Real Estate Investment Pool

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 Real Estate Investment Pool (the Fund ) seeks to provide an ongoing flow of current income and long-term capital appreciation primarily by investing throughout the world in a diversified portfolio of real estate investment trust units, equity securities and equity-related securities of those companies or entities in the real estate industry. Equity-related securities include convertible preferred shares, convertible debt obligations and warrants. The portfolio adviser establishes target sector weights following an analysis of national and regional economic trends, capital market conditions and property-type fundamentals. The Fund s investments are allocated in a diversified portfolio of securities with individual weightings based on the outlook for each major property sector. The portfolio adviser selects securities among those companies that are considered to be best positioned, subject to an evaluation that includes understanding the quality of properties owned and the track record of company management. The Fund focuses primarily on real estate investment trust units, as well as equity and equity-related securities of companies or entities in the real estate industry. Such issuers may include corporations, real estate investment trusts and master limited partnerships throughout the world. The Fund will not have any direct ownership or investment in land or buildings. This Fund may use derivatives, but only as permitted by securities regulations. This Fund may also enter into securities lending transactions, repurchase transactions and reverse repurchase transactions, to the extent permitted by securities regulations, to earn additional income. RISK The risks of investing in the Fund remain as discussed in the prospectus. This Fund is suitable for investors who can tolerate medium-high risk, want an investment that is focused on generating capital growth with a reasonable potential for current income and are planning to hold their investment for the medium and/or long term. The Fund outperformed its index for the 12-month period. Global real estate stocks had a solid gain in 2017, aided by a strengthening global economy and improving fundamentals across many property markets. However, real estate widely trailed global equities, restrained by relatively modest earnings acceleration compared to more cyclical sectors and a challenging environment for retail landlords. Europe and the Asia Pacific region significantly outperformed following a decade in which the U.S. was largely in the driver s seat within the global real estate market. At the country level, stock selection in the United States was the largest contributor to relative performance for the year. An overweight in Dupont Fabros Technology Inc. benefitted as the stock rallied in 2017 on news that the company would be acquired by Digital Realty Trust. The data center sector continues to see strong demand for space, due to the continued outsourcing of information technology infrastructure by corporations. An overweight in Colony Starwood (later named Starwood Waypoint Homes) also contributed positively, as the company has merged with Invitation Homes Inc. The combined company remains much stronger operationally than peers. In Europe, we benefitted from stock selection in the United Kingdom, with an overweight in Segro PLC, as the company continues to be a major beneficiary of the lack of available modern logistics space in the U.K. Our asset tours in the U.K. market confirm the strength in demand from e-commerce. In Austria, our overweight in Buwog AG also contributed as the company is benefitting from the same residential demand in major German cities that has driven shares in German-listed multi-family companies higher. The company is set to merge with German peer Vonovia. Our non-allocation to Singapore detracted as shares were boosted by strong data from China, though we believe the supply/demand profile in the country remains unfavourable in the long term. RESULTS OF OPERATIONS The net asset value of the Fund increased by $82.8 million to $566.0 million from December 31, 2016 to December 31, The Fund had net sales of $47.2 million for the year. The portfolio s performance increased assets by $35.6 million. Class W units returned 8.2% after fees and expenses for the one-year period ended December 31, Over the same time period, the Fund s benchmark returned -2.7%. The benchmark is the FTSE EPRA/NAREIT Developed Total Return Index. The performance of the Fund s other classes is substantially similar to that of Class W units, except for differences in the structure of fees and expenses. For the returns of the Fund s other classes, please refer to the Past performance section. We anticipate that demand for commercial real estate in the U.S. will moderately outpace new supply across most sectors in the coming months, but cyclical and secular changes to some sectors will result in widely divergent operating results. As such, during the year we initiated a position in Realty Income Corp., as the company s pipeline of deals remains very strong. The company s occupancies remain high and retailer/apparel malaise of the mall/shopping center sectors should not have the same effect on the free-standing sector. In the U.S., the Fund also initiated a position in apartment landlord AvalonBay Communities Inc., as the company s assets in the suburban New York area should mitigate volatility in the New York City market. CIG

