IA Clarington Inhance Global Equity SRI Class

Transcription

1 Series A, E, EF, F, I, L and V Shares This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements of the 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 522 University Avenue, Suite 700, Toronto, ON M5G 1Y7, 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 interim financial report, proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.

2 Management Discussion of Fund Performance The management discussion of fund performance for IA Clarington Inhance Global Equity SRI Class (the "Fund") represents management's view of the significant factors and developments affecting the Fund's performance and outlook for the 12-month period ended. IA Clarington Investments Inc. is the manager (the "Manager") of the Fund. Investment Objective and Strategies The Fund's investment objective is to achieve long term capital appreciation by investing primarily in equity securities from around the world. The Fund's strategy is to invest primarily in a broad selection of publicly traded common and preferred shares and convertible securities of issuers located around the world which meet the sub-advisor's socially responsible investment principles. The Fund's Portfolio Manager is Industrial Alliance Investment Management Inc. ("IAIM" or the "Portfolio Manager") and its Sub-Advisor is Vancity Investment Management Limited ("VIML" or the "Portfolio Sub-Advisor" or the "fund manager"). Risk The overall risk of investing in the Fund remains as described in the prospectus. The Fund is suitable for investors seeking the potential for capital appreciation, with a medium risk tolerance and have a long-term investment time horizon. Results of Operations The Fund's Net Assets increased by 42.8% or $74.7 million during the period, from $174.4 million on March 31, to $249.1 million on. This change in Net Assets resulted from an increase of $51.4 million due to net sales, a decrease of $1.5 million due to distributions and an increase of $24.8 million due to investment operations, including market volatility, income and expense. The average Net Asset Value of the Fund increased by 37.7% or $57 million in comparison to the prior period, from $151.4 million to $208.4 million. Average Net Asset Value influence revenue earned and expenses incurred by the Fund during the period. Series A shares of the Fund returned 11.2% for the twelve-month period ending. The performance of the other series of the Fund is substantially similar, save for differences in fees and expense structure. Refer to the " Performance" section for performance information of each series. The Fund's benchmark, the MSCI World Index^, returned 9.8% for the same twelve-month period. The Fund s return calculation for all series includes fees and expenses, which are not applicable in generating a return for the benchmark. During the period, the U.S. Federal Reserve (the Fed) continued to raise interest rates and reduce the outstanding balance of assets purchased under its quantitative easing program. Global markets and economies appeared to weather the initial phases well. Headwinds, however, are expected to pick up as monetary policy challenges have increased with many countries raising interest rates (including the U.K. and Canada) and the European Central Bank expected to wind down their own asset purchases. Triggered by concerns around inflation, global equity markets declined at the end of the period, resulting in a rise in the U.S. 10-year Treasury yield from 2.4% to 2.9% at the end of. Concerns over trade protectionism drove global equities down again in March. Global equity markets continued to decline in March amid concerns that trade tensions could lead to a trade war and undermine the synchronized global expansion. An extended decline in the information technology sector also weighed on investor sentiment. Regionally, the U.S. equity market was volatile during March, and the S&P 500 Index closed the month with its first quarterly loss since. Weakness also extended to overseas markets, with both international and emerging market equity markets losing value. Sector allocation and security selection contributed to the Fund s outperformance relative to the benchmark. From a geographic perspective, U.S. security selection was a key contributor to performance. Security selection in the information technology, financial and consumer discretionary sectors were the most significant contributors to the Fund s performance. The Fund s fossil fuel free climate risk strategy also added value, as energy sector holdings were excluded. The most significant individual contributors to the Fund s performance included First Solar Inc., Adobe Systems Inc. and Xylem Inc. U.S.-based First Solar benefited from strong demand for next generation solar panels where pricing has declined as a result of manufacturing efficiency. Adobe performed well as it experienced strong subscription sales of its cloud computing-based product suites. Xylem, a leading U.S.-based water services firm, is expected to benefit from the U.S. government s upcoming infrastructure spending to save the country s deteriorating water services network. Security selection in France and Spain detracted from the Fund s performance over the period, as did exposure to the real estate and utilities sectors. A higher-than-usual cash balance in the Fund also detracted from performance as the fund manager sought to buffer increasing global market volatility later in the period. Individual detractors from the Fund s performance included holdings in CVS Health Corp., Shire plc and Vestas Wind Systems A/S. CVS Health, a U.S. pharmacy benefit management and retail chain, was negatively impacted by concerns over drug pricing and regulation uncertainty. The company also faces possible competition from the potential entry of Amazon.com Inc. into the industry. U.K. pharmaceutical firm Shire saw its share price decline after it missed earnings targets. However, Shire s rare disease portfolio makes the firm a good candidate for acquisition. Vestas Wind Systems experienced continued uncertainty regarding input cost pricing following the U.S. tariff announcement regarding steel, which is the biggest component of wind turbines. New positions added to the Fund included Aptiv PLC, Danone SA, Unilever NV, MSCI Inc. and Koninklijke DSM NV. The Fund s cash levels increased over the period, as the fund manager sought reasonably priced companies with attractive growth potential, and to help protect the Fund from increasing market volatility later in the period. 1

