Transamerica CI Balanced Portfolio. Annual Financial Statement as at December 31, 2013

Transcription

1 Transamerica CI Balanced Portfolio Annual Financial Statement as at December 31, 2013

2 Transamerica CI Portfolio Funds Independent Auditor s Report To the Unitholders of: Transamerica CI Conservative Portfolio Transamerica CI Canadian Balanced Portfolio Transamerica CI Balanced Portfolio Transamerica CI Growth Portfolio Transamerica CI Maximum Growth Portfolio (collectively the Funds ) We have audited the accompanying financial statements of each of the Funds, which comprise the statement of investment portfolio as at December 31, 2013, the statements of net assets, operations and changes in net assets as at and for the periods indicated in Note 1, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the financial statements of each of the Funds in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in each of our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of each of the Funds present fairly, in all material respects, the financial position of each of the Funds, the results of each of their operations and the changes in each of their net assets as at and for the periods indicated in Note 1 in accordance with Canadian generally accepted accounting principles. Auditor s responsibility Our responsibility is to express an opinion on the financial statements of each of the Funds based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario April 17, 2014 Annual Financial Statements as at December 31,

3 Transamerica CI Balanced Portfolio Statement of Investment Portfolio as at December 31, 2013 No. of Shares/ Average Fair Units Cost ($) Value ($) FUNDS (98.9%) 5,661,835 AEGON Capital Management Canadian Bond Pool 56,849,749 54,974,160 1,571,245 Cambridge American Equity Corporate Class (A Shares) 6,994,303 10,103,106 1,034,978 Cambridge Canadian Equity Corporate Class (A Shares) 12,059,577 15,566, ,683 Cambridge Global Equity Corporate Class (A Shares) 7,585,838 10,266, ,977 Cambridge Income Corporate Class (A Shares) 10,041,208 11,712, ,431 CI American Managers Corporate Class (A Shares) 9,454,326 13,254, ,896 CI American Small Companies Corporate Class (A Shares) 6,727,749 9,799, ,191 CI American Value Corporate Class (A Shares) 10,773,083 14,972, ,564 CI Canadian Investment Corporate Class (A Shares) 12,649,437 15,872,375 1,181,087 CI International Value Corporate Class (A Shares) 12,522,204 16,050, ,596 Harbour Corporate Class (A Shares) 10,010,735 11,084,973 1,346,886 Signature Diversified Yield II Fund (Class A) 12,909,504 14,007, ,499 Signature Emerging Markets Corporate Class (A Shares) 4,968,006 5,410,561 2,562,946 Signature Global Bond Fund (Class I) 20,063,334 19,939,721 1,032,617 Signature High Income Fund (Class I) 12,965,305 13,733,804 1,458,865 Signature International Corporate Class (A Shares) 12,550,752 15,201, ,094 Signature Select Canadian Corporate Class (A Shares) 15,096,339 17,899, ,961 Synergy American Corporate Clas (A Shares) 7,309,964 10,228, ,310 Synergy Canadian Corporate Class (A Shares) 11,380,413 14,054,478 Total Investments (98.9%) 252,911, ,134,375 Other Net Assets (Liabilities) (1.1%) 3,244,054 Net Assets (100.0%) 297,378,429 The Fund invests in Underlying Funds. The Fund and the Underlying Funds are commonly managed by CI Investments Inc. Percentages shown in brackets relate investments at fair value to net assets of the Fund. The accompanying notes and supplementary schedules are an integral part of these financial statements. Annual Financial Statements as at December 31, CIG 5152

