Interim Management Report of Fund Performance

Transcription

1 Interim Management Report of Fund Performance SIA Trust For the period ended June 30, 2015 This management report of fund performance contains financial highlights but does not contain either interim or annual financial statements of the Fund. You can get a copy of the financial statements at your request, and at no cost, by calling , by writing to us at Fiera Capital Corporation, 1501 McGill College, suite 800, Montreal, QC, H3A 3M8 Attention: Fiera Capital Mutual Funds Investor Solutions 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.

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3 Management Report of Fund Performance The SIA Trust (the Fund ) is managed by Fiera Capital Corporation Inc. ( Fiera, Portfolio Manager or the Manager ). On September 2, 2014 Fiera Capital Corporation acquired Propel Capital Corporation, the former manager of the Fund. The Fund was created to invest in an actively managed diversified portfolio (the Portfolio ) comprised primarily of income generating North American fixed income investments, including high yield bonds, investment grade bonds, senior loans and convertible debt, which is managed by Fiera. On December 1, 2014 the portfolio manager duties were transferred from Aston Hill Asset Management Inc. to Fiera. The Fund began operation on March 20, 2012 and issued units to a Canadian chartered bank (the Counterparty ). Concurrently, the counterparty entered into a forward purchase and sale agreement with Strategic Income Allocation Fund under which the counterparty has agreed to pay Strategic Income Allocation Fund, the economic return provided by the Portfolio. INVESTMENT OBJECTIVES AND STRATEGIES The Fund s investment objectives are to provide holders of units ( Unitholders ) with maximized total returns. The Portfolio is comprised primarily of income generating North American fixed income investments, including high yield bonds, investment grade bonds, senior loans and convertible debt (the Income Investments ) held by the Portfolio Trust. In managing the Portfolio, the Manager engages in an active income allocation strategy, whereby the Manager shifts weightings among Income Investments across the credit quality spectrum, in accordance with the Funds investment restrictions, during differing business cycles. RISKS There were no material changes to the Fund over the period of this report that affected the overall level of risk associated with an investment in the Fund. For a detailed disclosure of risks associated with an investment in the Fund please refer to the Fund s prospectus. RESULTS OF OPERATIONS Portfolio As at June 30, 2015, the Fund s portfolio included a total of 35 bonds, notes & convertible securities. Net Asset Value The net asset value per unit of the Fund as at June 30, 2015 was $3.32 and Net asset value of the Fund was $21.57 million. Revenue and Expenses For the period ended June 30, 2015, the Fund generated an decrease in net assets attributable to holders of redeemable units of $57,849, including a net realized loss on sale of investments and derivatives of $125,169, a realized loss on foreign currency of investments and derivatives of $1, 711,436, a net change in unrealized appreciation on investments and derivatives of $1,014,148 and a foreign exchange gain of $67,149. The Fund paid management fees and operating expenses of $176,000. The management expense ratio ( MER ) for the Fund was 1.61%. The increase in the MER is due to a decrease in the total net asset value of the Fund. Leverage The Fund may employ leverage in an amount up to 25% of total assets and a minimum undiscounted principal amount of $500,000. Accordingly, the maximum amount of leverage that the Fund can employ is 1.33:1. The Fund will pay a commitment fee quarterly equal to % per annum on the unused portion of the maximum available credit limit of $14,000,000. Interest is charged on outstanding amounts at a rate of LIBOR plus 0.75%. At June 30, 2015, 21.1%, $ 5,930,138 (2014- $6,949,500), (23.2%) leverage is employed. Interest expense for the period ending June 30, 2015 was $ 31,924 ( $101,690). Portfolio Manager From January 1, 2014 to November 30, 2014 the portfolio manager of the Fund was Aston Hill Asset Management Inc.. Aston Hill Asset Management Inc. is a wholly owned subsidiary of Aston Hill Financial Inc., a diversified asset management company with a suite of retail mutual funds, closed end funds, private equity funds, hedge funds and segregated institutional funds, and with over $6 billion in assets under management as at December 31, Aston Hill has offices in Calgary, Toronto and Halifax. On December 1, 2014, Fiera Capital Corporation assumed responsibility for the portfolio management of the Fund. With over 90 billion in asset under management, Fiera Capital has broad expertise in managing fixed income portfolio as well as strong capabilities in asset allocation, which are the two key components of the strategy of this fund. In addition to Fiera s expertise, their size and scale have provided access to asset classes, allocations on IPO s as well as strong relationships with trading desks, all of which should positively influence relative performance. SIA TRUST I JUNE 30,

