CF Canada Life Investments Fund II Annual Report and Financial Statements 15 October 2016

Transcription

1 CF Canada Life Investments Fund II Annual Report and Financial Statements 15 October 2016 CF Canlife Portfolio III Fund CF Canlife Portfolio IV Fund CF Canlife Portfolio V Fund CF Canlife Portfolio VI Fund CF Canlife Portfolio VII Fund

2 AUTHORISED CORPORATE DIRECTOR ( ACD ) AND ALTERNATIVE INVESTMENT FUND MANAGER ( AIFM ) Capita Financial Managers Limited Head Office: 40 Dukes Place London EC3A 7NH Telephone: Fax: enquiries@capitafinancial.com (Authorised and regulated by the Financial Conduct Authority) DIRECTORS OF THE ACD C. Addenbrooke N. Boyling B. Hammond P. Hugh-Smith K.J. Midl PORTFOLIO MANAGER Canada Life Asset Management Limited Canada Life Place High Street Potters Bar Hertfordshire EN6 5BA (Authorised and regulated by the Financial Conduct Authority) DEPOSITARY BNY Mellon Trust & Depositary (UK) Limited The Bank of New York Mellon Centre 160 Queen Victoria Street London EC4V 4LA (Authorised and regulated by the Financial Conduct Authority) CONTENTS ACD s Report... 7 Authorised Status... 7 Important Information... 7 Cross Holdings... 7 Remuneration Policy... 8 Securities Financing Transactions... 9 Director s Statement Statement of ACD s Responsibilities in Relation to the Financial Statements Statement of Depositary s Responsibilities Report of the Depositary Independent Auditor s Report to the Members of CF Canada Life Investments Fund II Financial Statements Accounting Policies REGISTRAR Capita Financial Administrators Limited Customer Service Centre: Arlington Business Centre Millshaw Park Lane Leeds LS11 0PA Telephone: Fax: (Authorised and regulated by the Financial Conduct Authority) INDEPENDENT AUDITOR Ernst & Young LLP 25 Churchill Place Canary Wharf London E14 5EY CF Canada Life Investments Fund II 1

3 Contents (continued) CF CANLIFE PORTFOLIO III FUND ACD s Report Important Information Investment Objective and Policy Additional Information Portfolio Manager s Report Fund Information Portfolio Statement Summary of Material Portfolio Changes Financial Statements Statement of Total Return Statement of Change in Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Table CF CANLIFE PORTFOLIO IV FUND ACD s Report Important Information Investment Objective and Policy Additional Information Portfolio Manager s Report Fund Information Portfolio Statement Summary of Material Portfolio Changes Financial Statements Statement of Total Return Statement of Change in Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Table CF Canada Life Investments Fund II CF Canada Life Investments Fund II 3

4 Contents (continued) CF CANLIFE PORTFOLIO V FUND ACD s Report Important Information Investment Objective and Policy Additional Information Portfolio Manager s Report Fund Information Portfolio Statement Summary of Material Portfolio Changes Financial Statements Statement of Total Return Statement of Change in Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Table CF CANLIFE PORTFOLIO VI FUND ACD s Report Important Information Investment Objective and Policy Additional Information Portfolio Manager s Report Fund Information Portfolio Statement Summary of Material Portfolio Changes Financial Statements Statement of Total Return Statement of Change in Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Table CF Canada Life Investments Fund II CF Canada Life Investments Fund II 5

5 Contents (continued) CF CANADA LIFE INVESTMENTS FUND II ACD S REPORT FOR THE YEAR ENDED 15 OCTOBER 2016 CF CANLIFE PORTFOLIO VII FUND ACD s Report Important Information Investment Objective and Policy Additional Information Portfolio Manager s Report Fund Information Portfolio Statement Summary of Material Portfolio Changes Financial Statements Statement of Total Return Statement of Change in Assets Attributable to Shareholders Balance Sheet Notes to the Financial Statements Distribution Table General Information AUTHORISED STATUS CF Canada Life Investments Fund II ( the Company ) is an investment company with variable capital incorporated in England and Wales under registered number IC and authorised by the Financial Conduct Authority with effect from 21 November The Company has an unlimited duration. Shareholders are not liable for the debts of the Company. Shareholders are not liable to make any further payment to the Company after they have paid the price on purchase of the shares. The Company is a Non-UCITS Retail Scheme. The base currency of the Company and each subfund is Pounds Sterling. The Alternative Investment Fund Manager ( AIFM ) is the legal person appointed on behalf of the Company and which (through this appointment) is responsible for managing the Company in accordance with the AIFM Directive and The Alternative Investment Fund Managers Regulations This role is performed by the ACD and references to the ACD in this Annual Report and Financial Statements include the AIFM as applicable. IMPORTANT INFORMATION With effect from 21 July 2016, the address of the registrar has changed to Arlington Business Centre, Millshaw Park Lane, Leeds LS11 0PA, and the address for all correspondences to PO Box 389, Darlington DL1 9UF. With effect from 16 October 2016, the fund accounting of the Company changed from Capita Financial Administrators Limited to The Bank of New York Mellon (International) Limited. On 31 January 2017 a new-sub-fund, the CF Canlife Managed 0% 35% Fund was launched. Further details on this sub-fund are available in the latest scheme Prospectus. The annual management charge ( AMC ) applied to the B and C share classes of all the subfunds of the Company (with the exception of CF Canlife Managed 0% 35% Fund) will reduce by 0.275% and 0.225% respectively from 1 February The reduced AMC for the B and C share classes will be 0.65% and 0.45% respectively. Please be advised that Capita Financial Managers Limited will cease to produce and send the interim and annual short report to investors with immediate effect following a change in regulation. The full set of annual and interim Report and Financial Statements will remain available to all investors on our website ( and also upon request at our head office, 40 Dukes Place, London EC3A 7NH. CROSS HOLDINGS No sub-funds had holdings in any other sub-fund of the Company at the end of the year. 6 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 7

