds require collateral in the form of cash or such other securities as may be acceptable to Desjardins Financial Security and that have an aggregate value of no less than 102% of the loaned securities fair value .
50 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
The following table presents the carrying amount and the fair value of financial assets transferred by the Fund but not derecognized as well as the related liabilities recognized in ”Commitments related to repurchase transactions” and ”Commitments related to securities lending” of the Statement of Financial Position .
Fair Value* June 30, 2016
$
Fair Value* December 31, 2015
$Financial Assets 9,923,536 12,113,751 Related Liabilities 9,960,959 12,107,884
*The fair value equals the carrying amount .
RECONCILIATION OF INCOME FROM SECURITY LENDING AND REPURCHASE TRANSACTION (Note 2)The following table shows a reconciliation of the total income generated from securities lending transactions of the Fund and the revenue from securities lending and repurchase transactions disclosed in the Fund’s Statement of Comprehensive Income .
June 30, 2016$
June 30, 2016%
June 30, 2015$
June 30, 2015%
Total Income 17,052 100 16,672 100Net Income received by: DFS GIF – Income – Fiera Capital 10,232 60 10,058 60Desjardins Trust 6,820 40 6,704 40
Income
DFS GIF – INCOME – FIERA CAPITAL (cont.)
51DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 42,328,165 41,285,987 Premiums receivable 78,253 21,713 Receivable for securities sold 6,912 54,840
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 42,220,080
2016*$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 1,316,592
Adjustments for:Net realized gain (loss) (35,017)Net unrealized gain (loss) (1,158,406)
Proceeds from sale/maturity of investments 2,476,271
Investments purchased (2,325,026)Receivable for securities sold 47,928 Accrued expenses 1,286 Payable for securities purchased 18,868
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 342,496
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 3,593,177 Amounts paid on withdrawals (3,921,845)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (328,668)
Increase (Decrease) in cash/bank overdraft 13,828
Cash (bank overdraft), beginning of period (14,263)
CASH (BANK OVERDRAFT), END OF PERIOD (435)
Six-month Period Ended June 30
Six-month Period Ended June 30
* Beginning of operations in October 2015.
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Income
DFS GIF – CANADIAN BOND (cont.)
53DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)DGIA Canadian Bond Fund 4,034,235 41,061,649 42,328,165
TOTAL INVESTMENTS 41,061,649 42,328,165
OTHER NET ASSETS (-0.3%) (108,085)
NET ASSETS (100%) 42,220,080
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Canada Housing Trust, 2 .00%, December 15, 2019 4 .6%NHA MBS Merrill Lynch, 1 .35%, May 1, 2020 3 .9%Province of Ontario, 2 .10%, September 8, 2019 3 .3%Province of Ontario, 2 .60%, June 2, 2025 3 .2%Government of Canada, 1 .50%, June 1, 2026 2 .8%Government of Canada, 5 .00%, June 1, 2037 2 .7%Province of Ontario, 6 .50%, March 8, 2029 2 .6%Province of Ontario, 2 .85%, June 2, 2023 2 .5%NHA First National Financial, 1 .20%, June 1, 2020 2 .4%Canadian Imperial Bank of Commerce, 2 .35%, October 18, 2017 2 .2%Province of Ontario, 3 .15%, June 2, 2022 2 .2%NHA MBS Merrill Lynch, 1 .07%, July 1, 2020 2 .0%Scotiabank, 1 .33%, May 1, 2018 2 .0%Canada Housing Trust, 2 .40%, December 15, 2022 1 .9%Toronto-Dominion Bank, 2 .447%, April 2, 2019 1 .9%Government of Canada, 3 .50%, December 1, 2045 1 .8%Province of Quebec, 3 .50%, December 1, 2045 1 .8%Province of Ontario, 4 .20%, June 2, 2020 1 .8%Royal Bank of Canada, 2 .26%, March 12, 2018 1 .7%Canada Housing Trust, 2 .90%, June 15, 2024 1 .7%Province of Ontario, 3 .45%, June 2, 2045 1 .5%Canada Housing Trust, 1 .25%, June 15, 2021 1 .4%Province of British Columbia, 2 .80%, June 18, 2048 1 .4%Canada Housing Trust, 1 .70%, December 15, 2017 1 .4%Government of Canada, 2 .75%, December 1, 2048 1 .4%
54 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide regular income and capital security by investing in a portfolio of fixed-income securities from the Canadian bond market .
Investment StrategyThis Fund, actively managed, aims to provide regular income and capital security by investing in a portfolio of fixed-income securities from the Canadian bond market . The Fund employs a fundamental investment approach targeting a consistent allocation of value added sources . The strategy seeks to add value through management of duration, yield curve and credit risk .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair ValueThe following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 42,328,165 — 42,328,165 TOTAL — 42,328,165 — 42,328,165
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 41,285,987 — 41,285,987 TOTAL — 41,285,987 — 41,285,987
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Income
DFS GIF – CANADIAN BOND (cont.)
55DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe 1 .00 422,201 411,734
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
56 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 199,668,233 201,049,294 Premiums receivable 665,213 130,612 Receivable for securities sold 89,455 37,434
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 198,845,416 191,034,646
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unauditedSix-month Periods Ended June 30
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 198,508 5,220,222
Adjustments for:Net realized gain (loss) (1,387,632) (1,797,657)Net unrealized gain (loss) (1,634,685) (6,228,614)
Proceeds from sale/maturity of investments 10,955,344 6,840,986
Investments purchased (6,551,966) (3,323,278)Receivable for securities sold (52,021) 47,667 Accrued expenses (8,023) 13,298 Payable for securities purchased 507,319 (32,165)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 2,026,844 740,459
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 15,120,818 16,435,337 Amounts paid on withdrawals (17,170,585) (17,093,348)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (2,049,767) (658,011)
Increase (Decrease) in cash/bank overdraft (22,923) 82,448
Cash (bank overdraft), beginning of period (37,246) (28,347)
CASH (BANK OVERDRAFT), END OF PERIOD (60,169) 54,101
STATEMENT OF CASH FLOWS – unauditedSix-month Periods Ended June 30
58 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.4%)Franklin Quotential Diversified Income Portfolio 27,616,630 171,153,622 199,668,233
TOTAL INVESTMENTS 171,153,622 199,668,233
OTHER NET ASSETS (-0.4%) (822,817)
NET ASSETS (100%) 198,845,416
The accompanying Notes are an integral part of these financial statements.
TOP HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Franklin Bissett Core Plus Bond Fund 24 .4%Franklin Strategic Income Fund 9 .6%Franklin Bissett Canadian Short Term Bond Fund 9 .0%Templeton Global Bond Fund 8 .9%Cash and Cash Equivalents 8 .2%BMO Mid Federal Bond Index ETF 6 .4%Franklin Bissett Canadian Dividend Fund 4 .5%iShares TIPS Bond ETF 3 .9%iShares iBoxx High Yield Corporate Bond ETF 3 .8%Franklin U .S . Rising Dividends Fund 3 .1%WisdomTree Australia & New Zealand Debt ETF 3 .1%Templeton Emerging Markets Fund 2 .1%Franklin Global Real Estate Fund 2 .1%Franklin Global Listed Infrastructure Fund 2 .1%Franklin Mutual European Fund 2 .0%Franklin Bisset All Canadian Focus Fund 1 .6%Franklin U .S . Core Equity Fund 1 .6%SPDR Gold Trust ETF 1 .2%iShares S&P/TSX 60 Index ETF 0 .6%Franklin Japan Fund 0 .5%iShares MSCI Japan ETF 0 .5%Franklin European Small-Mid Cap Growth Fund 0 .5%SPDR Euro Stoxx 50 ETF 0 .5%
Balanced and Asset Allocation
DFS GIF – DIVERSIFIED INCOME – FRANKLIN QUOTENTIAL (cont.)
59DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a balance of capital growth and interest income by investing primarily in units of an underlying fund in order to gain the desired exposure to the equity and fixed income markets .
Investment StrategyTo emphasize investments in fixed income underlying funds in order to provide income and capital preservation . The Fund also invests, to a lesser extent, in equity underlying funds in order to increase the potential for capital appreciation over a longer investment horizon .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 199,668,233 — — 199,668,233 TOTAL 199,668,233 — — 199,668,233
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 201,049,294 — — 201,049,294 TOTAL 201,049,294 — — 201,049,294
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks . Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
60 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (55%) 1 .00 1,257,053 1,177,847Barclays Capital Multiverse (25%) 1 .00 571,388 535,385S&P/TSX (15%) 3 .00 1,028,498 963,693MSCI All Country World Net (5%) 3 .00 342,833 321,231
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – DIVERSIFIED INCOME – FRANKLIN QUOTENTIAL (cont.)
61DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 51,219 —Investments at fair value through profit
or loss (FVTPL) 250,775,330 259,869,458 Premiums receivable 47,004 15,808 Receivable for securities sold 187,161 87,783
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 249,818,242 257,670,718
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unauditedSix-month Periods Ended June 30
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (4,368,107) 12,940,963
Adjustments for:Net realized gain (loss) (2,491,173) (3,499,632)Net unrealized gain (loss) 3,202,569 (13,291,250)
Proceeds from sale/maturity of investments 12,285,628 9,779,679
Investments purchased (3,902,896) (84,459)Receivable for securities sold (99,378) 97,644 Accrued expenses (20,324) 21,097 Payable for securities purchased (114,512) 88,540
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 4,491,807 6,052,582
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 15,654,934 15,139,683 Amounts paid on withdrawals (20,083,074) (21,072,342)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (4,428,140) (5,932,659)
Increase (Decrease) in cash/bank overdraft 63,667 119,923
Cash (bank overdraft), beginning of period (12,448) 31,643
CASH (BANK OVERDRAFT), END OF PERIOD 51,219 151,566
STATEMENT OF CASH FLOWS – unauditedSix-month Periods Ended June 30
Balanced and Asset Allocation
DFS GIF – BALANCED INCOME – FRANKLIN QUOTENTIAL (cont.)
63DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.4%)Franklin Quotential Balanced Income Portfolio 26,820,891 196,630,937 250,775,330
TOTAL INVESTMENTS 196,630,937 250,775,330
OTHER NET ASSETS (-0.4%) (957,088)
NET ASSETS (100%) 249,818,242
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Franklin Bissett Core Plus Bond Fund 27 .0%Franklin Strategic Income Fund 6 .6%Templeton Global Bond Fund 6 .5%Franklin Bissett Canadian Equity Fund 4 .7%BMO Mid Federal Bond Index ETF 4 .5%Franklin U .S . Core Equity Fund 4 .2%Franklin U .S . Rising Dividends Fund 4 .0%Franklin Mutual European Fund 3 .7%iShares TIPS Bond ETF 3 .6%Franklin Bisset All Canadian Focus Fund 2 .9%iShares iBoxx High Yield Corporate Bond ETF 2 .8%Templeton Asian Growth Fund 2 .6%Franklin U .S . Opportunities Fund 2 .5%Franklin Templeton Canadian Large Cap Fund 2 .4%WisdomTree Australia & New Zealand Debt ETF 2 .2%Franklin Bissett Small Cap Fund 1 .7%iShares Russell 1000 Value ETF 1 .5%SPDR Gold Trust ETF 1 .5%Franklin Japan Fund 1 .4%SPDR Euro Stoxx 50 ETF 1 .4%Franklin European Small-Mid Cap Growth Fund 0 .9%Templeton Emerging Markets Smaller Companies Fund 0 .9%iShares MSCI Japan ETF 0 .7%iShares MSCI Japan Small-Cap ETF 0 .6%Franklin India Fund 0 .5%
64 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a balance of capital growth and interest income by investing primarily in units of an individual underlying fund in order to gain the desired exposure to the equity and fixed income markets .
Investment StrategyTo invest in fixed income underlying funds in order to provide income and capital preservation . The Fund also invests in equity underlying funds in order to increase the potential for capital appreciation over a longer investment horizon .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 250,775,330 — — 250,775,330 TOTAL 250,775,330 — — 250,775,330
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 259,869,458 — — 259,869,458 TOTAL 259,869,458 — — 259,869,458
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification . Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – BALANCED INCOME – FRANKLIN QUOTENTIAL (cont.)
65DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (45%) 1 .00 1,346,775 1,279,171Barclays Capital Multiverse (15%) 1 .00 448,925 426,390S&P/TSX (20%) 3 .00 1,795,700 1,705,561MSCI All Country World Net (20%) 3 .00 1,795,700 1,705,561
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
66 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 304,254 102,954 Investments at fair value through profit
or loss (FVTPL) 877,881,642 882,313,517 Premiums receivable 576,780 929,481 Receivable for securities sold 212,348 195,137
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 874,805,343 912,043,284
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unauditedSix-month Periods Ended June 30
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 19,692,552 51,475,416
Adjustments for:Net realized gain (loss) (6,054,442) (10,046,534)Net unrealized gain (loss) (13,256,991) (41,192,206)
Proceeds from sale/maturity of investments 39,394,959 29,459,592
Investments purchased (15,651,651) (9,006,580)Receivable for securities sold (17,211) 104,790 Accrued expenses (26,938) 99,244 Payable for securities purchased (575,585) 41,241
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 23,504,693 20,934,963
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 51,259,442 52,208,470 Amounts paid on withdrawals (74,562,835) (73,073,980)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (23,303,393) (20,865,510)
Increase (Decrease) in cash/bank overdraft 201,300 69,453
Cash (bank overdraft), beginning of period 102,954 104,454
CASH (BANK OVERDRAFT), END OF PERIOD 304,254 173,907
STATEMENT OF CASH FLOWS – unauditedSix-month Periods Ended June 30
68 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.4%)Fidelity Canadian Balanced Fund, Series O 37,964,111 723,205,968 877,881,642
TOTAL INVESTMENTS 723,205,968 877,881,642
OTHER NET ASSETS (-0.4%) (3,076,299)
NET ASSETS (100%) 874,805,343
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Royal Bank of Canada 3 .4%Scotiabank 2 .9%Restaurant Brands International 2 .5%Brookfield Asset Management 2 .5%Toronto-Dominion Bank 2 .2%Enbridge 2 .1%Canadian Pacific Railway 2 .0%Rogers Communications 1 .8%Fortis 1 .7%Canadian Natural Resources 1 .5%Barrick Gold Corporation 1 .3%Agnico-Eagle Mines Ltd 1 .1%Raging River Exploration 1 .1%EOG Resources 1 .0%Gildan Activewear 1 .0%Province of Ontario, 3 .15%, June 2, 2022 0 .9%Randgold Resources Ltd 0 .9%ARC Resources 0 .9%TELUS Corporation 0 .9%National Bank of Canada 0 .9%Silver Wheaton Corporation 0 .8%Loblaw Companies 0 .8%Province of Ontario, 2 .85%, June 2, 2023 0 .8%Peyto Exploration & Development Corporation 0 .8%Brookfield Property Partners 0 .8%
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIDELITY (cont.)
69DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve high total investment return using a diversified portfolio targeting long-term capital appreciation and a regular income stream through investment in any kind of equity or fixed-income security or money market instrument . The fundamental investment objective of the Fund is to provide investors with a balanced asset mix with the potential for capital growth .
Investment StrategyTarget fixed asset allocation to deliver superior long-term growth potential and reduced levels of risk . The Fund invests primarily in a mix of Canadian equity securities, investment grade bonds, high yield securities and money market instruments . The equity investment decisions are based on a thorough examination of the company, financial conditions and long-term earnings potential .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 877,881,642 — — 877,881,642 TOTAL 877,881,642 — — 877,881,642
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 882,313,517 — — 882,313,517 TOTAL 882,313,517 — — 882,313,517
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
70 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIDELITY (cont.)
71DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 11,337 Investments at fair value through profit
or loss (FVTPL) 6,804,811 2,641,839 Premiums receivable 6,544 34,992 Receivable for securities sold 65 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 6,788,127
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unauditedSix-month Period Ended June 30
2016*$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (49,294)
Adjustments for:Net realized gain (loss) 8,642 Net unrealized gain (loss) 17,769
Proceeds from sale/maturity of investments 176,341
Investments purchased (4,365,724)Receivable for securities sold (65)Accrued expenses 10,255 Payable for securities purchased (39,815)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (4,241,891)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 4,720,480 Amounts paid on withdrawals (489,992)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 4,230,488
Increase (Decrease) in cash/bank overdraft (11,403)
Cash (bank overdraft), beginning of period 11,337
CASH (BANK OVERDRAFT), END OF PERIOD (66)
STATEMENT OF CASH FLOWS – unauditedSix-month Period Ended June 30
* Beginning of operations in October 2015.
Balanced and Asset Allocation
DFS GIF – U.S. MONTHLY INCOME – FIDELITY (cont.)
73DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.2%)Fidelity U .S . Monthly Income Fund, Series O 310,660 6,884,922 6,804,811
TOTAL INVESTMENTS 6,884,922 6,804,811
OTHER NET ASSETS (-0.2%) (16,684)
NET ASSETS (100%) 6,788,127
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
iShares 20+ Year Treasury Bond ETF 1 .8%Chevron Corporation 1 .8%Johnson & Johnson 1 .7%JPMorgan Chase & Company 1 .4%Procter & Gamble Company 1 .3%Freddie Mac, 3 .50%, 30 Year 1 .3%General Electric Company 1 .2%U .S . Treasury Note, 1 .25%, March 31, 2021 1 .2%U .S . Treasury Note, 0 .375%, July 15, 2025 1 .1%U .S . Treasury Bill, 3 .00%, May 15, 2045 1 .0%United Parcel Service 0 .8%CVS Health Corporation 0 .8%Cisco Systems 0 .8%AT&T 0 .8%Ginnie Mae, 3 .50%, 30 Year 0 .7%Chubb Ltd 0 .7%M&T Bank Corporation 0 .7%Williams Companies 0 .7%Freddie Mac, 4 .00%, 30 Year 0 .7%Verizon Communications 0 .6%Simon Property Group 0 .6%Wells Fargo & Company 0 .6%United Technologies Corporation 0 .6%Exelon Corporation 0 .6%Fannie Mae, 3 .00%, 30 Year 0 .5%
74 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve a combination of a steady flow of income and the potential for capital gains by investing in a mix of U .S . income-producing securities .
Investment StrategyThe Fund invests primarily in a mix of U .S . income-producing securities, either directly or indirectly through investments in underlying funds . The Fund’s neutral mix is 50% exposure to equity securities and 50% exposure to fixed-income securities . These securities may be U .S . securities or non-U .S . securities but at least 70% of the Fund’s net assets will be invested in U .S . dollar-denominated investments .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 6,804,811 — — 6,804,811 TOTAL 6,804,811 — — 6,804,811
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 2,641,839 — — 2,641,839 TOTAL 2,641,839 — — 2,641,839
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – U.S. MONTHLY INCOME – FIDELITY (cont.)
75DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
Barclays Capital US Aggregate Bond (31%) 1 .50 31,565 12,258Bank of America ML all US Convertibles (5%) 1 .50 5,091 1,977Bank of America ML High Yield Master II Constrained (12%) 2 .00 16,292 6,327JP Morgan EMBI Global Diversified (5%) 2 .00 6,788 2,636Russell 3000 Value (40%) 3 .00 81,458 31,634FTSE NAREIT Equity REITs (7%) 3 .00 14,255 5,536
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
76 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 13,052 —Investments at fair value through profit
or loss (FVTPL) 11,460,989 8,142,045 Premiums receivable 379,563 109,603 Receivable for securities sold — 349
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 11,426,220
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unauditedSix-month Period Ended June 30
2016*$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 47,002
Adjustments for:Net realized gain (loss) 12,106 Net unrealized gain (loss) (195,351)
Proceeds from sale/maturity of investments 254,128
Investments purchased (3,389,827)Receivable for securities sold 349 Accrued expenses 6,447 Payable for securities purchased 290,760
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (2,974,386)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 3,595,670 Amounts paid on withdrawals (607,877)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 2,987,793
Increase (Decrease) in cash/bank overdraft 13,407
Cash (bank overdraft), beginning of period (355)
CASH (BANK OVERDRAFT), END OF PERIOD 13,052
STATEMENT OF CASH FLOWS – unauditedSix-month Period Ended June 30
* Beginning of operations in October 2015.
