Globevest Capital Tactical Covered Options Fund. Interim Financial Statements. June 30, 2018 (Unaudited)

Transcription

1 Globevest Capital Tactical Covered Options Fund Interim Financial Statements June 30, 2018 Interim Financial Statements Notice 2 Interim Comprehensive Income 3 Interim Financial Position 4 Interim Changes in Net Assets Attributable to Holders of Redeemable Units 5 Interim Cash Flows 6 Investment Portfolio 7-9 Derivative Financial Instruments Put and Call Options Short Position (Table 1) Derivative Financial Instruments Forward Foreign Currency Contracts (Table 2)

2 Notice The following unaudited Interim Financial Statements have not been subject to a review by the Fund s external auditors.

3 Interim Comprehensive Income For the six-month periods ended June 30, 2018 and $ $ Revenue Interest revenue Dividend revenue Net realized gain on sale of investments and derivative financial instruments 1,517 2,203 Net realized gain (loss) on foreign currency 170 (228) Net change in unrealized appreciation (depreciation) of investments and derivative financial instruments (437) 322 1,644 2,624 Expenses Management fees Fund valuation fees Custodian fees 10 8 Audit fees Commissions and other portfolio transaction costs Withholding expenses Increase in net assets attributable to holders of redeemable units 1,222 2,245 Increase in net assets attributable to holders of redeemable units per series Series A 6 15 Series F 794 1,554 Series O ,222 2,245 Increase in net assets attributable to holders of redeemable units per series per unit Series A Series F Series O The accompanying notes are an integral part of the interim financial statements.

4 4 Interim Financial Position (In thousands of Canadian dollars, except number of units and per unit amounts) $ $ ASSETS Current Investments 41,440 20,939 Cash and cash equivalents 8,788 17,013 Margin deposits on options 1,905 6,331 Dividends receivable Interest receivable Subscriptions of units receivable 3 Unrealized appreciation on derivative financial instruments - Forward Foreign Currency Contracts Other assets ,594 44,753 LIABILITIES Current Unrealized depreciation on derivative Financial Instruments Put and Call Options Short Position 1,510 1,024 Management fees payable Redemption of units payable 65 5 Other accrued expenses ,678 1,121 Net assets attributable to holders of redeemable units 50,916 43,632 Net assets attributable to holders of redeemable units per series Series A Series F 32,603 28,178 Series O 17,979 15,126 50,916 43,632 Units outstanding Series A 32,249 32,249 Series F 2,959,332 2,626,503 Series O 1,633,036 1,406,767 4,624,617 4,065,519 Net assets attributable to holders of redeemable units per series per unit Series A Series F Series O The accompanying notes are an integral part of the interim financial statements. On behalf of the Board of Directors of Globevest Capital Ltée, Director Director

5 5 Interim Changes in Net Assets Attributable to Holders of Redeemable Units For the six-month periods ended June 30, 2018 and 2017 (In thousands of Canadian dollars, except number of units) Series A Series F Series O $ $ $ $ $ $ Balance, beginning of period ,178 25,282 15,126 10,783 Increase in net assets attributable to holders of redeemable units , Capital unit transactions (a) Proceeds from sale of units 3, ,942 2,815 Amounts paid on redemptions (247) (324) (1,511) (1,384) 3,631 (121) 2,431 1,431 Increase in net assets attributable to holders of redeemable units for the period ,425 1,433 2,853 2,107 Balance, end of period ,603 26,715 17,979 12,890 (a) Capital unit transactions (number of units) Units outstanding, beginning of period 32,249 28,678 2,626,503 2,424,193 1,406,767 1,038,485 Units issued for cash 355,676 18, , ,074 Units redeemed (22,847) (30,279) (138,672) (127,926) Units outstanding, end of period 32,249 28,678 2,959,332 2,412,671 1,633,036 1,172,633 The accompanying notes are an integral part of the interim financial statements.

6 Interim Cash Flows For the six-month periods ended June 30, 2018 and 2017 (In thousands of Canadian dollars) $ $ OPERATING ACTIVITIES Increase in net assets attributable to holders of redeemable units 1,222 2,245 Changes in operating assets and liabilities Net foreign exchange gain on cash and cash equivalents (170) (9) Net realized gain on sale of investments and derivative financial instruments (2,690) (2,203) Net change in unrealized depreciation (appreciation) of investments and derivative financial instruments 437 (322) Investments purchased (36,402) (21,525) Proceeds from sale of investments 20,846 22,677 Proceeds from sale of derivative financial instruments (2,361) (272) Derivative financial instruments purchased 326 2,006 Net change in operating assets and liabilities (20,014) 352 Changes in non-cash items Margin deposits on options 4,426 (3,193) Dividends receivable (12) (3) Interest receivable (110) 1 Other assets (37) (6) Management fees payable 8 4 Other accrued expenses 3 (20) Net change in non-cash items 4,278 (3,217) Cash flows from operating activities (14,514) (620) FINANCING ACTIVITIES Proceeds from units issued for cash 7,817 3,026 Amounts paid on redemption of units (1,698) (1,706) Cash flows from financing activities 6,119 1,320 Net change in cash and cash equivalents (8,395) 700 Foreign exchange gain on cash and cash equivalents Cash and cash equivalents, beginning of period 17,013 12,072 Cash and cash equivalents, end of period (Note 7) 8,788 12,781 Dividends received included in the operating activities Interest received included in the operating activities The accompanying notes are an integral part of the interim financial statements.

