CIBC European Equity Fund. Annual Management Report of Fund Performance

Transcription

1 CIBC European Equity Fund Annua Management Report of Fund Performance for the financia year ended December 31, 2015 A figures are reported in Canadian doars uness otherwise noted This annua management report of fund performance contains financia highights but does not contain the compete annua financia statements of the investment fund If you have not received a copy of the annua financia statements with this annua management report of fund performance, you can get a copy of the annua financia statements at your request, and at no cost, by caing us to-free at , by writing to us at CIBC, 18 York Street, Suite 1300, Toronto, Ontario, M5J 2T8, or by visiting wwwcibccom/mutuafunds or the SEDAR website at wwwsedarcom Unithoders may aso contact us using one of these methods to request a copy of the investment fund s proy voting poicies and procedures, proy voting discosure record, or quartery portfoio discosure Management Discussion of Fund Performance Investment Objective and Strategies Investment Objective: CIBC European Equity Fund (the Fund) seeks to provide ong-term growth through capita appreciation by investing primariy in equity securities of medium to arge companies, ocated in seect member countries of the European Union, as we as securities of companies in other European countries with estabished stock echanges, and in ess deveoped European countries Investment Strategies: The Fund focuses on industries that have generated consistent and predictabe, above-average earnings by investing in securities such as common shares, preferred shares, convertibe bonds, and warrants Risk The Fund is a European equity fund that is suitabe for ong-term investors who can toerate medium investment risk For the period ended December 31, 2015, the Fund s overa eve of risk remains as discussed in the simpified prospectus Resuts of Operations The portfoio advisor of the Fund is CIBC Asset Management Inc (CAMI or the Portfoio Advisor) The commentary that foows provides a summary of the resuts of operations for the period ended December 31, 2015 A doar figures are epressed in thousands, uness otherwise indicated The Fund's net asset vaue increased by 24% during the period, from $206,105 as at December 31, 2014 to $255,160 as at December 31, 2015 Positive investment performance was partiay offset by net redemptions of $3,635, resuting in an overa increase in net asset vaue Cass A units of the Fund posted a return of 226% for the period The Fund s benchmark, the MSCI Europe Inde (the benchmark), returned 171% for the same period The Fund s return is after the deduction of fees and epenses, unike the benchmark See Past Performance for the returns of other casses of units offered by the Fund China s economic sowdown resuted in ower demand for European industria and manufacturing eports, which had an impact on European equity markets Low commodity prices negativey affected earnings growth for many of Europe s industria, manufacturing and materias companies Sow European economic growth and a ow infation environment owered the earnings growth of many European muti-nationa companies The European Centra Bank s increased quantitative easing (monetary poicy used by centra banks to stimuate the economy) gave equity markets a boost As goba energy and metas prices decined throughout the year, the Fund s minima eposure to companies affected by the decine (such as economicay sensitive industrias, oi and gas, god and precious metas, and mining and metas stocks) contributed to its performance Security seection aso contributed significanty to the Fund s performance The most significant individua contributors to the Fund s performance incuded Domino s Pizza Group PLC (Domino s), Ypsomed Hoding AG (Ypsomed) and United Internet AG (United Internet) Domino s share price rose, refecting positive trends in goba fast food consumption, new menu and product innovation, an optimized onine ordering system and attractive growth in operating earnings Ypsomed benefited from strong demand for injection systems and patch pumps as the market for insuin to treat diabetes continued to show soid growth United Internet s share price rose on the company s soid growth in mobie subscriber numbers, its internationa epansion pan and strong cash fow generation The company continued to gain market share against incumbent German broadband companies Individua detractors from the Fund s performance incuded Jazz Pharmaceuticas PLC (Jazz Pharmaceuticas), Bertrandt AG (Bertrandt) and NXP Semiconductors NV (NXP) Jazz Pharmaceuticas sighty detracted from performance, as it came under pressure from concerns about the increasing risk of patent chaenges from some of the argest generic drug companies Another sight detractor from performance was Bertrandt As a suppier to the German origina equipment manufacturer automotive industry, the