4 Management Report of Fund Performance (continued) Portfolio Manager s Report Global interest rates proved quite volatile over the first half of the year, though the general trend was upward (apart from January). US 10yr Treasuries began the year at 2.17%, and would get as low as 1.64% on January 30th their lowest level since May 2013, before reversing course in February and holding an upward bias throughout the remainder of the period, albeit with bouts of pronounced moves in either direction. Ultimately, the US 10yr yield would finish at 2.35%. Key contributors to volatility over the period included; diverging global monetary policies, oil price volatility and continued geopolitical tensions between a number of countries. Moreover, activity in European markets continued to play a major role in the behaviour of US Treasuries. In that regard, uncertainty surrounding the continent s economic activity and a seemingly endless back and forth between Greece and its creditors were major contributors to yield instability in North America. Additionally, relatively good economic data out of the US continued to heighten speculation that the Fed will, in fact, raise interest rates this year for the first time since The fund returned -1.20% for the first six months of 2015 compared to S&P/ TSX Total Return Index that returned +0.91%. Our positioning within the Banking, Consumer Goods and Real Estate sectors were the main drivers of performance, while Financial Services, Energy and Telecommunications proved the biggest detractors. Ultimately, however, the overall performance of the fund was heavily influenced by market sentiment, as high yield and investment grade spreads were basically flat over the period (1bps and 4bps wider, respectively). OUTLOOK We expect credit spreads to remain around these levels, with potential for pull-back in the near-term, as uncertainty remains surrounding geopolitical concerns and the global economic recovery. We are biased for slightly higher yields in the short-term, and, ultimately, expect them to continue rising throughout the next few years. Our year-end 2015 expectation for 10yr Canadian yields is 1.65%-1.90%. Inflation is currently not an issue; rather, deflationary pressures have become a more immediate concern across many developed economies. RELATED PARTY TRANSACTIONS The Manager provides all administrative services required by the Fund. The Manager receives a monthly fee in the amount of 0.65% per annum, plus applicable taxes, of the net asset value of the Fund, calculated and accrued daily and payable monthly in arrears. Total of $ 79,161 management fee was recorded for period ending June 30, The Manager is reimbursed by the Fund for all reasonable costs, expenses and liabilities incurred by the Manager for performance of services on behalf of the Fund in connection with the discharge by the Manager of its duties hereunder. Such costs and expenses may include, without limitation: mailing and printing expenses for reports to unitholders and other unitholder communications; a reasonable allocation of salaries, benefits and consulting fees; and other administration expenses and costs incurred in connection with the Fund s continuous public offering and other obligations. These expenses were $1, for the period ended June 30, 2015 and are included in the administration costs on the statement of comprehensive income. 2 SIA TRUST I JUNE 30, 2015

5 Financial Highlights The following tables show selected key financial information about the Fund and are intended to help in understanding the Fund s financial performance since its commencement of operations on March 20, Month ended Year ended December 31 June 30, 2015** 2014** 2013** 2012 Net Assets, beginning of period (2) $3.45 $6.55 $10.57 $9.99 Increase / (decrease) from operations: Total revenue Total expenses Realized gains / (losses) for the period Unrealized gains / (losses) for the period Foreign exchange gain (loss) on cash for the period Total increase / (decrease) from operations (3) Distributions: Net investment income Return of capital Total Distributions (5) Net Assets, end of period (4) (1) This information is derived from the Fund s unaudited interim financial statements provided as of June 30, 2015, or as of the year shown. The net assets per unit presented in the financial statements differ from the net asset value calculated for the Fund for pricing purposes. An explanation for these differences can be found in the notes to the financial statements. (2) Net assets, beginning of period for 2011 represents the original investment amount as at March 20, (3) Net assets and distributions are based on the actual number of units outstanding. The increase/decrease from operations is based on the weighted average number of units outstanding. (4) The Financial Highlights are not intended to act as a continuity of the opening and closing net asset value per unit. (5) Distributions were paid in cash. The Fund commenced operations on March ** 2015, 2014 and 2013 are prepared under IFRS and 2012 and 2011 are prepared under previously reported Canadian GAAP. Ratios and Supplemental Data (based on Net Asset Value) 6 Month ended Year ended December 31 June 30, 2015** 2014** 2013** 2012 Total Net Asset Value (000 s) (1) $21,570 $22,408 $42,515 $68,622 Number of Units Outstanding (000 s) (1) 6,492 6,492 6,492 6,492 Management Expense Ratio ( MER ) (2) 1.61% 1.32% 1.16% 0.97% Management Expense Ratio before Waivers or Absorptions 1.61% 1.32% 1.16% 0.97% Trading Expense Ratio (3) 0.00% 0.00% 0.00% 0.00% Portfolio Turnover Rate (3) % 66.96% 59.28% 59.48% Net Asset Value per Unit (1) $3.32 $3.45 $6.55 $10.57 (1) This information is provided as of December 31 as of the year shown, except 2015 which is provided as at June 30. (2) Management expense ratio ( MER ) is based on total expenses (excluding commissions and other portfolio transaction costs) of the stated period and is expressed as an annualized percentage of daily average NAV during the period. (3) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio manager manages the Common Share Portfolio. A portfolio turnover of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the period. The higher a Fund s portfolio turnover rate, the greater the trading costs payable by the Fund and the greater the chance of an investor receiving taxable capital gains. (4) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average NAV during the period. greater the trading costs payable by the Fund and the greater the chance of an investor receiving taxable capital gains. ** 2015, 2014 and 2013 are prepared under IFRS and 2012 and 2011 are prepared under previously reported Canadian GAAP. SIA TRUST I JUNE 30,

