U.S. Financials Income Fund

Quick Facts+

Inception Date: 02-24-2015

Management Fee: 1.25%

Fund Overview

Overview

The Fund is a closed-end investment trust that invests in an actively managed portfolio of U.S. financial issuers and U.S. publicly listed alterative asset management issuers. The Fund will utilize Strathbridge’s proprietary SSO covered call writing strategy to enhance the income generated by the portfolio and to reduce volatility.

 

Objectives

The Fund’s investment objectives are:

  • to provide Unitholders with quarterly cash distributions; and
  • to maximize total returns through capital appreciation and distributions.

 

Name Ticker Current Yield Recent
Distributions
Most Recent
Distribution Date
Distributions
Since Inception
U.S. Financials Income Fund USF.UN 9.03% $0.13 2020-06-30 $2.68

Top Holdings Top 10 Holdings as of March 31, 2020

Holding Name % of Fund
Cash and Short-term 20.6%
CME Group Inc. 6.7%
BlackRock, Inc. 6.6%
Berkshire Hathaway Inc. 6.6%
The Allstate Corporation 6.1%
Bank of America Corporation 5.2%
Northern Trust Corporation 5.2%
Aon Public Limited Company 5.0%
The Goldman Sachs Group, Inc. 5.0%
Ameriprise Financial, Inc. 4.8%
Sector Allocations

Historic Net Asset Value Per Unit

 

Date:   NAV Per
Class A Share
NAV Per
Class U Share
2020-06-03    $6.00  US$6.18 
2020-06-02    $5.85  US$6.03 
2020-06-01    $5.86  US$6.01 
2020-05-29    $5.86  US$5.97 
2020-05-28    $5.84  US$5.95 
2020-05-27    $5.88  US$5.98 
2020-05-26    $5.76  US$5.86 
2020-05-25    $5.66  US$5.73 
2020-05-22    $5.67  US$5.73 
2020-05-21    $5.64  US$5.71 
2020-05-20    $5.67  US$5.76 
2020-05-19    $5.60  US$5.69 
2020-05-15    $5.57  US$5.61 
2020-05-14    $5.57  US$5.61 
2020-05-13    $5.50  US$5.55 
2020-05-12    $5.57  US$5.63 
2020-05-11    $5.72  US$5.77 
2020-05-08    $5.73  US$5.80 
2020-05-07    $5.67  US$5.72 
2020-05-06    $5.59  US$5.63 
2020-05-05    $5.65  US$5.69 
2020-05-04    $5.62  US$5.66 
2020-05-01    $5.64  US$5.68 
2020-04-30    $5.73  US$5.81 
2020-04-29    $5.85  US$5.93 
2020-04-28    $5.76  US$5.82 
2020-04-27    $5.77  US$5.82 
2020-04-24    $5.64  US$5.68 
2020-04-23    $5.57  US$5.62 
2020-04-22    $5.61  US$5.64 
2020-04-21    $5.56  US$5.58 
2020-04-20    $5.69  US$5.73 
2020-04-17    $5.76  US$5.81 
2020-04-16    $5.56  US$5.59 
2020-04-15    $5.58  US$5.62 
2020-04-14    $5.76  US$5.84 
2020-04-13    $5.69  US$5.75 
2020-04-09    $5.85  US$5.92 
2020-04-08    $5.70  US$5.74 
2020-04-07    $5.51  US$5.56 
2020-04-06    $5.53  US$5.56 
2020-04-03    $5.22  US$5.26 
2020-04-02    $5.28  US$5.31 
2020-04-01    $5.18  US$5.20 
2020-03-31    $5.44  US$5.46 
2020-03-30    $5.55  US$5.58 
2020-03-27    $5.42  US$5.46 
2020-03-26    $5.54  US$5.59 
2020-03-25    $5.29  US$5.29 
2020-03-24    $5.19  US$5.18 
2020-03-23    $4.71  US$4.69 
2020-03-20    $4.93  US$4.93 
2020-03-19    $5.15  US$5.13 
2020-03-18    $5.04  US$5.01 
2020-03-17    $5.36  US$5.38 
2020-03-16    $5.07  US$5.12 
2020-03-13    $5.79  US$5.85 
2020-03-12    $5.14  US$5.21 
2020-03-11    $5.84  US$5.94 
2020-03-10    $6.13  US$6.23 
2020-03-09    $5.77  US$5.90 
2020-03-06    $6.43  US$6.59 
2020-03-05    $6.63  US$6.80 
2020-03-04    $6.93  US$7.11 
2020-03-03    $6.74  US$6.92 
2020-03-02    $6.99  US$7.18 
2020-02-28    $6.69  US$6.86 
2020-02-27    $6.82  US$7.01 
2020-02-26    $7.12  US$7.33 
2020-02-25    $7.15  US$7.36 
2020-02-24    $7.40  US$7.62 
2020-02-21    $7.65  US$7.89 
2020-02-20    $7.75  US$8.00 
2020-02-19    $7.78  US$8.02 
2020-02-18    $7.73  US$7.96 
2020-02-14    $7.79  US$8.02 
2020-02-13    $7.78  US$8.02 
2020-02-12    $7.79  US$8.02 
2020-02-11    $7.81  US$8.03 
2020-02-10    $7.78  US$7.99 
2020-02-07    $7.75  US$7.98 
2020-02-06    $7.78  US$8.00 
2020-02-05    $7.77  US$8.00 
2020-02-04    $7.65  US$7.88 
2020-02-03    $7.53  US$7.75 
2020-01-31    $7.49  US$7.73 
2020-01-30    $7.61  US$7.85 
2020-01-29    $7.54  US$7.79 
2020-01-28    $7.53  US$7.78 
2020-01-27    $7.45  US$7.70 
2020-01-24    $7.58  US$7.84 
2020-01-23    $7.70  US$7.96 
2020-01-22    $7.70  US$7.97 
2020-01-21    $7.65  US$7.94 
2020-01-20    $7.72  US$8.01 
2020-01-17    $7.72  US$8.01 
2020-01-16    $7.68  US$7.97 
2020-01-15    $7.57  US$7.86 
2020-01-14    $7.60  US$7.88 
2020-01-13    $7.61  US$7.90 
2020-01-10    $7.55  US$7.85 
2020-01-09    $7.60  US$7.88 
2020-01-08    $7.53  US$7.82 
2020-01-07    $7.48  US$7.78 
2020-01-06    $7.49  US$7.80 
2020-01-03    $7.50  US$7.81 
2020-01-02    $7.57  US$7.89 

Distributions & Tax

Class A distributions 0f $0.50 per Class A unit per annum are paid in the amount of $0.125 each calendar quarter.

Class U distributions of US$0.50 per Class U unit per annum are paid in the amount of US$0.125 each calendar quarter.

Distributions are not fixed but are reviewed and set annually at the discretion of the Fund.

 

Most Recent Distributions

Name Ticker Current Yield* Recent
Distributions
Most Recent
Distribution Date
Distributions
Since Inception
U.S. Financials Income Fund USF.UN 9.03% $0.13 2020-06-30 $2.68
U.S. Financials Income Fund USF.US 5.00% US$0.13 2020-06-30 US$2.68

 

Tax Benefits

Distributions from the Fund may have significant tax benefits which result in higher after-tax cash flow than if the income had been earned outside of the Fund. The Fund will generally earn dividends on portfolio securities, interest income on cash balances and option premium income which is generally taxed as capital gains. Some portion of a distribution may be considered a return of capital for tax purposes, which is not included in an investor’s taxable income for a year, but will reduce the adjusted cost base of the units, by the amount received. The reduction in the adjusted cost base of the units is ultimately taxed as a capital gain when the units are sold for investors who hold their units as capital property.

The actual breakdown of distributions for tax purposes will be provided to unitholders annually in March following receipt of the information from the Fund's custodian. This information will also be posted on the website as soon as it is available.