2 CIBC European Equity Fund company s share price steadiy decined after Chinese automotive industry saes growth turned negative in mid-2015 NXP s share price decined on concerns that the Chinese economic sowdown woud depress chip saes and cause a buid-up in chip inventory The Portfoio Advisor added new hodings in Domino s, Wirecard AG (Wirecard) and Industria de Disena Teti SA (Indite) to the Fund The Portfoio Advisor epects Domino s to continue its high-singe-digit saes growth trajectory, supported by strong products, an easy-to-use ordering patform, highy profitabe franchised operations and store epansion The Portfoio Advisor epects Wirecard, a provider of eectronic payment services and technoogy outsourcing, to deiver soid earnings-per-share growth over the net three years The Portfoio Advisor epects Indite, Europe s argest softine retaier and the parent company of Zara, to deiver doube-digit revenue growth over the net three years, supported by epansion in Asia Hodings eiminated from the Fund incuded Jazz Pharmaceuticas and Compagnie Financiere Richemont SA (Richemont) Jazz Pharmaceuticas was eiminated on concerns of patent chaenges to some of its key drugs by arger generic companies Richemont was sod on concerns about the impact that China s anti-corruption campaign and a sowdown in Asian uury retai saes coud have on the company The Portfoio Advisor aso trimmed the Fund s hoding in Shire PLC amid patent uncertainties for one of its key drugs Recent Deveopments During the period, there were no events or activities that had a materia impact on the Fund Reated Party Transactions Canadian Imperia Bank of Commerce (CIBC) and its affiiates have the foowing roes and responsibiities with respect to the Fund, and receive the fees described beow in connection with their roes and responsibiities Manager CIBC is the Manager of the Fund CIBC receives management fees with respect to the day-to-day business and operations of the Fund, cacuated based on the net asset vaue of each respective cass of units of the Fund as described in the section entited Management Fees The Manager aso compensates its whoesaers in connection with their marketing activities regarding the Fund From time to time, CIBC may provide seed capita to the Fund Trustee CIBC Trust Corporation, a whoy-owned subsidiary of CIBC, is the trustee (the Trustee) of the Fund The Trustee hods tite to the property (cash and securities) of the Fund on behaf of its unithoders Portfoio Advisor The portfoio advisor provides, or arranges to provide, investment advice and portfoio management services to the Fund CAMI, a whoy-owned subsidiary of CIBC, is the portfoio advisor of the Fund Distributor Deaers and other firms se the units of the Fund to investors These deaers and other firms incude CIBC s reated deaers such as the principa distributor, CIBC Securities Inc (CIBC SI), the CIBC Investor s Edge discount brokerage division of CIBC Investor Services Inc (CIBC ISI), the CIBC Imperia Service division of CIBC ISI, and the CIBC Wood Gundy division of CIBC Word Markets Inc (CIBC WM) CIBC SI, CIBC ISI, and CIBC WM are whoy-owned subsidiaries of CIBC CIBC may pay traiing commissions to these deaers and firms in connection with the sae of units of the Fund These deaers and other firms may pay a portion of these traiing commissions to their advisors who se units of the Fund to investors Brokerage Arrangements and Soft Doars The Portfoio Advisor makes decisions, incuding the seection of markets and deaers and the negotiation of commissions, with respect to the purchase and sae of portfoio securities, certain derivative products (incuding futures) and the eecution of portfoio transactions Brokerage business may be aocated by the Portfoio Advisor to CIBC WM and CIBC Word Markets Corp, each a subsidiary of CIBC CIBC WM and CIBC Word Markets Corp may aso earn spreads on the sae of fied income securities and other securities and certain derivative products (incuding forwards) to the Fund A spread is the difference between the bid and ask prices for a security in the appicabe marketpace, with respect to the eecution of portfoio transactions The spread wi differ based upon various factors such as the type and iquidity of the security Deaers, incuding CIBC WM and CIBC Word Markets Corp, may furnish goods and services, other than order eecution, to the Portfoio Advisor in partia echange for processing trades through them (referred to in the industry as soft doar arrangements) These goods and services are paid for with a portion of the brokerage commissions and assist the Portfoio Advisor with investment decision-making services for the Fund or reate directy to the eecution of portfoio transactions on behaf of the Fund In addition, CIBC may enter into commission recapture arrangements with certain deaers with respect to the Fund Any commission recaptured wi be paid to the Fund During the period, the Fund paid brokerage commissions and other fees of $41,726 to CIBC WM and $5,568 to CIBC Word Markets Corp Spreads associated with fied income and other securities are not ascertainabe and, for that reason, cannot be incuded when determining these amounts Fund Transactions The Fund may enter into one or more of the foowing transactions (the Reated Party Transactions) in reiance on the standing instructions issued by the Independent Review Committee (IRC): invest in or hod equity securities of CIBC or issuers reated to a portfoio sub-advisor; 2

