Mawer Global Small Cap Fund

Transcription

1 Interim Report of Fund Performance Discussion of Fund Performance For the Period Ended June 30, 2018 Investment Objectives and Strategies This interim management report of fund performance contains financial highlights but does not contain either interim or annual financial statements of the investment fund. You may obtain a copy of the interim or annual financial statements at no cost, by calling , by writing us at Suite 600, th Avenue SW, Calgary, Alberta T2R 0A8, or by visiting our website at or SEDAR at The objective of the (the Fund ) is to invest for above average long-term returns in securities of smaller companies around the world. This is done by choosing companies that we believe will be wealth-creating in the long-term and are trading at a discount to their intrinsic value. We prefer companies with enduring competitive advantages that will allow them to earn a return greater than their cost of capital over the longterm. The Fund has a long-term buy-and-hold strategy and seeks to keep turnover low. Unitholders may also contact us using one of the above noted methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. This Report of Fund Performance includes certain statements that are forward looking statements. All statements, other than statements of historical fact, included in this report that address activities, events or developments that the portfolio advisor, Mawer Investment Ltd., expects or anticipates will or may occur in the future, including such things as anticipated financial performance, are forward looking statements. The words may, could, would, should, believe, plan, anticipate, expect, intend, forecast, objective and similar expressions are intended to identify forward looking statements. These forward looking statements are subject to various risks and uncertainties, including the risks described in the Simplified Prospectus of the Fund, uncertainties and assumptions about the Fund, capital markets and economic factors, which could cause actual financial performance and expectations to differ materially from the anticipated performance or other expectations expressed. Economic factors include, but are not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. All opinions contained in forward looking statements are subject to change without notice and are provided in good faith but without legal responsibility. The portfolio advisor has no specific intention of updating any forward looking statements whether as a result of new information, future events or otherwise, except as required by securities legislation. Certain research and information about specific holdings in the Fund, including any opinion,is based upon various sources believed to be reliable, but it cannot be guaranteed to be current, accurate or complete. It is for information only, and is subject to change without notice. Risk This Fund is suitable for investors seeking long-term growth and who have a moderate to high tolerance for risk. General risks of investing in this Fund are outlined in the Prospectus and include the possibility of reduction in value of any given investment, liquidity risk, interest rate risk, and currency risk amongst others. The Manager reduces the exposure to these risks by not concentrating more than 20% of the net assets of the Fund in a particular industry (i.e., sub-sector) as defined by the Global Industry Classification Standards (GICS). It is also the Manager s policy to have no more than 10% of the net assets in any one common share of a corporation, at the time of purchase. The Fund typically owns positions in global corporations with a market capitalization of $3 billion (USD) or less at the time of purchase It is the Manager s intention to be generally fully invested (less than 5% in cash). The Fund was invested in 8 of the 11 Global Industry Classification (GICS) sectors at June 30, The Fund s largest sector weightings were in Industrials (29%), Information Technology (24%), and Consumer Staples (13%). Combined, the weight in the three largest sectors represented 66% of the portfolio which is an uptick from 59% at the end of In aggregate, the ten largest individual holdings accounted for 33% of the portfolio which is up from 30% as of December 31, Results of Operations The Fund's net assets increased 7.7% to $2,720.1 million from $2,525.2 million at June 30, Of this change, $121.5 million was attributable to positive investment performance and $73.4 million was due to net contributions to the Fund. Over the past 6 months, the Fund s Series A units were up 4.1% (after management fees) versus a 6.5% return for the blended benchmark which consists of the Russell Global Small Cap Index from inception to September 30, 2016 and the MSCI AWCI Small Cap (Net) Total Return Index as of June 30, All performance values provided are in Canadian dollar terms. When assessing relative performance by sector, the Fund s relative return is mainly attributable to negative sector allocation. Negative allocation was driven by the Fund s lack of exposure to Health Care, the benchmark s best performing sector and cash drag, holding cash in a rising market environment. Meanwhile, security

