AMG Gold, Mines & Metals

Transcription

1 Investment fund under Swiss law Annual report 2016 The English version of the annual report is a free translation from the original, which was prepared in German.

2 Contents 3 4 Facts and figures Organization Fund characteristics Key figures 5 6 Report of the Investment Manager 7 12 Financial Statements Statement of Assets Statement of Income Statement of Investments Transactions during the reporting period (If they no longer appear in the statement of net assets) Derivatives using the commitment approach II 13 Supplementary information to the annual report 14 Short form report of the audit company for collective investment schemes on the financial statements 2

3 Facts and figures Organization Board of directors of the Fund Management Company Holger Mai, President Hans Stamm, Vice President Salomon J. Guggenheim Michael Jent Herbert Kahlich Investment Manager of the Fund AMG Fondsverwaltung AG Bahnhofstrasse 29 CH-6300 Zug Distribution channels Investment Manager of the Fund Management of the Fund Management Company Marcel Weiss Ferdinand Buholzer Auditors PricewaterhouseCoopers AG Birchstrasse 160 CH-8050 Zurich Fund Management Company LB(Swiss) Investment AG Claridenstrasse 20 CH-8002 Zurich Phone Fax Custodian Bank Bank J. Safra Sarasin AG Elisabethenstrasse 62 CH-4002 Basel Phone Fax

4 Facts and figures Fund characteristics AMG Gold, Mines & Metals invests mainly in equities and equity-like securities of companies from the mining sector and in (physical) gold and other precious metals. Investments are selected according to the following criteria: valuation of the company relative to internal value: share price in proportion to the in-the-ground reserves (proven and provable), calculated by reference to the current price of gold; quality of the reserves; track record of management; (extent of experience of management, transparency of company, accessibility of management, roadshow activities, continuity). The fund management company may invest up to 30% of fund assets in physical gold in marketable form, which is stored exclusively in Switzerland at the same bank (the custodian bank). The physical gold is held in the form of unembossed bars, in standard units of 12.5 kg or 1 kg, of a purity of 995/1000 or better. Key figures Net fund assets in million Number of units (Class A) Number of units (Class B) Number of units (Class C) Asset value per unit in EUR (Class A) Asset value per unit in EUR (Class B) Asset value per unit in (Class C) Performance (Class A) 67.02% % -0.66% Performance (Class B) 67.02% % -0.67% Performance (Class C) 67.72% % -0.17% TER (Class A) 1.75% 1.78% 1.75% TER (Class B) 1.75% 1.78% 1.75% TER (Class C) 1.25% 1.25% 1.26% PTR Past performance is no guarantee for future results. The performance data do not take on the issue and redemption of units and costs incurred. No benchmark comparison is available for this fund. 4

