Meritas Maximum Growth Portfolio (the Portfolio )

Transcription

1 (the Portfolio ) Interim Period ended June 30, 2018 This contains financial highlights but does not contain either interim or annual financial statements of the Portfolio. You can obtain a copy of the interim or annual financial statements from the manager of the Portfolio, OceanRock Investments Inc. (the Manager or OceanRock ), at your request, and at no cost, by calling toll-free , by writing to us at OceanRock Investments Inc., Suite 1920, 505 Burrard St., Box 85, Vancouver, BC, V7X 1M6, or by visiting our website at or SEDAR at Unitholders may also contact us using one of these methods to request a copy of the Portfolio s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure.

2 Management Discussion of Fund Performance Results of Operations For the six-month period ended June 30, 2018, Series A units of the returned 3.68% versus its blended benchmark index which returned 3.76%. All index and Portfolio returns are calculated on a total return basis in Canadian dollars terms. The Portfolio s return is net of fees and expenses. Investors cannot invest in an index without incurring fees, expenses and commissions, which are not reflected in the index returns. The Meritas Monthly Dividend & Income Fund contributed to Portfolio performance, as Canadian stocks rebounded strongly in the second quarter driven by higher oil prices. The Fund s best returning sector on a year-to-date basis was Information Technology. The Meritas U.S. Equity Fund was the strongest performer within the Portfolio during the reporting period, in large part due to the strength of the U.S. dollar. Holdings in eight out of eleven sectors positively contributed to performance. The primary contributors to performance were Information Technology ( IT ), Health Care and Energy stocks. The Meritas International Equity Fund recorded a strong positive return for the six-month period, enhancing overall Portfolio performance. The Fund considerably outperformed the MSCI ACWI ex-u.s. Index, with stock selection within the Consumer Discretionary and Financials sectors being the strongest contributors. For information about the underlying funds held in the Portfolio, please see the individual Management Report of Fund Performance for the applicable fund. This Portfolio has an overall target mix of 100% equity. The weights of the Portfolio s underlying funds may be changed within range of these targets from time-to-time. Recent Developments Canadian stocks rebounded strongly in the second quarter. With its relatively higher weight in Energy stocks, the S&P/TSX Composite Index benefitted from rising oil prices, driving year-to-date returns into positive territory. The U.S. stock market overcame trade frictions and a market correction, caused by higher interest rates and fear of increasing inflation, to finish in positive territory during the first half of Growth stocks significantly outperformed value stocks over the period. Global equities had mixed performance during the six-month period ended June 30, Stocks in the US rallied to all-time highs at the very beginning of the period, as recent corporate tax reform helped boost investor sentiment. However, increasing inflation concerns and rising interest rates soon weighed on performance. While generally robust corporate earnings mitigated some downward pressure, worsening trade war fears and political turmoil in Europe dragged on returns toward the end of the period. The strengthening US dollar and investors decreased risk appetite caused emerging-market equities to significantly underperform. Proposed Change of Manager In December 2017, Desjardins Financial Holding Inc. ( Desjardins ), the indirect controlling shareholder of OceanRock, entered into an agreement with Canada s five provincial credit union centrals (the Centrals ) and The CUMIS Group Limited ( CUMIS ), pursuant to which the business of Qtrade Canada Inc., the parent company of OceanRock, would be combined with the businesses of Credential Financial Inc. and Northwest & Ethical Investments L.P. ( NEI ). The transaction closed on April 1, 2018 and resulted in an indirect change of control of OceanRock. The new entity, Aviso Wealth Inc. ( Aviso ), is indirectly jointly owned by Desjardins and a limited partnership comprised of the Centrals and CUMIS, with each holding a 50% stake. As a result of the above noted transaction, OceanRock and NEI are now affiliates and this has resulted in some overlap and duplication of offerings. As a result, it has been proposed that certain funds managed by OceanRock Page 2 of 11

3 be merged into funds managed by NEI and that the management agreements with respect to certain other funds currently managed by OceanRock be transferred to NEI, which will result in NEI becoming the new manager of those funds. OceanRock proposes to change the manager of this Portfolio to NEI effective on or about October 26, A meeting to obtain approval from Portfolio investors in respect of the change of manager will be held on or about August 31, If the change is approved, NEI will become the trustee and registrar of the Portfolio and Desjardins Trust Inc. (an affiliate of NEI) will become the custodian of the Portfolio. Proposed Change of Investment Objective In connection with the above, OceanRock is also proposing a change to the fundamental investment objective of the Portfolio effective on or about October 26, A meeting to obtain approval from Fund investors in respect of the change of investment objective will be held on or about August 31, If the change is approved, the Portfolio will be renamed NEI Select Maximum Growth RS Portfolio, its investment strategies will be updated and its distribution policy will change from an annual variable to a monthly fixed amount. Proposed Fixed Administration Fees In connection with the above, OceanRock is also a proposing the adoption of a fixed administration fee to replace certain operating expenses attributable to the series of the Portfolio effective on or about October 26, A meeting to obtain approval from Portfolio investors in respect of this change will be held on or about August 31, Page 3 of 11

