Counsel High Yield Fixed Income

Transcription

1 Counsel High Yield Fixed Income annual management report of fund performance For the year ended March 31, 15 Fund Manager Counsel Portfolio Services Inc. This Annual Management Report of Fund Performance contains financial highlights but does not contain either the annual or interim financial statements of the investment fund. If you have not received a copy of the Annual financial statements with this report, you may obtain a copy at no cost, by calling toll-free at , by writing to us at Counsel Portfolio Services Inc, Skymark Avenue, 7th Floor, Mississauga, Ontario, LW 5L, by visiting our website at or by visiting the SEDAR website 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. For more information, please refer to the Fund s Simplified Prospectus and Annual Information Form, which may also be obtained, at no cost, using any of the methods outlined above. Every effort has been made to ensure that the information contained in this report is accurate as of March 31, 15; however, the Fund cannot guarantee the accuracy or the completeness of this material. Please refer to the Fund s Simplified Prospectus and audited annual financial statements for more information. CAUTION ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements which reflect our current expectations or forecasts of future events. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as: expects, anticipates, intends, plans, believes, estimates, preliminary, typical and other similar expressions. In addition, these statements may relate to future corporate actions, future financial performance of a fund or a security and their future investment strategies and prospects. Forward-looking statements are inherently subject to, among other things, risks, uncertainties and assumptions which could cause actual events, results, performance or prospects to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, the volatility of global equity and capital markets, business competition, technological change, changes in securities legislation, changes in government regulations, changes in tax law, unexpected judicial or regulatory proceedings, catastrophic events and the ability of Counsel Portfolio Services Inc. to attract or retain key employees. The foregoing list of important risks, uncertainties and assumptions is not exhaustive. Please consider these and other factors carefully and do not place undue reliance on forward-looking statements. The forward-looking information contained in this report is current only as of the date of this report. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

2 Counsel High Yield Fixed Income March 31, 15 Management Discussion of Fund Performance This Management Report of Fund Performance ( MRFP ) is based on information as of March 31, 15. It is intended to present the significant factors and developments that have affected the performance and outlook of Counsel High Yield Fixed Income (the Fund ) during the past year. For information on the Fund s longer-term performance, please refer to the Past Performance section of the report. In this report, Counsel refers to Counsel Portfolio Services Inc., the manager of the Fund. NAV refers to the net asset value of the Fund or a series as calculated for transaction purposes, which is the basis of discussion in this report. Investment Objective and Strategies The Fund seeks to achieve a high level of income with the potential for long term capital growth. The Fund invests either directly or through securities of other mutual funds ( Underlying Funds ), primarily in Canadian, U.S., and international fixed income securities, as well as mortgage-backed securities, equity and equity-like securities that are expected to produce income. Risk The overall level of risk of investing remains as discussed in the Simplified Prospectus. The Fund is suitable for investors who seek interest income over the long term, and have a low to medium tolerance for risk. Results of Operations The Fund s NAV increased by $17. million, or 5.5%, to $17. million at March 31, 15, from $3.1 million at March 31, 1. Of this increase, $1. million was due to net sales and $.9 million was from investment performance (after deducting fees and expenses). This was slightly offset by $.1 million of distributions paid to securityholders. The performance of the Fund s Series A securities is discussed below. The performance of all other series offered by the Fund is shown in the Past Performance section of this report. Series returns may differ for a number of reasons, including if the series was not issued and outstanding for the entire reporting period and because of different levels of fees and expenses charged to each series. Please refer to the Series Information section of this report for the varying management and administration fees payable by series. Investment Performance During the 1-month period, the Fund s Series A securities returned 5.7% (after deducting fees and expenses). This compares with a 17.3% return of the blended index comprised of 7% Bank of America U.S. High Yield Master II Total Return Index and 3% Bank of America U.S. Emerging Market Liquid Corporate Plus Total Return Index. All index and series returns are calculated on a total return basis in Canadian dollar terms. Investors cannot invest in an index without incurring fees, expenses and commissions, none of which are reflected in the index returns. The Fund underperformed the broad-based FTSE TMX Canada Universe Total Return Index which returned.%. The broad-based index is comprised of Canadian fixed-income securities and has no exposure to below investment grade bonds and bonds outside of Canada, whereas the Fund invests in North American high yield bonds as well as emerging market bonds. Given the Fund s composition, the Blended Index provides a more meaningful comparison. The Fund underperformed the blended Index primarily due to performance of the underlying Mackenzie North American Corporate Bond Fund, which was negatively impacted by positioning within the Utilities, Energy, and Telecommunication sectors. In addition, this Fund has hedged the majority of its U.S. dollar exposure; this has detracted from performance as the U.S. dollar appreciated significantly versus the Canadian dollar during the period. The BlueBay Emerging Market Corporate Bond Fund performed in line with its benchmark. Recent Developments (based on information as of April 3, 15) Putnam Investments Inc. ( Putnam ), the sub-advisor for the Mackenzie North American Corporate Bond Fund, believes that fundamentals are positive for sectors outside of energy and metals & mining, benefitting from lower rates to refinance and cost cutting. Lower rates during 1 led to a robust volume of new issuance. Attractive yields are expected to drive demand for the high yield asset class during 15. Underlying conditions in the North American economy remain positive as growth in Canada is expected to pick up and corporate fundamentals in the U.S. look positive going into the second quarter of 15. Bluebay Asset Management ( Bluebay ), the sub-advisor for the Bluebay Emerging Markets Corporate Bond Fund, believes that high yield default rates will remain low for 15. Low levels of new issuance, particularly in Europe, is primarily due to uncertainty of near term interest rates and companies with strong enough balance sheets not coming to market. Although emerging markets continue to face volatility and deceleration of growth, these events will also produce opportunities for investment in the portfolio. Fees and Expenses The Management Expense Ratio ( MER ) for Series A was.7% and.% for the years ended March 31, 15 and 1 respectively. The MERs for each series offered by the Fund (before and after waivers or absorptions) are presented in the Financial Highlights section of the report. Other Developments International Financial Reporting Standards ( IFRS ) Effective April 1, 1, the Fund adopted IFRS as its basis of accounting as required by the Canadian Accounting Standards Board ( AcSB ). Previously, the Fund prepared its financial statements in accordance with Canadian generally accepted accounting principles as defined in Part V of the Chartered Professional Accountant ( CPA ) Handbook ( Canadian GAAP ). The Annual financial statements for the period ended March 31, 15, including comparative information, are the first set of annual financial statements prepared on an IFRS basis. The impact of the change from Canadian GAAP to IFRS has been applied retrospectively and is disclosed in the notes to the Annual financial statements. Key changes to the financial statements as a result of the implementation of IFRS are: Statement of Financial Position replaces the Statement of Net Assets. The Fund s issued and redeemable securities have been classified as a financial liability. Statement of Comprehensive Income replaces the Statement of Operations. Statement of Changes in Financial Position replaces the Statement of Changes in Net Assets. The Fund now presents a Statement of Cash Flows. Other notable changes to the financial statements include reclassification of certain balances, changes to the format of the financial statements, and additional or enhanced information in the notes to the financial statements, including a detailed note on the Fund s transition from Canadian GAAP to IFRS.