5 Report of the Investment Manager Review The gold price got off to an excellent start in 2016 with a hefty price up-move. The boom lasted for about three quarters before the price started to drop from its annual highs. Main drivers for both directions were interest rates, which dropped to all-time lows in the course of the year, especially in the Eurozone due to the ECB s bond buying programme and had a very positive impact on the gold price in the first half of the year. Bonds selling and interest rates hedges in the last quarter of the year pushed up interest rates in most currencies, which put pressure on the gold price. Inflation expectations - a further important factor for the gold price - also went up but could not keep up with the rise in government bonds yields, for instance in USD. In USD, the gold price moved up 8% in With a plus of 15% the silver price advanced even more. Precious metal companies continued to make good progress in their operational business. The average gold selling price rose from USD 1,160 in 2015 to USD in At the same time, further cost cuts, which came down to an impressive level, had a positive impact on the companies cash flow margins. Free cash flows (FCF) increased substantially. Almost all companies in the benchmark index, the Philadelphia Gold & Silver Index (XAU), were winners (chart 1). The two top performers, Coeur and Hecla Mining, have silver exposures. Over the last couple of years, Coeur Mining was forced to introduce drastic restructuring and modernisation measures. Because of a high balance sheet and cost leverage, the company came close to insolvency in However, the rise in gold and silver prices has substantially improved the company s situation. The leverage is now less perilous with costs down from over USD 20 (per ounce of silver) to USD This development reflects the positive industry XAU-Index Tops & Flops 2016 Perf Market Cap (Mio.USD) Sector Coeur Mining 275.6% 1'709 Silver stock Hecla Mining 175.8% 2'071 Silver stock Buenaventura 167.9% 3'109 Senior Iamgold McEwen Mining Primero Mining Seabridge Novagold Eldorado Gold Goldfields Chart 1: Tops and flops on the XAU Index 167.3% 1'746 Intermediate 164.3% 871 Junior Market Cap 2016 Perf (Mio. USD) -64.8% 149 Junior -1.3% 446 Explorer 7.3% 1'459 Explorer 7.3% 2'309 Senior 9.1% 2'472 Senior (Source: Bloomberg) trend. Hecla Mining has taken a similar approach to business optimisation. At +67.0% the AMG Gold Mines & Metals fund delivered a strong performance this year. In, the benchmark index rose slightly faster at +76.8% while the passive GDX ETF, quite popular among investors, closed below average with a plus of +54.8% (chart 2), (all figures converted into ) Dez 15 Feb 16 Apr 16 Jun 16 Aug 16 Okt 16 Dez 16 AMG Gold, Minen & Metalle indexed XAU in indexed GDX ETF in indexed Chart 2: AMG Gold compared to XAU and GDX Continuous analysis and consistent implementation of our weekly sector (subsector) and stock allocation in the portfolio gave us a decisive advantage over the passive GDX ETF. Chart 3 shows the changes in subsector allocation over the last four quarters. Chart 3: Changes in the portfolio per quarter Outlook (Source: Bloomberg / Chart AMG Sector allocation Q Q Q Q Q Benchmark Q Seniors 47.8% 47.5% 39.7% 35.2% 27.2% 60.5% Indermediates 15.3% 6.4% 12.9% 8.6% 16.9% 11.4% Juniors 9.0% 8.7% 9.5% 7.7% 6.3% 4.0% Explorers 9.1% 6.6% 5.2% 4.6% 4.7% 2.8% Silver stocks 6.4% 19.4% 27.8% 23.8% 32.9% 12.8% Royalties 5.8% 2.7% 0.0% 7.2% 9.5% 8.5% Silver (metal) 0.0% 0.0% 4.2% 4.7% 0.0% 0.0% Gold physical 5.7% 0.0% 0.0% 3.7% 0.0% 0.0% Platin/Palladium 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Cash 0.9% 8.7% 0.7% 4.5% 2.5% 0.0% (Source: AMG The FED s new course involving further incremental interest rate hikes is unsettling many investors. In principle, higher interest rates mean headwind for the gold price. It is not yet clear whether the FED merely aims to bring the rates back up to the long-term average or whether it intends to take early action to fight nascent inflation with more aggressive rate hikes. Since real interest rates (nominal interest rates minus expected inflation rate) continue to play an extremely important role in terms of the gold price we are keeping a very close eye on their development. Rising interest rates in USD also affects the relation between the USD and other currencies. A strongly negative correlation exists between the gold price and the USD. 5

6 Report of the Investment Manager As mentioned in the review, gold producers have optimised their production processes and cut costs to a larger extent than expected. The companies are generating solid cash flows which are only occasionally invested in new projects now. The disposable fee cash flows can now be used as needed and provide the companies with a financial cushion. In 2016, gold producers also continued to reduce their debts. As before, our selection criteria comprise healthy balance sheets and high-quality projects. We also prefer companies that are willing to invest parts of their cash flows into new projects, which will safeguard production continuity in the longer term. Higher gold and silver grades (grades per ton) are also preferable. Since its launch on 18 April 2006, the AMG Gold Mines & Metals has distinctively outperformed the benchmark index but also the passive ETF products on goldmining stocks (chart 4). We would like to take this opportunity to thank our investors for the trust they are placing in us and wish them a successful Your AMG Fondsverwaltung AG As shown in chart 3, during the course of 2016, we have continuously increased the allocation of companies with a silver production. Due to a supply/demand deficit in physical silver, we will retain our upbeat assumption for a positive silver price and we will continue to hold a high silver allocation in the portfolio for the foreseeable future. Since most silver mining companies have diversified their production with acquiring gold assets over the last few years, pure silver producers are now few and far between. Conclusion Gold is and will remain a form of insurance against unforeseen events on the financial markets. We are convinced that gold will play an important role in the financial system in the coming years, be it in the shape of physical bars or coins or as gold in the ground held by gold mining companies. Public debt is and will remain a problem and could have disastrous effects on paper currencies. We do not know when the fear-factor may once again arise in financial markets. Whether investors buy physical gold or gold producers depends on their risk propensity. In our opinion, a healthy combination is suitable for both private and institutional portfolios Apr 06 Apr 08 Apr 10 Apr 12 Apr 14 Apr 16 AMG Gold, Minen & Metalle XAU in indexed GDX ETF in indexed Chart 4: Comparison of performance since launch (18 Apr to 31 Dec. 2016) (Source: Bloomberg / Chart AMG 6