2 The pressures of e-commerce on brick-and-mortar retailers caused retail-focused landlords to underperform globally and the Fund subsequently exited a position in Klepierre SA, as we have grown less positive on the retail environment in continental Europe. The same trends that hurt retail properties benefited other sectors. Owners of cell towers, data centers and industrial properties enjoyed substantial due to demand for faster mobile networks, more bandwidth and data storage and faster delivery times and the Fund benefitted from overweights in the data center sector and an out-of-index allocation to cell tower landlord American Tower Corp. A decision not to allocate to Singapore centered on stalled employment growth and property fundamentals that remain poor amid significant new supply and sluggish demand growth. RECENT DEVELOPMENTS Over the past five years, global real estate securities have experienced generally strong cash flow growth but have widely trailed the stock market. As a result, REITs today are trading at earnings multiples near the low end of their five-year range while broad equity valuations are at cycle highs, representing attractive relative value in our view. We believe commercial real estate should continue to see improving operating fundamentals in most global markets amid solid economic growth, steady job creation, reasonable new supply levels and monetary conditions that should remain relatively accommodative even as stimulus is gradually withdrawn. We continue to have a positive view of the U.S. REIT market overall, although certain overseas property markets appear to have more runway for growth. RELATED PARTY TRANSACTIONS Manager, Trustee and Portfolio Advisor CI Investments Inc. is the Manager, Trustee and Portfolio Advisor of the Fund. CI Investments Inc. is a subsidiary of CI Financial Corp. The Manager, in consideration of 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. fee and fixed administration fee rates as at December 31, 2017, for each of the classes are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) Class A Class E Class E Class E Class E Class E Class F Class F Annual management fee rate (%) Annual fixed administration fee rate (%) Class F Class I Paid directly by investor - Class OF Class W Paid directly by investor 0.22 The Manager received $5.7 million in management fees and $0.8 million in fixed administration fees for the year. Fees Approximately 19% of total management fees were used to pay for sales and trailing commissions and other services required. The remaining 81% of management fees were used to pay for investment management and other general administration. Principal Distributor The Manager has the exclusive right to arrange for the distribution of units of the Fund. Pursuant to a series of agreements, the right to distribute such units has been granted, on a collective basis, to the following dealers, each of which is an affiliate of the Manager. Assante Capital Ltd. Assante Financial Ltd. 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 year. Class F Class F

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 five years, 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 (decrease) from income (excluding From From capital Total at the end of the year of year (2) revenue distributions) the year the year operations (2) dividends) dividends (2, 3) Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class A Commencement of operations December 28, 2006 Dec. 31, (0.36) 0.54 (0.09) Dec. 31, (0.35) 1.15 (1.28) (0.22) Dec. 31, (0.33) Dec. 31, (0.28) Dec. 31, (0.25) 1.05 (0.17) Class E Commencement of operations September, 2008 Dec. 31, (0.43) Dec. 31, (0.42) 1.61 (1.66) (0.07) Dec. 31, (0.40) Dec. 31, (0.33) Dec. 31, (0.29) 1.45 (0.44) Class E2 Dec. 31, (0.17) 0.32 (0.39) Class E3 Dec. 31, (0.16) 0.30 (0.36) Class E4 Dec. 31, (0.15) 0.23 (0.28) Class E5 Dec. 31, (0.14) 0.15 (0.09) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights.

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 (decrease) from income (excluding From From capital Total at the end of the year of year (2) revenue distributions) the year the year operations (2) dividends) dividends (2, 3) Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class F Dec. 31, (0.) Class F2 Dec. 31, (0.09) (0.01) Class F3 Dec. 31, (0.09) (0.04) Class F4 Dec. 31, (0.08) Class F5 Dec. 31, (0.07) 0.31 (0.34) Class I Commencement of operations September 18, 2008 Dec. 31, (0.07) Dec. 31, (2.07) Dec. 31, Dec. 31, Dec. 31, (0.51) *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) 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 (decrease) from income (excluding From From capital Total at the end of the year of year (2) revenue distributions) the year the year operations (2) dividends) dividends (2, 3) Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class OF Commencement of operations May 23, 2008 Dec. 31, (0.37) 0.73 (0.13) Dec. 31, (0.33) 1.69 (2.45) (0.63) Dec. 31, (0.32) Dec. 31, (0.28) Dec. 31, (0.25) 2.03 (3.54) (1.48) Class W Commencement of operations May 8, 1996 Dec. 31, (0.08) 1.51 (0.19) Dec. 31, (0.07) 3.11 (3.27) Dec. 31, (0.07) Dec. 31, (0.06) Dec. 31, (0.05) 2.64 (0.60) (1) This information is derived from the Fund s audited 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 year. (3) Distributions are automatically reinvested in additional units of the Fund. (4) This information is provided for the years ended December 31.

