International Equity Value Currency Hedged Corporate Class

Transcription

1 This annual management report of fund performance 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 writing to us at United Financial, 2 Queen Street East, Twentieth Floor, Toronto, ON, M5C 3G7 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. INVESTMENT OBJECTIVE AND STRATEGIES The primary investment objective of the International Equity Value Currency Hedged Corporate Class (the Fund ) is to provide long-term capital appreciation primarily through investment in a diversified portfolio of equity and equity-related securities of international issuers which are believed to be undervalued relative to their perceived growth potential while hedging against changes to the exchange rates between the Canadian and major foreign currencies. Equity-related securities include convertible preferred shares, convertible debt obligations and warrants. This Fund also may invest in other mutual funds. The portfolio advisor will not invest in Canadian or U.S. issuers. To meet the objectives of the Fund, the portfolio advisor invests primarily in issuers which are believed to be undervalued relative to their perceived growth potential while hedging against the exchange rates between the Canadian and major foreign currencies. The portfolio advisor will use value-based and price driven approaches to identify companies that they believe are undervalued and have the potential for long-term future growth. The investment choices between regions will be based on an on-going analysis of trends in international markets. The Fund intends to hedge substantially all of its exposure to changes in the exchange rates between the Canadian dollar and major foreign currencies through derivatives. The Fund may use derivatives, but only as permitted by securities regulations. In order to earn additional income, it may also enter into securities lending transactions, repurchase transactions and reverse repurchase transactions, to the extent permitted by securities regulations. The Fund currently achieves its investment objectives by investing all of its assets in International Equity Value Pool (the underlying fund ). RISK There were no changes to the Fund over the period of this report that materially affected the overall level of risk associated with the Fund. The Fund is suitable for investors who want a medium risk investment that is focused on generating capital growth with minimal exposure to changes to the exchange rates between the Canadian dollar and major foreign currencies and are investing for the medium and/or long term. RESULTS OF OPERATIONS The net asset value of the Fund increased by $3.8 million to $39.8 million from March 31, 2016 to March 31, The Fund had net redemptions of $0.7 million during the year. The portfolio s performance increased assets by $6.5 million. The Fund paid distributions totalling $2.0 million. The one-year return for Class E shares, Class ET8 shares, Class I shares and Class IT8 shares was 17.6%, 17.4%, 20.3% and 20.1%, respectively, compared to the return of the MSCI EAFE Total Return Index in local currency of 18.6% for the same year. The following commentary pertains to the results of operations of the underlying fund. The portfolio performed in line with the MSCI EAFE Total Return Index for the year ending March 31, Strong absolute and relative gains were delivered during an eventful year in which key developments, most notably Britain s decision to leave the European Union (EU) and the election of Donald Trump as U.S. President, defied the odds makers. A respect for unexpected developments is a core tenet of successful investing and is particularly germane given elevated valuations, high levels of bullish sentiment, geopolitical uncertainty, and the prevailing complacency surrounding the equity markets hypersensitivity to interest rate trends. We believe that much of the public discourse and consensus views toward valuations and interest rates are overly simplistic and potentially dangerous. The most consequential of these factors, the future direction of interest rates, is largely unpredictable with a wide range of possible outcomes as shown above. However, a powerful consensus has emerged that interest rates will continue to rise in a healthy fashion with improvement in the underlying U.S. economy, as the Trump administration reduces regulatory burdens, increases fiscal spending, cuts taxes, and inspires companies to boost capital exenditures. This is just one of an array of possibilities. Given that equities are long-duration assets, prices are particularly sensitive at prevailing valuations and current low interest rate levels. This sensitivity, coupled with the breadth of possible outcomes, provides less stable footing than suggested by the seemingly universal investor bullishness, as seen in several indicators, including the AAII Investor Sentiment Index and Wall Street Strategists forecasts. Performance was led by holdings in the financial, consumer discretionary and health care sectors. Telecommunications holdings weighed on performance. In financials, the last 12 months have seen strong share price expansion in insurers and banks in Europe and Japan. In Europe, Chubb Ltd. and ING Groep NV were the strongest performers. Chubb continues to execute well with its integration of the Chubb-ACE merger. ING has continued to generate strong quarterly earnings, while cost cutting plans continue to increase, leading to rising expectations of normalized earnings power. After a very weak start to the year, shares of our Japanese financials increased due to the significant yen weakness and modest improvement in local interest rates. Tokio Marine Holdings Inc. and Sumitomo Mitsui Trust Holdings Inc. were the top performing holdings. CIG