This information is of a general nature only and does not constitute legal or tax advice to any particular investor. Accordingly, prospective investors are advised to consult their own tax advisors with respect to their individual circumstances.

 

 

Tax and Distribution Summary - USF.UN Year Selection:  

 

  Regular Distribution Special Distribution Total Distribution Capital Gains
per Unit
Div. Income per Unit Return of Capital Other Income Foreign Dividend Income Witholding Taxes Paid
June 2020 0.125000 0.000000 0.125000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
March 2020 0.125000 0.000000 0.125000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
Total for 2020     $0.250000 $0.000000 $0.000000 $0.000000 $0.000000 $0.000000 $0.000000
Percent (%)       0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Distributions
to Date
    $2.675000            

 

Tax and Distribution Summary - USF.US

 

  Regular Distribution Special Distribution Total Distribution Capital Gains
per Unit
Div. Income per Unit Return of Capital Other Income Foreign Dividend Income Witholding Taxes Paid
June 2020 0.125000 0.000000 0.125000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
March 2020 0.125000 0.000000 0.125000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
Total for 2020     US$0.250000 $0.000000 $0.000000 $0.000000 $0.000000 $0.000000 $0.000000
Percent (%)       0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Distributions
to Date
    US$2.675000            

 

Portfolio Manager Updates

 

PM Updates - March 2020

As of March 31, 2020, the Net Asset Value (“NAV”) of UTE.UN was at $8.81 versus $10.14 on December 31, 2019. Unitholders received regular distributions totaling $0.1829 during the quarter. The unit’s closing price on March 31, 2020 was $8.53 which represents a discount of 3.18% to its underlying NAV.
The volatility experienced in the first quarter of 2020 has been truly historic across all asset classes as global markets and economies have been gripped by the pandemic COVID-19 (Coronavirus) which has infected over 2 million plus individuals to date while causing over 129,000 fatalities so far. After reaching all-time highs in the third week of February 2020, North American equity markets declined in the mid-30% range to the low reached on March 23rd, before rallying 15%-20% to end the quarter. Central banks and governments around the globe have responded with unprecedented monetary and fiscal policies to prop up economies and keep funding markets open.
The total return for the S&P/TSX Composite Index during the first quarter was -20.9%, while S&P 500 Index had a total return of -19.6%. All eleven sectors in the S&P/TSX Composite Index declined in the first quarter with the Information Technology sector outperforming, but still down 3.7%, while the Energy sector continued its underperformance of the past few years, declining 37.2% as the price of oil, as measured by WTI Cushing OK Spot, dropped 66.5%. In the U.S., the Information Technology sector also outperformed but still declined 11.9%, while the Energy sector was also the worst performing south of the border, down 50.5%.
The total returns for the S&P/TSX Capped Utilities Index and the S&P/TSX Capped Telecommunication Services Index for the quarter were -5.28% and -9.88% respectively and the return for the quarter of the S&P/TSX Oil and Gas Storage and Transportation Sub-Index was -22.54%. Stock within the Portfolio had varied results with Innergex Renewable Energy leading the way with a 14.67% return. Keyera Corp was the underperformer, down -59.57% while held within the portfolio during this period.
After several years of generally muted volatility for many months at a time, the VIX index which measures the average implied volatility of the S&P 500 index, spiked to levels not seen since the financial crisis of 2008; it topped 80% in mid-March. The Fund had on average 3.4% of portfolio written during the period vs. 11.7% on average during the previous quarter.
The Fund held an average cash position of 4.2% during the period vs. 5.0% during the previous quarter. The U.S. dollar exposure was actively hedged throughout the period and ended the third quarter 50% hedged back into Canadian dollars.



PM Updates - December 2019

As at December 31 ,2019, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.51 versus $7.37 on September 30, 2019. The NAV of the Class U unit on December 31, 2019 was US$7.83 vs. US$7.57 on September 30, 2019.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on December 31, 2019 was $7.36 which represents a 2.0% discount to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.
North American equity markets continued their impressive rally from the first three quarters of 2019 with most indices ending the year near all-time highs. U.S. markets led the way in the fourth quarter on expectations a trade resolution between the U.S. with China was to be announced in early 2020. The total return for the S&P/TSX Index in the fourth quarter was 3.2%, while the S&P 500 Index had a total return of 9.1%. In Canada, 7 of 11 sectors generated a positive total return for the quarter, with Information Technology sector leading the way up 10.8%, while Health Care lagged for the third consecutive quarter, down 5.9%, as Cannabis stocks continued to decline. The U.S. market saw 10 of 11 sectors generate positive performance, with the Information Technology sector also leading the way, up 14.4%, while the defensive Real Estate sector lagged during the quarter, down 0.5%.

During the period the total return for the S&P 500 Financials Index was 8.2%, the S&P 500 Real Estate Sector Index was -2.5%, while the S&P Listed Private Equity Index was up 7.2% (all in CAD$). Stocks within the portfolio had varying returns led by Bank of America Corporation, which rose 21.4% during the period. At the other end of the spectrum, The Travelers Companies, Inc. declined 11.7% while held in the Fund.

Volatility levels as measured by the CBOE SPX Volatility Index (“VIX”) were at the low end of the range for most of the period. The manager was opportunistic with the Strathbridge Selective Overwriting (“SSO”) strategy as the Fund had on average 22.2% of portfolio written during the period vs. 20.3% on average during the previous quarter.

The Fund had an average cash position of 6.4% during the quarter vs. 5.1% during the previous quarter. The Fund ended the period with a cash position of 1%. The U.S. dollar exposure was actively hedged throughout the period and ended the quarter 50% hedged back into Canadian dollars.

PM Updates - September 2019

As at September 30 ,2019, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.37 versus $7.43 on June 28, 2019. The NAV of the Class U unit on September 30, 2019 was US$7.57 vs. US$7.68 on June 28, 2019.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on September 30, 2019 was $7.57 which represents a 2.7% premium to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

North American equity markets continued their impressive rally from the first half of 2019, as markets in the third quarter continued to price in expectations that central banks around the world would be more accommodative with interest rate cuts. The S&P/TSX Index rose 2.5% while the S&P 500 Index rose 1.7%. In Canada, 9 of 11 sectors were positive for the quarter, with the defensive TSX Utilities Index leading the way up 10.1%, while Health Care lagged for the second consecutive quarter, down 30%, weighed down significantly by Cannabis stocks. The U.S. market saw 8 of 11 sectors generate positive performance, with the defensive S&P 500 utilities sector leading the way, up 9.3%, while the Energy sector remained the laggard during the quarter, down 6.3%.

During the period the total return for the S&P 500 Financials Index was 3.2%, the S&P 500 Real Estate Sector Index was 8.9%, while the S&P Listed Private Equity Index was up 5.5% (all in CAD$). Stocks within the portfolio had varying returns led by The Blackstone Group Inc., which rose 11.0% during the period. At the other end of the spectrum, Ameriprise Financial Inc. declined 9.1% while held in the Fund.

Volatility levels as measured by the CBOE SPX Volatility Index (“VIX”) remained low for most of the period other than the brief spike in early August as equity markets pulled back on trade war concerns and the potential effect on the economy. The manager was opportunistic with the Strathbridge Selective Overwriting (“SSO”) strategy as the Fund had on average 20.3% of portfolio written during the period vs. 26.1% on average during the previous quarter.

The Manager remained conservative during the period with an average cash position of 5.1% for the quarter vs. 14.2% during the previous quarter. The Fund ended the period with a cash position of 8.2%. The U.S. dollar exposure was actively hedged throughout the period and ended the quarter 50% hedged back into Canadian dollars.