3 Results of Operations (continued) Several holdings were sold, either to take profits or eliminate a position that no longer met the Fund s investment strategy. Panera Bread Co. was eliminated following an acquisition announcement. Acuity Brands Inc. did not meet the Fund s sales growth expectations and proceeds were allocated to other growth opportunities. Facebook Inc. was exited following governance concerns over the use of user data. In terms of environmental, social and corporate governance issues, the fund manager called on Weyerhaeuser Co. to work with the Grassy Narrows First Nation to resolve a logging conflict. The fund manager also requested that CVS Health begin a dialogue on the company s approach to management of copayments for generic medication. CVS Health was also engaged on its approach to phasing out toxic materials from its in-house products. Amazon.com Inc. was encouraged to participate in the Carbon Disclosure Project. The fund manager supported an initiative to align the Sustainability Accounting Standards Board standards for the biotechnology and pharmaceutical industry with the Access to Medicines Index. Gilead Sciences Inc., CSL Ltd., Shire and Novo Nordisk A/S were engaged to open a dialogue on supply chain management and risk mitigation in regard to anti-microbial resistance as it relates to pharmaceutical production. The fund manager participated in the Bangladesh Investor Coalition, encouraging the ongoing remediation of non-compliant factories. The subadvisor called on Costco Wholesale Corp. to join the Accord on Fire and Building Safety, which is being extended for three years to facilitate regulatory development in Bangladesh. The fund manager also joined an investor group, the Carbon 100 Initiative, calling on G20 countries to support the Paris Agreement, invest in a low carbon transition and implement climate-related financial reporting. This global climate coalition of investors encourages companies to address greenhouse gas emission reduction across the lifecycle of products, processes and services. Recent Developments In the U.S., the fund manager expects interest rates to move higher. The U.S. economy is running at relatively full capacity, with decades-low unemployment, corporate tax cuts and the repatriation of US$1.5 trillion in offshore profits. The Fed is also in the process of unwinding a US$4.4 trillion balance sheet. Outside the U.S., global growth remains strong and deflationary concerns in Europe have largely declined. Certain series of the Fund, as applicable, may make distributions which the Manager may change from time to time. If the aggregate amount of distributions in such series exceeds the portion of net income and net realized capital gains allocated to such series, the excess will constitute a return of capital. The Manager does not believe that the return of capital distributions made by such series of the Fund have a meaningful impact on the Fund s ability to implement its investment strategy or to fulfill its investment objective. Related Party Transactions The Portfolio Manager is affiliated with the Manager as they are both under common control of Industrial Alliance Insurance and Financial Services Inc. ("Industrial Alliance"). For the provision of management services, the Manager received management fees from the Fund, based on the average Net Asset Values of the respective series. The management fees paid are disclosed in the financial statements. The Manager paid the operating expenses of the Fund (the Operating Expenses ) in exchange for the payment by the Fund of a fixed rate administration fee (the Administration Fee ) to the Manager with respect to each series of the Fund, except for Series I and Series V, if applicable. The Manager pays the operating expenses of the Fund, other than Fund Costs, in exchange for the payment by the Fund of a fixed rate administration fee (the Administration Fee ) to the Manager with respect to each series of the Fund, except for Series I and Series V, if applicable. The expenses charged to the Fund in respect of the Administration Fee are disclosed in the Fund s financial statements. The Administration Fee is equal to a specified percentage of the net asset value of a series, calculated and paid in the same manner as the management fees for the Fund. The Fund s most recent simplified prospectus contains further details about the Administration Fee. In addition to the Administration Fee, each series of the Fund is responsible for its proportionate share of certain other operating expenses ( Fund Costs ). Further details about Fund Costs can be found in the Fund s most recent simplified prospectus. The Manager, at its sole discretion, may waive or absorb a portion of a series expenses. These waivers or absorptions may be terminated at any time without notice. During the 12-month period ended, the Fund did not pay brokerage commissions to Industrial Alliance Securities Inc., a subsidiary of Industrial Alliance. The fund manager expects marginally higher gross domestic product growth in the U.S., eurozone, U.K. and China. Despite the possibility of economic growth nearing its peak, the fund manager does not see any signs of recession, and therefore, anticipates solid equity returns in the coming period. While the fund manager believes that equity markets are entering a phase where share prices may rise less than underlying earnings, the strength of earnings could still provide solid returns for patient investors who can tolerate increased volatility. The fund manager will maintain the Fund s cash position to help protect the portfolio from increased market volatility, and will continue to seek out reasonably priced growth opportunities across sectors. Effective September 25,, Series FE of the Fund was renamed to Series EF. 2