4 Transamerica CI Balanced Portfolio Financial Statements Statements of Net Assets as at December 31 (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the years ended December 31 (in $000 s except for per unit amounts) Assets Investments at fair value* Cash Shortterm investments Daily variation margin on derivative investments Unrealized gain on futures and foreign currency forward contracts Premium paid for options contract Cash collateral receivable for securities on loan Receivable for unit subscriptions Receivable for securities sold Fees rebate receivable Receivable for dividends and accrued interest 294,134 3, , , , ,789 Liabilities Bank overdraft Management fees payable Accrued expenses Unrealized loss on futures and foreign currency forward contracts Premium received from options contract Payable for cash collateral under securities lending Payable for securities purchased Payable for unit redemptions Distributions payable Income taxes payable ,319 2,666 Net assets and unitholders equity 297, ,123 Income Dividends Interest Securities lending Income distribution from investments Fees rebate Less: Foreign withholding taxes Expenses Management fees (Note 5) Administrative fees (Note 5) Interest expense Custody fees Legal fees Audit fees Harmonized sales tax Net investment income (loss) for the year Realized and unrealized gain (loss) on investments Realized gain (loss) on investments Foreign exchange gain (loss) Capital gain distribution from investments Commissions and other portfolio transaction costs Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments Increase (decrease) in net assets from operations ,083 1,521 4, ,716 2, ,716 2,264 2,353 (14) 29 38,660 2,562 41,013 2,577 50,729 4,841 *Investments at cost 252, ,845 Increase (decrease) in net assets from operations per unit Net assets per unit Number of units outstanding (see Schedule of Fund Unit Transactions) ,546,535 26,712,420 Statements of Changes in Net Assets for the years ended December 31 (in $000 s) Net assets, beginning of year ,123 Capital transactions Proceeds from units issued Reinvested distributions (Note 6) Amounts paid for units redeemed 13, ,082 12,067 2,319 (37,883) (11,800) (12,380) 268,601 Distributions to investors From realized gains (2,378) (56) From net income (9,716) (2,263) From return of capital (12,094) (2,319) Increase (decrease) in net assets from operations 50,729 4,841 Net assets, end of year 297, ,123 Investment transactions of the Fund are not subject to commissions or transaction costs. The accompanying notes are an integral part of these financial statements. Annual Financial Statements as at December 31,

5 Transamerica CI Balanced Portfolio Financial Statements Supplementary Schedules Schedule of Fund Unit Transactions (Note 3) for the years ended December Balance, beginning of year Units issued for cash Units issued for reinvested distributions (Note 6) Units redeemed Balance, end of year 26,712,420 1,201,089 27,655,812 1,036, ,596 (3,403,623) (1,172,988) 25,546,535 26,712,420 Schedule of Tax Loss Carry Forwards (Note 4) as at December 31 (in $000 s) Net capital loss carried forward Noncapital losses expiring: Total 2013 Schedule of Fees (Note 5) as at December 31, 2013 (%) Annual management and administration fee rate The accompanying notes are an integral part of these financial statements. Annual Financial Statements as at December 31,

6 Transamerica CI Balanced Portfolio Fund Specific Financial Instruments Risks (Note 10) The Fund s investments were concentrated in the following Underlying Funds: as at December 31, 2013 Funds Net Assets (%) AEGON Capital Management Canadian Bond Pool Signature Global Bond Fund (Class I) Signature Select Canadian Corporate Class (A Shares) CI International Value Corporate Class (A Shares) CI Canadian Investment Corporate Class (A Shares) Cambridge Canadian Equity Corporate Class (A Shares) Signature International Corporate Class (A Shares) CI American Value Corporate Class (A Shares) Signature Diversified Yield II Fund (Class A) Synergy Canadian Corporate Class (A Shares) Signature High Income Fund (Class I) CI American Managers Corporate Class (A Shares) Cambridge Income Corporate Class (A Shares) Harbour Corporate Class (A Shares) Cambridge Global Equity Corporate Class (A Shares) Cambridge American Equity Corporate Class (A Shares) Synergy American Corporate Class (A Shares) CI American Small Companies Corporate Class (A Shares) Signature Emerging Markets Corporate Class (A Shares) Other Net Assets (Liabilities) Fair Value Hierarchy The tables below summarize the inputs used by the Fund in valuing the Fund s investments and derivatives carried at fair value. Long Positions at fair value as at December 31, 2013 Level 1 Level 2 Level 3 Total (in $000's) (in $000's) (in $000's) (in $000's) Underlying Funds 294, ,134 Total 294, ,134 Long Positions at fair value as at December 31, 2012 Level 1 Level 2 Level 3 Total (in $000's) (in $000's) (in $000's) (in $000's) Underlying Funds 270, ,407 Total 270, ,407 There were no transfers between Level 1, 2 and 3 during the years ended December 31, 2013 and as at December 31, 2012 Funds Net Assets (%) AEGON Capital Management Canadian Bond Pool Signature Global Bond Fund (Class I) Signature Select Canadian Corporate Class (A Shares) Cambridge Canadian Equity Corporate Class (A Shares) CI International Value Corporate Class (A Shares) Signature International Corporate Class (A Shares) CI Canadian Investment Corporate Class (A Shares) Signature Enhanced Yield Fund (Class A) Signature High Income Fund (Class I) CI American Value Corporate Class (A Shares) Synergy Canadian Corporate Class (A Shares) Cambridge Income Corporate Class (A Shares) Harbour Corporate Class (A Shares) CI American Managers Corporate Class (A Shares) Cambridge American Equity Corporate Class (A Shares) Cambridge Global Equity Corporate Class (A Shares) CI American Small Companies Corporate Class (A Shares) Synergy American Corporate Class (A Shares) Signature Emerging Markets Corporate Class (A Shares) Other Net Assets (Liabilities) Other Price Risk As at December 31, 2013 and 2012, the Fund indirectly bears the other price risk exposure of the Underlying Funds. As at December 31, 2013, had the global markets increased or decreased by 10% (December 31, %), with all other variables held constant, net assets of the Fund would have increased or decreased, respectively, by approximately $29,413,000 (December 31, 2012 $27,041,000). In practice, actual results may differ from this analysis and the difference may be material. Refer to Note 10 for discussion of other financial instrument risks. The accompanying notes are an integral part of these financial statements. Annual Financial Statements as at December 31,