7 Statement of Assets Bank Balances Securities Equities Metals Derivatives Other assets Total Fund Assets Liabilities Net Fund Assets Outstanding units units units Number of units outstanding at the beginning of the reporting period (Class A) New Issued Units Redeemed Units Number of units outstanding at the end of the reporting period Number of units outstanding at the beginning of the reporting period (Class B) New Issued Units Redeemed Units Number of units outstanding at the end of the reporting period Number of units outstanding at the beginning of the reporting period (Class C) New Issued Units Redeemed Units Number of units outstanding at the end of the reporting period Net asset value per unit Class A in Class B in Class C in Change in net assets Net fund assets at the beginning of the reporting period Balance from unit trade Total result of the financial year Net fund assets at the end of the reporting period

8 Statement of Income Income bank deposits Income on shares (dividends) Equalisation income on subscriptions Total income less: Bank charges and debit interest Auditor fees Management fees (Class A1: 1.63%; Class B1: 1.63%; Class C: 1.13%) Custodian fees (0.10%) Other expenses Partial transfer of expenses to realized capital gains and losses Equalisation income on redemptions Total expenses Net income Realized capital gains and losses Partial transfer of expenses to realized capital gains and losses Total realized capital gains and losses Net realized gain Unrealized capital gains and losses Total result Transaction costs The investment fund bears all incidental costs for the purchase and sale of investments. In the reporting period the transaction costs amounted to Allocation of income Net income Income brought forward Income available for distribution Balance to be brought forward (Accumulated capital gains/losses) Distribution per unit Withholding tax 35% 1) Sales commission class A and class B in total ) According to circular no. 24 of the ESTV from

9 Statement of investments Description Currency Balance at (in 1000 resp. piece) Purchases Sales Price at Valuation as % of total assets Securities Equities (traded on an exchange) Agnico Eagle Mines CAD Alamos Gold -A- CAD Bear Creek Mining CAD Endeavour Silver Corp CAD First Majestic Silver CAD Fortuna Silver Mines CAD Goldcorp CAD Great Panther CAD Guyana Goldfields CAD Klondex Mines CAD Lundin Gold CAD Mag Silver Corp CAD New Gold CAD Novagold Resources CAD OceanaGold Corp CAD Osisko Gold CAD Pan American Silver CAD Premier Gold Mines CAD Sabina Gold & Silver CAD Semafo CAD Silver Standard Resources CAD Silver Wheaton CAD Silvercorp Metals CAD Tahoe Resources CAD Torex Gold Resources CAD Barrick Gold USD Coeur Mining USD Hecla Mining Co USD Iamgold USD Newmont Mining USD Randgold Res. -ADR- USD Royal Gold USD Sibanye Gold -ADR- USD Total securities Total derivatives (as per separate list) Cash and other assets Total fund assets Liabilities Total net assets Exchange rates CAD = USD =

10 Statement of investments Breakdown Distribution of shares as % of total by enterprise classification assets Seniors Intermediates Juniors 0.94 Silver stocks Explorers Royalities 6.36 Total Fair value hierarchy The following table shows the fair value hierarchy of the investments. Fair value is the price, that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Valuation Valuated at prices quoted on an active market Valuation based on observable market parameters Valuation method not based on market data (valuation models) Investment type Total amount Equities (long) Equities (short) Bonds Derivatives (long) Derivatives (short) Total Divergences in the totals may be attributed to rounding differences. 10

11 Transactions during the reporting period (If they no longer appear in the statement of net assets) Currency Description Purchases Sales Securities Equities CAD Centerra Gold CAD Detour Gold CAD Eldorado Gold CAD Franco-Nevada CAD Pilot Gold CAD Primero Mining Corp CAD Teranga Gold CAD Torex Gold Resources CAD Yamana Gold USD Anglogold Ashanti -ADR USD Freeport-McMoRan USD Gold Fields ADR USD Kinross Gold Subscription rights CAD Yamana Gold Anr for shs Other assets / Gold bars Goldbarren 1KG 999.9/ Incl. merger, split, reorganisation, redemption etc. Bonds in thousand. 11

12 Derivatives using the commitment approach II Market risk The fund does not hold any derivative financial assets that are subject to market risk. Currency risk The fund does not hold any derivative financial assets that are subject to currency risk. Credit risk in amount in as % of net assets gross net 0.00 Forward exchange contracts (closed) Currency Expiry Amount of foreign currency Equivalent value purchase Value at Income USD/ Result on forward exchange contracts