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 periods indicated. The information on the following tables is based on prescribed regulations and as a result, is not expected to add down due to the increase (decrease) in net assets from operations being based on average shares outstanding during the period and all other numbers being based on actual shares outstanding at the relevant point in time. Footnotes for the tables are found at the end of the Financial Highlights section. Series A Net Assets, beginning of period Total revenue Total expenses (0.50) (0.44) (0.45) (0.40) (0.42) Realized gains (losses) for the period 0.97 (3) Unrealized gains (losses) for the period (1.71) Total increase (decrease) from operations (1.63) From dividends 4 (0.14) (0.14) (0.12) (0.16) - From capital gains (0.70) (1) Return of capital Total dividends 3 (0.14) (0.14) (0.12) (0.86) (1) Net Assets, end of period Series E Net Assets, beginning of period Total revenue Total expenses (0.31) (0.21) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations From dividends 4 (9) (0.10) From capital gains Return of capital Total dividends 3 (9) (0.10) Net Assets, end of period Series EF Net Assets, beginning of period Total revenue Total expenses (0.18) (0.12) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations From dividends 4 (9) (0.10) From capital gains Return of capital Total dividends 3 (9) (0.10) Net Assets, end of period Series F Net Assets, beginning of period Total revenue Total expenses (0.31) (0.27) (0.27) (0.24) (0.25) Realized gains (losses) for the period 1.04 (1) Unrealized gains (losses) for the period (1.98) Total increase (decrease) from operations (1.73) From dividends 4 (0.15) (0.15) (0.13) (0.17) - From capital gains (0.73) (2) Return of capital Total dividends 3 (0.15) (0.15) (0.13) (0.90) (2) Net Assets, end of period Series I Net Assets, beginning of period Total revenue Total expenses Realized gains (losses) for the period 1.19 (2) Unrealized gains (losses) for the period (1.96) Total increase (decrease) from operations (1.35) From dividends 4 (0.17) (0.17) (0.14) (0.19) - From capital gains (0.81) (1) Return of capital Total dividends 3 (0.17) (0.17) (0.14) (1.00) (1) Net Assets, end of period

