PENDER MUTUAL FUNDS › media › 2018 › 08 › ... · 2018-11-17 · PENDER CANADIAN...

Unaudited Semi-Annual Financial Statements of

PENDER MUTUAL FUNDS

Six months ended June 30, 2018

NOTICE OF NO AUDITOR REVIEW OF THE SEMI-ANNUAL FINANCIAL STATEMENTS

PenderFund Capital Management Ltd., the Manager of the Pender Mutual Funds (the “Funds”), appoints an independent auditor to audit the Funds’ Annual Financial Statements. In accordance with Canadian securities laws (National Instrument 81-106 “Investment Fund Continuous Disclosure”), the Manager must disclose if an auditor has not reviewed the Semi-Annual Financial Statements.

The Funds’ independent auditor has not performed a review of these Semi-Annual Financial Statements in accordance with standards established by the Chartered Professional Accountants of Canada.

PENDER CANADIAN OPPORTUNITIES FUNDStatements of Financial Position (Unaudited)

June 30, 2018 and December 31, 2017

Notes 2018 2017

Assets

Cash 119,669$ 169,984$ Subscriptions receivable 410,203 990Dividends receivable 2,913 6,454 Other receivable 2,718 1,151 Investments 6,890,112 6,842,418

7,425,615 7,020,997

Liabilities

Management and administration fees payable 4 8,382 7,470 Distributions payable to holders of redeemable units - 1,198 Redemptions payable to holders of redeemable units 773,320 2,000 Payable for investments purchased 43,914 -

825,616 10,668

Net assets, attributable to holders of redeemable units 6,599,999$ 7,010,329$

Net assets attributable to holders of redeemable units per class:Class A 974,018$ 1,068,144$ Class D 46,036 52,084 Class F 5,018,165 5,322,297 Class H 6,143 6,067 Class I 238,574 233,828 Class O 317,063 327,909

6,599,999$ 7,010,329$

Net assets attributable to holders of redeemable units per unit:Class A 9.61$ 9.57$ Class D 7.16 7.11 Class F 10.11 10.02 Class H 11.58 11.51 Class I 11.85 11.73 Class O 13.11 12.90

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

Approved on behalf of the Manager, PenderFund Capital Management Ltd.:

Director Director

1

(signed) "Kelly Edmison" (signed) "Dave Barr"

PENDER CANADIAN OPPORTUNITIES FUNDStatements of Comprehensive Income (Unaudited)

Six months ended June 30, 2018 and 2017

Notes 2018 2017

Revenue:Dividend income 35,618$ 36,246$ Foreign exchange gain (loss) 506 (1,609) Securities lending income 5 17,696 -Changes in fair value of investments: Net realized gain (loss) 266,390 41,807 Net change in unrealized appreciation (depreciation) (192,336) 178,454 Total revenue 127,874 254,898

Expenses: Management fees 4 30,441 27,028 Administration fees 4 14,693 10,763 Transaction costs 13,399 5,489 Independent review committee fees 121 239Total expenses 58,654 43,519

Less: Expenses absorbed by the Manager (121) (239)

Net expenses 58,533 43,280

Increase (decrease) in net assets attributable to holders of redeemable units 69,341$ 211,618$

Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 3,383$ 36,279$ Class D 191 1,316 Class F 54,695 140,939 Class H 34 238 Class I 5,972 4,595 Class O 5,066 28,251

69,341$ 211,618$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 0.03$ 0.32$ Class D 0.02 0.23Class F 0.10 0.38 Class H 0.07 0.42Class I 0.25 0.33Class O 0.20 0.58


2

PENDER CANADIAN OPPORTUNITIES FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A 2018 2017

Balance, beginning of period 1,068,144$ 1,051,313$

Increase (decrease) in net assets attributable to holders of redeemable units 3,383 36,279

Unit transactions:Proceeds from issue of redeemable units 38,617 182,216 Issued on reinvestment of distributions 330 229 Amounts paid on redemption of redeemable units (136,456) (168,216)

(97,509) 14,229 Distributions paid from:

Net investment income - (229) Realized gains on sale of investments - -Return of capital - -

- (229)

Balance, end of period 974,018$ 1,101,592$

Class D 2018 2017

Balance, beginning of period 52,084$ 23,650$

Increase (decrease) in net assets attributable to holders of redeemable units 191 1,316




- (45)

Balance, end of period 46,036$ 38,208$

Class F 2018 2017



Unit transactions:Proceeds from issue of redeemable units 1,406,003 3,037,852 Issued on reinvestment of distributions 21 17 Amounts paid on redemption of redeemable units (1,764,851) (454,563)

(358,827) 2,583,306 Distributions paid from:


- (17)

Balance, end of period 5,018,165$ 5,354,180$


3

PENDER CANADIAN OPPORTUNITIES FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class H 2018 2017


Increase (decrease) in net assets attributable to holders of redeemable units 34 238

Unit transactions:Proceeds from issue of redeemable units - - Issued on reinvestment of distributions 42 26 Amounts paid on redemption of redeemable units - -

42 26 Distributions paid from:


- (26)


Class I 2018 2017






- (27)


Class O 2018 2017



Unit transactions:Proceeds from issue of redeemable units - - Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units (15,912) (1,168)

(15,912) (1,168) Distributions paid from:

Net investment income - - Realized gains on sale of investments - - Return of capital - -

- -



4

PENDER CANADIAN OPPORTUNITIES FUNDStatements of Cash Flows (Unaudited)


2018 2017

Cash provided by (used in):

Operating:Increase (decrease) in net assets attributable to holders of redeemable units 69,341$ 211,618$ Adjustments for:

Dividend income (35,618) (36,246) Foreign exchange (gain) loss (506) 1,609 Net realized (gain) loss on sale of investments (266,390) (41,807)Net change in unrealized (appreciation) depreciation of investments 192,336 (178,454)Management and administration fees payable 912 3,227 Other receivable (1,567) -

(41,492) (40,053)

Proceeds on disposal of investments 3,486,380 347,465 Amounts paid on purchase of investments (3,416,106) (1,921,419) Dividends received 39,159 33,638

67,941 (1,580,369)

Financing:Proceeds from issue of redeemable units 1,012,568 3,149,154 Amounts paid on redemption of redeemable units (1,131,330) (612,790) Distributions paid to unitholders - -

(118,762) 2,536,364

Net increase (decrease) in cash (50,821) 955,995

Cash, beginning of period 169,984 1,229,415

Effect of exchange rate fluctuations on cash 506 (1,609)

Cash, end of period 119,669$ 2,183,801$


5

PENDER CANADIAN OPPORTUNITIES FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018

Number ofshares / units Cost Fair value

Canadian Equities:

Consumer discretionary (29.8%)Aritzia Inc. 17,900 233,112$ 279,240$ AutoCanada Inc. 9,500 216,735 161,595 DHX Media Ltd. 17,900 69,018 48,867 Dollarama Inc. 2,502 59,607 127,502 Freshii Inc., Class 'A' 41,340 343,524 255,895 Indigo Books & Music Inc. 5,405 87,206 91,885 Sleep Country Canada Holdings Inc. 5,850 203,445 190,535 Transat A.T. Inc. 18,300 135,942 149,694 Uni-Select Inc. 12,640 320,857 264,302 Wow Unlimited Media Inc. 260,800 358,907 393,808

2,028,353 1,963,323 Consumer staples (4.4%)

Alimentation Couche-Tard Inc., Class 'B' 3,300 203,266 188,463 Saputo Inc. 2,281 83,773 99,566

287,039 288,029 Diversified financials (13.4%)

Chesswood Group Limited 12,600 150,151 136,836 Crown Capital Partners Inc. 20,100 203,488 204,015 Cymbria Corporation, Class 'A' 1,690 57,243 101,739 Onex Corporation 1,118 92,397 107,876 Partners Value Investments LP 9,300 341,128 334,800

844,407 885,266 Energy (4.8%)

Athabasca Oil Corporation 176,700 200,419 318,060 200,419 318,060

Health care (6.1%)Knight Therapeutics Inc. 22,843 185,442 183,886 Medicure Inc. 31,200 200,780 219,336

386,222 403,222 Insurance (2.5%)

Trisura Group Ltd. 6,315 163,011 168,041 163,011 168,041

Industrials (4.2%)Carmanah Technologies Corporation 26,700 115,738 130,830 Exchange Income Corporation 3,500 115,305 112,140 INSCAPE Corporation, Class 'B' 19,860 65,670 36,245

296,713$ 279,215$


6

PENDER CANADIAN OPPORTUNITIES FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018

Exercise price

Expirydate

Issue currency

Number of shares / units Cost Fair value

Equities (continued):

Information technology (22.2%)Absolute Software Corporation 41,100 283,342$ 284,823$ C-Com Satellite Systems Inc. 307,800 344,685 338,579 Enghouse Systems Ltd. 1,900 117,819 145,863 EXFO Inc. 19,100 100,979 86,332 ProntoForms Corporation 666,700 225,363 246,679 Sangoma Technologies Corporation 184,440 166,826 213,950 Sierra Wireless, Inc. 6,830 158,086 143,635

1,397,100 1,459,861 Materials (10.9%)

CCL Industries Inc., Class 'B' 6,500 388,367 418,925 Winpak Ltd. 6,900 339,272 303,600

727,639 722,525 Real estate (2.1%)

Dream Unlimited Corp., Class 'A' 14,500 106,215 141,085 106,215 141,085

Utilities (4.0%)Maxim Power Corp. 53,401 163,898 136,173 Polaris Infrastructure Inc. 8,900 156,731 125,312

320,629 261,485

Total equities (104.4%) 6,757,747$ 6,890,112$

Warrants:Energy Fuels Inc. 3.20$ 2019/03/14 USD 4,450 1,682 -

1,682 -

Less: Transaction costs included in cost of investments (14,953)

Total investments (104.4%) 6,744,476$ 6,890,112$

Cash (1.8%) 119,669 Other assets less liabilities (-6.2%) (409,782)

Total net assets attributable to holders of redeemable units (100.0%) 6,599,999$


7

PENDER CORPORATE BOND FUNDStatements of Financial Position (Unaudited)


Notes 2018 2017

Assets

Cash 15,628,621$ 9,192,058$ Subscriptions receivable 7,709,324 295,500 Receivable for investments sold 44,189 5,003 Dividends receivable 208,936 90,466 Interest receivable 2,915,210 1,873,311 Other receivable 5,317 354 Derivative assets - 2,771,504 Investments 343,585,464 180,410,052

370,097,061 194,638,248

Liabilities

Management and administration fees payable 4 340,380 192,984 Distributions payable to holders of redeemable units 3,237 9,351 Redemptions payable to holders of redeemable units 647,163 21,458 Payable for investments purchased 2,016,460 164,441 Derivative liabilities 3,938,839 -

6,946,079 388,234


Net assets attributable to holders of redeemable units per class:Class A 53,343,793$ 38,229,254$ Class A (USD) 2,825,618 1,263,971 Class D 1,884,461 182,431 Class F 155,109,381 68,365,397 Class F (USD) 20,794,443 12,427,041 Class H 29,069,466 19,158,685 Class I 88,807,655 42,272,114 Class O 11,316,165 12,351,121

363,150,982$ 194,250,014$

Net assets attributable to holders of redeemable units per unit:Class A 12.42$ 11.92$ Class A (USD) 13.60 12.48 Class D 11.38 10.92 Class F 12.42 11.92 Class F (USD) 13.46 12.35 Class H 10.94 10.51 Class I 10.67 10.24 Class O 10.79 10.37



Director Director

8


PENDER CORPORATE BOND FUNDStatements of Comprehensive Income (Unaudited)


Notes 2018 2017

Revenue:Dividend income 848,805$ 440,941$ Interest for distribution purposes 5,621,980 2,719,164 Foreign exchange gain (loss) 151,277 155,801 Securities lending income 5 11,060 - Changes in fair value of investments and derivatives: Net realized gain (loss) 6,568,466 5,380,577 Net change in unrealized appreciation (depreciation) 3,759,816 (1,684,713) Total revenue 16,961,404 7,011,770

Expenses: Management fees 4 1,033,307 598,594 Administration fees 4 538,922 270,062 Withholding taxes (recovery) 6 53,783 1,143 Transaction costs 66,722 53,943 Other taxes (recovery) - (9,710)Independent review committee fees 6,265 5,154 Total expenses 1,698,999 919,186

Less: Expenses absorbed by the Manager (6,265) (5,154)

Net expenses 1,692,734 914,032

Increase (decrease) in net assets attributable to holders of redeemable units 15,268,670$ 6,097,738$

Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 2,409,716$ 1,724,484$ Class A (USD) 204,348 34,936 Class D 42,711 4,678 Class F 5,760,078 2,061,270 Class F (USD) 1,580,469 25,341 Class H 1,256,720 643,849 Class I 3,277,746 1,103,291 Class O 736,882 499,889

15,268,670$ 6,097,738$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 0.67$ 0.53$ Class A (USD) 1.37 0.31 Class D 0.59 0.46 Class F 0.69 0.55 Class F (USD) 1.35 0.07 Class H 0.60 0.46 Class I 0.62 0.49Class O 0.69 0.55


9

PENDER CORPORATE BOND FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A 2018 2017


Increase (decrease) in net assets attributable to holders of redeemable units 2,409,716 1,724,484

Unit transactions:Proceeds from issue of redeemable units 20,173,816 5,667,106 Issued on reinvestment of distributions 517,870 410,735 Amounts paid on redemption of redeemable units (7,290,328) (8,805,836)

13,401,358 (2,727,995) Distributions paid from:

Net investment income (696,535) (567,044) Realized gains on sale of investments - - Return of capital - -

(696,535) (567,044)


Class A (USD) 2018 2017



Unit transactions:Proceeds from issue of redeemable units 1,635,203 355,306 Issued on reinvestment of distributions 20,617 13,210 Amounts paid on redemption of redeemable units (265,819) (548,364)

1,390,001 (179,848) Distributions paid from:


(32,702) (20,744)


Class D 2018 2017



Unit transactions:Proceeds from issue of redeemable units 1,685,598 114,433 Issued on reinvestment of distributions 17,846 2,018 Amounts paid on redemption of redeemable units (26,016) (16,707)

1,677,428 99,744 Distributions paid from:


(18,109) (2,017)

Balance, end of period 1,884,461$ 150,382$


10

PENDER CORPORATE BOND FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class F 2018 2017



Unit transactions:Proceeds from issue of redeemable units 101,994,781 27,622,090 Issued on reinvestment of distributions 1,284,739 504,336 Amounts paid on redemption of redeemable units (20,172,503) (11,247,716)

83,107,017 16,878,710 Distributions paid from:

Net investment income (2,123,111) (838,318) Realized gains on sale of investments - - Return of capital - -

