globevest capital ltd...2017/12/31 · globevest capital ltd globevest capital tactical covered...

Globevest Capital Ltd

Globevest Capital Tactical Covered Options Fund

Annual Management Report of Fund Performance as of December 31, 2017

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 request

a copy, at no cost, of the annual financial statements by calling

us at 450-641-8989, by visiting www.globevestcapital.com or

www.sedar.com, by writing to us at 1005, Lionel-Daunais #104,

Boucherville, Quebec, J4B 0B1 or by e-mailing us at

[email protected].

You 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.

AMENDED

http://www.globevestcapital.com/

http://www.sedar.com/

mailto:[email protected]

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Investment Objectives and Strategies The Globevest Capital Tactical Covered Option Fund (the "Fund") seeks to maximize returns by providing high income and long-term capital appreciation through the sale of cash secured put options on equity securities to collect premiums and / or to reduce the net cost of acquiring equity securities, through direct investments in equity securities listed on stock exchanges issued by US or Canadian companies and through the sale of covered call options. The Fund hedges the put options with a cash hedge and, as a result, invests in cash, cash equivalents, money market securities and short-term debt securities. The investment objectives and strategies are described in the simplified prospectus.

Risk The risk determination of the Funds is based on the investment risk classification method of Schedule F of NI 81-102. The available returns for the fund are from May 1, 2016 to December 31, 2017. For the prior period, we used the following benchmark (in accordance with items 4 and 5 of Schedule F of NI 81-102): 20% FTSE Canada Short Term Bond, 52% S&P 500 and 28% S&P TSX Composite. With the new calculation method, the fund's risk remains “medium”.

Results of Operations The Fund was created on May 2, 2016. Its net asset value is 43 million as of December 31, 2017. Net assets as at June 30, 2017 were 40 million.

The net returns by class for the year 2017 are as follows:

Class A 11.65% Class F 13.13% Class O 12.46%

Commentary Economic growth is well established around the globe. The economic situation and most economic indicators are very encouraging: the corporate tax cuts adopted last December by the Trump Administration, investment and corporate profits, the rise in wages and the employment rate, the rates of interest and still low inflation, etc. However, a lot of the good news is already incorporated into stock market values. Moreover, the average price / earnings ratio of US companies is 25 compared to a long-term average of 15-16. Sooner or later, investors will look a little further and incorporate other less favorable data. It must also be kept in mind that the strength of global economic growth, especially that of our southern

neighbors, combined with rising average wages will put upward pressure on prices. It is to curb this inflation that governments will have to raise rates, but they will have to do it carefully so as not to precipitate the next recession. Another difficult year is expected for bond yields. The projected rise in interest rates will inevitably affect corporate profits, as will the rise in average wages. The Tactical Fund is made up of several large-cap stocks with good dividends and benefits from premiums on covered call option to enhance portfolio income. The good performance of the stock markets was largely captured by the fund as it generated a very good performance this year. Also, since the beginning of 2017, we have chosen to shorten the maturities of our commitments on put options, while maintaining a comfortable downward protection. This change has allowed us to achieve attractive returns and flexibility in the event of market downturns. The conservative buffer we hold on put options will help us preserve capital in the event of a stock market downturn. It is in this perspective that we strongly believe in using options to maximize performance while reducing risk. The vast majority of strategists do not see a recession for 2018 and average expectations are + 7.5% for the S & P500. These same strategists of the 18 largest US banks however expected an average return of + 5.5% in 2017, with the most optimistic who predicted + 12%. The US index finished the year up + 19.4% (+ 11.3% in Canadian dollars). There are so many factors that the game of predictions becomes difficult. With more modest expectations of stock markets (+ 7.5%) and bonds (+ 2.0%), a balanced fund composed of 50% equities and 50% bonds would yield between + 3% and +4 % net of fees. According to these same expectations for the markets, we are very confident that in 2018 we will be able to achieve a higher return net of fees.

International Financial Reporting Standards Since the Fund was created on May 2, 2016, all of its interim financial reports and annual financial statements are published in accordance with current IFRS standards.

