Strathbridge Asset Management
Blog FAQ Advisor Login Print
Home Funds Insights About Us Education & Tools Contact Us   Search
Fund Overview
Fund Features
NAVs
Distributions
Portfolio Manager Updates
Portfolio
Press Releases
Administration Governance
Financial Regulatory
Prospectus

World Financial Split Corp.

 

WFS.PR.A
WFS

Portfolio Manager Updates

 

Portfolio Manager Updates for 2017-06-30

As of June 30, 2017, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $13.98 versus $13.70 on March 31, 2016.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on June 30, 2017 at $9.95 and $3.75 respectively which, when combined, represents a 2% discount to the NAV.

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.

During the period the MSCI World Financial Services Index advanced to 115.32 from 110.54. Stocks held within the portfolio had varying returns led by insurer ING Groep N.V. which was up 15.4%. This was offset by our holding in Westpac Banking Corporation which declined 7.5%, while held within 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 3.7% of the Fund subject to covered calls vs. 1.1% the previous quarter.

The Fund ended the quarter with a cash position of 2.6% vs. 4.2% 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.

 

Portfolio Manager Updates for 2017-03-31

As of March 31, 2017, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $13.70 versus $13.74 on December 31, 2016.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on March 31, 2017 at $10.20 and $3.41 respectively which, when combined, represent a $0.09 discount to the NAV.

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 period, the MSCI World Financial Services Index advanced to 110.54 from 106.18. Stocks held within the portfolio had varying returns led by insurer China Life Insurance Co. Ltd. which was up 18.4%. This was offset by our holding in Northern Trust Corp. which declined 8.8% while held within 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 1.1% of the portfolio written vs. none at the end of the previous quarter.

The Fund ended the year with a cash position of 4.2%, unchanged from the previous quarter. The Fund ended the period with a geographic asset mix of 24% invested in Canada; 43% invested in the United States and 33% invested in the Rest of World.

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.

 

Portfolio Manager Updates for 2016-12-31

As of December 31, 2016, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $13.74 versus $12.19 on September 30, 2016.

Preferred shareholders received a distribution of $0.13125 per share, while the distribution for the Class A share remained suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on December 30, 2016 at $10.00 and $3.76 respectively which, when combined, represent a $0.02 premium to the NAV.

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 period, the MSCI World Financial Services Index advanced to 106.18 from 93.06. 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 held within the portfolio had varying returns led by an insurer, Lincoln National Corporation, which was up 37.9%. This was offset by our holding in Canadian Imperial Bank of Commerce which declined 3.9% while held within 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 nil% of the portfolio written vs. 5.1% at the end of the previous quarter.

The Fund ended the year with a cash position of 4.2% vs. 5.7% at the end of the previous quarter. The Fund ended the period with a geographic asset mix of 25% invested in Canada; 48% invested in the United States and 27% invested in the Rest of World.

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.

 

Portfolio Manager Updates for 2016-09-30

As of September 30, 2016, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $12.19 versus $11.92 on June 30, 2016.

Preferred shareholders received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on September 30, 2016 at $9.76 and $1.92 respectively which, when combined, represent a 4.2% discount to the NAV.

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 period, the MSCI World Financial Services Index advanced to 93.06 from 87.58. Stocks held within the portfolio had varying returns led by the SPDR S&P Regional Banking ETF which was up 12.1% (while held in the Fund) due to its leverage to a steepening U.S. yield curve. This was offset by our holdings in Wells Fargo & Company which declined 9.7%, with most of the decline coming after September 8th when it was fined US$190 million to settle a fraud case.

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 5.1% of the portfolio written vs. 3.7% at the end of the previous quarter.

The Fund maintained an average cash position of 6.0% during the period vs. 7.1% at the end of the previous quarter. The Fund ended the period with a geographic asset mix of 22% invested in Canada; 52% invested in the United States and 26% invested in the Rest of World.

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.

 

Portfolio Manager Updates for 2016-06-30

As of June 30, 2016, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $11.92 versus $12.57 on March 31, 2016.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on June 30, 2016 at $9.70 and $1.95 respectively which, when combined, represent a 2.3% discount to the NAV.

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 period, the MSCI World Financial Services Index declined to 87.58 from 90.32. Stocks held within the portfolio had varying returns led by Aflac which was up 15.5% 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 15.5% 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 3.7% of the portfolio written vs. 9.3% at the previous quarter-end.

The Fund maintained a lower average cash position of 7.1% during the period vs. an average of 15.5% for the first quarter. The Fund ended the period with a geographic asset mix of 33.7% invested in Canada; 56.2% invested in the United States and 10.1% invested in the Rest of World.

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.

 

Portfolio Manager Updates for 2016-03-31

As of March 31, 2016, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $12.57 versus $13.37 on December 31, 2015.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on March 31, 2016 at $9.69 and $2.02 respectively which, when combined, represent a 6.8% discount to the NAV.

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 period the MSCI World Financial Services Index declined to $90.32 from $97.02. Stocks held within the portfolio had varying returns led by Bank of Nova Scotia (“BNS”), which was up 13.8% during the period. This was offset by Japanese Bank Mitsubishi UFJ Financial which declined 27.2% while held in the portfolio.

