DIM PRIVATE FUND AND SEGREGATED ACCOUNT

Transcription

1 DIM PRIVATE FUND AND SEGREGATED ACCOUNT

2 SUMMARY FIXED INCOME FUNDS DIM Private Fund and Segregated Account Government Bonds 71 DIM Private Corporate Bond Fund 73 Segregated Account U.S. Treasury Bonds 77 Segregated Account RI Canadian Bonds 79 BALANCED FUNDS DIM Private Balanced Fund 81 DIM Private Monthly Distribution Income Fund 83 DIM Private Monthly Distribution Growth Fund 85 CANADIAN EQUITY FUNDS DIM Private Fund and Segregated Account Canadian Large Cap Equity 87 DIM Private Canadian Large Cap Equity Fund 89 DIM Private Canadian Equity Growth Fund 91 DIM Private Canadian Small Cap Equity Fund 93 Segregated Account RI Canadian Equity 95 U.S. EQUITY DIM Private Fund and Segregated Account U.S. Equity (for taxable and non-taxable accounts) 97 Segregated Account RI U.S. Equity 99 FOREIGN EQUITY FUNDS DIM Private International Equity Fund 101 COMPLETION STRATEGY FUND Dim Private Completion Strategy Fund

3 FIXED INCOME FUNDS DIM PRIVATE FUND AND FOR SEGREGATED ACCOUNT GOVERNMENT BONDS GOAL Within a diversified portfolio, the government bond fund generates steady income throughout the interest rate cycle and reduces portfolio fluctuations. OBJECTIVE The objective of the Fund is to protect the invested capital as much as possible and to ensure a constant and stable income throughout interest rate cycles. PORTFOLIO MANAGER Desjardins Global Asset Management (DGAM) offers institutional investment expertise in the following fields: Portfolio management of fixed-income securities investments; Selection of equity investments using effective and systematic protocols; Selection and monitoring of external managers; Development of investment strategies tailored to client needs; Optimization of risk-adjusted returns; Structuring portfolio customization and investment policy development; and Consulting on financial product development consultation. INVESTMENT STRATEGY When developing strategies, the managers capitalize on all opportunities to add value. Active management of portfolio duration and maturity and sector allocation are based mainly on the macroeconomic forecasts selected by the managers. The investment strategy aims to outperform the benchmark index. LIMITS BY ASSET CLASS MINIMUM (%) MAXIMUM (%) Cash and money market 0 10 Canadian government bonds LIMITS BY ISSUER CATEGORY Federal (and guaranteed securities) Provinces (and guaranteed securities) MINIMUM (%) MAXIMUM (%) Municipalities and others 0 20 LIMITS BY TERM CATEGORY MINIMUM (%) MAXIMUM (%) Short term (0 to 5 years) Medium term (5 to 10 years) The longest term of portfolio bonds is 10.5 years As a partner, DGAM plays an active role in the technical design of the DIM Private Funds. DGAM s main clients are Desjardins Group companies. 71 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

4 PORTFOLIO CONSTRUCTION METHOD The managers approach combines qualitative and quantitative factors. DGAM sets the portfolio target duration on the basis of probable trends in the yield curve. DGAM then has the tactical leeway to optimize maturity positioning and sector weighting to capitalize on yield spreads between provincial and municipal issues and Government of Canada bonds. TARGET The return objective is to outperform the benchmark index (before management fees). The benchmark index is made up of the FTSE TMX Canada Short Term Government Bond Index (50%) and FTSE TMX Canada Mid Term Government Bond Index (50%) indices. MINIMUM CREDIT RATINGS The minimum credit ratings for issuers are R-1 Low for money market securities and BBB for canadian bonds, according to FTSE TMX rating methodology. PORTFOLIO DURATION Portfolio duration cannot be shorter than 2 years or more than 1.5 year of a benchmark index comprising equal weightings of the FTSE TMX Canada Short Term Government Bond and the FTSE TMX Canada Mid Term Government Bond indices. DERIVATIVES Derivatives are not authorized. SPECIFICS FOR SECURITY PORTFOLIOS The maximum number of securities is 25. Unlisted municipal bonds cannot be held in security portfolios. All other constraints of the DIM Government Bond Fund s investment policy apply to security portfolio management. 72

5 FIXED INCOME FUNDS DIM PRIVATE CORPORATE BOND FUND GOAL As part of a diversified portfolio, this Fund helps to boost regular income and capitalizes on variations in interest rate spreads. OBJECTIVE This Fund s objective is to generate returns higher than those of government bonds. Risk management and active portfolio management will produce added value compared to benchmark index performance. PORTFOLIO MANAGERS Desjardins investment Management inc. (DIM) has primary responsibility of your portfolio. Through your private manager, Desjardins Securities takes the time to understand your needs and goals. Portfolio guidelines and asset mix are set at this stage. Desjardins Investment Management is known for its conservative management approach highlighting volatility control to ensure investor peace of mind. Management philosophy stresses asset class diversification to attain risk and return targets. Desjardins Investment Management favours a top-down macroeconomic approach in developing its tactical asset allocation strategies. LIMITS PER MANDATE MINIMUM (%) MAXIMUM (%) Canadian Bond Mandate Bank Loans Mandate 0 15 Fixed Income Core Plus Mandate 0 15 TARGET The Fund s performance objective, before management fees, is to outperform the following composite index: BENCHMARK TARGET WEIGHTING 50% 50% INDEX FTSE TMX Canada Short Term Corporate Bond Index FTSE TMX Canada Medium Term Corporate Bond Index CANADIAN BOND MANDATE Desjardins Global Asset Management (DGAM) offers institutional investment expertise in the following fields: Portfolio management of fixed-income securities investments; Selection of equity investments using effective and systematic protocols; Selection and monitoring of external managers; Development of investment strategies tailored to client needs; Optimization of risk-adjusted returns; Structuring portfolio customization and investment policy development; and Consulting on financial product development consultation. As a partner, DGAM plays an active role in the technical design of the DIM Private Funds. DGAM s main clients are Desjardins Group companies. 73 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

