Sprott Short-Term Bond Class

Transcription

1 Sprott Short-Term Bond Class Sprott Corporate Class Inc. ANNUAL MANAGEMENT REPORT OF FUND PERFORMANCE December 31 The annual management report of fund performance is an analysis and explanation that is designed to complement and supplement an investment fund s financial statements. This report contains financial highlights but does not contain the complete annual financial statements of the investment fund. You can get a copy of the annual financial statements at your request, and at no cost, by calling , by visiting our website at or SEDAR at or by writing to us at: Ninepoint Partners LP, Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2700, P.O. Box 27, Toronto, Ontario M5J 2J1. Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure.

2 Management Discussion of Fund Performance Investment Objective and Strategies The investment objective of the Sprott Short-Term Bond Class (the Fund ) is to seek a similar return to its underlying fund, Sprott Short-Term Bond Fund (the Underlying Fund ) by investing substantially all of its assets in securities of that fund. The investment objective of the Underlying Fund is to provide regular income while preserving capital and maintaining liquidity through investing primarily in short-term debt securities issued by Canadian federal, provincial and municipal governments as well as corporate issuers. To achieve the Underlying Fund s investment objective, it will employ investment strategies based upon economic research, quantitative and technical analysis, the analysis of credit quality pertaining to prospective investments and establishing an evolving asset allocation containing government and corporate bonds. Risk The risks of investing in the Fund are described in the Fund s simplified prospectus. The Fund is suitable for those investors who seek exposure to short-term high quality fixed income securities issued primarily by Canadian governments and companies. The Fund is suitable for investors with a low risk tolerance and a short-term investment horizon. There were no significant changes to the investment objective and strategies that affected the Fund s overall level of risk during the reporting period. Results of Operations and Recent Developments The Fund, Series A, returned 0.4% during, compared to a 0.1% return for the FTSE TMX Canada Short Term Overall Bond Index for the same period. The Bank of Canada raised its benchmark interest rate twice in, surprising the market and driving overall interest rates higher. In response, the Manager purchased some floating rate securities and reduced the overall duration (sensitivity to interest rate changes) of the Underlying Fund. The Underlying Fund s overweight allocation to investment-grade bonds rated BBB and BBB+ contributed to performance, as tightening spreads (the difference in yield from a Treasury bond with the same maturity) offset higher interest rates. An allocation to floating rate preferred shares improved the yield of the underlying portfolio without adding duration, also contributing to performance. Individual contributors to the Underlying Fund s performance included Brookfield Asset Management Inc. floating rate preferred shares. The price of this security rose in tandem with interest rates, offering both a higher coupon and price appreciation. Notes issued by Canadian Western Bank also contributed. As oil prices recovered and the firm issued equity, its credit quality improved and the spread on the securities tightened. Exposure to higher-duration securities detracted from the Underlying Fund s performance as interest rates rose over the period. The Fund s net asset value of the Fund decreased by 34.5% during the period, from 9.7 million as at December 31, to 6.3 million as at December 31,. The decrease was primarily the result of net share redemptions of 3.4 million. The management expense ratio decreased from the prior period. Ninepoint Partners LP is the manager and portfolio advisor of the Fund. Prior to August 1,, Sprott Asset Management LP was the manager and portfolio advisor of the Fund. Ninepoint Partners LP assumed the portfolio management of the Canadian diversified asset business of Sprott Asset Management LP on August 1,.

3 Related Party Transactions MANAGEMENT FEES The Fund pays a management fee to the Manager, at an annual rate of 0.75% for Series A shares, 0.5% for Series F shares and is negotiated by the shareholders for Series I. The management fee is calculated and accrued daily based on daily net asset value of the applicable series of the Fund, and is paid monthly. For the year ended December 31,, the Fund incurred management fees of 50,165 (including taxes). The breakdown of the services received in consideration of the management fees, as a percentage of management fees, is as follows: Portfolio Advisory Trailing Commission Sprott Short-Term Bond Class Series A 79% 21% Sprott Short-Term Bond Class Series F 89% 11% Out of the management fees that the Manager or former manager received from the Fund, the Manager or former manager paid trailer commissions of 2,602 during the year ended December 31,, to Sprott Private Wealth LP, an affiliate of the former manager. OPERATING EXPENSES The Fund pays its own operating expenses, which include, but are not limited to, audit, legal, custodial, filing and administrative expenses as well as shareholder reporting costs. The Manager pays certain of these expenses on behalf of the Fund and then is reimbursed by the Fund. At its sole discretion, the Manager may waive or absorb a portion of the operating expenses of the Fund. Amounts waived or absorbed by the Manager are reported in the Statements of Comprehensive Income. Waivers or absorptions can be terminated at any time without notice. For the year ended December 31,, the Manager absorbed 73,100 of expenses. OTHER RELATED PARTY TRANSACTIONS The Fund relied on the approval, positive recommendation or standing instruction from the Fund s Independent Review Committee with respect to any related party transactions.