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 9.3% of the portfolio written vs. 4.0% at the end of the previous quarter.

The manager actively altered the cash position during the period and ended the quarter at 11.7%. The Fund ended the period with a geographic asset mix of 51% invested in Canada; 40% invested in the United States and 9% invested in the Rest of World.

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.

 

Portfolio Manager Updates for 2015-12-31

As of December 31, 2015, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $13.37 versus $13.19 on September 30, 2015.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on December 31, 2015 at $9.90 and $3.05 respectively which, when combined, represent a 3.1% discount to the NAV.

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 other emerging markets.

During the period, the MSCI World Financial Services Index advanced to 97.02 from 93.50. Stocks held within the portfolio had varying returns led by Public Storage (“PSA”), a basket holding which was up 22.05% since we purchased it. This was offset somewhat by CME Group Inc., another basket holding, which declined 8.7% since we purchased it.

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 4.0% of the portfolio written vs. 22.0% 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 7.5% and ended the quarter at 4.0% vs. 24.1% at the end of the previous quarter.

The Fund ended the period with a geographic asset mix of 31.6% invested in Canada; 59.7% invested in the United States and 8.7% invested in the Rest of World. The Fund also ended the period with approximately 50% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2015-09-30

As of September 30, 2015, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $13.19 versus $14.40 on June 30, 2015.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on September 30, 2015 at $10.00 and $3.30 respectively which, when combined, represent a 0.8% premium to the NAV.

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 period, the MSCI World Financial Services Index declined to 93.5 from 103.81. Stocks within the portfolio had varying degrees of performance led by Progressive Corp., a basket stock which was up 18.3% since we purchased it. This was somewhat offset by our holding of Deutsche Bank AG, which declined 19.1% since we bought 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 22.0% 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 14.7% and ended the quarter at 24.1% vs. 1.6% in the previous quarter.

The Fund ended the period with a geographic asset mix of 19% invested in Canada; 65% invested in the United States and 16% invested in the Rest of World. The Fund also ended the period with approximately 70% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2015-06-30

As of June 30, 2015, the Net Asset Value (“NAV”) of a combined unit (WFS.PR.A + WFS) was $14.40 versus $14.17 on March 31, 2015.

Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS.PR.A and WFS. They closed on March 31, 2015 at $9.98 and $4.51 respectively which, when combined, represent a 0.6% premium to the NAV.

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%.

During the period, the MSCI World Financial Services Index (in U.S. dollar terms) advanced slightly to 103.81 from 102.97 on March 31, 2015.

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 1.9% of the portfolio written.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 1.6% vs. 1.1% at the end of the previous quarter.

The Fund ended the period with a geographic asset mix of 17% invested in Canada; 60% invested in the United States and 23% invested in the Rest of World.
The Fund also ended the period with approximately 80% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2015-03-31

As of March 31, 2015, the Net Asset Value of a combined unit (WFS.PR.A + WFS) was $14.17 versus $13.92 on December 31, 2014. Preferred shareholder’s received a distribution of $0.13125 per share, while the distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

On March 31, 2015 the closing market price of the Preferred shares and the Class A shares was $10.15 and $3.51 respectively which, when combined, represent a 3.6% discount to the NAV.

Global equity markets advanced in the first quarter of 2015, albeit at differing degrees as Europe, China and Japan led the way on optimism that recent quantitative easing measures by their respective central bank would have a similar effect that it did for U.S. markets.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) advanced to $130.55 from $119.36. The U.S. Financials returns were helped by the weaker Canadian dollar which depreciated 8.4% during the quarter vs. the U.S. dollar.

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 1.4% of the portfolio written.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 1.1% vs. 1.3% at the end of the previous quarter.

The fund ended the period with a geographic asset mix of 8% invested in Canada; 57% invested in the United States and 35% invested in the Rest of World. The Fund also ended the period with approximately 22% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2014-12-31

As of December 310, 2014, the Net Asset Value (“NAV”) of a combined unit was $13.92 versus $13.28 on September 30, 2014. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on September 30, 2014 at $3.45 and $9.85 respectively which, when combined, represent a 4.5% discount to the NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record December 15, 2014, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Most global equity markets retreated in the early part of the fourth quarter of 2014 on concerns around the U.S. Federal Reserve ending quantitative easing in October, a substantial decline in energy commodity prices as well as deflation risks surrounding Europe and Japan. However, most markets rebounded strongly into the end of the year as U.S. payrolls continued to strengthen and third quarter GDP in the U.S. came in well above expectations at 5%.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) advanced to 119.36 from 114.01. The Financial Services indices in the 3 geographic regions had varying total returns during the quarter with the S&P/TSX Capped Financials Index up 1.9%, the S&P 500 Financials Index up 11.1% and the MSCI EAFE Financials Index up 0.6%, all measured in Canadian dollars. Both the U.S. and International Financials returns were helped by the weaker Canadian dollar which depreciated 3.6% during the quarter to end at $0.86 per U.S. dollar.

