A Member of the Jovian Capital Group of Companies
26 Wellington St. E. Toronto, ON P: 1.877.273.2156 info@jovfunds.com
Suite 920 M5E 1S2 F: 1.877.273.2157 www.jovfunds.com
Jov Leon Frazer Enhanced Opportunities Fund
Fund Performance
Jov Leon Frazer Enhanced Opportunities Fund net returns for month ended February 28, 2014 were:
 1 Month3 Month6 MonthYTD1 Year3 Year5 YearSince
Inception
Series I-0.83 %0.07 %6.07 %0.07 %4.88 %-14.55 %-1.20 %-7.97 %
Series II-0.96 %0.51 %6.17 %0.51 %4.17 %-15.13 %-2.12 %-8.66 %
Series III-0.84 %0.03 %5.99 %0.03 %4.64 %-15.08 %-1.83 %-8.67 %
Blend: 40% S&P/TSX Comp., 60% S&P/TSX Venture Comp.-1.45 %6.16 %8.27 %6.16 %-1.07 %-14.92 %4.89 %-7.02 %
Historical Returns
The following chart shows the cumulative growth of $10,000 initial investment in the fund.
Sector Breakdown
As of December 31, 2013
Bonds32.91 %
Energy11.94 %
Information Technology10.66 %
Financials9.44 %
Consumer Discretionary4.67 %
Health Care4.43 %
Industrials2.70 %
Utilities2.30 %
Other0.64 %
Materials0.45 %
 
Top Holdings
As of December 31, 2013
EQUITY FINANCIAL HLDGS INC7.37 %
TRANSGAMING INC6.88 %
BURCON NUTRASCIENCE CORP4.51 %
CU INC3.89 %
SOLUTIONS4CO2 INC3.89 %
ROGERS COMMUNICATIONS INC3.77 %
TELUS CORPORATION3.77 %
ENBRIDGE INC3.75 %
BELL CANADA3.73 %
FORTISBC INC3.59 %
Manager Commentary  As of December 31, 2013

Manager’s Commentary

Since assuming management of the Fund in August 2012, Leon Frazer and Associates Inc. (“Leon Frazer”) has employed a strategy of reducing names and improving liquidity within the Fund. Over the past year the number of investment names has decreased to 28 to better focus holdings and generate a cash reserve. No positions were added in the quarter, though we continue to seek out investment opportunities, such as Solutions4CO2 Inc., which was acquired in Q3 2013 and ended the year with a 100% gain.

On May 10, 2013, the Fund was closed to new Unitholder purchases to assess the impact of the Federal Government’s Budget proposal to eliminate the Federal Tax Credit for Labour Sponsored Venture Capital Corporations. Liquidity will remain high as we continue to wait for the final proposals to assist with the orderly phase-out of the Federal Tax Credit.

Although the fourth quarter showed improvement, small and micro-cap stocks (the bulk of the Fund’s holdings) continue to languish. For the quarter ending December, the S&P/TSX Venture Composite Index® declined 6.8%, lagging its sister, large-cap, S&P/TSX Composite Total Return Index, which returned 7.2%. For all of 2013, the S&P/TSX Venture Composite remains down 24.6% compared to the S&P/TSX return of up 13.0%.

The Fund’s benchmark (60% S&P/TSX Venture Index/40% S&P/TSX Composite returned -1.2% in the fourth quarter. This compares with the Fund’s Series I return of 6.0%, the Series II return of 5.6% and the Series III return of 6.0%. For all of 2013, the Fund’s benchmark returned -9.6% compared to a Series I return of 5.0%, a Series II return of 4.7% and a Series III return of 5.1%. Given the high liquidity carried in the Fund as we await the Federal government’s proposals, it should not be expected that the fund will return in parallel with its benchmark. At December 31, 2013 the Fund held 20% Cash, 32% Fixed Income (the Fund’s Reserves) and 48% Equities.

Outlook

On the economic front, Leon Frazer’s view continues to be that North American economies should grow in the range of 1%-3%, with the US economy outperforming Canada. Over the past year the US economy has shown signs of self-sustaining growth with unemployment falling and growth accelerating, especially in Q4. The Canadian economy appears to be losing momentum, a result of slowing in housing and commodity exports.

Throughout 2013, Canadian equity markets lagged their global peers, and particularly the US, which gained 30%. Small cap stocks, the type that represent the bulk of the holdings in the Fund, continued to suffer from a lack of investor interest, uncertainty with respect to global growth impacted investor psychology. We do not see this underperformance of small cap and resource companies continuing for a fourth year. With fiscal and monetary policies around the world remaining quite accommodative, we anticipate that resource prices will recover from current depressed levels and as a result continue to see the Canadian market offering good value as a result of its underperformance. In the Fund, we continue to maintain existing equity weightings pending a decision from the Government. As was the case last year, we continue to look for opportunities, but are hesitant to reduce our reserves further without policy clarification.

Investment Objective

The Fund’s investment objective is to aim to achieve long-term capital appreciation by investing (a) in eligible investments which are comprised primarily of a diversified portfolio of equity and equity-like securities of listed issuers in compliance with the Federal Tax Act, and (b) in reserves as defined under the Federal Tax Act which are comprised primarily of debt and debt-like securities of Canadian corporations, provincial and federal governments and their agencies.

Portfolio Manager
 
Leon Frazer & Associates Inc.

Established in 1939 as one of the first investment counselling firms in Canada, Leon Frazer has been offering independent investment management services to clients for over 70 years. Leon Frazer offers a proven record of inflation protection through capital appreciation. The team of 17 investment professionals with an average of 30 years industry experience, and manages $2.1 billion in assets under management, as at December 31, 2012.

Fund Details
Fund Type: Retail Venture Capital
Inception Date: December 12, 2006
RRSP and TFSA Eligible: Yes
Management Fee: 2.50%
Minimum Initial Investment: $1,000
Minimum Subsequent Investment: $500
Series I (FE): JOV001
Series II (DSC): JOV002
Series III (DSC): JOV003
Distributions: n/a
Performance Fee: n/a
Fund Size: $3,614,088

Commissions, management fees and expenses all may be associated with an investment in the Jov Leon Frazer Enhanced Opportunities Fund (the “Fund”). The Fund is not guaranteed, its values change frequently and past performance may not be repeated.  The indicated rates of return for the Fund in the performance table are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends and distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Please read the prospectus before investing.

The opinions expressed in the portfolio commentary are those of the author and do not necessarily reflect the views and opinions of JovFinancial Solutions Inc. or any distributor of the Jov Leon Frazer Enhanced Opportunities Fund (the "Fund"). The views expressed are of a general nature and should not be interpreted as investment advice to you in any way. Please consult a qualified financial advisor before making an investment decision. The investment manager has a direct interest in the management and performance fees of the Fund, and may, at any given time, have a direct or indirect interest in the Fund or its holdings.