4 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 years shown. The Fund s Net Assets per Share 1 Series A Net assets, beginning of period Increase (decrease) from operations: Total revenue Total expenses (0.09) (0.11) (0.10) (0.08) (0.08) Realized gains (losses) for the period (0.02) (0.05) Unrealized gains (losses) for the period (0.04) (0.05) (0.01) 0.06 (0.03) Total Increase (decrease) from operations Distributions: Total annual distributions Net assets, end of period Series F Net assets, beginning of period Increase (decrease) from operations: Total revenue Total expenses (0.06) (0.09) (0.08) (0.07) (0.07) Realized gains (losses) for the period (0.02) (0.04) Unrealized gains (losses) for the period (0.04) (0.04) (0.11) 0.05 (0.02) Total Increase (decrease) from operations Distributions: Total annual distributions Net assets, end of period

5 Series I Net assets, beginning of period Increase (decrease) from operations: Total revenue 0.26 Total expenses Realized gains (losses) for the period (0.05) Unrealized gains (losses) for the period 0.06 Total Increase (decrease) from operations Distributions: Total annual distributions Net assets, end of period This information is derived from the Fund s interim and audited annual financial statements. 2 The increase/decrease from operations is based on the weighted average number of shares outstanding over the financial period. Net assets and distributions are based on the actual number of shares outstanding at the relevant time. This table is not intended to be a reconciliation of beginning to ending net assets per share. 3 All outstanding Series I units were fully redeemed during the year ended December 31,.

6 Ratios and Supplemental Data Series A Total net asset value (000s) 1 1,514 3,569 2,538 1,263 1,663 Number of shares outstanding 1 139, , , , ,066 Management expense ratio % 1.14% 1.13% 0.81% 0.82% Management expense ratio before waivers or absorptions % 2.25% 3.48% 4.04% 2.89% Trading expense ratio % 0.00% 0.00% 0.00% 0.00% Portfolio turnover rate % 93.66% % 67.52% 99.21% Net asset value per share Series F Total net asset value (000s) 1 4,819 6,106 3, Number of shares outstanding 1 438, , ,505 20,786 23,971 Management expense ratio % 0.92% 0.91% 0.65% 0.57% Management expense ratio before waivers or absorptions % 2.01% 2.88% 3.88% 2.64% Trading expense ratio % 0.00% 0.00% 0.00% 0.00% Portfolio turnover rate % 93.66% % 67.52% 99.21% Net asset value per share Series I Total net asset value (000s) 1 55 Number of shares outstanding 1 5,285 Management expense ratio % Management expense ratio before waivers or absorptions % Trading expense ratio % Portfolio turnover rate % Net asset value per share The information is provided as at December 31 of the years shown. 2 Management expense ratio ( MER ) is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. 3 The Manager may waive or absorb a portion of the operating expenses of the Fund. Waivers and absorption can be terminated at any time. 4 The trading expense ratio ( TER ) represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. The TER includes dividend expense and securities borrowing expense paid by the Fund in connection with securities sold short. As a result of the Fund s investment in the Underlying Fund, the TER includes costs that are indirectly incurred by the Fund attributable to its investment in the Underlying Fund. 5 The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor trades 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 year. The higher the Fund s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. As this Fund only invests in units of the Underlying Fund, the portfolio turnover rate relates to additional purchases and sales of these units resulting from shareholder subscriptions and redemptions.