6 INVESTMENT STRATEGY The manager DGAM combines top-down and bottom-up analyses. The top-down approach consists in analyzing economic, financial and market conditions to define the recommended strategy for the portfolio. The strategy is set for each quarter and is adjusted if necessary during the period. With the bottom-up approach, the manager relies on analyses of corporate issuers in the investment universe made by a team of research analysts. They review financial and operational aspects of each of the issuers in their respective sectors to draw up credit analyses independent of rating agency reports. LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 10 Canadian corporate bonds Government bonds 0 10 Other eligible securities 0 10 Other eligible securities are Canadian securitizations (CMBS, ABS, and MBS). PORTFOLIO CONSTRUCTION METHOD Once the issuer credit quality assessment is completed, their bonds are valued based on credit quality. The manager then identifies the issues and sectors that appear undervalued or overvalued to build the portfolio. The manager ensures the portfolio is sufficiently diversified by both issuer and sector, focusing exclusively on issuers with BBB or higher ratings according to leading rating agencies. LIMITS BY CREDIT QUALITY CREDIT RATING MAXIMUM (%) AAA/AA 100 A Index weight + 30% BBB Index weight + 10% The rating methodology for the FTSE TMX Canada indices will be used to determine the credit quality of the securities held in the portfolio. If the credit rating of a bond is revised downwards below BBB, the manager has 90 days to sell the bond. This period begins on the date of the first downgrade below BBB. LIMITS BY SECTOR Weightings for the sectors that comprise the FTSE TMX Canada Corporate Bond Index must respect the following limits: LIMITS BY SECTOR OF ACTIVITY SECTOR OF ACTIVITY MAXIMUM (%) Telecommunications 30 Energy 30 Financial services 65 Industrial products 15 Infrastructure 15 Real estate 10 Securitized assets 10 To ensure appropriate diversification, the portfolio must include securities in at least three of the seven corporate sectors according to the FTSE TMX Canada bond indices classification. LIMITS BY ISSUER CREDIT RATING MAXIMUM (%) AAA/AA 10 A 7.5 BBB 5 When an issuer has securities with different credit ratings, the authorized maximum for this issuer takes into consideration the securities with a lower credit rating. These limits apply only to corporate issuers. The maximum limit per government issuer is 10%. PORTFOLIO DURATION The portfolio s duration cannot be 2 years shorter or 1.5 years longer than an index comprising equal weightings of the FTSE TMX Canada Short Term Corporate Bond and FTSE TMX Canada Mid Term Corporate indices. DERIVATIVES PRODUCTS The use of derivative products is not permitted for the Canadian bond mandate. 74

7 BANK LOAN MANDATE AlphaFixe Capital Inc. Its investment philosophy was inspired in part by the consequences of the 2008 financial crisis and relies on a rigorous risk management process. Notions of capital preservation and flexibility in the execution of its strategies guide its team constantly. The Fund has exposure to the Bank Loan mandate through holdings of units of the AlphaFixe Floating Rate Bank Loan Fund. INVESTMENT STRATEGY The objective is to offer a fund made up exclusively of high-quality bank loans to target capital conservation and offer a high current yield solution in the face of a potential interest rate rise and of low interest rates. Fundamental credit analysis and capital conservation are accomplished through a rigorous securities selection process. The manager is supported by a seasoned and diversified team which invests with diligence and care according to a proprietary rating system and a binding risk budget. LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market Bank loans LIMIT BY ISSUER Where the securities of a same issuer represent a range of different credit ratings, the authorized maximum for that issuer factors in the securities with lower credit ratings. A maximum of 5% of portfolio market value may be invested in any one bank loan issuer. DURATION OF THE PORTFOLIO The duration of the portfolio may not exceed a half-year period. DERIVATIVES PRODUCTS Use of derivatives is permitted only in the AlphaFixe Floating Rate Bank Loan Fund. The authorized derivatives are foreign currency swaps, forward contracts and futures. OTHER RESTRICTIONS The manager performs a currency hedge for a minimum of 96% of the market value of securities denominated in foreign currencies. The portfolio excludes from its investments companies that explore or operate proven or probable fossil fuels reserves. A maximum of 15% of the portfolio s market value may be invested in the same sector, with the exception of a sector with a maximum of 20%. Government and corporate bonds 0 20 FIXED INCOME CORE PLUS MANDATE Bank loan ETFs are permitted to a maximum of 10%. CREDIT QUALITY LIMITS CREDIT RATINGS MAXIMUM (AS A %) BB 85 B 70 The credit rating methodology used for bank loans is to take the lowest credit rating (between S&P and Moody s) where both agencies rate the bank loan. If a bank loan is discounted to less than B-, the manager is obliged to inform DIM and provide an explanation of the strategy deployed to manage that particular bank loan within a maximum of one month after the discount. Jarislowsky Fraser A leader in corporate governance and defender of minority shareholder rights, the firm specializes in Canadian equity management with a conservative approach. It serves a wide range of clients investment funds, pension funds, foundations and private investors. Its objective is long-term capital growth while maintaining low risk. Speculative securities are avoided and selecting financially sound companies minimizes overall portfolio risk. This strategy is combined with extensive in-house securities analysis. The Fund has exposure to the Fixed Income Core Plus mandate through holdings of units of the Jarislowsky Fraser Fixed Income Core Plus Fund. 75 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