7 7 Investment Portfolio June 30, 2018 (In Canadian dollars) Coupon rate Maturity date Nominal value Cost Fair value Net assets $ $ $ % BONDS CANADIAN BONDS Provincial Government Province of Ontario 1.625% ,500,000 3,256,150 3,272,295 Province of Ontario 2.000% ,500,000 3,265,644 3,278,540 Province of Quebec 2.642% , , ,424 6,916,049 6,946, Corporate bcimc Realty Corp % ,000,000 5,021,750 5,004,758 Royal Bank of Canada 2.834% , , ,007 5,673,712 5,664, TOTAL CANADIAN BONDS 12,589,761 12,611, TOTAL BONDS 12,589,761 12,611, EQUITIES CANADIAN EQUITIES Consumer Staples BRP Inc. 6, , ,280 Dollarama Inc. 4, , , , , Energy Canadian Natural Resources Ltd. 10, , ,194 Suncor Energy Inc. 10, , , ,884 1,008, Finance Bank of Montreal 2, , ,240 Canadian Imperial Bank of Commerce 1, , ,540 National Bank of Canada 3, , , , , Health Care BELLUS Health Inc. 50,000 29,068 26,000 PharmaCielo Ltd. 42, , , , , Industrial Enbridge Inc. 16, , , , , Materials Franco-Nevada Corp. 2, , , , , Telecommunications BCE Inc. 4, , , , , TOTAL CANADIAN EQUITIES 3,220,182 3,507, INTERNATIONAL EQUITIES Germany Volkswagen AG ADR 6, , , , , Israel NICE Ltd. ADR 1, , ,348 Orbotech Ltd. 2, , , , , Netherlands Cimpress NV , , , ,

8 8 Investment Portfolio June 30, 2018 (In Canadian dollars) Coupon rate Maturity date Nominal value Cost Fair value Net assets $ $ $ % United States Alerian MLP ETF 1,300 21,540 17,261 Align Technology Inc. 2, , ,589 Alphabet Inc. Class 'A' , ,347 Alphabet Inc. Class 'C' , ,007 Amgen Inc. 2, , ,342 Apple Inc. 3, , ,413 Arrow Electronics Inc. 1, ,497 98,967 At Home Group Inc. 8, , ,748 AT&T Inc. 7, , ,715 Bank of America Corp. 10, , ,600 Broadcom Inc , ,493 Camping World Holdings Inc. Class 'A' 10, , ,400 CarMax Inc. 3, , ,396 Celgene Corp. 4, , ,638 Chevron Corp. 4, , ,845 Cisco Systems Inc. 5, , ,161 Citigroup Inc. 10, , ,359 CoStar Group Inc , ,739 Costco Wholesale Corp. 2, , ,471 Cummins Inc. 1, , ,242 Deere & Co. 2, , ,713 Digital Realty Trust Inc. 3, , ,404 Enterprise Products Partners L.P. 7, , ,736 Equinix Inc , ,608 Exxon Mobil Corp. 3, , ,283 Facebook Inc. Class 'A' 2, , ,842 Fair Issac Corp. 1, , ,978 First Solar Inc. 2, , ,997 FMC Corp. 3, , ,752 Fortinet Inc. 2, , ,769 Gilead Sciences Inc. 7, , ,908 Grand Canyon Education Inc. 2, , ,456 Harris Corp , ,014 Home Depot Inc. 2, , ,976 Intel Corp. 2, , ,703 International Business Machines Corp , ,925 Johnson & Johnson 1, , ,520 JPMorgan Chase & Co. 3, , ,960 Laureate Education Inc. 10, , ,389 Lincoln National Corp. 5, , ,185 McDonald's Corp. 2, , ,985 McKesson Corp. 1, , ,599 Microsoft Corp. 6, , ,499 Monster Beverage Corp. 2, , ,324 Morgan Stanley 9, , ,830 New Relic Inc. 2, , ,602 New Residential Investment Corp. 10, , ,932 Newmont Mining Corp. 4, , ,302 NVIDIA Corp ,729 31,144 Oracle Corp. 2, , ,393 Owens & Minor Inc. 4,000 82,018 87,871 Packaging Corp. of America 1, , ,840 PayPal Holdings Inc. 1, , ,153 Procter & Gamble Co. (The) 6, , ,729 Proofpoint Inc. 1, , ,752 Prudential Financial Inc. 3, , ,265 Realty Income Corp. 3, , ,574 Regeneron Pharmaceuticals Inc , ,479 RingCentral Inc. 3, , ,457 Salesforce.com Inc ,152 54,692 Stanley Black & Decker Inc. 2, , ,197 Tesla Motors Inc. 1, , ,547 Tyler Technologies Inc , ,190