PM Updates - June 2019

As at June 28,2019, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.43 versus $7.30 on March 29, 2019. The NAV of the Class U unit on June 28, 2019 was US$7.68 vs. US$7.45 on March 29, 2019.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on June 28, 2019 was $7.16 which represents a 1.9% discount to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

North American equity markets continued their impressive rally from the first quarter of 2019, albeit volatile as markets rose in April, declined significantly in May and advanced strongly in June. Markets have priced in expectations that central banks around the world would be more accommodative with interest rate cuts. The S&P/TSX Index rose 1.7% while the S&P 500 Index rose 3.8%. In Canada, 7 of 10 sectors were positive for the quarter, with Information Technology leading the way up 14.2%, while Health Care lagged down 9.3%. The U.S. market saw 10 of 11 sectors generate positive performance, with the Financials sector leading the way, up 7.4%, while Energy was the lone sector to be in the red during the quarter, down 3.7%.

During the period the total return for the S&P 500 Financials Index was 5.8%, the S&P 500 Real Estate Sector Index was 0.4%, while the S&P Listed Private Equity Index was up 7.9% (all in CAD$). Stocks within the portfolio had varying returns led by The Blackstone Group Inc., which rose 28.2% during the period. At the other end of the spectrum, Iron Mountain Inc. declined 9.9% while held in the Fund.

Volatility levels as measured by the CBOE SPX Volatility Index (“VIX”) remained low for most of the period other than the brief spike in early May as equity markets corrected on trade war concerns and the effect on the economy. The manager was opportunistic with the Strathbridge Selective Overwriting (“SSO”) strategy as the Fund had on average 23.4% of portfolio written during the period vs. 18.3% on average during the previous quarter.

The Manager remained conservative during the period with an average cash position of 14.3% for the quarter vs. 11.7% during the previous quarter. The Fund ended the period with a cash position of 4.7%. The U.S. dollar exposure was actively hedged throughout the period and ended the quarter 50% hedged back into Canadian dollars.

PM Updates - March 2019

As at March 29, 2019, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.30 versus $7.16 on December 31, 2018. The NAV of the Class U unit on March 29, 2019 was US$7.45 vs. US$7.19 on December 31, 2018.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on March 29, 2019 was $7.16 which represents a 1.9 percent discount to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

After a dreadful fourth quarter of 2018, North American equity markets staged an impressive recovery in the first quarter of 2019 with the S&P/TSX Index advancing 13.3 percent while the S&P 500 Index rose 13.6 percent. As fears of a trade war between the United States and China subsided and central banks around the globe changed to a more accommodative stance on forward looking interest rates, risk assets rallied strongly. In Canada, all 11 sectors were positive for the quarter, with Health Care, the worst performing sector in Q4 leading the way, producing a 49.1 percent return, mostly due to strength in the Cannabis sector. The U.S. market also saw all 11 sectors generate positive performance, with the Information Technology sector leading the way, up 19.9 percent, while the defensive U.S. Health Care sector lagged, up 6.6 percent.

During the period the total return for the S&P 500 Financials Index was 6.5 percent, the S&P 500 Real Estate Sector Index was positive 15.3 percent, while the S&P Listed Private Equity Index was up 14.3 percent (all in CAD$). Stocks within the portfolio had varying returns led by the Kimco Realty Corp, which rose 26.3 percent during the period. At the other end of the spectrum, the CME Group Inc. declined 5.5 percent while held in the Fund.

As equity markets rallied, volatility declined, as measured by the Chicago Board Options Exchange Volatility Index. (“VIX”) After starting the year above 25, the VIX declined for most of the period ending the quarter just under 14. The manager was opportunistic with the Strathbridge Selective Overwriting (“SSO”) strategy and the Fund had on average 18.3 percent of portfolio written during the period vs. 21.6 percent on average during the previous quarter.

The Manager reduced the cash position during the period with the Fund’s average cash position at 11.7 percent for the quarter vs. 21.4 percent during the previous quarter. The U.S. dollar exposure was actively hedged throughout the period and ended the quarter 50 percent hedged back into Canadian dollars.

PM Updates - December 2018

As at December 31, 2018, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.16 versus $7.81 on September 28, 2018. The NAV of the Class U unit on December 31, 2018 was US$7.19 vs. US$7.95 on September 28, 2018.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price December 31, 2018 was $6.81 which represents a 4.9% discount to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

North American markets were dreadful in the 4th quarter of 2018, with the S&P/TSX Index declining 10.1% while the S&P 500 Index declined 13.5%, weighed down by the implications of tighter global monetary policy, trades wars, soaring valuations along with heightened geopolitical risks. In Canada, 8 of 11 sectors were negative for the quarter, with Health Care leading the way down, producing a negative 35.3% return, mostly due to weakness in the Cannabis sector. The U.S. market saw 10 of 11 sectors generate negative performance, with Energy leading all declines down 23.8%, while the defensive Utilities sector was the lone sector with a positive return in the quarter, up 1.4%.

During the period the total return for the S&P 500 Financials Index was negative 8.5%, the S&P 500 Real Estate Sector Index was positive 1.3%, while the S&P Listed Private Equity Index was negative 13.1% (all in CAD$). Stocks within the portfolio had varying returns led by the CME Group, which rose 12.0% during the period. At the other end of the spectrum, KKR & Co. Inc. declined 27% while held in the Fund.

Equity volatility, as measured by the Chicago Board Options Exchange Volatility Index (“VIX”), started the quarter around 12 and accelerated into year-end, closing above 25. The rise in volatility created more opportunities to utilize the Strathbridge Selective Overwriting (“SSO”) strategy. The Fund had on average 21.6% of portfolio written during the period vs. 8.1% on average during the previous quarter.

The Manager became more cautious during the period and increased the Fund’s average cash position to 21.4% for the quarter vs. 6.3% during the previous quarter. The U.S. dollar exposure was actively hedged throughout the period and ended the year 50% hedged back into Canadian dollars.

PM Updates - September 2018

As September 28, 2018, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.81 versus $7.96 on June 29, 2018. The NAV of the Class U unit on September 28, 2018 was US$7.95 vs. US$8.02 on June 29, 2018.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price September 28, 2018 was $7.69 which represents a 1.5% discount to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

North American markets were mixed in the 3rd quarter, with the Canadian S&P/TSX Index declining 0.6% and the U.S. S&P 500 Index gaining 7.7%. In the Canadian market, 6 of 11 sectors were positive for the quarter, with Health Care leading the way up 31.1% due to strength in the Cannabis sector. The U.S. market saw 8 of 11 sectors with positive performance, also led by Health Care up 14.1%, while the Real Estate, Energy and Materials sectors lagged the broader market with negative returns.

During the period the total return for the S&P 500 Financials Index was 2.7%, the S&P 500 Real Estate Sector Index was negative 0.7%, while the S&P Listed Private Equity Index was 4.2% (all in CAD$). Stocks within the portfolio had varying returns led by insurance broker AON PLC., which rose 12.4% during the period. At the other end of the spectrum, State Street Corp declined 5.7% while held in the Fund.

Equity volatility, as measured by the Chicago Board Options Exchange Volatility Index (“VIX”), remained low and traded in a narrow range between 10 and 16 for most of the quarter. The Fund opportunistically wrote call options during the period as the Fund on average had 8.1% of portfolio written during the period vs. 13.4% on average during the previous quarter.

The Fund held an average cash position of 6.3% during the period vs. 7.6% during the previous quarter. The U.S. dollar exposure was actively hedged throughout the period and ended the third quarter 75% hedged back into Canadian dollars.

PM Updates - June 2018

As June 29, 2018, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.96 versus $8.41 on March 29, 2018. The NAV of the Class U unit on June 29, 2018 was US$8.02 vs. US$8.47 on March 29, 2018.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price June 29, 2018 was $7.71 which represents a 3.1% discount to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

After a tumultuous first quarter of 2018, North American equities were more constructive in the second quarter with some indices moving to new all-time highs. After lagging most other global indices in the first quarter, the S&P/TSX Composite Index was one of the strongest markets in the second quarter with a total return of 6.75%, while in the U.S., the S&P 500 Index was up 3.43% and the NASDAQ Composite Index was up 6.6%. Meanwhile the MSCI EAFE Index was flat and the MSCI Emerging Markets Index was down during the period on concerns surrounding trade and tariffs.

