Scotia Aria Moderate Pay Portfolio

Transcription

1 Scotia Aria Moderate Pay Portfolio Semi-Annual Management Report of Fund Performance For the period ended, 2015 This semi-annual management report of fund performance contains financial highlights but does not contain the complete semiannual financial statements of the fund. You may obtain a copy of the semi-annual financial statements at your request, and at no cost, by calling toll-free , by visiting our website or SEDAR at or by writing to us at: 1832 Asset Management L.P., 1 Adelaide Street East, 28th Floor, Toronto, ON M5C 2V9. Securityholders may also contact us using one of these methods to request a copy of the Fund s semi-annual financial statements, proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure Asset Management L.P. is the manager (the Manager ) of the fund. In this document, we, us, our and the Manager refer to 1832 Asset Management L.P. and Fund refers to the Scotia Aria Moderate Pay Portfolio. Caution Regarding Forward-Looking Statements Certain portions of this report, including, but not limited to, Recent Developments, may contain forward-looking statements about the fund and the underlying funds, as applicable, including statements with respect to strategies, risks, expected performance events and conditions. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, intends, plans, believes, estimates, projects and similar forward-looking expressions or negative versions thereof. In addition, any statement that may be made concerning future performance, strategies or prospects and possible future action by the fund is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future general economic, political and relevant market factors, such as interest rates, foreign exchange rates, equity and capital markets, and the general business environment, in each case assuming no changes to applicable tax or other laws or government regulation. Expectations and projections about future events are inherently subject to, among other things, risks and uncertainties, some of which may be unforeseeable. Accordingly, current assumptions concerning future economic and other factors may prove to be incorrect at a future date. Forward-looking statements are not guarantees of future performance and actual results or events could differ materially from those expressed or implied in any forward-looking statements made by the fund. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, such as interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government relations, unexpected judicial or regulatory proceedings and catastrophic events. We stress that the above mentioned list of important factors is not exhaustive. Some of these risks, uncertainties and other factors are described in the fund s simplified prospectus, under the heading Specific risks of mutual funds. We encourage you to consider these and other factors carefully before making any investment decisions. Forward-looking statements should not be unduly relied upon. Further, you should be aware of the fact that the fund has no specific intention of updating any forward-looking statements whether as a result of new information, future events or otherwise, prior to the release of the next management report of fund performance, and that the forward-looking statements speak only to the date of this management report of fund performance. Management Report of Fund Performance Results of Operations The Fund was created on November 19, 2014 and its net asset value was $37.0 million as of, Investment performance is not provided for a Fund that has been available for less than one year. The first half of the period was eventful as geopolitics and economic data took centre stage and impacted capital markets. The period began with a dramatic plunge in the price of crude oil, furthering declines from previous quarters and leading the Bank of Canada (BoC) to respond with a surprise interest rate cut to bolster the economy. By the end of the period, the price of oil had recovered slightly, helping Canadian equity markets to end the period higher, as the Canadian bonds also increased. Meanwhile, the U.S. also experienced declining economic growth in the first part of the period; however, data released later in the period showed a strengthening job market, as the economy was able to grow employment month-after-month, helping U.S. equities to rise modestly. In Europe, Greece elected a new government to negotiate with creditors on a new bailout package, and by the end of the period, the Greek government had called a national referendum on the issue of accepting a bailout package from creditors. Despite the developments in Greece, European equities were higher at the end of the period. In China, the economy began to experience a slowdown, with GDP growth coming in lower than had been experienced over the last few years, while its equity markets pushed towards new highs, before pulling back at the end of the period. To achieve its asset allocation mandate, the portfolio was invested directly in units or shares of the underlying funds, private pools or limited partnerships as disclosed in the summary of investment