7 Transamerica CI Portfolio Funds Notes to the Financial Statements 1. ESTABLISHMENT OF FUND The following funds are unincorporated openend trusts created under the laws of the Province of Ontario. (b) Cost of Investments Cost of investments represents the amount paid for each security and is determined on an average cost basis excluding commissions and transactions costs. Fund Inception Date Transamerica CI Conservative Portfolio September 1, 2012 Transamerica CI Canadian Balanced Portfolio September 1, 2012 Transamerica CI Balanced Portfolio September 1, 2012 Transamerica CI Growth Portfolio September 1, 2012 Transamerica CI Maximum Growth Portfolio September 1, 2012 (collectively the Funds, individually a Fund ) (c) Investment Transactions and Income Recognition Investment transactions are accounted for on the trade date for financial reporting purposes and any unrealized and realized gains and losses on such transactions are calculated on an average cost basis. Dividend income and distributions from investments are recognized on the exdividend/exdistribution date and interest income is accounted for on the accrual basis. CI Investments Inc. is the trustee (the Trustee ) of the Funds. RBC Investor Services Trust ( RBC ) is custodian of the Funds. Each Fund offers Class I units. The Statement of Investment Portfolio, Schedule of Tax Loss Carry Forwards and Schedule of Fees of each Fund are as at December 31, The Statements of Net Assets of each Fund are as at December 31, 2013 and The Statements of Operations, Statements of Changes in Net Assets and Schedule of Fund Unit Transactions of each Fund are for the year ended December 31, 2013 and for the period from September 1, 2012 (date of inception) to December 31, The Fund Specific Financial Instruments Risks for each of the Funds are as at December 31, 2013 and SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles ( Canadian GAAP ). The following is a summary of the significant accounting policies of the Funds: (a) Valuation of Investments Canadian GAAP requires the fair value of financial instruments traded in an active market to be measured based on an investment s bid/ask price depending on the investment position (long/short). For the purpose of processing unitholder transactions, net asset value is calculated based on the closing market price of investments (referred to as Net Asset Value ), while for financial statement purposes net assets are calculated based on bid/ask price of investments (referred to as Net Assets ). At the financial reporting date, listed securities are valued based on the bid price for securities held long and the ask price for securities held short. Unlisted securities are valued based on price quotations from recognized investment dealers, or failing that, their fair value is determined by the Manager on the basis of the latest reported information available. Fixed income securities, debentures, mortgage backed securities, assetbacked securities, money market investments and other debt instruments including shortterm investments, are valued at the bid quotation from recognized investment dealers. Underlying Funds are valued on each business day at their net asset value as reported by the Underlying Funds manager. Distributions received from underlying funds holdings are recorded as income, capital gains or a return of capital, based on the best information available to the Manager. Due to the nature of these investments, actual allocations could vary from this information. Distributions from underlying funds that are treated as a return of capital for income tax purposes reduce the average cost of the underlying fund. (d) Foreign Exchange Foreign currency amounts are translated into the functional currency of the Funds as follows: fair value of investments, forward currency contracts, other assets and liabilities at the closing rate of exchange on each business day; income and expenses, purchases, sales and settlements of investments at the rate of exchange prevailing on the respective dates of such transactions. Foreign exchange gains (losses) on completed transactions are included in Foreign exchange gain (loss) in the Statements of Operations. (e) Increase (Decrease) in Net Assets from Operations per Unit Increase (decrease) in net assets from operations per unit in the Statements of Operations is calculated by dividing the increase (decrease) in net assets from operations of a Fund by the weighted average number of units outstanding during the period. (f) Net Asset Value per Unit Net asset value per unit is calculated at the end of each day on which the Toronto Stock Exchange is open for business by dividing the total net asset value of a Fund by the number of units outstanding. 3. UNITHOLDERS EQUITY Units issued and outstanding represent the capital of each Fund. Each Fund is authorized to issue an unlimited number of redeemable, transferable units. Generally the Funds have no restrictions or specific capital requirements, except for the minimum initial investment which is determined when an investor enters into agreement with the Manager. The relevant changes pertaining to subscription and redemption of each Fund s units are disclosed in the Statements of Changes in Net Assets and the Schedule of Fund Unit Transactions. In accordance with the objectives and risk management polices outlined in Note 10, the Funds endeavor to invest subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing a shortterm borrowing facility or disposal of investments when necessary. Annual Financial Statements as at December 31,