6 CF CANADA LIFE INVESTMENTS FUND II ACD s Report (continued) For the year ended 15 October 2016 REMUNERATION POLICY Capita Financial Managers Limited ( CFML ) is committed to ensuring that its remuneration policies and practices are consistent with, and promote, sound and effective risk management. CFML s remuneration policy is designed to ensure that excessive risk taking is not encouraged by or within CFML including in respect of the risk profile of the Alternative Investment Funds ( AIFs ) it operates, to manage the potential for conflicts of interest in relation to remuneration (having regard, inter alia, to its formal conflicts of interest policy) and to enable CFML to achieve and maintain a sound capital base. CFML acts as the operator of both UCITS funds and AIFs. CFML delegates portfolio management for the AIFs to various investment management firms. The portfolio managers fees and expense for providing investment management services are paid by the ACD out of its own remuneration under the ACD agreement. The investment management firms make information on remuneration publicly available in accordance with the disclosure requirements of Pillar 3 of the Capital Requirements Directive. This disclosure is in respect of CFML activities (including activities performed by its sister company Capita Financial Administrators Limited ( CFAL ) or by employees of that entity), and excludes activities undertaken by third party investment management firms. CFML staff do not perform duties in respect of particular AIFs, nor are they remunerated by reference to the performance of any individual AIF. Accordingly, the information below is for CFML as a whole. No attempt has been made to attribute remuneration to the Company itself. Information on CFML s remuneration arrangements is collated annually, as part of its statutory accounts preparation processes. Accordingly, the information disclosed relates to the year ended 31 December 2015, being the most recent accounting period for which accounts have been prepared for CFML prior to the production of these accounts. As at 31 December 2015, CFML operated 94 UCITS and 56 AIFs, whose respective assets under management ( AuM ) were 31,166 million and 10,688 million. This Company was valued at 162 million as at that date and represented 0.39% of CFML s total AuM and 1.52% of its AIF AuM. The disclosure below represents that required under FUND R (5) and (6) for funds subject to AIFMD obligations. SECURITIES FINANCING TRANSACTIONS The Company has the ability to utilise Securities Financing Transactions (being transactions such as lending or borrowing of securities, repurchase or reverse repurchase transactions, buy-sell back or sell-buy back transactions, or margin lending transactions). No such transactions have been undertaken in the period covered by this report. CAPITA FINANCIAL MANAGERS LIMITED ACD of CF Canada Life Investments Fund II 3 February 2017 Total amount of remuneration paid by CFML for the year ended 31 December 2015 Total amount of remuneration paid to Senior Management for the year ended 31 December 2015 Total amount of remuneration paid to members of staff whose activities have a material impact on the risk profile of CFML s AIFs for the year ended 31 December 2015 Number of beneficiaries Fixed 000 Variable 000 Total , , CF Canada Life Investments Fund II CF Canada Life Investments Fund II 9