(2,123,111) (838,318)


Class F (USD) 2018 2017

Balance, beginning of period 12,427,041$ 985,495$

Increase (decrease) in net assets attributable to holders of redeemable units 1,580,469 25,341

Unit transactions:Proceeds from issue of redeemable units 10,732,630 7,048,156 Issued on reinvestment of distributions 127,842 79,248 Amounts paid on redemption of redeemable units (3,769,163) (45,470)



(304,376) (99,434)


Class H 2018 2017






(394,252) (237,427)



11

PENDER CORPORATE BOND FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class I 2018 2017





Net investment income (1,207,629) (473,768) Realized gains on sale of investments - - Return of capital - -

(1,207,629) (473,768)


Class O 2018 2017



Unit transactions:Proceeds from issue of redeemable units - 2,036,000 Issued on reinvestment of distributions 285,540 233,048 Amounts paid on redemption of redeemable units (1,771,838) (48,744)

(1,486,298) 2,220,304 Distributions paid from:


(285,540) (233,048)



12

PENDER CORPORATE BOND FUNDStatements of Cash Flows (Unaudited)


2018 2017


Operating:Increase (decrease) in net assets attributable to holders of redeemable units 15,268,670$ 6,097,738$ Adjustments for:

Dividend income (848,805) (440,941) Interest for distribution purposes (5,621,980) (2,719,164) Foreign exchange (gain) loss (151,277) (155,801) Net realized (gain) loss on sale of investments (7,135,962) (6,882,926) Net change in unrealized (appreciation) depreciation of investments (10,470,159) 5,986,909 Derivative assets and liabilities 6,710,343 (4,302,196) Other receivable (4,963) 2,100,000 Deposits with brokers - 488,897 Management and administration fees payable 147,396 21,310 Interest payable - (1,509)

(2,106,737) 192,317

Proceeds on disposal of investments 82,337,456 55,973,126 Amounts paid on purchase of investments (226,093,914) (85,988,841) Dividends received 730,335 459,724 Interest received 4,580,081 2,624,277

(140,552,779) (26,739,397)

Financing:Proceeds from issue of redeemable units 177,759,582 44,174,095 Amounts paid on redemption of redeemable units (29,122,791) (9,908,382) Distributions paid to unitholders (1,798,726) (671,350)

146,838,065 33,594,363

Net increase (decrease) in cash 6,285,286 6,854,966

Cash, beginning of period 9,192,058 3,147,266

Effect of exchange rate fluctuations on cash 151,277 155,801

Cash, end of period 15,628,621$ 10,158,033$


13

PENDER CORPORATE BOND FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018

Interest rate

Maturity date

Issue currency Face value Cost Fair value

Corporate bonds and loans:

Canada (27.4%)AGT Food and Ingredients Inc. 5.88% 2021/12/21 CAD 4,331,000 4,378,114$ 4,255,207$ Aimia Inc. 5.60% 2019/05/17 CAD 7,970,000 7,736,213 7,893,329 Canadian National Railway Co. 2.75% 2021/02/18 CAD 8,000,000 8,108,200 8,042,180 Canadian Pacific Railway Co. 5.10% 2022/01/14 CAD 3,750,000 4,160,925 4,022,536 City of Vancouver 4.90% 2019/12/02 CAD 3,000,000 3,123,300 3,118,793 Crown Capital Partners Inc. 6.00% 2023/06/30 CAD 2,500,000 2,500,000 2,458,750 Dorel Industries Inc. 5.50% 2019/11/30 USD 3,887,000 5,075,372 5,120,313 Eldorado Gold Corp. 6.13% 2020/12/15 USD 7,250,000 9,007,204 9,227,060 Element Fleet Management Corp. 5.13% 2019/06/30 CAD 5,744,000 5,563,562 5,665,020 Element Fleet Management Corp. 4.25% 2020/06/30 CAD 6,594,000 6,055,302 6,251,112 Energy Fuels Inc. 8.50% 2020/12/31 CAD 5,000,000 4,796,533 4,900,000 Gran Colombia Gold Corp. 8.25% 2024/04/30 USD 4,000,000 4,591,361 5,261,800 Just Energy Group Inc. 6.50% 2019/07/29 USD 9,200,000 11,641,480 11,769,332 Masonite International Corp. 5.63% 2023/03/15 USD 2,500,000 3,367,167 3,365,743 NAV Canada 5.30% 2019/04/17 CAD 5,000,000 5,290,400 5,118,820 Open Text Corp. 5.63% 2023/01/15 USD 2,000,000 2,801,858 2,706,538 Osisko Gold Royalties Ltd. 4.00% 2022/12/31 CAD 5,000,000 5,008,125 5,012,500 Silver Standard Resources Inc. 2.88% 2033/02/01 USD 2,500,000 3,203,045 3,268,416 TELUS Corp. 2.35% 2022/03/28 CAD 2,000,000 1,997,220 1,958,825

98,405,381 99,416,274 United States (45.3%)

Aceto Corp. 2.00% 2020/11/01 USD 4,425,000 3,332,350 4,474,918 Alliance Data Systems Corp. 5.38% 2022/08/01 USD 3,790,000 4,917,911 5,034,788 Alliance Data Systems Corp. 5.88% 2021/11/01 USD 1,158,000 1,563,125 1,557,565 Amyris, Inc. 6.50% 2019/05/15 USD 5,526,000 5,912,105 7,205,542 Amyris, Inc. 9.50% 2019/04/15 USD 5,500,000 6,038,310 7,244,076 Apple Inc. 2.85% 2021/05/06 USD 3,000,000 3,861,131 3,938,488 Apple Inc. 2.15% 2022/02/09 USD 3,500,000 4,473,443 4,463,442 Commonwealth of Puerto Rico 8.00% 2035/07/01 USD 1,000,000 410,066 536,046 Diageo Investment Corp. 2.88% 2022/05/11 USD 1,000,000 1,383,340 1,296,586 Era Group Inc. 7.75% 2022/12/15 USD 3,500,000 4,344,505 4,517,749 FireEye Inc. 1.63% 2035/06/01 USD 2,000,000 2,431,594 2,416,229 FLIR Systems Inc. 3.13% 2021/06/15 USD 2,700,000 3,538,203 3,515,249 Global Brokerage Inc. 7.00% 2023/02/08 USD 6,434,617 3,693,253 4,359,175 Global Eagle Entertainment Inc. 3.25% 2035/02/15 USD 6,250,000 5,309,662 6,027,120 GoPro Inc. 3.50% 2022/04/15 USD 150,000 165,988 183,018 Halyard Health Inc. 6.25% 2022/10/15 USD 4,380,000 6,053,865 5,934,521 ION Geophysical Corp. 9.13% 2012/12/15 USD 3,000,000 3,668,735 3,995,679 The KEYW Holding Corp. 2.50% 2019/07/15 USD 1,000,000 1,208,553 1,318,739 McDonald's Corp. 3.13% 2025/03/04 CAD 9,000,000 9,009,780 8,923,725 Mondelez International Inc. 3.25% 2025/03/07 CAD 4,000,000 3,942,230 3,950,880 Orexigen Therapeutics Inc. 2.75% 2020/12/01 USD 1,500,000 716,796 -PepsiCo, Inc. 2.15% 2024/05/06 CAD 8,000,000 7,651,500 7,638,800 PHI Inc. 5.25% 2019/03/15 USD 5,209,000 6,427,368 6,732,266 Revlon Consumer Products Corp. 6.25% 2024/08/01 USD 2,000,000 1,536,590 1,486,459 Samson Investment Co. 9.75% 2020/02/15 USD 5,000,000 69,641 424,233 Steel Connect, Inc. 5.25% 2019/03/01 USD 6,220,000 7,430,141 8,093,348


14

PENDER CORPORATE BOND FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018

Interest rate

Maturity date

Issue currency Face value Cost Fair value

Corporate bonds and loans (continued):

United States (45.3%) (continued):SunPower Corp. 4.00% 2023/01/15 USD 7,862,000 8,249,603$ 8,781,336$ Symantec Corp. 4.20% 2020/09/15 USD 4,000,000 5,262,323 5,290,255 Symantec Corp. 3.95% 2022/06/15 USD 4,000,000 4,956,608 5,137,616 Synchronoss Technologies Inc. 0.75% 2019/08/15 USD 2,000,000 2,455,826 2,473,148 TMST Inc. 8.00% 2013/05/15 USD 2,460,000 775,296 889,902 TreeHouse Foods Inc. 4.88% 2022/03/15 USD 1,000,000 1,277,691 1,324,908 Twitter Inc. 1.00% 2021/09/15 USD 2,000,000 2,460,707 2,552,254 Verisign, Inc. 4.63% 2023/05/01 USD 9,946,000 13,027,780 13,230,654 Visa Inc. 2.80% 2022/12/14 USD 2,500,000 3,233,538 3,230,190 W&T Offshore, Inc. 9.00% 2020/05/15 USD 9,187,673 10,934,390 12,116,139 Walt Disney Co. 2.76% 2024/10/07 CAD 4,000,000 3,974,410 3,934,240 William Carter Co. 5.25% 2021/08/15 USD 220,000 290,241 293,559

155,988,598 164,522,842

Foreign (4.9%)Golden Ocean Group Ltd. 3.07% 2019/01/30 USD 2,000,000 2,530,402 2,594,725 Grupo FAMSA SAB de CV 7.25% 2020/06/01 USD 3,008,000 3,484,115 3,772,958 National Grid Electricity Transmission PLC 2.90% 2019/11/26 CAD 7,000,000 7,079,800 7,054,196 Novasep Holding SAS 1.00% 2032/12/15 USD 487,750 284,025 211,732 Seagate HDD Cayman 4.25% 2022/03/01 USD 2,500,000 3,279,466 3,267,216 Seagate HDD Cayman 4.75% 2023/06/01 USD 1,000,000 1,251,150 1,300,671

17,908,958 18,201,498

Total corporate bonds and loans (77.6%) 272,302,937$ 282,140,614$

Closed end funds (6.4%)Aberdeen Asia-Pacific Income Fund Inc. USD 200,000 1,229,384$ 1,136,549$ Advent Claymore Convertible Securities and Income Fund USD 1,000 18,047 20,113 BlackRock Muni Intermediate Duration Fund Inc. USD 175,000 2,970,584 3,040,992 BlackRock MuniYield California Quality Fund Inc. USD 175,000 2,984,196 3,070,918 BrandywineGLOBAL - Global Income Opportunities Fund USD 178,948 2,955,211 2,681,174 Invesco Pennsylvania Value Municipal Income Trust USD 225,000 3,475,967 3,542,836 Nuveen Maryland Quality Municipal Income Fund USD 225,000 3,511,799 3,590,192 Nuveen New York Quality Municipal Income Fund USD 225,000 3,646,928 3,726,341 Templeton Global Income Fund USD 50,000 403,583 403,843 Western Asset Emerging Markets Debt Fund Inc. USD 110,406 2,078,711 1,927,250

23,274,410$ 23,140,208$ Common shares (0.2%)

SandRidge Energy Inc. USD 30,049 714,378$ 701,226$ 714,378$ 701,226$

Government bonds (5.3%)Government of Canada 1.25% 2019/11/01 CAD 5,500,000 5,455,090$ 5,457,861$ Government of Canada 2.00% 2023/09/01 CAD 3,000,000 2,971,650 2,986,392 Government of Canada 2.75% 2022/06/01 CAD 10,500,000 10,745,225 10,783,538

19,171,965$ 19,227,791$


15

PENDER CORPORATE BOND FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018

Interest rate /

Exercise price

Maturity date /

Expiry dateIssue

currency

Face value / Number of

units Cost Fair value

Preferred shares (5.0%)Aimia Inc., Series 1 Variable CAD 103,300 1,111,016$ 1,115,640$ Aimia Inc., Series 2 Variable CAD 29,100 295,684 320,100 Aimia Inc., Series 3 Variable CAD 74,000 849,346 851,000 BCE Inc., Series AD Floating CAD 80,000 1,666,750 1,647,200 BCE Inc., Series AE Floating CAD 50,000 1,052,000 1,031,000 BCE Inc., Series AI Variable CAD 75,000 1,465,465 1,440,750 BCE Inc., Series AJ Floating CAD 100,000 2,042,523 2,059,000 BCE Inc., Series AM Variable CAD 30,000 554,492 584,400 Braemar Hotels & Resorts Inc. 5.50% USD 134,647 3,259,995 3,344,052 Brookfield Renewable Power Preferred Equity Inc., Class A 5.59% CAD 47,700 925,914 1,130,013 Capstone Infrastructure Corp., Series A Variable CAD 20,000 236,480 277,800 George Weston Ltd., Series V 4.75% CAD 92,500 2,160,704 2,050,725 George Weston Ltd., Series III 5.20% CAD 92,100 2,288,035 2,196,585

17,908,404$ 18,048,265$ Warrants (0.1%)

Gran Colombia Gold Corp. 2.21$ 2024/04/30 CAD 496,000 -$ 327,360$ -$ 327,360$



Value date Rate Nominal value Cost Fair value

Derivative liabilities (-1.1%)BNY Mellon, CAD/USD Forward 2018/07/11 1.29$ 168,441,400$ -$ (3,938,839)$

-$ (3,938,839)$

Cash (4.3%) 15,628,621 Other assets less liabilities (2.2%) 7,875,736



16

PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Financial Position (Unaudited)


Notes 2018 2017

Assets

Cash 17,760,728$ 32,345,628$ Subscriptions receivable 248,204 41,650 Receivable for investments sold 864,570 2,118,453 Dividends receivable 194,298 171,240 Interest receivable 127,017 107,774 Other receivable 79,438 41,434 Investments 180,507,600 155,116,122

199,781,855 189,942,301

Liabilities

Management and administration fees payable 4 221,105 207,438 Distributions payable to holders of redeemable units 32,505 44,210 Redemptions payable to holders of redeemable units 726,634 51,778 Payable for investments purchased 3,070,514 28,706

4,050,758 332,132


Net assets attributable to holders of redeemable units per class:Class A 41,492,642$ 43,406,940$ Class B 5,034 - Class F 95,841,077 97,266,295 Class G 5,040 - Class I 10,876,221 5,347,136 Class N 41,181,858 36,673,297 Class O 6,329,225 6,916,501

195,731,097$ 189,610,169$

Net assets attributable to holders of redeemable units per unit:Class A 27.68$ 26.88$ Class B 10.07 - Class F 27.51 26.53 Class G 10.08 - Class I 12.97 12.51 Class N 11.99 11.55 Class O 27.12 26.02



Director Director

17


PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Comprehensive Income (Unaudited)