Volatility levels remained at the low end of the range for most of the period and the Fund was less active with its covered call writing. The Fund ended the quarter with 1.4% of the portfolio subject to covered calls.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 1.3% vs. 0.9% at the end of the previous quarter.

The Fund’s portfolio ended the period with a geographic asset mix of 18% invested in Canada; 71% invested in the United States and 11% invested in the Rest of World. The Fund maintained its overweight exposure to the U.S. during the quarter while maintaining an underweight position in the Rest of World Financials due to expectation of higher economic growth in North America.

The U.S. dollar hedge was maintained at the minimum level required during the quarter and ended the period with approximately 22% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2014-09-30

As of September 30, 2014, the Net Asset Value of a combined unit was $13.28 versus $12.94 on June 30, 2014. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on September 30, 2014 at $2.85 and $9.86 respectively which, when combined, represent a 4.3% discount to the NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record September 15, 2014, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Many global equity markets reached all-time highs during the third quarter of 2014 before retreating into the end the period due to concerns around slowing global growth as well as deflation risks surrounding Europe and Japan. U.S. equities outperformed Canadian and International stocks during the period, especially when converted into Canadian dollars as the U.S. dollar rose 4.7% vs. the loonie.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) advanced to 114.02 from 111.01. The Financial Services indices in the 3 geographic regions had varying total returns during the quarter with the S&P/TSX Capped Financials Index up 2.7%, the S&P 500 Financials Index up 7.5% and the MSCI EAFE Financials Index up 0.3%, all measured in Canadian dollars. Both the U.S. and International Financials returns were helped by the weaker Canadian dollar.

Volatility levels remained at the low end of the range for most of the period but did start to rise towards the end of September as the S&P 500 started to sell off after reaching an all-time high on September 19, the same day that Chinese e-commerce company Alibaba became the biggest initial public offering ever. Due to the low level of volatility, the Fund was less active with its covered call writing during the period and ended with 5.4% of the portfolio subject to covered calls.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 0.9% vs. 2.8% at the end of the previous quarter that was used to finance the annual concurrent retraction.

The Fund’s portfolio ended the period with a geographic asset mix of 35% invested in Canada; 54% invested in the United States and 11% invested in the Rest of World. The Fund maintained its overweight exposure to the U.S. and Canadian Financials during the quarter while maintaining an underweight position in the Rest of World Financials due to better economic growth in North America.

The U.S. dollar hedge was reduced during the quarter and ended the period with approximately 22% hedged back to the Canadian dollar.

 

Portfolio Manager Updates for 2014-06-30

As of June 30, 2014, the Net Asset Value (“NAV”) of a combined unit was $12.94 versus $12.91 on March 31, 2014. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on June 30, 2014 at $2.68 and $9.84 respectively which, when combined, represent a 3.2% discount to the NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record June 13, 2014, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

After posting mixed returns during the first quarter of 2014, global equity markets resumed their uptrend in the second quarter, as economic data out of the U.S. started to rebound from the weakness driven by harsh weather experienced this past winter.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) declined slightly to 111.01 from 112.60. The Financial Services indices in the 3 geographic regions had varying total returns during the quarter with the S&P/TSX Capped Financials Index up 5.7%, the S&P 500 Financials Index down 1.1% and the MSCI EAFE Financials Index down 0.8%, all measured in Canadian dollars. The Canadian dollar reversed its downtrend from the first quarter by rising 3.5% during the period to 93.7 cents vs. the U.S. dollar.

Volatility levels remained at the low end of the historical range during the period. Due to the low level of volatility, the Fund was less active with its covered call writing during the period and ended with 2.6% of the portfolio subject to covered calls.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 2.8% vs. 4.4% in the previous quarter that was used to finance the annual concurrent retraction.

The Fund’s portfolio ended the period with a geographic asset mix of 38.4% invested in Canada; 44.3% invested in the United States and 17.3% invested in the Rest of World. The U.S. dollar exposure was actively hedged during the quarter and ended the period with approximately 50% hedged back to the Canadian dollar.

The global economy is expected to continue to improve in 2014, although there is still uncertainty of how the economy will react to less monetary stimulus as the U.S. Federal Reserve continues to exit its quantitative easing program. The valuations of companies in the portfolio generally remain at reasonable levels when measured by price to earnings ratios and current dividend yields which should continue to provide support for share prices.

 

Portfolio Manager Updates for 2014-03-31

As of March 31, 2014, the Net Asset Value (“NAV”) of a combined unit was $12.91 versus $12.94 on December 31, 2013. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on March 31, 2014 at $2.87 and $9.80 respectively which, when combined, represent a 1.9% discount to the NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to Preferred shareholders of record March 14, 2014, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

After performing strongly in 2013, global equity markets posted mixed returns for the first quarter of 2014 due to geo-political tension between Ukraine and Russia as well as concerns that U.S. Federal Reserve might start to raise interest rates sooner than expected.