During the period the total return for the S&P 500 Financials Index was -3.2%, the S&P 500 Real Estate Sector Index was 6.1%, while the S&P Listed Private Equity Index was 3.1%. Stocks within the portfolio had varying returns led by alternative asset manager KKR & Co. Inc., which rose 23.3% during the period, with most of the return coming after May 3rd when the company announced that it was going to switch from a partnership to a corporation on July 1st. At the other end of the spectrum, Morgan Stanley declined 11.7% while held in the Fund.

After spiking above 50 in early February, volatility, as measured by the Chicago Board Options Exchange Volatility Index (“VIX”) drifted back towards the low levels witnessed over the past few years. The Fund still opportunistically wrote call options during the period as the Fund on average had 13.4% of portfolio written vs. 9.8% during the previous quarter.

The Fund held an average cash position of 7.6% during the period vs. 6.1% during the previous quarter. The U.S. dollar exposure was 50% hedged back into Canadian dollars throughout the period.

PM Updates - March 2018

As of March 29, 2018, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.41 versus $8.51 on December 29, 2017. The NAV of the Class U unit on March 29, 2018 was US$8.47 vs. US$8.67 on December 29, 2017.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price March 29, 2018 was $8.14 which represents a 3.2% discount to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets experienced heightened volatility in the first quarter of 2018, on fears surrounding rising interest rates, trade policy and market valuations. The S&P/TSX Composite Index lagged most other indices losing 4.5%, while in the U.S., the S&P 500 Index was down 0.76% and the international MSCI EAFE Index was down 1.58%.

During the period the S&P 500 Financials Index declined 0.95%, the S&P 500 Real Estate Sector Index declined 5.0% while the S&P Listed Private Equity Index declined 3.2%. Stocks within the portfolio had varying returns led by CME Group Inc., which rose 11.2% during the period. At the other end of the spectrum, Affiliated Managers Group declined 12.2% while held in the Fund.

Volatility, as measured by the Chicago Board Options Exchange Volatility Index (“VIX”) picked up in the first quarter of 2018 after touching new all-time lows in late November 2017. As a result, the call writing activity picked up as the Fund on average had 9.8% of portfolio written during the period vs. 3.0% on average during the previous quarter.

The Fund ended the quarter with a cash position of 7.5% vs. 3.5% for the previous quarter. The U.S. dollar exposure was 50% hedged back into Canadian dollars throughout the period.

PM Updates - December 2017

As of December 29, 2017, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.51 versus $8.23 on September 29, 2017. The NAV of the Class U unit on December 29, 2017 was US$8.67 vs. US$8.38 on September 29, 2017.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on December 29, 2017 was $8.39 which represents a 1.4% discount to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets rallied strongly in the fourth quarter of 2017, with many indices closing the year at or near new all-time highs. The Dow Jones Industrial Average was one of the strongest performing indices in the fourth quarter with a total return of 11.0%, while the NASDAQ Composite Index in the U.S. was up 7.3%. Here in Canada, the S&P/TSX Composite Index which had lagged most other indices in the first three quarters of 2017, generated a total return of 4.4% in the fourth quarter.

During the period the S&P 500 Financials Index rose to 463.94 from 429.08, the S&P 500 Real Estate Sector Index rose to 203.86 from 199.20, while the S&P Listed Private Equity Index rose to 145.15 from 143.97 on September 29, 2017. Stocks within the portfolio had varying returns led by Bank of America Corp., which rose 17.0% during the period. This was somewhat offset by our holding in AON PLC, which declined 6.3% while held in the Fund.

Volatility levels, as measure by the Chicago Board Options Exchange Volatility Index (“VIX”) remained at the lower end of its historical range, touch new all-time lows in late November, which adds to the challenge of overwriting. However, this low level of volatility and the manager’s favourable view on the market provided an opportunity to purchase calls options on select names while limiting the call writing activity over the period. The Fund on average had 3% of portfolio written during the period vs. 4.1% on average during the previous quarter.

The Fund ended the quarter with a cash position of 3.5% vs. 3.1% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended December with approximately 100% of the U.S. dollar exposure hedged.

PM Updates - September 2017

As of September 29, 2017, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.23, unchanged from June 30, 2017. The NAV of the Class U unit on September 29, 2017 was US$8.38 vs. US$8.36 on March 31, 2017.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on September 29, 2017 was $8.28 which represents a $0.05 premium to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets for the most part maintained or continued their strong first half rally through the third quarter of 2017. The MSCI Emerging Markets Index was again one of the strongest performing indices in the third quarter with a total return of 8.0%, while the S&P 500 Index in the U.S. was up 4.5%. Here in Canada, the S&P/TSX Composite Index bounced back, rising 4.1 % after declining by 1.6% in the second quarter.

During the period the S&P 500 Financials Index rose to 429.08 from 409.59, while the S&P 500 Real Estate Sector Index remained relatively flat at 199.20 from 199.01 on June 30, 2017. Stocks within the portfolio had varying returns led by Ameriprise Financial Inc., which rose 12.0% during the period. This was somewhat offset by our holding in M & T Bank Corporation, which declined 11.6% while held in the Fund.

Volatility remained subdued overall during the period with only a few days where it spiked towards 16. Due to our favourable view on the market as well as the low level of volatility, the call writing activity was limited over the period. The Fund on average had 4.1 percent of the Fund subject to covered calls vs. 8.8 percent the previous quarter.

The Fund ended the quarter with a cash position of 3.1% vs. 4.9% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended September with approximately 100% of the U.S. dollar exposure hedged, helping negate some of the negative impact of the 3.9 % decline in the U.S. dollar vs. the Canadian dollar during the quarter.

PM Updates - June 2017

As of June 30, 2017, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.23 versus $8.13 on March 31, 2017. The NAV of the Class U unit on March 31, 2017 was US$8.36 vs. US$8.19 on March 31, 2017.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on June 30, 2017 was $8.07 which represents a discount of 1.9% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets for the most part maintained or continued their strong first quarter rally through the second quarter of 2017. The MSCI Emerging Markets Index was one of the strongest performing indices in the second quarter with a total return of 6.4%, while the S&P 500 Index in the U.S. was up 3.1%. Here in Canada, the S&P/TSX Composite Index declined 1.6% as weakness in the energy and materials sectors dragged down the performance.

The Health Care sector was by far the best performing sector in Canada and the U.S. in the second quarter of 2017 with returns of 13.4% and 7.1% respectively. Meanwhile the Energy sector remained the worst performing sector in Canada in the second quarter with a total return of -8.3% while the Telecommunication Services sector was the worst performing sector in the U.S. with a total return of -7.1%.

During the quarter the S&P 500 Financials Index rose to 409.59 from 394.58, while the S&P 500 Real Estate Sector Index rose to 199.01 from 195.41 on March 31, 2017. Stocks within the portfolio had varying returns led by The Blackstone Group L.P., which rose 15.4% during the period. This was somewhat offset by our holding in Wells Fargo & Company, which declined 6.3% while held in the Fund.

While volatility remained subdued overall, it spiked for a brief period in the middle in April and May before drifting back toward historically low levels. The call writing activity was opportunistic over the period and took advantage of signals generated by the Strathbridge Selective Overwriting (“SSO”) strategy. The Fund ended June 30, 2017 with 2.4 percent of the Fund subject to covered calls, the same amount as at the end of the previous quarter.

The Fund ended the quarter with a cash position of 4.9% vs. 1.8% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended June with approximately 100% of the U.S. dollar exposure hedged, helping negate some of the negative impact of the 3.5% decline in the U.S. dollar vs. the Canadian dollar during the quarter.