78 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)SocieTerra Balanced Portfolio, I-Class 1,208,201 11,773,024 11,460,989
TOTAL INVESTMENTS 11,773,024 11,460,989
OTHER NET ASSETS (-0.3%) (34,769)
NET ASSETS (100%) 11,426,220
The accompanying Notes are an integral part of these financial statements.
TOP HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Desjardins SocieTerra Canadian Bond Fund 50 .5%NEI Ethical Canadian Equity Fund 11 .6%Desjardins SocieTerra American Equity Fund 10 .8%NEI Ethical International Equity Fund 10 .4%Desjardins SocieTerra Environment Fund 6 .9%Desjardins SocieTerra Environmental Bond Fund 5 .5%NEI Ethical Special Equity Fund 2 .6%Desjardins SocieTerra Cleantech Fund 1 .5%Cash and Cash Equivalents 0 .2%
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve a balance between long-term capital appreciation and income by investing primarily in Canadian, and to a lesser extent, foreign equity and fixed-income securities and/or in units of mutual funds which themselves invest primarily in Canadian or foreign equity and fixed-income securities . The Fund follows a socially responsible approach to investing .
Investment StrategyTo reach the Fund’s investment objective, selection of the securities and/or the underlying funds as well as the percentage of the assets that will be invested in each of these securities or underlying funds will be based on the following target weightings: Fixed-income (55%) and Growth (45%) .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 11,460,989 — — 11,460,989 TOTAL 11,460,989 — — 11,460,989
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 8,142,045 — — 8,142,045 TOTAL 8,142,045 — — 8,142,045
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
80 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s best estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, with all other variables held constant, is as follows:
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 223,240,429 157,321,733
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (2,182,990) 5,885,514
Adjustments for:Net realized gain (loss) (697,284) (2,040,264)Net unrealized gain (loss) 2,715,882 (3,900,312)
Proceeds from sale/maturity of investments 4,706,498 11,050,427
Investments purchased (26,115,120) (10,018,616)Receivable for securities sold — (25,198)Accrued expenses 46,238 17,979 Payable for securities purchased (5,274) (172,235)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (21,532,050) 797,295
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 42,592,486 11,925,329 Amounts paid on withdrawals (21,201,890) (13,038,494)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 21,390,596 (1,113,165)
Increase (Decrease) in cash/bank overdraft (141,454) (315,870)
Cash (bank overdraft), beginning of period 732,788 903,740
CASH (BANK OVERDRAFT), END OF PERIOD 591,334 587,870
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Balanced and Asset Allocation
DFS GIF – GLOBAL BALANCED – JARISLOWSKY FRASER (cont.)
83DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.0%)Jarislowsky Fraser Global Balanced Fund 17,259,347 190,187,218 223,262,171
TOTAL INVESTMENTS 190,187,218 223,262,171
OTHER NET ASSETS (-0.0%) (21,742)
NET ASSETS (100%) 223,240,429
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Jarislowsky Fraser International Pooled Fund 18 .4%Jarislowsky Fraser Special Equity Fund 2 .0%Toronto-Dominion Bank 1 .8%Government of Canada, 3 .50%, December 1, 2045 1 .6%Royal Bank of Canada 1 .4%Scotiabank 1 .3%Microsoft Corporation 1 .0%Province of Ontario, 2 .85%, June 2, 2023 1 .0%Government of Canada, 1 .25%, December 1, 2047 1 .0%Enbridge 1 .0%Canadian National Railway Company 0 .9%Canadian Natural Resources 0 .9%Suncor Energy 0 .8%Canadian Imperial Bank of Commerce, 1 .70%, October 9, 2018 0 .8%National Grid Electricity Transmission, 2 .90%, November 26, 2019 0 .8%Open Text Corporation 0 .8%Bank of Montréal, 2 .12%, March 16, 2022 0 .8%Walgreens Boots Alliance 0 .7%CVS Health Corporation 0 .7%Manulife Financial Corporation 0 .7%Colgate-Palmolive Company 0 .7%Canada Housing Trust, 1 .20%, June 15, 2020 0 .7%SNC-Lavalin Group 0 .7%Oracle Corporation 0 .7%Comcast Corporation 0 .7%
84 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with an opportunity to achieve a high rate of return by investing in a diversified portfolio consisting of a balance of equity and fixed-income securities of issuers located throughout the world .
Investment StrategyTo provide such an opportunity through a diversified portfolio consisting of a balance of mainly large cap equity and mainly investment grade fixed-income securities of issuers located throughout the world .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 223,262,171 — 223,262,171 TOTAL — 223,262,171 — 223,262,171
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 203,872,147 — 203,872,147 TOTAL — 203,872,147 — 203,872,147
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – GLOBAL BALANCED – JARISLOWSKY FRASER (cont.)
85DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
86 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 11,967 —Investments at fair value through profit
or loss (FVTPL) 163,655,080 161,011,034 Investments at fair value through profit
or loss (FVTPL) pledged as collateral 17,000,836 21,876,504 Premiums receivable 106,031 64,188 Receivable for securities sold 680,960 2,346,923 Cash guarantee received for repurchase
transactions 10,307,101 5,685,138 Interest, dividends and other receivables 331,109 379,735
192,093,084 191,363,522 LIABILITIESCurrent LiabilitiesBank overdraft — 785 Accrued expenses 396,491 410,645 Withdrawals payable 348,362 67,850 Payable for securities purchased 1,652,155 —Commitments related to repurchase
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 179,388,975 193,920,185
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 3,535,587 8,378,731
Adjustments for:Foreign exchange gain (loss) on cash — (9,204)Net realized gain (loss) (3,588,975) (6,769,196)Net unrealized gain (loss) (2,765) (2,083,841)
Proceeds from sale/maturity of investments 170,709,125 182,934,406
Investments purchased (164,883,974) (174,581,731)Receivable for securities sold 1,665,963 (1,909,936)Cash guarantee received for repurchase
transactions (4,621,963) (7,275,491)Interest, dividends and other receivables 48,626 7,067 Accrued expenses (14,154) 8,334 Commitments related to repurchase
transactions 4,621,963 7,275,491 Payable for securities purchased 1,652,155 1,906,352
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 9,121,588 7,880,982
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 8,034,559 8,779,510 Amounts paid on withdrawals (17,141,606) (16,746,932)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (9,107,047) (7,967,422)
Effect of exchange rate changes on foreign cash (1,789) 4,106
Increase (Decrease) in cash/bank overdraft 12,752 (82,334)
Cash (bank overdraft), beginning of period (785) 77,260
CASH (BANK OVERDRAFT), END OF PERIOD 11,967 (5,074)
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Interest received 709,947 752,860 Dividends received, net of
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
FOR EASE OF COMPREHENSION TO THE READER, FOR THE DFS GIF – CANADIAN BALANCED – FIERA CAPITAL, THE ENTIRE PORTFOLIO OF SECURITIES IN THE SCHEDULE OF INVESTMENT PORTFOLIO AS AT JUNE 30, 2016, HAS NOT BEEN DISCLOSED. INSTEAD, THE MAJOR CATEGORIES OF ASSETS ARE LISTED ALONG WITH THE PERCENTAGES THAT EACH OF THESE CATEGORIES HOLD. THE TOTAL COSTS, FAIR VALUES, NUMBER OF UNITS, TOTAL INVESTMENTS AND NET ASSETS ARE ALSO LISTED.
88 DFS GUARANTEED INVESTMENT FUNDS
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIERA CAPITAL (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number Fair of Shares Cost Value $ $EQUITIES (44.2%)
Energy (8.3%)Canadian Natural Resources 71,527 2,407,871 2,851,066 Cenovus Energy 84,435 1,633,580 1,508,853 Crescent Point Energy 55,404 1,231,042 1,130,796 Enbridge 50,367 2,560,070 2,756,586 Husky Energy 78,074 1,196,383 1,231,227 Peyto Exploration & Development 34,735 1,023,242 1,204,610 Suncor Energy 54,831 1,927,328 1,965,143 TransCanada, Subscription Receipts 39,684 1,815,543 2,314,371
Industrials (4.2%)Canadian National Railway Company 45,408 2,790,865 3,464,176 Canadian Pacific Railway 11,693 1,919,509 1,944,897 Waste Connections 22,885 1,873,359 2,136,086
6,583,733 7,545,159
Consumer Discretionary (4.7%)Dollarama 17,630 892,980 1,590,226 Gildan Activewear* 72,537 2,263,973 2,744,800 Magna International, Class A 33,900 1,728,954 1,537,365 Quebecor, Class B 33,115 1,090,808 1,225,917 Restaurant Brands International 26,323 1,432,952 1,415,651
7,409,667 8,513,959
Consumer Staples (2.6%)Alimentation Couche-Tard, Class B 51,901 2,325,818 2,879,467 Loblaw Companies 25,432 1,384,344 1,757,606
3,710,162 4,637,073
Health Care (0.2%)Valeant Pharmaceuticals International* 17,065 3,450,499 444,543
Financials (15.1%)Brookfield Asset Management, Class A 43,000 1,875,619 1,837,820 CI Financial 37,898 1,196,849 1,021,351 Element Financial Corporation 194,841 2,883,555 2,669,322 Intact Financial Corporation 12,130 1,008,956 1,119,478 Manulife Financial 156,164 3,230,648 2,759,418
*Securities pledged as collateral, in part or in whole, through the securities lending program.
89DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number Fair of Shares Cost Value $ $Financials (cont.)
Royal Bank of Canada 87,457 5,762,068 6,676,467 Scotiabank 77,399 4,620,534 4,900,131 Toronto-Dominion Bank 108,959 4,838,619 6,045,045
25,416,848 27,029,032
Information Technology (1.5%)CGI Group, Class A* 48,265 1,970,074 2,663,745
Utilities (0.5%)Algonquin Power & Utilities Corp . 75,826 822,756 901,578
TOTAL EQUITIES 73,303,073 79,376,075
Par Value BONDS (21.3%)
Canadian Bonds (21.3%)
Government of Canada (3.6%)Broadcast Center Trust 7 .530%, 2027-05-01 CAD 204,498 221,629 274,421 Canada Housing Trust 2 .350%, 2018-12-15 CAD 793,000 830,680 823,658 Government of Canada 0 .250%, 2018-05-01* CAD 1,769,000 1,759,517 1,760,437 2 .250%, 2025-06-01* CAD 19,000 20,689 21,114 Series E679, 1 .500%, 2026-06-01* CAD 2,425,000 2,508,214 2,524,997 5 .750%, 2033-06-01 CAD 31,000 49,770 50,046 PSP Capital Series 7, 3 .290%, 2024-04-04 CAD 120,000 119,939 133,246 Royal Office Finance Series A, 5 .209%, 2032-11-12 CAD 716,335 710,252 912,997
6,220,690 6,500,916 Provincial Governments and Crown Corporations (8.9%)
Ontario Infrastructure 4 .700%, 2037-06-01 CAD 70,000 70,093 87,082 Ontario School Boards Financing Corporation Series 00A1, 7 .200%, 2025-06-09 CAD 327,614 397,428 412,802 Series 04A1, 5 .483%, 2029-11-26 CAD 384,450 410,291 474,750 Private Placement, Series 06A1, 5 .070%, 2031-04-18 CAD 369,838 369,838 435,803 Province of Alberta 3 .900%, 2033-12-01 CAD 132,000 131,418 151,663 3 .300%, 2046-12-01* CAD 1,019,000 1,021,224 1,100,918 Province of British Columbia 3 .200%, 2044-06-18 CAD 236,000 218,064 260,288 Province of Newfoundland and Labrador Series 6Z, 3 .000%, 2026-06-02 CAD 275,000 274,681 287,806
*Securities pledged as collateral, in part or in whole, through the securities lending program.
90 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Par Fair Value Cost Value $ $Provincial Governments and Crown Corporations (cont.)
PORTFOLIO TRANSACTION COSTS INCLUDED IN THE SECURITIES’ COST (60,573) —
TOTAL INVESTMENTS (100.7%) 160,200,171 180,655,916
OTHER NET ASSETS (-0.7%) (1,266,941)
NET ASSETS (100%) 179,388,975
The accompanying Notes are an integral part of these financial statements.
TOP FIVE HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
FIERA GLOBAL EQUITY FUND 21.2%Moody’s Corporation 4 .2%Johnson & Johnson 4 .2%Becton, Dickinson and Company 4 .1%Keyence Corporation 4 .0%Nestlé 3 .3%
94 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with a balance of capital growth and interest income by investing primarily in Canadian fixed income and equity securities .
Investment StrategyTo provide such a balance by investing a portion of its assets in the common shares of medium and large cap Canadian corporations and the remainder in Canadian government and Canadian investment-grade corporate bonds and other interest-bearing instruments .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Classification of Level 3As at June 30, 2016 and December 31, 2015, the Fund has no financial instruments classified within Level 3 .
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIERA CAPITAL (cont.)
95DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Reconciliation of Level 3 Fair Value MeasurementThe following table summarizes a reconciliation of movements on Level 3 financial instruments between the beginning and end of the period:
June 30, 2016 Equities $
Balance, Beginning of Period — Proceeds from sale of investments — Investments purchased 2,799,168 Net realized gain (loss) — Net unrealized gain (loss) — Transfers to (from) Level 3 (2,799,168) Balance, End of Period —
Certain securities classified as Level 3 entailed restrictions . In April 2016, these securities valued at approximately $2,799,000 were transferred from Level 3 to Level 1 following the expiration of the restrictions . These securities are now valued at the quoted prices on the active markets .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Currency RiskAs at June 30, 2016 and December 31, 2015, part of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .As at June 30, 2016 and December 31, 2015, the majority of the Fund’s financial assets and liabilities are denominated in Canadian dollars . As a result, the Fund is not significantly exposed to currency risk .
Interest Rate RiskPart of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The following table summarizes the Fund’s exposure to interest rate risk . It includes the Fund’s financial assets and liabilities at fair value, categorized by the earlier of contractual re-pricing or maturity dates . The table also illustrates the impact on the Net Assets Attributable to Contract Owners, had prevailing interest rates changed by 0 .25%, assuming a parallel shift in the yield curve, with all other variables held constant .
Less than 1 Year
$1 to 5 Years
$5 to 10 Years
$
Greater than 10 Years
$Total
$
Impact on Net Assets Attributable to
Contract Owners$
June 30, 2016 26,458,072 12,966,093 11,305,078 12,513,218 63,242,461 728,947 December 31, 2015 15,605,259 15,537,608 10,556,269 11,608,315 53,307,451 684,204
In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
96 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskPart of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The following table summarizes the concentration risk, as a percentage of the Net Assets Attributable to Contract Owners:
MARKET SEGMENT June 30, 2016%
Equities Financials 15 .1 Energy 8 .3 Materials 7 .1 Consumer Discretionary 4 .7 Industrials 4 .2 Consumer Staples 2 .6 Information Technology 1 .5 Utilities 0 .5 Health Care 0 .2 Bonds Provincial Governments and Crown Corporations 8 .9 Corporations 8 .8 Government of Canada 3 .6 Growth Investment Fund 21 .2 Money Market Securities 13 .8 Mortgage-Backed Securities 0 .1 Asset-Backed Securities 0 .1 Other Net Assets (0 .7)TOTAL 100
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIERA CAPITAL (cont.)
MARKET SEGMENT December 31, 2015%
Equities Financials 17 .3 Energy 7 .9 Materials 6 .3 Industrials 4 .5 Consumer Staples 2 .7 Consumer Discretionary 2 .3 Information Technology 2 .1 Health Care 1 .3 Telecommunication Services 1 .2 Growth Investment Fund 24 .3 Bonds Corporations 8 .9 Provincial Governments and Crown Corporations 8 .2 Government of Canada 4 .3 Money Market Securities 7 .2 Mortgage-Backed Securities 0 .2 Asset-Backed Securities 0 .1 Other Net Assets 1 .2 TOTAL 100
Price RiskThe Fund may trade in financial instruments and take positions in traded and over-the-counter instruments .Part of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager's estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners December 31, 2015
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
97DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Credit RiskPart of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Fund’s credit risk concentration is separated between fixed-income and money market securities . Their fair values include consideration of the issuers' creditworthiness and accordingly, represent the Fund’s maximum exposure to credit risk .
Portfolio's Fixed-Income Securities by Credit Rating Category
Credit Rating Percentage of Fixed-Income Securities
June 30, 2016%
Percentage of Fixed-Income Securities
December 31, 2015%
AAA 20 22 AA 40 39 A 28 30 BBB 12 9 TOTAL 100 100
Portfolio's Money Market Securities by Credit Rating Category
Credit Rating Percentage of Money Market Securities
June 30, 2016%
Percentage of Money Market Securities
December 31, 2015%
R-1 (High) 82 62 R-1 (Middle) 18 38 TOTAL 100 100
Securities Lending and Repurchase TransactionsAs part of its securities lending cash counter and repurchase transactions, the Fund is exposed to counterparty credit risk .The carrying amount of financial assets lent as part of repurchase transactions is:
$June 30, 2016 10,269,940 December 31, 2015 5,688,216
The fair value of the financial assets held as collateral that the Fund is permitted to sell or repledge in the absence of default totalled:
$June 30, 2016 6,821,065 December 31, 2015 2,811,681
The fair value of financial assets accepted as collateral which have been sold or repledged totalled:
$June 30, 2016 11,342 December 31, 2015 —
These financial assets were received as collateral as part of transactions involving reverse repurchase transactions .
98 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Liquidity RiskAs at June 30, 2016 and December 31, 2015, part of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
DERECOGNITION OF FINANCIAL ASSETS
Securities Lending and Repurchase TransactionsAs part of transactions involving securities lending or repurchase transactions, the Fund transfers financial assets under terms and conditions providing for their future repurchase . These financial assets remain recognized in the “Investments at fair value through profit or loss pledged as collateral” of the Statement of Financial Position as the Fund retains substantially all the risks and rewards related to these assets .
June 30, 2016$
December 31, 2015$
Investments at FVTPL pledged as Collateral 17,000,836 21,876,504 Value of Collateral received 17,341,173 22,314,035
The Funds require collateral in the form of cash or such other securities as may be acceptable to Desjardins Financial Security and that have an aggregate value of no less than 102% of the loaned securities fair value .The following table presents the carrying amount and the fair value of financial assets transferred by the Fund but not derecognized as well as the related liabilities recognized in “Commitments related to repurchase transactions” and “Commitments related to securities lending” of the Statement of Financial Position .
Fair Value* June 30, 2016
$
Fair Value* December 31, 2015
$Financial Assets 10,269,940 5,688,216 Related Liabilities 10,307,101 5,685,138
*The fair value equals the carrying amount .
RECONCILIATION OF INCOME FROM SECURITY LENDING AND REPURCHASE TRANSACTION (Note 2)The following table shows a reconciliation of the total income generated from securities lending transactions of the Fund and the revenue from securities lending and repurchase transactions disclosed in the Fund’s Statement of Comprehensive Income .
June 30, 2016$
June 30, 2016%
June 30, 2015$
June 30, 2015%
Total Income 16,778 100 22,166 100Net Income received by: DFS GIF – Canadian Balanced – Fiera Capital 10,067 60 13,300 60Desjardins Trust 6,711 40 8,866 40
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FIERA CAPITAL (cont.)
99DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 111,676 —Investments at fair value through profit
or loss (FVTPL) 192,558,366 193,040,209 Premiums receivable 847,181 442,582 Receivable for securities sold — 68,041
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 192,097,909 216,456,761
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 7,901,361 2,466,068
Adjustments for:Net realized gain (loss) (2,042,385) (4,061,046)Net unrealized gain (loss) (8,427,901) (1,435,734)
Proceeds from sale/maturity of investments 13,232,275 18,673,617
Investments purchased (2,280,146) (3,346,343)Receivable for securities sold 68,041 (45,430)Accrued expenses (4,286) (13,972)Payable for securities purchased 515,775 (156,501)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 8,962,734 12,080,659
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 10,067,046 14,106,854 Amounts paid on withdrawals (18,850,218) (26,358,411)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (8,783,172) (12,251,557)
Increase (Decrease) in cash/bank overdraft 179,562 (170,898)
Cash (bank overdraft), beginning of period (67,886) 90,541
CASH (BANK OVERDRAFT), END OF PERIOD 111,676 (80,357)
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESInterest paid 22 —
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FRANKLIN BISSETT (cont.)
101DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.2%)Franklin Bissett Canadian Balanced Fund, Series O 4,412,429 153,774,148 192,558,366
TOTAL INVESTMENTS 153,774,148 192,558,366
OTHER NET ASSETS (-0.2%) (460,457)
NET ASSETS (100%) 192,097,909
The accompanying Notes are an integral part of these financial statements.
TOP HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Franklin Bissett Canadian Equity Fund 19 .1%Franklin Bissett Corporate Bond Fund 14 .5%Franklin Bissett Core Plus Bond Fund 14 .0%Franklin Bissett Microcap Fund 6 .4%Franklin Bisset All Canadian Focus Fund 6 .1%Franklin Bissett Small Cap Fund 5 .9%Franklin Bissett Canadian Dividend Fund 5 .0%Franklin Bissett U .S . Focus Fund 4 .3%Franklin U .S . Rising Dividends Fund 4 .2%Templeton EAFE Developed Markets Fund 4 .1%Franklin Mutual Global Discovery Fund 3 .9%Franklin Bissett Monthly Income and Growth Fund 3 .1%Templeton Global Bond Fund 2 .7%Templeton Global Smaller Companies Fund 2 .3%Franklin Strategic Income Fund 2 .2%Templeton Emerging Markets Fund 1 .0%Franklin Bissett Canadian Short Term Bond Fund 0 .8%Cash and Cash Equivalents 0 .4%
102 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with a balance of current income and long-term capital appreciation primarily through the investment in Canadian fixed-income and equity securities .
Investment StrategyTo provide such an opportunity by investing in a diversified portfolio of Franklin Bissett mutual funds . The underlying funds may invest in foreign securities .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 192,558,366 — — 192,558,366 TOTAL 192,558,366 — — 192,558,366
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 193,040,209 — — 193,040,209 TOTAL 193,040,209 — — 193,040,209
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – FRANKLIN BISSETT (cont.)
103DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (35%) 1 .00 649,133 621,058Barclays Capital U .S . Aggregate Bond (2 .5%) 1 .00 46,367 44,361J .P . Morgan Global Government Bond (2 .5%) 1 .00 46,367 44,361S&P/TSX Small Cap (5%) 3 .00 278,200 266,168S&P/TSX (32 .5%) 3 .00 1,808,300 1,730,090S&P 500 (10%) 3 .00 556,400 532,335MSCI EAFE Net (10%) 3 .00 556,400 532,335MSCI Emerging Markets Net (2 .5%) 3 .00 139,100 133,084
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .
In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
104 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 513,427,189 537,605,591 Premiums receivable 810,517 297,343 Receivable for securities sold 406,144 178,040
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 511,644,805 538,311,847
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (15,322,705) 32,040,562
Adjustments for:Net realized gain (loss) (5,147,700) (7,709,001)Net unrealized gain (loss) 12,867,368 (32,414,746)
Proceeds from sale/maturity of investments 20,153,900 26,375,701
Investments purchased (3,695,166) (8,549,146)Receivable for securities sold (228,104) 454,301 Accrued expenses (53,215) 68,449 Payable for securities purchased 233,887 205,628
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 8,808,265 10,471,748
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 30,750,898 28,523,230 Amounts paid on withdrawals (39,507,571) (38,836,732)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (8,756,673) (10,313,502)
Increase (Decrease) in cash/bank overdraft 51,592 158,246
Cash (bank overdraft), beginning of period (178,117) (101,925)
CASH (BANK OVERDRAFT), END OF PERIOD (126,525) 56,321
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESInterest paid 1 —
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
106 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Franklin Quotential Balanced Growth Portfolio 48,712,257 378,093,977 513,427,189
TOTAL INVESTMENTS 378,093,977 513,427,189
OTHER NET ASSETS (-0.3%) (1,782,384)
NET ASSETS (100%) 511,644,805
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Franklin Bissett Core Plus Bond Fund 19 .7%Franklin U .S . Core Equity Fund 6 .1%Franklin Bissett Canadian Equity Fund 5 .9%Franklin U .S . Rising Dividends Fund 5 .8%Franklin Mutual European Fund 5 .4%Franklin Strategic Income Fund 4 .8%Templeton Global Bond Fund 4 .7%Templeton Asian Growth Fund 3 .8%Franklin Bisset All Canadian Focus Fund 3 .6%Franklin U .S . Opportunities Fund 3 .5%BMO Mid Federal Bond Index ETF 3 .3%Franklin Templeton Canadian Large Cap Fund 3 .0%iShares TIPS Bond ETF 2 .6%iShares Russell 1000 Value ETF 2 .2%Franklin Bissett Small Cap Fund 2 .1%Franklin Japan Fund 2 .1%iShares iBoxx High Yield Corporate Bond ETF 2 .0%SPDR Euro Stoxx 50 ETF 1 .9%WisdomTree Australia & New Zealand Debt ETF 1 .6%SPDR Gold Trust ETF 1 .5%Franklin European Small-Mid Cap Growth Fund 1 .4%Templeton Emerging Markets Smaller Companies Fund 1 .3%iShares MSCI Japan ETF 1 .0%iShares MSCI Japan Small-Cap ETF 0 .9%Franklin India Fund 0 .7%
Balanced and Asset Allocation
DFS GIF – BALANCED GROWTH – FRANKLIN QUOTENTIAL (cont.)
107DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a balance of capital growth and interest income by investing primarily in units of an individual underlying fund in order to gain the desired exposure to the equity and fixed income markets .
Investment StrategyTo emphasize investments in equity underlying funds in order to increase the potential for capital appreciation over a longer investment horizon . The Fund also invests, to a lesser extent, in fixed income underlying funds in order to provide stability .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 513,427,189 — — 513,427,189 TOTAL 513,427,189 — — 513,427,189
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 537,605,591 — — 537,605,591 TOTAL 537,605,591 — — 537,605,591
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
108 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (30%) 1 .00 1,789,873 1,721,526Barclays Capital Multiverse (10%) 1 .00 596,624 573,842S&P/TSX (30%) 3 .00 5,369,620 5,164,579MSCI All Country World Net (30%) 3 .00 5,369,620 5,164,579
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – BALANCED GROWTH – FRANKLIN QUOTENTIAL (cont.)
109DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 108,128,030 110,268,316 Premiums receivable 33,005 356,582 Receivable for securities sold 35,999 203,681
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 107,794,154 110,044,764
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (1,511,904) 1,550,753
Adjustments for:Net realized gain (loss) 171,086 (256,856)Net unrealized gain (loss) (212,739) (2,864,259)
Proceeds from sale/maturity of investments 5,604,099 2,576,362
Investments purchased (3,422,160) (13,361,281)Receivable for securities sold 167,682 698 Accrued expenses (8,139) 41,527 Payable for securities purchased 21,304 (248,388)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 809,229 (12,561,444)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 8,972,582 20,605,719 Amounts paid on withdrawals (9,762,319) (8,029,966)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (789,737) 12,575,753
Increase (Decrease) in cash/bank overdraft 19,492 14,309
Cash (bank overdraft), beginning of period (32,321) (5,623)
CASH (BANK OVERDRAFT), END OF PERIOD (12,829) 8,686
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – CI SIGNATURE (cont.)
111DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Signature Canadian Balanced Fund, Class I 11,714,846 108,699,431 108,128,030
TOTAL INVESTMENTS 108,699,431 108,128,030
OTHER NET ASSETS (-0.3%) (333,876)
NET ASSETS (100%) 107,794,154
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
SPDR Gold Shares 6 .8%Scotiabank 2 .2%Toronto-Dominion Bank 1 .8%Royal Bank of Canada 1 .8%Province of Quebec, 4 .50%, December 1, 2019 1 .3%Alimentation Couche-Tard 1 .3%Province of Ontario, 3 .50%, June 2, 2024 1 .2%Province of Quebec, 4 .30%, December 1, 2021 1 .2%Province of Ontario, 4 .20%, June 2, 2020 1 .1%Citigroup 1 .1%Manulife Financial Corporation 1 .0%Roche Holding AG 1 .0%Province of Quebec, 2 .80%, September 1, 2025 1 .0%Province of Ontario, 3 .20%, June 2, 2022 1 .0%Province of British Columbia, 3 .20%, June 18, 2024 0 .9%Province of Ontario, 2 .90%, December 2, 2046 0 .9%Canadian National Railway Company 0 .9%Province of Ontario, 4 .00%, June 2, 2021 0 .9%TransCanada Corporation 0 .9%Sony Corporation 0 .8%Enbridge 0 .8%Suncor Energy 0 .8%Thermo Fisher Scientific 0 .8%Saputo 0 .8%Nestlé SA 0 .7%
112 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with an attractive balance of current income and capital appreciation by investing primarily in a combination of Canadian equity and equity-related securities and fixed income securities .
Investment StrategyFor the equity portion, the Fund invests primarily in companies providing a stable income or consistent dividends . For the fixed income portion, the portfolio advisor selects high-quality fixed income securities, including bank loans and floating rate debt instruments but may choose to shift the weighting of the portion of the Fund held in bonds with longer terms to maturity depending on the expected fluctuations in interest rates . The Fund may also invest in foreign securities as well as warrants, and derivatives, the latter to aid in hedging against potential losses resulting from changes in the prices of the securities that the Fund has invested in as well as any exposure from foreign currencies .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 108,128,030 — — 108,128,030 TOTAL 108,128,030 — — 108,128,030
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 110,268,316 — — 110,268,316 TOTAL 110,268,316 — — 110,268,316
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – CANADIAN BALANCED – CI SIGNATURE (cont.)
113DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (40%) 1 .00 373,091 387,077S&P/TSX (30%) 3 .00 839,454 870,924MSCI All Country World Net (30%) 3 .00 839,454 870,924
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .
In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
114 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 4,525 —Investments at fair value through profit
or loss (FVTPL) 65,491,251 69,141,832 Premiums receivable 437,229 232,269 Receivable for securities sold 973 28,314
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 65,305,489 69,115,973
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (732,867) 1,373,704
Adjustments for:Net realized gain (loss) (1,098,866) (1,443,858)Net unrealized gain (loss) 2,074,072 83,027
Proceeds from sale/maturity of investments 6,551,170 2,805,543
Investments purchased (3,875,795) (12,369,442)Receivable for securities sold 27,341 (4,744)Accrued expenses (9,188) 30,309 Payable for securities purchased 386,719 40,586
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 3,322,586 (9,484,875)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 6,173,406 15,115,830 Amounts paid on withdrawals (9,487,570) (5,637,204)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (3,314,164) 9,478,626
Increase (Decrease) in cash/bank overdraft 8,422 (6,249)
Cash (bank overdraft), beginning of period (3,897) 7,085
CASH (BANK OVERDRAFT), END OF PERIOD 4,525 836
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
116 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Signature Income & Growth Fund, Class I 7,165,345 67,532,003 65,491,251
TOTAL INVESTMENTS 67,532,003 65,491,251
OTHER NET ASSETS (-0.3%) (185,762)
NET ASSETS (100%) 65,305,489
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
SPDR Gold Shares 6 .8%Scotiabank 2 .1%Toronto-Dominion Bank 1 .8%Royal Bank of Canada 1 .8%Alimentation Couche-Tard 1 .1%Singapore Telecommunications 1 .1%Citigroup 1 .0%Manulife Financial Corporation 1 .0%Canadian National Railway Company 0 .9%Suncor Energy 0 .8%TransCanada Corporation 0 .8%Roche Holding AG 0 .8%Enbridge 0 .8%Province of Ontario, 4 .00%, June 2, 2021 0 .8%Province of Quebec, 4 .50%, December 1, 2019 0 .8%Saputo 0 .7%JPMorgan Chase & Company 0 .7%Bristol-Myers Squibb Company 0 .7%Loblaw Companies 0 .7%Province of Ontario, 4 .20%, June 2, 2020 0 .7%Telstra Corporation Ltd 0 .7%Province of Quebec, 4 .25%, December 1, 2021 0 .7%Total SA 0 .7%Nestlé SA 0 .6%Sony Corporation 0 .6%
Balanced and Asset Allocation
DFS GIF – INCOME AND GROWTH – CI SIGNATURE (cont.)
117DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe objective of this Fund is to provide a steady flow of current income while preserving capital by obtaining exposure primarily to equity, equity related and fixed income securities of Canadian issuers .
Investment StrategyThe Fund invests in a combination of equity, fixed income and derivatives . Broadly diversified by sector and style, preferred and common shares make up portions of the Fund’s investments in equity securities . The fixed income portion of the Fund’s investments is comprised of high-yielding government and corporate bonds, debentures and notes, including some securities that are unrated or have credit ratings below investment grade . The Fund may also invest in real estate investment trusts (REITs), royalty trusts, income trusts and other similar high yielding instruments .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 65,491,251 — — 65,491,251 TOTAL 65,491,251 — — 65,491,251
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 69,141,832 — — 69,141,832 TOTAL 69,141,832 — — 69,141,832
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
118 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (15%) 1 .00 79,488 86,164Merrill Lynch High Yield Master II (15%) 2 .00 158,976 172,328S&P/TSX Composite High Dividend (10%) 3 .00 158,976 172,328S&P/TSX (30%) 3 .00 476,929 516,985MSCI All Country World Net (30%) 3 .00 476,929 516,985
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – INCOME AND GROWTH – CI SIGNATURE (cont.)
119DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 416,748 371,470 Investments at fair value through profit
or loss (FVTPL) 152,441,242 154,530,284 Premiums receivable 498,758 17,148 Receivable for securities sold — 31,307
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 152,361,408 155,615,912
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 522,538 4,907,506
Adjustments for:Net realized gain (loss) (1,763,061) (2,451,644)Net unrealized gain (loss) 333,761 (2,368,064)
Proceeds from sale/maturity of investments 7,461,204 8,989,202
Investments purchased (3,942,862) (4,473,840)Receivable for securities sold 31,307 —Accrued expenses (6,490) 6,600 Payable for securities purchased 304,440 (76,838)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 2,940,837 4,532,922
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 10,622,562 9,053,042 Amounts paid on withdrawals (13,518,121) (13,623,182)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (2,895,559) (4,570,140)
Increase (Decrease) in cash/bank overdraft 45,278 (37,218)
Cash (bank overdraft), beginning of period 371,470 426,267
CASH (BANK OVERDRAFT), END OF PERIOD 416,748 389,049
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Balanced and Asset Allocation
DFS GIF – GROWTH AND INCOME – NEI NORTHWEST (cont.)
121DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.1%)NEI Northwest Growth and Income Fund, Series I 23,130,452 113,952,360 152,441,242
TOTAL INVESTMENTS 113,952,360 152,441,242
OTHER NET ASSETS (-0.1%) (79,834)
NET ASSETS (100%) 152,361,408
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
NEI Northwest Global Equity Fund 35 .3%NEI Canadian Bond Fund 23 .8%Toronto-Dominion Bank 3 .7%Québecor 2 .4%Onex Corporation 2 .3%Rogers Communications 2 .2%Canadian Imperial Bank of Commerce 2 .2%TELUS Corporation 2 .1%BCE 2 .1%FirstService Corporation 2 .1%Sun Life Financial 2 .0%Manulife Financial Corporation 2 .0%Thomson Reuters Corporation 2 .0%Granite Real Estate Investment Trust 1 .8%Colliers International Group 1 .6%Scotiabank 1 .5%Magna International 1 .4%Bombardier 1 .3%Allied Properties Real Estate Investment 1 .1%Vermilion Energy 0 .9%Pason Systems 0 .8%Bonterra Energy 0 .8%Precision Drilling Corporation 0 .7%Equitable Group 0 .6%NorthWest Healthcare Properties Real Estate Investment Trust 0 .6%
122 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a consistent stream of income and capital appreciation by investing primarily in a mix of Canadian equities and fixed-income securities .
Investment StrategyTo invest in a diversified portfolio consisting primarily of a balance of large cap equity and investment grade fixed-income securities issued principally by Canadian issuers .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 152,441,242 — — 152,441,242 TOTAL 152,441,242 — — 152,441,242
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 154,530,284 — — 154,530,284 TOTAL 154,530,284 — — 154,530,284
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – GROWTH AND INCOME – NEI NORTHWEST (cont.)
123DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
124 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 59,580 Investments at fair value through profit
or loss (FVTPL) 84,826,646 83,962,666 Premiums receivable 82,830 —Receivable for securities sold 664,389 69,564
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 84,548,937 78,657,657
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (699,163) 3,803,367
Adjustments for:Net realized gain (loss) 65,244 (886,772)Net unrealized gain (loss) (675,934) (4,147,190)
Proceeds from sale/maturity of investments 4,011,055 2,774,695
Investments purchased (4,264,345) (3,778,807)Receivable for securities sold (594,825) (6,667)Accrued expenses 6,213 19,199 Payable for securities purchased 3,644 3,271
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (2,148,111) (2,218,904)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 8,309,429 6,686,321 Amounts paid on withdrawals (6,267,202) (4,472,640)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 2,042,227 2,213,681
Increase (Decrease) in cash/bank overdraft (105,884) (5,223)
Cash (bank overdraft), beginning of period 59,580 43,362
CASH (BANK OVERDRAFT), END OF PERIOD (46,304) 38,139
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
126 DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)NEI Select Growth Portfolio, Series I 7,946,364 84,805,242 84,826,646
TOTAL INVESTMENTS 84,805,242 84,826,646
OTHER NET ASSETS (-0.3%) (277,709)
NET ASSETS (100%) 84,548,937
The accompanying Notes are an integral part of these financial statements.
TOP HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
NEI Northwest Global Equity Fund 13 .0%NEI Ethical Global Equity Fund 12 .8%NEI Ethical International Equity Fund 12 .2%NEI Northwest U .S . Dividend Fund 12 .1%NEI Northwest Specialty Global High Yield Bond Fund 8 .3%NEI Northwest Macro Canadian Asset Allocation Fund 8 .3%NEI Northwest Specialty Equity Fund 8 .2%NEI Global Total Return Bond Fund 7 .6%NEI Northwest Emerging Markets Fund 7 .1%NEI Northwest Canadian Dividend Fund 4 .2%NEI Northwest Canadian Equity Fund 4 .2%NEI Canadian Bond Fund 1 .9%Cash and Cash Equivalents 0 .1%
Balanced and Asset Allocation
DFS GIF – GLOBAL GROWTH – NEI SELECT (cont.)
127DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a balance of capital growth and interest income by investing primarily in units of individual underlying funds in order to gain the desired exposure to the equity and fixed income markets .
Investment StrategyTo emphasize investments in equity underlying funds in order to increase the potential for capital appreciation over a longer investment horizon . The Fund also invests to a lesser extent, in fixed income underlying funds in order to provide income and capital preservation .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 84,826,646 — — 84,826,646 TOTAL 84,826,646 — — 84,826,646
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 83,962,666 — — 83,962,666 TOTAL 83,962,666 — — 83,962,666
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
128 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – GLOBAL GROWTH – NEI SELECT (cont.)
129DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 340 Investments at fair value through profit
or loss (FVTPL) 12,225,986 10,642,981 Premiums receivable 15,318 173,108 Receivable for securities sold 2,757 150
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe objective of this Fund is to achieve a superior total investment return directly or indirectly, in a combination of primarily equity and fixed income securities of Canadian companies . Indirect investments may include convertible securities, derivatives, equity-related securities and securities of other mutual funds .