2 portfolio. By the end of the period the portfolio was fully invested with a low cash position and holdings in eighteen underlying investments. The portfolio was broadly diversified across multiple asset classes including Fixed Income, Canadian Equity and Global Equity. Fixed Income exposures include government and corporate bonds issued both domestically and globally, high yield bonds and preferred shares. Equity exposures include investment strategies focusing on dividend payers/growers, international companies, alternative sources of income generation, real estate and infrastructure. Certain series of the Fund, as applicable, may make distributions at a rate determined by the Manager from time to time. If the aggregate amount of distributions in such series exceeds the portion of net income and net realized capital gains allocated to such series, the excess will constitute a return of capital. The Manager does not believe that the return of capital distributions made by such series of the Fund have a meaningful impact on the Fund s ability to implement its investment strategy or to fulfill its investment objective. The Fund s net asset value increased by 436.2% to $37.0 million at, 2015, from $6.9 million at, The increase is attributed to net sales of $30.2 million and investment performance of $0.1 million, offset by cash distributions of $0.2 million. The investment performance of the Fund includes earned income and expenses which vary year over year due to portfolio activity. Prior period results are not available for comparative purposes as the Fund commenced operations during the year. Related Party Transactions The Manager is a wholly-owned subsidiary of The Bank of Nova Scotia ( Scotiabank ). Scotiabank also owns, directly or indirectly, 100% of Scotia Securities Inc. ( SSI ), HollisWealth Advisory Services Inc. and Tangerine Investment Funds Limited, each a mutual fund dealer, and Scotia Capital Inc. ( SCI ), (which includes HollisWealth Inc., ScotiaMcLeod and Scotia itrade), an investment dealer. The Manager, on behalf of the Fund, may enter into transactions or arrangements with other members of Scotiabank or certain other companies that are related or connected to the Manager (each a related party ). All transactions between the Fund and the related parties are in the normal course of business and are carried out at arm s length terms. The purpose of this section is to provide a brief description of any transaction involving the Fund and a related party. The following arrangements listed below are considered related party transactions: Management Fees The Fund pays the Manager a management fee, which may vary for each Series of the Fund. The management fees cover the costs of managing the Fund, arranging for investment analysis, recommendations and investment decision making for the Fund, arranging for distribution of the Fund, marketing and promotion of the Fund and providing or arranging for other services. The Fund incurred a management fee of $178,223. Fixed Administration Fee and Operating Expenses The Manager pays certain operating expenses of the Fund. These expenses include regulatory filing fees and other day-to-day operating expenses including, but not limited to, recordkeeping, accounting and Fund valuation costs, custody fees, audit and legal fees, costs of preparing and distributing annual and semi-annual reports, prospectuses, fund facts, statements and investor communications. In return, the Fund pays a fixed administration fee to the Manager (the Fixed Administration Fee ). In addition to the Fixed Administration Fee, the Fund also directly pays certain operating expenses referred to as Other Funds Costs. These include the costs and expenses related to the IRC of the Fund, cost of any new government or regulatory requirements, such as the costs associated with complying with International Financial Reporting Standards or any new fee introduced by a securities regulator or other government authorities based on the assets or other criteria of the Fund, any transaction costs, including all fees and costs related to derivatives, and any borrowing costs, and taxes (including, but not limited to, GST or HST, as applicable), which are detailed in the simplified prospectus of the Fund. The Fund incurred $11,465 in Fixed Administration Fees during the period. The Manager, at its sole discretion, may absorb a portion of Fixed Administration Fee or Other Fund Costs payable by certain Series. The Manager may cease to absorb expenses at any time, without notice. Custodian Fees Scotiabank as the custodian of the Funds earns a fee for providing custody and related services. The custodian holds the investments of the Fund and keeps it safe to ensure that they are used only for the benefit of the investors of the Fund. For the period ended, 2015, custodian fee was paid by the Manager in return for the Fixed Administration Fee paid to the Manager by the Fund. Other Fees Our affiliates may earn fees and spreads in connection with various services provided to, or transactions with, the Fund, such as banking, brokerage, securities lending, foreign exchange and derivatives transactions. We, or our affiliates, may earn a foreign exchange spread when unitholders switch between Series of funds denominated in different currencies. The Fund also maintains bank accounts and overdraft provisions with Scotiabank for which Scotiabank may earn a fee. Distribution Services Certain registered dealers through which units of the Fund are distributed are related parties to the Fund and the Manager. The Manager pays to these related parties a trailer commission out of its management fees, representing distribution and servicing fees, based on the amount of assets held in the investors accounts. These fees are paid on the basis and at the same rates that the Manager pays to non-affiliated dealers.