2 selection was also negative due to the Fund s Financials, Consumer Staples, and Information Technology holdings underperforming the benchmark. When examining relative return from a geographic perspective, the Fund s underperformance is attributable to regional allocation. The Fund s lack of exposure to the U.S. drove the negative allocation. Meanwhile, selection was positive due to the Fund s U.K., Canadian, and U.S. holdings. Overall the top contributors to the Fund s performance were Softcat Plc, Insperity, Inc., and Constellation Software Inc. Conversely, PC Jeweller Ltd., MYOB Group Ltd., and SYNNEX Corporation were the biggest year-to-date detractors. The Fund initiated the following new positions over the period: 1. ADDCN Technology 2. Amadeus Fire 3. APG SGA SA 4. Bravida Holding AB 5. Bravura Solutions Ltd 6. HiQ International 7. HRnetGroup 8. Kusuri no Aoki Holdings Co 9. Marr SpA 10. S-1 Corporation The Fund exited the following positions over the period: 1. Bangkok Aviation Fuel Services PCL 2. Beijer Ref AB 3. Computer Services Inc 4. DCC PLC 5. Frutarom 6. LIC Housing Finance Ltd. 7. Nihon Kohden Corp. 8. OldTown Berhad 9. ooh!media Ltd 10. PC Jeweller Ltd. 11. Servelec Group PLC 12. Unifin Recent Developments The year began with a more volatile backdrop as rising interest rates generated some investor uncertainty. The second quarter of 2018 can be characterized as mostly positive for investment returns perhaps surprisingly so, given the worries about escalating trade disputes and rising interest rates. A contributing factor was strong global economic growth. The U.S. performed well and other regions such as Canada, Japan, UK, the Eurozone, and a number of emerging markets experienced a slower pace of growth than previous quarters. In the U.S., strong fundamental results from companies, led by earnings growth and the flow through of lower tax rates, had a positive effect for equity prices. While the U.S. 10- year bond yield exceeded 3% in May, trepidation in markets caused it to fall back to February levels and the U.S. dollar appreciated versus all major currencies. Oil prices also rose in Q2, primarily on a change in U.S. policy stance with Iran. The Canadian dollar lost value versus the U.S. dollar, but otherwise appreciated versus most other major currencies. We believe it is important to note that the strategy s geographic make-up is the result of our stock selection process, and not a starting point. Currency fluctuations, diverging economic growth trajectories, and investor sentiment can all have material impacts in the short-term. But as long-term investors, we believe the proceeds of our decision to initiate a position in a stock are realized over the entire holding period of a stock, which tend to be measured in multiple years. And over the long-term, our view is that the benefits of focusing on wealth-creating businesses run by excellent management teams, if purchased at a reasonable price, far outweigh any short-term fluctuations associated with a company s country of domicile. Related Party Transactions Fees As Advisors to the Fund, Mawer Investment Ltd. ( Mawer ) receives management fees which are calculated for Series A Units as 1.50% per annum of the net asset value of the Fund calculated on a daily basis. fees for Series O Units are payable directly to the Manager by Series O investors and not by the Fund. The terms of the Agreement were amended January 4, 1994, to grant the Manager of the Fund the ability, at their discretion, to reduce the management fees for large investors. This reduction is effected by means of a management fee distribution and will be automatically reinvested in additional units of the Fund at the net asset value of the Fund on the date of distribution. Mawer also receives fees for performing administrative services. As at June 30, 2018 the Fund owes Mawer $30,268 related to these administrative services.

3 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the six-month period ended June 30, and for each of the past five years ended December 31 as applicable. This information is derived from the Fund s unaudited interim financial statements and audited annual financial statements which are prepared in accordance with IFRS. The Fund's Net Asset Value (NAV) per Unit SERIES A Net Assets, beginning of period Increase operations: Total revenue Total expenses (0.17) (0.29) (0.26) (0.25) (0.22) (0.17) Realized gains period Unrealized gains period (0.19) 1.06 (0.61) Total increase operations¹ (0.07) Distributions: From income (excluding dividends) - (0.12) (0.13) (0.08) (0.05) (0.10) From dividends - - (0.01) From capital gains - (0.53) - (0.04) (0.01) (0.14) Return of capital Total Distributions² - (0.65) (0.14) (0.12) (0.06) (0.24) Net Assets, end of period SERIES O Net Assets, beginning of period Increase operations: Total revenue Total expenses (0.03) (0.03) (0.03) (0.03) (0.04) (0.03) Realized gains period Unrealized gains period (0.18) 1.11 (0.62) Total increase operations¹ Distributions: From income (excluding dividends) - (0.37) (0.37) (0.28) (0.23) (0.20) From dividends - (0.01) (0.02) (0.01) - - From capital gains - (1.22) - (0.14) (0.02) (0.14) Return of capital Total Distributions² - (1.60) (0.39) (0.43) (0.25) (0.34) Net Assets, end of period (1) Net asset value and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period (June 30th). (2) Distributions were reinvested in additional units of the Fund. Ratios and Supplemental Data SERIES A Net Assets (000's) 1 814, , , , , ,452 Number of units outstanding (000's)¹ 49,402 45,200 41,879 36,802 21,909 18,463 expense ratio² 1.74% 1.76% 1.81% 1.74% 1.82% 1.82% expense ratio before waivers or absorptions 1.74% 1.76% 1.81% 1.74% 1.82% 1.82% turnover rate³ 16.72% 37.26% 10.79% 12.03% 12.00% 14.45% Trading expense ratio % 0.11% 0.07% 0.09% 0.10% 0.08% Closing market price or pricing NAV, (if applicable)