7 Past Performance The indicated rates of return are the historical total returns including changes in share values and assume reinvestment of all distributions in additional shares of the relevant Series of the Fund. These returns do not take into account sales, redemption, distribution or optional charges or income taxes payable by any shareholder that may reduce returns. Please note that past performance is not indicative of future performance. All rates of return are calculated based on the Net Asset Value of the particular Series of the Fund. Year-by-Year Returns The following chart indicates the performance of each Series of the Fund for the previous twelve-month periods ended December 31 shown, unless otherwise noted. The chart shows, in percentage terms, how much an investment made on the first day of each period would have grown or decreased by the last day of each period. 10 Return (%) * 2012** *** *** *** *** Series A Series F Series I * Return from October 17, 2011 (launch date) to December 31, 2011 (not annualized). ** Return from June 27, 2012 to December 31, 2012 for Series I (not annualized). *** There were no Series I shares outstanding at period end. Annual Compound Returns The following table illustrates the annual compound total return for each Series of shares of the Fund for the periods shown. As a basis of performance comparison, the annual compound return of the Fund is compared to that of the FTSE TMX Canada Short Term Overall Bond Index (the Index ). The Index, a subset of the FTSE TMX Canada Universe Bond Index, tracks investment-grade fixed income securities with remaining terms of 1 to 5 years. The Fund s former benchmark was Government of Canada 12-month T-bill return. The benchmark was changed as the new index is more representative of the composition of the portfolio. Since the Fund does not necessarily invest in the same securities or in the same proportion as these indices, the performance of the Fund is not expected to equal their performance. Since 1-Year 3-Year 5-Year Inception* Sprott Short-Term Bond Class Series A 0.4% 1.0% 1.3% 1.4% FTSE TMX Canada Short Term Overall Bond Index 0.1% 1.2% 1.7% 1.8% Government of Canada 12-month T-bill 1.0% 0.7% 0.8% 0.9% Sprott Short-Term Bond Class Series F 0.6% 0.7% 0.4% 1.6% FTSE TMX Canada Short Term Overall Bond Index 0.1% 1.2% 1.7% 1.7% Government of Canada 12-month T-bill 1.0% 0.7% 0.8% 0.9% * Since launch date of October 17, 2011 for Series A and December 7, 2011 for Series F. Returns for Series I are not shown as there were no Series I shares outstanding as at December 31,.

8 Summary of Investment Portfolio As at December 31, Portfolio Allocation All holdings of the Underlying Fund, as a percentage of the net asset value of the Underlying Fund are as follows: % of Net Asset Value Issuer % of Net Asset Value Long Positions TD Capital Trust III, 7.23%, Mutual Funds Bank of Montreal, 3.40%, Apr 23, Total Long Positions Bruce Power LP, 2.84%, Jun 23, Bank Indebtedness (0.0) Royal Bank of Canada, 1.92%, Jul 17, Other Net Liabilities (0.1) Brookfield Asset Management Inc., Preferred Shares 5.4 Total Net Asset Value American Express Canada Credit Corp., 2.31%, Mar 29, Molson Coors International LP, 2.25%, Sep 18, Canadian Western Bank, 2.79%, Sep 13, Loblaw Cos Ltd., 3.75%, Mar 12, Ford Credit Canada Ltd., 3.14%, Jul 14, HSBC Bank Canada, 2.49%, May 13, Canadian Imperial Bank of Commerce, 2.35%, Jun 24, Toyota Credit Canada Inc., 2.25%, May 23, Daimler Canada Finance Inc., 2.27%, Mar 26, Canadian Western Bank, 2.38%, Jan 23, RioCan REIT, 2.19%, Aug 26, Canadian Natural Resources Ltd., 2.05%, Jun 1, Royal Bank of Canada, 1.65%, Jul 15, John Deere Canada Funding Inc., 1.75%, Jan 28, Daimler Canada Finance Inc., 1.42%, Oct 2, Honda Canada Finance Inc., 1.82%, Dec 7, Ford Credit Canada Ltd., 2.45%, May 7, Finning International Inc., 2.84%, Sep 29, Canadian Government Bond, 0.75%, May 1, Bank Indebtedness (1.1) All long positions as a percentage of net asset value 99.4 This summary of investment portfolio may change due to the ongoing portfolio transactions of the Fund. Quarterly updates of the Fund s investment portfolio are available on the Internet at In addition, the simplified prospectus and other information about the underlying funds are available on the internet at or

9 Corporate Information Corporate Address Ninepoint Partners LP Royal Bank Plaza, South Tower 200 Bay Street, Suite 2700, P.O. Box 27 Toronto, Ontario M5J 2J1 T TOLL-FREE F E invest@ninepoint.com For additional information visit our website: Call our mutual fund information line for daily closing prices: or Auditors KPMG LLP Bay Adelaide Centre 333 Bay Street Suite 4600 Toronto, Ontario M5H 2S5 Legal Counsel Borden Ladner Gervais LLP Scotia Plaza 40 King Street West Toronto, Ontario M5H 3Y4 M 19 E