6 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (5) * Total net assets (5) Number of units outstanding (5) before taxes (2) Harmonized sales tax (2) after taxes (2) Effective HST rate for the year Trading (%) (2) (3) Portfolio turnover rate (4) $000 s 000 s % % % % % % Class A Commencement of operations December 28, 2006 Dec. 31, , Dec. 31, , Dec. 31, ,543 1, Dec. 31, ,719 1, Dec. 31, ,198 2, Class E Commencement of operations September, 2008 Dec. 31, ,875 7, Dec. 31, ,678 15, Dec. 31, ,145 13, Dec. 31, ,308 13, Dec. 31, ,363 11, Class E2 Dec. 31, ,341 8, Class E3 Dec. 31, ,943 5, Class E4 Dec. 31, , Class E5 Dec. 31, , *Footnotes for the tables are found at the end of the Financial Highlights section.

7 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (5) * Total net assets (5) Number of units outstanding (5) before taxes (2) Harmonized sales tax (2) after taxes (2) Effective HST rate for the year Trading (%) (2) (3) Portfolio turnover rate (4) $000 s 000 s % % % % % % Class F Dec. 31, , Class F2 Dec. 31, , Class F3 Dec. 31, , Class F4 Dec. 31, Class F5 Dec. 31, Class I Commencement of operations September 18, 2008 Dec. 31, ,892 7, Dec. 31, ,194 5, Dec. 31, ,480 4, Dec. 31, ,337 3, Dec. 31, ,084 3, *Footnotes for the tables are found at the end of the Financial Highlights section.

8 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (5) Total net assets (5) Number of units outstanding (5) before taxes (2) Harmonized sales tax (2) after taxes (2) Effective HST rate for the year Trading (%) (2) (3) Portfolio turnover rate (4) $000 s 000 s % % % % % % Class OF Commencement of operations May 23, 2008 Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Class W Commencement of operations May 8, 1996 Dec. 31, ,749 3, Dec. 31, ,975 3, Dec. 31, ,826 3, Dec. 31, ,512 3, Dec. 31, ,933 4, (1) This information is derived from the Fund s audited annual financial statements. (2) 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, 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 represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the year, including the Fund s proportionate share of such expenses of any underlying fund(s), if applicable. (4) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 0% 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 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. (5) This information is provided for the years ended December 31.

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 years 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 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. Class A Class E Class I Class OF Dec Dec Dec. 20 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec. 20 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec. 20 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec. 20 Dec Dec Dec Dec Dec Dec Dec Class W Dec Dec Dec. 20 Dec Dec Dec Dec Dec Dec Dec return is for the period from September, 2008 to December 31, return is for the period from September 18, 2008 to December 31, return is for the period from May 23, 2008 to December 31, 2008.

10 Annual Compound Returns The following table shows the Fund s annual compound returns for each year indicated, compared to the FTSE EPRA/NAREIT Developed Total Return Index. The FTSE EPRA/NAREIT Developed Total Return Index is a free float-adjusted capitalization weighted index, which is designed to track the performance of listed real estate companies and REITS. 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 (%) Class A n/a FTSE EPRA/NAREIT Developed Total Return Index (2.7) n/a Class E n/a 6.0 FTSE EPRA/NAREIT Developed Total Return Index (2.7) n/a 8.2 Class I n/a 9.6 FTSE EPRA/NAREIT Developed Total Return Index (2.7) n/a 8.2 Class OF n/a 5.9 FTSE EPRA/NAREIT Developed Total Return Index (2.7) n/a 6.0 Class W n/a FTSE EPRA/NAREIT Developed Total Return Index (2.7) n/a

11 SUMMARY OF INVESTMENT PORTFOLIO as at December 31, 2017 Category % of Net Assets Category % of Net Assets Top 25 Holdings % of Net Assets Country allocation U.S.A Japan....5 U.K Hong Kong Australia Spain Canada Germany Cayman Islands France Cash & Equivalents Sweden Cyprus Norway Austria Brazil Other Net Assets (Liabilities) Foreign Currency Forward Contracts Belgium Malta Sector allocation Real Estate Financials Consumer Discretionary Cash & Equivalents Information Technology Industrials Other Net Assets (Liabilities) Foreign Currency Forward Contracts Private Placements Mitsui Fudosan Co., Ltd Sun Hung Kai Properties Ltd CK Asset Holdings Ltd Realty Income Corp DEXUS Property Group Extra Space Storage Inc AvalonBay Communities Inc Simon Property Group Inc Prologis Inc Merlin Properties Socimi S.A Deutsche Wohnen AG Digital Realty Trust Inc Welltower Inc Sun Communities Inc Kilroy Realty Corp UDR Inc Weingarten Realty Investors Allied Properties Real Estate Investment Trust Host Hotels & Resorts Inc American Tower Corp., Class A Link REIT Goodman Group Douglas Emmett Inc Equity Lifestyle Properties Inc Cash & Equivalents Total Net Assets (in $000 s) $566,026 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. 11