7 CF CANADA LIFE INVESTMENTS FUND II DIRECTOR S STATEMENT This report has been prepared in accordance with the requirements of the Collective Investment Schemes Sourcebook and the Investment Funds Sourcebook, as applicable, as issued and amended by the Financial Conduct Authority together with the relevant provisions of the Alternative Investment Fund Manager s Directive and modified by a direction given by the Financial Conduct Authority where the ACD has opted to provide a NURS KII Document, a Key Investor Information Document for Non-UCITS Retail Schemes. N. BOYLING The ACD is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company s sub-funds and to enable it to ensure that the financial statements comply with the COLL and FUND Sourcebooks. The ACD is also responsible for safeguarding the assets of the Company s sub-funds and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the ACD is aware: there is no relevant audit information of which the Company s Auditor is unaware; and the ACD has taken all steps that it ought to have taken to make itself aware of any relevant audit information and to establish that the Auditor is aware of that information. CAPITA FINANCIAL MANAGERS LIMITED ACD of CF Canada Life Investments Fund II 3 February 2017 STATEMENT OF ACD S RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS The ACD is responsible for preparing the financial statements in accordance with applicable law and United Kingdom Generally Accepted Accounting Practice, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland with early application of Amendments to FRS 102 Fair value hierarchy disclosure, issued in March The Financial Conduct Authority s Collective Investment Schemes Sourcebook (the COLL Sourcebook ) and the Investment Funds Sourcebook (the FUND Sourcebook ), as applicable, require the ACD to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company, comprising each of its sub-funds, and of the net revenue/expense and of the net capital gains/losses on the scheme property of the Company s sub-funds for that year. In preparing those financial statements, the ACD is required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable United Kingdom accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements in accordance with the requirements of the IA SORP; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 10 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 11

8 CF CANADA LIFE INVESTMENTS FUND II STATEMENT OF DEPOSITARY S RESPONSIBILITIES The Depositary must ensure that the Company is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended, the Financial Services and Markets Act 2000, as amended, (together the Regulations ), the Company s Instrument of Incorporation and Prospectus (together the Scheme documents ) as detailed below. The Depositary must in the context of its role act honestly, fairly, professionally, independently and in the interests of the Company and its investors. The Depositary is responsible for the safekeeping of all custodial assets and maintaining a record of all other assets of the Company in accordance with the Regulations. The Depositary must ensure that: the Company s cash flows are properly monitored and that cash of the Company is booked into the cash accounts in accordance with the Regulations; the sale, issue, repurchase, redemption and cancellation of shares are carried out in accordance with the Regulations; the value of shares of the Company are calculated in accordance with the Regulations; any consideration relating to transactions in the Company s assets is remitted to the Company within the usual time limits; the Company s income is applied in accordance with the Regulations; and the instructions of the ACD, are carried out (unless they conflict with the Regulations). The Depositary also has a duty to take reasonable care to ensure that the Company is managed in accordance with the Regulations and the Scheme documents in relation to the investment and borrowing powers applicable to the Company. REPORT OF THE DEPOSITARY FOR THE YEAR ENDED 15 OCTOBER 2016 Having carried out such procedures as we consider necessary to discharge our responsibilities as Depositary of the Company, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Company, acting through the ACD: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Company s shares and the application of the Company s income in accordance with the Regulations and the Scheme documents of the Company; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Company. BNY MELLON TRUST & DEPOSITARY (UK) LIMITED Depositary of CF Canada Life Investments Fund II 3 February 2017 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF CF CANADA LIFE INVESTMENTS FUND II We have audited the financial statements of CF Canada Life Investments Fund II ( the Company ) for the year ended 15 October 2016 which comprise the accounting policies of the Company, the Statement of Total Return, Statement of Change in Assets Attributable to Shareholders, the Balance Sheet, the related notes and the Distribution Tables for each of the Company s subfunds. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice, including FRS 102 The Financial Reporting Standard applicable to the UK and Republic of Ireland ). This report is made solely to the Company s members, as a body, pursuant to Paragraph of the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority. Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF THE AUTHORISED CORPORATE DIRECTOR (ACD) AND AUDITOR As explained more fully in the ACD s responsibilities statement set out on pages 10 and 11, the ACD is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the ACD; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. OPINION ON FINANCIAL STATEMENTS In our opinion the financial statements: give a true and fair view of the financial position of the Company comprising each of its subfunds as at 15 October 2016 and of the net revenue and the net capital gains on the scheme property of the Company comprising each of its sub-funds for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice. 12 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 13