Investment StrategyThe Fund is actively managed with a disciplined bottom-up selection process . The strategy uses exposure in equity, fixed income instruments and cash and cash equivalents to achieve the Fund objective . The investments in each asset class will vary dependent on market conditions . The Canadian fixed income securities portion of the portfolio will consist mainly of high quality government and corporate bonds while foreign securities can make up part of the equity portion of the portfolio .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 12,225,986 — — 12,225,986 TOTAL 12,225,986 — — 12,225,986
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 10,642,981 — — 10,642,981 TOTAL 10,642,981 — — 10,642,981
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Balanced and Asset Allocation
DFS GIF – CANADIAN ASSET ALLOCATION – CI CAMBRIDGE (cont.)
133DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
134 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 54,845,087 60,640,944 Premiums receivable 12,504 17,818 Receivable for securities sold 20,663 4,522
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 54,671,201 62,429,712
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (2,776,921) 4,519,208
Adjustments for:Net realized gain (loss) (1,381,119) (1,691,002)Net unrealized gain (loss) 3,260,649 (3,846,942)
Proceeds from sale/maturity of investments 4,408,355 3,570,467
Investments purchased (492,028) (808,249)Receivable for securities sold (16,141) 18,016 Accrued expenses (14,768) 9,202 Payable for securities purchased (3,566) 22,888
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 2,984,461 1,793,588
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,566,116 2,194,183 Amounts paid on withdrawals (4,547,600) (3,984,279)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (2,981,484) (1,790,096)
Increase (Decrease) in cash/bank overdraft 2,977 3,492
Cash (bank overdraft), beginning of period (4,124) (5,487)
CASH (BANK OVERDRAFT), END OF PERIOD (1,147) (1,995)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
136 DFS GUARANTEED INVESTMENT FUNDS
Balanced and Asset Allocation
DFS GIF – GROWTH – FRANKLIN QUOTENTIAL (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Franklin Quotential Growth Portfolio 5,462,658 37,114,867 54,845,087
TOTAL INVESTMENTS 37,114,867 54,845,087
OTHER NET ASSETS (-0.3%) (173,886)
NET ASSETS (100%) 54,671,201
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Franklin Bissett Core Plus Bond Fund 11 .9%Franklin U .S . Core Equity Fund 8 .3%Franklin U .S . Rising Dividends Fund 7 .9%Franklin Mutual European Fund 7 .2%Franklin Bissett Canadian Equity Fund 6 .9%Templeton Asian Growth Fund 4 .9%Franklin U .S . Opportunities Fund 4 .8%Franklin Bisset All Canadian Focus Fund 4 .3%Franklin Templeton Canadian Large Cap Fund 3 .4%iShares Russell 1000 Value ETF 3 .0%Franklin Strategic Income Fund 2 .9%Franklin Japan Fund 2 .8%Templeton Global Bond Fund 2 .8%Franklin Bissett Small Cap Fund 2 .4%S&P Depositary Receipt EURO STOXX 50 ETF 2 .3%BMO Mid Federal Bond Index ETF 2 .0%Franklin European Small-Mid Cap Growth Fund 1 .8%Templeton Emerging Markets Fund 1 .8%iShares TIPS Bond ETF 1 .6%S&P Depositary Receipt Gold Trust ETF 1 .5%iShares MSCI Japan ETF 1 .3%iShares MSCI Japan Small-Cap ETF 1 .3%iShares iBoxx High Yield Corporate Bond ETF 1 .2%iShares S&P/TSX 60 Index ETF 1 .0%WisdomTree Australia & New Zealand Debt ETF 1 .0%
137DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide a balance of capital growth and interest income by investing primarily in units of an individual underlying fund in order to gain the desired exposure to the equity and fixed income markets .
Investment StrategyTo emphasize investments in a diversified mix of equity underlying funds in order to increase the potential for capital appreciation over a longer investment horizon . The Fund also invests, to a lesser extent, in fixed income underlying funds in order to provide income and capital preservation .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 54,845,087 — — 54,845,087 TOTAL 54,845,087 — — 54,845,087
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 60,640,944 — — 60,640,944 TOTAL 60,640,944 — — 60,640,944
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
138 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
FTSE TMX Canada Universe (15%) 1 .00 92,271 95,555Barclays Capital Multiverse (5%) 1 .00 30,757 31,852S&P/TSX (35%) 3 .00 645,898 668,886MSCI All Country World Net (45%) 3 .00 830,441 859,996
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Balanced and Asset Allocation
DFS GIF – GROWTH – FRANKLIN QUOTENTIAL (cont.)
139DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 15,793 —Investments at fair value through profit
or loss (FVTPL) 192,254,246 196,741,421 Premiums receivable 226,337 59,622 Receivable for securities sold 154,302 144,933
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 191,797,428 129,622,753
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 13,229,822 (3,812,926)
Adjustments for:Net realized gain (loss) (866,599) (3,498,019)Net unrealized gain (loss) (12,617,136) 6,878,940
Proceeds from sale/maturity of investments 20,688,527 14,632,405
Investments purchased (2,717,617) (1,723,432)Receivable for securities sold (9,369) (362,145)Accrued expenses (12,348) (28,439)Payable for securities purchased (8,673) (22,157)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 17,686,607 12,064,227
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 3,732,302 6,676,141 Amounts paid on withdrawals (21,350,701) (18,756,288)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (17,618,399) (12,080,147)
Increase (Decrease) in cash/bank overdraft 68,208 (15,920)
Cash (bank overdraft), beginning of period (52,415) 4,378
CASH (BANK OVERDRAFT), END OF PERIOD 15,793 (11,542)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Canadian Equity
DFS GIF – DIVIDEND INCOME – FRANKLIN BISSETT (cont.)
141DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.2%)Franklin Bissett Dividend Income Fund, Series O 4,929,602 173,365,231 192,254,246
TOTAL INVESTMENTS 173,365,231 192,254,246
OTHER NET ASSETS (-0.2%) (456,818)
NET ASSETS (100%) 191,797,428
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Canadian Imperial Bank of Commerce 3 .8%Royal Bank of Canada 3 .7%Toronto-Dominion Bank 3 .7%Bank of Montreal 2 .9%Scotiabank 2 .9%Enbridge 2 .8%Enbridge Income Fund Holdings 2 .5%IGM Financial 2 .5%Canadian National Railway Company 2 .2%Power Financial Corporation 2 .1%Inter Pipeline 2 .1%Brookfield Renewable Energy Partners 1 .8%Capital Power Corporation 1 .8%Russel Metals 1 .8%Fortis 1 .8%Rogers Communications 1 .7%ARC Resources 1 .6%Johnson & Johnson 1 .6%MacDonald, Dettwiler and Associates Ltd 1 .6%General Mills Inc . 1 .5%McDonald’s Corporation 1 .4%Brookfield Property Partners 1 .4%TELUS Corporation 1 .4%RioCan Real Estate Investment Trust 1 .4%The Kraft Heinz Company 1 .4%
142 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide the investor with a consistent return through investment in dividend paying common shares and preferred shares .
Investment StrategyTo invest in a diversified portfolio of large cap Canadian issuer preferred shares and common shares as well as common shares of large cap United States issuers with long histories of dividend growth . From time to time the Fund also invests in investment grade interest-bearing securities to a maximum of 25% of the total assets of the Fund .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 192,254,246 — — 192,254,246 TOTAL 192,254,246 — — 192,254,246
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 196,741,421 — — 196,741,421 TOTAL 196,741,421 — — 196,741,421
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Canadian Equity
DFS GIF – DIVIDEND INCOME – FRANKLIN BISSETT (cont.)
143DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
144 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 50,767 72,368 Investments at fair value through profit
or loss (FVTPL) 20,109,122 19,246,335 Premiums receivable 122,649 56,977 Receivable for securities sold 7,070 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 20,210,454 19,777,396
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 824,865 (100,276)
Adjustments for:Net realized gain (loss) (45,153) (136,015)Net unrealized gain (loss) (750,156) 157,228
Proceeds from sale/maturity of investments 1,145,672 1,071,963
Investments purchased (1,213,150) (2,778,182)Receivable for securities sold (7,070) (1,133)Accrued expenses 1,808 5,397 Payable for securities purchased (43,999) 13,152
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (87,183) (1,767,866)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 2,290,661 4,703,320 Amounts paid on withdrawals (2,225,079) (2,916,213)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 65,582 1,787,107
Increase (Decrease) in cash/bank overdraft (21,601) 19,241
Cash (bank overdraft), beginning of period 72,368 57,834
CASH (BANK OVERDRAFT), END OF PERIOD 50,767 77,075
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
146 DFS GUARANTEED INVESTMENT FUNDS
Canadian Equity
DFS GIF – CANADIAN DIVIDEND – NEI NORTHWEST (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (99.5%)NEI Northwest Canadian Dividend Fund, Series I 1,206,574 18,652,367 20,109,122
TOTAL INVESTMENTS 18,652,367 20,109,122
OTHER NET ASSETS (0.5%) 101,332
NET ASSETS (100%) 20,210,454
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Toronto-Dominion Bank 9 .3%Royal Bank of Canada 9 .1%Scotiabank 7 .2%Rogers Communications 7 .1%Kellogg Company 5 .0%Cenovus Energy 4 .6%Verizon Communications 4 .1%Atea 4 .1%Canadian Natural Resources 4 .1%Canadian Imperial Bank of Commerce 4 .0%Baxter International 3 .4%Power Financial Corporation 3 .2%Molson Coors Canada 2 .9%Magna International 2 .8%Canadian Tire Corporation 2 .7%Symantec Corporation 2 .6%Merck & Company 2 .5%Agrium 2 .5%Unilever 2 .2%Intact Financial Corporation 2 .2%Finning International 2 .1%Manulife Financial Corporation 2 .1%Parker Hannifin Corporation 2 .0%Eli Lilly and Company 1 .9%Potash Corporation of Saskatchewan 1 .6%
147DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe objective of this Fund is to achieve a balance between high dividend income and capital growth by investing mainly in a diversified portfolio of blue chip Canadian common stocks and, to a lesser extent, in high-yield preferred stocks and interest bearing securities .
Investment StrategyThe Fund invests in primarily blue chip common stocks but may also invest in preferred stocks, bonds, purchase warrants and rights, royalty trusts and income trusts with preference given to capital growth while still providing a high regular level of income . Quality liquid corporations whose management has built shareholder value over time not to mention a proven ability to generate free cash flow, supporting growth and profitability as well as providing management with the ability to make strategic acquisitions, buy back stock and pay increasing dividends are preferred investments for this Fund . While equity securities including preferred stocks providing stable income are favoured, any small, mid and large capitalization Canadian corporations in a variety of industries meeting these criteria will be considered .
FINANCIAL INSTRUMENTS MEASUREMENT AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 20,109,122 — — 20,109,122 TOTAL 20,109,122 — — 20,109,122
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 19,246,335 — — 19,246,335 TOTAL 19,246,335 — — 19,246,335
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
148 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX 3 .00 434,392 409,830
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Canadian Equity
DFS GIF – CANADIAN DIVIDEND – NEI NORTHWEST (cont.)
149DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsInvestments at fair value through profit
or loss (FVTPL) 148,815,453 151,331,052 Premiums receivable 40,268 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 148,325,402 168,941,073
* Beginning of operations in October 2015.
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 6,451,208 (5,101,787)
Adjustments for:Net realized gain (loss) 425,176 (1,541,134)Net unrealized gain (loss) (7,082,128) 6,337,656
Proceeds from sale/maturity of investments 11,281,513 32,778,617
Investments purchased (2,108,962) (18,760,682)Receivable for securities sold — (137,448)Accrued expenses (4,118) (26,610)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 8,962,689 13,548,612
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,334,293 1,663,373 Amounts paid on withdrawals (10,093,741) (15,390,144)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (8,759,448) (13,726,771)
Increase (Decrease) in cash/bank overdraft 203,241 (178,159)
Cash (bank overdraft), beginning of period (215,940) (150,757)
CASH (BANK OVERDRAFT), END OF PERIOD (12,699) (328,916)
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESInterest paid — 562
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Canadian Equity
DFS GIF – CANADIAN EQUITY – JARISLOWSKY FRASER (cont.)
151DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Jarislowsky Fraser Canadian Equity Fund 4,839,149 147,421,015 148,815,453
TOTAL INVESTMENTS 147,421,015 148,815,453
OTHER NET ASSETS (-0.3%) (490,051)
NET ASSETS (100%) 148,325,402
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Jarislowsky Fraser Special Equity Fund 8 .8%Toronto-Dominion Bank 7 .8%Royal Bank of Canada 6 .3%Scotiabank 5 .8%Enbridge 4 .3%Canadian National Railway Company 4 .2%Canadian Natural Resources 4 .1%Suncor Energy 3 .7%Open Text Corporation 3 .4%Manulife Financial Corporation 3 .2%SNC-Lavalin Group 3 .2%Alimentation Couche-Tard 3 .0%Canadian Tire Corporation 2 .8%Metro 2 .7%Loblaw Companies 2 .5%Gildan Activewear 2 .5%Thomson Reuters Corporation 2 .4%Intact Financial Corporation 2 .4%Cenovus Energy 2 .4%The Great-West Life Assurance Company 2 .1%Pembina Pipeline Corporation 1 .9%Potash Corporation of Saskatchewan 1 .8%Stantec 1 .7%CGI Group 1 .7%Saputo 1 .7%
152 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve long-term capital appreciation while continuing to emphasize the preservation of capital by investing primarily in large cap Canadian equity securities .
Investment StrategyTo invest primarily in Canadian equity securities in areas of the Canadian economy where superior rates of growth are expected .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 148,815,453 — 148,815,453 TOTAL — 148,815,453 — 148,815,453
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 151,331,052 — 151,331,052 TOTAL — 151,331,052 — 151,331,052
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Canadian Equity
DFS GIF – CANADIAN EQUITY – JARISLOWSKY FRASER (cont.)
153DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX 3 .00 3,604,583 3,362,033
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
154 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 20,014 15,527 Investments at fair value through profit
or loss (FVTPL) 32,146,407 29,987,011 Premiums receivable 420,344 142,119
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (958,157) (2,340,178)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 5,183,808 5,923,686 Amounts paid on withdrawals (4,221,164) (3,556,433)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 962,644 2,367,253
Increase (Decrease) in cash/bank overdraft 4,487 27,075
Cash (bank overdraft), beginning of period 15,527 12,324
CASH (BANK OVERDRAFT), END OF PERIOD 20,014 39,399
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
156 DFS GUARANTEED INVESTMENT FUNDS
Canadian Equity
DFS GIF – CANADIAN EQUITY – FIDELITY TRUE NORTH® (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.0%)Fidelity True North® Fund, Series O 708,200 26,856,006 32,146,407
TOTAL INVESTMENTS 26,856,006 32,146,407
OTHER NET ASSETS (0.0%) 12,124
NET ASSETS (100%) 32,158,531
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Toronto-Dominion Bank 7 .4%Loblaw Companies 4 .2%Rogers Communications 3 .8%Canadian National Railway Company 3 .3%Suncor Energy 3 .0%Metro 2 .9%CGI Group 2 .8%Enbridge 2 .6%Tahoe Resources 2 .2%Gildan Activewear 2 .1%Peyto Exploration & Development Corporation 2 .0%Power Corporation of Canada 2 .0%Fairfax Financial Holdings 2 .0%Alimentation Couche-Tard 1 .9%Restaurant Brands International 1 .8%Franco-Nevada Corporation 1 .8%Manulife Financial Corporation 1 .8%Johnson & Johnson 1 .8%Intact Financial Corporation 1 .7%Constellation Software 1 .6%Eldorado Gold Corporation 1 .6%SNC-Lavalin Group 1 .5%Precision Drilling Corporation 1 .5%Canadian Natural Resources 1 .4%ARC Resources 1 .4%
157DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve strong long-term capital growth by investing primarily in equity securities of Canadian companies that have a history of strong capital growth over the long-term . The fundamental investment of this Fund is to achieve long-term capital appreciation while still emphasizing the preservation of capital by investing primarily in Canadian equity securities .
Investment StrategyTo invest primarily in small, medium and large Canadian companies . The Fund may also invest in a limited portion of foreign securities . The Fund may also use, to a lesser degree, derivatives such as options, futures, forward contracts and swaps to protect against losses caused by changes in stock prices or exchange rates .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 32,146,407 — — 32,146,407 TOTAL 32,146,407 — — 32,146,407
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 29,987,011 — — 29,987,011 TOTAL 29,987,011 — — 29,987,011
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
158 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX Capped 3 .00 613,872 566,307
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Canadian Equity
DFS GIF – CANADIAN EQUITY – FIDELITY TRUE NORTH® (cont.)
159DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 81,534 88,334 Investments at fair value through profit
or loss (FVTPL) 29,799,313 29,600,986 Premiums receivable 35,368 5,499 Receivable for securities sold 36,791 6,974
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 29,798,847 35,030,796
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 2,404,283 (975,026)
Adjustments for:Net realized gain (loss) (787,112) (1,403,052)Net unrealized gain (loss) (2,094,177) 1,921,087
Proceeds from sale/maturity of investments 3,002,524 4,475,422
Investments purchased (319,562) (816,013)Receivable for securities sold (29,817) (88,621)Accrued expenses 377 (7,642)Payable for securities purchased — (4,460)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 2,176,516 3,101,695
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,604,563 1,994,295 Amounts paid on withdrawals (3,787,879) (5,161,100)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (2,183,316) (3,166,805)
Increase (Decrease) in cash/bank overdraft (6,800) (65,110)
Cash (bank overdraft), beginning of period 88,334 89,710
CASH (BANK OVERDRAFT), END OF PERIOD 81,534 24,600
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Canadian Equity
DFS GIF – CANADIAN EQUITY – FRANKLIN BISSETT (cont.)
161DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.0%)Franklin Bissett Canadian Equity Fund, Series O 220,801 20,326,873 29,799,313
TOTAL INVESTMENTS 20,326,873 29,799,313
OTHER NET ASSETS (-0.0%) (466)
NET ASSETS (100%) 29,798,847
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Brookfield Asset Management 5 .3%Canadian National Railway Company 4 .9%Toronto-Dominion Bank 4 .7%Canadian Imperial Bank of Commerce 4 .6%Royal Bank of Canada 4 .2%Bank of Montreal 4 .2%Restaurant Brands International 4 .2%Enbridge 3 .8%Scotiabank 3 .7%MacDonald, Dettwiler and Associates Ltd 3 .2%Onex Corporation 3 .0%Metro 3 .0%Saputo 2 .8%Alimentation Couche-Tard 2 .7%Canadian Pacific Railway 2 .7%Thomson Reuters Corporation 2 .2%Power Corporation of Canada 2 .2%Atco Ltd 2 .2%TransCanada Corporation 2 .0%Inter Pipeline 2 .0%Home Capital Group 1 .9%Toromont Industries Ltd 1 .9%Power Financial Corporation 1 .8%Keyera Corporation 1 .6%Rogers Communications 1 .5%
162 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe fundamental investment objective of this Fund is to achieve long-term capital appreciation while continuing to emphasize the preservation of capital by investing primarily in Canadian equity securities .
Investment StrategyTo invest primarily in mid to large cap Canadian equity securities of growth-oriented companies . The Fund may also have a foreign equity component .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 29,799,313 — — 29,799,313 TOTAL 29,799,313 — — 29,799,313
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 29,600,986 — — 29,600,986 TOTAL 29,600,986 — — 29,600,986
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Canadian Equity
DFS GIF – CANADIAN EQUITY – FRANKLIN BISSETT (cont.)
163DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX 3 .00 861,645 814,325
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
164 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 3,339 19,683 Investments at fair value through profit
or loss (FVTPL) 34,243,533 30,918,208 Investments at fair value through profit
or loss (FVTPL) pledged as collateral 2,216,362 5,513,817 Premiums receivable 3,311 6,981 Receivable for securities sold 9,216 149,690 Interest, dividends and other receivables 61,526 68,855
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ATTRIBUTABLE TO CONTRACT OWNERS 1,736,109 1,439,257 DATA PER SERIESSERIES 1Increase (Decrease) in Net Assets
from Operations 743,765 512,933 - per unit 0.47 0 .35
Average Number of Units 1,581,032 1,465,251 SERIES 3Increase (Decrease) in Net Assets
from Operations 575,089 511,177 - per unit 0.55 0 .42
Average Number of Units 1,046,600 1,219,426 SERIES 5Increase (Decrease) in Net Assets
from Operations 234,504 203,064 - per unit 0.61 0 .47
Average Number of Units 384,904 435,696 SERIES 6Increase (Decrease) in Net Assets
from Operations 25,454 12,433 - per unit 0.28 0 .17
Average Number of Units 90,750 72,709 SERIES 7Increase (Decrease) in Net Assets
from Operations 2,355 1,852 - per unit 0.28 0 .22
Average Number of Units 8,306 8,557 SERIES IGPIncrease (Decrease) in Net Assets
from Operations 154,942 197,798 - per unit 0.49 0 .47
Average Number of Units 315,517 424,091
STATEMENT OF COMPREHENSIVE INCOME – unauditedSix-month Periods Ended June 30
165DFS GUARANTEED INVESTMENT FUNDS
The accompanying Notes are an integral part of these financial statements.
2016$
2015$
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, BEGINNING OF PERIOD 36,568,801 41,731,769 Increase (Decrease) in Net Assets
from operations attributable to contract owners 1,736,109 1,439,257
PremiumsSeries 1 101,551 215,917 Series 3 253,644 298,793 Series 5 299,009 273,473 Series 6 60,516 234,475 Series 7 — —Series IGP 8,350 9,857
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 36,070,640 39,721,725
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 1,736,109 1,439,257
Adjustments for:Net realized gain (loss) 31,492 (1,972,362)Net unrealized gain (loss) (1,918,162) 294,128
Proceeds from sale/maturity of investments 33,280,494 33,277,335
Investments purchased (31,420,645) (29,646,531)Receivable for securities sold 140,474 —Cash guarantee received for repurchase
transactions — (1,875,741)Interest, dividends and other receivables 7,329 (7,535)Accrued expenses (3,218) (733)Commitments related to repurchase
transactions — 1,875,741 Payable for securities purchased 335,825 —
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 2,189,698 3,383,559
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 726,740 1,036,662 Amounts paid on withdrawals (2,931,733) (4,439,453)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (2,204,993) (3,402,791)
Effect of exchange rate changes on foreign cash (1,049) 720
Increase (Decrease) in cash/bank overdraft (16,344) (18,512)
Cash (bank overdraft), beginning of period 19,683 53,946
CASH (BANK OVERDRAFT), END OF PERIOD 3,339 35,434
SUPPLEMENTAL INFORMATION ON CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESInterest received 20,838 7,202
Dividends received, net of withholding taxes 465,147 454,055
Interest paid — 2
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
FOR EASE OF COMPREHENSION TO THE READER, FOR THE DFS GIF – CANADIAN EQUITY – FIERA CAPITAL, THE ENTIRE PORTFOLIO OF SECURITIES IN THE SCHEDULE OF INVESTMENT PORTFOLIO AS AT JUNE 30, 2016, HAS NOT BEEN DISCLOSED. INSTEAD, THE MAJOR CATEGORIES OF ASSETS ARE LISTED ALONG WITH THE PERCENTAGES THAT EACH OF THESE CATEGORIES HOLD. THE TOTAL COSTS, FAIR VALUES, NUMBER OF UNITS, TOTAL INVESTMENTS AND NET ASSETS ARE ALSO LISTED.
166 DFS GUARANTEED INVESTMENT FUNDS
Canadian Equity
DFS GIF – CANADIAN EQUITY – FIERA CAPITAL (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number Fair of Shares Cost Value $ $EQUITIES (96.3%)
Energy (18.2%)Canadian Natural Resources 31,495 1,075,774 1,255,391 Cenovus Energy* 36,852 714,321 658,545 Crescent Point Energy 24,753 550,346 505,209 Enbridge 22,048 1,128,869 1,206,687 Husky Energy 34,489 528,500 543,892 Peyto Exploration & Development 14,700 429,389 509,796 Suncor Energy 23,944 845,574 858,153 TransCanada, Subscription Receipts 17,336 793,122 1,011,036
Industrials (9.3%)Canadian National Railway Company 20,422 1,608,164 1,557,994 Canadian Pacific Railway 5,034 801,523 837,305 Waste Connections 10,092 830,353 941,987
3,240,040 3,337,286
Consumer Discretionary (10.3%)Dollarama 6,933 307,721 625,357 Gildan Activewear* 31,439 956,302 1,189,652 Magna International, Class A 14,800 769,250 671,180 Quebecor, Class B 14,101 464,487 522,019 Restaurant Brands International 13,038 713,613 701,184
3,211,373 3,709,392
Consumer Staples (5.6%)Alimentation Couche-Tard, Class B 22,716 1,075,116 1,260,284 Loblaw Companies 11,108 587,442 767,674
1,662,558 2,027,958
Health Care (0.5%)Valeant Pharmaceuticals International* 7,293 1,563,310 189,983
Financials (32.3%)Brookfield Asset Management, Class A 18,800 819,985 803,512 CI Financial 17,070 524,595 460,036 Element Financial Corporation* 85,122 1,250,670 1,166,171 Intact Financial Corporation 4,999 410,904 461,358 Manulife Financial 70,651 1,512,319 1,248,403Royal Bank of Canada 37,491 2,794,470 2,862,063
*Securities pledged as collateral, in part or in whole, through the securities lending program.
167DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number Fair of Shares Cost Value $ $Financials (cont.)
Scotiabank 32,197 1,977,284 2,038,392 Toronto-Dominion Bank 47,109 2,581,538 2,613,607
11,871,765 11,653,542
Information Technology (3.2%)CGI Group, Class A* 21,213 1,189,454 1,170,745
Utilities (1.1%)Algonquin Power & Utilities Corp . 33,174 359,956 394,439
PORTFOLIO TRANSACTION COSTS INCLUDED IN THE SECURITIES’ COST (24,235) —
TOTAL INVESTMENTS (101.1%) 35,888,229 36,459,895
OTHER NET ASSETS (-1.1%) (389,255)
NET ASSETS (100%) 36,070,640
*Securities pledged as collateral, in part or in whole, through the securities lending program.The accompanying Notes are an integral part of these financial statements.
168 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with long-term capital growth by investing primarily in Canadian equity securities .
Investment StrategyTo invest primarily in the common shares of medium and large cap Canadian securities of growth-oriented companies .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLEquities 34,726,071 — — 34,726,071 Money Market Securities 1,733,824 — — 1,733,824 TOTAL 36,459,895 — — 36,459,895
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLEquities 35,317,909 — — 35,317,909 Money Market Securities 1,114,116 — — 1,114,116 TOTAL 36,432,025 — — 36,432,025
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Classification of Level 3As at June 30, 2016 and December 31, 2015, the Fund has no financial instruments classified within Level 3 .
Reconciliation of Level 3 Fair Value MeasurementThe following table summarizes a reconciliation of movements on Level 3 financial instruments between the beginning and end of the period:
June 30, 2016 Equities $
Balance, Beginning of Period — Proceeds from sale of investments — Investments purchased 1,191,147 Net realized gain (loss) — Net unrealized gain (loss) — Transfers to (from) Level 3 (1,191,147)Balance, End of Period —
Certain securities classified as Level 3 entailed restrictions . In April 2016, these securities valued at approximately $1,191,000 were transferred from Level 3 to Level 1 following the expiration of the restrictions . These securities are now valued at the quoted prices on the active markets .
Canadian Equity
DFS GIF – CANADIAN EQUITY – FIERA CAPITAL (cont.)
169DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
FINANCIAL INSTRUMENTS RISKS (Note 7)
Currency Risk
As at June 30, 2016 and December 31, 2015, the majority of the Fund’s financial assets and liabilities are denominated in Canadian dollars . As a result, the Fund is not significantly exposed to currency risk .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Fund’s financial assets and liabilities are non-interest bearing . As a result, the Fund is not subject to significant amounts of risk arising from fluctuations in the prevailing levels of market interest rates .
Concentration RiskThe following table summarizes the concentration risk, as a percentage of the Net Assets Attributable to Contract Owners:
MARKET SEGMENT June 30, 2016%
Equities Financials 32 .3 Energy 18 .2 Materials 15 .8 Consumer Discretionary 10 .3 Industrials 9 .3 Consumer Staples 5 .6 Information Technology 3 .2 Utilities 1 .1 Health Care 0 .5 Money Market Securities 4 .8 Other Net Assets (1 .1)TOTAL 100
MARKET SEGMENT December 31, 2015%
Equities Financials 36 .5 Energy 16 .6 Materials 13 .4 Industrials 9 .6 Consumer Staples 5 .5 Consumer Discretionary 4 .9 Information Technology 4 .6 Health Care 2 .8 Telecommunication Services 2 .7 Money Market Securities 3 .0 Other Net Assets 0 .4 TOTAL 100
Price RiskThe Fund may trade in financial instruments and take positions in traded and over-the-counter instruments .The Manager's estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners December 31, 2015
$S&P/TSX Capped 3 .00 1,045,015 1,014,111
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the Fund had no significant investments in either fixed-income securities, money market securities and derivative financial instruments . As a result, the Fund is not significantly exposed to credit risk .
Liquidity RiskFor further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
170 DFS GUARANTEED INVESTMENT FUNDS
Canadian Equity
DFS GIF – CANADIAN EQUITY – FIERA CAPITAL (cont.)
DERECOGNITION OF FINANCIAL ASSETS
Securities Lending and Repurchase TransactionsAs part of transactions involving securities lending or repurchase transactions, the Fund transfers financial assets under terms and conditions providing for their future repurchase . These financial assets remain recognized in the “Investments at fair value through profit or loss pledged as collateral” of the Statement of Financial Position as the Fund retains substantially all the risks and rewards related to these assets .
June 30, 2016$
December 31, 2015$
Investments at FVTPL pledged as Collateral 2,216,362 5,513,817 Value of Collateral Securities 2,260,689 5,624,094
The Funds require collateral in the form of cash or such other securities as may be acceptable to Desjardins Financial Security and that have an aggregate value of no less than 102% of the loaned securities fair value .
RECONCILIATION OF INCOME FROM SECURITY LENDING AND REPURCHASE TRANSACTION (NOTE 2)The following table shows a reconciliation of the total income generated from securities lending transactions of the Fund and the revenue from securities lending and repurchase transactions disclosed in the Fund’s Statement of Comprehensive Income .
June 30, 2016$
June 30, 2016%
June 30, 2015$
June 30, 2015%
Total Income 3,942 100 5,773 100Net Income received by: DFS GIF – Canadian Equity – Fiera Capital 2,365 60 3,464 60Desjardins Trust 1,577 40 2,309 40
171DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 23,851 38,182 Investments at fair value through profit
or loss (FVTPL) 16,265,695 15,489,484 Premiums receivable 66,765 3,579 Receivable for securities sold 5,122 2,523
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 16,303,668 18,217,212
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 1,665,990 126,751
Adjustments for:Net realized gain (loss) 32,405 (147,622)Net unrealized gain (loss) (1,958,153) (301,641)
Proceeds from sale/maturity of investments 1,482,076 2,602,671
Investments purchased (332,539) (319,772)Receivable for securities sold (2,599) (482)Accrued expenses 2,234 (3,226)Payable for securities purchased (11,001) 1,977
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 878,413 1,958,656
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,403,284 1,915,994 Amounts paid on withdrawals (2,296,028) (3,854,625)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (892,744) (1,938,631)
Increase (Decrease) in cash/bank overdraft (14,331) 20,025
Cash (bank overdraft), beginning of period 38,182 20,664
CASH (BANK OVERDRAFT), END OF PERIOD 23,851 40,689
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Canadian Equity
DFS GIF – SPECIALTY EQUITY – NEI NORTHWEST (cont.)
173DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (99.8%)NEI Northwest Specialty Equity Fund, Series I 896,765 14,980,200 16,265,695
TOTAL INVESTMENTS 14,980,200 16,265,695
OTHER NET ASSETS (0.2%) 37,973
NET ASSETS (100%) 16,303,668
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Home Capital Group 5 .9%Cash and Cash Equivalents 5 .3%Osisko Gold Royalties 5 .0%Parex Resources 5 .0%Fortuna Silver Mines 4 .5%Premium Brands Holdings Corporation 4 .2%New Flyer Industries 4 .2%Kinaxis 3 .8%Callidus Capital Corporation 3 .5%Lassonde Industries 3 .5%Element Financial Corporation 3 .4%Winpak Ltd 3 .1%Major Drilling Group International 2 .9%Boyd Group Income Fund 2 .9%Alaris Royalty Corporation 2 .5%Descartes Systems Group 2 .4%Industrial Alliance, Insurance and Financial Services 2 .4%Metro 2 .3%Cogeco 2 .2%Laurentian Bank of Canada 2 .0%Parkland Fuel Corporation 2 .0%Advantage Oil & Gas 2 .0%Cipher Pharmaceuticals 1 .9%Andrew Peller 1 .8%WSP Global 1 .8%
174 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve capital appreciation over the longer term by investing primarily in the equity of smaller, fast growing Canadian companies with small market capitalizations under a billion dollars .
Investment StrategyTo invest primarily in common shares and other equity securities issued by companies that are financially strong and have distinct competitive advantages at relative valuations .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 16,265,695 — — 16,265,695 TOTAL 16,265,695 — — 16,265,695
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 15,489,484 — — 15,489,484 TOTAL 15,489,484 — — 15,489,484
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Canadian Equity
DFS GIF – SPECIALTY EQUITY – NEI NORTHWEST (cont.)
175DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX Small Cap (50%) 3 .00 201,760 231,847S&P/TSX Completion (50%) 3 .00 201,760 154,565
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
176 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 668 Investments at fair value through profit
or loss (FVTPL) 17,426,944 16,213,297 Premiums receivable 12,772 8,296 Receivable for securities sold 39,694 4,714
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 17,373,751 21,643,254
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 2,234,882 (665,750)
Adjustments for:Net realized gain (loss) 71,263 (442,984)Net unrealized gain (loss) (2,584,232) 721,182
Proceeds from sale/maturity of investments 1,773,644 3,783,405
Investments purchased (474,322) (442,631)Receivable for securities sold (34,980) (19,687)Accrued expenses 4,237 (8,213)Payable for securities purchased (13,653) (13,860)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 976,839 2,911,462
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,164,406 1,430,576 Amounts paid on withdrawals (2,142,501) (4,350,164)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (978,095) (2,919,588)
Increase (Decrease) in cash/bank overdraft (1,256) (8,126)
Cash (bank overdraft), beginning of period 668 (3,863)
CASH (BANK OVERDRAFT), END OF PERIOD (588) (11,989)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
178 DFS GUARANTEED INVESTMENT FUNDS
Canadian Equity
DFS GIF – SMALL CAP – FRANKLIN BISSETT (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)Franklin Bissett Small Cap Fund, Series O 226,001 16,435,363 17,426,944
TOTAL INVESTMENTS 16,435,363 17,426,944
OTHER NET ASSETS (-0.3%) (53,193)
NET ASSETS (100%) 17,373,751
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Indigo Books & Music 6 .3%Equitable Group 6 .1%Canam Group 5 .0%Leon’s Furniture Ltd 5 .0%Richelieu Hardware Ltd 3 .8%Transcontinental 3 .7%Transat A .T . 3 .6%Advantage Oil & Gas 3 .3%Winpak Ltd 3 .2%Trican Well Service Ltd 3 .1%Xtreme Drilling and Coil Services Corporation 3 .1%Trinidad Drilling 2 .9%Major Drilling Group International 2 .8%Canyon Services Group Inc . 2 .6%Calfrac Well Services Ltd 2 .5%Westaim Corporation 2 .5%NuVista Energy Ltd 2 .4%Reitmans (Canada) Ltd 2 .3%AGF Management Ltd 2 .1%Home Capital Group 2 .0%Horizon North Logistics 1 .9%Delphi Energy Corporation 1 .9%Storm Resources Ltd 1 .8%AKITA Drilling Ltd 1 .7%Granite Real Estate 1 .6%
179DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with long-term capital appreciation . The Fund invests mainly in shares of Canadian companies with small to medium market capitalizations which are expected to provide above-average returns .
Investment StrategyTo be fully diversified at all times to compensate for the volatility inherent in investing in small capitalization equities .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 17,426,944 — — 17,426,944 TOTAL 17,426,944 — — 17,426,944
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 16,213,297 — — 16,213,297 TOTAL 16,213,297 — — 16,213,297
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
180 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P/TSX Small Cap 3 .00 381,902 360,677
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Canadian Equity
DFS GIF – SMALL CAP – FRANKLIN BISSETT (cont.)
181DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 12,942 15,479 Investments at fair value through profit
or loss (FVTPL) 19,892,752 20,461,002 Premiums receivable 31,436 240,009
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 19,856,292 16,667,585
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (1,156,623) 1,064,432
Adjustments for:Net realized gain (loss) (245,375) (224,914)Net unrealized gain (loss) 1,251,280 (967,479)
Proceeds from sale/maturity of investments 1,858,218 1,816,874
Investments purchased (2,295,873) (3,984,526)Receivable for securities sold — (3,801)Accrued expenses (1,438) 8,755 Payable for securities purchased (2,210) 32,416
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (592,021) (2,258,243)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 3,358,420 3,916,780 Amounts paid on withdrawals (2,768,936) (1,633,686)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 589,484 2,283,094
Increase (Decrease) in cash/bank overdraft (2,537) 24,851
Cash (bank overdraft), beginning of period 15,479 5,768
CASH (BANK OVERDRAFT), END OF PERIOD 12,942 30,619
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Foreign Equity
DFS GIF – AMERICAN EQUITY – MFS (cont.)
183DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.2%)MFS MB U .S . Equity Core Fund 1,290,311 17,508,454 19,892,752
TOTAL INVESTMENTS 17,508,454 19,892,752
OTHER NET ASSETS (-0.2%) (36,460)
NET ASSETS (100%) 19,856,292
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
JPMorgan Chase & Company 3 .2%Danaher Corporation 3 .2%Visa 2 .8%Thermo Fisher Scientific 2 .5%American Tower Corporation 2 .5%Johnson & Johnson 2 .4%Alphabet, Class A 2 .3%Schlumberger Ltd 2 .1%Newell Brands 2 .1%Comcast Corporation 2 .0%Broadcom Ltd 2 .0%Accenture 2 .0%Bank of America Corporation 1 .9%Fidelity National Information Services 1 .9%Wells Fargo & Company 1 .9%Cognizant Technology Solutions Corporation 1 .9%Alphabet, Class C 1 .8%Honeywell International 1 .7%Mondelez International 1 .7%Monsanto Corporation 1 .7%Canadian National Railway Company 1 .6%Ross Stores 1 .6%Time Warner 1 .6%EOG Resources 1 .6%Mastercard 1 .6%
184 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo outperform the S&P 500 .
Investment StrategyTo invest mainly in large cap equity securities of corporations located in the United States .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 19,892,752 — 19,892,752 TOTAL — 19,892,752 — 19,892,752
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 20,461,002 — 20,461,002 TOTAL — 20,461,002 — 20,461,002
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Foreign Equity
DFS GIF – AMERICAN EQUITY – MFS (cont.)
185DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P 500 3 .00 586,702 620,303
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
186 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 63,665 86,275 Investments at fair value through profit
or loss (FVTPL) 22,281,405 23,456,902 Premiums receivable 87,516 64,526 Receivable for securities sold 527 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 22,359,748 19,539,532
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (958,067) 929,637
Adjustments for:Net realized gain (loss) (434,775) (120,445)Net unrealized gain (loss) 1,334,321 (875,955)
Proceeds from sale/maturity of investments 2,295,689 925,919
Investments purchased (2,019,329) (4,912,390)Receivable for securities sold (527) (14,036)Accrued expenses (1,892) 13,403 Payable for securities purchased (19,604) (74,456)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 195,816 (4,128,323)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 3,489,534 5,895,346 Amounts paid on withdrawals (3,707,551) (1,788,519)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (218,017) 4,106,827
Effect of exchange rate changes on foreign cash (409) 386
Increase (Decrease) in cash/bank overdraft (22,610) (21,110)
Cash (bank overdraft), beginning of period 86,275 79,584
CASH (BANK OVERDRAFT), END OF PERIOD 63,665 58,474
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
188 DFS GUARANTEED INVESTMENT FUNDS
Foreign Equity
DFS GIF – AMERICAN EQUITY VALUE – DESJARDINS (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (99.6%)Desjardins American Equity Value Fund, I-Class 938,283 17,927,577 22,281,405
TOTAL INVESTMENTS 17,927,577 22,281,405
OTHER NET ASSETS (0.4%) 78,343
NET ASSETS (100%) 22,359,748
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Exxon Mobil Corporation 4 .0%Chevron Corporation 3 .5%Merck & Company 3 .3%Wells Fargo & Company 3 .0%Cash and Cash Equivalents 3 .0%JPMorgan Chase & Company 3 .0%Bank of America Corporation 2 .8%Cisco Systems 2 .7%Intel Corporation 2 .6%Chubb Ltd 1 .7%Johnson & Johnson 1 .6%Ameren Corporation 1 .6%Verizon Communications 1 .6%Walgreens Boots Alliance 1 .6%Citigroup 1 .6%Alliant Energy Corporation 1 .6%AstraZeneca 1 .6%EOG Resources 1 .6%Philip Morris International 1 .5%Pfizer 1 .5%Lockheed Martin Corporation 1 .5%United Parcel Service 1 .5%Anadarko Petroleum Corporation 1 .5%Mondelez International 1 .4%Comcast Corporation 1 .4%
189DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo provide investors with long-term capital growth by investing primarily in U .S . equities .
Investment StrategyTo invest primarily in the common shares of high quality, publicly traded mid to large United States companies across a wide range of market sectors .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 22 281,405 — — 22 281,405 TOTAL 22,281,405 — — 22,281,405
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 23,456,902 — — 23,456,902 TOTAL 23,456,902 — — 23,456,902
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
190 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
S&P 500 3 .00 644,073 679,820
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Foreign Equity
DFS GIF – AMERICAN EQUITY VALUE – DESJARDINS (cont.)
191DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash — 3,719 Investments at fair value through profit
or loss (FVTPL) 18,895,819 15,263,692 Premiums receivable 74,925 97,889 Receivable for securities sold 2,064 —
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 18,851,600 11,937,558
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners 167,033 184,446
Adjustments for:Net realized gain (loss) (59,362) (57,468)Net unrealized gain (loss) 9,411 (258,046)
Proceeds from sale/maturity of investments 898,887 416,964
Investments purchased (4,481,063) (4,015,667)Receivable for securities sold (2,064) (25,677)Accrued expenses 8,590 10,260 Payable for securities purchased (32,616) (3,224)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (3,491,184) (3,748,412)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 5,394,425 4,953,710 Amounts paid on withdrawals (1,908,555) (1,232,363)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 3,485,870 3,721,347 Increase (Decrease) in cash/bank
overdraft (5,314) (27,065)Cash (bank overdraft), beginning of
period 3,719 2,042
CASH (BANK OVERDRAFT), END OF PERIOD (1,595) (25,023)
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Foreign Equity
DFS GIF – GLOBAL DIVIDEND – DESJARDINS (cont.)
193DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.2%)Desjardins Global Dividend Fund, I-Class 987,501 17,415,914 18,895,819
TOTAL INVESTMENTS 17,415,914 18,895,819
OTHER NET ASSETS (-0.2%) (44,219)
NET ASSETS (100%) 18,851,600
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Cash and Cash Equivalents 3 .0%Welltower 2 .0%WEC Energy Group 2 .0%National Grid 2 .0%AT&T 2 .0%PPL Corporation 1 .9%Philip Morris International 1 .9%Duke Energy Corporation 1 .8%Verizon Communications 1 .8%BCE 1 .8%Iron Mountain REIT 1 .7%Altria Group 1 .7%Terna - Rete Elettricita Nazionale 1 .7%Rogers Communications 1 .7%Imperial Brands 1 .6%Reynolds American 1 .6%Vodafone Group plc 1 .6%Entergy Corporation 1 .5%British American Tobacco 1 .5%Statoil ASA 1 .5%GlaxoSmithKline plc 1 .5%Royal Dutch Shell 1 .5%Total SA 1 .4%Muenchener Rueckversicherung 1 .4%Occidental Petroleum Corporation 1 .4%
194 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe objective of this Fund is to provide dividend income and long term capital appreciation through the investment in equity and equity related securities of companies around the world, including, when deemed appropriate, emerging markets .
Investment StrategyIn order to achieve its investment objective, the Fund invests in companies with high dividend yields and whose management teams optimize their balance sheets through the redemption of shares or reducing debt or by opting to increase cash flows sufficiently to allow for the opportunity for dividend growth . Companies are selected which show stable or high profit growth, a lower than average debt in comparison to their industry average and whose securities are traded at a reasonable price in relation to other companies with similar characteristics . Equity related securities such as American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) may be used to gain exposure to a particular stock or sector .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 18,895,819 — — 18,895,819 TOTAL 18,895,819 — — 18,895,819
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 15,263,692 — — 15,263,692 TOTAL 15,263,692 — — 15,263,692
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Foreign Equity
DFS GIF – GLOBAL DIVIDEND – DESJARDINS (cont.)
195DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
MSCI World Net 3 .00 480,833 437,431
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
196 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 23,734 23,690 Investments at fair value through profit
or loss (FVTPL) 54,676,157 62,025,234 Premiums receivable 3,625 48,000 Receivable for securities sold 1,631 1,617
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 54,494,658 25,394,716
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (3,890,001) 2,596,087
Adjustments for:Net realized gain (loss) (326,430) (390,286)Net unrealized gain (loss) 4,040,643 (2,319,276)
Proceeds from sale/maturity of investments 4,804,055 1,165,382
Investments purchased (1,169,191) (675,876)Receivable for securities sold (14) (1,526)Accrued expenses (17,593) 5,653 Payable for securities purchased — (1,719)
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 3,441,469 378,439
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 1,768,394 669,558 Amounts paid on withdrawals (5,209,819) (1,049,746)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (3,441,425) (380,188)Increase (Decrease) in cash/bank
overdraft 44 (1,749)Cash (bank overdraft), beginning of
period 23,690 32,356
CASH (BANK OVERDRAFT), END OF PERIOD 23,734 30,607
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
198 DFS GUARANTEED INVESTMENT FUNDS
Foreign Equity
DFS GIF – GLOBAL EQUITY – MFS (cont.)
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.3%)MFS Global Research Fund 2,999,965 50,952,523 54,676,157
TOTAL INVESTMENTS 50,952,523 54,676,157
OTHER NET ASSETS (-0.3%) (181,499)
NET ASSETS (100%) 54,494,658
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Danaher Corporation 1 .9%CMS Energy Corporation 1 .6%Alphabet 1 .6%Procter & Gamble Company 1 .4%Charter Communications 1 .3%KDDI Corporation 1 .3%Novartis AG 1 .3%British Petroleum plc 1 .3%SBA Communications Corporation 1 .3%Facebook 1 .3%JPMorgan Chase & Company 1 .2%Roche Holding AG 1 .2%Medtronic 1 .2%Nestlé 1 .2%Visa 1 .2%EOG Resources 1 .2%Cisco Systems 1 .1%Exxon Mobil Corporation 1 .1%Honeywell International 1 .0%Aon plc 1 .0%Union Pacific Corporation 1 .0%Eli Lilly and Company 1 .0%Stryker Corporation 1 .0%Chubb Ltd 1 .0%Broadcom Ltd 1 .0%
199DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveTo achieve long-term capital growth by investing primarily in equity securities .
Investment StrategyTo control the level of volatility of return relative to the overall stock markets by maintaining strong geographic diversification and by investing in attractively-valued securities . The Fund will primarily invest in common stocks of American, European, and Asian corporations .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 54,676,157 — 54,676,157 TOTAL — 54,676,157 — 54,676,157
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 62,025,234 — 62,025,234 TOTAL — 62,025,234 — 62,025,234
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
200 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
MSCI All Country World Net 3 .00 1,624,383 1,775,679
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Foreign Equity
DFS GIF – GLOBAL EQUITY – MFS (cont.)
201DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 1,305 5,443 Investments at fair value through profit
or loss (FVTPL) 10,832,413 12,617,872 Premiums receivable 908 17,684 Receivable for securities sold 1,718 —Interest, dividends and other receivables 260 272
NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS, END OF PERIOD 10,786,962 12,131,419
2016$
2015$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESIncrease (Decrease) in Net Assets
from operations attributable to contract owners (1,402,531) 1,536,568
Adjustments for:Net realized gain (loss) (116,623) (332,534)Net unrealized gain (loss) 1,334,243 (1,407,731)
Proceeds from sale/maturity of investments 878,243 1,362,780
Investments purchased (310,404) (676,673)Receivable for securities sold (1,718) (20,479)Interest, dividends and other receivables 12 3 Accrued expenses (4,639) 2,868 Payable for securities purchased (2,275) 1,238
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 374,308 466,040
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESPremium payments 634,354 1,082,418 Amounts paid on withdrawals (1,012,800) (1,569,275)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (378,446) (486,857)Increase (Decrease) in cash/bank
overdraft (4,138) (20,817)Cash (bank overdraft), beginning of
period 5,443 23,667
CASH (BANK OVERDRAFT), END OF PERIOD 1,305 2,850
STATEMENT OF CASH FLOWS – unauditedSTATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS – unaudited
Six-month Periods Ended June 30
Six-month Periods Ended June 30
Foreign Equity
DFS GIF – INTERNATIONAL EQUITY – MFS (cont.)
203DFS GUARANTEED INVESTMENT FUNDS
SCHEDULE OF INVESTMENT PORTFOLIO – unauditedas at June 30, 2016
Number of Units
Cost
$
Fair Value
$
INVESTMENT FUND (100.4%)MFS International Equity Fund 940,314 9,619,305 10,832,413
TOTAL INVESTMENTS 9,619,305 10,832,413
OTHER NET ASSETS (-0.4%) (45,451)
NET ASSETS (100%) 10,786,962
The accompanying Notes are an integral part of these financial statements.
TOP 25 HOLDINGS OF THE UNDERLYING FUND – unaudited
Security Name Percentage of Portfolio
Nestlé 4 .1%Roche Holding AG 3 .4%Compass Group plc 3 .3%Bayer AG 3 .1%WPP Group plc 3 .1%Taiwan Semiconductor Manufacturing Company 2 .7%Reckitt Benckiser Group plc 2 .7%Danone 2 .6%Hoya Corporation 2 .5%AIA Group 2 .4%Pernod-Ricard SA 2 .3%Yum! Brands 2 .3%Terumo Corporation 2 .2%Novartis AG 2 .1%SAP SE 2 .1%Beiersdorf AG 2 .1%Air Liquide 2 .1%Schneider Electric 2 .0%UBS Group AG 1 .9%Canadian National Railway Company 1 .9%Diageo plc 1 .8%DBS Group Holdings Ltd 1 .8%Akzo Nobel NV 1 .7%Moet Hennessy Louis Vuitton 1 .7%ING Groep 1 .7%
204 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe fundamental investment objective of this Fund is to provide investors with long-term capital growth based on an internationally diversified equity portfolio by investing primarily in Europe and the Far East .
Investment StrategyTo invest its assets primarily in the common shares of large corporations with attractive relative valuations located in many countries .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 10,832,413 — 10,832,413 TOTAL — 10,832,413 — 10,832,413
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds — 12,617,872 — 12,617,872 TOTAL — 12,617,872 — 12,617,872
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Foreign Equity
DFS GIF – INTERNATIONAL EQUITY – MFS (cont.)
205DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
MSCI EAFE Net 3 .00 342,158 392,372
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
206 DFS GUARANTEED INVESTMENT FUNDS
June 30 2016
$
December 31 2015
$ASSETSCurrent AssetsCash 5,367 496 Investments at fair value through profit
or loss (FVTPL) 2,419,348 2,531,545 Premiums receivable 25 160 Receivable for securities sold 35,022 2,078
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
STRATEGY IN USING FINANCIAL INSTRUMENTS
Investment ObjectiveThe objective of this Fund is to achieve long-term capital growth by investing in equity and equity related securities of companies located or operating outside of North America, while when appropriate, also investing in equity and equity related securities of companies located or operating in emerging markets .
Investment StrategyInvestment decisions are backed by extensive research and analysis with preference given to those companies that can sustain above average growth in earnings and cash flow and whose securities are traded at a reasonable price . The investment approach involves a bottom-up, stock driven approach to country and sector allocation and more specifically, those companies with sustainable competitive advantages and strong management teams operating in a favourable market background and display solid financial characteristics .
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE (Note 7)
Hierarchy of Financial Instruments Measured at Fair Value The following tables categorize the Fund’s financial assets fair value measurement according to a three-level hierarchy . The methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities . Fair value measurement is described in the “Significant Accounting Policies” section of Note 2 .
Investment Measured at Fair Value at the End of the Period, within the Following Levels:
June 30, 2016 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 2,419,348 — — 2,419,348 TOTAL 2,419,348 — — 2,419,348
December 31, 2015 Level 1 $
Level 2 $
Level 3 $
Total $
Financial Assets at FVTPLInvestment Funds 2,531,545 — — 2,531,545 TOTAL 2,531,545 — — 2,531,545
Transfers between Levels 1 and 2During the periods ended June 30, 2016 and December 31, 2015, there were no transfers of securities between Levels 1 and 2 .
Investment Entities (Note 2)The total value of index-based investments, mortgage-backed securities, asset-backed securities, investment funds (including limited partnerships) and master asset vehicles (included in the bonds) in the table “Investment Fair Value Measurement within the Levels” also represent the fair value of the investments in structured entities .
FINANCIAL INSTRUMENTS RISKS (Note 7)
Underlying Fund Risk ManagementMonthly, the investment strategy team compares the Fund’s performance to similar funds as well as to the related benchmarks .Quarterly, this team makes an analysis of the Fund’s performance . This analysis includes among others a review of the securities having obtained a greater or lower performance than forecasts, an evaluation of the strategies used as well as a complete analysis of the sector . It also ensures the compliance with the Fund’s investment policies . Furthermore, it examines thoughtfully any change within the organization, such as the recruitment, the departure of key staff or any structure modification .Annually, this team reviews the practices and processes used by the Fund’s managers through an exhaustive questionnaire and periodic meetings .
Currency RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to currency risk . As a result, the Fund may be exposed to currency risk related to the current underlying fund . Detailed disclosure about the currency risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
210 DFS GUARANTEED INVESTMENT FUNDS
NOTES TO THE FINANCIAL STATEMENTS – SPECIFIC INFORMATION – unauditedas at June 30, 2016
Interest Rate RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to interest rate risk . As a result, the Fund may be exposed to interest rate risk related to the current underlying fund . Detailed disclosure about the interest rate risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Concentration RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to concentration risk . As a result, the Fund is exposed to concentration risk related to the current underlying fund . Detailed disclosure about the concentration risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Price RiskThe majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to price risk . As a result, the Fund is exposed to price risk related to the current underlying fund . Detailed disclosure about the price risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .The Manager’s estimate of the impact on Net Assets Attributable to Contract Owners as a result of a reasonably possible change in benchmarks, using a historical beta coefficient (a measure of the sensitivity of a security in comparison to the market) between the Fund’s return as compared to the return of the Fund’s benchmarks, with all other variables held constant, is included in the following table . A 36-month regression analysis has been utilized to estimate the historical beta coefficient . The regression analysis uses data based on the monthly returns of the Fund .
BenchmarksChange in Price
%
Impact on Net Assets Attributable to Contract Owners
June 30, 2016 $
Impact on Net Assets Attributable to Contract Owners
December 31, 2015 $
MSCI EAFE Net 3 .00 76,805 79,143
When there is more than one benchmark, the effect of each benchmark must be considered individually, as each benchmark might fluctuate independently from the others .In practice, actual trading results may differ from these sensitivity analyses and the differences could be significant .
Credit RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which may be exposed to credit risk . As a result, the Fund may be exposed to credit risk related to the current underlying fund . Detailed disclosure about the credit risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .
Liquidity RiskAs at June 30, 2016 and December 31, 2015, the majority of the Net Assets Attributable to Contract Owners are invested in an underlying fund which is exposed to liquidity risk . As a result, the Fund is exposed to liquidity risk related to the current underlying fund . Detailed disclosure about the liquidity risk on the underlying fund can be obtained from Desjardins Financial Security (see Note 7) .For further information on maturities of financial liabilities and liquidity risk management of the Fund, please refer to Note 7 “Financial Instruments Disclosures” .
Foreign Equity
DFS GIF – INTERNATIONAL EQUITY GROWTH – DESJARDINS (cont.)
211DFS GUARANTEED INVESTMENT FUNDS
Six-months Periods ended June 30, 2016 and 2015
1. ESTABLISHMENT OF THE FUNDSThe Desjardins Financial Security Guaranteed Investment Funds (the “Funds”) consist of thirty-seven Funds established by Desjardins Financial Security Life Assurance Company (“Desjardins Financial Security” or the “Company”) in respect of individual variable insurance contracts issued under the Desjardins Financial Security Guaranteed Investment Funds Plan – Helios, Helios2, the Millennia III Plan and the Imperial Growth Plan . The assets of each Fund are segregated from the Company’s other assets and are owned by Desjardins Financial Security . The Funds are not separate legal entities . The Company’s head office is located at 200, rue des Commandeurs, Lévis, Québec, Canada G6V 6R2 .The Funds were established on the following dates by resolutions of the Board of Directors:
Series 1 Series 3 Series 5 Series 6 Series 7 Series IGPINVESTMENT SOLUTIONSConservative — — Oct . 19, 2015 Feb . 24, 2014 Feb . 24, 2014 —Moderate — — Oct . 19, 2015 Feb . 24, 2014 Feb . 24, 2014 —Balanced — — Oct . 19, 2015 Feb . 24, 2014 Feb . 24, 2014 —Growth — — Oct . 19, 2015 Feb . 24, 2014 Feb . 24, 2014 —Maximum Growth — — Oct . 19, 2015 Feb . 24, 2014 Feb . 24, 2014 —
INDIVIDUAL FUNDSIncomeMoney Market Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 Nov . 7, 2014Income – Fiera Capital Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Bond — — Oct . 19, 2015 Oct . 19, 2015 Oct . 19, 2015 —Balanced and Asset AllocationDiversified Income – Franklin Quotential — Oct . 30, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Balanced Income – Franklin Quotential — Oct . 30, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Balanced – Fidelity — Dec . 1, 2008 Dec . 1, 2008 Feb . 24, 2014 Feb . 24, 2014 —U .S . Monthly Income – Fidelity — — Oct . 19, 2015 Oct . 19, 2015 Oct . 19, 2015 —Balanced – Desjardins SocieTerra — — Oct . 19, 2015 Oct . 19, 2015 Oct . 19, 2015 —Global Balanced – Jarislowsky Fraser — Nov . 17, 2003 Oct . 29, 2007 Oct . 19, 2015 Oct . 19, 2015 —Canadian Balanced – Fiera Capital Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Balanced – Franklin Bissett — Dec . 5, 2005 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Balanced Growth – Franklin Quotential — Dec . 11, 2006 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Balanced – CI Signature — — May 3, 2010 Feb . 24, 2014 Feb . 24, 2014 —Income and Growth – CI Signature — — Sep . 24, 2012 Feb . 24, 2014 Feb . 24, 2014 —Growth and Income – NEI Northwest — Dec . 11, 2006 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Global Growth – NEI Select — Jan . 14, 2002 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Asset Allocation – CI Cambridge — — Sep . 24, 2012 Feb . 24, 2014 Feb . 24, 2014 —Growth – Franklin Quotential — Oct . 30, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian EquityDividend Income – Franklin Bissett — Apr . 17, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Dividend – NEI Northwest — — Sep . 24, 2012 Feb . 24, 2014 Feb . 24, 2014 —Canadian Equity – Jarislowsky Fraser — Dec . 5, 2005 Oct . 29, 2007 Oct . 19, 2015 Oct . 19, 2015 —Canadian Equity – Fidelity True North® — Dec . 1, 2008 Dec . 1, 2008 Feb . 24, 2014 Feb . 24, 2014 —Canadian Equity – Franklin Bissett — Apr . 17, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Canadian Equity – Fiera Capital Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 Nov . 7, 2014Specialty Equity – NEI Northwest — Dec . 11, 2006 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Small Cap – Franklin Bissett — Apr . 17, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Foreign EquityAmerican Equity – MFS — Apr . 17, 2000 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —American Equity Value – Desjardins Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —Global Dividend – Desjardins — — Sep . 24, 2012 Feb . 24, 2014 Feb . 24, 2014 —Global Equity – MFS — Dec . 1, 2008 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —International Equity – MFS Nov . 15, 1995 Dec . 14, 1998 Oct . 29, 2007 Feb . 24, 2014 Feb . 24, 2014 —International Equity Growth – Desjardins — — Sep . 24, 2012 Feb . 24, 2014 Feb . 24, 2014 —
The interim financial statements (“financial statements”) of the Funds are presented in Canadian dollars (CAD), the Funds’ functional and presentation currency .