During the period, the MSCI World Financial Services Index (in Canadian dollar terms) increased to 112.60 from 108.29. The Financial Services indices in the 3 geographic regions all rose during the quarter with the S&P/TSX Capped Financials Index up 2.5%, the S&P 500 Financials Index up 6.6% and the MSCI EAFE Financials Index up 3.7%, all measured in Canadian dollars. The Canadian dollar declined by 3.8% during the period to 90.5 cents vs. the U.S. dollar.

Volatility levels rose briefly at the end of January to around 21.5 after it was reported that Russian troops were occupying Crimea, an autonomous republic of Ukraine. The CBOE SPX Volatility Index (“VIX”) averaged just under 15 for the first quarter of 2014. The Fund continued with its active approach to covered call writing during the period and ended the first quarter with 18.1% of the portfolio subject to covered calls.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 4.4% vs. 1.6% at the end of the previous quarter.

The Fund’s portfolio ended the period with a geographic asset mix of 34% invested in Canada; 41% invested in the United States and 25% invested in the Rest of World. The U.S. dollar exposure was actively hedged during the quarter and ended the period with approximately 50% hedged back to the Canadian dollar.

The global economy is expected to continue to improve in 2014, although there is still uncertainty of how the economy will react to less monetary stimulus as central banks start to exit their quantitative easing programs. The valuations of companies in the portfolio generally remained at reasonable levels when measured by price to earnings ratios and current dividend yields which should continue to provide support for share prices.

 

Portfolio Manager Updates for 2013-12-31

As of December 31, 2013, the Net Asset Value (“NAV”) of a combined unit was $12.94 versus $12.09 on September 30, 2013. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on December 31, 2013 at $2.70 and $9.76 respectively which, when combined, represent a 3.7% discount to the NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record December 13, 2013, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Global equity markets continued to advance in the fourth quarter of 2013 with many indices finishing the year at new all-time highs reflecting improved global economic data and accommodative central bank monetary policy.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) increased to $108.29 from $97.79. The Financial Services indices in the 3 geographic regions rose sharply during the quarter with the S&P/TSX Capped Financials Index up 10.7%, the S&P 500 Financials Index up 10.3% and the MSCI EAFE Financials Index up 9.8%, all measured in Canadian dollars.

Volatility levels rose briefly at the start of the period as the U.S. Government shut down for 16 days in October as brinkmanship ruled the day. The CBOE SPX Volatility Index (“VIX”) rose to over 20 but quickly retraced and ended 2013 at the lower end of the range over the last twenty years. The Fund was not very active with its covered call writing during the period and ended the quarter with no covered calls.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 1.6% vs. 2.4% at the end of the previous quarter.

The Fund’s portfolio ended the period with a geographic asset mix of 37% invested in Canada; 44% invested in the United States and 19% invested in the Rest of World. The U.S. dollar exposure was actively hedged during the quarter and ended the period with approximately 50% hedged back to the Canadian dollar.

The Global Financial Services companies demonstrated stronger fundamentals and profitability in 2013 due to declining credit losses, stronger capital market related revenues and improving loan growth. Although interest rates continue to remain low by historical standards, longer term rates rose throughout the year which should help improve net interest margins at the banks and also improve reinvestment rates for insurance companies.

The global economy is expected to continue to improve in 2014, there is still uncertainty of how the economy will react to less monetary stimulus as central banks start to exit their quantitative easing programs. The valuations of companies in the portfolio generally remaine at reasonable levels when measured by price to earnings ratios and current dividend yields which should continue to provide support for share prices.

 

Portfolio Manager Updates for 2013-09-30

As of September 30, 2013, the Net Asset Value (NAV) of a combined unit was $12.09 versus $11.42 on June 30, 2013. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on September 30, 2013 at $2.11 and $9.85 respectively which, when combined, represent a $0.13 (1.1%) discount to its NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record on September 16, 2013, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Global equity markets continued their rally from the first two quarters of 2013 on improved global economic data and also after U.S. Federal Reserve Chairman, Ben Bernanke, surprised the market by delaying the tapering of quantitative easing at the Federal Open Market Committee meeting in September.

During the period, the MSCI World Financial Services Index (in Canadian dollar terms) increased from 92.86 to 97.79. The Financial Services indices in the 3 geographic regions had varying total returns during the quarter with the S&P/TSX Capped Financials Index up 8.61%, the S&P 500 Financials Index up only 0.61% and the MSCI EAFE Financials Index up 10.51%, the latter two measured in Canadian dollars.

Volatility levels remained low for the period with the CBOE SPX Volatility Index (VIX) still at the lower end of the range over the last twenty years. The Fund continued with its active approach to covered-call writing during the period and ended the third quarter with 21.1% of the portfolio written.

The Fund maintained a high investment position during the majority of the period and ended the quarter with a cash position of 2.4% vs. 5.1% at the end of the previous quarter.

The Fund’s portfolio ended the period with a geographic asset mix of 38% invested in Canada; 28% invested in the United States and 34% invested in the Rest of World. The U.S. dollar exposure was actively hedged during the quarter and ended the period with approximately 50% hedged back into Canadian dollar.