3 Counsel High Yield Fixed Income March 31, 15 Related Party Transactions Management and Administration Services For each applicable series, the Fund paid management fees and administration fees to Counsel at the annual rates specified under Series Information in this report and as more fully described in the Simplified Prospectus. In return for the administration fees, Counsel pays all costs and expenses (other than certain specified fund costs) required to operate the Fund. See also Management Fees. Other Related Party Transactions Counsel has created the Independent Review Committee ( IRC ) to review potential conflicts of interest (including related party transactions) referred to it by Counsel and makes recommendations on whether a course of action achieves a fair and reasonable result for the Fund. In addition, the IRC regularly reviews Counsel s policies and procedures relating to conflicts of interest. The IRC has issued positive recommendations and standing instructions that permit the Fund to purchase, hold or sell shares of related parties to the Fund, excluding IGM Financial Inc. ( IGM ), provided that any investment activity proposed by Counsel or its sub-advisors relating to securities of related parties: is free from any influence by a related party and without taking into account any consideration relevant to a related party; represents the business judgment of the portfolio manager uninfluenced by considerations other than the best interests of the Fund; complies with Counsel s written policies and procedures; and achieves a fair and reasonable result for the Fund. Counsel is an indirect subsidiary of IGM. As at March 31, 15, the Fund had investments of $3.1 million in Mackenzie North American Corporate Bond Fund, an investment fund managed by Mackenzie Financial Corporation (a whollyowned subsidiary of IGM). This represented 7.3% of the Fund s NAV. Management Fees The Fund s management fees were used by the Manager to pay for: costs of managing the investment portfolio; providing investment analysis and recommendations; making investment decisions; the purchase and sale of the investment portfolio; and providing other services. The Manager also used the management fees to fund commission payments and other compensation (collectively, Distribution Related Payments ) paid to the dealers and brokers for securities of the Fund bought and held by investors. The following dealers, who are affiliated with Counsel, may be entitled to Distribution Related Payments from Counsel on the same basis as unrelated registered brokers and dealers: IPC Securities Corporation, Investors Group Securities Inc., IPC Investment Corporation, Investors Group Financial Services Inc. and Quadrus Investment Services Ltd. During the year, approximately 1% of the total management fee revenues received from all Counsel funds were used to fund Distribution Related Payments to registered dealers and brokers. In comparison, such Distribution Related Payments for the Fund represented 3% of the management fees paid. This amount is an average percentage of the management fees paid by all series. The actual percentage for each series may be higher or lower than the average depending on the level of trailing commissions and sales commissions paid for that series. The rate is lower compared to other Counsel Funds due to the lower trailer fee payable on certain series compared to other Counsel funds. The IRC prepares, at least annually, a report of its activities for investors, which is available at