8 INVESTMENT STRATEGY The investment objective is to provide a stable rate of return, primarily through income, and to a lesser extent, capital appreciation. The mandate invests primarily in Canadian high-quality fixed-income corporate bonds. In order to add yield and enhance return potential, this mandate also invests to a lesser extent in high yield bonds, preferred shares and convertible bonds and opportunistically in international and emerging market fixed-income securities. LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 5 Corporate bonds Federal bonds 0 80 Provincial bonds 0 80 Municipal bonds 0 20 High yield bonds 0 50 Preferred shares 0 25 Convertible bonds 0 25 Foreign bonds 0 25 Emerging market bonds 0 25 CREDIT QUALITY LIMITS CREDIT RATINGS MAXIMUM (AS A %) CCC 5 Not rated 20 DBRS credit ratings are used to classify the credit quality of portfolio securities. Where a portfolio security is not rated by DBRS, Standard & Poor s rating is used, and failing that, Moody s rating. Minimum securities rating at purchase is B or the equivalent for unlisted securities. Average portfolio credit quality is BBB- or better LIMIT BY ISSUER A maximum of 10% of portfolio market value may be invested in the securities of any one issuer, except for government issued and guaranteed securities. DURATION OF THE PORTFOLIO The duration of the portfolio must be within three years (plus or minus) of the duration of the FTSE TMX Canada Universe index. DERIVATIVES PRODUCTS The use of derivatives is not permitted in the Jarislowsky Fraser Fixed Income Core Plus Fund. Exposure to foreign currencies (other than the Canadian dollar) is limited to 10% of the portfolio. For the Cash and money market portion, the portfolio may invest in units of the Jarislowsky Fraser Money Market Fund. 76

9 FIXED INCOME FUNDS SEGREGATED ACCOUNT U.S. TREASURY BONDS GOAL Within a diversified portfolio, the purpose of the U.S. Treasury Bond mandate is to protect invested capital as much as possible and ensure steady income throughout the interest rate cycle. OBJECTIVE The objective of the mandate is to generate steady income while focusing on risk management. The portfolio should also offer added value compared with the benchmark index through dynamic portfolio management. PORTFOLIO MANAGER Desjardins Investment Management inc. (DIM) has primary responsibility of your portfolio. Through your Private Wealth Manager, DIM helps you define your investment policy according to your goals and needs. Portfolio guidelines and asset mix are set at this stage. DIM is known for its conservative management approach highlighting volatility control to ensure investor peace of mind. Management philosophy stresses asset class diversification to attain risk and return targets. DIM favours a top-down macroeconomic approach in developing its tactical asset allocation strategies. INVESTMENT STRATEGY Based on global and domestic macroeconomic data from both public and private sources, the manager develops a set of expectations and then analyzes their impact on the interest rate structure. Investment decisions are then guided by the benchmark index, Bloomberg/EFFAS Bond Indices U.S. Govt 1-10 Yr, but deviating from it with a view to creating value added and reducing unfavourable fluctuations. PORTFOLIO CONSTRUCTION METHOD Based on active management of duration and a strategy that works the yield curve, the manager tailors the portfolio so that the selected maturities benefit from anticipated yield curve variations. TARGET The mandate s return objective (before management fees) is to outperform the Bloomberg/EFFAS Bond Indices U.S. Govt 1-10 Yr. LIMITS BY ASSET CLASS MINIMUM (%) MAXIMUM (%) Cash and money market 0 50 U.S. federal bonds LIMITS BY ISSUER CATEGORY U.S. Treasury (federal bonds [and guaranteed bonds]) LIMITS BY ASSET CLASS MINIMUM (%) MAXIMUM (%) MINIMUM (%) MAXIMUM (%) Short term (0 to 5 years) Medium term (5 to 10 years) The longest term of portfolio bonds is 10 years AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

10 MINIMUM CREDIT RATINGS The minimum credit rating of money market issuers, based on Standard and Poor s (S&P), is A-1+ for money market securities and AA+ for U.S. bond issuers. PORTFOLIO DURATION Portfolio duration cannot be 2 years shorter than the benchmark, i.e. the Bloomberg/EFFAS Bond Indices U.S. Govt 1-10 Yr. Similarly, it cannot be longer than the benchmark s duration of 1.5 years. NUMBER OF SECURITIES The maximum number of securities is 25. DERIVATIVES PRODUCTS Derivatives are not authorized. 78