4 SERIES O Net Assets (000's) 1 1,905,674 1,809,682 1,482,267 1,420, , ,101 Number of units outstanding (000's)¹ 117, , , ,616 85,418 62,472 expense ratio² 0.04% 0.04% 0.05% 0.04% 0.08% 0.10% expense ratio before waivers or absorptions 0.04% 0.04% 0.05% 0.04% 0.08% 0.10% turnover rate³ 16.72% 37.26% 10.79% 12.03% 12.00% 14.45% Trading expense ratio % 0.11% 0.07% 0.09% 0.10% 0.08% Closing market price or pricing NAV, (if applicable) (1) This information is for the period ended June 30, 2018 and December 31 of any other period(s) shown. (2) expense ratio is based on total expenses for the stated period and is expressed as an annualized percentage of daily average net assets during the period. (3) The Fund s portfolio turnover rate indicates how actively the Fund s Advisors manage its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher a fund s portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between a high turnover rate and the performance of a fund. (4) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period. Past Performance Sales commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any investor that would have reduced returns. Mutual funds are not guaranteed. Their value changes frequently and past performance may not be repeated. The Fund s performance numbers assume that all distributions are reinvested in additional units of the Fund. If you hold this Fund outside of a registered plan, income and capital gains distributions that are paid to you increase your income for tax purposes whether paid to you in cash or reinvested in additional units. The amount of the reinvested taxable distributions is added to the adjusted cost base of the units that you own. This would decrease your capital gains or increase your capital loss when you later redeem from the Fund, thereby ensuring that you are not taxed on this amount again. Please consult your tax advisor regarding your personal tax situation. The past performance of the Fund is set out in the following charts. Year-by-Year Returns The bar charts below show the Fund s annual performance in each of the past 10 years to June 30, The charts show in percentage terms how an investment made on January 1 would have increased or decreased by December 31 of the fiscal year. Series A 60% 40% 20% 0% -20% Series O 60% 40% 20% 0% (1) This information is for the period ended June 30, 2018 and December 31 of any other period(s) shown. (*) The Fund's start date was October 2, Annual Compound Returns The following table shows the historical annual compound total return of the Fund for the periods shown ending on June 30, The annual compound total return is benchmarked to the Mawer Global Small Cap Benchmark (GSC Benchmark) and calculated on the same compound basis. The GSC Benchmark is a composite return stream consisting of Russell Global Small Cap Index from inception to September 30, 2016 and the MSCI All Country World Small Cap Index (Net), as of September 30, All index returns are calculated in Canadian dollars on a total return basis, meaning that all distributions are reinvested. 1 Year 3 Year 5 Year 10 Year Fund Series A 12.9% 11.3% 18.5% 15.2% Fund Series O 14.8% 13.2% 20.5% 17.2% Fund Benchmark 15.3% 11.2% 15.2% 10.2%

5 Summary of Investment A summary of the Fund as at June 30, 2018 is as follows: % of Cash Total cash Treasury bills Total short-term Equities Asia Europe North America South Pacific Total equities Total portfolio Totals may not add to 100% due to rounding. The following table list the 25 largest holdings of the Fund as at June 30, Issuer Softcat PLC XP Power Ltd. Tsuruha Holdings, Inc. Jardine Lloyd Thompson Group PLC Diploma plc Ascential PLC Constellation Software Inc. Bechtle AG Insperity, Inc. MYOB Group Limited Bravida Holding AB Cembra Money Bank AG VZ Holding AG APN Outdoor Group Pty, Ltd. Addtech AB Series B KWS Saat SE Kainos Group PLC Origin Enterprises PLC Amsterdam Commodities NV Fox Factory Holding Corp. Freightways Limited Kusuri No Aoki Holdings Co., Ltd. Hansen Technologies Ltd. Tikkurila OYJ NICE Information Service Co., Ltd. Percentage of Transactional Net Asset Value 6.1% 3.4% 3.3% 3.3% 3.2% 3.0% 2.9% 2.6% 2.5% 2.5% 2.4% 2.4% 2.2% 1.9% 1.8% 1.8% 1.5% 1.5% 1.4% 1.3% 1.2% The investments and percentages may have changed by the time you purchase units of this fund. The top 25 holdings are made available quarterly, 60 days after quarter-end and may be obtained by contacting your registered representative or by contacting Mawer toll-free at or by at info@mawer.com.