9 CF CANADA LIFE INVESTMENTS FUND II Independent Auditor s Report to the Shareholders of CF Canada Life Investments Fund II (continued) OPINION ON OTHER MATTERS PRESCRIBED BY THE RULES OF THE COLLECTIVE INVESTMENT SCHEMES SOURCEBOOK OF THE FINANCIAL CONDUCT AUTHORITY In our opinion: the financial statements have been properly prepared in accordance with the Statement of Recommended Practice relating to Authorised Funds, the rules of the Collective Investment Schemes Sourcebook of the Financial Conduct Authority and the Instrument of Incorporation; the information given in the ACD s report for the financial year for which the financial statements are prepared is consistent with the financial statements; there is nothing to indicate that proper accounting records have not been kept or that the financial statements are not in agreement with those records; and we have received all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit. ERNST & YOUNG LLP Statutory Auditor London 3 February 2017 FINANCIAL STATEMENTS ACCOUNTING POLICIES AS AT 15 OCTOBER 2016 The principal accounting policies, which have been applied to the financial statements of the sub-funds in both the current and prior year, are set out below. These have been applied consistently across all sub-funds unless otherwise stated in the Notes to the Financial Statements of each sub-fund. (a) Basis of accounting The financial statements of each sub-fund have been prepared under the historical cost basis, as modified by the revaluation of investments and in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland including early application of Amendments to FRS 102 Fair value hierarchy disclosure, issued in March The financial statements have been prepared in accordance with the Statement of Recommended Practice ( SORP ) for Financial Statements of UK Authorised Funds issued by the Investment Association ( IA ) in May Previously, the requirements of the SORP issued by the IA in October 2010 were applied; there are no changes to the financial statements of the sub-funds on adoption of the new SORP and FRS 102, other than minor presentational amendments and additional disclosures in notes 11 to 14 of the sub-funds. (b) Recognition of revenue Distributions from collective investment schemes are recognised when the schemes are quoted ex-distribution. returned with the distribution is deducted from the cost of the investment in the scheme and does not form part of the distributable revenue. Reportable income from funds with Reporting Fund status for UK tax purposes is recognised when the information is made available by the Reporting Fund. Rebates of annual management charges (AMC rebates) from underlying investments are accounted for on an accruals basis and are recognised as revenue, or capital in line with the allocation of the annual management charge between capital and revenue of the underlying investments. Interest on bank and other cash deposits is recognised on an accruals basis. is recognised gross of any withholding taxes but excludes attributable tax credits. (c) Treatment of special dividends Special dividends are reviewed on a case by case basis in determining whether the dividend is to be treated as revenue or capital. Amounts recognised as revenue will form part of the distributable revenue. Amounts recognised as capital are deducted from the cost of the investment. The tax accounting treatment follows the treatment of the principal amount. (d) Treatment of expenses All expenses, except for those relating to the purchase and sale of investments and stamp duty reserve tax, are charged initially against revenue. The Fund receives a rebate of the Annual Management Charge in relation to related party investments in the Fund. This is to eliminate double charging and, as such, is not a reduction in expenses suffered by shareholders. (e) Allocation of revenue and expenses to multiple share classes and sub-funds Any revenue or expense not directly attributable to a particular share class or sub-fund will normally be allocated pro-rata to the net assets of the relevant share classes and sub-funds, unless a different allocation method is more appropriate. 14 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 15

10 CF CANADA LIFE INVESTMENTS FUND II Financial Statements (continued) Accounting Policies (continued) As at 15 October 2016 (e) Allocation of revenue and expenses to multiple share classes and sub-funds (continued) All share classes are ranked pari passu and have no particular rights or terms attached, including rights on winding up. (f) Taxation Corporation tax is provided at 20% on taxable revenue, after deduction of allowable expenses. Offshore income gains, from funds without reporting status, are liable to corporation tax at 20% and any resulting charge is deducted from capital. Where overseas tax has been deducted from overseas revenue that tax can, in some instances, be set off against the corporation tax payable by way of double tax relief and where this is the case the offset is reflected in the tax charge. Deferred tax is provided using the liability method on all timing differences arising on the treatment of certain items for taxation and accounting purposes, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset. (g) Distribution policy Surplus revenue after taxation, as disclosed in the financial statements, after adjustment for items of a capital nature, is distributable to shareholders. Any deficit of revenue is deducted from capital. Interim distributions may be made at the ACD s discretion. Final distributions are made in accordance with the COLL Sourcebook. (h) Basis of valuation of investments All investments are valued at their fair value as at noon (London time) on 14 October 2016, being the last business day of the financial year. Collective investment schemes are valued at published bid prices for dual priced funds and at published prices for single priced funds. (i) Exchange rates The base and functional currency of the sub-funds is Pounds Sterling. Transactions in foreign currencies are recorded in sterling at the rate ruling at the date of the transactions. Assets and liabilities expressed in foreign currencies at the end of the accounting period are translated into sterling at the exchange rate prevailing at noon (London time) on the last business day of the financial year. (j) Dilution levy The ACD may require a dilution levy on the purchase and redemption of shares if, in its opinion, the existing shareholders (for purchases) or remaining shareholders (for redemptions) might otherwise be adversely affected. For example, the dilution levy may be charged in the following circumstances: where the scheme property of a sub-fund is in continual decline; on a sub-fund experiencing large levels of net purchases relative to its size; on large deals (typically being a purchase or redemption of shares to a size exceeding 5% of the Asset Value of the relevant sub-fund); in any case where the ACD is of the opinion that the interests of existing or remaining shareholders require the imposition of a dilution levy. (k) Portfolio transaction costs Direct transaction costs may consist of fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Indirect transaction costs may be incurred on transactions in underlying schemes but these do not form part of the direct transaction costs disclosures. Direct transaction costs do not include any difference between the quoted bid and offer prices or internal administrative or holding costs. The average portfolio dealing spread disclosed is the difference between the bid and offer prices of investments at the balance sheet date, including the effect of foreign exchange, expressed as a percentage of the value determined by reference to the offer price. 16 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 17