Notes 2018 2017

Revenue:Dividend income 1,101,359$ 822,197$ Interest for distribution purposes 189,991 191,292 Foreign exchange gain (loss) 611,776 (477,836) Securities lending income 5 144,054 - Changes in fair value of investments: Net realized gain 14,305,763 10,102,455 Net change in unrealized appreciation (depreciation) (7,844,010) 1,021,992 Total revenue 8,508,933 11,660,100

Expenses: Management fees 4 965,576 870,413 Administration fees 4 461,474 364,707 Withholding taxes 6 833 1,047 Transaction costs 186,106 66,143 Other taxes (recovery) (50,067) (67,348) Independent review committee fees 3,417 6,010 Total expenses 1,567,339 1,240,972

Less: expenses absorbed by the Manager (3,417) (6,010)

Net expenses 1,563,922 1,234,962


Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 1,220,084$ 3,315,681$ Class B 34 - Class F 3,548,724 6,697,638 Class G 40 - Class I 377,976 (21,515) Class N 1,520,744 (64,059) Class O 277,409 497,393

6,945,011$ 10,425,138$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 0.78$ 1.91$ Class B 0.07 - Class F 1.00 2.07 Class G 0.08 - Class I 0.57 (0.05) Class N 0.46 (0.03) Class O 1.17 2.13


18

PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A Notes 2018 2017



Unit transactions:Proceeds from issue of redeemable units 9,296 - Issued on reinvestment of distributions 4,456 4,969 Amounts paid on redemption of redeemable units (3,148,134) (4,427,673)

(3,134,382) (4,422,704) Distributions paid from:

Net investment income - (4,969) Realized gains on sale of investments - - Return of capital - -

- (4,969)


Class B Notes 2018 2017

Balance, beginning of period -$ -$

Increase (decrease) in net assets attributable to holders of redeemable units 34 -

Unit transactions:Proceeds from issue of redeemable units 5,000 - Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units - -

5,000 - Distributions paid from:


- -

Balance, end of period 5,034$ -$

Class F 2018 2017




(4,913,121) (481,981) Distributions paid from:


(60,821) (57,643)



19

PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class G Notes 2018 2017

Balance, beginning of period -$ -$


Unit transactions:Proceeds from issue of redeemable units 5,000 - Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units - -

5,000 - Distributions paid from:


- -

Balance, end of period 5,040$ -$

Class I 2018 2017

Balance, beginning of period 5,347,136$ -$

Increase (decrease) in net assets attributable to holders of redeemable units 377,976 (21,515)

Unit transactions:Proceeds from issue of redeemable units 5,175,724 5,824,886 Issued on reinvestment of distributions 3,918 1,617 Amounts paid on redemption of redeemable units (25,108) (343,143)



(3,425) (1,617)


Class N 2018 2017

Balance, beginning of period 36,673,297$ -$

Increase (decrease) in net assets attributable to holders of redeemable units 1,520,744 (64,059)

Unit transactions:Proceeds from issue of redeemable units 5,739,316 30,452,633 Issued on reinvestment of distributions 303 1,817 Amounts paid on redemption of redeemable units (2,751,802) (567,508)


Net investment income - (1,817) Realized gains on sale of investments - -Return of capital - -

- (1,817)



20

PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class O 2018 2017



Unit transactions:Proceeds from issue of redeemable units - 832,160 Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units (864,685) (26,480)



- -



21

PENDER SMALL CAP OPPORTUNITIES FUNDStatements of Cash Flows (Unaudited)


Notes 2018 2017



Dividend income (1,101,359) (889,545) Interest for distribution purposes (189,991) (191,292) Foreign exchange (gain) loss (611,776) 477,836 Net realized (gain) loss on sale of investments (14,305,763) (10,102,455) Net change in unrealized (appreciation) depreciation of investments 7,844,010 (1,021,992) Other receivable (38,004) -Management and administration fees payable 13,667 17,336

(1,444,205) (1,284,974)

Proceeds on disposal of investments 48,387,900 25,811,373 Amounts paid on purchase of investments (63,021,934) (21,512,307) Investments acquired on merger - (23,417,208) Dividends received 1,078,301 751,000 Interest received 170,748 256,411

(14,829,190) (19,395,705)

Financing:Proceeds from issue of redeemable units 10,833,347 2,477,195 Cash received on merger 4 - 33,378,399 Amounts paid on redemption of redeemable units (11,200,833) (4,567,346)

(367,486) 31,288,248

Net increase (decrease) in cash (15,196,676) 11,892,543


Effect of exchange rate fluctuations on cash 611,776 (477,836)



22

PENDER SMALL CAP OPPORTUNITIES FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018

Number of shares / units Cost Fair value

Equities:

Consumer discretionary (16.6%)Aritzia Inc. 475,200 6,253,248$ 7,413,120$ AutoCanada Inc. 254,000 5,350,830 4,320,540 DHX Media Ltd. 466,100 1,826,152 1,272,453 Diversified Royalty Corp. 1,496,458 3,791,891 4,594,126 Freshii Inc., Class 'A' 1,039,373 6,729,846 6,433,719 Indigo Books & Music Inc. 247,400 4,053,645 4,205,800 Transat A.T. Inc. 509,600 4,152,070 4,168,528


Brick Brewing Co. Limited 578,100 2,294,014 2,404,896 GreenSpace Brands Inc. 4,259,967 5,281,996 4,430,366

7,576,010 6,835,262 Diversified financials (2.9%)

Chesswood Group Limited 465,300 5,314,635 5,053,158 Deans Knight Income Corp 3,000 1,200 1,200 Quarterhill Inc. 399,700 839,804 583,562

6,155,639 5,637,920 Energy (4.8%)

Questor Technology Inc. 1,018,800 2,049,019 4,411,404 TerraVest Industries Inc. 497,400 3,182,916 5,008,818

5,231,935 9,420,222 Health care (8.3%)

Clarius Mobile Health Corp,. Series 1 1,123,596 1,000,000 1,000,000 Knight Therapeutics Inc. 616,357 4,941,286 4,961,674 Medicure Inc. 1,019,300 3,986,527 7,165,679 Vigil Health Solutions Inc. 1,589,000 227,433 730,940 Waverley Pharma Inc. 4,000,000 2,000,000 1,040,000 Zymeworks Inc. 65,844 726,787 1,283,958

12,882,033 16,182,251 Industrials (4.3%)

CanWel Building Materials Group Ltd. 544,900 2,940,428 3,748,912 Carmanah Technologies Corporation 426,300 1,845,311 2,088,870 exactEarth Ltd. 506,452 577,035 582,420 INSCAPE Corporation, Class 'B' 1,055,944 3,329,017 1,900,699

8,691,791 8,320,901 Information technology (40.9%)

Absolute Software Corporation 991,700 6,665,790 6,872,481 AgJunction Inc. 5,460,100 3,266,849 4,695,686 BSM Technologies Inc. 3,465,921 2,679,839 4,575,016 Cortex Business Solutions Inc. 557,200 2,194,484 2,256,660 Critical Control Energy Services Corp. 4,389,000 1,573,067 768,075 eGain Corporation 146,713 1,973,194 2,917,194 Espial Group Inc. 3,516,544 6,720,698 5,415,478 EXFO Inc. 523,100 2,845,606 2,364,412 Mattersight Corporation 1,313,747 4,843,982 4,627,595 Mediagrif Interactive Technologies Inc. 271,800 2,831,757 3,343,140 NexJ Systems Inc. 779,400 2,432,377 1,621,152 Photon Control Inc. 1,597,800 1,338,503 3,770,808 Pixelworks, Inc. 680,737 4,363,117 3,235,984 Points International Ltd. 172,880 2,187,112 3,751,496 ProntoForms Corporation 1,589,500 546,865 588,115


23

PENDER SMALL CAP OPPORTUNITIES FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018

Interest rate / Exercise

price

Maturity date /

Expiry dateIssue

currency

Number of shares / units /

Face value Cost Fair value


Information technology (40.9%) (continued)Quantum Corporation 556,049 3,834,186 1,610,852 Redline Communications Group Inc. 1,719,511 4,561,636 3,060,730 Sangoma Technologies Corporation 3,762,482 3,507,937 4,364,479 Sierra Wireless, Inc. 365,504 8,971,161 7,686,549 Siyata Mobile Inc. 4,228,000 2,383,643 1,500,940 Solium Capital Inc. 340,700 3,487,438 3,921,457 Symbility Solutions Inc. 3,317,000 1,335,172 1,658,500 Tantalus Systems Inc., Class 'D' 294,392 910,536 2,752,140 Upland Software, Inc. 67,786 1,893,147 3,067,887

77,348,096 80,426,826 Insurance (0.6%)

Trisura Group Ltd. 44,000 1,162,858 1,170,840 1,162,858 1,170,840

Telecommunication services (3.5%)TeraGo Inc. 947,600 4,755,902 6,794,292

4,755,902 6,794,292 Utilities (4.5%)

Maxim Power Corp. 1,634,499 4,569,095 4,167,971 Polaris Infrastructure Inc. 328,213 3,787,477 4,621,239

8,356,572 8,789,210

Total equities (89.9%) 164,318,518$ 175,986,010$

Corporate bonds:

Corporate bonds (2.1%)Good Natured Products Inc. 10.00% 2022/02/28 CAD 2,475,000 2,475,000$ 2,475,000$ GuestLogix Inc. 7.00% 2019/12/31 CAD 7,600 429 152 Siyata Mobile Inc. 10.50% 2020/06/28 CAD 1,660,000 1,660,000 1,660,000

Total corporate bonds (2.1%) 4,135,429$ 4,135,152$

Warrants:

Warrants (0.2%)Energy Fuels Inc. 2.45$ 2021/09/20 USD 200,000 -$ 250,000$ Energy Fuels Inc. 3.20 2019/03/14 USD 1,350 - - Good Natured Products Inc. 0.10 2022/02/28 CAD 3,712,500 - 129,938 Siyata Mobile Inc. 0.50 2018/12/10 CAD 1,285,714 - -Siyata Mobile Inc. 0.70 2019/12/28 CAD 1,660,000 - -Wellness Lifestyles Inc. 0.25 2019/06/13 CAD 50,000 - 6,500

Total warrants (0.2%) - 386,438



Cash (9.1%) 17,760,728$ Other assets less liabilities (-1.3%) (2,537,231)



24

PENDER STRATEGIC GROWTH AND INCOME FUNDStatements of Financial Position (Unaudited)


Notes 2018 2017

Assets

Cash 217,249$ 674,925$ Subscriptions receivable - 20,000Dividends receivable 22,109 30,623Other receivable 3,109 231Investments 15,238,682 20,588,569

15,481,149 21,314,348

Liabilities

Management and administration fees payable 4 23,885 28,955Redemptions payable 3,981 -Distributions payable to holders of redeemable units - 2,280

27,866 31,235


Net assets attributable to holders of redeemable units per class:Class A 9,709,266$ 9,827,861$ Class D 25,403 19,784 Class F 4,890,919 11,418,974 Class H 5,104 5,066 Class I 816,142 5,088 Class O 6,449 6,340

15,453,283$ 21,283,113$




Director Director

25


PENDER STRATEGIC GROWTH AND INCOME FUNDStatements of Comprehensive Income (Unaudited)


Notes 2018 2017

Revenue:Dividend income 101,358$ 123,832$ Distributions from underlying funds 81,528 94,052Foreign exchange gain (loss) 5,409 (5,551)Securities lending income 5 12,014 -Changes in fair value of investments: Net realized gain (loss) 238,024 318,462 Net change in unrealized appreciation (depreciation) (134,859) 119,653 Total revenue 303,474 650,448

Expenses: Management fees 4 112,930 120,411 Administration fees 4 33,575 39,111Withholding taxes (recovery) 6 6,230 6,064Transaction costs 4,592 4,483Independent review committee fees 269 765Other taxes (recovery) - 3,968Total expenses 157,596 174,802


Net expenses 157,327 174,037

Increase (decrease) in net assets attributable to holders of redeemable units 146,147$ 476,411$

Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 46,529$ 309,236$ Class D 320 1,591 Class F 96,652 165,312 Class H 38 - Class I 2,499 - Class O 109 272

146,147$ 476,411$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 0.06$ 0.41$ Class D 0.15 0.28 Class F 0.23 0.26 Class H 0.07 - Class I 0.03 - Class O 0.19 0.53


26

PENDER STRATEGIC GROWTH AND INCOME FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A 2018 2017



Unit transactions:Proceeds from issue of redeemable units 942,918 2,192,547 Issued on reinvestment of distributions 760 698 Amounts paid on redemption of redeemable units (1,108,802) (961,466)

(165,124) 1,231,779 Distributions paid from:

Net investment income - (698) Realized gains on sale of investments - - Return of capital - -

- (698)


Class D 2018 2017


Increase (decrease) in net assets attributable to holders of redeemable units 320 1,591

Unit transactions:Proceeds from issue of redeemable units 5,255 85,760 Issued on reinvestment of distributions 44 158 Amounts paid on redemption of redeemable units - (35,710)

5,299 50,208 Distributions paid from:


- (158)


Class F 2018 2017



Unit transactions:Proceeds from issue of redeemable units 617,109 9,312,758 Issued on reinvestment of distributions 1,476 10,739 Amounts paid on redemption of redeemable units (7,243,292) (261,362)

(6,624,707) 9,062,135 Distributions paid from:


- (22,150)



27

PENDER STRATEGIC GROWTH AND INCOME FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class H 2018 2017

Balance, beginning of period 5,066$ -$


Unit transactions:Proceeds from issue of redeemable units - 5,000 Issued on reinvestment of distributions - -Amounts paid on redemption of redeemable units - -

- 5,000 Distributions paid from:


- -


Class I 2018 2017

Balance, beginning of period 5,088$ -$

Increase (decrease) in net assets attributable to holders of redeemable units 2,499 -

Unit transactions:Proceeds from issue of redeemable units 810,055 5,000 Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units (1,500) -



- -


Class O 2018 2017


Increase (decrease) in net assets attributable to holders of redeemable units 109 272

Unit transactions:Proceeds from issue of redeemable units - 2 Issued on reinvestment of distributions - 24 Amounts paid on redemption of redeemable units - -

- 26 Distributions paid from:


- (25)



28

PENDER STRATEGIC GROWTH AND INCOME FUNDStatements of Cash Flows (Unaudited)


2018 2017


Operating:Increase (decrease) in net assets attributable to holders of redeemable units 146,147$ 476,411$ Adjustments for:

Dividend income (101,358) (123,832) Distributions received from underlying funds (81,528) (94,052) Foreign exchange (gain) loss (5,409) 5,551 Net realized (gain) loss on sale of investments (238,024) (318,462) Net change in unrealized (appreciation) depreciation of investments 134,859 (119,653) Other receivable (2,878) 89 Management and administration fees payable (5,070) 12,397