5 Financial Highlights (continued) Series L Net Assets, beginning of period Total revenue Total expenses (0.36) (0.24) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations From dividends 4 (9) (0.10) From capital gains Return of capital Total dividends 3 (9) (0.10) Net Assets, end of period Series V Net Assets, beginning of period Total revenue Total expenses Realized gains (losses) for the period 1.18 (2) Unrealized gains (losses) for the period (1.93) Total increase (decrease) from operations (1.27) From dividends 4 (0.17) (0.17) (0.14) (0.19) - From capital gains (0.81) (2) Return of capital Total dividends 3 (0.17) (0.17) (0.14) (1.00) (2) Net Assets, end of period The per share data is derived from the Fund's audited annual financial statements. For financial years beginning before April 1, the Fund's financial statements were prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). For financial years beginning after April 1, the Fund's financial statements were prepared in accordance with International Financial Reporting Standards ("IFRS"). Under IFRS, the Net Assets per share presented in the financial statements is the same as the Net Asset Value calculated for fund pricing purposes. 2 Net Assets and dividends are based on the actual number of shares outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of shares outstanding over the financial period. 3 Dividends were paid in cash or reinvested in additional shares of the Fund, or both. 4 Dividends qualified for Canadian dividend tax credit, when applicable. 5 The period ended March 31, is a 15-month fiscal period. Series A Total NAV ($) (000's) 1 70,290 52,293 47,849 31,025 21,535 Number of shares outstanding (000's) 1 3,582 2,942 2,974 1,764 1,484 Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) Series E Total NAV ($) (000's) 1 9, Number of shares outstanding (000's) Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) Series EF Total NAV ($) (000's) 1 8,237 3, Number of shares outstanding (000's) Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) Series F Total NAV ($) (000's) 1 24,317 15,126 10,072 3, Number of shares outstanding (000's) 1 1, Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($)

6 Financial Highlights (continued) Series I Total NAV ($) (000's) 1 133, ,980 75,726 52,261 36,562 Number of shares outstanding (000's) 1 5,468 4,718 3,974 2,574 2,242 Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) Series L Total NAV ($) (000's) 1 2, Number of shares outstanding (000's) Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) Series V Total NAV ($) (000's) Number of shares outstanding (000's) Management expense ratio (%) 2, Trading expense ratio (%) Portfolio turnover rate (%) NAV per share ($) This information is provided as at each period shown. 2 Management expense ratios are based on total expenses (excluding dividends, commissions, withholding taxes and other portfolio transaction costs) and a proportion of underlying fund expenses (mutual funds & ETFs), where applicable, of each series for the stated period and are expressed as an annualized percentage of each series' daily average NAV during the period. 3 The annual Management Fees and Fixed Administration Fees net of waivers, if any, excluding HST, for the Fund were 2.47% for Series A, 2.29% for Series E, 1.29% for Series EF, 1.39% for Series F, 0% for Series I, 2.47% for Series L and 0% for Series V. 4 At its sole discretion, the Manager may have waived management fees or absorbed expenses of the Fund. 5 The trading expense ratio represents total commissions incurred directly or indirectly by way of an underlying fund, as applicable, and other portfolio transaction costs expressed as an annualized percentage of the Fund's daily average NAV during the period. 6 The Fund's portfolio turnover rate indicates how actively the fund manager manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher a Fund's portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship or correlation between a high turnover rate and the performance of a Fund. The value of any trades to realign the Fund's portfolio after a fund merger, if any, is excluded from the portfolio turnover rate. Management Fees Management fees paid by the Fund per series are based on applying the annual management fee rate per series to the daily average NAV of each series and are recorded on an accrual basis. The following is a breakdown of major services received by the Fund in consideration of the management fees for the period, as a percentage of the management fee: Management Fees (%) Series Trailer commissions Other Series A FE LL First 3 years LL After 3 years DSC First 7 years DSC After 7 years Series E FE Series EF and F Series I - - Series L ASC First year ASC Year 2 and ASC After 3 years Series V - - FE - front end; LL - low load; DSC - deferred sales charge; ASC - advisor service charge Other - includes general administration, investment advice and profit. Performance The performance information shown (based on NAV) assumes that all dividends made by the Fund in the periods shown were reinvested in additional shares of the Fund. The performance information does not take into account sales, redemption, dividends or other optional charges, or income taxes payable by any investor that would have reduced returns or performance. How the Fund has performed in the past does not necessarily indicate how it will perform in the future. Returns are calculated, and year-by-year returns are shown, from December 4, 2009, the date of a material fund merger. The Fund's portfolio sub-advisor changed on December 14, This change may have affected the Fund's performance. 5