NOTES TO THE FINANCIAL STATEMENTS – UNAUDITED
212 DFS GUARANTEED INVESTMENT FUNDS
The main activities of the Funds are disclosed in the section “Strategy in Using Financial Instruments” in the section “Notes to the Financial Statements – Specific Information” pertaining to each Fund .In October 2015, the Company made modifications to the Fund names for the following Funds:
OLD FUND NAME NEW FUND NAMEDFS GIF – Diversified Income – Quotential DFS GIF – Diversified Income – Franklin Quotential DFS GIF – Balanced Income – Quotential DFS GIF – Balanced Income – Franklin Quotential DFS GIF – Canadian Balanced – Bissett DFS GIF – Canadian Balanced – Franklin Bissett DFS GIF – Balanced Growth – Quotential DFS GIF – Balanced Growth – Franklin Quotential DFS GIF – Growth – Quotential DFS GIF – Growth – Franklin Quotential DFS GIF – Dividend Income – Bissett DFS GIF – Dividend Income – Franklin Bissett DFS GIF – Canadian Equity – Bissett DFS GIF – Canadian Equity – Franklin Bissett DFS GIF – Small Cap – Bissett DFS GIF – Small Cap – Franklin Bissett DFS GIF – Income – Fiera DFS GIF – Income – Fiera Capital DFS GIF – Canadian Balanced – Fiera DFS GIF – Canadian Balanced – Fiera Capital DFS GIF – Canadian Equity – Fiera DFS GIF – Canadian Equity – Fiera Capital DFS GIF – Growth and Income – Northwest DFS GIF – Growth and Income – NEI Northwest DFS GIF – Canadian Dividend – Northwest DFS GIF – Canadian Dividend – NEI Northwest DFS GIF – Specialty Equity – Northwest DFS GIF – Specialty Equity – NEI Northwest DFS GIF – Global Growth – Northwest Select DFS GIF – Global Growth – NEI Select
In October 2015, the Company closed the following Funds:
FUND NAME
DFS GIF – Canadian Dividend – Fiera DFS GIF – Income – Beutel Goodman DFS GIF – Global High Income – Multi-managers DFS GIF – Balanced – Ethical DFS GIF – Global – Fidelity
2. BASIS OF PRESENTATION
International Financial Reporting Standards (“IFRS“)These financial statements have been prepared in compliance with International Financial Reporting Standards (“IFRS”), applicable to the preparation of financial statements . The Funds adopted this basis of accounting in 2014, as required by the Canadian Securities Administrator and the Canadian Accounting Standards Board .
Statement of Compliance The policies applied in these financial statements are based on IFRS in effect as of September 8, 2016, the date on which financial statements have been approved for publication by the Audit and Risk Management Committee of the Company .
Significant Accounting PoliciesThe significant measurement and presentation policies applied to prepare these financial statements are described below .
Financial Assets and LiabilitiesThe Funds’ financial assets consist primarily of investments in non-derivative financial instruments and derivative financial instruments presented in the schedule of investment portfolio . Financial liabilities consist primarily of derivative financial instruments . Financial assets and liabilities are recognized on the date the Funds become a party to the contractual provisions of the instrument, namely the trade date .
Classification of Financial InstrumentsThe Funds classify their financial assets and liabilities in the following categories:Financial assets at fair value through profit or loss (“FVTPL”):• Held for trading: derivative financial instruments;• Designated at FVTPL: all other investments including equity and fixed-income securities .Financial assets at amortized cost:• Loans and receivables: cash and all other receivables .
NOTES TO THE FINANCIAL STATEMENTS – unaudited (cont.)
213DFS GUARANTEED INVESTMENT FUNDS
Financial liabilities at FVTPL:• Held for trading: derivative financial instruments and short positions .Financial liabilities at amortized cost:• Bank overdraft and all other payables .A financial instrument is designated at FVTPL if it eliminates or significantly reduces a measurement or a recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases .The Funds’ obligation concerning net assets attributable to Contract Owners is recorded at the redemption amount that approximates fair value . The accounting policies used to measure the fair value of investments and derivatives financial instruments are identical to those used in measuring the net asset value for transactions with Contract Owners except where the closing price for financial assets and liabilities is not within the bid-ask spread .As at June 30, 2016 and December 31, 2015, there are no differences between the Funds’ net asset value per unit for transactions and their net assets attributable to Contract Owners per unit, in accordance with IFRS .
Determination of the Fair Value of Financial InstrumentsFair value is the price that would be received from selling an asset or paid to transfer a liability in an ordinary transaction between market participants at the valuation date . The fair value of financial assets and liabilities traded in active markets are based on quoted market prices at the close of trading on the disclosure date and there is little subjectivity in its determination . The Funds use the closing price for both financial assets and financial liabilities where this price falls within the bid-ask spread . In circumstances where the closing price is not within the bid-ask spread, the Company determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances .The fair value of financial assets and liabilities that are not traded in an active market, including over-the-counter derivative financial instruments, is determined using valuation techniques . The Funds use a variety of methods and make assumptions that are based on existing market conditions at each disclosure date .Valuation techniques include the use of comparable recent arm’s length transactions, the fair value of other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other techniques commonly used by market participants and which make the maximum use of observable inputs . Refer to Note 7, “Financial Instruments Disclosures” for further information about the Funds’ fair value measurements .LiquidityCash (bank overdraft) is measured at cost, which closely approximates fair value .Money Market SecuritiesMoney market securities are recorded at cost, together with accrued interest, which closely approximates fair value .Equities and Index-Based InvestmentsEquity securities and index-based investments securities are recorded at the closing price of the accredited stock exchange on which the corresponding security is principally traded . Unlisted warrants are valued with a recognized valuation model, including Black & Scholes .Bonds, Mortgage-Backed Securities and Asset-Backed SecuritiesBonds, mortgage-backed securities and asset-backed securities are valued based on prices obtained from recognized securities dealers .Investment FundsUnits of underlying funds are generally valued based on the net asset value per unit provided by the underlying Fund’s manager at the end of each valuation day . Derivative Financial InstrumentsCertain Funds may use an array of derivative financial instruments such as foreign currency forward contracts, forward contracts and futures contracts for hedging purposes or purposes other than hedging, or both . The fair value of derivative financial instruments takes into account the impact of legally binding master netting agreements, if applicable . Refer to the section “Offsetting Financial Assets and Liabilities” for further information about the Fund’s offsetting section .
Foreign Currency Forward Contracts and Forward ContractsThe fair value of these instruments corresponds to the gains or losses that would result from the contract close-out on the valuation date; this value is recorded in “Unrealized appreciation (depreciation) on derivatives” in the Statement of Financial Position .
Futures ContractsFutures contracts are valued at fair value and are settled daily through brokers acting as intermediaries . Any amounts receivable (payable) from the settlement of futures contracts are recorded in “Receivable (Payable) on futures contracts” in the Statement of Financial Position .Valuation of Unlisted Securities and Other Investments When the valuation principles of the aforementioned investments are not appropriate, fair value is determined according to the Company’s best estimates, based on established valuation procedures and on prevailing market conditions on each valuation date . These procedures cover, amongst others, securities no longer traded, securities issued by private corporations and illiquid securities . For further information, refer to Note 3 “Critical Accounting Judgments, Estimates and Assumptions” .
214 DFS GUARANTEED INVESTMENT FUNDS
Investment TransactionsInvestment transactions are accounted for on the trade date . Cost is determined on an average cost basis except for money market securities, for which the cost is determined using the First In First Out method . The average cost does not include amortization of premiums or discounts on fixed-income securities with the exception of stripped bonds . Transaction costs, such as brokerage commissions, incurred in the purchase and sale of securities by the Funds are recognized in the Statement of Comprehensive Income . The difference between the unrealized appreciation (depreciation) of investments at the beginning and at the end of the period is included in “Net unrealized gain (loss) on investments” in the Statement of Comprehensive Income . On disposal of an investment, the difference between the fair value and the cost of the investment is included in “Net realized gain (loss) on investments” in the Statement of Comprehensive Income .
Securities Lending and Repurchase TransactionsCertain Funds may enter into securities lending and repurchase transactions through the securities lending program of the Funds’ custodian, Desjardins Trust Inc . (Trust) .The loaned securities and repurchased securities are not derecognized in the Statement of Financial Position as substantially all the risks and advantages of ownership of these securities is kept . To limit the risk that the counterparty fails to fulfill its obligations, the Funds obtain collateral, representing at least 102% of the contract amount, determined daily based on the fair value of the previous business day’s loaned securities or repurchase transactions . Securities received as collateral in securities lending transactions are not recognized in the Statement of Financial Position as substantially all the risks and advantages of ownership of these securities have not been transferred to the Funds . Cash guarantees received for securities lending and repurchase transactions are recognized as financial assets in “Cash guarantee received for securities lending” and/or “Cash guarantee received for repurchase transactions”, as appropriate in the Statement of Financial Position . A liability representing the obligation to return the securities is recognized in “Commitments related to securities lending” and/or “Commitments related to repurchase transactions”, as appropriate .Revenue generated through the securities lending program is recognized at a rate presented in the “Notes to the Financial Statements – Specific Information” pertaining to each Fund . This revenue is included in “Revenue from securities lending and repurchase transactions” in the Statement of Comprehensive Income .Offsetting Financial Assets and Financial LiabilitiesFinancial assets and liabilities are offset in the Statement of Financial Position for the Funds if and only if a Fund has:• a legally enforceable and unconditional right to offset the recognized amounts and • an intention to settle on a net amount, or to close-out the asset and settle the liability simultaneously .The Funds have a legally enforceable and unconditional right to offset a financial asset and liability when they meet the following criteria:• the right is enforceable in the normal course of business and• the right is enforceable in the event of default, insolvency or bankruptcy .Over-the-counter derivative financial instruments, securities lending, repurchase transactions and receivable for investments sold and payable for investments purchased that are subject to master netting or similar agreements do not meet the criteria for offsetting in the Statement of Financial Position, as they give a right to an offset that is enforceable only in the event of default, insolvency or bankruptcy .
Other Assets and LiabilitiesPremiums receivable, receivable for securities sold, interest, dividends and other receivables and cash guarantee received for repurchase transactions are classified as loans and receivables and are recorded at cost .Similarly, accrued expenses, withdrawals payable, payable for securities purchased and interest, dividends and others payables, as well as commitments related to repurchase transactions, are classified as financial liabilities and recorded at amortized cost . Given their short-term maturity, their carrying amount approximates their fair value .
IncomeInterest for attribution purposes from investments in debt securities and presented in the Statement of Comprehensive Income is recognized as it is earned . The Funds do not amortize premiums paid or discounts received on the purchase of debt securities except for stripped bonds, which are amortized on a straight line basis . Dividends are recognized as income on the ex-dividend date . Interest and dividend distributions received from underlying funds are recorded at the date of distribution . Distributions received from income and royalty trust investments are classified as income, capital gains or return of capital based on amounts reported by the management of these trusts . If such specific information is not available, the Company will determine the split at its discretion . Foreign income is accounted for on a gross amount received and is included in the income section in the Statement of Comprehensive Income . On derivative financial instruments contract close-out, the gains and losses from financial derivative financial instruments held for hedging purposes are included in “Net realized gain (loss) on derivative” in the Statement of Comprehensive Income . Gains and losses from derivative financial instruments held for purposes other than hedging are included in “Net income (loss) from derivative financial instruments” in the Statement of Comprehensive Income .
NOTES TO THE FINANCIAL STATEMENTS – unaudited (cont.)
215DFS GUARANTEED INVESTMENT FUNDS
Foreign Currency TranslationThe Funds’ premiums and withdrawals are denominated in Canadian dollars . Foreign currency assets and liabilities denominated in a foreign currency are translated into the functional currency at the exchange rate on each valuation date . Purchases and sales of securities, as well as income and expenses denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates . Foreign exchange gains and losses relating to cash are presented as “Foreign exchange gain (loss) on cash” and those relating to other financial assets and liabilities are presented within “Net realized gain (loss) on investments” and “Net unrealized gain (loss) on investments” in the Statement of Comprehensive Income .
Increase (Decrease) in Net Assets per Unit from Operations Attributable to Contract OwnersThe increase (decrease) in net assets per unit from operations attributable to Contract Owners, presented in the Statement of Comprehensive Income is calculated by dividing the increase (decrease) in net assets from operations attributable to Contract Owners per unit by the average number of units outstanding during the period .
Income TaxesUnder the Income Tax Act (Canada), each Fund is treated as a segregated fund trust . The Fund’s income, as well as gains or losses realized, if any, are allocated to Contract Owners on a regular basis . In the case of interest that accumulates in a registered account, Contract Owners will not receive annual tax slips . However, any amount paid to Contract Owners or former Contract Owners may be subject to be taxed in their hands . On the other hand, for interest that accumulates in a non-registered account, Contract Owners will receive an annual tax slip for any income, gains or losses allocated . Under current tax laws, Funds do not pay income taxes, with the exception of foreign tax withholdings that may apply .In certain circumstances, to avoid double taxation to the Contract Owners, the Funds adjust the cost of the investments held to properly reflect the adjusted cost base for tax purposes .
Investments in Entities The Funds meet the definition of IFRS 10, Consolidated Financial Statements, for investment entities and account for their investments in underlying funds at FVTPL . According to IFRS 12, Disclosure of Interests in Other Entities, the Funds must disclose specific information on their investments in other entities, such as Subsidiaries, Associates and Structured Entities .SubsidiariesAn entity, including investments in any other investment entity, is considered as a subsidiary when it is controlled by another entity . The Fund controls an entity when it has the right to variable returns from its involvement with the entity and through its power over the entity .AssociatesAssociates are investments in entities over which the Fund exercises significant influence without, however, exercising control . Structured EntitiesStructured Entities are conceived in a way that the right to vote and other similar rights are not determining factors in who exercises control . The Company has determined that its investments in underlying funds, index-based investments, asset-backed securities and mortgage-backed securities are Structured Entities, unless the specified relationship is different .
Refer to the section “Notes to the Financial Statements – Specific Information” pertaining to each Fund for more information on Investments in Entities .
Accounting Standard Issued but not yet AppliedIn July 2014, the International Accounting Standards Board (“IASB”) issued the complete and final version of IFRS 9, Financial Instruments (“IFRS 9”), which will replace IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”) . IFRS 9 includes, among others, the requirements for the classification and measurement of financial assets and liabilities .
IFRS 9 sets out a new classification and measurement model for financial assets to determine whether a financial asset should be classified at amortized cost, at FVTPL or at fair value through other comprehensive income . This model is based on the contractual cash flow characteristics of the financial asset and the business model under which the financial asset is held . The valuation basis of financial assets, namely amortized cost or fair value, may need to be changed, as well as the recognition of unrealized gains and losses arising from changes in fair value . For the classification and measurement of financial liabilities, the new standard essentially carries forward the current requirements under IAS 39 .The Funds will have to adopt IFRS 9 retrospectively for annual periods beginning on or after January 1, 2018 . However, the restatement of comparative periods is not mandatory as an exemption from applying the standard allows comparative periods to be presented in accordance with the previous GAAP under certain conditions . A team has been assigned to the project to highlight the following: the changes in disclosure and financial reporting as well as in systems and processes, disclosures and training . The project is progressing according to the proposed implementation schedule . The Manager continues to assess the impact of adopting IFRS 9 .
3. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements requires the Management of the Company to use judgment in applying its accounting policies and to make estimates and assumptions about the future . Actual results may differ from these estimates . The following paragraphs discuss the most significant accounting judgments and estimates that the Funds have made in preparing the financial statements .
216 DFS GUARANTEED INVESTMENT FUNDS
Fair Value Measurement of Derivatives Financial Instruments and Securities not Quoted in an Active Market
The Funds may hold financial instruments that are not quoted in active markets, including derivative financial instruments . Fair value is determined based on models that make maximum use of observable inputs and rely as little as possible on unobservable inputs . The Funds consider the data observable if market data is readily available, distributed or updated on a regular basis, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market . The models used to determine fair values are validated and periodically reviewed by experienced personnel of the Company .
When no quoted prices are available, the fair value is estimated using present value or other valuation methods, which are influenced by the assumptions used concerning the amount and timing of estimated future cash flows and discount rates, which reflect varying degrees of risk, including liquidity risk, credit risk, risks related to interest rates, exchange rates, and price and rate volatility .
The calculation of the fair values may differ given the role that judgment plays in applying the acceptable estimation and valuation techniques . Estimated fair value reflects market conditions on a given date and for this reason, it may not be representative of future fair values . Refer to Note 7, “Financial Instruments Disclosures” for further information on fair value measurement of financial instruments .
Classification and Measurement of Investments and Application of the Fair Value Option
In classifying and measuring financial instruments held by the Funds, the Company is required to make significant judgments about whether or not the business of the Funds is to invest on a total return basis for the purpose of applying the fair value option for financial assets under IAS 39 . The most significant judgment lies in determining if certain investments are held-for-trading, and if the fair value option can be applied to those which are not . For further information on financial instruments, refer to Note 2, “Basis of Presentation” .
4. NET ASSETS ATTRIBUTABLE TO CONTRACT OWNERS
Structure of the Funds and the Units attributedThe Funds are wholly owned assets of Desjardins Financial Security, which have been segregated from the Company’s other assets . Except for instances where the Company has acquired an interest in a Fund, the Funds’ assets may only be used to pay benefits under the Contracts .Each Fund has a series of units, which are attributed to Contracts for the purpose of determining the value of benefits to the units attributable to those Contracts . A Contract Owner acquires no direct claim on the units or assets of a Fund by purchasing a Contract but only the benefits that are provided under the Contract .Units within the same series of Funds have the same net asset value per unit . Subject to the Company’s administrative rules, Contract Owners have the right to make transactions under their Contracts such as premiums, withdrawals and switches between units of Funds . As a result of these transactions, units are attributed to and withdrawn from the Contract based on each Contract’s terms and conditions or as provided by law . Since the Contract Owner does not own units of a Fund, ownership of units cannot be sold or transferred to another party . There are no voting rights associated with the units of the Fund .
