International Equity Value 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 International Equity Value Pool (the Fund ) seeks to provide long-term capital appreciation primarily through investment in a diversified portfolio of equity and equity-related securities of international issuers which are believed to be undervalued relative to their perceived growth potential. Equity-related securities include convertible preferred shares, convertible debt obligations and warrants. The portfolio adviser will not invest in Canadian or U.S. issuers. The portfolio advisers use both value-based and price-driven approaches to allocate the investments between regions based on an on-going analysis of trends in international markets. When the portfolio advisers deem such investments appropriate, the assets of this Fund may be invested in short-term fixed income securities or cash equivalents. 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 risk, want an investment that is focused on generating capital growth and are planning to hold their investment for the medium and/or long term. RESULTS OF OPERATIONS The net asset value of the Fund increased by $54.1 million to $375.3 million from December 31, 2016 to December 31, The Fund had net sales of $9.5 million for the year. The portfolio s performance increased assets by $44.6 million. Class W units returned 14.6%, after fees and expenses for the one-year period ended December 31, Over the same time period, the Fund s benchmark returned 16.9%. The benchmark is the MSCI EAFE 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. The Fund underperformed its benchmark for the year. The fear that prevailed in the aftermath of the global financial crisis has been replaced by complacency in most markets and there are excesses in a growing number of them. Of the major asset classes, 38 of 39 monitored by Deutsche Bank delivered positive returns in The virtual currency, bitcoin, gained 1,331%, while Argentina successfully issued a 0-year bond. Stock market valuations have become stretched by historical measures, while interest rates, credit spreads and volatility hover near all-time lows. Holdings in health care, energy and financials weighed on relative returns, while materials, information technology and consumer staples generated the strongest performance. In health care, lackluster growth for Xtandi, a prostate cancer drug, contributed to underperformance for Astellas Pharma, although we expect this to pick up in coming quarters. Energy holdings Schlumberger underperformed due to the potential for a slower recovery in demand for global oilfield services due to lower oil prices. In financials, property and casualty insurance holdings Chubb and XL Group underperformed due to 2017 s natural disasters and worries that insurance pricing is unlikely to improve. Valuations remain compelling at this stage and each stock has its own bottom up driver to improve profitability, mostly through cost cutting and improved underwriting. In materials, Linde outperformed, moving closer to a merger with Praxair. Other materials names outperformed on the back of strong commodity prices. Technology holding Nintendo has benefited from the optimism surrounding sales of its new Switch Console, which continues to do well. In consumer staples, premium drink company Diageo continued to outperform, as it expects U.S. spirits (~50% profits) to continue to grow at over 4%. Heineken shares advanced on high and accelerating volume growth and coinciding margin expansion. During the 12-month period ending December 31, 2017, positions in Sandvik AB (Sweden, industrials), Glencore PLC (U.K., materials), ING (Netherlands, financials), SAP SE (Germany, information technology), Suzuki Motor Corp. (Japan, consumer discretionary), Experian PLC (U.K., financials), KB Financial Group Inc. (South Korea, financials) and Scor SE (France, financials) were sold when their shares traded near or at our estimate of intrinsic value. Philip Morris (Switzerland, consumer staples) was sold to make room for better ideas. New positions over the last 12 months include the following: Ambev SA is Brazil s foremost brewer (consumer staples), Zurich Insurance Group AB is one of the largest global insurance groups (financials), Swiss Re AG is one of the world s largest reinsurers (financials), Euronext NV operates derivatives and equity exchanges primarily in France and the Netherlands (financials), XL Group is a Bermuda-based property and casualty insurer (financials), Shire PLC is a U.K.-based biopharmaceutical company (health care) Babcock International Group PLC is a U.K. based engineering services company that serves defense and civil clients (industrials), Cielo SA is the leading electronic payment processor in Brazil (information technology), Yahoo Japan Corp., is the leading internet media franchise in Japan (information technology), Trivago NV, based in Germany, is a leading hotel meta-search company (information technology), CIG

2 Akzo Nobel NV, is one of the world s largest paint manufacturers (materials) and BT Group PLC is a leading communications company, serving phone, broadband, TV and mobile needs of the U.K. and customers in 170 countries (telecommunications). RECENT DEVELOPMENTS In the prevailing world of excessive structure and compartmentalization, we believe that flexibility and an absolute approach to value is essential. The risk embedded in the portfolio is primarily the byproduct of where we identify undervalued opportunities and we give close attention to the symmetry of possible outcomes. The resulting portfolio is positioned quite differently than popular indexes with below-market risk and underlying drivers that we believe are more company specific rather than tied to the macro environment. The investment environment in the second half of 2017 was led by cyclical and highly valued businesses in which we believe the downside risk outweighs the potential upside. Consideration of a company s and portfolio s margin of safety is more timely and relevant now than any time in recent years. RELATED PARTY TRANSACTIONS Manager and Trustee CI Investments Inc. is the Manager and Trustee 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. Management 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 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 Management Ltd. Assante Financial Management 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 E Class F Class F Class F Class F Class I Paid directly by investor - Class OF Class W Paid directly by investor 0.22 The Manager received $3.1 million in management fees and $0.6 million in fixed administration fees for the year. Management 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.