7 Performance (continued) Series F Year-by-Year Returns 6 The bar charts show the Fund's performance for each of the periods indicated. The charts show, in percentage terms, how an investment made on the first day of each period would have increased or decreased by the last day of the period presented Series A Series I 2009 * * Series E * Series L ** Series EF ** ** 6

8 Performance (continued) Annual Compound Returns, Series L Series V Jun.27/16 Series L Benchmark Index Annual Compound Returns, Series V 4/09 5 years 3 years Series V Benchmark Index * * Return shown is for the partial period ended December 31. Return shown is for the 15-month period ended March 31,. Annual Compound Returns The tables show the annual compound returns for the Fund compared to the MSCI World Index^ (the "Benchmark Index") for the periods ended. Annual Compound Returns, Series A 4/09 5 years 3 years Series A Benchmark Index Annual Compound Returns, Series E Jun.27/16 Series E Benchmark Index Annual Compound Returns, Series EF Jun.27/16 Series EF Benchmark Index Annual Compound Returns, Series F 4/09 5 years 3 years Series F Benchmark Index Annual Compound Returns, Series I 4/09 5 years 3 years Series I Benchmark Index The MSCI World Index^ is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index^ consists of 24 developed market country indices. A discussion of the performance of the Fund as compared to the Benchmark Index is found in the "Results of Operations" section of this report. Summary of Investment Portfolio As at The summary of investment portfolio shown, as a percentage of total NAV, may change due to ongoing portfolio transactions of the Fund and a quarterly update is available on the Manager's website. Sector Allocation % Financials Information Technology Consumer Discretionary Industrials Health Care Cash and Other Net Assets Materials 5.41 Consumer Staples 5.09 Utilities 3.20 Real Estate 2.77 Telecommunication Services 2.43 The positions held by the Fund by country are allocated as follows: 100 Country Allocation % United States Europe - Other Cash and Other Net Assets France 7.24 Japan 5.49 Asia - Other 1.53 Australia & Oceania 1.36 North America - Other

9 Summary of Investment Portfolio (continued) The top positions held by the Fund (up to 25) as shown as a percentage of the total NAV: Top Holdings % Cash and Other Net Assets Amazon.com Inc Apple Inc Microsoft Corp JPMorgan Chase & Co Adobe Systems Inc Xylem Inc Salesforce.com Inc Equinix Inc Visa Inc Alphabet Holding Company Inc., Class C 1.60 Shire PLC, Sponsored ADR 1.59 Vestas Wind Systems A/S 1.58 Schneider Electric SA 1.57 Edwards Lifesciences Corp BlackRock Inc AIA Group Ltd Home Depot Inc Toray Industries Inc Danaher Corp Koninklijke Philips Electronics NV M Corp CSL Ltd ORIX Corp Panasonic Corp You can obtain the prospectus and other information on the investment funds in which the Fund invests, if any, at (for Canadian investment funds) and (for U.S. investment funds). ^ Source: MSCI Inc. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Forward-Looking Statements This management report of fund performance may contain forward-looking statements which reflect the current expectations of the Manager (or, where indicated, the Portfolio Manager or Portfolio Sub-Advisor or fund manager) regarding the Fund s future growth, results of operations, performance and business prospects and opportunities. These statements reflect the current beliefs of the person to which the statements are attributed with respect to future events and are based on information currently available to that person. Forward looking statements involve significant risks, uncertainties and assumptions. Many factors could cause the Fund s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors could include, among other things, general economic, political and market factors, including interest and foreign exchange rates, business competition, changes in government regulations or in tax laws. Please refer to the prospectus for a discussion of some specific risks that are associated with mutual funds. Although the forward-looking statements contained in this report are based upon what management currently believes to be reasonable assumptions, the Manager cannot assure current or prospective investors that actual results, performance or achievements will be consistent with these forward-looking statements. 8

10 Administrative Office: 522 University Avenue, Suite 700 Toronto, Ontario M5G 1Y Head Office: 1080 Grande Allée West PO Box 1907, Station Terminus Québec City, Québec G1K 7M3 funds@iaclarington.com