9 9 Investment Portfolio June 30, 2018 (In Canadian dollars) Coupon rate Maturity date Nominal value Cost Fair value Net assets $ $ $ % Ultimate Software Group Inc. (The) , ,136 Ventas Inc. 5, , ,347 VeriSign Inc. 1, , ,659 Verizon Communications Inc. 3, , ,946 Walmart Inc. 5, , ,999 Walt Disney Co. (The) 3, , ,365 Zendesk Inc. 2, , ,252 23,536,791 24,568, TOTAL INTERNATIONAL EQUITIES 24,336,587 25,321, TOTAL INVESTMENTS 40,146,530 41,439, Transaction costs (21,321) Total investments 40,125,209 41,439, Derivative financial instruments Total of put and call options short position (Table 1) (1,509,769) (2.97) Total of forward foreign currency contracts (Table 2) 260, Unrealized depreciation on derivative financial instruments (1,248,828) (2.45) Margin deposits on options 1,905, Other net assets 8,819, Total net assets attributable to holders of redeemable units 50,916, The accompanying notes are an integral part of the interim financial statements.

10 10 Derivative Financial Instruments Put and Call Options Short Position (Table 1) June 30, 2018 (In Canadian dollars) Number Expiry date of contracts Book value Fair value Net assets $ $ % Put options short position Canadian put options Canadian Imperial Bank of Commerce (26) (9,826) (3,809) Canopy Growth Corp (80) (20,665) (34,800) Husky Energy Inc (150) (10,587) (375) Pembina Pipeline Corp (100) (15,270) (3,615) Premium Brands Holdings Corp (40) (5,110) (3,000) Suncor Energy Inc (100) (16,942) (6,836) (78,400) (52,435) (0.10) American put options 2U Inc (55) (23,727) (5,604) ABIOMED Inc (11) (21,373) (43,456) ABIOMED Inc (10) (36,239) (11,437) Allstate Corp. (The) (30) (12,055) (14,790) Alphabet Inc. Class 'C' (3) (4,362) (177) Amazon.com Inc (2) (12,127) (3,116) American Express Co (30) (11,462) (16,959) Blackstone Group L.P. (The) (100) (20,451) (21,034) Boeing Co. (The) (14) (23,546) (27,792) Caterpillar Inc (25) (19,032) (23,335) Charles Schwab Corp. (The) (60) (18,648) (37,862) Chevron Corp (14) (8,332) (4,923) CME Group Inc (20) (14,317) (21,166) CVR Energy Inc (100) (16,555) (4,930) D.R. Horton Inc (90) (13,698) (10,116) Delta Air Lines Inc (45) (13,263) (23,516) Discover Financial Services (50) (15,346) (8,381) Express Scripts Holding Co (30) (10,204) (1,578) Facebook Inc. Class 'A' (8) (1,929) (68) Floor & Decor Holdings Inc. Class 'A' (50) (12,099) (7,724) FMC Corp (30) (12,731) (592) Freeport-McMoRan Inc (200) (16,713) (15,381) Helmerich & Payne Inc (43) (16,785) (19,220) Hess Corp (70) (29,666) (460) Hess Corp (90) (41,086) (4,792) HollyFrontier Corp (50) (16,048) (6,409) HollyFrontier Corp (20) (15,561) (28,396) Johnson & Johnson (30) (14,731) (16,959) Johnson & Johnson (30) (13,248) (14,100) Knight-Swift Transportation Holdings Inc (80) (23,805) (41,017) Kroger Co. (The) (100) (16,461) (20,640) Lamb Weston Holdings Inc (40) (9,117) (1,315) Lowe's Cos. Inc (30) (13,478) (17,649) New Residential Investment Corp (230) (32,268) (7,559) Northrop Grumman Corp (10) (13,176) (18,997) Old Dominion Freight Line Inc (25) (12,143) (7,888) Owens & Minor Inc (60) (11,950) (3,944) Penske Automotive Group Inc (50) (14,977) (8,874) Pfizer Inc (100) (16,765) (3,221) ServiceNow Inc (15) (15,688) (18,044) Tesla Motors Inc (5) (14,904) (14,971) Teva Pharmaceutical Industries Ltd. ADR (120) (28,563) (30,684) Texas Instruments Inc (26) (9,686) (461) Textron Inc (35) (6,912) (8,052) Ultimate Software Group Inc. (The) (7) (5,468) (5,568) Union Pacific Corp (28) (20,419) (4,252) UnitedHealth Group Inc (17) (18,905) (23,578) Valero Energy Corp (42) (25,306) (19,325) Valero Energy Corp (15) (11,152) (11,487) Ventas Inc (70) (17,918) (1,380) XPO Logistics Inc (40) (40,929) (76,513) Yum! Brands Inc (36) (7,341) (22,954) (872,665) (762,646) (1.50) Total Put options short position (951,065) (815,081) (1.60)

