CI US Money Market Fund

Transcription

1 This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual or annual financial statements of the investment fund. You can get a copy of the semi-annual or annual financial statements at your request, and at no cost, by calling , by writing to us at CI Investments Inc., 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. RESULTS OF OPERATIONS The net asset value of the Fund increased by $29.9 million to $54.2 million from March 31, 2017 to September 30, The Fund had net sales of $29.9 million during the period. The portfolio s performance increased assets by $0.2 million. The Fund paid distributions totalling $0.2 million. Class A units returned 0.2% after fees and expenses for the six-month period ended September 30, The performance of the Fund s other Classes is substantially similar to that of Class A units, except for differences in fees and expenses structure. For the returns of the Fund s other Classes, please refer to the Past performance section. Year-to-date lows in global interest rates and inflation expectations and the meeting of global central bankers in Sintra, Portugal at the end of first half of 2017 instilled renewed confidence in the global cyclical upturn that has been underway since mid More notably, however, the meeting gave way to a seemingly coordinated hawkish tone from developed market policy makers that caught some investors by surprise in light of still-tepid inflation. Against this backdrop, the second half of 2017 began with U.S. interest rates moving noticeably lower. By the beginning of September, 10-year U.S. yields reached year-to-date lows close to 2% as months of disappointing economic activity data persuaded the market to price out any further U.S. Federal Reserve (Fed) hikes. Yet, global financial conditions remained incredibly supportive, giving way to continued outperformance of risky assets including equities, corporate bond spreads and, on the back of a very weak U.S. dollar, emerging market sovereign spreads. This has given the Fed the confidence to continue on its tightening path. The Fed had previously announced it would commence its program to normalize the Fed balance sheet in October. While this was largely expected, the famous Fed dot plot revealed that the majority of members deemed another interest rate hike of 0.25% to be needed before the end of The Bank of Canada took advantage of better-than-expected economic results, despite slowing inflation (which remains stubbornly below its 2% target), to undo the interest rate cuts it gave the Canadian economy in 2015 following the commodity crash. Whether it was a desire to remove unnecessary stimulus or a fear of financial system instability stemming from highly indebted consumers, the Bank of Canada was the only central bank post-sintra to directly increase lending rates. Appropriately, the Canadian fixed-income market was the worst G10 performer throughout the third quarter. The consequences of recent tightening actions will only reveal themselves in subsequent months, yet the market expects the Bank of Canada to continue to hike at least two more times over the next year. The Bank of England has also changed course recently. In September, it noted that the coming months may see a withdrawal of monetary stimulus to return inflation sustainably to target. To be clear, however, the bank has stated that much (if not all) of the observed U.K. inflation over the past year has been due to the huge depreciation of the currency following the Brexit vote. That hardly signals a strong, red-hot economy needing to be reined in. As Brexit negotiations continue to loom large, the risks to the U.K. economy and labour market are as grave as ever. Any tightening by the Bank of England may prove to be shortlived. Meanwhile, despite interpretations of hawkish turns, the Bank of Japan and European Central Bank continue to resist taking action in a post-sintra world. The lack of meaningful inflationary pressures keeps them sidelined in an otherwise action-packed lineup. Over the third quarter, nominal 10-year interest rates were unchanged in Germany and Japan, while in the U.S., U.K. and Canada they increased 0.03%, 0.11% and 0.36%, respectively. The total return of the portfolio was primarily driven by the yield earned on portfolio holdings. Even though interest rates in the U.S. have backed up, investments in short-dated instruments and a continued preference for corporate and non-federal Canadian government debt allowed the Fund to add value relative to U.S. T-bills. The portfolio s substantial cash position, maintained partly to meet regulatory and other liquidity requirements, as well as to take advantage of a potential credit spread widening, contributed to a reduction in performance. As U.S. economic data continue to show progress in recent months and amidst continued signals from the Fed, the market is largely pricing in one more rate hike from the Fed before the end of this year. The portfolio s term to maturity remains substantially short, relative to the benchmark, as interest rates continue to push higher. We primarily retain long positions in corporate and U.S.-dollar denominated Canadian provincial debt in the portfolio in order to collect better income. The portfolio also maintains a long position in corporate floating notes to provide protection against a potential increase in short-term rates. Within the government sector, despite the tight spreads, we continued to prefer the incremental income derived from U.S.- dollar-denominated Canadian provincial debt versus U.S. T-bills. RECENT DEVELOPMENTS Between North Korean nuclear tensions in Asia, numerous hurricanes, U.S. policy paralysis, NAFTA negotiations, the Italian election, the Catalonian referendum and Brexit negotiations, there has been no shortage of political headlines to grab investors attention. Yet the paths of global economic development and financial CIG - 125