The profitability of global Financial Services companies is likely to increase in the fourth quarter of 2013 due to improving global economies, stronger capital markets and a better credit environment. Also, in the context of low global interest rates, the valuation of companies within the portfolio remain at very attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2013-06-30

As of June 28, 2013, the Net Asset Value (NAV) of a combined unit was $11.42 versus $11.52 on March 28, 2013. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. They closed on June 28, 2012 at $1.31 and $9.81 respectively which, when combined, represent a $0.30 (2.6%) discount to the actual NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record on June 14, 2013, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Global equity markets continued their rally from the first quarter of 2013 advancing in both April and most of May on improved economic data out of the U.S. and other parts of the world. Markets corrected considerably for the rest of the period after the U.S. Federal Reserve chairman, Ben Bernanke, signaled to the market that the central bank may start to taper their bond purchase program later this year.

During the period, the MSCI World Financial Services Index (in Canadian dollar terms) increased to 92.87 from 89.04. The Financial Services indices in the 3 geographic regions had varying total returns during the quarter with the S&P/TSX Capped Financials Index up 0.43%, the S&P 500 Financials Index up 7.25% and the MSCI EAFE Financials Index down 1.20%, each measured in Canadian dollars.

Volatility levels remained low for the period with the CBOE SPX Volatility Index (“VIX”) still at the lower end of the range over the last twenty years. The Fund continued with its active approach to covered-call writing during the period and ended the second quarter with 15.1% of the portfolio written.

The Fund maintained a high investment position during the majority of the period but ended the quarter with a cash position of 5.1% (vs. 1.8% at the end of the previous quarter) in order to finance the Fund’s annual concurrent redemption.

The Fund’s portfolio ended the period with a regional asset mix of 25% invested in Canada; 56% invested in the U.S. and 19% invested in the Rest of World. The U.S. dollar exposure was actively hedged during the period and ended the quarter with approximately 100% hedged back into Canadian dollar.

The profitability of Global Financial Services companies is likely to increase in the second half of 2013 due to improving global economies, stronger capital markets and a better credit environment. Also, in the context of low Global interest rates, the valuation of companies within the portfolio remain at very attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2013-03-31

As of March 31, 2013, the Net Asset Value (“NAV”) of a combined unit was $11.52 versus $11.02 on December 31, 2012. The Fund’s two share classes are listed on the Toronto Stock Exchange as WFS and WFS.PR.A. The closing market prices closed on March 28, 2012 were $1.46 and $9.70 respectively which, when combined, represent a $0.36 (3.13%) discount to the actual NAV.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record March 15, 2013, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

Global equity markets moved higher in Q1 of 2013 as markets concerns surrounding the “Fiscal Cliff” in the U.S. dissipated after a last minute deal was reached at the end of 2012 that increased taxation but pushed out mandatory spending cuts to March 1, 2013. At the same time, sovereign default risk in Europe reared its head once again as Cyprus became the latest country requiring a bailout of its banking system.

Unlike the previous two quarters, the S&P/TSX Composite Index underperformed the S&P 500 Index on a total return basis during the period, up 3.3% and 10.6% respectively. During the period, the MSCI World Financial Services Index (in Canadian dollar terms) increased considerably to 89.04 from 81.53. The Financial Services indices in the 3 geographic regions also had strong total returns during the quarter with the S&P/TSX Capped Financials Index up 4.2%, the S&P 500 Financials Index up 13.8% and the MSCI EAFE Financials Index up 7.9%, each measured in Canadian dollars.

Volatility levels remained low for the period with the CBOE SPX Volatility Index (VIX) back to levels not seen since 2007. The Fund continued with its active approach to covered-call writing during the period with only 1.6% of the portfolio on average subject to covered calls and ended the first quarter with 7.6% of the portfolio written.

The Fund maintained a high investment position during the period and ended the quarter with a cash position of 1.8% vs. 4.1% at the end of the previous quarter.

The Fund’s portfolio ended the period with a regional asset mix of 23% invested in Canada; 50% invested in the United States and 27% invested in the Rest of World. The U.S. dollar hedge was maintained and ended the quarter with approximately 100% hedged back into Canadian dollar.

The profitability of Global Financial Services companies is likely to increase in 2013 due to improving global economies, stronger capital markets and a better credit environment. Also, in the context of record low Global interest rates, the valuation of companies within the portfolio remain at very attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2012-12-31

As of December 31, 2012, the Net Asset Value (“NAV”) of a combined unit was $11.02 versus $10.01 on September 30, 2012.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record December 14, 2012, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Class A share’s last trading price on December 28, 2012 was $1.24, which is a premium of $0.22 to its NAV.

Global equity markets took a breather in the fourth quarter of 2012 as markets pulled back heading into the U.S. presidential election in November and then rallied into year-end, even as concerns were growing over the looming ‘Fiscal Cliff’ deadline. At the same time, economic data out of the U.S. and other parts of the world continued to improve while Central Banks stayed with extremely loose monetary policy.

For the second consecutive quarter, the S&P/TSX Composite Index outperformed the U.S. S&P 500 Index on a total return basis during the period, posting returns of 1.7% and negative 0.4% respectively. During the period the MSCI World Financial Services Index (in Canadian dollar terms) increased considerably to 81.53 from 74.84. The Financial Services indices in the 3 geographic regions had strong total returns during the quarter with the S&P/TSX Capped Financials Index up 6.8%, the S&P 500 Financials Index up 7.2%, and the MSCI EAFE Financials Index up 12.6%, all measured in Canadian dollars.