PM Updates - March 2017

As of March 31, 2017, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.13 versus $8.32 on December 30, 2016. The NAV of the Class U unit on March 31, 2017 was US$8.19 vs. US$8.28 on December 30, 2016.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the same quarter.

The Class A units closing price on March 31, 2017 was $7.86 which represents a discount of 3.3% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets for the most part continued their strong post-Trump election rally into the first quarter of 2017. The Nasdaq Composite Index was one of the strongest performing indices in the first quarter with a total return of 10.1 %, while the S&P 500 Index in the U.S. was up 3.8%. Here in Canada, the S&P/TSX Composite Index rose 2.4%.

The Financials sector which was by far the best performing sector in Canada and the U.S. during the fourth quarter of 2016 on expectations of higher net interest margins and less regulation gave way to the Information Technology and Consumer Discretionary sectors in the first quarter of 2017. Meanwhile, the Energy sector which was one of the best performing sectors in 2016 has been one of the worst performing sectors so far in 2017.

During the quarter, the S&P 500 Financials Index rose to 3394.58 from 386.53 on December 30, 2016. Stocks within the portfolio had varying returns, led by KKR & Co L.P. which rose 19.5% during the period. This was somewhat offset by our holding in Simon Property Group Inc., which declined 5.5% while held in the Fund.

Volatility as measured by the CBOE Volatility Index (VIX) remained at the low end of the range it has been trading at over the past few years, namely in the 10.5% to 13.0% range. The Fund stayed open on most of the portfolio during the period but did selectively write some covered calls and ended the quarter with 2.4% of the portfolio written vs. 2.6% at the end of the previous quarter.

The Fund ended the quarter with a cash position of 1.7% vs. 3.4% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended the first quarter with approximately 100% of the U.S. dollar exposure hedged.

PM Updates - December 2016

As of December 30, 2016, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.32 versus $7.20 on September 30, 2016. The NAV of the Class U unit on December 30, 2016 was US$8.28 vs. US$7.18 on September 30, 2016.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on December 30, 2016 was $8.08 which represents a discount of 2.9% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Most global equity markets rallied strongly in the fourth quarter of 2016 with the majority of the performance coming after the election of Donald Trump as the President of the United States on November 8, 2016. The S&P/TSX Composite Index rose 4.5% while the S&P 500 Index in the U.S. was up 3.8%. Meanwhile, Asian markets declined during the period, dragging the international MSCI EAFE Index down 0.6%.

During the quarter, the S&P 500 Financials Index rose to 386.53 from 320.82 on September 30, 2016. The Financials sector was by far the best performing sector in the fourth quarter on expectations of a steeper yield curve and less regulation. Stocks within the portfolio had varying returns led by Goldman Sachs Group Inc., which rose 48.9% during the period. This was offset by our holding in KKR & Co. LP, a Private Equity firm which declined 12.5% while held in the portfolio.

Volatility moved higher heading into the U.S. Election as the Chicago Board Options Exchange Volatility Index (VIX) went from 13% on October 24th to 22.5% on November 4th. After the election, volatility declined swiftly hitting a low for the year on December 21st at 10.9%. The Fund stayed open on most of the portfolio during the period but did selectively write some covered calls and ended the quarter with 2.6% of the portfolio written vs. 4.6% at the end of the previous quarter.

The Fund ended the year with a cash position of 3.4% vs. 7.6% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended December with approximately 50% of the U.S. dollar exposure hedged.

PM Updates - September 2016

As of September 30, 2016, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was C$7.20 versus C$7.24 on June 30, 2016. The NAV of the Class U unit on September 30, 2016 was US$7.18 vs. US$7.20 on June 30, 2016.

Class A unitholders received distributions totaling C$0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on September 30, 2016 was C$6.99 which represents a discount of 2.9% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets rallied in the third quarter of 2016 with most of the performance coming in July and August, as September, traditionally the weakest month of the year, ended little changed. The S&P/TSX Index rose 5.4% and the S&P 500 Index in the U.S. was up 3.8% while the international index (EAFE) led the way up 6.5% as investor concerns around ‘Brexit” receded.

During the quarter, the S&P 500 Financials Index rose to 320.82 from 308.39 on June 30, 2016. Stocks within the portfolio had varying returns led by State Street Corp. and The Charles Schwab Corporation which were up 29.8% and 25% respectively during the period. Both were helped by back up in interest rates as 2-year U.S. Treasury yields rose from 0.58% at the end of June to 0.76% at the end of September on the expectations that the U.S. Federal Reserve will raise the overnight lending rate by 25 basis points before the end of 2016. This was offset by our holdings in Crown Castle International Corp., a Real Estate Investment Trust, which was down 6.5% while held in the Fund.

Volatility was range bound during the period as the Chicago Board Options Exchange Volatility Index (“VIX”) traded in a range of 10% to 15%. The Fund stayed open on most of the portfolio during the period but did selectively write some covered calls and ended the quarter with 4.6% of the portfolio written vs. 2.1% at the end of the previous quarter.

The Fund maintained an average cash position of 6.2% during the period vs. 6.9% for the previous quarter.

The U.S. dollar was mostly hedged back into Canadian dollars throughout the period and ended September with approximately 100% of the U.S. dollar exposure hedged.

PM Updates - June 2016

As of June 30, 2016, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.24 versus $7.81 on March 31, 2016. The NAV of the Class U unit on June 30, 2016 was US$7.20 vs. US$7.74 on March 31, 2016.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the same period.

The Class A units closing price on June 30, 2016 was $7.10 which represents a discount of 1.9% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets were mixed in the second quarter of 2016 with markets in North America showing positive results while International markets were modestly lower. The S&P/TSX Index rose 5.1% and the S&P 500 Index in the U.S. was up 2.4%, while the international index (EAFE) was down 1.2% with most of the decline occurring after the “Brexit” vote was decided on June 23 with 52 percent of Great Britain voting in favor to leave the European Union. The news roiled global markets immediately following the vote but rebounded by quarter-end. The longer term impacts on the region and the world are not yet known.

During the quarter, the S&P 500 Financials Index rose slightly to 308.39 from 303.71 on March 31, 2016. Stocks within the portfolio had varying returns led by Aflac Inc. which was up 15.0% during the period. The U.S. insurer was helped by a strengthening Yen which benefitted the translation of their Japanese insurance division’s earnings. This was offset by our holding in another insurer, Lincoln National Corp., which was down 15.8% while held in the Fund with most of the decline occurring post “Brexit” as 10-year US Treasury Yields declined 28 basis points from June 23rd to June 30th to end the quarter at 1.47%.

After a fairly volatile first quarter of 2016, the Chicago Board Options Exchange Volatility Index (VIX) retreated for most of the second quarter before briefly spiking on the “Brexit” news on June 23rd. Volatility stayed elevated only for a few days before declining as markets staged a meaningful rally into quarter-end. The Fund was active in its covered-call writing during the period and ended the quarter with 2.1% of the portfolio written vs. 5.1% at the previous quarter-end.

The Fund maintained a lower average cash position of 6.9% during the period vs. an average of 13.9% for the first quarter.

The U.S. dollar was actively hedged back into Canadian dollars throughout the period and ended June with approximately 50% of the U.S. dollar exposure hedged.

PM Updates - March 2016

As of March 31, 2016, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $7.81 versus $8.45 on December 31, 2015. The NAV of the Class U unit on March 31, 2016 was US$7.74 vs. US$8.27 on December 31, 2015.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on March 31, 2016 was $7.40 which represents a discount of 5.2% to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity market performance was “A Tale of Two Cities” in the first quarter of 2016. From the start of the year up to the lows on February 11, 2106, most global indices over 10% due to concerns surrounding global growth. The WTI Crude Oil spot price declined over 30% during the same period. Since then, many markets have advanced over 10% erasing most if not all of the losses incurred earlier in the year as global macroeconomic indicators started to show some signs of improvement. By the end of the quarter, the S&P/TSX Composite advanced 4.5%, the S&P 500 Index advanced 1.3%, while the WTI Crude Oil spot price ended the period down only 0.5% to end at US$36.94 per barrel.