11 11 Derivative Financial Instruments Put and Call Options Short Position (Table 1) June 30, 2018 (In Canadian dollars) Number Expiry date of contracts Book value Fair value Net assets $ $ % Call options short position Canadian call options BCE Inc (40) (2,498) (263) Canadian Natural Resources Ltd (100) (13,573) (51,929) Dollarama Inc (45) (3,863) (3,375) Enbridge Inc (80) (4,843) (1,052) Franco-Nevada Corp (20) (4,376) (3,089) Suncor Energy Inc (100) (12,003) (69,676) (41,156) (129,384) (0.25) American call options Align Technology Inc (20) (28,215) (171,299) Alphabet Inc. Class 'A' (3) (3,084) (4,555) Alphabet Inc. Class 'C' (3) (3,294) (3,826) Amgen Inc (20) (12,157) (16,039) Apple Inc (37) (4,193) (340) AT&T Inc (71) (1,009) (140) Bank of America Corp (100) (8,214) (6,968) CarMax Inc (30) (12,554) (1,380) Celgene Corp (40) (18,937) (3,497) Chevron Corp (40) (12,252) (29,317) Cisco Systems Inc (52) (3,139) (34) Citigroup Inc (102) (19,097) (17,499) Costco Wholesale Corp (20) (3,004) (2,011) Cummins Inc (17) (10,748) (3,352) Deere & Co (23) (19,322) (16,933) Digital Realty Trust Inc (32) (11,072) (316) Exxon Mobil Corp (30) (7,325) (9,604) Facebook Inc. Class 'A' (29) (2,493) (4,289) FMC Corp (6) (2,154) (3,905) Gilead Sciences Inc (70) (15,986) (14,816) Grand Canyon Education Inc (20) (3,670) (2,301) Home Depot Inc (20) (2,606) (776) Intel Corp (20) (1,362) (13) JPMorgan Chase & Co (30) (12,520) (8,736) Lincoln National Corp (30) (9,920) (592) Lincoln National Corp (20) (5,143) (223) McKesson Corp (16) (11,096) (4,891) Microsoft Corp (69) (7,925) (4,399) Morgan Stanley (90) (19,003) (12,068) Newmont Mining Corp (40) (7,477) (8,940) Oracle Corp (27) (1,411) (53) Packaging Corp. of America (17) (10,914) (4,245) PayPal Holdings Inc (16) (10,829) (14,619) Procter & Gamble Co. (The) (60) (6,503) (21,297) Prudential Financial Inc (35) (11,801) (8,259) Regeneron Pharmaceuticals Inc (7) (14,809) (21,948) Tesla Motors Inc (18) (46,204) (116,011) Ventas Inc (50) (3,827) (20,870) Verizon Communications Inc (39) (1,996) (4,102) Walmart Inc (40) (1,740) (841) (389,005) (565,304) (1.11) Total call options short position (430,161) (694,688) (1.36) Total of put and call options short position (1,381,226) (1,509,769) (2.97) The accompanying notes are an integral part of the interim financial statements.

12 12 Derivative Financial Instruments Forward Foreign Currency Contracts (Table 2) June 30, 2018 (In Canadian dollars) Settlement date Currency buys Book value Currency sells Book value Fair value Net assets $ $ $ % Bank of New York Mellon USD (23,100,258) CAD 30,584, ,941 Total of forward foreign currency contracts 260, The accompanying notes are an integral part of the interim financial statements.

13 THE FUND The (hereafter the "Fund") was established under the laws of the Province of Quebec by a trust agreement dated April 18, 2016 (hereafter the "Trust Agreement"). The Fund is authorized to issue an unlimited number of series "A" units, series "F" units and series "O" units (collectively, the "Units"). Globevest Capital Ltée (the "Manager") manages the Fund and is responsible for the investment management of the Fund. National Bank Trust Inc. (the "Trustee") is the trustee of the Fund. National Bank Correspondent Network (the "Custodian") is the custodian of the Fund. The address of the Fund's registered office and its principal place of business is Lionel-Daunais Street, Boucherville, Quebec, J4B 0B1. The Fund seeks to maximise returns by providing high income and long-term capital appreciation through the sale of cash secured put options on equity securities to collect premiums and/or to reduce the net cost of acquiring equity securities, the direct investment mainly in listed equity securities issued by American or Canadian companies, or the sale of listed covered call options on these securities. The positions taken under the put options will be secured with cash cover as required under applicable securities laws. These interim financial statements were approved and authorized for publication by the Board of Directors of the Manager on August 15, CHANGES IN ACCOUNTING STANDARDS IFRS 9 Financial Instruments (IFRS 9) Effective January 1, 2018, the Funds adopted retrospectively IFRS 9 Financial Instruments. The new standard requires financial assets to be carried at amortized cost or fair value, with changes in fair value recognized in fair value through profit or loss (FVTPL) or fair value through other comprehensive income (FVOCI) based on the entity s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Upon transition to IFRS 9, the Fund s financial assets and financial liabilities that were classified and designated as fair value through profit and loss (FVTPL) under IAS 39 are, from the transition date, classified at fair value through profit or loss. Financial assets that were classified as loans and receivables under IAS 39 are classified as financial asset measured at amortized cost. There were no changes in the measurement attributes for any of the financial assets and financial liabilities upon transition to IFRS 9.