In July 2014, the IASB issued IFRS 9, which replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). IFRS 9 introduces significant changes to the IAS 39 guidance on the classification and measurement of financial assets and liabilities and introduces a new model for expected credit losses for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting. IFRS 9 requires the classification, based on the characteristics of the contractual cash flow and the business model of the Fund, of financial instruments

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into one of the following three categories: amortized cost, fair value through profit or loss or fair value to other items of the overall result. The Fund will adopt IFRS 9 for annual periods beginning on or after January 1, 2018. The primary impact of the adoption of IFRS 9 for the Fund will be a change in the wording from the IAS 39 classification and will not have a material impact on the valuation and the accounting for the Fund.

Related Party Transactions Globevest Capital ltd is the Fund’s Manager pursuant to the administrative agreement. The Manager ensures the daily administration of the Fund and makes sure the Fund is provided with all services (accounting, custody, portfolio management, record maintenance, transfer agent) required to function properly.

Management Fees In compensation for the continuous advice, recommendations and services provided to the Fund, the Fund pays management fees to the Manager, which are calculated on a daily basis according to the net asset value of the Fund and paid monthly. For the twelve months ended December 31, 2017, the Fund paid a total of $490k in management fees to the Manager, inclusive of sales tax.

Independent Review Committee In accordance with National Instrument 81-107 - Independent Review Committee for Investment Funds, the Manager has appointed an Independent Review Committee ("IRC") to review and evaluate:

a) The relevance and effectiveness of the management company's written policies and procedures relating to conflict of interest matters;

b) The relevance and effectiveness of any standing instruction that it provides to the management;

c) The independence of its members and their remuneration;

d) Its own effectiveness as a committee, as well as the efficiency and contribution of each of its members;

e) Its structural effectiveness.

For the period from January 1, 2017 to December 31, 2017, the IRC concluded that:

1) To the best of his knowledge, there have been no breaches of any of the Manager's policies or procedures or grounds for believing that a breach has occurred;

2) That the policies and procedures in place are adequate.

Fund expenses The expenses of the Fund include:

1) Management fees. This is the total of the Manager's fee, the trailing commission if applicable and the operating expenses of the Fund.

2) The transaction costs. These are the Fund's transaction fees.

Series Management

expense ratio (MER)

Trading expense ratio

(TER)

Fund expenses

Série A 2.57% 0,24% 2,81% Série F 1.42% 0,24% 1.66% Série O 1.99% 0,24% 2.23%

Past performance

The performance information assumes that all distributions made by the investment fund during the periods presented were reinvested in additional securities of the investment fund. Past performance of the investment fund is not necessarily indicative of future performance.

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Annual returns

The following bar graphs indicate the Fund’s annual returns for each year. They show the year-to-year variation in the Fund’s return. The graphs present, in percentage form, what would have been the upward or downward, on the last day of the year, of an investment made on the first day of the year.

Annual Compound Returns The following graph indicates the Fund’s annual composite returns and highlights Fund performance fluctuations from one fiscal year to the next, ending on December 31, for each period, as well as those of the Fund’s benchmark.

1 year % 3 years % 5 years % 10 years % Since inception

Serie A1 11.65% - - - 7.26% Serie F1 13.13% - - - 10.38% Serie O1 12.46% - - - 9.70%

Benchmark 13.63% - - - 10.38%

1 Inception date: May 2, 2016. The benchmark is weighted as follows: 20% FTSE Canada Short term bond, 52% S&P 500 and 28% S&P TSX Composite. The FTSE TMX Canada Short Term Bond Index is a well-diversified portfolio of federal, provincial and municipal securities with maturities of 5 years and under. The S&P500 Total Return Index is widely regarded as the best single gauge of large-cap U.S. equities and includes the effect of dividends. The S&P/TSX Composite Total Return Index is the principal broad market measure for the Canadian equity markets and includes the effect of dividends. The Fund's performance in 2017, slightly underperformed the benchmark. The manager has chosen to shorten the maturities of the options, while maintaining a comfortable downside protection. This change made it possible to take advantage of downturns during the year and maintain a conservative approach

11.65%

0.00%

5.00%

10.00%

15.00%

2017

%

Series A

13.13%

0.00%

5.00%

10.00%

15.00%

2017

%

Series F

12.46%

0.00%

5.00%

10.00%

15.00%

2017

%

Series O

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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 year.