(153,261) (161,551)

Proceeds on disposal of investments 7,454,727 739,220 Amounts paid on purchase of investments (2,001,675) (8,432,363) Dividends received 109,872 118,612 Distributions received from underlying funds 81,528 103,684

5,491,191 (7,632,398)

Financing:Proceeds from issue of redeemable units 2,236,595 11,384,689 Amounts paid on redemption of redeemable units (8,190,871) (935,520) Distributions paid to unitholders - (8,799)

(5,954,276) 10,440,370

Net increase (decrease) in cash (463,085) 2,807,972

Cash, beginning of period 674,925 619,051


Cash, end of period 217,249$ 3,421,472$


29

PENDER STRATEGIC GROWTH AND INCOME FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018


Mutual Funds:Pender Corporate Bond Fund, Class 'O' 296,758 3,003,403$ 3,202,105$ Pender Small Cap Opportunities Fund, Class 'O' 33,973 768,336 921,184

Total Mutual Funds (26.7%) 3,771,739$ 4,123,289$

Equities:

Banks (2.4%)The Bank of Nova Scotia 5,040 324,609$ 375,178$

324,609 375,178 Consumer discretionary (14.7%)

Discovery, Inc., Series 'C' 12,600 395,527 422,654 Freshii Inc., Class 'A' 58,900 531,078 364,591 Hanesbrands Inc. 7,700 193,486 223,040 Liberty Global plc, Series 'C' 10,900 465,318 381,545 Newell Brands Inc. 7,300 249,240 247,656 Sleep Country Canada Holdings Inc. 10,000 363,250 325,700 Starbucks Corporation 4,700 319,749 302,021


Alimentation Couche-Tard Inc., Class 'B' 6,500 382,963 371,215 Saputo Inc. 7,800 329,057 340,470 Unilever PLC, ADR 3,500 200,544 254,513

912,564 966,198 Diversified financials (15.1%)

Berkshire Hathaway Inc., Class 'B' 1,750 321,683 429,675 Brookfield Asset Management Inc., Class 'A' 13,200 612,558 703,956 Oaktree Cap Group, LLC 7,930 419,483 424,041 Onex Corporation 4,400 354,170 424,556 Starwood Property Trust, Inc. 12,750 345,611 364,120

2,053,505 2,346,348 Energy (3.4%)

ARC Resources Ltd. 15,500 378,365 210,490 Peyto Exploration & Development Corp. 31,200 721,723 315,744

1,100,088 526,234 Health care (1.9%)

Roche Holding AG, ADR 8,000 296,749 290,767 296,749 290,767

Industrials (1.8%)Exchange Income Corporation 8,700 286,615 278,748

286,615 278,748 Information technology (8.7%)

Alphabet Inc., Class 'C' 350 301,780 513,653 Baidu, Inc., ADR 1,300 302,181 415,551 Visa Inc., Class 'A' 2,360 73,756 411,186

677,717$ 1,340,390$


30

PENDER STRATEGIC GROWTH AND INCOME FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018



Insurance (2.7%)Trisura Group Ltd. 15,664 399,314$ 416,819$

399,314 416,819 Materials (5.7%)

CCL Industries Inc., Class 'B' 7,400 455,120 476,930 Winpak Ltd. 9,100 449,097 400,400

904,217 877,330 Real estate (7.2%)

Brookfield Property Partners L.P. 8,800 216,110 219,736 Dream Unlimited Corp., Class 'A' 52,500 346,337 510,825 The Howard Hughes Corporation 2,200 333,531 383,454

895,978 1,114,015 Telecommunication services (2.0%)

TELUS Corporation 6,770 260,241 316,159 260,241 316,159

Total Equities (71.9%) 10,629,245$ 11,115,393$



Cash (1.4%) 217,249$ Other assets less liabilities (0.0%) (2,648)



31

PENDER US ALL CAP EQUITY FUNDStatements of Financial Position (Unaudited)


Notes 2018 2017

Assets

Cash 1,157,513$ 224,111$ Subscriptions receivable 131,624 2,875Dividends receivable 7,552 8,458Other receivable 194 251Investments 19,677,899 19,418,642

20,974,782 19,654,337

Liabilities

Management and administration fees payable 4 24,451 18,433Distributions payable to holders of redeemable units 915 6,888Redemptions payable 117,442 -

142,808 25,321


Net assets attributable to holders of redeemable units per class:Class A 8,184,521$ 8,215,230$ Class A (USD) 704,458 655,366 Class D 25,181 18,329Class F 5,288,947 4,764,685 Class F (USD) 710,339 638,737 Class H 501,451 352,594 Class I 234,723 283,185 Class O 5,182,354 4,700,890

20,831,974$ 19,629,016$

Net assets attributable to holders of redeemable units per unit:Class A 13.95$ 12.61$ Class A (USD) 13.63 12.32Class D 10.64 9.59Class F 13.80 12.42Class F (USD) 13.61 12.25Class H 11.03 9.95Class I 11.10 9.99Class O 11.61 10.39



Director Director

32


PENDER US ALL CAP EQUITY FUNDStatements of Comprehensive Income (Unaudited)


Notes 2018 2017

Revenue:Dividend income 42,506$ 75,511$ Interest for distribution purposes - 1,450Foreign exchange gain (loss) 20,375 (16,098)Securities lending income 5 1,281 -Changes in fair value of investments: Net realized gain (loss) 1,726,956 1,733,640 Net change in unrealized appreciation (depreciation) 481,146 366,137 Total revenue 2,272,264 2,160,640

Expenses: Management fees 4 112,323 106,107 Administration fees 4 31,826 38,230Withholding taxes (recovery) 6 1,125 (7,281)Transaction costs 4,704 2,136Other taxes (recovery) 17,829 2,655Independent review committee fees 363 667Total expenses 168,170 142,514


Net expenses 167,807 141,847


Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 825,912$ 885,775$ Class A (USD) 70,543 71,718Class D 1,724 2,098Class F 526,723 477,793 Class F (USD) 71,385 55,235Class H 41,134 22,767Class I 20,538 20,488Class O 546,498 482,919

2,104,457$ 2,018,793$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 1.32$ 1.29$Class A (USD) 1.34 1.28Class D 0.96 0.90Class F 1.37 1.32Class F (USD) 1.36 1.14Class H 1.09 1.04Class I 0.90 1.40Class O 1.21 1.15


33

PENDER US ALL CAP EQUITY FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A 2018 2017



Unit transactions:Proceeds from issue of redeemable units 130,353 237,206 Issued on reinvestment of distributions 2,160 1,782Amounts paid on redemption of redeemable units (989,134) (1,078,903)


Net investment income - (1,782)Realized gains on sale of investments - -Return of capital - -

- (1,782)


Class A (USD) 2018 2017



Unit transactions:Proceeds from issue of redeemable units 21,645 25,729Issued on reinvestment of distributions 99 129Amounts paid on redemption of redeemable units (43,195) (110,123)


Net investment income - (129)Realized gains on sale of investments - -Return of capital - -

- (129)


Class D 2018 2017



Unit transactions:Proceeds from issue of redeemable units 11,224 16,400Issued on reinvestment of distributions 152 126Amounts paid on redemption of redeemable units (6,248) (7,479)

5,128 9,047Distributions paid from:


- (126)



34

PENDER US ALL CAP EQUITY FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class F 2018 2017



Unit transactions:Proceeds from issue of redeemable units 258,786 140,286 Issued on reinvestment of distributions 3,268 3,434Amounts paid on redemption of redeemable units (262,733) (383,122)

(679) (239,402)Distributions paid from:

Net investment income (1,782) (3,434)Realized gains on sale of investments - -Return of capital - -

(1,782) (3,434)


Class F (USD) 2018 2017



Unit transactions:Proceeds from issue of redeemable units 12,355 109,440 Issued on reinvestment of distributions 1,303 567Amounts paid on redemption of redeemable units (13,441) (31,800)

217 78,207Distributions paid from:


- (567)


Class H 2018 2017



Unit transactions:Proceeds from issue of redeemable units 220,972 -Issued on reinvestment of distributions 773 670Amounts paid on redemption of redeemable units (114,022) -

107,723 670Distributions paid from:


- (671)



35

PENDER US ALL CAP EQUITY FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class I 2018 2017



Unit transactions:Proceeds from issue of redeemable units 1,000 -Issued on reinvestment of distributions - 718Amounts paid on redemption of redeemable units (70,000) (110,662)



- (718)


Class O 2018 2017



Unit transactions:Proceeds from issue of redeemable units - -Issued on reinvestment of distributions - -Amounts paid on redemption of redeemable units (65,034) (19,322)


Net investment income - -Realized gains on sale of investments - -Return of capital - -

- -



36

PENDER US ALL CAP EQUITY FUNDStatements of Cash Flows (Unaudited)


2018 2017



Dividend income (42,506) (75,511) Interest for distribution purposes - (1,450) Foreign exchange (gain) loss (20,375) 16,098 Net realized (gain) loss on sale of investments (1,726,956) (1,733,640) Net change in unrealized (appreciation) depreciation of investments (481,146) (366,137) Other receivable 57 - Management and administration fees payable 6,018 (23,035) Other payable - 1,107

(160,451) (163,775)

Proceeds on disposal of investments 6,124,113 3,744,462 Amounts paid on purchase of investments (4,175,268) (2,066,597) Dividends received 43,412 73,439 Interest received - 1,450

1,831,806 1,588,979

Financing:Proceeds from issue of redeemable units 202,666 479,827 Amounts paid on redemption of redeemable units (1,121,445) (1,651,352) Distributions paid to unitholders - -

(918,779) (1,171,525)

Net increase (decrease) in cash 913,027 417,454

Cash, beginning of period 224,111 65,064


Cash, end of period 1,157,513$ 466,420$


37

PENDER US ALL CAP EQUITY FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018

Cost Fair value

Equities:

Consumer discretionary (33.8%)Discovery, Inc., Series 'C' 27,600 560,034$ 926,764$ GCI Liberty, Inc. 7,300 407,167 433,338 Liberty Broadband Corporation 9,400 952,152 937,256 Liberty Global plc, Series 'C' 27,400 1,040,684 960,097 Liberty Latin America Ltd., Class 'A' 56,348 1,767,886 1,418,686 TripAdvisor, Inc. 32,300 1,462,685 2,369,493


Brookfield Asset Management Inc., Class 'A' 20,494 543,756 1,092,945 FRMO Corporation 53,048 299,793 530,887

843,549 1,623,832 Industrials (16.3%)

Colfax Corporation 37,560 1,881,689 1,515,919 Navios Maritime Holdings Inc. 323,600 1,069,744 363,009 The Middleby Corporation 11,000 1,564,133 1,512,503


Baidu, Inc., ADR 6,100 1,455,463 1,951,893 Syntel, Inc. 32,100 1,238,151 1,356,421

2,693,614 3,308,314 Materials (9.6%)

Platform Specialty Products Corporation 131,500 2,499,434 2,008,647 2,499,434 2,008,647

Real estate (11.0%)Kennedy-Wilson Holdings, Inc. 35,600 966,095 991,471 The Howard Hughes Corporation 7,500 1,110,671 1,308,570

2,076,766 2,300,041

Less: transaction costs included in cost of investments (9,713)


Cash (5.6%) 1,157,513 Other assets less liabilities (0.0%) (3,438)



Number ofshares / units

38

PENDER VALUE FUNDStatements of Financial Position (Unaudited)


Notes 2018 2017

Assets

Cash 35,801,909$ 73,427,452$ Subscriptions receivable 1,297,107 407,619 Dividends receivable 109,234 84,153 Interest receivable 214,313 102,481 Other receivable 9,042 5,626Investments 314,967,962 183,023,444

352,399,567 257,050,775

Liabilities

Management and administration fees payable 4 422,046 310,124 Distributions payable to holders of redeemable units 1,211 13,022 Redemptions payable to holders of redeemable units 629,374 268,687 Payable for investments purchased 3,060,404 -

4,113,035 591,833


Net assets attributable to holders of redeemable units per class:Class A 71,546,727$ 57,012,606$ Class D 3,968,310 3,167,875 Class F 171,263,389 122,313,181 Class H 14,117,241 12,187,255 Class I 72,094,245 48,805,007 Class O 15,296,620 12,973,018

348,286,532$ 256,458,942$




Director Director

39


PENDER VALUE FUNDStatements of Comprehensive Income (Unaudited)


Notes 2018 2017

Revenue:Dividend income 809,838$ 676,491$ Interest for distribution purposes 393,995 210,692 Foreign exchange gain (loss) 642,943 (35,184) Securities lending income 5 36,413 -Changes in fair value of investments: Net realized gain (loss) 28,300,549 4,729,907 Net change in unrealized appreciation (depreciation) 9,678,201 5,633,570 Total revenue 39,861,939 11,215,476

Expenses: Management fees 4 1,675,864 1,028,520 Administration fees 4 592,408 444,798 Withholding taxes (recovery) 6 12,708 24,296 Transaction costs 270,433 169,706 Other taxes (recovery) 40,756 -Independent review committee fees 6,062 7,415Total expenses 2,598,231 1,674,735

Less: Expenses absorbed by the Manager (6,062) (7,415)

Net expenses 2,592,169 1,667,320


Increase (decrease) in net assets attributable to holders of redeemable units per class:Class A 7,714,284$ 2,375,591$ Class D 442,213 28,214 Class F 18,055,591 4,199,205 Class H 1,625,255 496,785 Class I 7,520,040 1,666,212 Class O 1,912,387 782,149

37,269,770$ 9,548,156$

Increase (decrease) in net assets attributable to holders of redeemable units per unit:Class A 2.40$ 0.97$Class D 1.48 0.16Class F 2.49 0.96 Class H 1.80 0.76Class I 1.87 0.64Class O 2.23 1.17


40

PENDER VALUE FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited)


Class A 2018 2017






- (1,805)


Class D 2018 2017

Balance, beginning of period 3,167,875$ 546,349$


Unit transactions:Proceeds from issue of redeemable units 672,244 2,676,894 Issued on reinvestment of distributions 1,094 694 Amounts paid on redemption of redeemable units (315,116) (195,078)

358,222 2,482,510 Distributions paid from:


- (694)


Class F 2018 2017






(2,335) (6,321)



41

PENDER VALUE FUNDStatements of Changes in Net Assets Attributable to Holders of Redeemable Units (Unaudited) (Continued)


Class H 2018 2017



Unit transactions:Proceeds from issue of redeemable units 1,304,704 4,484,346 Issued on reinvestment of distributions - 945 Amounts paid on redemption of redeemable units (999,973) (2,882,653)

304,731 1,602,638 Distributions paid from:


- (945)


Class I 2018 2017






- (1,531)