Volatility levels remained low into year-end other than a brief spike heading into the U.S. election. The Fund remained active in its covered-call writing during the period with, on average, approximately 20% of the portfolio subject to covered calls and ended the year with 3.9% of the portfolio written. The Fund also ended the year with 7.5% of the portfolio hedged with protective put options.

The Fund maintained a high investment position during the period and ended the year with a cash position of 4.1% vs. 2.2% at the end of the third quarter.

The Fund’s portfolio ended the quarter with a regional asset mix of 26% invested in Canada; 33% invested in the United States and 41% invested in the Rest of World. The U.S. dollar hedge was maintained in the fourth quarter and ended the year being 100% hedged back into Canadian dollar.

The profitability of Global Financial Services companies is likely to increase in 2013 due to improving global economies, stronger capital markets and a better credit environment. Also, in the context of record low global interest rates, the valuations of companies within the portfolio remain at very attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2012-09-30

As of September 30, 2012, the Net Asset Value (“NAV”) of a combined unit was $10.01 versus $10.06 on June 30, 2012.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record September 14, 2012, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Class A share’s last trading price on September 28, 2012 was $0.92, which is a premium of $0.91 to its NAV.

Global equity markets posted strong gains in the third quarter of 2012 on expectations that both the European Central Bank (ECB) and the U.S. Federal Reserve would enter another round of quantitative easing in response to a slowing global economy.

Central Banks did not disappoint and the ECB announced in August they would soon be implementing a bond purchase program to lower borrowing costs while Ben Bernanke, Chairman of the U.S. Federal Reserve, announced a third round of quantitative easing in order to improve labour market conditions.

During the period, the MSCI World Financial Services Index (in Canadian dollar terms) increased considerably to 74.84 from 71.57. The Financial Services indices in the 3 geographic regions had strong total returns during the quarter with the S&P/TSX Capped Financials Index up 5.3%, the S&P 500 Financials Index up 3.3% and the MSCI EAFE Financials Index up 7.5%, all measured in Canadian dollar terms.

Volatility levels remained low in the third quarter. The Fund had been active in its covered-call writing during the period but ended the third quarter with only one equity security representing approximately 1% of the portfolio subject to covered calls.

The Fund maintained a high investment position during the period and ended the quarter with a cash position of 2.2% vs. 17.5% at the end of the second quarter (in order to finance the annual concurrent redemption).

The Fund’s portfolio ended the quarter with a regional asset mix of 24% invested in Canada, 37% invested in the United States and 39% invested in the Rest of World. The U.S. dollar hedge was maintained in the third quarter and ended with 50% hedged back into Canadian dollar.

The profitability of Global Financial Services companies is likely to grow at a slower pace in 2012 due to decelerating loan growth, volatile capital markets and net interest margin compression. However, in the context of record low Global interest rates, the valuation of companies within the portfolio remain at attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2012-06-30

As of June 30, 2012, the Net Asset Value (“NAV”) of a combined unit was $10.06 versus $10.99 on March 31, 2012.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to preferred shareholders of record June 15, 2012, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Class A share’s last trading price on June 29, 2012 was $0.69, which is a premium of $0.63 to its NAV.

After rallying in the first quarter of 2012, equity markets took a breather and corrected in the second quarter due to continued concerns regarding the European debt crisis as well as growing fears over a decelerating global economy.

Similar to the last few quarters, the S&P/TSX Composite Index underperformed the S&P 500 Index in the U.S. during the period, down 5.7% and 2.8% respectively. During the period, the MSCI World Financial Services Index (in Canadian dollar terms) decreased to 71.57 from 76.46. The Financial Services indices in the 3 geographic regions had negative total returns during the quarter with the S&P/TSX Capped Financials Index down 6.4%, the S&P 500 Financials Index down 5.0% and the MSCI EAFE Financials Index down 5.8%, all measured in Canadian dollars.

Volatility levels remained low in the second quarter. The fund remained active in both its covered call writing and protective put buying during the period and ended the second quarter with 46.0% of the portfolio subject to covered calls options and 33.6% of the portfolio hedged with protective put options.

The Fund maintained a high investment position during most of the period but ended the quarter with a cash position of 17.5% vs. 1.7% at the end of the first quarter in order to finance the Fund’s annual concurrent redemption.

The Fund’s portfolio ended the quarter with a regional asset mix of 36% invested in Canada; 45% invested in the United States and 19% invested in the Rest of World. The U.S. dollar hedge was reduced in the second quarter and ended with approximately 40% hedged back into Canadian dollar.

The profitability of Global Financial Services companies is likely to grow at a slower pace in 2012 due to decelerating loan growth, volatile capital markets and net interest margin compression. As well, many global financial institutions have holdings of European sovereign debt and European bank debt on their balance sheet, which may impact their earnings and capital ratios due to concerns of default risk. In the context of record low global interest rates, the valuation of companies in the portfolio remain at attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2012-03-31

As of March 31, 2011, the Net Asset Value (“NAV”) of a combined unit was $10.99 versus $9.93 on December 31, 2011.