Series A

For the periods ended December 31

Fund’s Net Assets per Unit(1) 2017 2016 2015 2014 2013

$ $ $ $ $

Net assets, beginning of period 9.90 - - - -

Increase (decrease) from operations

Total revenue 0.16 0.07 - - -

Total expenses (excluding distributions) (0.32) (0.11) - - -

Realized gains (losses) for the period (0.87) (0.04) - - -

Unrealized gains (losses) for the period 0.43 0.01 - - -

Total increase (decrease) from operations(2) 1.14 (0.07) - - -

Distributions

Net investment income (except dividends) (0.06) - - - -

Dividends - - - - -

Capital gains (0.81) - - - -

Return of capital - - - - -

Total Annual Distributions(3) (0.87) - - - -

Net assets at the end of the period 10.17 9.90 - - -

(1) This information is derived from the fund’s audited annual financial statements. The net assets per security presented in the financial statements

differs from the net asset value calculated for fund pricing purposes. An explanation of these differences can be found in the notes to the financial statements.

(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.


Ratio and Supplemental Data 2017 2016 2015 2014 2013

Total net asset value (000’s) 328 284 - - -

Number of units outstanding 32 249 28 678 - - -

Management Expense Ratio (%)(1) 2.57% 2.71% - - - Management expense ratio before waivers or absorptions (%) 2.57% 2.71% - - -

Portfolio turnover (%)(2) 87.98% 85.20% - - -

Trading expense ratio(3) 0.24% 0.57% - - -

Net asset value per unit ($) 10.17 9.90 - - - (1) Management expense ratio is based on total expenses (excluding distributions, commissions and other portfolio transaction costs) before income

taxes for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. (2) The Fund’s portfolio turnover rate indicates how actively the Fund’s portfolio adviser 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.

(3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period.

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Series F



$ $ $ $ $





Realized gains (losses) for the period 0.93 0.35 - - -

Unrealized gains (losses) for the period 0.43 (0.03) - - -

Total increase (decrease) from operations(2) 1.34 0.28 - - -

Distributions

Net investment income (except dividends) (0.20) - - - -

Dividends (0.01) - - - -

Capital gains (0.85) - - - -










Total net asset value (000’s) 28 178 25 282 - - -

Number of units outstanding 2 626 503 2 424 193 - - -






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.

(3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period.

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Series O



$ $ $ $ $





Realized gains (losses) for the period 0.90 0.19 - - -

Unrealized gains (losses) for the period 0.44 0.40 - - -

Total increase (decrease) from operations(2) 1.26 0.53 - - -

Distributions

From net investment income (0.15) - - - -

From dividends (0.01) - - - -

From capital gains (0.75) - - - -










Total net asset value (000’s) 15 126 10 783 - - -

Number of units outstanding 1 406 767 1 038 485 - - -






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. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period.

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SUMMARY OF INVESTMENT PORTFOLIO Globevest Capital Tactical Covered Options Fund

As of December 31, 2017

Portfolio Allocation

As of December 31, 2017

% of Net Asset Value

Cash, cash equivalent and cash cover 55.92%

Put option -1.28%

Call option -1.38%

Equities 45.72%

Other financial derivatives 1.02%

Total Net Asset Value 43 431 974$

Holdings

Long Positions as of Dec. 31, 2017 % of Net Asset Value Short Positions as of Dec. 31, 2017 % of Net Asset Value

