INTERIM MANAGEMENT REPORT

Transcription

1 17 INTERIM MANAGEMENT REPORT of Fund Performance for the period ended June 30, 2017 FÉRIQUE European Fund This Interim Management Report of Fund Performance contains financial highlights but does not contain the complete interim or annual financial statements of the Fund. You can get a copy of the Interim Financial Statements at your request, and at no cost, by calling our Advisory Services at (toll-free ), by writing to us at Gestion FÉRIQUE, Place du Canada, 1010 de La Gauchetière Street West, Suite 1400, Montréal, Québec H3B 2N2, or by visiting our Web site at ferique.com or SEDAR at sedar.com. Unitholders may also contact us using one of these methods to request a copy of the Fund s proxy voting policies and procedures, proxy voting disclosure record and quarterly portfolio disclosure.

2 There may be management fees and expenses associated with an investment in the Funds. Management expense ratios vary from one year to another. Please read the Prospectus before investing. Mutual funds are not guaranteed or covered by the Canada Deposit Insurance Corporation or another government deposit insurer. Their values fluctuate frequently and past performance may not be repeated. FÉRIQUE Funds are distributed by Services d investissement FÉRIQUE since July 1, 2013 and used to be by National Bank Securities Inc., until June 30, A Note on Forward looking Statements This report may contain forward looking statements about the Funds, their future performance, strategies or prospects, and possible future Fund actions. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and similar expressions are intended to identify forward looking statements. Forward looking statements are not guarantees of future performance. Forward looking statements involve inherent risks and uncertainties, both about the Funds and general economic factors, so it is possible that predictions, forecasts, projections and other forward looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward looking statement made in relation to the Funds. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward looking statements are subject to change without notice and are provided in good faith but without legal responsibility. Some rates or returns presented in this report come from the PALTrak study as at June 30, 2017, owned by Morningstar Research Inc. Please read the following note: [2017] Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Morningstar may not be held responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

3 INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE As at June 30, 2017 Management Discussion of Fund Performance Results of Operations The FÉRIQUE European Fund, managed by Lazard Asset Management (Canada) Inc. (Lazard), posted a net return of 11.8% for the six-month period ended June 30, 2017, compared to 12.3% for its benchmark, the MSCI Europe Index. Contrary to benchmark returns, which include no investment fees, Fund returns are expressed net of management and operating expenses payable by the Fund. On a relative basis, the Fund outperformed the industry median 1, which posted 11.3% net of fees for the six-month period. At the sector level, stock selection in Consumer Discretionary and Consumer Staples contributed to relative performance during the period, while Health Care and Materials detracted from returns. The portfolio s overweight to Unilever was the largest contributor to returns during the first half of 2017, following the news on Kraft Heinz s merger bid, which was subsequently rejected by Unilever. In Consumer Discretionary, the overweight to automotive parts supplier Faurecia delivered strong returns during the period, and the lack of exposure to Daimler also added to the portfolio s performance. The biggest detractors came from Materials. Steel producer ArcelorMittal s was impeded by investors concern over steel prices and the reduction in underlying demand growth in China and building materials supplier. Meanwhile, encouraging macro lead indicators failed to revive building materials supplier CRH s subdued stock price. In Health Care, Lazard s long-standing overweight position in U.K.-listed pharmaceuticals business Shire detracted from relative performance, despite strong results for 2016 and the opening quarter of Among the changes Lazard made to its holdings over the period, the most significant was in Materials, where it narrowed its underweight exposure through a number of disposals, including Swiss crop science and chemicals business Syngenta, as well as industrial gases businesses Linde and Air Liquide. Moreover, in Telecommunications, the portfolio manager sold its holdings in French-listed telecommunications provider Iliad. In Industrials, it recently added French electrical and mechanical contractor SPIE. Lastly, Lazard also reduced the portfolio s underweight to Health Care with the addition of Bayer. Recent Developments The economic recovery in Europe remains sustainable and in many ways embedded, as economic data remains broadly positive. The region has also cleared some important political hurdles during the first half of 2017, following the Brexit vote and the U.S. presidential election. Signs of a populist surge in France meant the possibility of Frexit could not be completely discounted ahead of the French Presidential election. The eventual victory of the pro-european Union (EU) candidate, Emmanuel Macron, did much to bolster his power base, which should enable him to press ahead with key reforms. This should prove positive for investor sentiment and the overall corporate backdrop in France, with the euro rallying against the dollar in the wake of the French elections. FÉRIQUE FÉRIQUE Nom European du Fonds Fund The European Central Bank (ECB) remains accommodative given the benign inflation backdrop, which is likely to keep underpinning the positive momentum year-to-date. Across global markets, investors experienced synchronized growth prospects for the first time in a decade, with Europe, the United States, China and other emerging markets enjoying high or improving economic growth momentum. The ECB confirmed that eurozone interest rates would remain at current levels for an extended period, and the asset-purchase programme would continue until the end of The European corporate results season was the strongest for a number of years, with a high proportion of companies reporting revenues and earnings that were above market expectations. M&A activity has also picked up. However, the outlook for the U.K. is murkier. While The Bank of England looks closer to raising rates compared to the ECB, much will depend on how negotiations over leaving the EU unfold and how sentiment around this affects economic performance. The possibility of another U.K. general election before the U.K. formally leaves the EU poses an additional tail risk to this backdrop. Lazard s fundamental, bottom-up stock picking approach focuses on investing in companies with sustainable, high or improving financial productivity, at an attractive valuation. Currently, major European equity markets are making steady progress, the monetary environment remains stimulative, and the global environment is supportive. At the sector level, the portfolio manager has maintained its overweight exposure to Information Technology and Financials, and underweight to Utilities and Health Care. At the stock selection level, the portfolio manager s biggest holdings are in Consumer Staples (Unilever and Carlsberg), with Novartis, Spire Healthcare and Shire remaining significant on a bottom-up basis in Health Care. Elsewhere, Lazard also holds large overweight positions in Faurecia, CRH and Wolters Kluwer. It is its firm belief that a focused, bottom-up stock selection approach is the best way to uncover compelling opportunities. Related Party Transactions The Manager of the Fund is Gestion FÉRIQUE, a not for profit organization. Gestion FÉRIQUE receives management fees to cover its expenses with respect to the day to day business and operations of the Fund, as reported under the Management Fees section. These expenses include the portfolio manager s fees, the fees relating to the marketing and distribution of the Fund, as well as the administration fees of the Manager. Services d investissement FÉRIQUE (SIF) is a not for profit subsidiary of Gestion FÉRIQUE registered as a group savings plan brokerage and financial planning firm, and acts as distributor of units of the Fund. A percentage of the management fees paid by the Fund to Gestion FÉRIQUE is used to cover the expenses of SIF with respect to its day to day activities. For the six-month ended June 30, 2017, Lazard paid no commission to related parties as it pertains to the management of the FÉRIQUE European Fund ($0 as at December 31, 2016). 1 Source: median return of similar funds according to Fundata, as at June 30, 2017.