Class O 2018 2017



Unit transactions:Proceeds from issue of redeemable units 533,618 71,066 Issued on reinvestment of distributions - - Amounts paid on redemption of redeemable units (122,403) (25,748)



- -



42

PENDER VALUE FUNDStatements of Cash Flows (Unaudited)


2018 2017



Dividend income (809,838) (676,491) Interest for distribution purposes (393,995) (210,692) Foreign exchange (gain) loss (642,943) 35,184 Net realized (gain) loss on sale of investments (28,300,549) (4,729,907) Net change in unrealized (appreciation) depreciation of investments (9,678,201) (5,633,570) Management and administration fees payable 111,922 118,331 Other receivable (3,416) 11,262

(2,447,250) (1,537,727)

Proceeds on disposal of investments 96,104,561 17,416,493 Amounts paid on purchase of investments (187,009,925) (44,765,107) Dividends received 784,757 563,764 Interest received 282,163 185,308

(92,285,694) (28,137,269)

Financing:Proceeds from issue of redeemable units 73,622,472 84,064,544 Amounts paid on redemption of redeemable units (19,605,264) (10,709,623) Distributions paid to unitholders - -

54,017,208 73,354,921

Net increase (decrease) in cash (38,268,486) 45,217,652





43

PENDER VALUE FUNDSchedule of Investment Portfolio (Unaudited)

June 30, 2018


Equities:

Consumer discretionary (21.7%)Chipotle Mexican Grill, Inc., Class 'A' 11,300 4,075,173$ 6,412,136$ Discovery, Inc., Series 'C' 170,400 4,338,426 5,715,893 Freshii Inc., Class 'A' 893,424 5,943,191 5,530,295 Liberty Broadband Corporation 131,600 11,722,739 13,108,132 Liberty Latin America Ltd., Class 'A' 378,100 10,854,358 9,509,746 Naspers Limited 113,100 7,121,330 7,456,723 Sleep Country Canada Holdings Inc. 276,700 9,484,353 9,012,119 Transat A.T. Inc. 140,300 1,205,122 1,147,654 TripAdvisor, Inc. 140,507 6,631,746 10,296,876 Uni-Select Inc. 345,300 8,521,687 7,220,223


Currency Exchange International, Corp. 157,400 3,848,019 4,753,480 Exor N.V 60,500 5,588,190 5,361,435

9,436,209 10,114,915 Energy (4.3%)

Athabasca Oil Corporation 4,367,100 4,657,321 7,860,780 Energy XXI Gulf Coast, Inc. 622,699 5,596,638 7,241,104

10,253,959 15,101,884 Health care (4.0%)

Knight Therapeutics Inc. 1,072,000 8,406,418 8,629,600 Medicure Inc. 775,800 4,978,647 5,453,874

13,385,065 14,083,474 Industrials (8.0%)

Colfax Corporation 346,800 15,120,591 13,982,471 Navios Maritime Holdings Inc. 2,669,401 5,911,961 2,991,416 The Middleby Corporation 78,800 11,955,306 10,823,912


Absolute Software Corporation 1,381,800 9,446,644 9,575,874 Asure Software, Inc. 275,341 4,592,669 5,777,047 Baidu, Inc., ADR 41,634 11,379,400 13,308,488 BSM Technologies Inc. 4,646,180 4,716,374 6,132,958 Espial Group Inc. 1,997,829 4,466,177 3,076,657 Leaf Group Ltd. 425,000 4,015,772 6,065,869 Mattersight Corporation 1,562,079 5,622,686 5,496,689 Model N Inc. 139,843 2,321,830 3,421,590 ProntoForms Corporation 10,945,400 3,921,347 4,049,798 Redline Communications Group Inc. 1,111,785 2,683,870 1,928,947 Sangoma Technologies Corporation 2,197,600 2,197,600 2,659,096 SeaChange International, Inc. 1,437,584 5,246,070 6,467,459Sierra Wireless, Inc. 322,920 7,372,368 6,791,008 Syntel, Inc. 203,464 6,691,620 8,588,783 Upland Software, Inc. 95,677 2,686,837 4,325,750

77,361,264$ 87,666,013$


44

PENDER VALUE FUNDSchedule of Investment Portfolio (Unaudited) (Continued)

June 30, 2018

Interest rate / Exercise

price

Maturity date /

Expiry Date Issue

currency Number of

shares / units Cost Fair value

Equities:

Materials (12.9%)CCL Industries Inc., Class 'B' 274,100 17,095,224$ 17,665,745$ Platform Specialty Products Corporation 911,800 13,764,010 13,913,356 POSCO, ADR 53,600 3,850,222 5,226,062 Winpak Ltd. 187,250 8,788,927 8,239,000

43,498,383 45,044,163 Real estate (8.9%)

Brookfield Property Partners L.P. 351,000 8,812,269 8,764,470 Kennedy-Wilson Holdings, Inc. 336,656 9,291,571 9,366,365 The Howard Hughes Corporation 73,682 10,730,449 12,842,561

28,834,289 30,973,396 Utilities (0.2%)

Maxim Power Corp. 240,300 678,294 612,765 678,294 612,765

Total equities (88.1%) 286,333,446$ 306,804,206$

Corporate bonds (0.9%)Global Brokerage Inc. 7.00% 2023/02/08 USD 4,397,578 2,524,061$ 2,979,169$

2,524,061$ 2,979,169$ Warrants (1.4%)

American International Group, Inc. 45.00$ 2021/01/19 USD 271,814 7,009,867$ 5,184,587$ Energy Fuels Inc. 3.20 2019/03/14 USD 15,950 - -ProntoForms Corporation 0.48 2019/06/21 CAD 3,284,000 - -

7,009,867$ 5,184,587$



Cash (10.3%) 35,801,909$ Other assets less liabilities (-0.7%) (2,483,339)



45

PENDER MUTUAL FUNDS Notes to Financial Statements (Unaudited)


1. The Funds:

The Pender Mutual Funds (individually a “Fund” and collectively the “Funds”) include the following:

Fund Inception Date Classes

Canadian Opportunities Fund November 24, 2010 A, D, F, H, I, O Corporate Bond Fund June 1, 2009 A, A(USD), D, F, F(USD), H, I, O North American Small Cap Fund June 25, 2018 A, D, F, H, I, O Small Cap Opportunities Fund June 1, 2009 A, B, F, G, I, N, O Strategic Growth and Income Fund November 24, 2010 A, D, F, H, I, O US All Cap Equity Fund June 28, 2013 A, A(USD), D, F, F(USD), H, I, O Value Fund June 28, 2013 A, D, F, H, I, O

Each of the Funds is an open-end investment trust governed under the laws of the Province of British Columbia pursuant to the Tenth Amended and Restated Mutual Fund Trust Agreement dated May 22, 2018.

The Pender North American Small Cap Fund was created during the six month period ending June 30, 2018. The inception date of the fund was June 25, 2018 and its first interim period ended on June 30, 2018. As this interim period comprises less than three months, no interim financial report is presented in these financial statements.

The Pender Small Cap Opportunities Fund acquired all of the assets of the Pender Small Cap Equity Fund on April 28, 2017 (see Note 4).

The Funds invest primarily in a diversified portfolio of equity securities issued by companies listed on major North American stock exchanges, investment funds, fixed and variable income securities, and derivatives, with the objective of providing unitholders with above-average returns over the long-term.

The Funds’ registered office is located at 1640 - 1066 West Hastings Street, Vancouver, BC, V6E 3X1. The Manager of the Funds is PenderFund Capital Management Ltd. (the “Manager”).

2. Basis of preparation:

(a) Statement of compliance:

The annual financial statements of the Funds are prepared under International Financial ReportingStandards (“IFRS”) as issued by the International Accounting Standards Board. These interim financialstatements (“financial statements”) of the Funds have been prepared in accordance with IAS 34 InterimFinancial Reporting and do not include all of the information required for full annual financial statements.These financial statements should be read in conjunction with the audited annual financial statements.

These financial statements were authorized for issue by the Manager on August 27, 2018.

(b) Basis of measurement:

The financial statements have been prepared on a historical cost basis except for investments,investments sold short and derivatives, which are measured at fair value.

46



2. Basis of preparation (continued):

(c) Functional and presentation currency:

These financial statements are presented in Canadian dollars, the Funds’ functional currency.

(d) Use of estimates and judgment:

The preparation of financial statements in conformity with IFRS requires the Manager to makejudgments, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates arerecognized in the period in which the estimates are revised and in any future period affected.

The Funds may hold financial instruments that are not quoted in an active market, including derivatives.The determination of the fair value of these investments is the area with the Manager’s most significantaccounting judgements and estimates in preparing these financial statements.

(e) Comparative information:

Certain comparative figures have been reclassified to conform with the financial statement presentationadopted for the current period.

3. Significant accounting policies:

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

(a) Financial instruments:

(i) Recognition and measurement:

Financial instruments are required to be classified into one of the following categories: amortizedcost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss(“FVTPL”). All financial instruments are measured at fair value on initial recognition. Measurementin subsequent periods depends on the classification of the financial instrument. Transaction costsare included in the initial carrying amount of financial instruments except for financial instrumentsclassified as FVTPL in which case transaction costs are expensed as incurred.

Financial assets and financial liabilities are recognized initially on the trade date, which is the dateon which the particular Fund becomes a party to the contractual provisions of the instrument. TheFunds derecognize a financial liability when its contractual obligations are discharged, cancelled orexpire.

Financial assets and liabilities are offset and the net amount presented in the Statements ofFinancial Position only when the Funds have a legal right to offset the amounts and intend either tosettle on a net basis or to realize the asset and settle the liability simultaneously.

47



3. Significant accounting policies (continued):

(a) Financial instruments (continued):

(i) Recognition and measurement (continued):

A financial asset is measured at amortized cost if it meets both of the following conditions:

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

its contractual terms give rise on specified dates to cash flows that are solely payments of principal interest on the principal amount outstanding.

A financial asset is measured at FVOCI if it meets both of the following conditions:

it is held within a business model whose objective is both to hold assets to collect contractual cash flows and to potentially sell financial assets; and

its contractual terms give rise on specified dates to cash flows that are solely payments of principal interest on the principal amount outstanding

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition the Funds may irrevocably elect to measure financial assets that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL when doing so results in more relevant information.

Financial assets are not reclassified subsequent to their initial recognition, unless the Funds changes their business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

The Funds have not classified any of their financial assets as FVOCI.

A financial liability is generally measured at amortized cost, with exceptions that may allow for classification as FVTPL. These exceptions include financial liabilities that are mandatorily measured at fair value through profit or loss, such as derivatives liabilities. The Funds may also, at initial recognition, irrevocably designate a financial liability as measured at FVTPL when doing so results in more relevant information.

(ii) Fair value through profit and loss:

Financial instruments classified as FVTPL are subsequently measured at fair value at eachreporting period with changes in fair value recognized in the Statements of Comprehensive Incomein the period in which they occur. The Funds’ derivative assets and derivative liabilities,investments in securities, and investments sold short are classified as FVTPL.

48




(a) Financial instruments (continued):

(ii) Fair value through profit and loss (continued):

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair value offinancial assets and liabilities traded in active markets (such as publicly traded derivatives andmarketable securities) is based on quoted market prices at the close of trading on the reportingdate. The Funds use the last traded market price for both financial assets and financial liabilities. Incircumstances where there is no closing price, the average of the closing bid and the closing askprice on the valuation date is used. The Funds’ policy is to recognize transfers into and out of thefair value hierarchy levels described in Note 10(a) as of the date of the event or change incircumstances giving rise to the transfer.

The fair value of financial assets and liabilities that are not traded in an active market, includingnon-publicly traded derivative instruments, is determined using valuation techniques. Valuationtechniques also include the use of comparable recent arm’s length transactions, reference to otherinstruments that are substantially the same, discounted cash flow analysis, and other methodscommonly used by market participants and which make the maximum use of observable inputs.Where the value of a financial asset or liability is not readily available or where the Manager is ofthe opinion that the value available is inaccurate or unreliable, the fair value is estimated on thebasis of the most recently reported information of a similar financial asset or liability.

(iii) Amortized Cost:

Financial assets and liabilities classified as amortized cost are recognized initially at fair value plusany directly attributable transaction costs. Subsequent measurement is at amortized cost using theeffective interest method, less any impairment losses. The Funds classify cash and cashequivalents, dividends receivable, interest receivable, subscriptions receivable, balances due frombrokers, daily variation margins, other receivables, bank indebtedness, management andadministration fees payable, performance fees payable, redemptions payable to holders ofredeemable units, distributions payable to holders of redeemable units, balances due to brokersand other accrued liabilities as amortized cost.

The effective interest method is a method of calculating the amortized cost of a financial asset orliability and of allocating interest income or expense over the relevant period. The effective interestrate is the rate that discounts estimated future cash payments through the expected life of thefinancial asset or liability, or where appropriate, a shorter period.

49




(b) Redeemable units:

The Funds classify financial instruments issued as financial liabilities or equity instruments inaccordance with the substance of the contractual terms of the instruments. The Funds have designatedredeemable units as financial liabilities at FVTPL because they are managed, and their performance isevaluated on a fair value basis. The redeemable units provide investors with the right to requireredemption, subject to available liquidity, for cash at a unit price based on the Funds’ valuation policiesat each redemption date. Distributions to holders of redeemable units are recognized in comprehensiveincome when they are authorized and no longer at the discretion of the Manager.

(c) Per unit amounts:

Net assets attributable to holders of redeemable units is calculated based on the number of unitsoutstanding at the end of the period. The increase (decrease) in net assets attributable to holders ofredeemable units per unit is calculated by dividing the increase (decrease) in net assets attributable toholders of redeemable units by the weighted average number of units outstanding during the period.

(d) Securities lending transactions:

The Funds are permitted to enter into securities lending transactions as set out in the Funds’ SimplifiedProspectus. These transactions involve the temporary exchange of securities for collateral with acommitment to redeliver the same securities on a future date.

Securities lending transactions are administered by Canadian Imperial Bank of Commerce and TheBank of New York Mellon (collectively the “Securities Lending Agent”). The value of cash or securitiesheld as collateral must be at least 102% of the fair value of the securities loaned, sold or purchased.Income is earned from these transactions in the form of fees paid by the counterparty and, in certaincircumstances, interest paid on cash or securities held as collateral. Income earned from thesetransactions is included in the Statements of Comprehensive Income as Securities lending income andrecognized when earned.

Note 5 summarizes the details of securities loaned and collateral received, and presents a reconciliationof the gross amount generated from securities lending to the securities lending income earned by theFunds.