11 CF CANLIFE PORTFOLIO III FUND ACD S REPORT FOR THE YEAR ENDED 15 OCTOBER 2016 IMPORTANT INFORMATION Refer to the Important Information section on page 7. With effect from 16 October 2016, share class prices converted from net to a gross basis to remove any provisions for income tax withheld. Distributions after 6 April 2017 are required to be paid gross (without deducting income tax) under Finance Bill INVESTMENT OBJECTIVE AND POLICY The CF Canlife Portfolio III Fund ( the Fund ) aims to achieve long-term capital growth and income whilst seeking to remain within a defined risk band. The Fund invests primarily in collective investment schemes. It will usually invest in collective investment schemes outside of the Company which are managed by the Portfolio Manager but it may also invest in other collective investment schemes such as ETFs. Its underlying exposure to equities may be up to 45% of the value of its portfolio. The Fund may have indirect exposure, through collective investment schemes, or direct exposure to a diverse range of asset classes across the globe including equities, fixed income, other transferable securities, warrants, cash, near cash, money market instruments and (through indirect exposure only) to immovable property and commodities. It may also invest in derivatives for the purposes of efficient portfolio management. ADDITIONAL INFORMATION The Fund s risk band is managed by varying the weighting of asset types. The asset allocation is determined by reference to investment research carried out by an external agency and based on the long term historic return and volatility of each asset type. The external agency has determined risk bands ranging between 1 and 10, with 10 being the highest. This Fund aims to stay within band 3 over a rolling three-year period. However, during this period the Fund s volatility may be outside the relevant risk band if the Portfolio Manager believes it is expedient to do so in order to mitigate potential losses. At times observing the asset allocation restrictions may limit long term capital growth and income. Further details of the volatility parameters and measurement process can be obtained at CAPITA FINANCIAL MANAGERS LIMITED ACD of CF Canlife Portfolio III Fund 3 February 2017 PORTFOLIO MANAGER S REPORT INVESTMENT REVIEW Over the period of review, 16 October 2015 to 15 October 2016, the world economic landscape continued to be dominated by monetary policy actions, as well as key macro risk events. The US Federal Reserve ( the Fed ) raised interest rates by 25 basis points in December 2015, which was the first rate hike in nearly a decade. Expected further interest rate rises from the Fed were delayed, primarily due to bouts of global economic uncertainty. The major global macro issues over the period surrounded fears over a hard landing for the Chinese economy, as well as the UK s shock referendum vote to leave the European Union ( EU ). ECONOMIC AND MARKET REVIEW During the period under review, the world economic landscape continued to be dominated by monetary policy actions from Global Central Banks. The Fed raised interest rates by 25 basis points in December, which was the first rate hike in nearly a decade. Further interest rate rises from the Fed were expected throughout the period under review, but these were abandoned, primarily due to bouts of global economic uncertainty. However, late in the period the Fed acknowledged the strength of the labour market and the positive momentum of underlying economic activity, but it said it required more signs of inflationary pressures before it increased rates. Rates are expected to increase further in the coming months. The European economy continues to expand, albeit moderately. The European Central Bank ( ECB ) cut rates to zero over the period, while it also decreased deposit interest rates well below zero, in a bid to make banks inject more cash into the European economy. The ECB s Quantitative Easing ( QE ) programme remains operational, which includes the purchase of investment grade corporate bonds. QE has helped to depress government bond yields and corporate bond spreads across the continent. The benchmark 10-year German bund yield fell sharply, falling into negative territory for most of the latter part of the period under review. The UK has also introduced a QE programme following the unexpected referendum result in late June where the UK public voted to leave the EU. This result initially sent shockwaves through global asset prices, but most markets recovered shortly after. Fear and uncertainty over the longer-term health of the UK economy led the Bank of England to implement a QE programme, including the purchase of investment grade corporate bonds. As with Europe, this sharply depressed UK government bond yields and sterling corporate bond spreads. UK gilt yields fell sharply in the months following the referendum result and remain well below the beginning of the period. The major casualty of the Brexit vote thus far has been sterling, with the currency falling markedly particularly very late in the period under review. In other monetary policy decisions, the Bank of Japan ( BoJ ) attempted to spur inflation by modifying the structure of its QE programme. These measures are aimed at addressing investor concerns over the policy response from the BoJ and signal a shift towards fiscal stimulus to complement the current monetary stimulus programme. In a world of even lower rates and modest global growth, global equities remained in demand. However, markets had to ensure a sharp sell-off early in the period under review, as investor fears grew on the stability of the Chinese economy with many participants wary of a hard landing. Despite this, as well as the Brexit dip, many global markets more than recouped the losses and extended gains over the period under review. US equity markets were strong, as were stocks in the developing world particularly the sharply rebounding Brazilian market. UK stocks saw strong gains late in the period as sliding sterling boosted the earnings prospects of many 18 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 19