14 SIGNIFICANT ACCOUNTING POLICIES Basis of presentation These interim financial statements are presented in Canadian dollars and have been prepared in compliance with International Financial Reporting Standards (IFRS) and International Accounting Standard IAS 34 Interim Financial Reporting as well as the standards governed by Regulation respecting Investment Fund Continuous Disclosure. Valuation of investments The Fund recognizes financial instruments at fair value upon initial recognition, plus transaction costs in the case of financial instruments measured at amortized cost. Derivative financial instruments and investments are measured at fair value through profit or loss (FVTPL). All other financial assets and liabilities are measured at amortized cost. Fair value of investments and derivative financial instruments are measured using the same accounting policies as those used to measure the net asset value (NAV) transactions with unitholders. The change in appreciation of the fair value of investments and derivative financial instruments (including unrealized gains and losses on foreign exchange) and the average cost are included in the net assets attributable to holders of redeemable units and in the interim statements of comprehensive income under the caption Net change in unrealized appreciation of investments and derivative financial instruments. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and marketable securities) are based on quoted market prices at the close of trading on the reporting date. The Fund uses the last traded market price for both financial assets and financial liabilities where the last traded price falls within that day's bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. Furthermore, the Manager exercises its judgment in selecting the appropriate valuation technique for financial instruments that are not listed on an active market. The valuation techniques used are those that are currently applied by market participants. These methods and procedures may include, but are not limited to, performing comparisons with prices of comparable or similar securities, discounted cash flow analysis, obtaining valuation related information from issuers and/or other analytical data relating to the investment and using other available indicators of value. These values are independently assessed internally to ensure that they are reasonable. However, because of the inherent uncertainty of valuation, the estimated fair value of the aforementioned securities and interests may be materially different from the value that would have been used had a ready market for the investment existed. The fair value of such securities is affected by the perceived credit risks of the issuer, predictability of cash flows and the length of time to maturity.

15 SIGNIFICANT ACCOUNTING POLICIES (Continued) Derivative financial instruments Derivative financial instruments are recorded at fair value. Derivative financial instruments consist of option contracts and forward foreign currency contracts, which are valued at their last traded market price where the last traded market price falls within the day's bid-ask spread. Derivative financial instruments that are not traded in an active market are valued based on the results of valuation techniques using observable market inputs where possible, on such basis and in such manner established by the Manager. The premium received or paid on options written or purchased is recorded at cost. The unrealized gain or loss is reflected in the interim statements of comprehensive income as part of net change in unrealized appreciation of investments and derivative financial instruments. The gain or loss on sale or expiry of options is reflected in the interim statements of comprehensive income as part of the net realized gain on sale of investments and derivative financial instruments. Financial instruments short positions The Fund can enter into short positions by borrowing securities and selling them on the open market. The value of the short positions is recorded as liabilities in the statements of financial position. The Fund may experience a loss if the price of the security sold short increases between the date that the short position is initiated and the date that it is settled. The Fund will realize a gain if the price of the security for which the Fund has taken a short position decreases between the date that the short position is initiated and the date that it is settled. The unrealized gain or loss is the difference between the proceeds received and the value of the financial instruments short positions as at the date of evaluation and is recorded in the Net change in unrealized appreciation of investments and derivative financial instruments in the interim statements of comprehensive income and in the Unrealized depreciation on derivative financial instruments in the interim financial position. The Fund records a realized gain or loss when short positions are closed out. Securities and cash and cash equivalents may be segregated and used as collateral for the value of the Fund's obligation under short positions. Interest on securities borrowed is accrued on a daily basis on outstanding short positions. Investment transactions, transaction costs, and income and expenses Investment transactions are accounted for as of the trade date the date on which the Fund commits to purchase or sell the investment. The cost of investments represents the amount paid for each security and is determined as per the average cost basis. The realized gain (loss) on investment transactions and the unrealized appreciation (depreciation) on investments are computed as per the average cost basis which excludes transaction costs.

16 SIGNIFICANT ACCOUNTING POLICIES (Continued) Income and expenses are recorded using the accrual basis of accounting. The interest income for distribution purposes presented in the interim statements of comprehensive income is the nominal interest amount received by the Fund. The Fund does not amortize the premiums paid or discounts received upon the purchase of fixed income securities. Dividends are recognized as income at the ex-dividend date. Commission costs incurred in the purchase and sale of securities by the Fund and the other portfolio transaction costs are recognized in the interim statements of comprehensive income. Financial assets and liabilities Cash and cash equivalents, margin deposits on options, dividends receivable, interest receivable and subscriptions of units receivable are classified as financial assets and measured at amortized cost. Similarly, management fees payable and redemption of redeemable units payable are classified as financial liabilities measured at amortized cost. Amortized cost approximates fair value for these assets and liabilities due to their short-term maturity. Units outstanding are classified as financial liabilities since they meet criteria for that classification. Derecognition Financial assets are derecognized when the contractual rights to the cash flows from the investments have expired or when the Fund has significantly transferred the risk and financial reward of their participation (ownership). Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expired. Realized gains and losses are recognized based on the average cost method and included in the interim statement of comprehensive income of the period in which they occur. Impairment of financial assets Financial assets measured at amortized cost must be depreciated by the amount of expected credit losses. Given the very short maturity of these financial assets, the financial strengh of the counterparties involved and the history of losses incurred, the manager believes that the risk of loss is very low. For this reason, no impairment was recorded for assets measured at amortized cost. Foreign currency translation The reporting currency of the Fund is the Canadian dollar. The fair value of investments and other assets and liabilities denominated in a foreign currency is translated into Canadian dollars at the rate of exchange prevailing on each valuation date.