During the quarter the S&P 500 Financials Index declined to 303.71 from 321.73 on December 31, 2015. Stocks within the portfolio had varying returns led by Nasdaq Inc. which was up 14.6% during the period on the back of strong earnings accretion coming from some recent acquisitions. This was offset by our holding in Citigroup Inc. which declined 19.0% while held within the Fund.

After a fairly stable fourth quarter of 2015, the Chicago Board Options Exchange Volatility Index (“VIX”) rose on the back of market weakness in January and February up to the 30 level which was last observed in August of 2015. The VIX has subsequently declined back to around 14, the low end of the range over the past few years. The Fund was active in its covered-call writing during the period and ended the quarter with 5.1% of the portfolio written vs. 5.2% at the end of the previous quarter.

The manager actively altered the cash position during the period and ended the quarter at 6.9% vs. 8.1% at the end of the previous quarter.

The manager became more concerned with the Fund’s exposure to the U.S. dollar during the quarter and increased the hedge to 100% of the U.S. dollar exposure from 50% at the end of 2015.

PM Updates - December 2015

As of December 31, 2015, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.45 versus $8.30 on September 30, 2015. The NAV of the Class U unit on December 31, 2015 was US$8.27 vs. US$8.31 on September 30, 2015.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the same period.

The Class A units closing price on December 31, 2015 was $8.07 which represents a discount of 4.5% to its underlying net asset value. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets mostly advanced in the fourth quarter of 2015 with strong gains generated in October partially offset by weakness in December. The S&P 500 Index advanced 7.0% during the period, while the S&P/TSX Composite was an exception as it declined 1.4% due to weak commodity prices emanating from concerns surrounding slower growth in China and

During the quarter, the S&P 500 Financials Index increased to 321.73 from 305.33 on September 30, 2015. Stocks within the portfolio had varying returns led by Public Storage (“PSA”), which was up 17.9% during the period. This was offset somewhat by our holding in Morgan Stanley which declined 9.4% while held within the Fund.

After a fairly volatile third quarter, the Chicago Board Options Exchange Volatility Index (“VIX”) declined in the fourth quarter to an average level of 17.1 for the period. The Fund was active in its covered-call writing during the period and ended the quarter with 5.2% of the portfolio written vs. 19.5% at the end of the previous quarter.

As investment opportunities arose, the Fund’s cash position was reduced during the period with an average cash position of 8.3% and ended the quarter at 8.1% vs. 24.3% at the end of the previous quarter.

The Fund ended the quarter with approximately 50% of the U.S. dollar exposure hedged back to the Canadian dollar.

PM Updates - September 2015

As of September 30, 2015, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $8.30 versus $9.11 on June 30, 2015. The NAV of the Class U unit on September 30, 2015 was US$8.31 vs. US$9.24 on June 30, 2015.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on September 30, 2015 was $7.97 which represents a discount of 4.0% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets were down across the board in the third quarter of 2015 due to concerns surrounding slower growth in emerging market economies (most notably China) and the effects on global growth. Global indices were down anywhere from 6.9% for the S&P 500 Index to 28.6% for the Shanghai SE A Share market, with the flash crash on August 24th contributing most of the weakness. The resource heavy S&P/TSX Composite was also down 8.6% during the quarter, due to its dependence on emerging market’s demand for its resources.

During the quarter, the S&P 500 Financials Index decreased to 305.33 from 328.94 on June 30, 2015. Stocks within the portfolio had varying returns led by The Progressive Corporation (PGR), a basket holding which was up 10.1% since we purchased it. This was offset somewhat by our holding in The Charles Schwab Corporation which declined 12.6% while we owned it.

Volatility was fairly subdued in July and the first half of August, but started to rise after the FOMC meeting in August when the minutes revealed there was less of chance for the Federal Reserve to embark on its first tightening cycle in over a decade. The Chicago Board Options Exchange Volatility Index (“VIX”) spiked over 45% to a level of 40.74 on August 24th, the same day as the flash crash when the Dow Jones Industrial Average was down more than 1,000 points intraday. The Fund was active in its covered-call writing during the period and ended the quarter with 19.5% of the portfolio written.

The Manager became more cautious and increased the Fund’s cash during the period. The Fund had an average cash position of 15.1% and ended the quarter at 24.3% vs. 3.2% in the previous quarter.

PM Updates - June 2015

As of June 30, 2015, the Net Asset Value (“NAV”) of the Class A unit, USF.UN was $9.11 versus $9.25 on March 31, 2015. The NAV of the Class U unit on June 30, 2015 was US$9.24 vs. US$9.19 on March 31, 2015.

Class A unitholders received distributions totaling $0.125 per unit during the quarter, while Class U unitholders received distributions totaling US$0.125 per unit during the quarter.

The Class A units closing price on June 30, 2015 was $9.03 which represents a discount of 0.9% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

Global equity markets generated mixed returns in the second quarter of 2015 due to concerns surrounding whether Greece would exit the Eurozone or not. European markets felt most of the brunt of “Grexit” risk as the DAX 30 in Germany and CAC 40 in France declined 8.5% and 4.8% respectively. Although the Shanghai Class A market declined 7.2% in June, it was still the top performing market globally in the 2nd quarter, rising 14%.

The S&P 500 Financials Index increased slightly during the period to 328.94 from 324.95 on March 31, 2015.

Stocks within the universe had varying returns, led by American International Group (AIG), which the Fund held, up 13.1%, while, Boston Properties., a real estate investment trust (“REIT”) which the Fund did not own, lagged the group, down 13.4%. REITs in general were weak as 10-year U.S. Treasury Bond Yields rose from 1.92% to 2.35% over the period.

Volatility during the quarter remained towards the low end of the range it has traded in the past few years. The Fund has been selective in its covered call writing and ended the quarter with 2.8% of the portfolio written.

The Fund maintained a high investment position during the period and ended the quarter with a cash position of 3.2% vs. 10.0% at the end of the previous quarter.

PM Updates - March 2015

As of March 31, 2015, the Net Asset Value of the Class A unit, USF.UN was $9.25 versus $9.33 on the Fund’s inception date, February 24, 2015. The NAV of the Class U unit on March 31, 2015 was US$9.19 vs. US$9.33 on February 24, 2015.

Class A unitholders received a regular distributions totaling $0.05 per unit during the quarter, while Class U unitholders received distributions totaling US$0.05 per unit during the quarter, each prorated from the date of inception to March 31, 2015.

The closing market price of the Class A units on March 31, 2015 was $10.00 which represents a premium of 8.1% to its underlying NAV. The Fund’s Class U units are not listed on the Toronto Stock Exchange.

The S&P 500 Financials Index decreased slightly during the period to 324.95 from 328.01 on February 23, 2014 as slower economic growth in the U.S. during the first quarter reduced 10-year treasury yields to 1.92% from 2.17% at the end of 2014.

Stocks within the portfolio had varying returns led by M & T Bank Corp, which increased 5.4%, while, Icahn Enterprises L.P., which the Fund did not own, lagged the group, down 8.4% as the company generated an annual loss of $373 million in 2014, its first since 2008.

After starting off 2015 at elevated levels, volatility slowly declined to end the first quarter at the low end of the range for the past few years. The Fund has been selective in its covered-call writing and ended the quarter with 39.3% of the portfolio written.

As of March 31, 2015 the Fund was approximately 90% invested as the manager prudently invested the proceeds of the offering in an orderly fashion.

Fund Features

Objectives

The Fund’s investment objectives are:

  • to provide Unitholders with quarterly cash distributions; and
  • to maximize total returns through capital appreciation and distributions.

