CI American Small Companies Fund

Transcription

1 This semi-annual management report of fund performance contains financial highlights but does not contain the complete semi-annual or annual financial statements of the investment fund. You can get a copy of the semi-annual or annual financial statements at your request, and at no cost, by calling , by writing to us at CI Investments Inc., 2 Queen Street East, Twentieth Floor, Toronto, ON, M5C 3G7 or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure. RESULTS OF OPERATIONS The net asset value of the Fund decreased by $.3 million to $92.7 million from March 31, 18 to September, 18. The Fund had net redemptions of $4.6 million during the period. The portfolio s performance increased assets by $4.3 million. Class A units returned 4.4% after fees and expenses for the six-month period ended September, 18. Over the same time period, the Fund s benchmark returned.3%. The benchmark is the S&P Total Return Index. The performance of the Fund s other classes is substantially similar to that of Class A units, except for differences in the structure of fees and expenses. For the returns of the Fund s other classes, please refer to the Past performance section. Stocks had a strong quarter, touching all-time highs, shrugging off trade tensions and benefitting from exceptional profit growth. Corporate profits jumped 16% year-over-year according to the Department of Commerce, helped by tax cuts and a robust domestic economy. Investors lost confidence in social media stocks as some reported disappointing quarterly results along with cautious outlooks for growth. Information technology stocks generally experienced an increase in volatility in an environment of heightened regulatory scrutiny. Specific stocks hurt by tariffs also made headlines. Large-cap stocks beat small caps. Health care, industrials, information technology, telecommunications services and large-cap financials had strong returns. All sectors were positive except for energy, despite Brent crude edging over $8 per barrel, a four-year high. The -year U.S. Treasury yield closed the quarter above 3%. The Federal Reserve raised interest rates for the third time in 18 which implies that more rate increases are likely this year and next. U.S. GDP grew at a 4.2% rate in the second quarter amid a pickup in hiring. The consumer price index rose 2.7% from the previous year through August, offsetting modest wage gains. Nevertheless, consumer confidence rose to nearly an 18-year high. Tariffs of $2 billion worth of Chinese goods went into full effect during the quarter, with observers debating the influence they would have on consumers. Investments in Credit Acceptance Corp., Axos Financial Inc., CarMax Inc., LogMeIn Inc., Casey s General Stores Inc., FactSet Research Systems Inc., Carter s Inc., Bruker Corp., CyberArk Software Ltd. and Watsco Inc. were made during the reporting period. Credit Acceptance is in the business of indirect subprime auto lending. Since going public 25 years ago, the company has only lost money in one year (1999), has grown earnings per share at an annualized rate of 21% and has earned an average return on equity of 22.9%. Axos Financial has a sustainable low-cost competitive advantage in a commodity business (banking) through its internet-based business model. Given that a significant portion of bank transactions now occur outside of branches, BofI isn t harmed from a competitive perspective and isn t encumbered with an expensive branch network. The company passes on a significant portion of the benefit to customers through better deposit and loan rates creating a virtuous growth cycle. CarMax, the largest retailer of used vehicles in the United States, currently operates 185 stores and sold 7, used cars at retail in the last 12 months. Despite its size, market share is only about 4.4% of -4 years old used cars, while their share can be % in their more mature markets. CarMax has a differentiated business model (no-haggle pricing, large selection, non-traditional salesperson incentives). Aside from scale, other barriers to entry include an enormous amount of retail and wholesale transaction data, in-house auction business and in-house financing. The company is run by a solid management team with a strong track record on both operations and capital allocation. Over the long term, CarMax can continue to gain market share in this highly fragmented market. The Fund sold out of VeriFone Systems Inc., LegacyTexas Financial Group, Harmonic Inc., Black Hills Corp., Under Armour Inc., TripAdvisor Inc., Algonquin Power & Utilities Corp., Live Nation Entertainment Inc., Westinghouse Air Brake Technologies Corp. and Alkermes PLC during the period. TripAdvisor is a leading user generated content travel website with 455 million average monthly unique users and 57 million reviews on 1.9 million hotels, 4.4 million restaurants and 875 thousand attractions. The stock was a top contributor after reporting better than expected first-quarter 18 results, including 36% year-over-year growth in its experiences business and raising its 18 EBITDA guidance. We used the strength to exit the position as the shares reached our price target. The portfolio posted positive absolute returns for the period. Stock selection in the consumer staples and information technology sectors and a greater-than-index allocation to the health care sector were positive contributors to relative results. The largest individual contributors were Centene Corp., Encompass Health Corp., LivaNova PLC, Morningstar Inc. and Bio-Rad Laboratories Inc. The Fund underperformed its benchmark during the period. Stock selection, particularly in the consumer discretionary, materials, real estate, financials, industrials and energy sectors, was the primary detractor from relative results. The largest individual detractors were LGI Homes Inc., Bank of the Ozarks Inc., Summit Materials Inc., LCI Industries and Jones Lang LaSalle Inc. The Fund s less-than-index allocations to the energy and real estate sectors also negatively impacted relative performance. RECENT DEVELOPMENTS Stocks have the support of a robust global economy, policy rates that remain negative in real terms and the broad adoption of technology that reduces the need for capital and labour. The U.S. is also benefitting from the Tax Cuts and Jobs Act, which has boosted corporate profits. However, as its effect wanes and financial conditions tighten, we expect both economic and earnings growth to moderate. With trade frictions potentially increasing and interest rates likely to rise, the stage is set for higher volatility and a growing focus on company fundamentals. We believe our investment approach is well suited to this environment. As always, we seek companies that can generate a growing stream of free cash flow and can allocate that cash effectively for the benefit of shareholders. CIG - 213