2 We believe the valuations remain quite cheap and do not give enough credit for the meaningful improvement in capital ratios and shareholder returns for each of these companies. Our Japanese financial holdings still offer a shareholder yield (dividends + buybacks) that is more than double historic levels. Performance in the consumer discretionary sector was led by Adidas AG, which is executing well amidst a tailwind of health, sport, and fitness globally. Profitability is led by a healthy combination of originals and new/edgier styles. We expect Kasper Rorsted, the company s highly respected CEO, to breathe even more vigor into the organization and, with margins still well below industry peers, there is ample room for improvement. In health care, GlaxoSmithKline PLC was one of the stronger performers during the year. Despite being at the epicenter of Brexit, pharmaceutical company GlaxoSmithKline outperformed. This was driven by the perceived defensiveness of the company s global franchises and its dividend yield. In addition, after underperforming earlier in the year, shares of Sanofi benefited from the market move to defensives as well as a stabilization of its diabetes franchise. Also, portfolio moves, such as Sanofi s spinoff of the animal health business, were received positively. Management fee and fixed administration fee rates as at March 31, 2017, for each of the classes are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) E Shares ET8 Shares I Shares Paid directly by investor - IT8 Shares Paid directly by investor - The Manager received $0.4 million in management fees and $0.1 million in fixed administrative fees for the year. Management Fees Approximately 25% of total management fees were used to pay for sales and trailing commissions and other services required. The remaining 75% of management fees were used to pay for investment management and other general administration. The European telecommunications sector was one of the worst performing this year, as the regulator returned to a more pro-competition stance and several consolidation deals were blocked. Despite the tougher backdrop, Vodafone has continued to show improving growth across the majority of its European operations, however a lack of merger and acquisition news with Liberty Global and an aggressive new entrant in India hurt the stock. RECENT DEVELOPMENTS There are several forces influencing markets that have never been reckoned with before, including the flood of capital flowing into passive/quantitative strategies and extraordinary central bank policy experimentation. After eight years of virtually uninterrupted market appreciation, the prevailing complacency and bullish sentiment amidst elevated valuations is concerning. This is not a time to be greedy. Against this backdrop, we continue to emphasize the identification of undervalued high-quality and/or misperceived businesses with company-specific levers that can be applied to unlock value and talented management teams that can innovate, execute, and adapt to evolving global conditions. Effective January 3, 2017, James Werry became a member of the Independent Review Committee of the Fund. RELATED PARTY TRANSACTIONS Manager, Portfolio Advisor and Registrar CI Investments Inc. is the Manager, Portfolio Advisor and Registrar of the Fund. CI Investments Inc. is a subsidiary of CI Financial Corp. The Manager, in consideration for management fees, provided management services required in the day-to-day operations of the Fund. The Manager bears all of the operating expenses of the Fund (other than taxes, borrowing costs and new governmental fees) in return for a fixed administration fee. Principal Distributor The Manager has the exclusive right to arrange for the distribution of shares of the Fund. Pursuant to a series of agreements, the right to distribute such shares has been granted, on a collective basis, to the following dealers, each of which is an affiliate of the Manager. Assante Capital Management Ltd. Assante Financial Management Ltd. Independent Review Committee The Fund received standing instructions from the Board of Governors ( BoG ) in its capacity as the Independent Review Committee ( IRC ) with respect to the following Related Party Transactions: a) trades in securities of CI Financial Corp.; b) purchases or sales of securities of an issuer from or to another investment fund managed by the Manager (referred to as Inter-Fund Trades ); c) purchases or sales of other investment funds managed by the Manager or their affiliates; and d) mergers of funds with another fund that is subject to National Instrument ( Fund Mergers ). The applicable standing instructions require that Related Party Transactions be conducted in accordance with the Manager s policies and procedures. The Manager is required to advise the IRC of any material breach of a condition of the standing instructions. The standing instructions require, among other things, that the investment decisions in respect to Related Party Transactions (a) are made by the Manager free from any influence by any entities related to the Manager and without taking into account any consideration to any affiliate of the Manager; (b) represent the business judgment of the Manager uninfluenced by considerations

3 other than the best interests of the Fund; and (c) are made in compliance with the Manager s policies and procedures. Transactions made by the Manager under the standing instructions are subsequently reviewed by the IRC on a quarterly basis to monitor compliance. The Fund relied on the IRC s standing instructions regarding Related Party Transactions during this reporting year. 3