A quarterly distribution of $0.13125 per Preferred Share was declared and paid to Preferred shareholders of record March 15, 2012, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per Unit was less than $15.00.

The Class A share’s last trading price on March 30, 2012 was $1.55, which is a premium of $0.56 to its NAV.

Equity markets continued to rally in the first quarter of 2012 after stabilizing and rallying into year-end 2011 on the back of better U.S. employment and housing numbers as well as reduced risk of a European sovereign default.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) increased considerably to 76.46 from 66.31. The Financial Services indices in the 3 geographic regions had strong total returns during the quarter with the S&P/TSX Capped Financials Index up 11.4%, the S&P 500 Financials Index up 19.9% and the MSCI EAFE Financials Index up 14.5%, both measured in Canadian dollars.

Volatility continued to decline in the first quarter of 2012, reaching levels not seen since July 2011, as economic statistics in the U.S. continued to improve and concerns about European sovereign default subsided. The percent of the portfolio subject to covered calls on average during the period was 17.6% and the Fund ended the first quarter with 19.8% of the portfolio subject to covered calls.

No put protection was purchased during the quarter due to an improved outlook on the securities within the portfolio.

The Fund maintained a high investment position during the period and ended the quarter with a cash position of 1.7% vs. 2.8% at the end of 2011.

The Fund’s portfolio ended the quarter with a regional asset mix of 33% invested in Canada; 46% invested in the United States and 21% invested in the Rest of World. The U.S. dollar hedge was increased in the first quarter and ended with 100% hedged back into Canadian dollar.

The Global Financial Services companies profitability is likely to grow at a slower pace in 2012 due to decelerating loan growth, volatile capital markets and net interest margin compression. As well, many global financial institutions have holdings of European sovereign debt and European bank debt on their balance sheet, which may impact their earnings and capital ratios due to concerns of default risk. In the context of record low global interest rates, the valuations of companies in the portfolio remain at attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2011-12-31

As of December 31, 2011, the Net Asset Value ("NAV") of a combined unit was $9.93 versus $10.02 on September 30, 2011.

The quarterly distribution of $0.13125 per Preferred Share was paid December 30, 2011 to shareholders of record as of December 15, 2011, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Class A share’s last trading price on December 30, 2011 was $0.75, which is a premium of $0.75 to its NAV.

Equity markets continued their volatile ride in the fourth quarter of 2011. After correcting significantly in the 3rd quarter of 2011 due to Standard and Poor’s downgrade of U.S. Government debt and concerns about a potential sovereign default by Greece, equity markets found some footing and rallied into year-end.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) rose modestly to 66.31 from 65.52. The Financial Services indices in the 3 geographic regions had mixed total return during the quarter with the S&P/TSX Capped Financials Index relatively flat up 0.9%, the S&P 500 Financials Index up 8.4% and the MSCI EAFE Financials Index also flat down 0.2%, both measured in Canadian dollars.

Volatility for the fourth quarter remained high until December as economic statistics in the U.S. gradually improved and concerns about European sovereign default slowly subsided with the announcement of the Long-Term Refinancing Operation (“LTRO”) by the European Central Bank which is expected to help bank funding and liquidity. The Fund was active in its call writing during the quarter and ended the year with 31.2% of the portfolio subject to covered calls.

The Fund also opportunistically purchased some put protection on some individual holdings during the period due to continued concerns of European sovereign default risk increasing as well as the potential for lower than expected global growth and its impact on the market .

The Fund maintained a high invested position during most of the period and ended 2011 with a cash position of 2.8% vs. 9.8% at the end of the third quarter.

The Fund's portfolio ended the year with a regional asset mix of 34% invested in Canada; 37% invested in the United States and 29% invested in the Rest of World. The U.S. dollar hedge was reduced in the fourth quarter and ended 2011 with 65% hedged back into Canadian dollar.

The Global Financial Services companies profitability is likely to grow at a slower pace in 2012 due to decelerating loan growth, volatile capital markets and a low interest rate environment. As well, many global financial institutions have holdings of European sovereign debt and European bank debt on their balance sheet, which may impact their earnings and capital ratios as the risk default remains high. In the context of record low Global interest rates, the valuations of companies in the portfolio remain at attractive levels when measured by price to earnings ratios and current dividend yields.

 

Portfolio Manager Updates for 2011-09-30

As of September 30, 2011, the Net Asset Value of a combined unit was $10.02 versus $10.84 (pre-consolidation) and $11.48 (post consolidation of Class A shares) on June 30, 2011.

The quarterly distribution of $0.13125 per Preferred Share was paid September 30, 2011 to shareholders of record as of September 15, 2011, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Preferred Share last trading price on September 30, 2011 was $8.24 while the Class A Share trading price was 1.07, which represents a premium of $1.05 to its NAV.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) declined to 65.52 from 79.48. The Financial Services indices in the 3 geographic regions had negative total returns during the quarter with the S&P/TSX Capped Financials Index down 10.12%, the S&P 500 Financials Index down 16.73% and the MSCI EAFE Financials Index down 18.12%, when measured in Canadian dollars.