17 SIGNIFICANT ACCOUNTING POLICIES (Continued) The Fund's investment portfolio may consist of securities that are traded in foreign markets. The proceeds on the sale of such securities will be realized in the respective currency. Unhedged foreign currency positions are subject to gains and losses due to fluctuations in the respective exchange rates. Foreign currency purchases and sales of investments and foreign currency interest income are translated into the reporting currency at the rate of exchange prevailing on the respective date of the transaction. Foreign exchange gains and losses on the sale of investments are included in the interim statements of comprehensive income. Unrealized foreign exchange gains and losses on investments are included in Net change in unrealized appreciation (depreciation) of investments and derivative financial instruments in the interim statements of comprehensive income. Valuation of redeemable units The NAV per unit is calculated at 4:00 p.m. (Eastern time) on each valuation date by dividing net asset value attributable to each series by the number of units outstanding for the corresponding series. The "valuation date" means (i) the last business day in each calendar month; (ii) such other business days on which the Manager calculates or causes to be calculated the NAV; (iii) such other business days on which the Manager determines that NAV is required to be calculated for any purpose; and (iv) December 31 of each year. Increase in net assets attributable to holders of redeemable units per series per unit The increase in net assets attributable to holders of redeemable units per series per unit reported in the interim statements of comprehensive income is calculated as the increase in net assets attributable to holders of redeemable units divided by the weighted average number of units outstanding during the period. Taxation Under the Income Tax Act (Canada), the Fund is defined as a unit trust. All of the Fund's net assets for tax purposes and a sufficient portion of the net capital gains realized in any period must be distributed to holders of redeemable units to ensure no income tax is payable by the Fund. The Fund does not record income taxes. Hence, the tax benefit of capital and non-capital losses has not been reflected in the interim financial position as a deferred income tax asset. The Fund currently incurs withholding taxes imposed by certain countries on investment income and capital gains. Such income and gains are recorded on a gross basis, and the related withholding taxes, if any, are shown as a separate expense in the interim statements of comprehensive income.

18 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of interim financial statements requires management to use judgment in applying its accounting policies and to make estimates and assumptions about the future. The following discusses the most significant accounting judgments and estimates that the Fund has made in preparing the interim financial statements. Significant judgments The following are significant management judgments in applying the accounting policies of the Fund that have the most significant effect on the interim financial statements. Functional currency The Manager considers the Canadian dollar to be the functional currency in which the Fund operates, because it is the currency which, in its opinion, most faithfully represents the economic effects of the underlying transactions, events and conditions of the Fund. Moreover, the Canadian dollar is the currency in which the Fund assesses its performance. The Fund issues and redeems its units in Canadian dollars. Units classification According to IAS 32 Financial Instruments: Presentation, units must be classified as liabilities in the Fund s interim financial position, unless all conditions enabling their classification as equity are met. Because the conditions described hereafter are not met, all the Fund's units are presented as liabilities. But for the issuer s contractual obligation to buy back or redeem the units for cash or an other financial asset, the units characteristics don t include a contractual obligation to give back cash or other financial assets to an other entity, or for trade assets and liabilities with an other entity in conditions adverse to the Fund. Furthermore, the units characteristics don t include a contractual obligation that may be equity-settled by the Fund itself. Investment entity It was determined that Fund meets the definition of an investment entity per IFRS 10 Consolidated Financial Statements and, as a result, investments in structured entities are valued at FVTPL. An investment entity is an entity that: obtains funds from one or more investors, with the responsibility of providing them with investment management services; declares to its investors its mission to invest in portfolios with the sole objective of generating returns in the form of capital gains and/or investment income; and assesses the performance of almost all of its investments on a fair-value basis. The most important decision used to determine that the Fund meets the aforementioned definition is that fair value be used as the main performance criteria to assess the performance of nearly all of the Fund s investments.