(e) Foreign exchange:

The financial statements of the Funds are denominated in Canadian dollars. Foreign denominatedinvestments and other foreign denominated assets and liabilities are translated into Canadian dollarsusing the exchange rates prevailing on each valuation date. Purchases and sales of investments, aswell as income and expense transactions denominated in foreign currencies, are translated usingexchange rates prevailing on the date of the transaction. Foreign currency gains and losses arerecognized in the Statements of Comprehensive Income.

50




(f) Income recognition:

The interest for distribution purposes shown on the Statements of Comprehensive Income is recognizedon an accrual basis. Dividend income is recognized on the date that the right to receive payment isestablished, which for quoted equity securities is usually the ex-dividend date. Portfolio transactions arerecorded on the trade date. Realized gains and losses arising from the sale of investments aredetermined on the average cost basis of the respective investments.

(g) Income taxes:

The Funds qualify as unit trusts under the Income Tax Act (Canada). All of the Funds’ net income fortax purposes and net capital gains realized in any period is required to be distributed to unitholders suchthat no income tax is payable by the Funds. As a result, the Funds do not record income taxes.

(h) New standards and interpretations not yet adopted:

The Funds have determined there are no IFRS standards that are issued but not yet effective that couldmaterially impact the Funds’ financial statements.

4. Related party transactions:

(a) Management fees:

Each Fund pays a management fee to the Manager for the management of the Funds. Themanagement fee is calculated as an annualized percentage of the net asset value (“NAV”) of eachclass. The annual management fee percentages of each class as at June 30, 2018 and December 31,2017 are as follows:

Class A/ Class F/ 2018 Class A

(USD) Class B Class D Class F

(USD) Class G Class H Class I Class N

Canadian Opportunities Fund 1.85% - 1.10% 0.85% - 1.55% 0.70% Corporate Bond Fund 1.45% - 0.90% 0.65% - 1.15% 0.50% Small Cap Opportunities Fund 2.00% 2.00% - 1.00% 1.00% 0.85% 0.50% Strategic Growth and Income Fund 1.75% - 1.00% 0.75% - 1.45% 0.60% US All Cap Equity Fund 1.85% - 1.10% 0.85% - 1.55% 0.70% Value Fund 1.90% - 1.15% 0.90% - 1.60% 0.75%


(USD) Class D Class F

(USD) Class H Class I Class N

Canadian Opportunities Fund 1.85% 1.10% 0.85% 1.55% 0.70% Corporate Bond Fund 1.45% 0.90% 0.65% 1.15% 0.50% Small Cap Opportunities Fund 2.00% - 1.00% 0.85% 0.50% Strategic Growth and Income Fund 1.75% 1.00% 0.75% 1.45% 0.60% US All Cap Equity Fund 1.85% 1.10% 0.85% 1.55% 0.70% Value Fund 1.90% 1.15% 0.90% 1.60% 0.75%

51



4. Related party transactions (continued):

(b) Administration fees and other expenses:

Each Fund also pays the Manager an administration fee equal to 0.50% of NAV. In exchange for thefee, the Manager pays for the operating costs of each Fund (including GST/HST, registrar and transferagency fees, custody fees, unitholder servicing costs, costs of prospectus and reports, regulatory fees,audit and legal fees, and other administrative and operating expenses) other than Independent ReviewCommittee fees and portfolio-related expenses such as interest, withholding taxes, and transactioncosts. The management and administration fees for Class O units are negotiable and paid directly bythe investors and not by the Funds.

The Manager, at its discretion, may reduce or waive management or administration fees and reimbursethe Funds for any expenses. The Manager has agreed to cap the management fees, administration feesand other expenses charged to each Fund class so that the management expense ratio (“MER”) as atJune 30, 2018 and December 31, 2017, being expressed as a percentage of average NAV, does notexceed the following rates:


(USD) Class B Class D Class F

(USD) Class G Class H Class I Class N

Canadian Opportunities Fund 2.35% - 1.60% 1.35% - 2.05% 1.20% Corporate Bond Fund 1.95% - 1.40% 1.15% - 1.65% 1.00% Small Cap Opportunities Fund 2.50% 2.50% - 1.50% 1.50% 1.35% 1.00% Strategic Growth and Income Fund 2.25% - 1.50% 1.25% - 1.95% 1.10% US All Cap Equity Fund 2.35% - 1.60% 1.35% - 2.05% 1.20% Value Fund 2.40% - 1.65% 1.40% - 2.10% 1.25%


(USD) Class D Class F

(USD) Class H Class I Class N

Canadian Opportunities Fund 2.35% 1.60% 1.35% 2.05% 1.20% Corporate Bond Fund 1.95% 1.40% 1.15% 1.65% 1.00% Small Cap Opportunities Fund 2.50% - 1.50% 1.35% 1.00% Strategic Growth and Income Fund 2.25% 1.50% 1.25% 1.95% 1.10% US All Cap Equity Fund 2.35% 1.60% 1.35% 2.05% 1.20% Value Fund 2.40% 1.65% 1.40% 2.10% 1.25%

(c) Performance fees:

The Manager is also entitled to a performance fee in respect of Class B and Class G units of the PenderSmall Cap Opportunities Fund, in certain circumstances. The performance fee is equal to 20% of theamount by which the total return of the class of units exceeds the total percentage increase or decreasein the Fund’s benchmark for the period since the performance fee was last paid, subject to a relativehigh water mark. The high water mark for a class of units is the highest year-end net asset value onwhich a performance fee has previously been paid for that class. The performance fee will be calculatedmonthly and paid annually. There was no performance fee payable to the Manager as at June 30, 2018or December 31, 2017.

52

PENDER MUTUAL FUNDS Notes to Financial Statements (Unaudited) Six months ended June 30, 2018


(d) Amounts payable to the Manager:

As at June 30, 2018 and December 31, 2017, the Funds had the following amounts payable to the Manager relating to management fees, administration fees and other expenses incurred by the Manager on behalf of the Funds:

2018 2017 Canadian Opportunities Fund $ 8,382 $ 7,470 Corporate Bond Fund 340,380 192,984 Small Cap Opportunities Fund 221,105 207,438 Strategic Growth and Income Fund 23,885 28,955 US All Cap Equity Fund 24,451 18,433 Value Fund 422,046 310,124

From time to time the Manager may reduce the effective management fee payable by some unitholders by reducing the management fee it charges to the Funds, and directing the Funds to make distributions to these unitholders in amounts equal to the management fee reduction.

(e) Related party holdings:

As at June 30, 2018 and December 31, 2017, parties related to the Manager directly or indirectly held the following percentages of each Fund’s outstanding units. Subscriptions and redemptions of related parties are subject to the same terms and conditions as those of arm’s length investors in the Funds.

2018 2017

Canadian Opportunities Fund 9% 8% Corporate Bond Fund 1% 1% Small Cap Opportunities Fund 1% 1% Strategic Growth and Income Fund 3% 2% US All Cap Equity Fund 10% 10% Value Fund 0% 1%

As at June 30, 2018 and December 31, 2017, the aggregate investment in all investee companies owned by the Manager’s directors and officers did not exceed 1% of the respective investee companies’ issued and outstanding shares.

53




(f) Fund merger:

On April 28, 2017, the Pender Small Cap Equity Fund was merged into the Pender Small CapOpportunities Fund. The two funds were both managed by the Manager, had the same investmentobjectives, and had substantially similar investment strategies. The merger resulted in an increase of$33,378,399 in net assets attributable to unitholders of the continuing fund, Pender Small CapOpportunities Fund:

Cash $ 10,219,104 Investments 23,417,208 Other net liabilities (257,913)

$ 33,378,399

Units Issued Amount

Class I 316,169 $ 4,153,573 Class N 2,384,583 28,962,666 Class O 9,592 262,160

2,710,344 $ 33,378,399

5. Securities lending transactions:

The value of securities loaned and collateral received from securities lending as at June 30, 2018 andDecember 31, 2017 was as follows:

2018 Securities loaned Collateral received

Canadian Opportunities Fund $ 1,099,758 $ 1,156,273 Corporate Bond Fund 32,532,028 34,339,414 Small Cap Opportunities Fund 23,922,223 25,199,416 Strategic Growth and Income Fund 1,821,923 1,920,316 US All Cap Equity Fund 6,134,671 6,452,672 Value Fund 60,408,978 63,786,984

2017 Securities loaned Collateral received

Canadian Opportunities Fund $ 857,442 $ 900,722 Corporate Bond Fund 1,911,622 2,007,976 Small Cap Opportunities Fund 13,365,793 14,041,676 Strategic Growth and Income Fund 1,200,602 1,262,658 US All Cap Equity Fund 2,863,927 3,009,676 Value Fund 28,071,948 29,913,500

54



5. Securities lending transactions (continued):

Collateral received on securities lending may be comprised of debt obligations of the Government of Canadaand other countries, Canadian provincial or territorial governments, governments of states of the UnitedStates of America, and evidence of indebtedness of financial institutions whose short-term debt is rated A-1or R-1 or equivalent by a recognized, widely followed North American credit rating agency.

A reconciliation of the gross amount generated from securities lending transactions to the securities lendingincome earned by the Funds for the period ended June 30, 2018 is included in the following table. Nosecurities lending income was earned by the Funds for the period ended June 30, 2017.

Gross income Withholding

taxes Agent fees Securities

lending income

Canadian Opportunities Fund $ 29,491 $ - $ (11,795) $ 17,696 Corporate Bond Fund 23,711 (5,281) (7,370) 11,060 Small Cap Opportunities Fund 240,099 (17) (96,028) 144,054 Strategic Growth and Income Fund 20,022 - (8,008) 12,014 US All Cap Equity Fund 2,134 - (853) 1,281 Value Fund 62,498 (1,816) (24,269) 36,413

All agent fees were paid to the Securities Lending Agent (see Note 3(d)) and represented 40% of the securities lending revenues of the Funds.

6. Withholding tax expense:

Certain dividend and interest income received by the Funds is subject to withholding tax imposed in thecountry of origin. During the period, withholding tax rates were between 0% and 35% (2017 - between 0%and 35%).

7. Redeemable units:

The Funds are authorized to issue an unlimited number of redeemable units in an unlimited number ofclasses. The redeemable unit transactions for the Funds during the periods ended June 30, 2018 and 2017were as follows:

2018

Outstanding units, beginning

of period Units issued

Units issued on reinvestment of

distributions Units

redeemed

Outstanding units, end of

period

Canadian Opportunities Fund: Class A 111,541 4,078 34 (14,371) 101,282 Class D 7,325 1,863 7 (2,772) 6,423 Class F 531,065 140,921 2 (175,897) 496,091 Class H 527 - 4 - 531Class I 19,927 5,595 64 (5,459) 20,127Class O 25,406 - - (1,225) 24,181

55


7. Redeemable units (continued):

2018

Outstanding units, beginning

of period Units issued

Units issued on reinvestment of

distributions Units

redeemed

Outstanding units, end of

period

Corporate Bond Fund: Class A 3,206,403 1,640,177 42,169 (593,135) 4,295,614 Class A (USD) 101,249 126,070 1,561 (21,117) 207,763 Class D 16,702 149,639 1,579 (2,342) 165,578 Class F 5,733,494 8,290,963 104,473 (1,640,384) 12,488,546 Class F (USD) 1,006,425 817,994 9,860 (289,147) 1,545,132 Class H 1,823,363 1,071,236 27,151 (265,632) 2,656,118 Class I 4,127,027 4,867,041 68,313 (740,987) 8,321,394 Class O 1,191,011 - 26,785 (169,211) 1,048,585

Small Cap Opportunities Fund:

Class A 1,615,045 353 159 (116,396) 1,499,161 Class B - 500 - - 500 Class F 3,665,716 54,628 2,500 (239,188) 3,483,656 Class G - 500 - - 500 Class I 427,391 412,566 309 (2,006) 838,260 Class N 3,174,979 491,268 25 (232,252) 3,434,020 Class O 265,855 - - (32,504) 233,351

Strategic Growth and Income Fund:

Class A 762,169 73,337 58 (87,095) 748,469 Class D 1,776 479 4 - 2,259 Class F 876,675 47,908 112 (553,295) 371,400 Class H 524 - - - 524 Class I 526 82,987 - (158) 83,355 Class O 546 - - - 546

US All Cap Equity Fund:

Class A 651,735 9,944 164 (75,134) 586,709 Class A (USD) 53,195 1,718 8 (3,246) 51,675 Class D 1,911 1,055 15 (615) 2,366 Class F 383,551 19,565 257 (19,985) 383,388 Class F (USD) 52,147 1,022 100 (1,071) 52,198 Class H 35,431 21,353 75 (11,386) 45,473 Class I 28,360 97 - (7,310) 21,147 Class O 452,379 - - (5,979) 446,400

Value Fund:

Class A 3,084,249 684,548 125 (347,694) 3,421,228 Class D 287,545 57,092 94 (27,516) 317,215 Class F 6,603,036 2,414,802 358 (886,028) 8,132,168 Class H 910,031 89,979 - (69,583) 930,427 Class I 3,592,102 1,320,121 256 (248,734) 4,663,745 Class O 843,553 32,647 - (7,387) 868,813

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7. Redeemable units (continued):

Outstanding Units issued on Outstanding units, Units reinvestment of Units units, end 2017 beginning of period issued distributions redeemed of period Canadian Opportunities Fund:

Class A 112,086 18,919 24 (17,580) 113,449 Class D 3,490 6,264 7 (4,337) 5,424 Class F 269,143 302,198 2 (44,696) 526,647 Class H 500 - 2 - 502 Class I 500 18,163 2 (9,356) 9,309 Class O 49,509 - - (97) 49,412

Corporate Bond Fund: Class A 3,362,129 484,533 35,092 (751,558) 3,130,196 Class A (USD) 112,029 27,301 1,028 (42,065) 98,293 Class D 4,562 10,688 188 (1,550) 13,888 Class F 3,044,053 2,359,917 43,074 (962,178) 4,484,866 Class F (USD) 78,583 552,138 6,238 (3,510) 633,449 Class H 1,198,204 401,869 18,078 (112,536) 1,505,615 Class I 1,639,624 1,148,637 27,149 (165,106) 2,650,304 Class O 783,439 200,302 22,873 (4,749) 1,001,865

Small Cap Opportunities Fund: Class A 1,824,936 - 192 (163,396) 1,661,732 Class F 3,237,397 109,464 2,145 (128,479) 3,220,527 Class I - 443,371 124 (26,259) 417,236 Class N - 2,507,812 151 (46,680) 2,461,283 Class O 220,062 31,080 - (1,019) 250,123

Strategic Growth and Income Fund: Class A 671,653 166,805 54 (72,616) 765,896 Class D 1,193 7,872 15 (3,234) 5,846 Class F 249,399 703,559 829 (19,680) 934,107 Class H - 500 - - 500 Class I - 500 - - 500 Class O 515 - 2 - 517

US All Cap Equity Fund: Class A 720,635 18,077 150 (82,738) 656,124 Class A (USD) 58,619 1,942 11 (8,470) 52,102 Class D 1,735 1,631 14 (715) 2,665 Class F 376,605 10,502 271 (29,755) 357,623 Class F (USD) 48,204 8,084 48 (2,622) 53,714 Class H 21,747 - 69 - 21,816 Class I 23,647 - 74 (10,768) 12,953 Class O 419,774 - - (1,765) 418,009

Value Fund: Class A 2,119,812 976,074 100 (338,442) 2,757,544 Class D 51,572 234,880 65 (17,003) 269,514 Class F 3,256,192 2,685,663 342 (715,529) 5,226,668 Class H 686,980 323,145 72 (214,589) 795,608 Class I 1,659,398 1,594,402 116 (167,361) 3,086,555 Class O 670,026 4,401 - (1,622) 672,805

57



8. Capital management:

The capital of each Fund is represented by its redeemable units issued. The Funds are not subject to anyinternally or externally imposed restrictions on their capital. The Funds’ objective in managing capital is toensure a stable base to maximize returns to all unitholders, and to manage liquidity risk arising fromunitholder redemptions.