3 CIBC European Equity Fund invest in or hod non-echange-traded debt securities of CIBC or an issuer reated to CIBC in a primary offering and in the secondary market; make an investment in the securities of an issuer for which CIBC WM, CIBC Word Markets Corp, or any affiiate of CIBC (a Reated Deaer) acts as an underwriter during the offering of the securities at any time during the 60-day period foowing the competion of the offering of such securities (in the case of a private pacement offering, in accordance with the eemptive reief order granted by the Canadian securities reguatory authorities and in accordance with the poicies and procedures reating to such investment); purchase equity or debt securities from or se them to a Reated Deaer, where it is acting as principa; undertake currency and currency derivative transactions where a Reated Deaer is the counterparty; and purchase securities from or se securities to another investment fund or a managed account managed by the Manager or an affiiate of the Manager At east annuay, the IRC reviews the Reated Party Transactions for which they have issued standing instructions The IRC is required to advise the Canadian securities reguatory authorities if it determines that an investment decision was not made in accordance with conditions of its approva Custodian CIBC Meon Trust Company is the custodian of the Fund (the Custodian) The Custodian hods a cash and securities for the Fund and ensures that those assets are kept separate from any other cash or securities that the Custodian might be hoding The Custodian aso provides other services to the Fund incuding record-keeping and processing of foreign echange transactions The Custodian may hire sub-custodians for the Fund The fees and spreads for services of the Custodian directy reated to the eecution of portfoio transactions by the Fund are paid by CAMI and/or deaer(s) directed by CAMI, up to the amount of the credits generated under soft doar arrangements from trading on behaf of the Fund during that month A other fees and spreads for the services of the Custodian are paid by the Manager and charged to the Fund on a recoverabe basis CIBC owns a 50% interest in the Custodian Service Provider CIBC Meon Goba Securities Services Company (CIBC GSS) provides certain services to the Fund, incuding securities ending, fund accounting and reporting, and portfoio vauation Such servicing fees are paid by the Manager and charged to the Fund on a recoverabe basis CIBC indirecty owns a 50% interest in CIBC GSS 3