12 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) Portfolio Manager s Report (continued) For the year ended 15 October 2016 ECONOMIC AND MARKET REVIEW (continued) globally-diversified UK-listed companies. While Japanese and European equity markets saw declines locally, sterling-based investors saw gains from these markets as the losses were more than offset by the weakness in the pound. The rally in oil and commodity markets during the latter part of the period under review also boosted investor sentiment and had a positive impact on many risk assets particularly in emerging markets and parts of the high yield credit universe. FUND ACTIVITY The Fund is managed in accordance to the asset allocation model set out by Dynamic Planner risk profile 3 and implements the asset allocation by investing primarily in funds from Canada Life Investments in-house fund range. During the period under review, the Fund implemented the latest asset allocation model from Dynamic Planner. This was announced in August 2016 and saw a 2% increase in the weighting to International bonds, as well as the introduction of 2% allocations to both European and Japanese equities. To accommodate these moves, there was a 2% fall in the allocation to UK gilts, as well as a 1% decline for UK equities and a 3% decline for North American equities. The Fund continued to hold a portfolio of primarily fixed income assets over the period under review, with additional smaller exposures to equities and commercial property. OUTLOOK Overall, the global economy continues to post positive, but moderate, growth. Uncertainty surrounds the UK economy, as the terms of the exit from the EU are yet to be determined. Prime Minister Theresa May has outlined her plan to trigger Article 50 before March 2017 and begin the two-year exit negotiations with the EU. While the Fed is expected to raise rates again in December 2016, the messaging from the Central Bank is still expected to be dovish. With European and UK monetary policy expected to also remain highly accommodative. Inflationary pressures remain low in many parts of the world. However, the sharp fall for sterling during the latter part of the period under review has heightened fears over near-term inflation in the UK. Despite muted inflationary expectations, we do not believe global bond yields can remain anchored to these historically-low levels indefinitely. Therefore, we believe it is prudent to hold shorter duration credit assets, which have less price sensitivity if rates move higher. Despite witnessing volatility in the aftermath of the UK referendum vote, we remain cautiously optimistic on the prospects for the UK real estate market, as buildings let on long-term leases at attractive yields should prove defensive in an environment of low interest rates. As was the case in the period under review, political risk remains evident with upcoming elections in a number of key European countries during We also remain vigilant to risks in other areas of the world, particularly the transitioning Chinese economy. FUND INFORMATION RISK AND REWARD PROFILE Typically lower rewards Lower risk Typically higher rewards Higher risk The above indicator is known as the Synthetic Risk and Reward Indicator ( SRRI ). It shows how much a fund may have risen and fallen in the past, and therefore how much a fund s returns may have varied. It is a standard measure of volatility required under financial regulations to allow comparisons with other funds. The higher a fund s past volatility the higher the number on the scale and the greater the risk that investors in that fund may have made losses as well as gains. The lowest number on the scale does not mean that a fund is risk free. The Fund has been classed as 3 because its volatility has been measured as medium to average. The SRRI measure differs from that used by Dynamic Planner. The Fund aims to remain within Dynamic Planner s band 3 hence the reference to III in the name of the Fund. Further details can be found in the Prospectus. This indicator is based on historical data and may not be a reliable indication of the future risk profile of this Fund. The risk and reward profile shown is not guaranteed to remain the same and may shift over time. Liquidity/Credit Risks: The Fund invests indirectly in government and corporate debt. Their value is affected by changes in interest rates and inflation as well as their credit ratings. At times of market stress, corporate debt may not be saleable in a timely manner at reasonable prices. Property Fund Investment Risk: Investments may be illiquid and have wide price spreads that may impact the Fund s value. Currency Risk: Exchange rates movements may, when not hedged, cause the value of your investment to increase or decrease. Non-UCITS Retail Scheme (NURS): The Fund can be less diversified than UCITS schemes as it has higher investment limits for certain types of assets. It can also invest in assets which are not available to UCITS schemes. This can increase the potential rewards but can also increase risk. For full details of the Fund s risks, please see the Prospectus which may be obtained upon application and can be found on the ACD s website, by following the link Fund Information. CANADA LIFE ASSET MANAGEMENT LIMITED Portfolio Manager 3 November CF Canada Life Investments Fund II CF Canada Life Investments Fund II 21