11 FIXED INCOME FUNDS SEGREGATED ACCOUNT RI CANADIAN BONDS GOAL Within a diversified portfolio, RI Canadian Bonds for segregated accounts aim to protect capital and provide stable income while taking into account the sustainable development aspects of investments. OBJECTIVE The objective is to generate regular income while maintaining a cautious balance between risk and return. PORTFOLIO MANAGER Founded in 1962, Guardian Capital LP is one of the oldest independent investment advisory firms in Canada, serving institutional clients such as pension funds, endowment funds and mutual funds. It aims to generate superior results for added value and risk management, using a disciplined researchbased approach. RESPONSIBLE INVESTMENT ADVISOR NEI Investments is a mutual fund company that makes excellent independent portfolio managers accessible to Canadian retail investors through two award-winning fund families: Northwest Funds and Ethical Funds. With true active management and a relentless, disciplined focus on risk management, NEI strives to deliver strong returns and peace of mind to investors as they work toward their financial goals and a secure future. NEI is home to Canada s largest team of in-house responsible investing specialists who, as our ESG Services Team, provide environmental, social and governance (ESG) analysis to portfolio managers, including NEI s own Ethical Funds. NEI is a wholly Canadian company, owned 50% by Desjardins Group and 50% by the Provincial Credit Union Centrals. GUIDELINE All investments must comply with NEI Investments Sustainable Investing Program. INVESTMENT STRATEGY A balanced portfolio is key for long-term performance. The manager includes five elements in the decision-making process: duration management, portfolio maturity structure, sector weighting, and security selection. PORTFOLIO CONSTRUCTION METHOD After setting constraints on duration to limit risk, the manager builds the portfolio to capitalize on anticipated changes on the yield curve. In addition, sector allocation is adjusted according to current and expected yield spreads. From time to time, the manager may propose higher-than-average weighting in corporate bonds. Credit analysis is an integral part of the decision-making process to ensure returns are optimized and lower quality issuers are avoided. 79 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

12 LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 10 Canadian equities TARGET The mandate s return objective, gross of management fees, consists in outperforming the FTSE TMX Universe Bond Index over three-year moving periods. SECTOR AND DIVERSIFICATION CRITERIA Segregated account cover bonds issued in Canadian dollars and the manager must comply with the following criteria: AUTORIZED INVESTMENTS Investment grade corporate bonds; Canadian federal, provincial or municipal government bonds; All investments will be rated BBB or higher by a recognized credit rating agency. PORTFOLIO DURATION Portfolio duration must be maintained with more or less one year of the duration of the FTSE TMX Canada Universe Bond Index. DERIVATIVES PRODUCTS Derivatives are not authorized. Portfolio investments managed under this mandate must have a minimum average credit rating of A- at all times; Except for government securities, the maximum per issuer is 10% of the model portfolio s market value; The maximum cash holding is 10%; The portfolio may hold between 10 and 35 securities; The selected securities must satisfy socially responsible investing criteria; Corporate issuer securities cannot exceed 50% of the portfolio s market value; Securities with a BBB credit rating will not exceed 10% of the portfolio s value. 80

13 BALANCED FUNDS DIM PRIVATE BALANCED FUND GOAL The DIM Private Balanced Fund provides minimum diversification to holders of accounts with limited assets. OBJECTIVE To produce capital gains over the long term while generating income. PORTFOLIO MANAGER Desjardins Investment Management Inc. (DIM) has primary responsibility of your portfolio. Through your Private Wealth Manager, DIM helps you define your investment policy according to your goals and needs. Portfolio guidelines and asset mix are set at this stage. DIM is known for its conservative management approach highlighting volatility control to ensure investor peace of mind. Management philosophy stresses asset class diversification to attain risk and return targets. DIM favours a top-down macroeconomic approach in developing its tactical asset allocation strategies. The underlying DIM Private Funds are managed by different managers. ASSET ALLOCATION LIMITS ASSET CLASSES MINIMUM (%) TARGET (%) MAXIMUM (%) Cash and money market securities Canadian bonds Fixed income total Canadian large caps Canadian small caps Canadian equities total U.S. equities Global equities International equities total Equities total Completion Strategy TOTAL AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

14 ASSET ALLOCATION MANAGEMENT To reach the fund s performance target, the manager will ensure active management of asset class allocation while taking into account investment policy markers. PORTFOLIO CONSTRUCTION METHOD The portfolio is made up of underlying funds. The Fund is slightly weighted in favour of fixed-income securities while maintaining a permanent diversified exposure to growth stocks. TARGET AUTHORIZED INVESTMENTS With the exception of cash and the money market funds, the Fund can only invest in DIM Private Funds. DERIVATIVES PRODUCTS The DIM Private Balanced Fund holds positions in underlying funds that use or may use derivatives. The return objective is to obtain an annual gross return (before management fees) above the Fund s composite index, i.e. the weighted sum of the individual objectives of asset classes. 82

15 BALANCED FUNDS DIM PRIVATE MONTHLY DISTRIBUTION INCOME FUND GOAL The Fund with fixed monthly distributions, as a standalone investment or combined with other assets, provides investors with stable distributions, so they can avoid the sale of securities that could generate taxable income. OBJECTIVE To produce capital gains over the long term while generating income. PORTFOLIO MANAGER Desjardins Investment Management Inc. (DIM) has primary responsibility of your portfolio. Through your Private Wealth Manager, DIM helps you define your investment policy according to your goals and needs. Portfolio guidelines and asset mix are set at this stage. DIM is known for its conservative management approach highlighting volatility control to ensure investor peace of mind. Management philosophy stresses asset class diversification to attain risk and return targets. DIM favours a top-down macroeconomic approach in developing its tactical asset allocation strategies. The underlying DIM Private Funds are managed by different managers. ASSET ALLOCATION LIMITS ASSET CLASSES MINIMUM (%) TARGET (%) MAXIMUM (%) Cash and money market securities Canadian bonds Fixed income total Canadian large caps U.S. equities International equities Equities total TOTAL 100 Note: This Fund is suitable only for non-registered accounts. 83 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