6 Management Fees The Manager is responsible for managing the business and administration of the Fund and oversees the portfolio management services provided by the Portfolio Manager. The Manager receives a monthly fee in the amount of 0.65% per annum, plus applicable taxes, of the net asset value of the Fund, calculated and accrued daily and payable monthly in arrears. The Manager is responsible for the payment of the Portfolio Manager s fee of 0.35% out of its annual management fees. The remaining 0.30% of management fees were used to pay for investment management and other general administration. Past Performance The Fund s past performance is no guarantee of how it will perform in the future. All performance information is calculated using Net Asset Value per Unit and assumes that all distributions made by the Fund in the period shown were reinvested in additional Units of the Fund. However, this does not take into account sales, redemption, distribution, or other optional changes that would have, if applicable, reduced returns or performance. YEAR-BY-YEAR RETURNS The following bar chart shows the Fund s performance for the period shown, and illustrates how the fund s performance has changed since inception. The chart shows in percentage terms how an investment made at inception would have increased or decreased by December 31, for the period. 14% 12.99% 13.19% 12% 10% 10.55% 8% 6% 6.45% 4% 2% 0.91% 1.48% 2.16% 0% -1.20% (1) SIA Trust S&P/TSX Total Return Index (1) For the period March 20, 2012 to December 31, Source: CIBC Mellon, Bloomberg 4 SIA TRUST I JUNE 30, 2015

7 Summary of Investment Portfolio as of June 30, 2015 PORTFOLIO COMPOSITION OF SIA TRUST Industry Sector Allocation % of Net Asset Value Equity Financials 2.94% Fixed Income U.S. Fixed Income 67.45% Global Fixed Income 13.92% Canadian Corporate Bonds 18.03% SUPRANATIONAL 23.58% Cash 2.99% Other Assets and Liabilities % Total Net Asset Value $21,569,707 TOP 25 HOLDINGS OF SIA TRUST Description % of Net Asset Value Province of Quebec Discount Note, 9/14/2015, 0.12% 9.26 Hunt Cos. Inc., Callable, 3/1/2021, 9.62% 5.99 Century Aluminum Co., Callable, 6/1/2021, 7.50% 5.40 Province of Quebec Discount Note, 9/10/2015, 0.13% 5.06 Ruby Tuesday Inc., Callable, 5/15/2020, 7.62% 4.48 Hydro-Quebec Discount Note, 7/6/2015, 0.11% 3.18 Province of Quebec Discount Note, 9/17/2015, 0.13% 3.18 Vector Group Ltd., Callable, 2/15/2021, 7.75% 3.11 Air Canada, 4/15/2021, 7.75% 3.10 MPG Holdco I Inc., Callable, 10/15/2022, 7.38% 3.10 Hudbay Minerals Inc., Callable, 10/1/2020, 9.50% 3.08 Carrols Restaurant Group Inc., Callable, 5/1/2022, 8.00% 3.05 Genworth Holdings Inc., Callable, 9/24/2021, 7.62% 3.05 Argos Merger Sub Inc., Callable, 3/15/2023, 7.12% 3.04 Dynegy Inc., Callable, 11/1/2019, 6.75% 3.03 OneMain Financial Holdings Inc., Callable, 12/15/2019, 6.75% 3.02 FMG Resources August 2006 Pty. Ltd., Callable,3/1/2022, 9.75% 3.00 Oasis Petroleum Inc., Callable, 3/15/2022, 6.88% 2.95 Ally Financial Inc., 7.00%, Preferred, Series 'G', Perpetual 2.94 Province of Ontario Discount Note, 8/6/2015, 0.10% 2.89 Cequel Communications Escrow 1 LLC / Cequel Communications Escrow Capital Corp., Callable, 9/15/2020, 6.38% 2.89 Frontier Communications Corp., Callable, 4/15/2022, 8.75% 2.88 JBS USA LLC / JBS USA Finance Inc., Callable, 6/15/2025, 5.75% 2.87 Viking Cruises Ltd., Callable, 5/15/2025, 6.25% 2.86 XPO Logistics Inc., Callable, 6/15/2022, 6.50% This Summary of Investment Portfolio may change due to ongoing portfolio transactions. SIA TRUST I JUNE 30,

8 Forward-Looking Statement Some of the statements contained herein including, without limitation, financial and business prospects and financial outlook may be forward-looking statements which reflect management s expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as may, will, should, could, anticipate, believe, expect, intend, plan, potential, continue and similar expressions have been used to identify these forward-looking statements. These statements reflect management s current beliefs and are based on information currently available to management. Forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forwardlooking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based on what management believes to be reasonable assumptions, we cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances. Fiera Capital Corporation 1501 McGill College Avenue, Suite 800 Montreal, Quebec, Canada H3A 3M8 Telephone Toll-Free