4 CIBC European Equity Fund Financia Highights The foowing tabes show seected key financia information about the Fund and are intended to hep you understand the Fund s financia performance for the period ended December 31 The Fund's Net Assets per Unit¹ - Cass A Units Net Assets, beginning of period $ 1575 $ 1577 $ 1297 $ 1082 $ 1165 Increase (decrease) from operations: Tota revenue $ 027 $ 035 $ 030 $ 028 $ 032 Tota epenses (059) (051) (043) (031) (031) Reaized gains (osses) for the period (134) (014) Unreaized gains (osses) for the period 197 (215) (062) Tota increase (decrease) from operations 2 $ 351 $ (001) $ 280 $ 215 $ (075) Distributions: From income (ecuding dividends) $ $ $ $ $ From dividends From capita gains Return of capita Tota Distributions 3 $ $ $ $ $ Net Assets, end of period $ 1932 $ 1575 $ 1577 $ 1297 $ This information is derived from the Fund's audited annua financia statements The Fund adopted Internationa Financia Reporting Standards (IFRS) on January 1, 2014 Previousy, the Fund prepared its financia statements in accordance with Canadian Generay Accepted Accounting Principes (GAAP) as defined in Part V of the CPA Canada Handbook Under Canadian GAAP, the Fund measured fair vaues of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for ong positions and ask prices for short positions As such, the net assets per unit figure presented in the financia statements may differ from the net asset vaue cacuated for fund pricing purposes An epanation of these differences can be found in the notes to the financia statements issued prior to January 1, 2014 Upon adoption of IFRS, the Fund measures the fair vaue of its investments by using the cose market prices, where the cose market price fas within the bid-ask spread As such, the Fund's accounting poicies for measuring the fair vaue of investments in the financia statements are consistent with those used in measuring the net asset vaue for transactions with unithoders Accordingy, the opening net asset figure as at January 1, 2013 was restated to refect accounting poicy adjustments made in accordance with IFRS A figures presented for periods prior to January 1, 2013 were prepared in accordance with Canadian GAAP and subsequent thereto were prepared in accordance with IFRS 2 Net assets and distributions are based on the actua number of units outstanding at the reevant time The tota increase (decrease) from operations is based on the weighted average number of units outstanding during the period 3 Distributions were paid in cash, reinvested in additiona units of the Fund, or both Ratios and Suppementa Data - Cass A Units Tota Net Asset Vaue (000s) 4 $ 21,405 $ 16,904 $ 19,988 $ 16,430 $ 16,025 Number of Units Outstanding 4 1,108,211 1,072,996 1,267,783 1,266,730 1,481,418 Management Epense Ratio 5 266% 266% 266% 263% 264% Management Epense Ratio before waivers or absorptions 6 307% 318% 319% 337% 337% Trading Epense Ratio 7 033% 026% 010% 017% 011% Portfoio Turnover Rate % 10434% 1169% 3222% 1692% Net Asset Vaue per Unit $ 1932 $ 1575 $ 1577 $ 1297 $ This information is presented as at December 31 of the period(s) shown 5 Management epense ratio is based on the tota epenses of the fund (ecuding commissions and other portfoio transaction costs), incurred by or aocated to a cass of units for the period shown, epressed as an annuaized percentage of the daiy average net asset vaue of that cass during the period 6 The decision to waive and/or absorb management fees and operating epenses is at the discretion of the Manager The practice of waiving and/or absorbing management fees and operating epenses may continue indefinitey or may be terminated at any time without notice to unithoders 7 The trading epense ratio represents tota commissions and other portfoio transaction costs before income taes epressed as an annuaized percentage of the daiy average net asset vaue during the period Spreads associated with fied income securities trading are not ascertainabe and, for that reason, are not incuded in the trading epense ratio cacuation 8 The portfoio turnover rate indicates how activey the portfoio advisor and/or portfoio sub-advisor manages the portfoio investmentsa portfoio turnover rate of 100% is equivaent to a fund buying and seing a of the securities in its portfoio once in the course of the period The higher a portfoio turnover rate in a period, the greater the trading costs payabe by a fund in the period, and the greater the chance of an investor receiving taabe capita gains in the year There is not necessariy a reationship between a high turnover rate and the performance of a fund 4

