Cambridge Canadian Short-Term Bond 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 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. INVESTMENT OBJECTIVE AND STRATEGIES The objective of the Cambridge Canadian Short-Term Bond Pool (the Fund ) is to provide interest income and a relatively-high level of capital stability. To achieve the objective of the Fund, the portfolio advisor primarily invests in fixedincome securities such as bonds, debentures, preferred shares and notes issued by Canadian federal, provincial and municipal governments and corporations and assetbacked and mortgage-backed securities, bank loans and floating rate debt instruments, creating a portfolio with an average duration no less than 1.5 years and no greater than 3.5 years. In selecting such securities, the portfolio advisor emphasizes bonds of high credit quality. Overseas, the European Central Bank and Bank of Japan held their benchmark rates steady, as they chose to pause their respective economic stimulus programs. Yields on the two-year government bonds in Germany and Japan remained at slightly negative levels during the quarter. Stock markets worldwide generally posted double-digit total returns, led by Asian and emerging markets, which were particularly strong during the second half of the period. U.S. and European equities also posted solid gains, propelled by accelerating corporate earnings, tax cuts in the United States and strong underlying economic growth. Canadian stocks lagged, held back by the anticipation of rising interest rates and continuing underperformance in the energy sector. It is currently expected that preferred shares will generally constitute less than 25% of holdings and common shares will generally constitute less than 5% of holdings; high yield and non-rated bonds will generally constitute less than 25% of holdings; and foreign securities will generally constitute less than 30% of holdings and foreign currency exposure will generally remain below 10% of holdings. The Fund may use derivatives such as options, futures, forward contracts and swaps but only as permitted by securities regulations. To earn additional income the Fund also may enter into securities lending transactions, repurchase transactions and reverse repurchase transactions to the extent permitted by securities regulations. Stock market sentiment remained positive through most of the period. As the year wore on and markets reached historic highs, it became increasingly difficult to find attractive risk-return investment opportunities. The portfolio s position in government bonds was nearly 45% of assets at the end of the period, made up of federal, municipal and provincial issues with weights of 26%, 8% and 11% respectively. Corporate bond exposure remained overweight at slightly less than 55% of assets. High-yield bonds represented less than 3% of assets. The Fund was nearly fully invested, while average duration within the portfolio stood at about three years at the end of the period. RISK The risks remain as discussed in the prospectus. The Fund is suitable for investors who want to receive income, are investing for the short to medium term and can tolerate low risk. RESULTS OF OPERATIONS As at March 31, 2018, the Fund s net asset value was $951.2 million. The Fund had net sales of $972.8 million during the period. The portfolio s performance decreased assets by $4.4 million. The Fund paid distributions totalling $17.2 million. Central banks around the world responded to the accelerating economic backdrop by raising short-term interest rates. In mid-march, the U.S. Federal Reserve (Fed) increased its interest rate to 1.5%, Jerome Powell s first rate hike as Fed Chair. Yields on the U.S. two-year Treasury bond rose 35 basis points to about 2.25% at the end of March. The rate hike had little impact on the 10-year issue. The Bank of Canada raised its benchmark lending rate 25 basis points to 1.25% in mid- January. The two-year Government of Canada bond yield rose 12 basis points to about 1.9%, while the 10-year issue remained relatively steady at 2.1%. The Fund s inception date was June 1, 2017, with an investment objective to provide interest income and a relatively high level of capital stability. RECENT DEVELOPMENTS As rising short-term interest rates filter through the global economy, we will be watching for signs of slowing economic growth. This may be somewhat offset by the benefits of U.S. tax reform, which should stimulate capital spending and support economic growth in the second half of 2018 and beyond. In Canada, housing and consumer debt levels will be closely monitored as these could make the domestic economy vulnerable to a potential slowdown. We will adhere to Cambridge s bottom-up fundamental investment process to uncover attractive risk-reward opportunities. This involves evaluating the investment merits of a business and measures this analysis against a range of scenarios to determine the investment s potential upside and downside. This evaluation is an integral part of our investment process and helps prepare for potential volatility. We will monitor economic and market developments and will be ready to act when compelling risk-adjusted return opportunities emerge. CIG

2 Effective April 3, 2018, Karen Fisher became a member of the CI Board of Governors ( BOG ) and the Independent Review Committee ( IRC ) of the Fund. Meanwhile, Christopher Hopper resigned from the role as a member of the BOG and IRC. 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 March 31, 2018, for each of the classes are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) Class I Paid directly by investor - Inter-Fund Trading Inter-fund trading occurs when a Fund purchases or sells a security of any issuer from or to another Fund managed by the Manager. These transactions are executed through market intermediaries and under prevailing market terms and conditions. The Independent Review Committee reviews such transactions during scheduled meetings. During the year ended March 31, 2018 the Fund executed inter-fund trades. Independent Review Committee The Fund received standing instructions from the Fund s Independent Review Committee 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.

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 period. 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 I Commencement of operations June 7, 2017 Mar. 31, (0.12) (0.16) (0.04) (0.16) (0.16) 9.75 Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2013^ (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 period. (3) Distributions are automatically reinvested in additional units of the Fund. (4) This information is provided for the period ended March 31.

4 FINANCIAL HIGHLIGHTS (cont d) Ratios and Supplemental Data (1) (5) Total net assets (5) Number of units outstanding (5) Management expense ratio before taxes (2) Management expense ratio after taxes (2) Effective HST rate for the period (2) Harmonized Trading Portfolio sales tax (2) expense ratio (3) turnover rate (4) $000 s 000 s % % % % % % Class I Commencement of operations June 7, 2017 Mar. 31, ,196 97, Mar. 31, Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2013^ (1) This information is derived from the Fund s audited 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) 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 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 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 period, 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 period. (5) This information is provided for the period ended March 31.

5 SUMMARY OF INVESTMENT PORTFOLIO as at March 31, 2018 Category % of Net Assets Category % of Net Assets Top 25 Holdings % of Net Assets Country allocation Canada U.S.A Jersey Island Other Net Assets (Liabilities) Cash & Equivalents Foreign Currency Forward Contracts Sector allocation Corporate Bonds Canadian Government Bonds Provincial Bonds Municipal Bonds Other Net Assets (Liabilities) Financials Cash & Equivalents Foreign Currency Forward Contracts CPPIB Capital Inc., 1% 01/15/ Province of Quebec 4.5% 12/01/ Canada Housing Trust No.1, 1.15% 12/15/ Government of Canada 1.25% 02/01/ National Bank of Canada 1.809% 07/26/ PSP Capital Inc., 1.73% 06/21/ Toronto-Dominion Bank 2.621% 12/22/ Government of Canada 1.25% 11/01/ Regional Municipality of York 4% 06/30/ Hollis Receivables Term Trust II 1.788% 02/26/ Province of British Columbia 3.7% 12/18/ Bank of Montreal 2.12% 03/16/ The Bank of Nova Scotia 2.62% 12/02/ TerraForm Power Operating LLC 4.25% 01/31/ Province of Nova Scotia 4.1% 06/01/ Heathrow Funding Ltd., FRN, 3% 06/17/ City of Toronto 4.5% 12/02/ Citigroup Inc., 3.39% 11/18/ Bank of Montreal 3.19% 03/01/ HSBC Bank Canada 2.938% 01/14/ The Bank of Nova Scotia 3.1% 02/02/ Canadian Imperial Bank of Commerce 1.9% 04/26/ Province of British Columbia 9% 08/23/ Royal Bank of Canada, FRN, 2.99% 12/06/ Province of New Brunswick 4.5% 06/02/ Total Net Assets (in $000 s) $951,196 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.