13 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) Fund Information (continued) COMPARATIVE TABLES Where the Fund has significant investment in collective investment schemes, the operating charges take account of the ongoing charges incurred in the underlying schemes, calculated as the expense value of such holdings at the year end weighted against the net asset value of the share class at that date. A Accumulation shares Change in net assets per share (p/share) (p/share) (p/share) Opening net asset value per share Return before operating charges* Operating charges (1.85) (2.03) (1.79) Return after operating charges Distributions (2.81) (2.63) (2.04) Retained distributions on accumulation shares Closing net asset value per share * after direct transaction costs of: Performance Return after charges 11.38% 3.62% 3.21% Other Information Closing net asset value ( 000) 1, Closing number of shares 1,519, ,671 97,638 Operating charges 1.87% 1.91% 2.05% 2 Direct transaction costs Prices B Income shares Change in net assets per share (p/share) (p/share) (p/share) Opening net asset value per share Return before operating charges* Operating charges (1.72) (1.94) (1.68) Return after operating charges Distributions on income shares (2.51) (2.38) (1.87) Closing net asset value per share * after direct transaction costs of: Performance Return after charges 11.26% 3.65% 3.29% Other Information Closing net asset value ( 000) Closing number of shares Operating charges 1.37% 1.41% 1.55% 2 Direct transaction costs Prices Highest share price Lowest share price From 28 November Annualised figure due to share class launched less than 1 year. Highest share price Lowest share price From 28 November Annualised figure due to share class launched less than 1 year. 22 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 23

14 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) Fund Information (continued) COMPARATIVE TABLES (continued) B Accumulation shares Change in net assets per share (p/share) (p/share) (p/share) C Income shares Change in net assets per share (p/share) (p/share) (p/share) Opening net asset value per share Return before operating charges* Operating charges (1.31) (1.49) (1.68) Return after operating charges Distributions (2.76) (2.50) (1.89) Retained distributions on accumulation shares Closing net asset value per share * after direct transaction costs of: Performance Return after charges 11.91% 3.87% 3.35% Other Information Closing net asset value ( 000) Closing number of shares 118,342 31, Operating charges 1.37% 1.41% 1.55% 2 Direct transaction costs Prices Highest share price Lowest share price Opening net asset value per share Return before operating charges* Operating charges (1.00) (1.22) (1.06) Return after operating charges Distributions on income shares (2.78) (2.63) (1.91) Closing net asset value per share * after direct transaction costs of: Performance Return after charges 12.13% 4.44% 4.20% Other Information Closing net asset value ( 000) Closing number of shares 323, ,707 11,980 Operating charges 1.12% 1.16% 1.30% 2 Direct transaction costs Prices Highest share price Lowest share price From 28 November Annualised figure due to share class launched less than 1 year. 1 From 28 November Annualised figure due to share class launched less than 1 year. 24 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 25

15 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) Fund Information (continued) COMPARATIVE TABLES (continued) C Accumulation shares Change in net assets per share (p/share) (p/share) (p/share) G Accumulation shares Change in net assets per share ¹ (p/share) (p/share) (p/share) Opening net asset value per share Return before operating charges* Operating charges (1.03) (1.25) (1.16) Return after operating charges Distributions (2.88) (2.67) (2.02) Retained distributions on accumulation shares Closing net asset value per share * after direct transaction costs of: Performance Return after charges 12.22% 4.41% 3.97% Other Information Closing net asset value ( 000) 13,464 6,211 1,487 Closing number of shares 11,204,584 5,772,024 1,435,114 Operating charges 1.12% 1.16% 1.30% 2 Direct transaction costs Prices Highest share price Lowest share price Opening net asset value per share Return before operating charges* Operating charges (0.70) (0.93) (0.91) Return after operating charges Distributions on income shares (2.90) (2.69) (2.02) Retained distributions on accumulation shares Closing net asset value per share * after direct transaction costs of: Performance Return after charges 12.55% 4.71% 4.17% Other Information Closing net asset value ( 000) 12,112 10,813 10,378 Closing number of shares 10,000,250 10,000,250 10,000,250 Operating charges 0.82% 0.86% 1.00%² Direct transaction costs Prices Highest share price Lowest share price From 28 November Annualised figure due to share class launched less than 1 year. 1 From 28 November Annualised figure due to share class launched less than 1 year. 26 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 27