4 Counsel High Yield Fixed Income March 31, 15 Series Information The Fund may issue an unlimited number of securities for each series. The number of issued and outstanding securities of each series is disclosed in Financial Highlights. A -year history of the major changes affecting the Fund can be found in the Fund s Annual Information Form, available at Date of Minimum Management Administration Inception Investment ($) Fee (%) Fee (%) Series A 1 July 13, 1 1, Series D July 13, 1 1, Series E July 13, 1 75, 1..5 Series F July 13, 1 75, Series I,3 July 13, 1 15, -.15 Series P July 13, As described in the Fund s Simplified Prospectus, Series A securities may be subject to redemption fees of up to % or initial sales charges of up to 5% depending on the purchase option selected. A negotiable advisory or asset-based fee (plus sales taxes) is payable by investors to their dealer(s) in connection with Series D, F, and I investments. The fee is collected by Counsel from the investor s account and is remitted directly to the dealer. 3 The management fee for Series I securities is 1.5% and is payable directly to Counsel by the investor. Counsel may waive or lower the fee paid by any investor at its discretion. Effective January 1, 15, investors in this series may become eligible for a reduction on the rate stated above subject to meeting certain requirements as discussed in the Fund s Simplified Prospectus. There are no management fees for Series P. An investor must enter into an agreement to participate in the IPC Private Wealth Program and agree to pay certain asset-based fees.

5 Counsel High Yield Fixed Income March 31, 15 Past Performance The indicated rates of return are the historical annual compound total returns, including changes in NAV per security and assuming reinvestment of all distributions. They do not take into account sales, redemption, distribution or optional sales charges, or income taxes payable by any investor that would have reduced returns. The past performance of the Fund is not necessarily an indication of how it will perform in the future. If you hold this Fund outside of a registered plan, income and capital gains distributions paid to you increase your income for tax purposes, whether paid in cash or reinvested in additional securities. The amount of reinvested taxable distributions is added to the adjusted cost base of the securities that you own. This would decrease your capital gain or increase your capital loss when you later redeem from the Fund, thereby ensuring that you are not taxed on this amount again. Please consult your tax advisor regarding your personal tax situation. Year-by-Year Returns The bar chart shows how much an investment made on the first day of each financial year would have increased or decreased by the end of the respective periods. For the first year of a series, the percentage SERIES A 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 % mo. SERIES D 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 % mo. shown will be the actual return of the series from its inception date, which can be found under Series Information. The chart illustrates how the Fund s performance has changed over time. SERIES F SERIES I 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 %.1.3. mo. 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 % mo. SERIES E SERIES P 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 % mo. 9/ 9/7 9/ 3/9 3/ 3/11 3/1 3/13 3/1 3/15 % mo. Annual Compound Returns The Annual Compound Return table shows the annual compound total return for each series of the Fund for the periods shown ended March 31, 15. The annual compound total return is also compared to the Fund s benchmark(s) 1 calculated on the same compound basis. Since (%) 1 yr 3 yrs 5 yrs yrs inception Series A 5.7 n/a n/a n/a.9 Series D.9 n/a n/a n/a 7.9 Series E 5.3 n/a n/a n/a 7. Series F.3 n/a n/a n/a 7.59 Series I 7. n/a n/a n/a 9.37 Series P 7. n/a n/a n/a 9.3 Blended Index 17.3 n/a n/a n/a 15.5 FTSE TMX Canada Universe Bond Index. n/a n/a n/a.7 1 The blended index consists of 7% Bank of America Merrill Lynch U.S. High Yield Master Trust II Total Return Index and 3% Bank of America U.S. Emerging Market Liquid Corporate Plus Total Return Index. The FTSE TMX Canada Universe Bond Index is a broad measure of the total return of Canadian bonds that mature in more than one year. It includes approximately 9 Canadian federal, provincial, municipal and corporate bonds rated BBB or higher. The Bank of America Merrill Lynch U.S. High Yield Total Return Master Trust II Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The Bank of America Merrill Lynch U.S. Emerging Markets Liquid Corporate Plus Total Return Index tracks the performance of U.S. dollar denominated emerging markets non-sovereign debt publicly issued in the major domestic and eurbond markets. The return since inception for each series will differ when the inception date differs. The index s return since inception is calculated from the month-end following the inception date of the series.