8 Transamerica CI Portfolio Funds Notes to the Financial Statements (cont d) 4. INCOME TAXES The Funds qualify as unit trusts under the provisions of the Income Tax Act (Canada) and are not subject to tax on net income, including net realized taxable capital gains for the taxation year, which is paid or payable to unitholders at the end of the taxation year. However, such part of each Fund s taxable income and net realized capital gains that is not so paid or payable to its unitholders will be taxable to that Fund. It is the intention of each Fund to distribute all net taxable income and sufficient net realized capital gains so that the Fund will not be subject to income tax. Occasionally, a Fund may distribute more than it earns. This excess distribution is a return of capital and is not taxable to unitholders. Net capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non capital losses may be carried forward twenty years. Non capital losses carried forward may reduce future taxable income. Refer to Fund specific Schedule of Tax Loss Carry Forward in the financial statements for tax loss carried forward information. 5. MANAGEMENT FEE AND OTHER EXPENSES CI Investments Inc. is the Manager of each Fund and in consideration for management and administrative fees provides management and administrative services required in the daytoday operations of the each Fund including management of the investment portfolio of each Fund. The management/administrative fee is calculated as fixed annual percentage of the net asset value of each Fund at the end of each business day. Refer to the Schedule of Fees in the financial statements for the management/administrative fee rate applicable to each Fund. 6. REINVESTMENT OF DISTRIBUTIONS When a Fund pays a distribution to a unitholder, it will be paid in the same currency in which the units are held. Distributions are automatically reinvested without charge in the same Fund or paid out in cash to the Unitholder. The Manager may change the distribution policy at its discretion. 7. NOTICE OF FILING EXEMPTION On behalf of each Fund, the Funds Manager has advised the Ontario Securities Commission [ OSC ] that each Fund is relying on the filing exemption in accordance with part 2.11 of National Instrument Consequently, these financial statements will not be filed with the OSC. 8. INTERNATIONAL FINANCIAL REPORTING STANDARDS On December 12, 2011 the Canadian Accounting Standards Board ( AcSB ) allowed investment funds to defer mandatory adoption of International Financial Reporting Standards ( IFRS ) as issued by the International Accounting standards Board ( IASB ) until the fiscal year beginning on or after January 1, Accordingly, the Funds will adopt IFRS for its fiscal year beginning January 1, 2014, and will issue financial statements in accordance with IFRS, including comparative information, for the semiannual period ending June 30, The June 30, 2014 semiannual and December 31, 2014 annual financial statements will include an opening Statement of Net Assets as at January 1, 2013 and comparative financial information prepared in accordance with IFRS. The Manager has evaluated the differences between Canadian GAAP and IFRS and implemented a transition plan to meet the AcSB implementation timeline. Based on the Manager s analysis to date, the adoption of IFRS may impact the Funds' Net Assets with the potential elimination of the difference between the Net Assets per Unit and the Net Asset Value per Unit at the financial statement reporting date as disclosed in the respective Funds' Schedule of Net Assets per Unit and Net Asset Value per Unit. The changeover to IFRS will also result in the presentation of a Statement of Cash Flow and additional note disclosures, and may result in the presentation of Net Assets representing unitholders equity as a liability instead of the current presentation as equity depending on the Funds meeting certain criteria. The Manager s current evaluation may be subject to changes due to issuance of new standards or new interpretations of existing standards. 9. FINANCIAL INSTRUMENTS The categorization of financial instruments is as follows: investments and derivatives are classified as held for trading and are stated at fair value. Receivable for unit subscriptions, receivable for dividends and accrued interest, receivable for securities sold, management fee rebate receivable and other receivables are designated as loans and receivables. They are recorded at amortized cost which approximates their fair value due to their shortterm nature. Similarly, payable for unit redemptions, payable for securities purchased, management fees payable, distribution payable, accrued expenses and other payables are designated as financial liabilities and are carried at their amortized cost which approximates their fair value, due to their shortterm nature. Financial liabilities are generally paid within three months. 10. FINANCIAL INSTRUMENTS RISK Risk Management The Funds invest in units of Underlying Funds and are exposed to a variety of financial instruments risks: credit risk, liquidity risk and price risk (including interest rate risk, currency risk and other price risk). The level of risk to which each Fund is exposed depends on the investment objective and the type of investments held by the Underlying Funds. The value of investments within an Underlying Fund portfolio can fluctuate daily as a result of changes in prevailing interest rates, economic and market conditions and company specific news related to investments held by the Underlying Fund and this will affect the value of each of the Funds. The Manager of the Underlying Fund may minimize potential adverse effects of these risks by, but not limited to, regular monitoring of the Underlying Fund s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated objectives, and through the usage of derivatives to hedge certain risk exposures. Credit Risk Credit risk is the risk that a security issuer or counterparty to a financial instrument will fail to meet its financial obligations. The fair value of a debt instrument includes consideration of the credit worthiness of the debt issuer. The Funds invest only in units of underlying funds and may be exposed to indirect credit risk in the event that the underlying fund invests in debt instruments, preferred securities and derivatives. Cash balances as disclosed in the Statements of Net Assets are maintained by the custodian, RBC Investor Services Trust. The Manager monitors the credit worthiness of the custodian on a regular basis. Liquidity Risk Liquidity risk is the risk that a Fund may not be able to settle or meet its obligations, on time or at a reasonable price. The Funds are exposed to daily cash redemption of redeemable units. The Funds invest all of their assets in Underlying Funds which can be readily disposed of. Annual Financial Statements as at December 31,