 

Investment Strategy

The Fund will invest in an actively managed portfolio of U.S. financial issuers selected from the S&P 500 Index that are classified as “financials” and “real estate” by Standard & Poor’s Global Industry Classification Standard and which have a market capitalization of at least US$10 billion and a credit rating issued by Standard & Poor’s® Rating Services, a division of The McGraw-Hill Companies, Inc. of at least A- at the time of purchase. The Portfolio will also include U.S. publicly listed alterative asset management issuers which have a market capitalization of at least US$5 billion at the time of purchase. U.S. Financial issuers may include, but are not limited to, issuers operating in the following financial industry sub-sectors: retail and commercial banking, investment banking, wealth management, insurance and real estate. Alternative Asset Manager issuers may include, but are not limited to, managers or investment advisors who structure, promote, sponsor or operate investment and other funds focused on non-traditional asset classes such as private equity, real estate, commodities and alternative investment strategies.

The Fund may invest up to 25% of the net asset value in U.S. financial securities or alternative asset managers that do not meet the rating or market capitalization tests noted above. To generate additional returns above the dividend income earned on the Fund’s investment portfolio, the Fund will, from time to time, write covered call options in respect not more than 33% of the securities in its portfolio. In addition, the Fund may write cash covered put options and may invest up to 10% of net assets to purchase call options, both in respect of securities in which the Fund is permitted to invest.

The Manager may short securities from time to time. Short exposure in the Portfolio, for purposes other than hedging (as defined in NI 81-102), will not exceed 10% of the Net Asset Value of the Fund determined on a daily marked-to-market basis.

 

Option Strategy

The Fund employs option strategies to generate additional returns above the distributions earned on its equity securities.

 

Distributions

Class A distributions 0f $0.50 per Class A unit per annum are paid in the amount of $0.125 each calendar quarter.

Class U distributions of US$0.50 per Class U unit per annum are paid in the amount of US$0.125 each calendar quarter.

Distributions are not fixed but are reviewed and set annually at the discretion of the Fund.

 

Mandatory Market Repurchase Program

The Fund will undertake a mandatory market purchase program pursuant to which if the Class A Units close at a trading price that is less than 98% of the latest NAV per Class A Unit, the Fund will offer to purchase Class A Units thereafter if and to the extent that the Class A Units continue to trade at a price that is below 98% of the latest NAV per Class A Unit at the time.

 

Redemptions

The Units are redeemable annually in September of each year beginning in 2016 at 100% of each respective unit’s Net Asset Value less costs, at the option of the unitholder and monthly at a discount to market price. Redemption proceeds will be payable in Canadian dollars to holders of Class A Units and in U.S. dollars to holders of Class U Units.

Click to expand Redemption Details

Redemption Deadlines
Units may be surrendered at any time for redemption, but will be redeemed only on a Redemption Date, being the last business day of any month. Units surrendered for redemption by a Unitholder on or before the first business day of September 2016 or any year thereafter (the “Annual Redemption Deadline”) will be redeemed on the last business day of September (the “Annual Redemption Date”). Units surrendered for redemption by a Unitholder at least ten business days prior to the last day of any other month (a “Monthly Redemption Date”), will be redeemed on such Monthly Redemption Date. Unitholders will receive payment for the Units on or before the 15th day following any such Redemption Date. If a Unitholder surrenders Units after 5:00 p.m. (EST) on the applicable cut-off date, the Units will be redeemed on the following Redemption Date. Redemption notices must be delivered to the Fund by an investor’s advisory firm in sufficient time to meet the deadline.

Annual Redemption
Beginning in September 2016, units surrendered for redemption on or before the first business day of September will be redeemed at 100% of each respective unit’s net asset value less costs, valued on the last business day of September being the redemption day. Costs may include an amount equal to the aggregate of all brokerage fees, commissions and other costs incurred by the Fund in connection with such payment, including, but not limited to, costs incurred in liquidating securities held in the Fund’s portfolio. Payment will be received on or before the 15th day following the redemption day. Redemption proceeds will be payable in Canadian dollars to holders of Class A Units and in U.S. dollars to holders of Class U Units.

Monthly Redemption
For Unitholders whose Units are redeemed on any other Redemption Date, the redemption price per Unit will be equal to the lesser of:

  1. a)95% of the Market Price. For such purposes, “Market Price” means the weighted average trading price of the Units on the principal stock exchange on which the Units are listed for the ten trading days immediately preceding the applicable Redemption Date, and
  2. b)100% of the Closing Market Price of the Units on the applicable Redemption Date, minus an amount equal to the aggregate of all brokerage fees, commissions and other costs incurred by the Fund in connection with such payment, including, but not limited to, costs incurred in liquidating securities held in the Fund’s portfolio. For such purposes, the “Closing Market Price” means the closing price of the Units on the principal stock exchange on which the Units are listed or, if there was no trade on the relevant date, the average of the last bid and the last asking prices of the Units on the principal stock exchange on which the Units are listed.

For Unitholders whose Class U Units are redeemed on a Monthly Redemption Date, the Redemption Price per Class U Unit will be the U.S. dollar amount calculated as the Class A Monthly Redemption Price (converted to U.S. dollars at the Reference Exchange Rate on the Monthly Redemption Date) multiplied by a fraction, the numerator of which is the NAV per Class U Unit and the denominator of which is the NAV per Class A Unit (converted to U.S. dollars at the Reference Exchange Rate on the Monthly Redemption Date).

Any unpaid distribution payable on or before the applicable Redemption Date in respect of Units tendered for redemption on such Redemption Date will also be paid on the applicable Redemption Payment Date.

 

Class U Conversion

A holder of Class U Units may convert such Class U Units into Class A Units on a weekly basis for liquidity purposes. It is expected that liquidity for the Class U Units will be obtained primarily by means of conversion into Class A Units and the sale of such Class A Units on the stock exchange. Class U Units may be converted in any week on the first Business Day of such week (the “Conversion Date”) by delivering a notice to the Manager and surrendering such Class U Units by 3:00 p.m. (Toronto time) at least five Business Days prior to the applicable Conversion Date.

For each Class U Unit so converted, a holder will receive that number of Class A Units equal to the Net Asset Value per Class U Unit as at the close of trading on the Business Day immediately preceding the Conversion Date divided by the Net Asset Value per Class A Unit as at such time. As the Units are denominated in different currencies, the Fund will utilize the applicable Reference Exchange Rate, or as nearly as practicable to, the Conversion Date. No fraction of a Class A Unit will be issued upon any conversion of Class U Units and any fractional amounts will be rounded down to the nearest whole number of Class A Units.

 

Leverage

The Fund will not employ leverage, except as described under shorting.

 

Shorting

The Manager may short securities from time to time. Short exposure in the Portfolio, for purposes other than hedging (as defined in NI 81-102), will not exceed 10% of the Net Asset Value of the Fund determined on a daily marked-to-market basis.

 

Termination

The Fund does not have a fixed termination date.

 

CUSIP ISIN

Class A Shares
     CUSIP – 90290Q102
     ISIN - CA 90290Q1028
Class U
     CUSIP – 90290Q110
     ISIN – CA 90290Q1101

 

Eligibility

RRSPs, DPSPs, RRIFs, RESPs and TFSAs

 

Management Fees

The Fund pays a management fee of 1.25% of net asset value annually to Strathbridge Asset Management for acting as the Manager and the Investment Manager.

 

MER

The Fund’s Management Expense Ratio (“MER”) is the sum of all operating expenses, including management and service fees but excluding portfolio transaction costs, expressed as percentage of average net asset value.

 

Inception Date

02/24/2015

 

Manager

Strathbridge Asset Management

 

Hedging

The Fund may hedge all or none of the U.S. dollar exposure of the Class A units back to the Canadian dollar from time to time at the discretion of the Manager.