6 Counsel High Yield Fixed Income March 31, 15 Summary of Investment Portfolio as at March 31, 15 The holdings of the Fund as at the end of the period and the major asset classes in which the Fund was invested are indicated below. The investments and percentages may have changed by the time you purchase securities of this Fund. The top 5 holdings are made available quarterly, days after quarter-end, except for March 31, which is the fiscal year-end for the Fund, when they are available after 9 days. Please see the front page for information about how they can be obtained. The effective allocation shows the asset type, regional, credit rating, or currency exposure of the Fund calculated by including the Fund s proportionate share of its holdings in Underlying Funds. The Simplified Prospectus and other information about each of the Underlying Funds are available on the SEDAR website at Summary of Holdings % of net asset value Mackenzie North American Corporate Bond Fund Series O 7.3 Bluebay Emerging Markets Corporate Bond Fund Series O 9.1 Cash and cash equivalents Summary of Composition of the Portfolio EFFECTIVE ASSET TYPE % of net asset value Corporate Bonds 91. Equities 1. Cash and cash equivalents.5 Other.7 Total. EFFECTIVE REGIONAL ALLOCATION United States 5.5 Latin America.1 Canada 1.1 Europe ex U.K..5 Japan.3 Cash and cash equivalents.5. EFFECTIVE CREDIT RATING AAA - AA - A 1. BBB 1. BB 33. B 7. Less than B or unrated 11. Other EFFECTIVE CURRENCY EXPOSURE Canadian dollars 7.9 United States dollars 9.1.

7 Counsel High Yield Fixed Income March 31, 15 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 financial periods (as applicable). In the year a series is established, period represents from inception to March 31 of that fiscal year. Footnotes are presented after Ratios and Supplemental Data. Net Assets per Security 1 Series A (in $) Net assets, beginning of period n/a n/a Total revenue n/a n/a 3 Total expenses (.5) (.5) (.17) n/a n/a for the period n/a n/a for the period (.1).1.33 n/a n/a Total increase operations n/a n/a Canadian dividends) (.1) (.) (.17) n/a n/a From Canadian dividends - (.1) (.1) n/a n/a From capital gains (.5) - (.19) n/a n/a distributions (.) (.5) (.37) n/a n/a Net assets at period end n/a n/a Series E (in $) Net assets, beginning of period n/a n/a Total revenue n/a n/a 3 Total expenses (.) (.) (.1) n/a n/a for the period n/a n/a for the period (.1).1.33 n/a n/a Total increase operations n/a n/a Canadian dividends) (.1) (.5) (.1) n/a n/a From Canadian dividends - (.1) (.1) n/a n/a From capital gains (.) - (.19) n/a n/a distributions (.7) (.) (.3) n/a n/a Net assets at period end n/a n/a Series D (in $) Net assets, beginning of period.5.3. n/a n/a Total revenue n/a n/a 3 Total expenses (.15) (.15) (.) n/a n/a for the period n/a n/a for the period (.1).13.3 n/a n/a Total increase operations...1 n/a n/a Canadian dividends) (.7) (.) (.) n/a n/a From Canadian dividends - (.3) (.1) n/a n/a From capital gains (.3) - (.19) n/a n/a distributions (.7) (.51) (.) n/a n/a Net assets at period end n/a n/a Series F (in $) Net assets, beginning of period n/a n/a Total revenue..5.3 n/a n/a 3 Total expenses (.1) (.1) (.13) n/a n/a for the period n/a n/a for the period (.1).1.33 n/a n/a Total increase operations...77 n/a n/a Canadian dividends) (.) (.5) (.) n/a n/a From Canadian dividends - (.1) (.1) n/a n/a From capital gains (.5) - (.) n/a n/a distributions (.71) (.55) (.3) n/a n/a Net assets at period end n/a n/a