5 CIBC European Equity Fund The Fund's Net Assets per Unit¹ - Cass O Units Net Assets, beginning of period $ 1594 $ 1580 $ 1285 $ 1067 $ 1150 Increase (decrease) from operations: Tota revenue $ 027 $ 038 $ 030 $ 028 $ 031 Tota epenses (011) (009) (005) Reaized gains (osses) for the period (131) (015) Unreaized gains (osses) for the period 208 (271) (065) Tota increase (decrease) from operations 2 $ 414 $ 023 $ 321 $ 248 $ (049) Distributions: From income (ecuding dividends) $ 019 $ 028 $ 023 $ 029 $ 029 From dividends From capita gains Return of capita Tota Distributions 3 $ 019 $ 028 $ 023 $ 029 $ 029 Net Assets, end of period $ 1987 $ 1594 $ 1580 $ 1285 $ This information is derived from the Fund's audited annua financia statements The Fund adopted Internationa Financia Reporting Standards (IFRS) on January 1, 2014 Previousy, the Fund prepared its financia statements in accordance with Canadian Generay Accepted Accounting Principes (GAAP) as defined in Part V of the CPA Canada Handbook Under Canadian GAAP, the Fund measured fair vaues of its investments in accordance with CICA Handbook Section 3855 which required the use of bid prices for ong positions and ask prices for short positions As such, the net assets per unit figure presented in the financia statements may differ from the net asset vaue cacuated for fund pricing purposes An epanation of these differences can be found in the notes to the financia statements issued prior to January 1, 2014 Upon adoption of IFRS, the Fund measures the fair vaue of its investments by using the cose market prices, where the cose market price fas within the bid-ask spread As such, the Fund's accounting poicies for measuring the fair vaue of investments in the financia statements are consistent with those used in measuring the net asset vaue for transactions with unithoders Accordingy, the opening net asset figure as at January 1, 2013 was restated to refect accounting poicy adjustments made in accordance with IFRS A figures presented for periods prior to January 1, 2013 were prepared in accordance with Canadian GAAP and subsequent thereto were prepared in accordance with IFRS 2 Net assets and distributions are based on the actua number of units outstanding at the reevant time The tota increase (decrease) from operations is based on the weighted average number of units outstanding during the period 3 Distributions were paid in cash, reinvested in additiona units of the Fund, or both Ratios and Suppementa Data - Cass O Units Tota Net Asset Vaue (000s) 4 $ 233,755 $ 189,201 $ 324,098 $ 233,427 $ 191,086 Number of Units Outstanding 4 11,762,442 11,869,658 20,506,106 18,168,612 17,908,128 Management Epense Ratio 5 000% 000% 000% 000% 000% Management Epense Ratio before waivers or absorptions 6 001% 000% 000% 001% 000% Trading Epense Ratio 7 033% 026% 010% 017% 011% Portfoio Turnover Rate % 10434% 1169% 3222% 1692% Net Asset Vaue per Unit $ 1987 $ 1594 $ 1580 $ 1285 $ This information is presented as at December 31 of the period(s) shown 5 Management epense ratio is based on the tota epenses of the fund (ecuding commissions and other portfoio transaction costs), incurred by or aocated to a cass of units for the period shown, epressed as an annuaized percentage of the daiy average net asset vaue of that cass during the period 6 The decision to waive and/or absorb management fees and operating epenses is at the discretion of the Manager The practice of waiving and/or absorbing management fees and operating epenses may continue indefinitey or may be terminated at any time without notice to unithoders 7 The trading epense ratio represents tota commissions and other portfoio transaction costs before income taes epressed as an annuaized percentage of the daiy average net asset vaue during the period Spreads associated with fied income securities trading are not ascertainabe and, for that reason, are not incuded in the trading epense ratio cacuation 8 The portfoio turnover rate indicates how activey the portfoio advisor and/or portfoio sub-advisor manages the portfoio investmentsa portfoio turnover rate of 100% is equivaent to a fund buying and seing a of the securities in its portfoio once in the course of the period The higher a portfoio turnover rate in a period, the greater the trading costs payabe by a fund in the period, and the greater the chance of an investor receiving taabe capita gains in the year There is not necessariy a reationship between a high turnover rate and the performance of a fund 5

6 CIBC European Equity Fund Management Fees The Fund, either directy or indirecty, pays an annua management fee to CIBC to cover the costs of managing the Fund Management fees are based on the net asset vaue of the Fund and are cacuated daiy and paid monthy Management fees are paid to CIBC in consideration for providing, or arranging for the provision of, management, distribution, and portfoio advisory services Advertising and promotiona epenses, office overhead epenses, traiing commissions, and the fees of the portfoio sub-advisor(s) are paid by CIBC out of the management fees received from the Fund The Fund is required to pay appicabe taes on the management fees paid to CIBC Refer to the Simpified Prospectus for the maimum annua management fee rate for each cass of units For Cass O units, the management fee is negotiated with and paid by, or as directed by, unithoders or deaers and discretionary managers on behaf of unithoders Such Cass O management fee wi not eceed the Cass A unit management fee rate The foowing tabe shows a breakdown of the services received in consideration of the management fees, as a percentage of the management fees coected from the Fund for the period ended December 31, 2015 These amounts do not incude waived fees or absorbed epenses Cass A Units Saes and traiing commissions paid to deaers 2432% Genera administration, investment advice, and profit 7568% Past Performance The performance data provided assumes reinvestment of distributions ony and does not take into account saes, redemption, distribution, or other optiona charges payabe by any unithoder that woud have reduced returns Past performance does not necessariy indicate how a fund wi perform in the future The Fund s returns are after the deduction of fees and epenses, and the difference in returns between casses of units is primariy due to differences in the management epense ratio See the section entited Financia Highights for the management epense ratio Year-by-Year Returns These bar charts show the annua performance of each cass of units of the Fund for each of the periods shown, and iustrate how the performance has changed from period to period These bar charts show, in percentage terms, how an investment made on January 1 woud have increased or decreased by December 31, uness otherwise indicated Cass A Units 6