 

Documentation

Date:      Type:      Description
June 03, 2020 Press Release USF: Declares Quarterly Fund Distribution
March 27, 2020 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 27, 2020 Financial Report 2019 Annual Report
March 27, 2020 Press Release USF: Announces Year End Results
March 03, 2020 IRC Report IRC Report for U.S. Financials Income Fund
March 03, 2020 Press Release USF: Declares Quarterly Fund Distribution
December 04, 2019 Press Release USF: Declares Quarterly Fund Distributions
September 04, 2019 Press Release USF: Declares Quarterly Fund Distribution
August 28, 2019 Financial Report 2019 Semi-Annual Report
August 28, 2019 Press Release USF: Announces Semi-Annual Results
June 04, 2019 Press Release USF: Declares Quarterly Fund Distributions
March 21, 2019 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 21, 2019 Financial Report 2018 Annual Report
March 21, 2019 Press Release USF: Announces Year End Results
March 05, 2019 Press Release USF: Declares Quarterly Fund Distributions
December 04, 2018 Press Release USF: Declares Quarterly Fund Distributions
September 04, 2018 Press Release USF: Declares Quarterly Fund Distributions
August 24, 2018 Financial Report 2018 Semi-Annual Report
August 24, 2018 Press Release USF: Announces Semi-Annual Results
June 04, 2018 Press Release USF: Declares Quarterly Fund Distribution
March 29, 2018 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 22, 2018 Financial Report 2017 Annual Report
March 22, 2018 Press Release USF: Announces Year End Results
March 02, 2018 Press Release USF: Declares Quarterly Fund Distribution
December 05, 2017 Press Release USF: Declares Quarterly Fund Distribution
September 05, 2017 Press Release USF: Declares Quarterly Fund Distributions
August 28, 2017 Financial Report 2017 Semi-Annual Report
August 28, 2017 Press Release USF: Announces Semi-Annual Results
May 29, 2017 Press Release USF: Declares Quarterly Fund Distribution
March 31, 2017 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 22, 2017 Financial Report 2016 Annual Report
March 22, 2017 Press Release USF: Announces Annual Results
March 06, 2017 Press Release USF: Declares Quarterly Fund Distribution
December 05, 2016 Press Release USF: Declares Quarterly Fund Distribution
September 06, 2016 Press Release USF: Declares Quarterly Fund Distribution
September 02, 2016 Press Release USF: Confirms Investment Strategy
August 23, 2016 Financial Report 2016 Semi-Annual Report
August 23, 2016 Press Release USF: Announces Semi-Annual Results
June 01, 2016 Press Release USF: Declares Fund Distributions
March 30, 2016 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 23, 2016 Financial Report 2015 Annual Report
March 23, 2016 Press Release USF: Announces Year End Results
March 07, 2016 Press Release USF: Declares Quarterly Fund Distribution
December 03, 2015 Press Release USF: Declares Quarterly Fund Distribution
September 03, 2015 Press Release USF: Declares Quarterly Fund Distribution
August 21, 2015 Financial Report 2015 Semi-Annual Report
August 21, 2015 Press Release USF: Announces Semi-Annual Results
June 03, 2015 Press Release USF: Declares Quarterly Fund Distribution
June 01, 2015 Financial Report 2015 Interim Report
May 29, 2015 Annual Information Form Annual Information Form U.S. Financials Income Fund
March 09, 2015 Press Release USF: Closes Over-Allotment
March 04, 2015 Press Release USF: Declares Initial Distribution
February 24, 2015 Press Release USF: Closes Initial Public Offering
January 30, 2015 Press Release USF: Files Final Prospectus
January 30, 2015 Prospectus Final Prospectus (English)
January 30, 2015 Prospectus Final Prospectus (French)
January 05, 2015 Press Release USF: Announces Initial Public Offering
January 05, 2015 Prospectus Preliminary Prospectus (English)
January 05, 2015 Prospectus Preliminary Prospectus (French)

Administration & Governance

Introduction

Strathbridge Asset Management serves as the Manager and the Investment Manager of the Fund.

 

Manager

The Manager is responsible for providing or arranging for the provision of administrative services to the Fund including but not limited to:

  • authorizing the payment of operating expenses incurred on behalf of the Fund,
  • preparing financial statements and other accounting information,
  • ensuring that unitholders are provided with annual and semi-annual reports and other reports as required by applicable law;
  • ensuring the Fund complies with regulatory requirements and applicable stock exchange listing requirements;
  • providing the Trustee with information and reports as required;
  • calculating and arranging for the payment of distributions;
  • negotiating any contractual agreements with third-party providers of services to the Fund, including auditors, printers, registrar and transfer agent
  • Overseeing and paying monthly and annual redemptions;
  • Managing the issuer bid;
  • Maintaining the website and ongoing communication with investors.

The Management fee payable to the Manager includes any amount payable to the Investment Manager.

 

Investment Manager

The Investment Manager is responsible for making all investment decisions and managing the call option writing program in accordance with the investment objectives, strategies and restrictions of the Fund. Fees for the provision of investment management services are included in the management fee.

The Investment Manager has an asset mix committee consisting of senior members of the firm. The investment process for the Fund begins at the asset mix committee. Members of this committee meet monthly to examine macro-economic variables and relationships among dominant economic factors. This process culminates in an outlook for the various capital markets around the world and provides the Fundamental basis for Strathbridge’s long-term market outlook. These views are integrated into the investment decision making process at the portfolio management level. The asset mix committee of Strathbridge oversees investment decisions made by the portfolio managers of the Fund.

 

Independent Review Committee

The Fund has established an Independent Review Committee (“IRC”) in accordance with National Instrument 81-107 – Independent Review Committee for Investment Funds (“NI 81-107”) which is comprised of three members who are independent of the Manager. The mandate of the IRC is to review and provide its decisions to the Manager regarding any conflict of interest matters relating to its management of the Fund that the Manager has identified and brought to the committee.

A conflict of interest matter is a situation where a reasonable person would consider the Manager or an entity related to it to have an interest that may conflict with the Manager’s ability to act in good faith and in the best interests of the Funds and Securityholders. Click here for the IRC Report to Securityholders.

Click here to review members of the IRC.

 

Advisory Board

The Fund has established an Advisory Board to assist the Fund in the provision of services by the Manager and the Investment Manager and to provide oversight of these activities. The Advisory Board consists of five members, three of whom are independent of the Manager and Investment Manager. The three independent members of the Advisory Board are also members of the Independent Review Committee. The Advisory Board includes an audit committee whose mandate is to review the annual and semi-annual financial statements and discuss any issues with the auditors.

 

Trustee and Custodian

RBC Investor & Treasury Services

 

Registrar and Transfer Agent

Computershare Investor Services Inc.

 

Legal Counsel

Osler Hoskin & Harcourt LLP

 

Auditors

Deloitte & Touche LLP

Financial & Regulatory

The Annual Report and the Interim Report include the Management Report on Fund Performance and the Financial Statements of the Fund.

Report Year:      Release Date Description
2019 March 27, 2020 2019 Annual Report
2019 August 28, 2019 2019 Semi-Annual Report

 

The Annual Information Form (“AIF”) is a regulatory filing that provides material information to investors about the Fund’s structure, operations, risks and other factors that may affect the Fund. The AIF is supplemented throughout the year by other filings including press releases, information circulars, prospectuses, material change reports, the annual and interim management report on fund performance and the financial statements.

Date Description
March 27, 2020 Annual Information Form

 

The Fund has adopted the proxy voting guidelines with respect to the voting of proxies received by it relating to voting securities held by the Fund. The proxy guidelines establish standing policies and procedures for dealing with routine matters, as well as circumstances where deviations may occur from such standing policies. Click here for proxy guidelines.

The Fund has retained ISS Governance Services to administer and implement the proxy guidelines for the Fund. Click here to review the proxy voting record.