16 ASSET ALLOCATION MANAGEMENT In this Fund, the manager will not actively manage asset allocation: the minimum and maximum limits are nonetheless useful for limiting the frequency and tax impact of rebalancing. PORTFOLIO CONSTRUCTION METHOD The portfolio is made up of underlying funds. The Fund is primarily invested in government bonds with a permanent minimum exposure to Canadian and international equities to produce some growth. FIXED MONTHLY DISTRIBUTIONS The Fund makes monthly distributions to investors. Mainly made up of income generated by the Fund s investments, distributions may also include a return of capital. TARGET The return objective is to obtain an annual gross return (before management fees) above the Fund s composite index, i.e. the weighted sum of the individual objectives of asset classes. AUTHORIZED INVESTMENTS The Fund may invest only in DIM Private Funds, cash and the money market. DERIVATIVES PRODUCTS The DIM Private Monthly Distribution Income Fund holds positions in underlying funds that use or may use derivatives. ANNUAL REVIEW OF DISTRIBUTIONS The distribution amount is based on the portfolio s expected long-term return. The distribution amount is reviewed annually to protect capital in the event of a gap between expected and actual returns. If necessary, the Fund manager may review the distribution amount at a different frequency. 84

17 BALANCED FUNDS DIM PRIVATE MONTHLY DISTRIBUTION GROWTH FUND GOAL The Fund with fixed monthly distributions, as a stand-alone investment or combined with other assets, provides investors with stable income so they can avoid the sale of securities that could generate taxable revenues. OBJECTIVE To produce capital gains over the long term while generating income. PORTFOLIO MANAGER Desjardins Investment Management Inc. (DIM) has primary responsibility of your portfolio. Through your Private Wealth Manager, DIM helps you define your investment policy according to your goals and needs. Portfolio guidelines and asset mix are set at this stage. DIM is known for its conservative management approach highlighting volatility control to ensure investor peace of mind. Management philosophy stresses asset class diversification to attain risk and return targets. DIM favours a top-down macroeconomic approach in developing its tactical asset allocation strategies. The underlying DIM Private Funds are managed by different managers. ASSET ALLOCATION LIMITS ASSET CLASSES MINIMUM (% TARGET (%) MAXIMUM (%) Cash and money market securities Canadian bonds Fixed income total Canadian large caps U.S. equities International equities Equities total TOTAL 100 Note: This Fund is suitable only for non-registered accounts. 85 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

18 ASSET ALLOCATION MANAGEMENT In this Fund, the manager will not actively manage asset allocation: the minimum and maximum limits are nonetheless useful for limiting the frequency and tax impact of rebalancing. PORTFOLIO CONSTRUCTION METHOD The portfolio is made up of underlying funds. Although mainly invested in equities, the Fund maintains a permanent exposure to fixed income securities to reduce volatility and generate steady income. FIXED MONTHLY DISTRIBUTIONS The Fund makes monthly distributions to investors. Made up of income and gains generated by the Fund s investments, distributions may also include a relatively large return of capital amount. TARGET The return objective is to obtain an annual gross return (before management fees) above the Fund s composite index, i.e. the weighted sum of the individual objectives of asset classes. AUTHORIZED INVESTMENTS The Fund may invest only in DIM Private Funds, cash and the money market. DERIVATIVES PRODUCTS The DIM Private Monthly Distribution Growth Fund holds positions in underlying funds that use or may use derivatives. ANNUAL REVIEW OF DISTRIBUTIONS The distribution amount is based on the portfolio s expected long-term return. The distribution amount is reviewed annually to protect capital in the event of a gap between expected and actual returns. If necessary, the Fund manager may review the distribution amount at a different frequency. 86

19 DIM PRIVATE FUND AND SEGREGATED ACCOUNT CANADIAN LARGE CAP EQUITY CANADIAN EQUITY FUNDS GOAL As part of a diversified portfolio, Canadian large cap equity management facilitates capital growth. OBJECTIVE To produce capital gains over the long term while generating income. PORTFOLIO MANAGER Desjardins Global Asset Management (DGAM) offers institutional investment expertise in the following fields: Management of fixed-income investments. Management of equity investments using effective and systematic protocols. Selection and monitoring of external managers. Development of investment strategies tailored to client needs. Optimization of risk-adjusted returns. Structuring of target portfolios and investment policy development. Consulting on financial product development. As a partner, DGAM plays an active role in the technical design of DIM Private Funds. DGAM s main clients are Desjardins Group companies. INVESTMENT STRATEGY The manager invests in Canadian large cap equities of companies with sustainable dividend payouts, solid cash flows and attractive valuations on a risk-adjusted basis, and an emphasis is on security selection. Sector allocation results from security selection while maintaining exposure to various sectors and optimal diversification to control risk. The portfolio is managed to maintain an acceptable level of volatility and low turnover. PORTFOLIO CONSTRUCTION METHOD After applying various quantitative filters to the investment universe, the portfolio construction process consists of the following stages: A. Initial qualitative filter: In particular, this stage includes an analysis of the company s industry, business model and capacity to generate cash flows. Greater emphasis is placed on sources of income and profitability, as well as capital structure. An assessment of market positioning and competitive environment pertains not only to the company, but also to its competitors and suppliers. LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 10 Canadian equities AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