7 CIBC European Equity Fund Cass O Units a 2010 return is for the period from June 1, 2010 to December 31, 2010 Annua Compound Returns This tabe shows the annua compound return of each cass of units of the Fund for each indicated period ended on December 31, 2015 The annua compound tota return is aso compared to the Fund s benchmark(s) The Fund s benchmark is the MSCI Europe Inde 1 Year 3 Years 5 Years 10 Years* or Since Inception* Inception Date Cass A units 226% 142% 106% 55% December 11, 1995 MSCI Europe Inde 171% 174% 116% 57% Cass O units 259% 173% 136% 151% June 1, 2010 MSCI Europe Inde 171% 174% 116% 135% * If a cass of units has been outstanding for ess than 10 years, the annua compound return since inception is shown MSCI Europe Inde is a free foat-adjusted market capitaization inde that is designed to measure deveoped market equity performance in Europe A discussion of the reative performance of the Fund compared to its primary benchmark(s) can be found in Resuts of Operations 7

8 CIBC European Equity Fund Summary of Investment Portfoio (as at December 31, 2015) The summary of investment portfoio may change due to ongoing portfoio transactions of the investment fund A quartery update is avaiabe by visiting wwwcibccom/mutuafunds The Top Positions tabe shows a fund s 25 argest positions For funds with fewer than 25 positions in tota, a positions are shown Cash and cash equivaents are shown in tota as one position % of Net Asset Portfoio Breakdown Vaue United Kingdom 245 France 163 Germany 151 Switzerand 100 Denmark 77 Ireand 73 Netherands 57 Spain 55 Ise of Man 33 Itay 30 Cash & Cash Equivaents 13 Other Assets, ess Liabiities 03 % of Net Asset Vaue Top Positions United Internet AG, Registered 51 Greencore Group PLC 50 Ingenico Group 48 Domino's Pizza Group PLC 48 Ypsomed Hoding AG 48 Wirecard AG 44 Novo Nordisk AS, Series 'B' 44 Fresenius SE 43 Essior Internationa SA 43 Auto Trader Group PLC 42 Nesté SA, Registered, Series 'B' 41 Reckitt Benckiser Group PLC 39 Heineken NV 35 Novozymes AS, Cass 'B' 33 Grifos SA 33 Danone 33 Paysafe Group PLC 33 Luottica Group SPA 30 Prudentia PLC 30 Whitbread PLC 25 WPP PLC 23 Industria de Diseño Teti SA 22 Virgin Money Hodings UK PLC 20 Pernod-Ricard SA 16 Cash & Cash Equivaents 13 8

9 The management report of fund performance may contain forward-ooking statements Forward-ooking statements incude statements that are predictive in nature, that depend upon or refer to future events or conditions, or that incude words such as epects, anticipates, intends, pans, beieves, estimates, or other simiar wording In addition, any statements that may be made concerning future performance, strategies, or prospects and possibe future actions taken by the fund, are aso forward-ooking statements These statements invove known and unknown risks, uncertainties, and other factors that may cause the actua resuts and achievements of the fund to differ materiay from those epressed or impied by such statements Such factors incude, but are not imited to: genera economic, market, and business conditions; fuctuations in securities prices, interest rates, and foreign currency echange rates; changes in government reguations; and catastrophic events We do not undertake, and specificay discaim, any obigation to update or revise any forward-ooking statements, whether as a resut of new information, future deveopments, or otherwise prior to the reease of the net management report of fund performance

10 CIBC Mutua Funds CIBC Famiy of Managed Portfoios CIBC 18 York Street, Suite 1300 Toronto, Ontario M5J 2T8 CIBC Securities Inc Website wwwcibccom/mutuafunds CIBC Securities Inc is a whoy-owned subsidiary of CIBC and is the principa distributor of the CIBC Mutua Funds and the CIBC Famiy of Managed Portfoios CIBC Famiy of Managed Portfoios are mutua funds that primariy invest in other CIBC Mutua Funds To obtain a copy of the simpified prospectus, ca CIBC Securities Inc at or ask your advisor