19 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued) Estimation uncertainties Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Fair value of financial instruments IFRS stipulate that the Manager must determine the traded price by considering the characteristic that is most representative of fair value based on the specific facts and circumstances. The Manager has taken the position that when the last traded market price does not fall within that day's bid-ask spread, investments are measured at the point within the bid-ask spread which is the most representative of fair value based on the specific facts and circumstances. Furthermore, the Manager exercises its judgment in selecting the appropriate valuation technique for financial instruments that are not listed on an active market. The valuation techniques used are those that are currently applied by market participants. 5 - REDEEMABLE UNITS Units of the Fund, which are redeemable at the option of the unitholder in accordance with the provisions of the Declaration of Trust, do not have any nominal or par value and the number of units which may be issued is unlimited. The NAV per unit of each series of units of the Fund is calculated as at the close of trading of the Toronto Stock Exchange (the "TSX") (normally 4:00 p.m. Toronto time) on each day the TSX is open for trading. If the TSX closes early on any day, the NAV per unit of each series of units of the Fund will be calculated as at that earlier closing time at the NAV per unit determined after the purchase order or redemption request is received by the Manager. Units issued and outstanding represent the capital of the Fund. The Fund does not have any specific capital requirements on the subscription and redemption of units, other than minimum subscription requirements. Changes in the Fund's capital during the period are reflected in the interim statement of changes in net assets attributable to holders of redeemable units. The Manager is responsible for managing the capital of the Fund in accordance with its investment objectives and for managing its liquidity in order to meet redemption requests as discussed in Note 8. At the end of each quarter, income distributions are reinvested in additional units and recorded to the account of the unitholders pro rata to the number of units held by them.

20 MANAGEMENT FEES AND TRAILER FEES Management fees The Manager of the Fund provides investment and administrative services. In exchange for these services, each series of the Fund pays monthly management fees to the Manager based on a percentage of the NAV. The annual management fees charged are indicated in the following table: Series A 0.85 Series F 0.85 Series O 1.35 To encourage larger purchases, particularly by group plans, and to achieve effective management fees which are competitive, the Manager authorizes a reduction in the management fee rates borne by the Fund's investors. To effect such a reduction, the Manager reduces the management fee that it charges to the Fund with respect to the particular investor's units and the Manager distributes the amount of such reduction to that investor as a special distribution ("Management Fee Distribution"). The Manager will calculate and accrue Management Fee Distributions, where applicable, on a daily basis, and such amounts will be distributed at such intervals as the Manager determines from time to time. Generally, Management Fee Distributions are paid first out of net income and net realized capital gains and then out of capital. Management Fee Distributions will automatically be reinvested in additional units of the Fund, as applicable. Trailer fees The Manager of the Fund pays a trailer to the brokers according to the rates listed below: Series A 1.15 Series F None Series O None The trailer fees incurred during the six-month periods ended June 30, 2018 and 2017 was nil. 7 - CASH AND CASH EQUIVALENTS $ $ Cash Bank deposit 8,467 16,706 % % 8,788 17,013

21 FINANCIAL RISK MANAGEMENT Financial risk factors Risk management The Fund faces various financial risks: credit risk, market risk, liquidity risk and concentration risk. The Fund may use derivative instruments to achieve its investment objectives, moderate certain risk exposures or increase potential returns and risks. The Manager monitors all risks on a daily basis using a database system. The system gives the risk profile of the Fund by giving metrics for the asset mix, industry diversification, option delta, FX exposure, as well as the maturity profile of fixed income securities. Credit risk Credit risk is the risk that the counterparty to a financial instrument fails to fulfil an obligation and leads the other party to suffer a financial loss. The Fund's credit risk is derived primarily from bond investments. Generally, the carrying amount of the Fund's financial assets exposed to credit risk represents the maximum amount exposed to credit risk. Bond investments: The Fund manages the credit risk by investing mostly in bonds having a credit rating of BBB or better and by diversifying across many issuers. Also, the exposure of any particular corporate issuer is less than 5% of the Fund's assets. The Fund invested in financial instruments having the following credit rating: Credit rating Percentage of the Fund's total net assets % % AA A Additionally, credit risk with respect to cash and cash equivalents and margin deposits on derivative financial instruments is considered to be negligible because these financial instruments are held by a reputable financial institution with a quality external credit rating. The credit risk with respect to dividends receivable, interest receivable and subscriptions of units receivable is considered to be negligible. All transactions are done through approved brokers. The risk of default is considered minimal as securities sold are delivered only once the broker has made payment, whereas payment on a purchase is made to the broker only once the securities have been delivered. The trade will fail if either party defaults on its obligation.

22 FINANCIAL RISK MANAGEMENT (Continued) Market risk Interest rate risk: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The bond investments bear interest at a fixed rate and the Fund is, therefore, exposed to the risk of changes in fair value resulting from interest rate fluctuations. The Fund's bond investments are diversified across different maturities. The interest rate risk is therefore reduced. The Fund's exposure to interest rate risk due to bond investments according to their maturities is as follows: Maturity dates Total exposure $ $ Less than 1 year 11,556 1 to 5 years 395 1,010 5 to 10 years ,611 1,010 A change of plus or minus 1% in the interest rates, all other variables remaining unchanged, would impact the net assets attributable to holders of redeemable units by more or less $230 as at June 30, 2018 and $1 as at December 31, Actual results could differ from that sensitivity analysis and differences could be important; Currency risk: Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Fund invests in foreign companies (mainly in U.S. dollars) and is subject to currency risk. However, the proportion of foreign investments is monitored daily.