Volatility levels picked up in the quarter after being relatively tame during the first half of the year. Volatility levels started to pick up in late July as the deadline for the U.S. Congress vote on the debt ceiling limit on August 2nd was approaching and has remained high since as Standard & Poor’s downgraded the rating of U.S. Government debt and the prospect of Greece defaulting on their debt increased. The Fund increased the level of call writing over the quarter and ended September 30, 2011 with 34.66 percent of the portfolio subject to covered calls.

The Fund also opportunistically purchased some put protection on the iShares S&P/TSX Capped Financial Index Fund (“XFN”), the Financial Select Sector SPDR Fund (“XLF”) and some individual holdings during the period due to continued concerns of European sovereign default risk increasing as well as the potential for lower than expected global growth .

The fund maintained a high invested position during most of the period and ended the third quarter with a cash position of 9.8% vs. 21.2% at the end of the second quarter. The cash was increased at the end of the second quarter in order to finance the special redemption right offered in conjunction with the Fund extension.

The funds portfolio ended the quarter with a regional asset mix of 51.3% invested in Canada; 29.5% invested in the United States and 19.2% invested in the Rest of World. The U.S. dollar exposure was fully hedged back into Canadian over the period.

The Global Financial Services companies profitability is likely to grow at a slower pace than was originally expected at the beginning of 2011 due to decelerating loan growth, weaker equity and capital markets along with lower interest rates and net interest margin compression. As well, many global financial institutions have holdings of European sovereign debt and European bank debt on their balance sheet, which may impact their earnings and capital ratios as the risk default remains high. In the context of record low Global interest rates, the valuations of companies in the portfolio remain at attractive levels when measured by price to earnings ratios and current dividend yields and this should continue to act as support for the share prices.

 

Portfolio Manager Updates for 2011-06-30

On May 31, 2011, holders of Class A shares and holders of Preferred shares approved a proposal to extend the term of the Fund for seven years beyond the scheduled termination date of June 30, 2011, and for automatic successive seven-year terms after June 30, 2018.

On June 24, 2011, the Fund announced a Class A share consolidation ratio of 0.562426082 new Class A shares for each Class A share held, effective the opening of trading on July 4, 2011. The total value of a shareholder’s investment did not change, however, the number of Class A shares reflected in the shareholder’s account declined and the net asset value per share increased proportionately.

As of June 30, 2011, the Net Asset Value of a combined unit was $10.84 ($11.48 post-consolidation of Class A shares) versus $11.50 on March 31, 2011.

The quarterly distribution of $0.13125 per Preferred Share was paid June 30, 2011 to shareholders of record as of June 15, 2010, while the quarterly distribution for the Class A share remains suspended in accordance with the terms of the prospectus as the NAV per unit was less than $15.00.

The Class A Share trading price of $1.62 (post-consolidation of Class A shares) represents a premium of 9.46% to its post-consolidated NAV of $1.48.

During the period the MSCI World Financial Services Index (in Canadian dollar terms) declined to 79.48 from 82.63. The Financial Services indices in the 3 geographic regions had negative total returns during the quarter with the S&P/TSX Financials Index down 2.65%, the S&P 500 Financials Index down 6.46% and the MSCI EAFE Financials Index down 1.25% when measured in Canadian dollars.

The volatility of the financial stocks within the portfolio traded in a fairly narrow range over the quarter and the covered call writing activity was opportunistic to take advantage of higher volatility levels as well as the general decline in prices. The fund ended the quarter with approximately 20% of the portfolio subject to covered calls.

The fund also opportunistically purchased some put protection on both the iShares S&P/TSX Capped Financials Index Fund (“XFN”) and the Financial Select Sector SPDR Fund (“XLF”) during the period due to concerns of European sovereign default risk increasing as well as the U.S. debt ceiling controversy impacting global financials.

The fund maintained a high invested position during most of the period but ended the first quarter with a cash position of 21.2% vs. 6.6% at the end of the first quarter. The cash was increased at the end of the quarter in order to finance the special redemption right offered in conjunction with the Fund extension.

The funds portfolio ended the quarter with a regional asset mix of 40% invested in Canada; 29% invested in the United States and 31% invested in the Rest of World. The U.S. dollar exposure was fully hedged back into Canadian over the period.

The Global Financial Services companies demonstrated improving fundamentals and profitability in the second quarter due to declining credit losses and strong capital market related revenues. Although the global economy is expected to improve in 2011, volatility and uncertainty will remain as the European sovereign debt crisis and slowing global economic growth represent major overhangs on the sector. In the context of record low global interest rates, the valuations of companies in the portfolio remain at reasonable levels when measured by price to earnings ratios and current dividend yields. As global regulatory and capital requirements become clearer in 2011, several companies are likely to start returning capital to shareholders in the form of increased dividends and share repurchases.

 

 

© 2017 Strathbridge Asset Management Inc.         Privacy     |    Legal     |    Trade Matching Statement