1. REN C/EPG I/E 17.36%

2. REN C/E IE U$ 16.82%

3. CASH 15.21%

4. MLF BQ INV SV 4.22%

5. APPLE INC. 1,66%

6. MICROSOFT CORP. 1.58%

7. BRC GBMT U$ TX/VR 6MR20 1.45%

8. CHEVRON CORP. 1.45%

9. GILEAD SCIENCES INC. 1.45%

10. HOLLYFRONTIER CORP. 1.33%

11. DELTA AIRLINES INC 1.21%

12. RESSOURCES TECK LTEE 1.13%

13. HOME DEPOT INC 1.09%

14. FREEPORT-MCMORAN INC 1.09%

15. COSTCO WHOLESALE CORP 1.07%

16. FACEBOOK INC 1.07%

17. CONSTELLATION BRANDS CL-A 0.99%

18. BROADCOM LTD 0.89%

19. BANK OF AMERICA 0.85%

20. BARRICK GOLD CORP 0.84%

21. BIOGEN INC 0.83%

22. TESLA INC 0.81%

23. MICRON TECHNOLOGY INC 0.81%

24. TIME WARNER INC- 0.79%

25. COMCAST CORP CL-A 0.74%

Long Positions as a % of Total Net Asset Value 76.74%

1. HOLLYFRONTIER CORP / call option / 01/18 / 38.00$ -3.53%

2. FREEPORT-MCMORAN INC / call option / 05/18 / 16.00$ -2.13%

3. CONOCOPHILLIPS / call option / 02/18 / 47.00$ -1.21%

4. TESLA INC / put option / 04/18 / 330.00$ -0.96%

5. DELTA AIRLINES INC / call option / 03/18 / 55.00$ -0.68%

6. CHEVRON CORP / call option / 03/18 / 125.00$ -0.63%

7. 2U INC / put option / 07/18 / 55.00$ -0.57%

8. CHARLES SCHWAB CORP / put option / 06/18 / 50.00$ -0.51%

9. DISCOVER FINANCIAL / put option/ 07/18 / 70.00$ -0.51%

10. THE CHEMOURS CO / put option/ 04/18 / 47.00$ -0.49%

11. FERRARI / put option/ 05/18 / 100.00$ -0.48%

12. WELLCARE HEAL PLANS INC / put option / 06/18 / 160.00$ -0.48%

13. FMC CORP / put option/ 04/18 / 90.00$ -0.43%

14. MCKESSON CORP / put option/ 05/18 / 150.00$ -0.40%

15. COMERICA INC / put option/ 04/18 / 85.00$ -0.35%

16. UNION PACIFIC CORP / put option / 03/18 / 130.00$ -0.34%

17. CONSTELLATION BRANDS / call option / 02/18 / 230.00$ -0.33%

18. ZIONS BANCORP / call option / 04/18 / 50.00$ -0.30%

19. LAMB WESTON INC / call option / 01/18 / 55.00$ -0.30%

20. GILEAD SCIENCES INC / put option / 03/18 / 70.00$ -0.30%

21. TEXAS INSTRUMENTS INC / put option / 07/18 / 95.00$ -0.30%

22. CITIGROUP INC / put option / 03/18 / 72.50$ -0.29%

23. CELGENE CORP / put option / 04/18 / 95.00$ -0.29%

24. MURPHY OIL CORP / put option / 04/18 / 27.50$ -0.29%

25. CATERPILLAR INC / put option / 03/18 / 145.00$ -0.29%

Short Positions as a % of Total Net Asset Value -16.39%

The summary of investment portfolio may change due to ongoing portfolio transactions of the investment fund. A quarterly update is available.

You can request copies of the quarterly update and other information regarding the Globevest Capital Secured Put Writing Fund, at no cost by

contacting your advisor or Globevest Capital Ltd.

Globevest Capital Ltd

1005, Lionel-Daunais #104 Boucherville, Quebec

J4B 0B1

Telephone : 450-641-8989

E-mail : [email protected]

www.globevestcapital.com

6%9%

12%

23%2%13%

2%

8%

12%

13%Put option sector mix

Consumer StaplesConsumer DiscretionnaryEnergyFinancialsReal EstateIndustrialsAgricultureBasic materialsHealth Care

http://www.globevestcapital.com/

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A note of forward-looking Statements

This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund actions. The words “forecast”, “plan”, “anticipate”, “estimate”, “suspect”, “believe” and “expect” 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 in relation to the Fund. Those factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchange rates, global equity and capital, market, 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 futures results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in the forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.

globevest capital ltd...2017/12/31 · globevest capital ltd globevest capital tactical covered...

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