20 B. Fundamental analysis: This stage includes risk exposures specific to the company and its industry, business plan and growth drivers. This includes meetings with company senior executives, an analysis of the financial statements, exchanges with the firm s other management teams and a survey of financial analyst reports. C. Investment approach: This stage consists in determining a price range for each stock. The analysis factors in an investment horizon of months. Several securities are held in the portfolio over a longer period due to their long-term growth potential. D. Valuation: At this stage, relative and absolute valuation techniques are used with an emphasis on financial ratios. This involves a review of financial and operating leverage, and dividend stability. TARGET The return objective is to outperform the S&P/ TSX Dividend. The S&P/TSX Dividend index aims to provide exposure to Canadian equities with dividend payouts. SECTOR ALLOCATION AND DIVERSIFICATION The portfolio must include securities from at least six of the ten GICS sectors. The portfolio must have a minimum of 30 securities. Individual securities cannot exceed 10% of the portfolio s total market value, and at least 90% of stocks must pay dividends. Money market securities in the portfolio are limited to issues guaranteed by the Government of Canada and provincial governments, and overnight certificates of deposit of financial institutions. The minimum credit rating of corporate issuers is R-1 Low for money market securities. SPECIFIC SECURITIES MANAGEMENT FEATURES According to the management policy of segregated portfolio, the number of securities cannot exceed 55. DERIVATIVES PRODUCTS In accordance with the investment policy, the Fund and the segregated portfolios do not invest in derivatives. 88

21 DIM PRIVATE CANADIAN LARGE CAP EQUITY FUND CANADIAN EQUITY FUNDS GOAL Within a diversified portfolio, the role of the Canadian Equity High Income mandate is to generate high after-tax current income with moderate capital appreciation. This mandate is designed primarily for taxable accounts, but may also be suitable for registered plan accounts. Securities are generally acquired with a long-term horizon in view. OBJECTIVE Through a blend of high income common stocks, preferred stocks and real estate trust units, the investment manager s objective is to generate taxadvantaged current income. Target after-tax return is above bond portfolio return. Accordingly, volatility is higher, although still below the levels of traditional Canadian equity mandates. PORTFOLIO MANAGER Desjardins Global Asset Management (DGAM) offers institutional investment expertise in the following fields: Management of fixed-income investments. Management of equity investments using effective and systematic protocols. Selection and monitoring of external managers. Development of investment strategies tailored to client needs. Optimization of risk-adjusted returns. Structuring of target portfolios and investment policy development. Consulting on financial product development. INVESTMENT STRATEGY For this mandate, the manager uses a bottom-up approach and practises a relative value management style. The investment horizon is long term, and quality securities with high resistance to economic slow downs are preferred. All securities pay dividends or distributions, providing investors with tax-advantaged high current income. PORTFOLIO CONSTRUCTION METHOD The portfolio comprises high income common stocks, preferred shares and real estate trust units. The portfolio is fully invested. Following a major sale or in certain unfavourable short-term market situations, the manager may maintain a cash balance. TARGET The mandate aims to equal or exceed the return of its benchmark index, made up of the following subindices over four-year moving periods. SUBINDICES SUBINDICES WEIGHT (%) S&P/TSX Preferred Shares S&P/TSX REIT S&P/TSX Utilities S&P/TSX Consumer Discretionary 6.00 S&P/TSX Current Consumption 5.25 S&P/TSX Industrial 3.75 S&P/TSX Telecommunication 3.75 S&P/TSX Financials S&P/TSX Energy As a partner, DGAM plays an active role in the technical design of DIM Private Funds. DGAM s main clients are Desjardins Group companies. 89 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

22 LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) TARGET (%) MAXIMUM (%) Cash and money market Common stocks and real estate investment trust units Preferred shares Per sector limits for investment in common stock are as follows: SECTOR LIMITS Natural resources Energy Industrial products Industrial Consumer products Consumer discretionary Current Consumption Interest rate sensitive Financial services Telecommunication Utilities Real estate trusts PERMITTED EXPOSURE RANGE 1 ± 4% ± 4% ± 2.5% ± 2.5% ± 5% ± 3% ± 3% ± 8% ± 4% ± 2.5% ± 4% ± 5% 1. Compared with composite index weights under Target section. The maximum weight of all securities not included in the composite index is 10%. MARKET RISKS AND DIVERSIFICATION Securities held are mainly included in the S&P/ TSX Preferred Shares, REIT, Utilities, Consumer Discretionary, Current Consumption, Industrial, Telecommunications, Financials and Energy subindices. The manager may nonetheless invest in securities that are not included in these indices. At least 75% of the companies and real estate trusts held in the portfolio must have a market capitalization higher than $1 billion. Furthermore, the manager ensures that the liquidity of the preferred stock selected is adequate. All securities held must pay a dividend. Desjardins Global Asset Management Team monitors portfolio risk continuously, factoring in the impact of the individual securities, sector weight and total portfolio risk. Special attention is given to issuer concentration in financial services 90 due to its dominant position in the preferred shares category. When purchased, the minimum and maximum weights of a security in the portfolio are 1.5% and 5%, respectively. Weight may increase to a ceiling of 8% due to security appreciation. The manager may not carry out short sale transactions. CREDIT QUALITY LIMITS Limits for investment in preferred shares are as follows: CREDIT QUALITY LIMITS CREDIT RATING 1 MINIMUM (%) 2 MAXIMUM (%) 2 Pfd-1 and Pfd Pfd Pfd-4 or under DBRS credit ratings are used. S&P and Moody s ratings may be used as supplements. 2. Percentage of the preferred shares portion. MAXIMUM NUMBER OF SECURITIES The total number of securities targeted is DERIVATIVES PRODUCTS Derivatives are not authorized.