2 Effective July 26, 18, the risk rating for the Fund changed from Medium to High to Medium. This change is the result of an annual review to comply with the methodology mandated by the Canadian Securities Administrators and is not the result of any changes to investment objective, strategies or management of the Fund. Management Fees Approximately 26% of total management fees were used to pay for sales and trailing commissions. The remaining 74% of management fees were used for investment management and other general administration. Effective September, 18, Tom Eisenhauer became a member of the Board of Governors ( BOG ) and Independent Review Committee ( IRC ), and effective October 15, 18, Mary Robertson resigned as a member of the BOG and IRC. Independent Review Committee The Fund received standing instructions from the Fund s Independent Review Committee with respect to the following related party transactions: RELATED PARTY TRANSACTIONS Manager, Portfolio Advisor, Trustee and Registrar CI Investments Inc. is the Manager, Portfolio Advisor, Trustee and Registrar of the Fund. CI Investments Inc. is a subsidiary of CI Financial Corp. The Manager, in consideration for management fees, provides management services required in the day-to-day operations of the Fund. The Manager bears all of the operating expenses of the Fund (other than taxes, borrowing costs and new governmental fees) in return for a fixed administration fee. Management fee and fixed administration fee rates as at September, 18, for each of the classes are shown below: Annual management fee rate (%) Annual fixed administration fee rate (%) Class A Class A Class A Class A Class A Class A Class E Class EF.9.15 a) trades in securities of CI Financial Corp.; b) purchases or sales of securities of an issuer from or to another investment fund managed by the Manager; and c) purchases or sales of other investment funds managed by the Manager or their affiliates. The applicable standing instructions require that related party transactions be conducted in accordance with the Manager s policies and procedures and that the Manager advise the IRC of any material breach of a condition of the standing instructions. The standing instructions require, among other things, that investment decisions in respect of related party transactions (a) are free from any influence by an entity related to the Manager and without taking into account any consideration relevant to an entity related to the Manager; (b) represent the business judgment of the Manager uninfluenced by considerations other than the best interests of the Fund; (c) are made in compliance with the Manager s policies and procedures; and (d) achieve a fair and reasonable result for the Fund. Transactions made by the Manager under the standing instructions are subsequently reviewed by the IRC on a quarterly basis to monitor compliance. The Fund relied on the IRC s standing instructions regarding related party transactions during this reporting period. Except as otherwise noted above, the Fund was not a party to any related party transactions during the period ended September, 18. Class F Class F Class F2.9. Class F Class F Class F5.7. Class I Paid directly by investor - Class O Paid directly by investor.15 Class P Paid directly by investor.21 Class W Paid directly by investor.21 The Manager received $.8 million in management fees and $.1 million in fixed administration fees for the period.