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 past five years, as applicable. Net Assets per Share ($) (1) (2) (8) * E Shares Commencement of operations September 26, 2008 Net assets at the beginning of year (1) Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Dividends: From net investment income (excluding dividends) From dividends From capital gains Return of capital (2, 3) Total dividends Net assets at the end of the year shown (2) Ratios and Supplemental Data Total net assets ($000 s) (8) Number of shares outstanding (000 s) (8) Portfolio turnover rate (%) (5) Trading expense ratio (%) (6) Management expense ratio before taxes (%) (4) Harmonized sales tax (%) (4) Management expense ratio after taxes (%) (4) Effective HST rate for the year (%) (4) Year Ended Year Ended Year Ended Year Ended Year Ended Mar. 31, 2017 Mar. 31, 2016 Mar. 31, 2015 Mar. 31, 2014 Mar. 31, 2013^ $ $ $ $ $ (0.31) (0.30) (0.28) (0.26) (0.21) (2.27) (1.10) (0.07) (0.06) (0.05) (0.09) (0.03) (0.60) (0.53) (0.33) - - (0.67) (0.59) (0.38) (0.09) (0.03) ,059 22,231 30,274 30,180 30,991 1,807 1,946 2,295 2,599 3, ET8 Shares Commencement of operations June 20, 2011 Net assets at the beginning of year (1) Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Dividends: From net investment income (excluding dividends) From dividends From capital gains Return of capital (2, 3) Total dividends Net assets at the end of the year shown (2) Ratios and Supplemental Data Total net assets ($000 s) (8) Number of shares outstanding (000 s) (8) Portfolio turnover rate (%) (5) Trading expense ratio (%) (6) Management expense ratio before taxes (%) (4) Harmonized sales tax (%) (4) Management expense ratio after taxes (%) (4) Effective HST rate for the year (%) (4) Year Ended Year Ended Year Ended Year Ended Year Ended Mar. 31, 2017 Mar. 31, 2016 Mar. 31, 2015 Mar. 31, 2014 Mar. 31, 2013^ $ $ $ $ $ (0.22) (0.24) (0.24) (0.24) (0.21) (1.79) (0.95) (0.05) (0.04) (0.04) (0.08) (0.02) (0.41) (0.40) (0.27) - - (0.77) (0.80) (0.83) (0.74) (0.70) (1.23) (1.24) (1.14) (0.82) (0.72) *Footnotes for the tables are found at the end of the Financial Highlights section. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 7.

5 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Share ($) (1) (2) (8) * I Shares Commencement of operations October 10, 2008 Net assets at the beginning of year (1) Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Dividends: From net investment income (excluding dividends) From dividends From capital gains Return of capital (2, 3) Total dividends Net assets at the end of the year shown (2) Ratios and Supplemental Data Total net assets ($000 s) (8) Number of shares outstanding (000 s) (8) Portfolio turnover rate (%) (5) Trading expense ratio (%) (6) Management expense ratio before taxes (%) (4) Harmonized sales tax (%) (4) Management expense ratio after taxes (%) (4) Effective HST rate for the year (%) (4) Year Ended Year Ended Year Ended Year Ended Year Ended Mar. 31, 2017 Mar. 31, 2016 Mar. 31, 2015 Mar. 31, 2014 Mar. 31, 2013^ $ $ $ $ $ (0.03) (3.28) (1.14) (0.11) (0.08) (0.08) (0.13) (0.03) (0.87) (0.76) (0.46) - - (0.98) (0.84) (0.54) (0.13) (0.03) ,322 13,482 19,403 16,754 17, ,054 1,058 1, IT8 Shares Commencement of operations June 22, 2011 Net assets at the beginning of year (1) Increase (decrease) from operations: Total revenue Total expenses (excluding distributions) Realized gains (losses) for the year Unrealized gains (losses) for the year Total increase (decrease) from operations (2) Dividends: From net investment income (excluding dividends) From dividends From capital gains Return of capital (2, 3) Total dividends Net assets at the end of the year shown (2) Ratios and Supplemental Data Total net assets ($000 s) (8) Number of shares outstanding (000 s) (8) Portfolio turnover rate (%) (5) Trading expense ratio (%) (6) Management expense ratio before taxes (%) (4) Harmonized sales tax (%) (4) Management expense ratio after taxes (%) (4) Effective HST rate for the year (%) (4) Year Ended Year Ended Year Ended Year Ended Year Ended Mar. 31, 2017 Mar. 31, 2016 Mar. 31, 2015 Mar. 31, 2014 Mar. 31, 2013^ $ $ $ $ $ (0.02) (2.20) (0.70) (0.06) (0.05) (0.05) (0.09) (0.03) (0.50) (0.47) (0.31) - - (0.90) (0.91) (0.93) (0.81) (0.74) (1.46) (1.43) (1.29) (0.90) (0.77) *Footnotes for the tables are found at the end of the Financial Highlights section. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 7.