4 Financial Highlights The following tables show selected key financial information about the Portfolio and are intended to help you understand the Portfolio s financial performance for the past five years. The Portfolio s Net Assets per Unit 1 Series A Units June 30, Net assets per unit, beginning of periods $17.46 $16.07 $15.24 $13.78 $12.51 $9.94 Increase (decrease) from operations: Total revenue (0.16) Total expenses (0.22) (0.42) (0.39) (0.37) (0.33) (0.29) Realized gains (losses) for the periods Unrealized gains (losses) for the periods Total increase (decrease) from operations Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions Net assets per unit, end of periods $18.10 $17.46 $16.07 $15.24 $13.78 $12.51 Ratios and Supplemental Data Total net asset value (000 s) 4 $23,625 $18,997 $12,616 $8,171 $5,092 $2,940 Number of units outstanding (000 s) 4 1,305 1, Management expense ratio % 2.58% 2.59% 2.60% 2.58% 2.57% Management expense ratio before waivers or absorptions 2.64% 2.67% 2.77% 2.79% 2.99% 4.09% Portfolio turnover rate % 0.55% 4.39% 43.66% Trading expense ratio % Net asset value per unit $18.10 $17.46 $16.07 $15.24 $13.78 $ The Fund adopted International Financial Reporting Standards ("IFRS") on January 1, Previously, the Fund prepared its financial statements in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). Furthermore, the Fund has adopted IFRS 9 Financial Instruments commencing with the period beginning January 1, IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of IFRS 9 did not impact classification and measurement of the Fund. A restatement of prior periods is not required. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial period. 3 Distributions were reinvested in additional units of the Portfolio and paid in cash. 4 The information is provided as at December 31st of the year shown, except as otherwise indicated. 5 Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. The Manager may absorb some operating expenses payable by the Portfolio and may discontinue doing so at any time in its discretion. 6 The portfolio turnover rate indicates how actively the portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Portfolio buying and selling all of the securities in its portfolio once in the course of the year. The higher the portfolio turnover rate in a year, the greater the trading costs payable by the Portfolio in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. 7 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. Page 4 of 11

5 The Portfolio s Net Assets per Unit 1 Series F Units June 30, Net assets per unit, beginning of periods $18.23 $16.59 $15.65 $14.33 $12.98 $10.04 Increase (decrease) from operations: Total revenue (0.20) Total expenses (0.13) (0.25) (0.23) (0.24) (0.21) (0.17) Realized gains (losses) for the periods Unrealized gains (losses) for the periods Total increase (decrease) from operations Distributions: From income (excluding dividends) From dividends From capital gains Return of capital Total annual distributions Net assets per unit, end of periods $19.00 $18.23 $16.59 $15.65 $14.33 $12.89 Ratios and Supplemental Data Total net asset value (000 s) 4 $3,244 $1,693 $1,350 $997 $684 $253 Number of units outstanding (000 s) Management expense ratio % 1.47% 1.50% 1.60% 1.56% 1.56% Management expense ratio before waivers or absorptions 2.04% 2.54% 2.89% 3.19% 4.12% 8.57% Portfolio turnover rate % 0.55% 4.39% 43.66% Trading expense ratio % Net asset value per unit $19.00 $18.23 $16.59 $15.65 $14.33 $ The Fund adopted International Financial Reporting Standards ("IFRS") on January 1, Previously, the Fund prepared its financial statements in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). Furthermore, the Fund has adopted IFRS 9 Financial Instruments commencing with the period beginning January 1, IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of IFRS 9 did not impact classification and measurement of the Fund. A restatement of prior periods is not required. 2 Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial period. 3 Distributions were reinvested in additional units of the Portfolio and paid in cash. 4 The information is provided as at December 31 st of the year shown, except as otherwise indicated. 5 Management expense ratio is based on total expenses (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. The Manager may absorb some operating expenses payable by the Portfolio and may discontinue doing so at any time in its discretion. 6 The portfolio turnover rate indicates how actively the portfolio adviser manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Portfolio buying and selling all of the securities in its portfolio once in the course of the year. The higher the portfolio turnover rate in a year, the greater the trading costs payable by the Portfolio in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of a fund. 7 The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. Page 5 of 11

