Annual Management Report of Fund Performance

Transcription

1 The Lonsdale Tactical Balanced Portfolio For the Period Ended 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 can get a copy of the interim or annual financial statements at your request, and at no cost, by calling , by writing to us at 469 King Street West, 4 th Floor, Toronto, ON M5V 1K4 or by visiting our website at or SEDAR at 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. Every effort has been made to ensure that the information contained in this report is accurate as of the dates indicated in the report, however, the Fund cannot guarantee the accuracy of this material. For your information, please refer to the Fund s Simplified Prospectus and Annual Information Form, which may also be obtained, at no cost, using any of the methods outlined above.

2 Note on Forward Looking Statements This report may contain forward-looking statements about the Fund, including its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future Fund action, is also forward-looking. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Fund and economic factors. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and international, interest and foreign exchange rates, global equity and capital markets, business competition, technology change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic event. It should be stressed that the above-mentioned list of important factors is not exhaustive. You are encouraged to consider these and other factors carefully before making any investment decisions and you are urged to avoid placing undue reliance on forward-looking statements. Further, you should be aware of the fact that the Fund has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise prior to the release of the next Management Report on Fund Performance.

3 Management Discussion of Fund Performance This management discussion of fund performance represents the Fund Manager s view of the significant factors and developments affecting the Fund s performance and outlook. Investment Objective and Strategies The investment objective of Lonsdale Tactical Balanced Portfolio (the Fund ) is to maximize total investment return using a balance of current income and longer term capital growth. Preservation of capital is paramount with each investment made. The Fund may invest directly or indirectly in cash and cash equivalents, government bonds, corporate bonds, maple bonds, high yield bonds, debentures, convertible bonds, preferred shares, listed securities, public equities, private equities, and other yield based securities that meet the return and risk parameters of the Manager. Risk The risks of investing in the Fund remain as disclosed in the current prospectus. The principal risks associated with the Fund are changes in concentration risk, credit risk, credit risk, derivative risk, emerging markets risk, equities risk, FATCA risk, foreign currency risk, foreign investment risk, illiquidity risk, interest rate risk, large investor risk, liquidity risk, portfolio advisors risks, prepayment risk and securities lending risk. The Fund is suitable for investors with medium to long-term time horizons who are willing to accept price volatility in exchange for earning rates of return higher than risk-free alternatives and who have medium level of investment risk. Results of Operations The Fund was established December 9, 2013 and its first subscriptions were taken on December 23, At the end of December 2013 the market value of the Fund was $25,805,865 of which 78% of the portfolio was in cash and cash equivalents due to the launch date so close to year end. The Fund ended 2014 with a market value of $80,410,060 of which 22% was invested in cash and cash equivalents and the balance in long term investments. Despite finishing the year with cash and cash equivalents higher than long term expected levels (22% versus approximately 10%), the Fund made considerable strides in investing the cash on hand at the start of the year along with from the substantial new subscriptions throughout the year to reach its targeted asset mix in the underlying asset classes. Currently the Fund remains modestly underweight in its long term allocation for bonds due to the significant drop in yields to levels well below which the Manager views to be sustainable or fair value. The Fund finished the year modestly underweight its target exposure for high yield bonds, but given the volatility subsequent to year end resulting in yields rising and spreads widening, additional capital is expected to be deployed soon. The Fund is currently positioned in the middle range for equity investments, and given that the Manger expects volatility to remain high in the near term, a cash reserve will be maintained for defensive purposes and to invest opportunistically should prices fall. Lastly, the Fund is less than the target weight for its Alternative allocation and will continue to add to this asset class as new investments become available.