9. Financial risk management:

The Funds are exposed to various financial risks associated with their respective investment objectives andstrategies, financial instruments and the markets in which they invest. These include credit risk, liquidity risk,and market risk, which consists of currency risk, interest rate risk and other price risk.

The Manager manages the potential impact of these financial risks on the Funds’ performance by employingand overseeing professional and experienced portfolio advisors who regularly monitor the Funds’ positionsand market events and diversify investment portfolios within the constraints of the investment guidelines

Each Fund maintains positions in a variety of financial instruments in accordance with its investmentobjectives and strategies.

Pender Canadian Opportunities Fund:

The objective of the Pender Canadian Opportunities Fund is to achieve long-term growth of its investmentportfolio value by investing primarily in Canadian common shares, preferred shares, income trust units andexchange traded funds which track sector or broad market indices. The Fund may also invest a portion of itsinvestment portfolio in securities outside of Canada. The Fund designed to provide reasonable growth overthe long-term, while being sufficiently diversified to mitigate volatility.

Pender Corporate Bond Fund:

The Pender Corporate Bond Fund’s objective is to preserve capital and generate returns through currentincome and capital appreciation by investing primarily in investment and non-investment grade fixed incomesecurities of North American corporations. The balance of the Fund’s assets are invested primarily ingovernment securities, and cash or cash equivalents. The Fund employs a value-based fundamentalresearch process to identify and exploit private and public securities that, in the view of the portfolio advisor,are priced inefficiently.

Pender Small Cap Opportunities Fund:

The objective of the Pender Small Cap Opportunities Fund is to achieve significant capital appreciation byinvesting primarily in a concentrated portfolio of well-managed businesses, with strong competitive positions,that are overlooked by the market. These businesses may be in Canada, the US and in other foreignjurisdictions with an emphasis on companies with a small market capitalization. The Fund may also invest inother securities regardless of market capitalization, sector or region, including other foreign equities whereopportunities warrant.

58


9. Financial risk management (continued):

Pender Strategic Growth and Income Fund:

The objective of the Pender Strategic Growth and Income Fund is to generate long-term growth in value and income by investing primarily in a diversified portfolio of Canadian and foreign equities, corporate bonds, Canadian and foreign government bonds, and exchange traded funds which track sector or broad market indices. The Fund is designed to provide both moderate income and portfolio growth over the long-term, while being sufficiently diversified to mitigate volatility.

Pender US All Cap Equity Fund:

The primary objective of the Pender US All Cap Equity Fund is to achieve capital growth over the long-term. The Fund invests primarily in US securities but may also invest in Canadian and foreign securities.

Pender Value Fund:

The objective of the Pender Value Fund is to achieve capital growth over the long-term, while being sufficiently diversified to mitigate volatility. The Fund invests primarily in Canadian and US securities but may also invest in foreign securities. The Fund focuses on businesses that have the potential for growth over the long term and that have securities that trade at favourable prices.

A Fund’s exposure to financial risks is concentrated in its investment holdings. The Schedule of Investment Portfolio for each Fund groups securities by asset type, geographic region and/or market segment. The Pender Strategic Growth and Income Fund carries out part of its investment strategy by investing in Class O units of the Pender Corporate Bond Fund and the Pender Small Cap Opportunities Fund. The financial risks associated with the Pender Strategic Growth and Income Fund’s investment strategy are disclosed in a manner consistent with directly holding the individual securities within the investment portfolio of the underlying fund. The Manager’s risk management practices include the monitoring of compliance to investment objectives and strategies. The Manager manages the potential effects of these financial risks on each Fund’s performance by regularly monitoring each Fund’s positions and market events and by diversifying investment portfolios within the constraints of each Fund’s investment objective.

(a) Credit risk:

Credit risk is the risk that a loss could arise due to a security issuer or counterparty to a financial instrument not being able to meet its financial obligations. The determination of fair value of debt securities includes a consideration of the creditworthiness of the debt issuer. The credit exposure of other assets is represented by their carrying amounts.

Credit risk is managed by the portfolio advisor of each Fund through a careful selection of securities and diversification within each respective Fund. Each Fund’s portfolio advisor monitors their Fund’s overall market positions and positions are maintained within established ranges.

59




(a) Credit risk (continued):

The Pender US All Cap Equity Fund is not exposed to any significant credit risk. The following tablesummarizes the maximum exposure to credit risk for the remaining Funds as at June 30, 2018 andDecember 31, 2017, categorized by credit ratings. The Pender Strategic Growth and Income Fund hasindirect exposure to credit risk through its holdings of underlying mutual funds.

2018 2017

Canadian Opportunities Fund Unrated $ - $ 1,088

$ - $ 1,088

Corporate Bond Fund AAA $ 22,346,584 $ - AA 13,520,750 8,296,768 A 31,196,191 9,489,824 BBB 35,601,870 13,710,738 Below BBB 94,403,776 71,030,080 Unrated 104,299,234 55,675,417

$ 301,368,405 $ 158,202,827

Small Cap Opportunities Fund Unrated $ 4,135,152 $ 2,488,418

$ 4,135,152 $ 2,488,418

Strategic Growth and Income Fund AAA $ 197,042 $ - AA 119,220 198,107 A 275,074 226,594 BBB 313,922 327,380 Below BBB 832,411 1,696,028 Unrated 939,126 1,351,567

$ 2,676,795 $ 3,799,676

Value Fund Below BBB $ - $ 2,136,631 Unrated 2,979,169 6,091,216

$ 2,979,169 $ 8,227,847

60



(b) Liquidity risk:

Liquidity risk is the risk that a Fund may not be able to settle or meet its obligations on time or at a reasonable price.

Each Fund is exposed to liquidity risk through unitholder redemptions of its units. The redeemable units of each Fund are issued and redeemed on demand at the option of the unitholder based on the then current NAV per class of unit.

Each Fund is also exposed to liquidity risk through its investments. This risk is managed by investing the majority of each Fund’s assets in investments that are traded in an active market and that can be readily disposed. In accordance with securities regulations, each Fund must maintain at least 85% of its assets in liquid investments (i.e., investments that are traded in an active market). In the case where the Funds hold thinly traded investments, timely disposition of such investments and the realized price may be significantly different from their carrying values.

The Manager’s approach to managing liquidity is to ensure, as far as possible, that it has sufficient liquidity at all times to meet its liabilities, including estimated redemptions of units, when due, without incurring unacceptable losses or risking damage to the Funds’ reputation. Each Fund has the ability to borrow up to 5% of the value of its net assets on a temporary basis for the purpose of settling investment portfolio transactions or unitholder redemptions.

The Funds’ remaining non-derivative liabilities other than redeemable units are due within one month of the reporting date of the respective Fund. The following were the contractual maturities of derivative assets (liabilities) of the Pender Corporate Bond Fund as at June 30, 2018 and December 31, 2017, that were due within three months of the financial reporting date. The amounts are gross and undiscounted. The Pender Strategic Growth and Income Fund, through its investment in the Pender Corporate Bond Fund, has indirect exposure to the risk inherent in the derivative instruments held by the Pender Corporate Bond Fund. The remaining Funds did not hold any derivatives as at June 30, 2018 and December 31, 2017. 2018 2017 Nominal Nominal value Fair value value Fair value Derivative instruments:

Inflows (Outflows) $ 168,441,400 $ (3,938,839) $ 110,609,900 $ 2,771,504

(c) Market risk:

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices, will affect the Funds’ income or the fair value of their holdings of financial instruments.

(i) Interest rate risk:

Interest rate risk is the risk that the market value of a Fund’s interest-bearing investments will fluctuate due to changes in market interest rates. A Fund’s exposure to interest rate risk is concentrated in its investment in debt securities. Other assets and liabilities are short-term in nature and/or non-interest bearing, which reduce interest rate risk.

61



(c) Market risk (continued):

(i) Interest rate risk (continued):

Interest rate risk is managed by the portfolio advisor of each Fund through a careful selection of securities and diversification within each respective Fund. Where applicable, the Fund’s portfolio advisor monitors the Fund’s overall duration and positions are maintained within established ranges.

The Pender US All Cap Equity Fund is not exposed to any material interest rate risk. The following table summarizes the exposure to interest rate risk for the remaining Funds as at June 30, 2018 and December 31, 2017, categorized by the earlier of contractual re-pricing or maturity dates. The Pender Strategic Growth and Income Fund is subject to indirect interest rate risk through its holdings of underlying mutual funds.

2018 2017

Canadian Opportunities Fund 1 to 3 years $ - $ 1,088

$ - $ 1,088

Corporate Bond Fund

Less than 1 year $ 56,337,028 $ 3,992,143 1 to 3 years 93,364,974 62,653,371 3 to 5 years 105,024,564 51,411,094 More than 5 years 46,641,839 40,146,219 $ 301,368,405 $ 158,202,827

Small Cap Opportunities Fund

1 to 3 years $ 1,660,152 $ 2,488,418 3 to 5 years 2,475,000 - $ 4,135,152 $ 2,488,418

Strategic Growth and Income Fund

Less than 1 year $ 496,755 $ 160,496 1 to 3 years 831,064 1,518,183 3 to 5 years 937,709 1,162,401 More than 5 years 411,267 958,596 $ 2,676,795 $ 3,799,676

Value Fund

Less than 1 year $ - $ 2,398,146 1 to 3 years - 3,693,070 3 to 5 years 2,979,169 - More than 5 years - 2,136,631 $ 2,979,169 $ 8,227,847

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(i) Interest rate risk (continued):

As at June 30, 2018 and December 31, 2017, if the prevailing interest rates had been increased ordecreased by 1%, assuming a parallel shift in the yield curve and all other factors remainingconstant, the net assets of those Funds with exposure to interest rate risk would have decreased orincreased by the following amounts:

2018 2017

Canadian Opportunities Fund $ - $ - Corporate Bond Fund 9,592,592 5,468,071 Small Cap Opportunities Fund 124,035 42,767 Strategic Growth and Income Fund 46,240 130,945 Value Fund 105,343 440,339

Interest rate sensitivity was determined based on portfolio-weighted, modified duration. In practice, actual results may differ from this sensitivity analysis and the difference could be material.

(ii) Currency risk:

Currency risk is the risk that the value of financial assets and liabilities denominated in currenciesother than the Canadian dollar will fluctuate due to changes in foreign exchange rates. Equities inforeign markets and foreign bonds are exposed to currency risk as the prices denominated in foreigncurrencies are converted to Canadian dollars at the valuation date.

Currency risk is managed by the portfolio advisor of each Fund in accordance with the policies andprocedures in place, through a careful selection of securities and diversification within eachrespective Fund. Each Fund’s portfolio advisor monitors their Fund’s overall market positions on adaily basis and positions are maintained within established ranges.

The Pender Corporate Bond Fund enters into certain forward foreign currency contracts to mitigateits foreign currency exposure.

63




(ii) Currency risk (continued):

The net currency exposures for the Funds as at June 30, 2018 and December 31, 2017 were as follows:

Canadian US Japanese 2018 dollar dollar yen Euro Total

Canadian Opportunities Fund $ 6,599,999 $ - $ - $ - $ 6,599,999 Corporate Bond Fund 313,371,576 49,779,406 - - 363,150,982 Small Cap Opportunities Fund 169,051,858 26,679,239 - - 195,731,097 Strategic Growth and Income Fund 10,372,195 5,081,088 - - 15,453,283 US All Cap Equity Fund 1,108,370 19,723,604 - - 20,831,974 Value Fund 147,278,222 195,646,704 156 5,361,450 348,286,532

Canadian US Japanese 2017 dollar dollar yen Total

Canadian Opportunities Fund $ 6,992,040 $ 18,289 $ - $ 7,010,329 Corporate Bond Fund 168,337,037 25,912,977 - 194,250,014 Small Cap Opportunities Fund 158,406,974 31,203,195 - 189,610,169 Strategic Growth and Income Fund 14,917,055 6,366,058 - 21,283,113 US All Cap Equity Fund 2,294,002 17,335,014 - 19,629,016 Value Fund 98,029,658 155,393,627 3,035,657 256,458,942

As at June 30, 2018 and December 31, 2017, if the Canadian dollar had strengthened or weakened by 10% in relation to all foreign currencies, with all other factors remaining constant, the net assets of the Funds would have decreased or increased, respectively, by the following amounts:

2018 2017

Canadian Opportunities Fund $ - $ 1,829 Corporate Bond Fund 4,977,941 2,591,298 Small Cap Opportunities Fund 2,667,924 3,120,320 Strategic Growth and Income Fund 508,109 636,606 US All Cap Equity Fund 1,972,360 1,733,501 Value Fund 20,100,831 15,842,928

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(iii) Other price risk:

Other price risk is the risk that the fair value of a security will fluctuate as a result of changes inmarket prices (other than those changes arising from interest rate risk or currency risk) whethercaused by factors specific to the security or its issuer or by factors affecting all similar securitiestraded in a market.

Other price risk is moderated by the portfolio advisor of each Fund through a careful selection ofsecurities within specified limits and the Funds’ price risk is managed through diversification withineach respective Fund. Each Fund’s portfolio advisor monitors their Fund’s overall market positionsand positions are maintained within established ranges.

The following table summarizes each Fund’s exposure to other price risk as at June 30, 2018 andDecember 31, 2017.