2 markets will continue to be shaped, as they normally are, by central bank policy. Our focus continues to be on analyzing developments in monetary policy and assessing appropriateness given real economic realizations. Absent a misstep (tightening too much, too quickly) by any one of the major central banks, the cyclical upturn that has been underway for more than twelve months now should continue to persist. Despite less accommodative monetary policy stances from numerous central bankers, the market s assessment of implied interest rate volatility is at year-to-date lows, meaning that global financial conditions continue to support investors appetite for risk in all asset classes. However, valuations of credit risk premiums are approaching the pre-financial crisis levels of 2007 and, therefore, careful portfolio construction is critical. To weather this challenging environment and protect against a mistake by any one of the major central banks, it is imperative that investors properly balance and diversify their portfolio investment risks. Effective April 3, 2017, William Harding ceased to be a member of the Independent Review Committee. RELATED PARTY TRANSACTIONS Manager, Portfolio Advisor, Trustee and Registrar CI Investments Inc. is the Manager, Portfolio Advisor, Trustee and Registrar of the Fund. CI Investments Inc. is a subsidiary of CI Financial Corp. The Manager, in consideration for management fees, provides 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. Management fee and fixed administration fee rates as at September 30, 2017, are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) Class A Nil Class A Nil Class A Nil Management Fees Approximately 26% of total management fees were used to pay for sales and trailing commissions. The remaining 74% of management fees were used for investment management and other general administration. During the period ended September 30, 2017, the Manager of the Fund absorbed $8,000 in management fees due to the declining yields generated by the Fund. Independent Review Committee The Fund received standing instructions from the Fund s 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; c) purchases or sales of other investment funds managed by the Manager or their affiliates; and d) mergers involving the Fund and another fund managed by the Manager that is subject to National Instrument Investment Funds. The applicable standing instructions require that related party transactions be conducted in accordance with the Manager s policies and procedures and that the Manager advise the IRC of any material breach of a condition of the standing instructions. The standing instructions require, among other things, that investment decisions in respect of related party transactions (a) are free from any influence by an entity related to the Manager and without taking into account any consideration relevant to an entity related to the Manager; (b) represent the business judgment of the Manager uninfluenced by considerations other than the best interests of the Fund; (c) are made in compliance with the Manager s policies and procedures; and (d) achieve a fair and reasonable result for the Fund. 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 period. Class A Nil Class A Nil Class F Nil Class F Nil Class F Nil Class F Nil Class F Nil Class I Paid directly by investor Nil Class P Paid directly by investor Nil The Fund paid the Manager $0.03 million in management fees for the period ended September 30, 2017.

3 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 six periods, as applicable. Net Assets per Unit ($) (1) (2) (4) * Increase (decrease) from operations: Distributions: Total Realized Unrealized Total increase From net investment Net assets Net assets at the beginning Total expenses (excluding gains (losses) for gains (losses) for (decrease) from income (excluding From From capital Total at the end of the period of period (2) revenue distributions) the period the period operations (2) dividends) dividends (2, 3) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class A Commencement of operations January 30, 1995 Sept. 30, (0.04) (0.01) (0.02) (0.02) Mar. 31, (0.07) - (0.01) Mar. 31, (0.03) (0.02) Mar. 31, (0.03) (0.04) (0.01) (0.01) Mar. 31, (0.05) (0.03) Mar. 31, 2013^ (0.04) (0.03) Class A1 Sept. 30, (0.02) (0.01) (0.03) (0.03) Class A3 Sept. 30, (0.02) (0.02) (0.03) (0.03) Class A4 Sept. 30, (0.02) (0.02) (0.03) (0.03) Class A5 Sept. 30, (0.02) (0.01) (0.03) (0.03) Class F Sept. 30, (0.04) (0.01) (0.02) (0.02) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights. ^Historical figures are based on Canadian GAAP, for more details refer to footnote 5.