6 FINANCIAL HIGHLIGHTS (cont d) (1) This information is derived from the Fund s audited annual financial statements. (2) Net assets per share and dividends per share are based on the actual number of shares outstanding for the relevant class at the relevant time. The increase (decrease) in net assets from operations per share is based on the weighted average number of shares outstanding for the relevant class over the fiscal year. (3) Dividends are automatically reinvested in additional shares of the Fund. (4) Management expense ratio is calculated based on expenses charged to the Fund (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net assets for the year. The Effective HST tax rate is calculated using the attribution percentage for each province based on shareholder residency and can be different from 13%. (5) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor 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 in the course of the fiscal year. The higher a 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 higher turnover rate and the performance of a Fund. Portfolio turnover rate is calculated by dividing the lesser of the cost of purchases and the proceeds of sales of portfolio securities for the year, and excluding cash and short-term investments maturing in less than one year, and before assets acquired from a merger, if applicable, by the average of the monthly fair value of investments during the year. (6) The trading expense ratio represents total commissions and other portfolio transaction costs disclosed in the statements of comprehensive income expressed as an annualized percentage of daily average net assets of the Fund during the year. (7) For financial years beginning on or after April 1, 2013 the financial highlights are derived from the financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS allows net assets to be calculated based on the last traded market price for financial assets and financial liabilities where the last traded price falls within the day s bid-ask spread. There are no differences between the net assets calculated for purpose of processing shareholders transactions and the net assets attributable to holders of redeemable shares used for financial statement reporting purposes. For financial years before April 1, 2013, the financial highlights are derived from the financial statements prepared in accordance with Canadian GAAP. Under Canadian GAAP net assets for financial statement purposes were calculated based on bid/ask price while for purpose of processing shareholder transactions net assets were calculated based on the closing market price. (8) This information is provided as at March 31 of the years shown. 6

7 PAST PERFORMANCE This section describes how the Fund has performed in the past. Remember, past returns do not indicate how the Fund will perform in the future. The information shown assumes that dividends made by the Fund in the years shown were reinvested in additional shares of the relevant classes of the Fund. In addition, the information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. Year-by-Year Returns The following charts show the Fund s annual performance for each of the years shown and illustrate how the Fund s performance has changed from year to year. In percentage terms, the charts show how much an investment made on the first day of each financial year would have grown or decreased by the last day of each financial year, except where noted. E Shares ET8 Shares I Shares IT8 Shares Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar This figure is for the period from September 26, 2008 to March 31, This figure is for the period from October 10, 2008 to March 31, This figure is for the period from June 20, 2011 to March 31, This figure is for the period from June 22, 2011 to March 31, 2012.

8 Annual Compound Returns The following table shows the Fund s annual compound returns for each year indicated, compared to the MSCI EAFE Total Return Index (LC). The MSCI EAFE Total Return Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States of America and Canada. The Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. A discussion of the performance of the Fund as compared to the benchmark is found in the Results of Operations section of this report. One Year (%) Three Years (%) Five Years (%) Ten Years (%) Since Inception (%) E Shares n/a 4.6 MSCI EAFE Total Return Index (LC) n/a 7.0 ET8 Shares n/a 8.3 MSCI EAFE Total Return Index (LC) n/a 8.7 I Shares n/a 9.4 MSCI EAFE Total Return Index (LC) n/a 9.3 IT8 Shares n/a 11.7 MSCI EAFE Total Return Index (LC) n/a 9.1 8

9 Summary of Investment Portfolio as at March 31, 2017 Portfolio Breakdown* Percentage of Portfolio Breakdown (cont d)* Percentage of Top 25 Holdings* Percentage of Category Net Assets (%) Category Net Assets (%) Security Name Net Assets (%) Country allocation Japan U.K Switzerland Germany Cash & Equivalents France Netherlands Ireland Jersey Island Mexico Denmark India Thailand Hong Kong Cayman Islands U.S.A Netherlands Antilles Sweden South Korea Other Net Assets (Liabilities) Israel Bermuda Russia Luxembourg Foreign Currency Forward Contracts... - Sector allocation Financials Consumer Staples Health Care Information Technology Cash & Equivalents Consumer Discretionary Materials Telecommunication Services Industrials Energy Other Net Assets (Liabilities) Utilities Foreign Currency Forward Contracts... - Cash & Equivalents Chubb Ltd Heineken N.V Willis Towers Watson PLC Aon PLC Nestle S.A., Registered Shares Mitsubishi UFJ Financial Group Inc Tokio Marine Holdings Inc GlaxoSmithKline PLC Novartis AG, Registered Shares Sanofi Diageo PLC Vodafone Group PLC, ADR Nintendo Co., Ltd Danone S.A Roche Holding AG Henkel AG & Co., KGaA, Preferred, Non-Voting Shares Linde AG Astellas Pharma Inc Grupo Televisa S.A.B. de C.V., ADR Sumitomo Mitsui Trust Holdings Inc TDC AS MS&AD Insurance Group Holdings Inc Experian PLC Akzo Nobel N.V Total Net Assets (in $000 s) $39,770 *These are holdings and the breakdown of the underlying fund. The summary of investment portfolio may change due to ongoing portfolio transactions of the Fund and updates will be available on a quarterly basis. A NOTE ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. 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 Fund 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 by the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchanges 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.