3 FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the past six periods, as applicable. Net Assets per Unit ($) (1) (2) (4) * Increase (decrease) from operations: Distributions: Total Realized Unrealized Total increase From net investment Net assets Net assets at the beginning Total expenses (excluding gains (losses) for gains (losses) for (decrease) from income (excluding From From capital Total at the end of the period of period (2) revenue distributions) the period the period operations (2) dividends) dividends (2, 3) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class A Commencement of operations September 9, 1995 Sept., (.81) 5.9 (2.61) Mar. 31, (1.51) 6.28 (4.91) Mar. 31, (1.37) Mar. 31, (1.29) 7.71 (9.95) (2.64) Mar. 31, (1.11) Mar. 31, (.94) Class A1 Sept., (.12).92 (.43) Mar. 31, (.21).88 (.44) Class A2 Sept., (.12).92 (.38) Mar. 31, (.21).87 (.58) Class A3 Sept., (.12).92 (.38) Mar. 31, (.).86 (.91) (.14) Class A4 Sept., (.11).94 (.18) Mar. 31, (.19).77 (.71) (.2) Class A5 Sept., (.11).93 (.42) Mar. 31, (.18).97 (1.58) (.67) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights.

4 Net Assets per Unit ($) (1) (2) (4) * Increase (decrease) from operations: Distributions: Total Realized Unrealized Total increase From net investment Net assets Net assets at the beginning Total expenses (excluding gains (losses) for gains (losses) for (decrease) from income (excluding From From capital Total at the end of the period of period (2) revenue distributions) the period the period operations (2) dividends) dividends (2, 3) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class E Commencement of operations July 29, 15 Sept., (.14) 1.5 (.48) Mar. 31, (.26) 1.27 (.53) Mar. 31, (.24) Mar. 31, (.14).7 (1.65) (.94) Class EF Commencement of operations July 29, 15 Sept., (.7) 1.6 (.32) Mar. 31, (.13) 1.12 (.68) Mar. 31, (.12) Mar. 31, (.7).76 (1.95) (1.11) Class F Commencement of operations July 17, Sept., (.12) 1.53 (.68) Mar. 31, (.21) 1.63 (1.22) Mar. 31, (.19) Mar. 31, (.17) 1.96 (2.42) (.41) Mar. 31, (.15) Mar. 31, (.13) Class F1 Sept., (.7).93 (.42) Mar. 31, (.11).87 (.54) Class F2 Sept., (.7).93 (.45) Mar. 31, (.11).85 (.63) Class F3 Sept., (.6).93 (.32) Mar. 31, (.).82 (.56) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights.

5 Net Assets per Unit ($) (1) (2) (4) * Increase (decrease) from operations: Distributions: Total Realized Unrealized Total increase From net investment Net assets Net assets at the beginning Total expenses (excluding gains (losses) for gains (losses) for (decrease) from income (excluding From From capital Total at the end of the period of period (2) revenue distributions) the period the period operations (2) dividends) dividends (2, 3) gains Return of capital distributions shown (2) $ $ $ $ $ $ $ $ $ $ $ $ Class F4 Sept., (.5).93 (.43) Mar. 31, (.9).93 (1.3) (.7) Class F5 Sept., (.5).94 (.43) Mar. 31, (.8).87 (.86) Class I Commencement of operations July 31, 1 Sept., (1.51) Mar. 31, (2.63) Mar. 31, Mar. 31, (5.44) (.85) Mar. 31, Mar. 31, Class O Commencement of operations July 29, 15 Sept., (.1) 1.11 (.44) Mar. 31, (.2) 1.16 (.77) Mar. 31, (.2) Mar. 31, 16.. (.1).39 (.) Class P Sept., (.1).95 (.46) Mar. 31, (.2) 1.2 (1.26) (.9) Class W Commencement of operations July 27, 17 Sept., (.1) 1.1 (.47) Mar. 31, (.2) *Footnotes for the tables are found at the end of the Net Assets per Unit section of the Financial Highlights.

6 (1) This information is derived from the Fund s semi-annual and annual financial statements. (2) Net assets per unit and distributions per unit are based on the actual number of units outstanding for the relevant class at the relevant time. The increase (decrease) in net assets from operations per unit is based on the weighted average number of units outstanding for the relevant class over the fiscal period. (3) Distributions are automatically reinvested in additional units of the Fund. (4) This information is provided for the period ended September, 18 and the years ended March 31.

7 Ratios and Supplemental Data (1) (5) * Total net assets (5) Number of units outstanding (5) Management expense ratio before taxes (2) Management expense ratio after taxes (2) Effective HST rate for the period (2) Harmonized Trading Portfolio sales tax (2) expense ratio (3) turnover rate (4) $ s s % % % % % % Class A Commencement of operations September 9, 1995 Sept., 18 57, Mar. 31, 18 58, Mar. 31, 17 82,527 1, Mar. 31, 16 8,332 1, Mar. 31, 15 85,684 1, Mar. 31, 14 77,658 1, Class A1 Sept., 18 9, Mar. 31, 18 9, Class A2 Sept., 18 2, Mar. 31, 18 2, Class A3 Sept., Mar. 31, Class A4 Sept., Mar. 31, Class A5 Sept., Mar. 31, *Footnotes for the tables are found at the end of the Financial Highlights section.