4 INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE FÉRIQUE European Fund As at June 30, 2017 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help the reader understand the Fund s financial performance for the accounting periods shown. Six-month period ended Years ended (1) (5) Net Assets per Unit June (6 months) $ $ $ $ $ $ Net assets, beginning of accounting period (4) Increase (decrease) from operations Total revenues Total expenses (0.10) (0.18) (0.19) (0.18) (0.14) (0.11) Realized gains (losses) 0.50 (0.21) (0.35) Unrealized gains (losses) 0.78 (1.10) 1.27 (1.79) Total increase (decrease) from operations (2) 1.39 (1.20) Distributions From dividends From capital gains 0.44 Total annual distributions (3) Net assets, end of accounting period (4) (1) This information is derived from the Fund s Annual Audited Financial Statements and Interim Unaudited Financial Statements. The net assets per unit presented in the financial statements could differ from the net asset value calculated for fund pricing purposes. The differences are explained in the notes to the financial statements. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase or decrease from operations is based on the weighted average number of units outstanding during the accounting period. This table is not intended to show a reconciliation between net assets per unit at the beginning and at the end of the accounting period. (3) Distributions were paid in cash or reinvested in additional units of the Fund, or both. (4) Since January 1, 2013, the net assets are calculated in accordance with International Financial Reporting Standards (IFRS). Previously, it was the accounting principles as set out in Part V of the CPA Canada Handbook Accounting ( Canadian GAAP ). (5) Issued and outstanding units of the Fund have been redesignated as Series A units effective on July 1, This change relates only to the designation of the units and the rights, privileges and other attributes of units redesignated into Series A units remain unchanged. In this document, the word units indicates Series A units. Six-month period ended Years ended Ratios and Supplemental Data June (6 months) Net asset value (in thousands of $) (1) 199, , , , ,360 92,509 Number of units outstanding (1) 14,912,644 15,106,496 13,242,081 12,014,582 10,914,432 10,438,970 Management expense ratio (%) (2) Management expense ratio before waivers or absorptions by the Manager (%) Portfolio turnover rate (%) (3) Trading expense ratio (%) (4) Net asset value per unit ($) (1) This information is provided as at June 30, 2017 and as at December 31 for the comparative accounting periods. (2) Management expense ratio is based on total expenses for the stated accounting period (excluding commissions, other portfolio transaction costs and withholding taxes on dividend income) and is expressed as an annualized percentage of the daily average net asset value during the accounting period. (3) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio manager manages 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 during the accounting period. The higher a Fund s portfolio turnover rate in the accounting period, the greater the trading costs payable by the Fund during the accounting period, and the greater the chance of an investor receiving taxable capital gains during the accounting period. There is not necessarily a relationship between a high turnover rate and the performance of a portfolio. (4) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of the daily average net asset value during the accounting period. Management Fees The fees and expenses payable by the Fund include management fees and operating expenses. The management fees include, among others, the portfolio manager s fees, the fees relating to the marketing and distribution of the Fund, and administration fees of the Manager. These fees are calculated and credited daily and paid monthly. Operating expenses include, among others, regulatory filing fees, registrar, custodian and fiduciary fees, expenses relating to accounting and valuation of the Fund, taxes and duties, auditors and legal advisors fees, and reporting fees to unitholders. For the period, annualized management fees charged to the Fund amounted to 1.25% and are detailed as follows: Management fees: 1.05% Operating expenses: 0.20%