23 CANADIAN EQUITY FUNDS DIM PRIVATE CANADIAN EQUITY GROWTH FUND GOAL Within a diversified portfolio, the Canadian Growth Equity Fund aims to provide capital growth and risk control. OBJECTIVE The Fund s objective is to generate long-term capital growth. PORTFOLIO MANAGER Triasima Inc., a portfolio management firm, founded in 1998, is wholly owned by its employees and directors and completely independent from any other company or organization. Maintaining value and growth simultaneously, the firm structures portfolios for stability and consistency of results. Triasima is also known for its unique and rigorous investment process called the Three Pillar Approach that combines Fundamental Analysis, Quantitative Analysis and Trend Analysis. The aggregate conclusions of these three methods determine whether a security should be bought, held or sold. INVESTMENT STRATEGY The investment strategy seeks high total investment return mainly through capital gains from a broad universe of market capitalizations. Value added over S&P/TSX composite index return derives primarily from securities selection as the portfolio risk is, on average, less than market risk. PORTFOLIO CONSTRUCTION METHOD A quantitative screen is applied to the portfolio investment universe to identify the following financial factors: value, growth, profitability, expectations. Growth and expectations (estimates and earnings surprises) are the most highly sought after and the manager allocates them the greatest weight in the factorial model. In addition to filtering and identifying potentially attractive securities, the quantitative screen plays a role in the portfolio risk control/management process. It identifies securities that enable the portfolio to post above-market characteristics. Top down analysis is paired with bottom up fundamental research with a view to carrying out exhaustive studies of businesses and their industries. The manager examines the strength of an industry and a company s operations, its historical background and its team and business culture, as well as its viability and potential for growth. Analyses of market conditions, macroeconomic climate, economic and stock market cycles, industry structure and growth drivers are performed at this stage. The purpose of the bottom up fundamental analysis is not to determine a target price or growth/return forecasts for each security, but rather to reveal and provide insight into a company s competitive advantages, its inherent risks, its strengths and its weaknesses. The manager carries out company visits several times a year to support the bottom up analysis. 91 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

24 LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 15 Canadian equities Market trend analyses play a role in identifying potential portfolio securities. Eight indicators are examined across short, medium and long term historical horizons. This analysis provides a price trend for each potentially attractive security and avoids adding to the portfolio securities that are undergoing a downtrend. Furthermore, portfolio sell-side discipline comprises the elimination of securities in a downtrend. The portfolio is thus constructed and assessed on three different levels, making it possible to manage the strategy s risk/return side. The three methods of analysis are combined in a rigorous and structured manner, and their overall results will determine if a security should be bought, maintained or sold. Generally, two or three methods should yield positive results, whereas the third can yield either a positive or neutral result. This is true for any combination of results of the three methods of analysis. TARGET AUTHORIZED INVESTMENTS To ensure sound diversification, the portfolio must include at least six of the ten GICS industry sectors. Money market securities included in the portfolio are limited to issues guaranteed by the Government of Canada and provincial governments, and one-day certificates of deposit of financial institutions. For money market securities, the minimum credit rating of corporate issuers is R-1 Low. ASSET ALLOCATION LIMITS The relative weighting of a security may not exceed 10% of the total portfolio market value and the minimum number of portfolio holdings is 30. DERIVATIVES PRODUCTS The Fund s investment policy does not authorize investment in derivatives. The return objective is to obtain an annual gross return (before management fees) above the S&P/TSX Composite index. 92

25 DIM PRIVATE CANADIAN SMALL CAP EQUITY FUND CANADIAN EQUITY FUNDS GOAL Within a diversified portfolio, the role of the Canadian Small Cap Equity Fund is to capitalize on high-growth potential securities. OBJECTIVES One of the Fund s objectives is to outperform the overall Canadian stock market, given that investments in small caps involve higher risk. Another objective is to provide long term capital appreciation. PORTFOLIO MANAGER Fiera Capital Corporation (Fiera Capital) is one of Canada s largest independent investment managers. The corporation provides equity, fixed-income securities and asset allocation management services. It also offers alternative investment solutions and financial engineering services. This enables Fiera Capital to develop and implement diversified investment strategies fitted to the unique needs and objectives of its three main client types institutional markets, private wealth management and investor solutions. Fiera Capital is a listed company partially owned and controlled by management. The firm was created in 2003 following the acquisition of certain investment management operations from Desjardins Group. Over the last few years, Fiera Capital has made several acquisitions and transactions to expand its operations. Among the largest are the merger in 2010 with Sceptre Investment Counsel and the purchase in 2012 of the Natcan management operations from National Bank. INVESTMENT STRATEGY The manager invest in reasonably priced small cap growth stocks (capitalization generally between $100 million and $1 billion) with the aim of generating long-term capital growth. Average portfolio capitalization is below $1 billion. The manager seek companies with solid balance sheets and quality management teams that meet strict growth and profitability criteria. The focus is on security selection, while sector allocation is the result rather than the objective, and is managed for control purposes. PORTFOLIO CONSTRUCTION METHOD Canadian stocks are selected using in-depth fundamental analysis based on meetings with company management. The managers first verify the quality and competency of company management, then analyze the financial data and, finally, before buying the stock, round off the selection process by visiting the premises and speaking with mid-level executives. The collected qualitative data is then used to pose additional questions to management. Portfolio construction is subject to several guidelines. The market capitalization of portfolio securities must be between $100 million and $1 billion, while the portfolio must hold between 65 and 75 stocks. 93 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