4 The fund ended the year with approximately 22% invested in cash and cash equivalents, 25% in yield investments (primarily bonds), 47% in public equities (72% Canadian, 17% U.S., and 11% International), and 6% in alternative investments. We expect to reduce the amount invested in cash & cash equivalents into the 3 categories throughout the year as opportunities arise. The Fund underperformed its Balanced Benchmark, 4.23% vs 8.91%, for The Balanced Benchmark is comprised of 50% FTSE TMX Canada Universe Bond Index (formerly known as the DEX Universe Bond Index), 32.5% S&P/TSX Composite Index and 17.5% MSCI World Index. The fund underperformed its benchmark due to 3 primary reasons. Firstly, maintaining cash throughout the year earning returns lower than what the benchmark earned hurt performance by approximately 2%. Secondly, the manager maintained a short duration in the bond investments as the expectation was for higher and not lower yields which cost approximately 1%. Lastly, much of the subscriptions came in after a strong first half of the year where the benchmark earned approximately 6.99% versus 1.95% for the second half of the year costing approximately 3% in performance. Recent Developments The primary geographic markets for the fund s investments are Canada, the United States, and Europe, with secondary emphasis on the Emerging Markets. The broader economic outlook for Canada remains mixed with a slowly growing economy, modest but sub-par job growth, concerns about real estate valuations, a continued weakening of the dollar against the U.S, and most importantly what the impact will be from the significant drop in the price of Oil given its importance to the economy as a net exporter. Much attention will be focused on at what price oil bottoms and for how long it stays there before rebounding to more stabilized levels. The U.S. on the other hand is on a clear upswing on its recovery from the 2008 financial crisis with strong job creation, an improving housing market, and increased confidence from consumers who have worked hard to de-lever their balance sheets. Europe took a step back in 2014 falling back into recession, with high unemployment and undercapitalized banks. Subsequent to year end a coordinated Quantitative Easing stimulus package was put in place that will help the slow recovery back to more normalized growth levels. The Manager continues to assess the relative valuation of both asset classes and geographic regions in allocating capital to generate attractive returns with lower levels of volatility than the broader markets. Related Party Transactions Newport Private Wealth Inc. is the Manager (the Manager ) and the trustee of the Fund. Pursuant to the management agreement between the Fund and the Manager, the Manager is responsible for the management of the overall business and operations of the Fund. Management fees were paid to the Manager effective January 17, 2014 and the amount paid to was $1,216,262. The Manager waived the management from the date of commencement of operations, December 9, 2013 to January 16, The amount of management fee waived by the Manager for fiscal 2014 was $17,649.

5 The Manager also absorbed expenses of the Fund for the period end in the amount of $181,567 which included the management fee noted above. The amount of expenses absorbed to the end of December 31, 2013 was $36,485. The Fund did not rely on an independent review committee for approval or positive recommendation to proceed with a transaction because the Fund did not engage in any other related party transactions. 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 past five years, as applicable. The Fund s Net Asset per unit (1) For the periods ended Net Assets, beginning of period (1) $ $ $ - $ - $ - Increase from operations: Total revenue Total expense (0.25) Realized gains Unrealized gains Total increase from operations (2) Distributions: From income From dividend From capital gains (0.07) Return of capital Total annual distributions (3) Net Assets, end of period (4) $ $ The Fund s Ratios/Supplemental Data (1) For the periods ended Total Net Asset Value ($000s) 80,410 25, Number of units outstanding (000s) 7,768 2, Management expense ratio (5) 2.31% 0.00% Management expense ratio before 2.63% 2.46% waivers or absorptions (5) Trading expense ratio (6) 0.06% 0.00% Portfolio turnover rate (7) 18.37% 0.00% Net Asset Value per unit $ $

6 Explanatory note 1. a. All per unit figures presented are referenced to the net assets determined in accordance with International Financial Reporting Standards ( IFRS ) and are derived from the Fund s audited financial statements for the year ended. The net assets per unit presented in the financial statements ( Net Assets ) does not differ from the net asset value per unit calculated for Fund pricing purposes ( Net Asset Value ). b. The Fund was established and commenced operations on December 9, 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. 3. Distributions are paid in cash/reinvested in additional units of the Fund, or both. The characterization of the distributions is based on management s estimate of the actual income for the period. 4. This is not a reconciliation of the beginning and end Net Assets per unit. 5. The management expense ratio ( MER ) is calculated in accordance with National Instruments based on all the expense of the Fund (including Harmonized Sales Tax, Good and Services Tax and interest, but excluding commissions and other portfolio transaction costs) divided by the average daily Net Asset Value during the period. The Manager has absorbed expenses of $181,566 in the period. 6. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of average daily Net Asset Value during the period. 7. The Fund s portfolio turnover rate ( PTR ) indicates how actively the Fund s portfolio adviser manages its portfolio investments. A PTR 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 the Fund s PTR in a period, the greater the trading costs payable by the Fund in the period, the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between the high turnover rate and the performance of a Fund. PTR is calculated based on the lesser of the cumulative cost of purchases or cumulative proceeds of sales divided by the average market value of the portfolio, excluding short-term investments. Management Fees The manager is to be paid a management fee of 2% per annum calculated on the net asset value of the Fund. The fee is calculated and accrued daily and paid monthly. The manager uses the management fee to pay the sub-advisors for managing the investment portfolio, providing investment analysis and recommendations, making investment decisions and to fund the day to day administration expenses of the Fund. Management fees were paid to the Manager effective January 17, 2014 and the amount paid to was $1,216,262. The Manager waived the management from the date of commencement of operations, December 9, 2013 to January 16, The amount of management fee waived by the Manager for fiscal 2014 was $17,649.