8 Counsel High Yield Fixed Income March 31, 15 Net Assets per Security 1 (continued) Series I Series P (in $) Net assets, beginning of period.55.. n/a n/a (in $) Net assets, beginning of period... n/a n/a Total revenue..5.3 n/a n/a 3 Total expenses (.) (.) - n/a n/a for the period n/a n/a for the period (.5).13.3 n/a n/a Total increase operations n/a n/a Canadian dividends) (.) (.5) (.3) n/a n/a From Canadian dividends (.1) (.1) (.1) n/a n/a From capital gains (1.13) - (.) n/a n/a distributions (1.9) (.55) (.53) n/a n/a Net assets at period end n/a n/a Total revenue n/a n/a 3 Total expenses (.) (.) (.1) n/a n/a for the period n/a n/a for the period (.1).1.3 n/a n/a Total increase operations n/a n/a Canadian dividends) (.59) (.) (.3) n/a n/a From Canadian dividends - (.1) (.1) n/a n/a From capital gains (.5) - (.19) n/a n/a distributions (.) (.5) (.5) n/a n/a Net assets at period end n/a n/a Ratios and Supplemental Data Series A Total net asset value (pricing NAV) ($ s),77 7,7 7,1 n/a n/a outstanding ( s) n/a n/a Management expense ratio (%).7.. n/a n/a Management expense or absorptions (%).7.. n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($).3 Series D Total net asset value (pricing NAV) ($ s) 1, 17 n/a n/a outstanding ( s) n/a n/a Management expense ratio (%) n/a n/a Management expense or absorptions (%) n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($).7 Series E Total net asset value (pricing NAV) ($ s) 9,315,7 9,95 n/a n/a outstanding ( s) n/a n/a Management expense ratio (%) n/a n/a Management expense or absorptions (%) n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($).3

9 Counsel High Yield Fixed Income March 31, 15 Ratios and Supplemental Data Series F Total net asset value (pricing NAV) ($ s) 95 1 n/a n/a outstanding ( s) 9 1 n/a n/a Management expense ratio (%) n/a n/a Management expense or absorptions (%) n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($).3 Series I Total net asset value (pricing NAV) ($ s) n/a n/a outstanding ( s) 5 n/a n/a Management expense ratio (%)... n/a n/a Management expense or absorptions (%)... n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($) These calculations are prescribed by securities regulations and are not intended to be a reconciliation between opening and closing net assets per security. This information is derived from the Fund s audited annual financial statements and unaudited interim financial statements. Information for periods prior to April 1, 1 is derived from financial statements prepared in accordance with Canadian GAAP. Information presented for the current period is derived from financial statements prepared in accordance with IFRS. The net assets per security presented here and in the financial statements and this table may differ from the NAV per security. 3 Effective April 1, 1, commissions and other portfolio transaction costs are included in total expenses. Prior to April 1, 1, these costs were reported within realized and unrealized gains (losses) for the period for the purposes of these tables. NAV and distributions per security figures are based on the actual number of securities outstanding at the relevant time. The increase operations is based on the weighted average number of securities outstanding over the financial period. 5 Distributions were paid in cash, reinvested in additional securities of the Fund, or both. MER and MER before waivers or absorptions ( Gross MER ) are based on total expenses borne by the Fund, excluding commissions and other portfolio transaction costs, for the stated period and is expressed as an annualized percentage of average daily NAV during the period. In the period a series is established, the MERs and Gross MERs are annualized from the date of inception to the end of the period. Where the Fund invests in securities of an Underlying Fund, the MERs and Gross MERs presented for the Fund include the portion of MERs of the Underlying Fund(s) attributable to this investment. 7 The trading expense ratio ( TER ) represents total commissions and other portfolio transaction costs incurred as a percentage of daily average NAV during the period. Where the Fund invests in securities of an Underlying Fund, the TERs presented for the Fund include the portion of TERs of its Underlying Fund(s) attributable to this investment. The portfolio turnover rate ( PTR ) indicates how actively the portfolio advisor manages the investments. A PTR of % is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher PTR 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 high PTR and the performance of the Fund. Costs incurred to realign the Fund s portfolio after a fund merger, if any, are excluded from the PTR. Series P Total net asset value (pricing NAV) ($ s) 33, 15,777 7,131 n/a n/a outstanding ( s) 3,3 1,9 n/a n/a Management expense ratio (%)...3 n/a n/a Management expense or absorptions (%)...3 n/a n/a Portfolio turnover rate (%) n/a n/a Pricing NAV per security ($).7

10 Client Services Queen St. W., Toronto, ON M5V 3K1 Toll-Free: Fax: (1) 9-5 Sales & Marketing Skymark Ave., 7th Floor, Mississauga, ON LW 5L Toll-Free: Fax: (95) 5-1