26 LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 20 Canadian equities TARGET The annual return objective, before management fees, is to outperform the benchmark index S&P/TSX Equity Small Cap. LIMITS BY ISSUER AND DIVERSIFICATION The Canadian equities portfolio must include securities from at least six of the ten GICS sectors. To ensure satisfactory diversification, the Canadian equities portfolio must include at least 30 securities. Money market securities are limited to securities guaranteed by the Government of Canada and provincial governments, and financial institution overnight certificates of deposit. The minimum credit rating for corporate issuers is R-1 Low for money market securities. DERIVATIVES PRODUCTS Derivatives are not authorized. The maximum per issuer is 10% of the market value of the total portfolio. 94

27 CANADIAN EQUITY FUNDS SEGREGATED ACCOUNT RI CANADIAN EQUITY GOAL Within a diversified portfolio, the RI Canadian Equity for segregated accounts aim to provide capital growth and risk control while taking into account the sustainable development aspects of investments. OBJECTIVE The segregated account objective is to generate longterm capital growth as well as income. PORTFOLIO MANAGER Founded in 1996, QV Investors is a management firm that invests in companies with remarkable track records, skilled management teams, competitive products and services and superior quality financial structure. The firm takes a bottom-up approach to securities selection. To ensure quality portfolios with sustainable value, QV Investors manages and measures the value, growth, liquidity, returns and diversification of the companies in which it invests. RESPONSIBLE INVESTMENT ADVISOR NEI is home to Canada s largest team of in-house responsible investing specialists who, as our ESG Services Team, provide environmental, social and governance (ESG) analysis to portfolio managers, including NEI s own Ethical Funds. NEI is a wholly Canadian company, owned 50% by Desjardins Group and 50% by the Provincial Credit Union Centrals. GUIDELINE All investments must comply with NEI Investments Sustainable Investing Program. INVESTMENT STRATEGY The manager uses relative value industry analysis, combined with an analysis of factors such as growth outlook for industrial sectors and companies. It also keeps a close watch on major demographic trends, foreign currency capital flows and the financial environment. In this way, the manager integrates the technical impact of investor behaviour and enthusiasm for certain industries. Overall, the approach is oriented 45% value, 45% growth and 10% market. NEI Investments is a mutual fund company that makes excellent independent portfolio managers accessible to Canadian retail investors through two award-winning fund families: Northwest Funds and Ethical Funds. With true active management and a relentless, disciplined focus on risk management, NEI strives to deliver strong returns and peace of mind to investors as they work toward their financial goals and a secure future. 95 AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS

28 LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 20 Foreign equities 0 10 Canadian equities PORTFOLIO CONSTRUCTION METHOD The manager seeks to build a portfolio of Canadian large caps to be held for an indefinite period, mainly using company visits, meetings with senior management and quantitative analyses to identify attractive securities. Experienced management teams with integrity and excellent governance records are prized. To control overall risk, the manager continuously monitors growth, value, credit, liquidity and sector diversification factors. SECTOR AND DIVERSIFICATION CRITERIA The portfolio must include securities from at least five GICS sectors. The portfolio must hold between 25 and 45 securities. The maximum per issuer is 10% of the portfolio s market value. DERIVATIVES PRODUCTS Derivatives are not authorized. The same disciplined approach is applied to sell decisions, which are generally made following a deterioration of financial factors or a significant overvaluation of the security. The manager makes sure that investments with the lowest return potential are sold, to be replaced by others that could improve the portfolio s risk/return trade-off. TARGET The mandate s return objective, gross of management fees, consists in outperforming the S&P/TSX Composite Index by 200 basis points per year, over three-year moving periods. 96

29 DIM PRIVATE FUND AND SEGREGATED ACCOUNT U.S. EQUITY U.S. EQUITY FUNDS GOAL Within a diversified portfolio, the DIM Private U.S. Equity portfolio aims to capitalize on exposure to very large cap U.S. companies operating in a range of sectors. OBJECTIVE The portfolio s objective is to generate long-term capital growth. PORTFOLIO MANAGER Lazard Asset Management is a subsidiary of Lazard, the pre-eminent financial group dating from 1848 that offers financial consulting (mergers & acquisitions and financing) and portfolio management services. Lazard Asset Management is recognized primarily for equity management according to an investment method that favours security selection focused on value and financial return. The firm also manages fixed-income securities, alternative strategies, asset allocation and private wealth mandates. Lazard Asset Management provides management services to institutional clients, distribution networks and high net worth clients. INVESTMENT STRATEGY The investment strategy is based on selecting stocks of financially sound large and very large caps that are undervalued. This approach uses: In-depth fundamental research and accounting validation focusing on the risk-return trade-off; Scenario analysis (base, optimistic and pessimistic) with target buy / sell prices set by scenario type. A financially sound company must have: Significant cash flows; A healthy balance sheet; Operational flexibility. The investment process comprises the following steps: 1. Brainstorming; 2. Fundamental research; 3. Portfolio construction. PORTFOLIO CONSTRUCTION METHOD Following scenario analyses and accounting validation, streams of expected cash flows and profits are calculated by analysts with company valuations for each scenario. After assumptions underlying current stock prices are identified for each company and comparisons are made with their research results, analysts issue recommendations to the management team. Analysts and the management team then discuss the results of fundamental research, particularly the different scenarios and the probability of their materialization. The most likely scenario is favoured. The management team is entirely responsible for security selection during portfolio construction. Working with the risk management team, particular attention is given to portfolio risk characteristics and to ensuring satisfactory diversification. LIMITS BY ASSET CLASS ASSET CLASSES MINIMUM (%) MAXIMUM (%) Cash and money market 0 10 U.S. equities Other eligible securities AMENDED AND RESTATED DECLARATION OF TRUST OF DIM PRIVATE FUNDS