2018 2017

Canadian Opportunities Fund $ 6,890,112 $ 6,841,330 Corporate Bond Fund 42,217,059 22,207,225 Small Cap Opportunities Fund 176,372,448 152,553,918 Strategic Growth and Income Fund 16,441,008 16,150,431 US All Cap Equity Fund 19,677,899 19,418,642 Value Fund 311,988,793 174,795,597

As at June 30, 2018 and December 31, 2017, if equity prices had increased or decreased by 10%, with all other factors remaining constant, the net assets of the Funds would have increased or decreased, respectively, by the following amounts:

2018 2017

Canadian Opportunities Fund $ 409,200 $ 496,436 Corporate Bond Fund 363,151 227,121 Small Cap Opportunities Fund 9,199,362 12,087,745 Strategic Growth and Income Fund 679,944 973,751 US All Cap Equity Fund 1,895,710 1,939,891 Value Fund 25,076,630 17,693,999

Price sensitivity was determined based on portfolio-weighted beta. In practice, actual trading results may differ from this sensitivity analysis and the difference could be material.

65


10. Fair value of financial instruments:

(a) Valuation models:

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

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

The Funds measure fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

─ Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities that the Funds can access at the measurement date.

─ Level 2: Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. as derived from prices).

─ Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Funds use widely recognized valuation models for determining the fair value of common and relatively simple financial instruments, such as debt securities, mutual fund units and warrants that use only observable market data and require little management judgment and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple OTC derivatives such as forward foreign currency contacts. The availability of observable market prices and model inputs reduces the need for management judgment and estimation, and reduces the uncertainty associated with the determination of fair values. The availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets. Valuation techniques may include discounted cash flow techniques for debt securities and for forward foreign currency contracts, option pricing matrices for warrants and net asset value as published by underlying fund managers for mutual fund units.

For more complex instruments, the Funds use recognized valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions. Valuation models that employ significant unobservable inputs require a higher degree of management judgment and estimation in the determination of fair value.

66


10. Fair value of financial instruments (continued):

(a) Valuation models (continued):

In determining fair value for these types of instruments the Manager considers the history and nature of the business; operating results and financial conditions; general economic, industry and market conditions; capital market and transaction market conditions; independent valuations of the business; contractual rights relating to the investment; comparable company trading and transaction multiples, where applicable; and other pertinent considerations. Adjustments to the carrying value of the investments may also be determined by the Manager when there is pervasive and objective evidence of a decline in the value of the investment, as indicated by an assessment of the financial condition of the investment based on operational results, forecasts and other developments since acquisition.

The table below presents the fair value of financial instruments as at June 30, 2018 and December 31, 2017 by the level in the fair value hierarchy into which the fair value measurement is categorized. The amounts are based on the values recognized in the Statements of Financial Position. All fair value measurements below are recurring.

Level 1 Level 2 Level 3

2018 2017 2018 2017 2018 2017

Canadian Opportunities Fund: Equities $ 6,890,112 $ 6,841,330 $ - $ - $ - $ - Bonds - - - - - 1,088 Warrants - - - - - -

$ 6,890,112 $ 6,841,330 $ - $ - $ - 1,088

Corporate Bond Fund: Bonds and loans $ 291,535,698 $ 150,937,636 $ - $ - $ 9,832,707 $ 7,265,191 Closed end funds 23,140,208 7,040,212 - - - - Common shares 701,226 1,189,278 - - - - Forward foreign currency contracts - - (3,938,839) 2,771,504 - - Preferred shares 18,048,265 13,977,735 - - - - Warrants - - 327,360 - - -

$ 333,425,397 $ 173,144,861 $ (3,611,479) $ 2,771,504 $ 9,832,707 $ 7,265,191

Small Cap Opportunities Fund: Equities $ 172,232,670 $ 149,800,578 $ - $ - $ 3,753,340 $ 2,753,340 Bonds - - - - 4,135,152 2,488,418 Warrants 250,000 - 136,438 73,786 - -

$ 172,482,670 $ 149,800,578 $ 136,438 $ 73,786 $ 7,888,492 $ 5,241,758

Strategic Growth and Income Fund Mutual Funds $ 3,202,105 $ 4,638,225 $ 921,184 $ 1,689,414 $ - $ - Equities 11,115,393 14,260,930 - - - -

$ 14,317,498 $ 18,899,155 $ 921,184 $ 1,689,414 $ - $ -

US All Cap Equity Fund: Equities $ 19,677,899 $ 19,418,642 $ - $ - $ $ -

$ 19,677,899 $ 19,418,642 $ - $ - $ - $ -

Value Fund: Equities $ 306,804,206 $ 168,624,480 $ - $ - $ - $ - Bonds - 5,829,701 - - 2,979,169 2,398,146 Warrants 5,184,587 6,171,117 - - - -

$ 311,988,793 $ 180,625,298 $ - $ - $ 2,979,169 $ 2,398,146

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(a) Valuation models (continued):

The carrying amount of the Funds’ net assets attributable to holders of redeemable units also approximates fair value as it is measured at the redemption amount and classified as Level 2 in the fair value hierarchy.

There were no transfers between the three levels during the periods ended June 30, 2018 and 2017.

The following table shows a reconciliation of the movement in fair value of all financial instruments categorized within Level 3, for those Funds holding such financial instruments, the Pender Canadian Opportunities Fund, Pender Corporate Bond Fund, Pender Small Cap Opportunities Fund and Pender Value Fund for the period ended June 30, 2018 and 2017. The remaining Funds did not hold any financial instruments categorized with Level 3.

2018 2017

Canadian Opportunities Fund Opening balance $ 1,088 $ 5,440 Purchase of investments - - Sales of investments (1,088) - Total gain (loss) recognized in comprehensive income - - Ending balance $ - $ 5,440

Corporate Bond Fund: Opening balance $ 7,265,191 $ 4,650,740 Purchase of investments 1,862,686 2,437,755 Sales of investments (653,638) (337,562) Total gain (loss) recognized in comprehensive income 1,358,468 (228,694) Ending balance $ 9,832,707 $ 6,522,239

Small Cap Opportunities Fund: Opening balance $ 5,241,758 $ 4,471,865 Purchase of investments 5,135,000 768,969 Sales of investments (2,488,266) - Total gain (loss) recognized in comprehensive income - 331 Ending balance $ 7,888,492 $ 5,241,165

Value Fund: Opening balance $ 2,398,146 $ 1,902,605 Purchase of investments - 1,276,895 Sales of investments (167,530) - Total gain (loss) recognized in comprehensive income 748,553 (865,052) Ending balance $ 2,979,169 $ 2,314,448

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(b) Significant unobservable inputs used in measuring fair value:

The table below sets out information about significant unobservable inputs used in measuring financial instruments categorized as Level 3 as at June 30, 2018 and December 31, 2017 for those funds with financial instruments categorized as Level 3, in the fair value hierarchy: the Pender Canadian Opportunities Fund, Pender Corporate Bond Fund, Pender Small Cap Opportunities Fund and Pender Value Fund.

2018

Sensitivity to change Valuation Unobservable in significant

Description Fair value technique input unobservable input

Corporate Bond Fund: Unlisted private $ 9,620,975 Investment cost/ Enterprise The estimated investments enterprise value value fair value would

increase if enterprise value increased

Unlisted private $ 211,732 Income approach Discount The estimated investments using net present rate fair value would

value increase if enterprise value increased

Small Cap Opportunities Fund: Unlisted private $ 7,888,492 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


Value Fund: Unlisted private $ 2,979,169 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


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(b) Significant unobservable inputs used in measuring fair value (continued):

2017

Sensitivity to change Valuation Unobservable in significant

Description Fair value technique input unobservable input

Canadian Opportunities Fund: Unlisted private $ 1,088 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


Corporate Bond Fund: Unlisted private $ 6,997,518 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


Unlisted private $ 267,673 Income approach Discount The estimated investments using net present rate fair value would

value increase if enterprise value increased

Small Cap Opportunities Fund: Unlisted private $ 5,241,758 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


Value Fund: Unlisted private $ 2,398,146 Investment cost/ Enterprise The estimated investments enterprise value value fair value would


Enterprise value represents the amount that market participants would pay when purchasing the investee company. The Manager determines this value using valuation techniques such as the use of comparable recent arm’s length transactions in shares of the respective company and net present value calculated using discount rates derived from comparable market yields, for example.

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(c) Effects of unobservable input on fair value measurement:

The Pender Canadian Opportunities Fund, Pender Corporate Bond Fund, Pender Small Cap Opportunities Fund and Pender Value Fund believe that their estimates of fair value are appropriate, however the use of different methodologies or assumptions could lead to different measurements of fair value. Changing one or more of the assumptions used for fair value measurements in Level 3 to alternative reasonably possible assumptions would have the following effects on the net assets attributable to holders of redeemable units as at June 30, 2018 and December 31, 2017. The remaining Funds did not have any financial instruments categorized with Level 3.

2018 2017

Canadian Opportunities Fund: Favourable $ - $ 109 Unfavourable - (109)

Corporate Bond Fund: Favourable 993,578 744,196 Unfavourable (989,269) (737,627)

Small Cap Opportunities Fund: Favourable 788,849 524,176 Unfavourable (788,849) (524,176) Value Fund: Favourable 297,917 239,815 Unfavourable (297,917) (239,815)

The favourable and unfavourable effects of using alternative reasonably possible assumptions for the valuation of unlisted private equity investments have been calculated by recalibrating the model values using unobservable inputs based on averages of the upper and lower quartiles respectively of the Pender Canadian Opportunities Fund’s, Pender Corporate Bond Fund’s, Pender Small Cap Opportunities Fund and Pender Value Fund's ranges of possible estimates. The recalibrated model considers the impact of a 10% increase or decrease in enterprise value and a 1% increase or decrease in the discount rate.

(d) Financial instruments not measured at fair value:

Given their short-term nature, the carrying value of assets and liabilities other than investments, investments sold short and derivatives approximates their fair value. These financial instruments are classified as Level 2 in the fair value hierarchy because while prices are available, there is no active market for these instruments.

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11. Involvement with structured entities:

The table below describes the type of structured entities in which the Pender Corporate Bond Fund and the Pender Strategic Growth and Income Fund hold an interest but which they do not consolidate. The remaining Funds did not hold an interest in structured entities as at June 30, 2018 and December 31, 2017.

Interest held by Entity Nature and purpose the respective Fund Investment funds To manage assets on behalf of third Investment in units party investors and generate fees issued by the for the investment manager. These underlying funds vehicles are financed through the issue of units to investors The table below sets out interests held by the Pender Corporate Bond Fund and the Pender Strategic Growth and Income Fund in unconsolidated structured entities as at June 30, 2018 and December 31, 2017. The maximum exposure to loss is the carrying amount of the investment in the underlying funds held.

Number of Total net Carrying amount investee assets of included in

Corporate Bond Fund funds held investee funds investments

2018 10 7,668,000,000 23,140,208 2017 5 3,690,000,000 7,040,212

Number of Total net Carrying amount investee assets of included in

Strategic Growth and Income Fund funds held investee funds investments

2018 2 558,882,079 4,123,289 2017 2 383,860,183 6,327,639

During the periods ended June 30, 2018 and December 31, 2017, the Pender Corporate Bond Fund and Pender Strategic Growth and Income Fund did not provide financial support to unconsolidated structured entities and have no intention of providing financial or other support. The Pender Corporate Bond Fund and Pender Strategic Growth and Income Fund can sell or redeem their units in the above investment funds at any time.

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12. Income taxes:

As at June 30, 2018, the Pender Corporate Bond Fund has accumulated capital losses available forutilization against realized capital gains in future years of $3,252,236 (2017 - $9,820,702). Capital losseshave no expiry date. The remaining Funds have no accumulated capital losses as at June 30, 2018 orDecember 31, 2017. None of the Funds have non-capital losses available for carry forward.

13. Change in accounting policy:

The Funds have adopted IFRS 9 Financial Instruments (“IFRS 9”) with a date of initial application of January1, 2018. The requirements of IFRS 9 represent a significant change from IAS 39 Financial Instruments:Recognition and Measurement (“IAS 39”), which it replaces. IFRS 9 specifies the accounting for financialinstruments, including: classification and measurement, impairment and hedge accounting. The adoption ofIFRS 9 has been applied retrospectively. The nature and effects of the key changes to the Funds’accounting policy are summarized below.

(a) Classification and measurement of financial assets and liabilities:

IFRS 9 contains three principal classification categories for financial assets: measured at amortizedcost, FVOCI and FVTPL. The classification of financial assets under IFRS 9 is generally based on thebusiness model in which a financial asset is managed and its contractual cash flow characteristics. TheFunds may also, at initial recognition, irrevocably designate a financial asset as measured at FVTPLwhen doing so results in more relevant information. IFRS 9 eliminates the previous IAS 39 categories ofheld to maturity, loans and receivables and available-for-sale.

A financial liability is generally measured at amortized cost, with exceptions that may allow forclassification as FVTPL. These exceptions include financial liabilities that are mandatorily measured atfair value through profit or loss, such as derivatives liabilities. The Funds may also, at initial recognition,irrevocably designate a financial liability as measured at FVTPL when doing so results in more relevantinformation.

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13. Change in accounting policy (continued):

(a) Classification and measurement of financial assets and liabilities (continued):

The adoption of IFRS 9 did not result in any measurement differences in the Funds’ financial assets andliabilities as at the transition date. The following table shows the original classification and measurementcategories under IAS 39 and the new classification and measurement categories under IFRS 9 for eachclass of the Fund’s financial assets and financial liabilities as at January 1, 2018.

Original NewClassification Classification

under underIAS 39 IFRS 9

Financial assets Cash Loans and receivables Amortized cost Receivable for investments sold Loans and receivables Amortized cost Subscriptions receivable Loans and receivables Amortized cost Dividend receivable Loans and receivables Amortized cost Interest receivable Loans and receivables Amortized cost Other receivables Loans and receivables Amortized cost Due from brokers Loans and receivables Amortized cost Derivative assets Held-for-trading FVTPL Investments FVTPL FVTPL

Financial liabilities Payable for investments purchased Other financial liabilities Amortized cost Distributions payable to holders of redeemable units Other financial liabilities Amortized cost Redemptions payable to holders of redeemable units Other financial liabilities Amortized cost Management and administration fees payable Other financial liabilities Amortized cost Interest payable Other financial liabilities Amortized cost Derivative liabilities Held-for-trading FVTPL Investments sold short FVTPL FVTPL

(b) Impairment of financial assets:

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ model. As the Fundsmeasure their financial assets at FVTPL or hold only short-term financial assets at amortized cost, theimpairment requirements under the new standard do not impact these financial statements.

(c) Hedge accounting:

As permitted by IFRS 9, an election is available to continue to apply the hedge accounting requirementsof IAS 39. However, the Funds have not applied hedge accounting under either standard. Therefore,the hedge accounting requirements under the new standard do not impact these financial statements.

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