Classification of Units Attributable to Contract OwnersThe Funds’ outstanding units qualify as “puttable instruments” as required by the IAS 32, Financial Instruments: Presentation (“IAS 32”) . IAS 32 states that units that include a contractual obligation for the issuer to repurchase or redeem them for cash or another financial asset should be classified as financial liabilities . The Funds issue different series of units attributable to Contract Owners that are equally subordinated but have different features .The Funds issue series of units to Contract Owners that include a contractual obligation for the issuer to repurchase or redeem them for cash or another financial asset . These series of units attributable to Contract Owners have different characteristics and are therefore classified as financial liabilities .
Valuation of the UnitsThe units of a Fund are valued according to the administrative rules established by the Company and in accordance with the Contract and all laws and regulations applicable to the Funds .These units differ with respect to redemption charges and management fees charged to each series (See Note 5) . The net asset value per unit is determined on each market day by dividing the net assets attributable to Contract Owners by its outstanding units .
Series of units availableThe Desjardins Financial Security Guaranteed Investment Funds Plan, the Millennia III Plan, and the Imperial Growth Plan, as well as the various Contract versions offered under each of these Plans, offers different Series providing different guarantees and provisions as well as varying Management Expense Ratios (MERs) .Series 1: This Series was offered under the Millennia III Plan through two different Contracts: the Millennia lll and Millennia lll – New Era Contracts . The Millennia III Plan was offered from November 15, 1995 to October 28, 2007 .Series 3: This Series was offered under the Millennia III Plan through two different Contracts: the Millennia lll – Classic and Millennia lll – New Era Contracts . The Millennia III Plan was offered from November 15, 1995 to October 28, 2007 .
NOTES TO THE FINANCIAL STATEMENTS – unaudited (cont.)
217DFS GUARANTEED INVESTMENT FUNDS
Series 5: This Series was offered under the Desjardins Financial Security Guaranteed Investment Funds Plan through the Helios Contract . The Desjardins Financial Security Guaranteed Investment Funds Plan was first offered starting on October 29, 2007 and currently, the only Contract available is the Helios2 Contract .Series 6: This Series was offered under the Desjardins Financial Security Guaranteed Investment Funds Plan through the Helios2 Contract . The Desjardins Financial Security Guaranteed Investment Funds Plan was first offered starting on October 29, 2007 and currently, the only Contract available is the Helios2 Contract .Series 7: This Series was offered under the Desjardins Financial Security Guaranteed Investment Funds Plan through the Helios2 Contract . The Desjardins Financial Security Guaranteed Investment Funds Plan was first offered starting on October 29, 2007 and currently, the only Contract available is the Helios2 Contract .Series IGP: This Series was offered under the Imperial Growth Plan through the three remaining Contracts (C71, C81, and C88) . The Imperial Growth Plan was offered pre-1995 .
Number of UnitsThe number of units outstanding in each Fund as at June 30, 2016 and 2015, and the number of units attributed to and withdrawn from Contracts during the periods are as follows:
Management feesIn return for investment management, Desjardins Financial Security is paid a management fee from the Funds based on the net asset value of the units attributed to each series of each Fund and calculated daily .The management fees, as a percentage of the daily average net assets, are as follows:
Operating expensesIn addition to management fees, a charge is applied to each Fund for operating and administrative expenses relating to the Fund . Each Fund is also responsible for all applicable taxes, including Goods and Services Tax (“GST”) and Harmonized Sales Tax (“HST”) if any, and all brokerage commissions incurred by a Fund in buying and selling investments on behalf of a Fund .
Management Expense RatiosSome expenses (audit fees, legal fees, custodial fees, marketing costs, etc .) have been absorbed by the Company . Management expense ratios for all the Funds would be nine basis points higher if these expenses had been charged to the Funds . The Company does not intend to change its method of allocating costs .The management expense ratios for the period ended June 30, 2016 and for each of the past five years, which includes management, guarantee and operating expenses, are as follows*:
* Starting in 2013, management expense ratios include all applicable sales taxes (sales taxes not included before 2013) .** Annualized . *** The management expense ratios for these Funds include underlying fund managers’ fees, ranging from 0 .01 to 0 .05% .
6. RELATED PARTY TRANSACTIONSThe Funds pay management fees and operating expenses to the Company, which are presented in the Statement of Comprehensive Income . Those fees are calculated on a daily basis with the net asset value of the Fund . The management fees are paid monthly at the annual rate specified in Note 5 . Accrued expenses, presented in the Statement of Financial Position, are to be paid to the Company .Some Funds have investments in underlying funds from related parties . As at June 30, 2016 and December 31, 2015, the Company had the following seed capital investments:
June 30, 2016$
December 31, 2015$
Conservative 145,218 141,919Moderate 172,598 169,802Balanced 199,721 197,511Growth 228,790 227,584Maximum Growth 255,799 255,521Money Market 82,774 82,464Income – Fiera Capital 22,652 21,886Canadian Bond 22,204 21,451 Diversified Income – Franklin Quotential 21,886 21,797Balanced Income – Franklin Quotential 21,951 22,256Canadian Balanced – Fidelity 22,927 22,336U .S . Monthly Income – Fidelity 435,109 443,758 Balanced – Desjardins SocieTerra 139,490 139,525 Global Balanced – Jarislowsky Fraser 76,357 77,425 Canadian Balanced – Fiera Capital 22,624 22,113Canadian Balanced – Franklin Bissett 121,502 116,535Balanced Growth – Franklin Quotential 21,862 22,440Canadian Balanced – CI Signature 216,356 219,294Income and Growth – CI Signature 201,815 203,815Growth and Income – NEI Northwest 61,133 60,970Global Growth – NEI Select 22,373 22,518
226 DFS GUARANTEED INVESTMENT FUNDS
June 30, 2016$
December 31, 2015$
Canadian Asset Allocation – CI Cambridge 229,968 226,885Growth – Franklin Quotential 21,822 22,777Dividend Income – Franklin Bissett 39,781 36,927Canadian Dividend – NEI Northwest 241,792 231,804Canadian Equity – Jarislowsky Fraser 21,657 20,657 Canadian Equity – Fidelity True North® 138,026 133,480Canadian Equity – Franklin Bissett 20,332 18,612Canadian Equity – Fiera Capital 41,004 38,843Specialty Equity – NEI Northwest 273,046 245,362Small Cap – Franklin Bissett 18,035 15,725American Equity – MFS 25,661 27,133American Equity Value – Desjardins 784,274 819,806Global Dividend – Desjardins 269,993 268,529Global Equity – MFS 231,537 247,098International Equity – MFS 21,738 24,386International Equity Growth – Desjardins 236,209 265,511
The related parties transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties .
7. FINANCIAL INSTRUMENTS DISCLOSURES
DFS Preliminary Information The net assets of the DFS Guaranteed Investment Funds are held by the Company on behalf of all Contract Owners . These Funds are not separate legal entities . The Contract Owners do not own any of the assets of the Funds nor own an interest in the Funds . However, the financial instrument risks resulting from the Funds are assumed by the Contract Owners . The segregated Fund’s value may increase or decrease according to market fluctuations .Moreover, the Funds are offered with a deposit guarantee of 75 to 100% that protects the deposits until specific maturity dates .For the Fund of funds, details regarding the top holdings of the underlying fund(s) are shown in the appendix of the schedule of investment portfolio .
Hierarchy of Financial Instruments at Fair ValueThe fair value measurement of financial instruments is determined using the following three levels of the fair value hierarchy:• Level 1 – Measurement based on quoted prices (unadjusted) in active markets for identical assets or liabilities;• Level 2 – Valuation techniques based primarily on observable market data;• Level 3 – Valuation techniques not based primarily on observable market data .If inputs of different levels are used to measure the fair value of an asset or liability, the classification within the hierarchy is based on the lowest level input that is significant to the measurement of fair value .
Measurement MonitoringThe Company is responsible for establishing the fair value measurements included in the Funds’ financial statements, including Level 3 measurements . The Company obtains prices from a pricing agency, monitors and analyzes these prices on a daily basis . A Measurement Monitoring Committee established by the Company ensures that appropriate operating procedures and a proper monitoring structure are in place and followed . Monthly monitoring reports are prepared and sent to each member for approval . The Measurement Monitoring Committee verifies the measurements on a monthly basis . On a quarterly basis, this committee examines and approves the Level 3 measurements after obtaining confirmation of the measurements from each portfolio manager, as needed . The committee signs off on any adjustments made to prices or estimates provided by the pricing agency .
Classification within the Fair Value HierarchyA change in the fair value measurement method could result in a transfer between levels . The Funds’ policy is to record the implications of transfers between levels on the date of the event or change in circumstances behind the transfer .The following types of investments may be classified Level 3 if their prices are no longer based on observable inputs .
a) Money Market SecuritiesMoney market securities primarily include public sector and corporate securities, which are valued using models with inputs including interest rate curves, credit spreads and volatilities . The inputs that are significant to valuation are generally observable . Public sector money market securities guaranteed by the federal and provincial government have been classified as Level 1 . Other money market securities have been classified as Level 2 .
NOTES TO THE FINANCIAL STATEMENTS – unaudited (cont.)
227DFS GUARANTEED INVESTMENT FUNDS
b) EquitiesEquities are classified as Level 1 when the security is actively traded and a reliable price is observable . Certain equities do not trade frequently and therefore observable prices may not be available . In such cases, fair value is determined using observable market data and the fair value is classified as Level 2, unless the determination of fair value requires significant unobservable data, in which case the measurement is classified as Level 3 . Unlisted warrants are generally classified as Level 2 .
c) Index-Based InvestmentsIndex-based Investments are classified as Level 1 when the security is actively traded and a reliable price is observable .
d) BondsPublic sector bonds guaranteed by the federal and provincial government are classified as Level 1 . Corporate bonds, which are valued using models with inputs including interest rate curves, credit spreads and volatilities are usually classified as Level 2 .
e) Mortgage-backed Securities and Asset-backed SecuritiesMortgage-backed securities and asset-backed securities consist primarily of corporate securities, which are valued using models with inputs including interest rate curves, credit spreads and volatilities . Since the inputs that are significant to valuation are generally observable, mortgage-backed securities and asset-backed securities are usually classified as Level 2 .
f) Investment FundsPublic investment funds are classified as Level 1 when their prospectus is unrestricted and their price is reliable and observable . Since some investment funds are not public, their price is determined using observable market data and fair value is classified as Level 2, unless the measurement of fair value requires the use of significant unobservable inputs, in which case it is classified as Level 3 .
g) Derivative Financial InstrumentsDerivative instruments consist of foreign currency forward contracts for which counterparty credit spreads are observable and reliable or for which the credit-related inputs are determined to be significant to fair value, are classified as Level 2 .Detailed information concerning the fair value hierarchy of each Fund is available in their respective Notes to the Financial Statements pertaining to each Fund . For securities classified as Level 3, the valuation techniques and assumptions are also presented in their respective notes .
Management of Risks Arising from Financial Instruments During the course of their activities, the Funds are exposed to a variety of risks associated with financial instruments such as market risk (including currency risk, interest rate risk and price risk), concentration risk, credit risk and liquidity risk . The overall strategy of the Funds’ risk management focuses on the unpredictability of financial markets and optimizes the Funds’ financial performance, in accordance with the risk level established for the Fund . Most investments involve a risk of loss .For the purpose of the financial statements, certain risks detailed in the Contract and Information Folder are associated with other risks . The market risk, the special equity risk and the sovereign risk are presented under price risk . The credit risk and the derivatives risk are presented under credit risk .In accordance with the Funds’ investment policy, the Company monitors the Funds’ risks on a quarterly basis .
Market RiskMarket risk is the risk that the fair value or future cash flows associated with a financial instrument will fluctuate because of a change in the relevant risk variables, such as interest rates and equity prices .The Funds’ market risk is managed through diversification of the investment portfolio’s exposure ratios . The return on investments held by the Funds is monitored by the Company on a monthly basis and reviewed by the investment committee on a quarterly basis .
Currency RiskCurrency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in foreign exchange rates . Currency risk is composed of monetary items (usually including cash, receivable amounts in foreign currencies, and investments in fixed-income and money market securities) and non-monetary items (usually including investments in equities and investment funds) . The non-monetary assets are classified according to the currency in which the security was purchased .The Funds are exposed to the currency risk in holding assets and/or liabilities denominated in currencies other than the Canadian dollar, the Funds’ functional currency, as the value of the securities denominated in other currencies will fluctuate according to the prevailing exchange rates . The Funds may enter into foreign currency forward contracts to reduce their exposure to currency risk .The Funds’ exposure to currency risk is shown based on the carrying value of financial assets and financial liabilities (including the notional amount of foreign currency forward contracts and foreign currency futures, if any) .If the Canadian dollar decreases in relation to foreign currencies, the value of foreign investments increases . Conversely, if the value of the Canadian dollar increases, the value of foreign investments decreases .
228 DFS GUARANTEED INVESTMENT FUNDS
Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates .Interest rate risk occurs when an investment fund invests in interest-bearing financial instruments . Generally, the value of these securities increases if interest rates decrease, and decreases if interest rates increase . The Company manages this risk by calculating and monitoring the average effective duration of the portfolio of these securities and the exposures on different points along the interest rate yield curve . The Funds also hold a limited amount of cash subject to variable interest rates, which expose them to cash flow interest rate risk .
Price RiskPrice risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices, other than those arising from currency risk or interest rate risk .The Company manages this risk by carefully selecting securities and other financial instruments, in accordance with defined limits . The maximum risk resulting from financial instruments is determined by the fair value or contract value of the financial instruments . The Funds’ overall market positions are monitored on a monthly basis by the Company and reviewed on a quarterly basis by the investment committee . The Funds’ financial instruments are exposed to price risk arising from uncertainties about the future prices of instruments .
Concentration RiskConcentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location or industry sector . For Funds with an international investment strategy, the concentration by geographic location is presented according to, among other things, the country of incorporation or region . For Funds with a domestic investment strategy, the concentration by industry sector is presented according to, among other things, their investments in finance, healthcare or energy sectors, etc . The concentration risk is managed through portfolio diversification within the framework of the Funds’ objective and strategy .
Credit RiskCredit risk is the risk that the financial instrument counterparty will be unable to pay the full amount at maturity . The Funds’ credit risk is managed through an independent credit analysis from the Manager/sub-advisor, in addition to credit rating agencies analysis .
Financial Instrument TransactionsThe Funds are exposed to credit risk . The Funds’ and counterparty’s respective credit risks are taken into account when determining the fair value of financial assets and liabilities . Transactions are settled or paid on delivery using approved brokers . The risk of default is considered limited as delivery of the securities sold is made once the broker has received payment .Payment is made on a purchase once the securities have been received by the broker . The trade will fail if either party fails to meet its obligations . However, there are risks involved in dealing with custodians or prime brokers who settle trades and, in rare circumstances, the securities and other assets deposited with the custodian or broker may be exposed to credit risk with regard to such parties . In addition, there may be practical problems or time delays associated with enforcing the Funds’ rights to their assets in the case of an insolvency of any such party .The investment grade for fixed-income securities and money market securities is rated by credit rating agencies, such as the Dominion Bond Rating Service (“DBRS”), Standard & Poor’s and Moody’s . In cases where the credit rating agencies do not agree on a credit rating for fixed-income securities and money market securities, they will be classified following these rules:• If two credit ratings are available, but the ratings are different, the lowest rating is used;• If three credit ratings are available, the most common credit rating is used;• If all three credit rating agencies have different ratings, the middle credit rating is used .The credit rating is then converted to DBRS format . Generally, the greater the credit rating of a security, the lower the probability of it defaulting on its obligations .Derivative financial instruments are financial contracts whose value depends on underlying assets, including interest rates and foreign exchange rates . The vast majority of derivative financial instruments is negotiated by mutual agreement between the Funds and their counterparties, and include foreign currency forward contracts, swaps and options . Other transactions are carried out as part of trades and mainly consist of futures contracts .
Securities Lending and Repurchase TransactionsSecurities lending and repurchase transactions expose the Funds to credit risk . These transactions are governed by Investment Industry Regulatory Organization of Canada participation agreements . The Funds also use netting agreements with counterparties to mitigate credit risk and require a percentage of collateralization (a pledge) on these transactions . The Funds only accept pledges from counterparties that comply with the eligibility criteria defined in their policies . These criteria promote quick realization, if necessary, of collateral in case of default . The collateral received and given by the Funds are mainly cash and government securities . Further information on assets pledged and received as collateral is presented in the “Notes to the Financial Statements – Specific Information” pertaining to each Fund .
Liquidity RiskLiquidity risk is the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities .The Funds are exposed to daily cash redemptions of units . Most of their assets are therefore invested in liquid investments (i .e . investments that are traded in an active market and that can be readily disposed of) .
NOTES TO THE FINANCIAL STATEMENTS – unaudited (cont.)
229DFS GUARANTEED INVESTMENT FUNDS
Some Funds may invest in derivatives financial instruments, debt securities and unlisted equity investments that are not traded in an active market . As a result, some Funds may not be able to quickly liquidate their investments at amounts approximating their fair values, or be able to respond to specific effects such as deterioration in the creditworthiness of any particular issuer . Units attributable to Contract Owners are redeemable on demand at the owner’s option . However, the Company does not expect that the contractual maturity disclosed will be representative of the actual cash outflows, as Contract Owners of the instruments typically retain them for a longer period .The majority of the remaining liabilities are due within the next 3 months . Balances due within 12 months equal their carrying balances as the impact of discounting is not significant .
Management of Risks from Units Attributable to Contract OwnersUnits attributed and outstanding are considered as the Funds’ capital . The Funds are not subject to specific capital requirements on the premiums and withdrawals, other than certain minimum subscription requirements . Contract Owners are entitled to require payment of the net asset value per unit for all or any of the units they hold by giving an official notice to the Company within the prescribed time period . Units attributable to Contract Owners are redeemable for cash equal to a pro rata share of the Funds’ net asset value .Additional InformationFor further information regarding the hierarchy of financial instruments at fair value measurement and risk exposure of each Fund, please refer to the “Notes to the Financial Statements – Specific Information” pertaining to each Fund . Details on risks and various documents on underlying funds (detailed description of each Fund’s investment policy and, where applicable, the investment policy and/or prospectus and financial statements of the underlying fund(s)) are available upon request by writing to the Company at its address:1 Complexe DesjardinsP .O . Box 9000Montreal, QuebecH5B 1H5
8. EVENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITIONLaunch of new Fund in Series 1 and IGPIn November 2016, the DFS GIF – Canadian Equity – Franklin Bissett will be added to Series 1 and Series IGP .
Closing of FundIn November 2016, the Company will close the DFS GIF – Canadian Equity – Fiera Capital .On September 2, 2016, the Company ceased to accept additional deposits in this Fund .
DFS GUARANTEED INVESTMENT FUNDS
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76E
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Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company.
This document is printed on Rolland Enviro paper.
100%
The Contract and Information Folder contains important information on the DFS Guaranteed Investment Funds. Please read it carefully before investing. DFS Guaranteed Investment Funds is a registered trademark owned by Desjardins Financial Security Life Assurance Company. DFS Guaranteed Investment Funds are established by Desjardins Financial Security Life Assurance Company.
DFS stands for Desjardins Financial Security.
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Thank you.Thank you for choosing the strength and stability of a company specialized in providing individual insurance and retirement savings products to over five million Canadians, every day, to ensure their financial security.
Thank you for also choosing Desjardins Group, the largest cooperative financial group in Canada, whose financial stability is recognized by the following credit ratings which are comparable, if not superior to those of the five largest Canadian banks and insurance companies:
• Standard and Poor’s A+ • Moody’s Aa2• Dominion Bond Rating Service AA• Fitch AA-