3 Independent Review Committee The Manager has established the Independent Review Committee (the IRC ) for the Funds in accordance with the requirements of National Instrument Independent Review Committee for Investment Funds ( NI ) in order to review and provide recommendations or approval, as required, regarding certain conflict of interest matters referred to it by the Manager on behalf of the Funds. The IRC is responsible for overseeing the Manager s decisions in situations where the Manager is faced with any present or perceived conflicts of interest, all in accordance with NI The IRC currently consists of five members, all of whom are independent of the Manager. The IRC prepares and files a report to securityholders each fiscal year that describes the IRC and its activities for securityholders which is available on the Manager s website at The compensation and other reasonable expenses of the IRC will be paid out of the assets of the Funds as well as out of the assets of the other investment funds for which the IRC may act as the independent review committee. The main components of compensation are an annual retainer and a fee for each committee meeting attended. The chair of the IRC is entitled to an additional fee. The Fund received the following standing instructions from the IRC with respect to related party transactions: Paying brokerage commissions and spreads to related brokers for effecting security transactions on an agency and principal basis on behalf of the Fund (referred to as Related Brokerage Commissions ); Purchases or sales of securities of an issuer from or to another investment fund managed by the Manager (referred to as Inter-Fund Trades ); Investments in the securities of issuers for which a related underwriter acted as an underwriter during the distribution of such securities and the 60-day period following the completion of such distribution (referred to as Underwriting of Securities ); Executing foreign exchange transactions with Scotia Capital Inc. (a related broker) on behalf of the Fund; Purchases of securities of a related issuer; and Entering into OTC derivatives on behalf of the Fund with The Bank of Nova Scotia (a related counterparty); The Manager is required to advise the IRC of any breach of a condition of the standing instructions. The standing instructions require, among other things, that the investment decision in respect to a related party transaction: (a) is made by the Manager free from any influence by an entity related to the Manager and without taking into account any consideration to any associate or affiliate of the Manager; (b) represents the business judgment of the Manager uninfluenced by considerations other than the best interests of the Fund; and (c) is made in compliance with the Manager s written policies and procedures. Transactions made by the Manager under the standing instructions are subsequently reviewed by the IRC to monitor compliance. The Fund did not rely on IRC standing instructions regarding related party transactions during the period. 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 periods indicated. The information on the following tables is based on prescribed regulations and as a result, is not expected to add down due to the increase (decrease) in net assets from operations being based on average units outstanding during the period and all other numbers being based on actual units outstanding at the relevant point in time. Footnotes for the tables are found at the end of the Financial Highlights section. Following is a description of all the available series of the Fund. Series A units and Premium Series units are intended for investors that are not seeking stable monthly distributions. Series T, Series TL and Series TH units as well as Premium T Series, Premium TL Series and Premium TH Series units are intended for investors seeking stable monthly distributions. The principal difference between (i) Series A, Series T, Series TL and Series TH units and (ii) Premium Series, Premium T Series, Premium TL Series and Premium TH Series units relates to the minimum aggregate investment required to invest in Scotia Aria Portfolios. The minimum aggregate investment amounts are determined by Manager and may change from time to time. Presented below are the key financial information for any applicable Series that had units outstanding as of, The Fund s Net Assets per Unit (1) Series A Units period (1) $ Total revenue $ Total expenses $ (0.09) (0.02) period $ (0.04) (0.35) operations (2) $ 0.06 (excluding dividends) $ (0.04) From dividends $ (0.06) From capital gains $ (0.11) Return of capital $ Total distributions (3) $ (0.21) Net Assets, end of period (1) $ * The start date of Series A was November 19.