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 gains (losses) for gains (losses) for (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) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class A Commencement of operations December 28, 2006 Dec. 31, (0.29) Dec. 31, (0.25) 0.39 (0.19) Dec. 31, (0.26) Dec. 31, (0.23) 0.36 (0.15) Dec. 31, (0.20) Class E Commencement of operations September, 2008 Dec. 31, (0.34) Dec. 31, (0.29) Dec. 31, (0.29) Dec. 31, (0.26) 0.53 (0.26) Dec. 31, (0.22) Class E3 Dec. 31, (0.16) 0.71 (0.69) Class E4 Dec. 31, (0.15) 0.70 (0.69) Class E5 Dec. 31, (0.14) 0.72 (0.65) Class F Dec. 31, (0.09) 0.73 (0.39) *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 gains (losses) for gains (losses) for (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) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class F3 Dec. 31, (0.08) 0.68 (0.41) Class F4 Dec. 31, (0.07) 0.73 (0.30) Class F5 Dec. 31, (0.07) 0.69 (0.47) Class I Commencement of operations September 18, 2008 Dec. 31, Dec. 31, Dec. 31, Dec. 31, (0.36) Dec. 31, Class OF Commencement of operations October 5, 2007 Dec. 31, (0.22) 0.98 (0.) Dec. 31, (0.19) Dec. 31, (0.18) Dec. 31, (0.16) Dec. 31, (0.14) Class W Commencement of operations May 1, 2000 Dec. 31, (0.06) Dec. 31, (0.05) 0.93 (0.22) Dec. 31, (0.05) Dec. 31, (0.04) 0.82 (0.37) Dec. 31, (0.04) *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 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) Management expense ratio before taxes (2) Harmonized sales tax (2) Management expense ratio after taxes (2) Effective HST rate for the year Trading (%) (2) expense ratio (3) Portfolio turnover rate (4) $000 s 000 s % % % % % % Class A Commencement of operations December 28, 2006 Dec. 31, , Dec. 31, 2016,163 1, Dec. 31, ,384 1, Dec. 31, ,605 2, Dec. 31, ,347 2, Class E Commencement of operations September, 2008 Dec. 31, ,269 8, Dec. 31, ,020, Dec. 31, ,696 8, Dec. 31, ,377 8, Dec. 31, ,488 6, Class E3 Dec. 31, ,596 2, Class E4 Dec. 31, , Class E5 Dec. 31, , Class F 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) Management expense ratio before taxes (2) Harmonized sales tax (2) Management expense ratio after taxes (2) Effective HST rate for the year Trading (%) (2) expense ratio (3) Portfolio turnover rate (4) $000 s 000 s % % % % % % Class F3 Dec. 31, Class F4 Dec. 31, Class F5 Dec. 31, Class I Commencement of operations September 18, 2008 Dec. 31, ,504 4, Dec. 31, ,366 3, Dec. 31, ,916 2, Dec. 31, ,742 2, Dec. 31, ,774 1, Class OF Commencement of operations October 5, 2007 Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Class W Commencement of operations May 1, 2000 Dec. 31, ,613 4, Dec. 31, ,337 5, Dec. 31, ,3 5, Dec. 31, ,079 7, Dec. 31, ,753 9, *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 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 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 expense ratio 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 gains 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. *Footnotes for the tables are found at the end of the Financial Highlights section. (4) 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, 2008.

10 Annual Compound Returns The following table shows the Fund s annual compound returns for each year indicated, compared to the MSCI EAFE Total Return Index. The MSCI EAFE Total Return Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States of America and Canada. The Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. 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 MSCI EAFE Total Return Index n/a Class E n/a 4.3 MSCI EAFE Total Return Index n/a 8.4 Class I n/a 7.9 MSCI EAFE Total Return Index n/a 8.4 Class OF n/a MSCI EAFE Total Return Index n/a Class W n/a MSCI EAFE Total Return Index 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 Japan U.K Switzerland Germany Cash & Equivalents Netherlands France Ireland Jersey Island Denmark Bermuda Hong Kong India Brazil Thailand Netherlands Antilles Cayman Islands Sweden Luxembourg Israel Mexico South Korea Russia Other Net Assets (Liabilities) Sector allocation Financials Health Care Consumer Staples Information Technology Cash & Equivalents Telecommunication Services Materials Energy Consumer Discretionary Industrials Utilities Other Net Assets (Liabilities) Cash & Equivalents Chubb Ltd Linde AG Vodafone Group PLC, ADR Heineken N.V GlaxoSmithKline PLC Aon PLC Tokio Marine Holdings Inc TDC AS Mitsubishi UFJ Financial Group Inc Sumitomo Mitsui Trust Holdings Inc Astellas Pharma Inc Roche Holding AG Novartis AG, Registered Shares Henkel AG & Co., KGaA, Preferred, Non-Voting Shares Diageo PLC Willis Towers Watson PLC Zurich Financial Services AG XL Group Ltd MS&AD Insurance Group Holdings Inc Nestle S.A., Registered Shares Medtronic PLC Sanofi ICICI Bank Ltd., ADR Yahoo! Japan Corp Total Net Assets (in $000 s) $375,324 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