6 Management Fees Management fees payable to the Manager by the Portfolio are calculated daily on the net asset value of the Portfolio at an annual rate of: Series A 1.95% Series F 0.90% The Portfolio paid the Manager management fees of $219,653 during the interim period. The management fee for each series is calculated as a percentage of its net asset value as of the close of business on each business day. The fees are paid monthly. The Portfolio s management fees were used by the Manager to pay costs related to managing the investment portfolio, providing investment analysis and recommendations, making investment decisions, making brokerage arrangements for the purchase and sale of the investment portfolio and providing other services. For the six months ended June 30, 2018, approximately 25.5% of the total management fees from all OceanRock managed funds was used to fund these costs. Where total costs exceeded the current period s management fees paid by the Portfolio, the balance was paid out of the Manager s other resources. The Manager also used the management fees to fund commission payments and other dealer compensation (collectively, distribution-related costs) to registered dealers for units of the Portfolio bought and held by investors. For the six months ended June 30, 2018, approximately 54.4% of the total management fee revenues received from all OceanRock managed funds was used to fund distribution-related costs paid to registered dealers. This may vary by series depending on the assets invested in each series. Page 6 of 11

7 Past Performance The performance information shown below assumes that all distributions made by the Portfolio in the periods shown were reinvested in additional units of the Portfolio. It does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. How the Portfolio has performed in the past does not necessarily indicate how it will perform in the future. Year-by-Year Returns The following bar chart shows the Portfolio s annual performance for each of the periods shown and illustrates how the Portfolio s performance has changed from year to year. The bar chart shows, in percentage terms, how much an investment made on the first day of each financial period would have grown or decreased by the last day of each financial period shown. The differences in performance between series are the result of the timing of cash flows into and out of each series and the different management fees charged to the applicable series. Series A 30% 26.07% 24.81% Series F 20% 10% 9.42% 10.61% 11.18% 11.75% 10.09% 10.66% 5.70% 6.85% 8.65% 9.86% 4.25% 3.68% 0% -10% -20% -30% Jun-18 Note: Series A inception date: April 6, Series F inception date: April 6, Page 7 of 11

8 Summary of Investment Portfolio The following tables show a summary of the Portfolio s holdings as at June 30, The Portfolio invests in other investment funds. The prospectus and other information about the underlying investment funds are available on the Internet at or The summary of investment portfolio may change due to ongoing portfolio transactions of the Portfolio. Updates are available quarterly. Underlying Funds and Assets Security Name Series % of NAV Asset Mix Asset Class MERITAS MONTHLY DIVIDEND AND INCOME FUND O 35.3 Equities 99.3 MERITAS US EQUITY FUND O 34.7 Cash & Equivalents 0.7 MERITAS INTERNATIONAL EQUITY FUND O 29.3 Total CASH 0.7 Total % of NAV Page 8 of 11

9 The Portfolio is a fund-of-fund structure and invests in other investment funds. The following table represents an aggregated "look-through" of the Portfolio s holdings. Actual consolidated security holdings are only identifiable by including the holdings of the underlying investment funds. Top 25 Holdings Security Name Coupon % Maturity % of NAV Investment / Sector Mix Investment Type THE TORONTO-DOMINION BANK 3.3 Financials 23.9 CASH 2.7 Information Technology 17.8 ROYAL BANK OF CANADA 2.7 Consumer Discretionary 12.1 BANK OF NOVA SCOTIA 2.1 Industrials 9.4 ENBRIDGE INC 1.8 Energy 8.8 MICROSOFT CORP 1.6 Materials 6.7 CANADIAN NATIONAL RAILWAY COMPANY 1.5 Health Care 6.5 CANADIAN NATURAL RESOURCES 1.5 Consumer Staples 5.8 OPEN TEXT CORP 1.4 Cash & Equivalents 4.7 PEMBINA PIPELINE CORP 1.3 Telecommunication Services 2.0 MANULIFE FINANCIAL CORP 1.2 Impact Investments 0.8 NUTRIEN LTD 1.2 Real Estate 0.8 CGI GROUP INC CLASS A 1.2 Utilities 0.7 CANADA T BILL Sep 06, Total AETNA INC 1.1 WSP GLOBAL INC 1.0 ADOBE SYSTEMS INC 1.0 STANTEC INC 1.0 HOME DEPOT INC 1.0 ORACLE CORP 0.9 GILDAN ACTIVEWEAR INC 0.9 WASTE MANAGEMENT INC 0.9 CANADIAN TIRE CORP 0.9 METRO INC 0.9 JPMORGAN CHASE & CO 0.9 Total 35.1 % of NAV Note: Rounding to one decimal place may result in the individual figures totalling to more or less than 100%. Page 9 of 11

10 Forward-Looking Statements This report may contain forward-looking statements about the Portfolio, including its strategy, expected performance and condition. Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made by the Portfolio. Any number of important factors could contribute to these differences, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. This list of factors is not exhaustive. Consider these and other factors carefully before making any investment decisions and avoid placing any undue reliance on forward-looking statements. Page 10 of 11

11 Meritas SRI Funds Suite 1920, 505 Burrard Street Box 85, Vancouver, BC, V7X 1M