9 Transamerica CI Portfolio Funds Notes to the Financial Statements (cont d) Interest Rate Risk Interest rate risk is the risk that the fair value of interestbearing investments will fluctuate due to changes in prevailing levels of market interest rates. As a result, the value of the Underlying Funds that invest in debt securities and/or income trusts will be affected by changes in applicable interest rates. If interest rates fall, the fair value of existing debt securities may increase due to the increase in yield. Alternatively, if interest rates rise, the yield of existing debt securities decrease which may then lead to a decrease in their fair value. The magnitude of the decline will generally be greater for longterm debt securities than for shortterm debt securities. Interest rate risk also applies to convertible securities. The fair value of these securities varies inversely with interest rates, similar to other debt securities. However, since they may be converted into common shares, convertible securities are generally less affected by interest rate fluctuations than other debt securities. Investments classified as Level 3 have significant unobservable inputs. Level 3 instruments may include private equities, private term loans, private equity funds and certain derivatives. As observable prices are not available for these securities, the Funds may use a variety of valuation techniques to derive the fair value. The Funds invest only in other investment funds and these investments are classified as Level 1. Details of each Fund s exposure to financial instruments risks including fair value hierarchy classification are available in the Fund Specific Financial Instruments Risks section of the financial statements of each Fund. The Funds invest only in units of underlying funds and may be exposed to indirect interest rate risk in the event that the underlying fund invests in interest bearing financial instruments. Currency Risk Currency risk arises from financial instruments that are denominated in a currency other than, Canadian dollars, the functional currency of the Funds and the Underlying Funds. As a result, the Underlying Funds may be exposed to the risk that the value of securities denominated in other currencies will fluctuate due to changes in exchange rates. Equities traded in foreign markets are also exposed to currency risk as the prices denominated in foreign currencies are converted to Underlying Funds functional currency to determine their fair value. The Funds invest only in units of underlying funds and may be exposed to indirect currency risk in the event that the underlying fund invests in financial instruments that are denominated in a currency other than the functional currency of the Fund. Other Price Risk Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk). The value of each investment is influenced by the outlook of the issuer and by general economic and political conditions, as well as industry and market trends. All securities present a risk of loss of capital. Other assets and liabilities are monetary items that are shortterm in nature and therefore are not subject to significant other price risk. Fair Value Hierarchy The Funds are required to classify financial instruments measured at fair value using a fair value hierarchy. Investments whose values are based on quoted market prices in active markets are classified as Level 1. This level may include publicly traded equities, exchange traded and retail mutual funds, exchange traded warrants, futures contracts, traded options, American depositary receipts ( ADRs ) and Global depositary receipts ( GDRs ). Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. These may include fixed income securities, mortgage backed securities ( MBS ), shortterm instruments, nontraded warrants, overthecounter options, structured notes of indexed securities, foreign currency forward contracts and swap instruments. Annual Financial Statements as at December 31,

10 2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I Head Office / Toronto CI Managed Solutions Team TRANSAM(5152)_AR_04/14E