13 Supplementary information to the annual report as of December 31, Fund Performance No benchmark comparison is available for this fund. Past performance is no indicator for current or future results. Performance figures do not take into account any commissions charged on issue or redemption of units. 2. Soft commission agreements For the period from January 1 to December 31, 2016 no soft commission agreements in the name of LB(Swiss) Investment AG were applied and no soft commissions were received. 3. Principles for the valuation and the calculation of the net asset value The valuation is effected as per 16 of the fund contract 16 Calculation of the Net Asset Value 1. The net asset value of the investment fund and the share of assets attributable to the individual classes [prorated shares] are calculated in at their market value as of the end of the financial year and for each day on which units are issued or redeemed. The fund assets will not be calculated on days when the stock exchanges / markets in the investment fund s main investment countries are closed (e.g., bank and stock exchange holidays). 2. Securities traded on a stock exchange or another regulated market open to the public shall be valued at the current prices paid on the main market. Other investments or investments for which no current market value is available shall be valued at the price which would probably be obtained upon a diligent sale at the time of the valuation. In such cases, the fund management company shall use appropriate and recognized valuation models and principles to determine the market value. 3. Open-ended collective investment schemes are valued at their redemption price / net asset value. If they are regularly traded on a stock exchange or another regulated market open to the public, the fund management company may value such funds in accordance with sec The value of money market instruments that are not traded on a stock exchange or another regulated market open to the public is determined as follows: the valuation price of such investments is successively adjusted in line with the redemption price, taking the net purchase price as the basis and ensuring that the investment returns calculated in this manner are kept constant. If there are significant changes in the market conditions, the valuation principles for the individual investments will be adjusted in line with the new market returns. If there is no current market price in such instances, the calculations are as a rule based on the valuation of money market instruments with the same characteristics (quality and domicile of the issuer, issuing currency, term to maturity). 5. Bank credit balances are valued on the basis of the amount due plus accrued interest. If there are significant changes in the market conditions, the valuation principles for time deposits will be adjusted in line with the new circumstances. 6. The net asset value of units of a given class is determined by the proportion of the fund s assets as valued at the market value attributable to the given unit class, minus any of the investment fund s liabilities that are attributed to the given unit class, divided by the number of units of the given class in circulation. It will be rounded to one centime. 7. The percentages of the market value of the Fund s net assets (fund assets less liabilities) attributable to the individual unit classes is determined for the first time at the initial issue of more than one class of units (if this occurs simultaneously) or the initial issue of a further unit class. The calculation is made on the basis of the assets accruing to the Fund for each unit class. The percentage is recalculated when one of the following events occurs: a) when units are issued and redeemed; b) on the relevant date for distributions, provided that (i) such distributions are only made for individual unit classes (distribution classes); (ii) the distributions of the various unit classes differ when expressed as a percentage of the respective net asset values; or (iii) different commission or expenses are charged on the distributions of the various unit classes when expressed as a percentage of the distribution; c) when the net asset value is calculated, as part of the allocation of liabilities (including due or accrued expenses and commissions) to the various unit classes, provided that the liabilities of the various unit classes are different when expressed as a percentage of the respective net asset value, especially if (i) different commission rates are applied for the various unit classes or (ii) class-specific expenses are charged; d) when the net asset value is calculated, as part of the allocation of income or capital gains to the various unit classes, provided the income or capital gains stem from transactions made solely in the interests of one unit class or several unit classes but disproportionately to their share of the net fund assets. 4. Information about Affairs of Special Economic or Legal Importance The fund prospectus and regulations have been amended to meet the Ordiance of the Swiss Financial Market Supervisory Authority FINMA (CISO-FINMA) of 27 August 2014 as set out in the model prospectus with integrated model fund contract for a securities fund under Swiss Law. The respective publication was made on October 4, The full text of the publication is available in German at the Fund Management Company. 13

14 Short form report of the audit company for collective investment schemes on the financial statements As audit company for collective investment schemes, we have audited the accompanying financial statements of the investment fund AMG Gold, Mines & Metals, which comprise the statement of net assets and the income statement, the statement on the appropriation of available earnings and the disclosure of the total costs as well as the supplemental disclosures in accordance with art. 89 para. 1 lit. b h of the Swiss Collective Investment Schemes Act (pages 3, 4 and 7 to 13 of the annual report), for the year ended December 31, that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended December 31, 2016 comply with the Swiss Collective Investment Schemes Act, the related ordinances as well as the investment fund agreement and the prospectus. Responsibility of the Fund Management Company s Board of Directors The Board of Directors of the Fund Management Company is responsible for the preparation of the financial statements in accordance with the requirements of the Swiss Collective Investment Schemes Act, the related ordinances as well as the investment fund agreement and the prospectus. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors of the Fund Management Company is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Responsibility of the audit company for collective investment schemes Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and art. 127 CISA as well as on independence (art. 11 AOA) and that there are no circumstances incompatible with our independence. PricewaterhouseCoopers AG Daniel Pajer, Audit Expert, Auditor in charge Andreas Scheibli, Audit Expert Zurich, January 20, 2017 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the existence and effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe 14