16 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) Fund Information (continued) FUND PERFORMANCE TO 15 OCTOBER 2016 (%) 1 year Since launch* CF Canlife Portfolio III Fund * Launch date 28 November The performance of the Fund is based on the published price per B Accumulation share which includes reinvested income. The performance of the Fund disclosed in the above table may differ from the Return after charges disclosed in the Comparative Table due to the above performance being calculated on the latest published price prior to the year end, rather than the year end return after operating charges. Details of the distributions per share for the year are shown in the Distribution Table on pages 44 to 46. RISK WARNING An investment in an open-ended investment company should be regarded as a medium to long term investment. Investors should be aware that the price of shares and the income from them can fall as well as rise and investors may not receive back the full amount invested. Past performance is not a guide to future performance. Investments denominated in currencies other than the base currency are subject to fluctuation in exchange rates, which can be favourable or unfavourable. PORTFOLIO STATEMENT AS AT 15 OCTOBER 2016 Holding Portfolio of Investments Value % FIXED INTEREST 57.83% ( %) 2,154,608 CF Canlife Corporate Bond 5, ,014,953 CF Canlife Global Bond 2, ,570 CF Canlife Short Duration Corporate Bond ,208,786 CF Canlife UK Government Bond 3, ,879 ishares Index-Linked Gilts UCITS ETF 1, ,995 Putnam Global High Yield Bond 1, TOTAL FIXED INTEREST 16, EQUITIES 24.29% ( %) 455,500 CF Canlife European ,600 CF Canlife Japan ,495 CF Canlife North American 1, ,597,851 CF Canlife UK Equity 2, ,033 CF Canlife UK Equity Income TOTAL EQUITIES 6, UK PROPERTY 7.77% ( %) 89,672 CF Canlife UK Property Jersey 2, MONEY MARKET 9.85% ( %) 2,744,602 BlackRock Institutional Sterling Liquidity 2, Portfolio of investments 27, other assets assets 27, The investments have been valued in accordance with note (h) of the Accounting Policies and are collective investment schemes. With the exception of ishares Index-Linked Gilts UCITS ETF and BlackRock Institutional Sterling Liquidity, all investments are related party holdings. 28 CF Canada Life Investments Fund II CF Canada Life Investments Fund II 29

17 CF CANLIFE PORTFOLIO III FUND ACD s Report (continued) SUMMARY OF MATERIAL PORTFOLIO CHANGES FOR THE YEAR ENDED 15 OCTOBER 2016 Total purchases for the year 000 (note 13) 10,615 Purchases Cost 000 CF Canlife Corporate Bond 1,982 CF Canlife UK Government Bond 1,399 CF Canlife UK Equity 1,237 CF Canlife Global Bond 1,110 CF Canlife Short Duration Corporate Bond 990 CF Canlife UK Property Jersey 797 CF Canlife North American 611 ishares Index-Linked Gilts UCITS ETF 595 CF Canlife Japan 535 CF Canlife European 529 Putnam Global High Yield Bond 445 CF Canlife UK Equity Income 385 In addition to above, purchases totalling 1,100 thousand were made in short term investments during the year. Total sales for the year 000 (note 13) 4,134 Sales Proceeds 000 CF Canlife North American 1,229 CF Canlife Corporate Bond 1,113 CF Canlife UK Government Bond 700 CF Canlife UK Equity 585 ishares Index-Linked Gilts UCITS ETF 240 CF Canlife Global Bond 220 CF Canlife UK Equity Income 47 In addition to above, sales totalling 50 thousand were made in short term investments during the year. The summary of material portfolio changes represents all of the purchases and sales during the year. FINANCIAL STATEMENTS STATEMENT OF TOTAL RETURN FOR THE YEAR ENDED 15 OCTOBER 2016 Notes Income: capital gains 2 2, Expenses 4 (168) (114) revenue before taxation Taxation 5 revenue after taxation Total return before distributions 2, Distributions 6 (558) (380) Change in net assets attributable to shareholders from investment activities 2, STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS FOR THE YEAR ENDED 15 OCTOBER 2016 Opening net assets attributable to shareholders 17,889 11,977 Amounts receivable on issue of shares 9,087 5,915 Amounts payable on cancellation of shares (1,615) (488) 7,472 5,427 Change in net assets attributable to shareholders from investment activities 2, Retained distributions on Accumulation shares Closing net assets attributable to shareholders 27,870 17, CF Canada Life Investments Fund II CF Canada Life Investments Fund II 31