23 FINANCIAL RISK MANAGEMENT (Continued) The Fund's exposure to currency risk results from financial instruments denominated in U.S. dollars, and the impact on the net assets attributable to holders of redeemable units of an increase or a decrease of 5% of the exchange rate of the Canadian dollar compared to the U.S. dollar are as follows: Percentage Financial instruments denominated in U.S. dollars Amount of net assets Sensitivity CAN$ % CAN$ Investments and cash and cash equivalents Percentage Financial instruments denominated in U.S. dollars Amount of net assets Sensitivity CAN$ % CAN$ Investments and cash and cash equivalents Actual results could differ from that sensitivity analysis and differences could be important; Other price risk: Other price risk is the risk that the value of a financial instrument will fluctuate because of changes in market prices due to factors specific to security, its issuer or any other factor affecting a market or market segment. The Fund is exposed to other price risk since its equities and derivative financial instruments are exposed to the volatility of market factors. The other price risk is managed through diversification of the investment portfolio's exposure ratio. The impact on the net assets attributable to holders of redeemable units of a change of 1% in the trade places as at June 30, 2018 and December 31, 2017, all other variables remaining unchanged, would be more or less $288 and $193, respectively. Actual results could differ from that sensitivity analysis and differences could be important. Liquidity risk Liquidity risk is the risk that the Fund may not be able to settle or meet its obligations on time or at a reasonable price. The Fund is exposed to liquidity risk because of unrealized depreciation on derivative financial instruments, management fees payable and redemption of redeemable units payable.

24 FINANCIAL RISK MANAGEMENT (Continued) The vast majority of the Fund's investments are liquid. Finally, the bonds are of high quality as at June 30, 2018 and December 31, 2017: 64% and 100%, respectively, are rated A or better, ensuring that they can be sold at a fair price, if need be. All the Fund's liabilities are due in the next year, except for unrealized depreciation on derivative financial instruments for which the maturity is described in Table 1 and Table 2. Concentration risk Concentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product type, industry sector or counterparty type. The following is a summary of the Fund's concentration risk, expressed in terms of percentage of total net assets attributable to holders of redeemable units invested by sector: Market segment % % Canadian bonds Canadian equities Consumer staples Financials Industrial Health care 0.33 Energy 1.98 Materials Telecommunication 0.42 International equities Israel 0.67 China 0.39 Germany 0.51 Netherlands Singapore 0.89 United states Hierarchy of financial instruments at fair value Financial instruments established at fair value in the interim financial position are classified using a three-level hierarchy, based on the quality of the inputs used to establish the fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The fair value hierarchy is comprised of the following three levels: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities, for which the investment managers have access on valuation date;

25 FINANCIAL RISK MANAGEMENT (Continued) Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: inputs for the asset or liability that are not based on observable market data. The classification within the hierarchy is based on the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the financial asset or liability. When on the interim financial position date, the observable inputs used for a financial instrument are different from those used at the opening date, the Fund s policy is to establish that at the closing date, a transfer between levels of the fair value hierarchy is deemed to have occurred. The determination of what constitutes "observable data" requires significant judgment by the Fund. The Fund considers observable data to be that of market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The table below illustrates the classification of the fair value hierarchy of the assets and liabilities of the Fund recorded at fair value Level 1 Level 2 Level 3 Total $ $ $ $ Assets Investments 28,829 12,611 41,440 Unrealized appreciation on derivative financial instruments Liabilities Unrealized depreciation on derivative financial instruments (1,510) (1,510) 27,319 12,872 40,191

26 FINANCIAL RISK MANAGEMENT (Continued) Level 1 Level 2 Level 3 Total $ $ $ $ Assets Investments 19,929 1,010 20,939 Unrealized appreciation on derivative financial instruments Liabilities Unrealized depreciation on derivative financial instruments (1,024) (1,024) 9 - RELATED PARTY TRANSACTIONS 18,905 1,442 20,347 The Manager is responsible for the management of the Fund's investment portfolio, including investment decisions relating to the Fund's assets. The Manager provides instructions which permit the Fund to make securities transactions as follows: Transactions on investment funds or discretionary accounts, all managed by the Manager; Engagement in cash transactions with related investment funds and discretionary accounts, all managed by the Manager; and Purchase of the Trustee's and the Custodian's parent company securities. The instructions require, from the securities transactions with the Manager's related parties, (i) to be free of influence and not to reflect consideration relevant to a related entity of the Manager; (ii) to represent the Manager's judgment without any influence, in the best interest of the Fund; (iii) to be consistent with the Manager's policies and procedures; and (iv) to get a reasonable and appropriate result for the Fund. During the six-month period ended June 30, 2018 and the six-month period ended June 30, 2017, management fees were paid to the Manager. These transactions occurred in the normal course of operations and the fees are measured at exchange value, which is the amount established and agreed to by the related parties. For the six-month period ended June 30, 2018 and June 30, 2017, the Fund expensed management fees of $296 and $235, respectively., amounts of $49 and $41, respectively, payable to the Manager are disclosed under the caption Management fees payable.