7 The Manager also absorbed expenses of the Fund for the period end in the amount of $181,566 which included the management fee noted above. The amount of expenses absorbed to the end of December 31, 2013 was $36,485. Past Performance It is the Manager s policy to report rates of return for funds in existence greater than one year. The performance start date for each fund represents the date of the first purchase of such series, excluding seed money. The Funds commenced operations on December 9, The Fund s performance information shown assumes that all distributions made by the Fund in the period shown were reinvested in additional units of the ETF. The performance information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future Year-by-Year Returns The following bar chart shows the performance of the Fund for each of the periods and illustrates how its performance has changed from year to year. The chart shows in percentage terms how much an investment made on the first day of each period would have increased or decreased by the last day of the period. * Fund s inception date was December 9, Annual Compound Returns The below table is intended to compare the historical annual compound returns of the Fund with those of its Balanced Benchmark. The FTSE TMX Canada Universe Bond Index (formerly known as the DEX Universe Bond Index) consists of a diversified selection of investment-grade Government of Canada, provincial, corporate and municipal bonds issued domestically in Canada and denominated in Canadian dollars.

8 The S&P/TSX Composite Index is an index of the equity prices of the largest companies on the Toronto Stock Exchange. The MSCI World Index captures large and mid-cap stocks represented across 23 Developed Markets. Annual Compound Return Period Ended 1 Year Since Inception The Lonsdale Tactical Balanced Portfolio 4.23% 3.98% FTSE TMX Canada Universe Bond Index (formerly known as the DEX Universe Bond Index) 8.79% 8.72% S&P/TSX Composite Index 7.42% 9.91% MSCI World Index 12.33% 15.27% Balanced Benchmark 8.97% 10.25% * Fund s inception date was December 9, 2013 Summary of Investment Portfolio The major portfolio categories and top holdings (up to 25) of the Fund at the end of the period are indicated in the following tables. The Summary of Investment Portfolio may change due to ongoing portfolio transactions of the Fund. Quarterly updates of the Fund s investment portfolio are available 60 days after quarter-end and can be accessed at www. sedar.com or our website at As at Portfolio by Asset Category Percentage of Net Asset Value (%) Growth Investments Yield Investments Cash & Cash Equivalents Alternative Investments 6.26

9 Top 25 Holdings Percentage of Net Asset Value (%) Cash & Cash Equivalents Lysander Corporate Value Bond Fund Edgepoint Global Portfolio Series I ishares MSCI EAFE ETF 4.39 Tourmaline Oil Corporation 4.38 Vanguard Canadian Short Term Corporate Bond Index Exchange Traded Fund 3.27 BMO Short Corporate Bond Index Exchange Traded Fund 2.62 Timbercreek Senior Mortgage Investment Corporation 2.44 Timbercreek Mortgage Investment Corporation 2.24 SPDR Barclays High Yield Bond 2.13 Timbercreek Four Quadrant Global Real Estate Partners 1.90 Inovalis Real Estate Inventment Trust 1.86 Milestone Apartments Real Estate Investment Trust 1.64 Tricon Capital Group Inc Nobel Limited Partnership 1.24 The Toronto-Dominion Bank 0.78 VR 2014 Limited Partnership Fairways LP 0.72 Cymbria Corporation 0.66 Stream Asset Financial Limited Partnership 0.59 VR Limited Partnership Park Prairiesky Royalty Limited 0.49 Imax Corporation 0.49 Bank of Montreal 0.45 Jack Henry & Associates Inc Northland Power Inc Top 25 Holdings 81.04

10 469 King Street West, 4 th Floor Toronto, Ontario, Canada M5V 1K4 Telephone: Toll Free: Lonsdale Wealth Partners is a division of Newport Private Wealth Inc. Newport Private Wealth and Lonsdale Wealth Partners are marks of Newport Partners LP. Newport Private Wealth carries on its business through Newport Private Wealth Inc. and its affiliate, Newport Insurance LP.