4 Series T Units * period (1) $ Total revenue $ Total expenses $ (0.14) (0.03) period $ (0.15) 0.37 operations (2) $ (0.01) 0.65 (excluding dividends) $ (0.07) (0.09) From dividends $ (0.02) (0.11) Return of capital $ (0.21) Total distributions (3) $ (0.30) (0.36) Net Assets, end of period (1) $ * The start date of Series T was November 19. Series TH Units period (1) $ Total revenue $ Total expenses $ (0.14) (0.03) period $ (0.21) 0.20 operations (2) $ (0.08) 0.51 (excluding dividends) $ (0.07) (0.09) From dividends $ (0.02) (0.12) Return of capital $ (0.36) Total distributions (3) $ (0.45) (0.37) Net Assets, end of period (1) $ * The start date of Series TH was November 19. Series TL Units period (1) $ Total revenue $ Total expenses $ (0.14) (0.03) period $ (0.29) 0.35 operations (2) $ (0.17) 0.85 (excluding dividends) $ (0.09) (0.08) From dividends $ (0.03) (0.10) From capital gains $ (0.03) (0.16) Return of capital $ Total distributions (3) $ (0.15) (0.34) Net Assets, end of period (1) $ * The start date of Series TL was November 19. Premium Series Units period (1) $ Total revenue $ Total expenses $ (0.09) (0.02) period $ (0.03) (0.27) operations (2) $ 0.06 (0.03) (excluding dividends) $ (0.04) From dividends $ (0.05) From capital gains $ (0.11) Return of capital $ Total distributions (3) $ (0.20) Net Assets, end of period (1) $ * The start date of Premium Series was November 19.

5 Premium T Series Units * period (1) $ Total revenue $ Total expenses $ (0.13) (0.03) period $ (0.05) 0.89 operations (2) $ (excluding dividends) $ (0.07) (0.09) From dividends $ (0.02) (0.11) Return of capital $ (0.21) Total distributions (3) $ (0.30) (0.36) Net Assets, end of period (1) $ * The start date of Premium T Series was November 19. Premium TH Series Units period (1) $ Total revenue $ Total expenses $ (0.13) (0.03) period $ (0.05) 0.10 operations (2) $ (excluding dividends) $ (0.05) (0.09) From dividends $ (0.02) (0.12) Return of capital $ (0.38) Total distributions (3) $ (0.45) (0.37) Net Assets, end of period (1) $ * The start date of Premium TH Series was November 19. Premium TL Series Units period (1) $ Total revenue $ Total expenses $ (0.12) (0.03) period $ (0.59) (3.33) operations (2) $ (0.50) (0.06) (excluding dividends) $ (0.11) (0.06) From dividends $ (0.04) (0.08) Return of capital $ Total distributions (3) $ (0.15) (0.30) Net Assets, end of period (1) $ * The start date of Premium TL Series was November 19. (1) This information is derived from the Fund s semi-annual and audited annual financial statements. The net assets per unit presented in the financial statements may differ from the net asset value calculated for Fund pricing purposes. This difference is due to the requirements of the CPA Handbook ( IFRS ) and may result in a different valuation of securities held by the Fund in accordance with IFRS than the market value used to determine net asset value of the Fund for the purchase, switch and redemption of the fund s units ( Net Asset Value ). The Net Asset Value per unit at the end of the period is disclosed in Ratios and Supplemental Data. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease from operations is based on the weighted average number of units outstanding over the financial period. (3) Distributions were paid in cash/reinvested in additional units of the fund, or both. Ratios and Supplemental Data Series A Units Total net asset value (000 s) (1) $ 15,979 2,783 (000 s) (1) 1, (2) % before waivers or absorptions (2) % Net asset value per unit $