4 FINANCIAL HIGHLIGHTS (cont d) Net Assets per Unit ($) (1) (2) (4) * Increase (decrease) from operations: Distributions: Total Realized Unrealized Total increase From net investment Net assets Net assets at the beginning Total expenses (excluding gains (losses) for gains (losses) for (decrease) from income (excluding From From capital Total at the end of the period of period (2) revenue distributions) the period the period operations (2) dividends) dividends (2, 3) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class F1 Sept. 30, (0.03) (0.01) (0.03) (0.03) Class F3 Sept. 30, (0.02) (0.01) (0.03) (0.03) Class F4 Sept. 30, (0.02) (0.01) (0.03) (0.03) Class F5 Sept. 30, (0.02) (0.01) (0.03) (0.03) Class I Commencement of operations July 4, 2016 Sept. 30, (0.01) (0.06) (0.06) Mar. 31, (0.12) (0.03) (0.05) (0.05) Class P Sept. 30, (0.01) (0.05) (0.05) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights.

5 FINANCIAL HIGHLIGHTS (cont d) (1) This information is derived from the Fund s semi-annual and annual financial statements. (2) Net assets per unit and distributions per unit are based on the actual number of units outstanding for the relevant class at the relevant time. The increase (decrease) in net assets from operations per unit is based on the weighted average number of units outstanding for the relevant class over the fiscal period. (3) Distributions are automatically reinvested in additional units of the Fund.

6 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (4) * Number Management expense ratio Management Management Effective HST Total net assets (4) of units before waivers outstanding (4) or absorptions (2) expense ratio before taxes (2) Harmonized sales tax (2) expense ratio after taxes (2) rate for the period (%) (2) Trading expense ratio (3) $000 s 000 s % % % % % % Class A Commencement of operations January 30, 1995 Sept. 30, , Mar. 31, ,000 1, Mar. 31, ,429 4, Mar. 31, ,357 3, Mar. 31, ,888 3, Mar. 31, 2013^ 62,506 6, Class A1 Sept. 30, , Class A3 Sept. 30, Class A4 Sept. 30, Class A5 Sept. 30, Class F Sept. 30, *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 5.

7 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (4) * Number Management expense ratio Management Management Effective HST Total net assets (4) of units before waivers outstanding (4) or absorptions (2) expense ratio before taxes (2) Harmonized sales tax (2) expense ratio after taxes (2) rate for the period (%) (2) Trading expense ratio (3) $000 s 000 s % % % % % % Class F1 Sept. 30, Class F3 Sept. 30, Class F4 Sept. 30, Class F5 Sept. 30, Class I Commencement of operations July 4, 2016 Sept. 30, ,409 4, Mar. 31, ,328 1, Class P Sept. 30, *Footnotes for the tables are found at the end of the Financial Highlights section.

8 FINANCIAL HIGHLIGHTS (cont d) (1) This information is derived from the Fund s semi-annual and annual financial statements. (2) 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 period, including the Fund s proportionate share of any underlying fund(s) expenses, if applicable. The Effective HST tax rate is calculated using the attribution percentage for each province based on unitholder residency and can be different from 13%. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period, including the Fund s proportionate share of such expenses of any underlying fund(s), if applicable. (4) This information is provided for the period ended September 30, 2017 and the years ended March 31. (5) For financial periods 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 unitholders transactions and the net assets attributable to holders of redeemable units 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 unitholder transactions net assets were calculated based on the closing market price.

9 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 distributions made by the Fund in the periods shown were reinvested in additional units 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 semi-annual and annual performance for each of the periods shown and illustrate how the Fund s performance has changed from period to period. In percentage terms, the charts show 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, except where noted. Class A 20 Class I Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Sept Mar Sept return is for the period from July 4, 2016 to March 31, 2017.

10 Summary of Investment Portfolio as at September 30, 2017 Portfolio Breakdown Percentage of Portfolio Breakdown (cont d) Percentage of Top Holdings Percentage of Category Net Assets (%) Category Net Assets (%) Security Name Net Assets (%) Country allocation Cash & Equivalents Short-Term Investments U.S.A Canada Other Net Assets (Liabilities) Sector allocation Cash & Equivalents Short-Term Investments Corporate Bonds Provincial Bonds Other Net Assets (Liabilities) Cash & Equivalents HSBC Bank Canada % 10/03/ Province of Ontario % 10/19/ National Bank of Canada % 10/05/ Province of Quebec % 10/23/ Toronto-Dominion Bank % 11/10/ The Bank of Nova Scotia % 01/12/ Suncor Energy Inc., % 11/10/ Daimler Finance North America LLC 1.875% 01/11/ Royal Bank of Canada % 03/02/ Royal Bank of Canada 1.4% 10/13/ Suncor Energy Inc., % 10/03/ Province of Ontario 1.1% 10/25/ Wells Fargo & Co., % 04/22/ Citigroup Inc., % 12/07/ Citigroup Inc., % 06/07/ Total Net Assets (in $000 s) $54,191 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.