5 INTERIM MANAGEMENT REPORT OF FUND PERFORMANCE As at June 30, 2017 Past Performance The performance information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund. The information does not take into account purchase, redemption, investment or other optional charges that would have reduced returns or performance. The Fund s past performance is not necessarily indicative of how it will perform in the future. Annual Returns The bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the Fund s performance has changed from year to year, with the exception of the last bar, which indicates the Fund s total return for the interim six-month period ended June 30, The bar chart shows, in percentage terms, how much an investment made on the first day of each financial year would have grown or decreased by December 31 of each financial year or on the last day of the six-month period. % Annual Compound Returns (%) months 1 year 3 years 5 years 10 years FÉRIQUE European MSCI Europe Index ($CA) Median* * Median return of all investment funds of the same category according to Fundata. MSCI Europe Index The MSCI Europe Index measures the total return of equity securities issued on the European markets. Comparison with the Index The Fund posted a net return of 11.8% for the six-month period ended June 30, 2017, compared to 12.3% for its benchmark index. Please note that the Fund s return is presented net of management fees and operating expenses, while the Index s return is gross of fees. Portfolio Overview FÉRIQUE European Fund The Top 25 Holdings in the Portfolio % of net asset value Unilever NV, GDR 4.2 Novartis AG 4.0 Royal Dutch Shell PLC, Class A (EUR) 3.3 SAP SE 3.1 British American Tobacco PLC 2.6 Prudential Corp. PLC 2.5 Carlsberg, Class B 2.5 Shire Ltd. 2.4 Anheuser-Busch InBev SA/NV 2.4 Associated British Food PLC 2.3 CRH PLC 2.2 AXA 2.1 ABN AMRO Group NV 2.1 Faurecia 2.0 UniCredit SpA 2.0 Wolters Kluwer NV 1.9 Nordea AB 1.7 Wolseley PLC 1.7 Bayer AG 1.7 Spire Healthcare Group PLC 1.6 London Stock Exchange Group PLC 1.6 Bank of Ireland PLC 1.6 Fresenius SE 1.6 Deutsche Wohnen AG 1.6 Cash, Money Market and Other Net Assets 1.5 Weighting by Country 56.2 % of net asset value United Kingdom 19.5 France 15.3 Netherlands 13.8 Germany 10.6 Switzerland 9.7 Ireland 7.4 Italy 5.1 Sweden 3.9 Denmark 3.8 Belgium 2.4 Spain 2.0 Finland 1.4 Austria 1.3 Luxembourg 1.3 Portugal 1.0 Cash, Money Market and Other Net Assets 1.5 Net Asset Value $199,925,410 The allocation of the portfolio may vary due to the transactions carried out by the Fund. A quarterly update is available.

6 Gestion FÉRIQUE Place du Canada 1010 de La Gauchetière Street West Suite 1400 Montréal, Québec H3B 2N2 ferique.com Additional information about the Funds is available in the Funds Prospectus, Annual Information Form, Fund Facts and Financial Statements. You may obtain a copy of these documents, free of charge and on demand: by contacting the Manager, Gestion FÉRIQUE, at (toll free at ); by contacting the Principal Distributor, Services d investissement FÉRIQUE at (toll free at ) or client@ferique.com; by visiting ferique.com or sedar.com.