6 Series T Units Total net asset value (000 s) (1) $ 1, (000 s) (1) (2) % before waivers or absorptions (2) % Net asset value per unit $ Premium T Series Units Total net asset value (000 s) (1) $ 3, (000 s) (1) (2) % before waivers or absorptions (2) % Net asset value per unit $ Series TH Units Total net asset value (000 s) (1) $ 1, (000 s) (1) (2) % before waivers or absorptions (2) % Net asset value per unit $ Premium TH Series Units Total net asset value (000 s) (1) $ 3,964 1,826 (000 s) (1) (2) % before waivers or absorptions (2) % Net asset value per unit $ Series TL Units Total net asset value (000 s) (1) $ (000 s) (1) 34 7 (2) % before waivers or absorptions (2) % Net asset value per unit $ Premium Series Units Total net asset value (000 s) (1) $ 9,749 1,008 (000 s) (1) (2) % before waivers or absorptions (2) % Net asset value per unit $ Premium TL Series Units Total net asset value (000 s) (1) $ (000 s) (1) 34 0 (2) % before waivers or absorptions (2) % Net asset value per unit $ (1) This information is provided as at the period end of the years shown. (2) is based on total expenses (excluding commissions and other portfolio transaction costs) of each series of the Fund and the underlying funds, where applicable, for the stated period and is expressed as an annualized percentage of the daily average net asset value during the period. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of the daily average net asset value and underlying funds, if applicable, during the period. (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 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 high turnover rate and the performance of a fund.

7 Management Fees The management fee is an annualized rate based on the net asset value of each Series of the Fund, accrued daily and paid monthly. The management fee covers the cost of managing the Fund, arranging for investment analysis, recommendations and investment decisions for the Fund, arranging for distribution of the Funds, marketing and promotion of the Fund and providing and arranging for other services as required. The management fees for Series I, if applicable, are negotiated and paid directly by the investor, not by the Fund. The breakdown of services received in consideration of management fees for each series, as a percentage of the management fees, are as follows: Maximum Management Fees (%) Dealer Compensation (%) Other* (%) Series A Premium Series Premium TH Series Premium TL Series Premium T Series Series T Series TH Series TL * Includes all cost related to investment advisory services, marketing services, general administration and other. Top Holdings Issuer % of net asset value (2) Scotia Private Canadian Corporate Bond Pool Series I 9.8 PIMCO Monthly Income Fund (Canada) Class I 9.8 Dynamic Dividend Advantage Fund Series O 7.4 CI Cambridge Canadian Equity Corporate Class I 7.3 Scotia Private High Yield Income Pool Series I 7.3 Scotia Total Return Bond LP Series I AM North American Preferred Share LP Series I 7.3 Dynamic Premium Yield Fund Series O 6.0 Scotia Canadian Dividend Fund Series I 5.9 Scotia Global Dividend Fund Series I 4.9 Scotia Private Short-Mid Government Bond Pool Series I 4.9 Scotia Private International Equity Pool Series I 4.0 Scotia U.S. Dividend Fund Series I 4.0 Scotia U.S. Dividend Growers LP Series I 3.0 Dynamic Small Business Fund Series O 3.0 Scotia Private American Core-Plus Bond Pool Series I 2.4 Cash and Cash Equivalents 2.3 Pinnacle Emerging Markets Fund Class I 2.0 Dynamic Global Infrastructure Fund Series O 2.0 (1) Excludes other net assets (liabilities) and derivatives. (2) Based on Pricing NAV, therefore, weighting presented in the Schedule of Investment will differ for the ones disclosed above. Past Performance In accordance with National Instrument , past performance and annual return data is not disclosed as the Fund has been a reporting issuer for less than a year. Summary of Investment Portfolio The Summary of Investment Portfolio many change due to ongoing portfolio transactions. A quarterly portfolio update is available to the investor at no cost by calling , or by visiting 60 days after quarter ends, except for, which is the calendar year end, when they are available after 90 days. By Asset Type (1) % of net asset value (2) Canadian Equity Funds 30.9 Fixed Income Funds 41.5 Foreign Equity Funds 25.7

8 Registered trademarks of The Bank of Nova Scotia, used under licence.