8 Ratios and Supplemental Data (1) (5) * Total net assets (5) Number of units outstanding (5) Management expense ratio before taxes (2) Harmonized sales tax (2) Management expense ratio after taxes (2) Effective HST rate for the period (2) Trading expense ratio (3) Portfolio turnover rate (4) $ s s % % % % % % Class E Commencement of operations July 29, 15 Sept., 18 2, Mar. 31, 18 2, Mar. 31, Mar. 31, Class EF Commencement of operations July 29, 15 Sept., Mar. 31, Mar. 31, Mar. 31, Class F Commencement of operations July 17, Sept., 18 3, Mar. 31, 18 3, Mar. 31, 17 3, Mar. 31, 16 3, Mar. 31, 15 4, Mar. 31, 14 3, Class F1 Sept., Mar. 31, Class F2 Sept., Mar. 31, Class F3 Sept., Mar. 31, *Footnotes for the tables are found at the end of the Financial Highlights section.

9 Ratios and Supplemental Data (1) (5) * Total net assets (5) Number of units outstanding (5) Management expense ratio before taxes (2) Harmonized sales tax (2) Management expense ratio after taxes (2) Effective HST rate for the period (2) Trading expense ratio (3) Portfolio turnover rate (4) $ s s % % % % % % Class F4 Sept., Mar. 31, Class F5 Sept., Mar. 31, Class I Commencement of operations July 31, 1 Sept., 18 13, Mar. 31, 18 12, Mar. 31, 17 14, Mar. 31, 16 12, Mar. 31, 15 16, Mar. 31, 14 8, Class O Commencement of operations July 29, 15 Sept., 18 2, Mar. 31, 18 2, Mar. 31, 17 2, Mar. 31, Class P Sept., Mar. 31, Class W Commencement of operations July 27, 17 Sept., Mar. 31, *Footnotes for the tables are found at the end of the Financial Highlights section.

10 (1) This information is derived from the Fund s semi-annual and annual financial statements. (2) Management expense ratio is calculated based on expenses charged to the Fund (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net assets for the period, including the Fund s proportionate share of any underlying fund(s) expenses, if applicable. The Effective HST tax rate is calculated using the attribution percentage for each province based on unitholder residency and can be different from 13%. (3) The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net assets during the period, including the Fund s proportionate share of such expenses of any underlying fund(s), if applicable. (4) The Fund s portfolio turnover rate indicates how actively the Fund s portfolio advisor manages its portfolio investments. A portfolio turnover rate of % is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the fiscal period. The higher a Fund s portfolio turnover rate in a period, the greater the trading costs payable by the Fund in the period, and the greater the chance of an investor receiving taxable capital gains in the period. There is not necessarily a relationship between a higher turnover rate and the performance of a Fund. Portfolio turnover rate is calculated by dividing the lesser of the cost of purchases and the proceeds of sales of portfolio securities for the period, and excluding cash and short-term investments maturing in less than one year, and before assets acquired from a merger, if applicable, by the average of the monthly fair value of investments during the period. (5) This information is provided for the period ended September, 18 and the years ended March 31.

11 PAST PERFORMANCE This section describes how the Fund has performed in the past. Remember, past returns do not indicate how the Fund will perform in the future. The information shown assumes that distributions made by the Fund in the periods shown were reinvested in additional units of the relevant classes of the Fund. In addition, the information does not take into account sales, redemption, distribution or other optional charges that would have reduced returns or performance. Year-by-Year Returns The following charts show the Fund s semi-annual and annual performance for each of the periods shown and illustrate how the Fund s performance has changed from period to period. In percentage terms, the charts show how much an investment made on the first day of each financial period would have grown or decreased by the last day of each financial period, except where noted. Class A Class A1 Class A2 Class A Mar. 9 Mar. Mar. 11 Mar. 12 Mar. 13 Mar. 14 Mar. 15 Mar. 16 Mar. 17 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Class A4 Class A5 Class E Class EF Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 16 Mar. 17 Mar. 18 Sept. 18 Mar. 16 Mar. 17 Mar. 18 Sept. 18 Class F Class F1 Class F2 Class F Mar. 9 Mar. Mar. 11 Mar. 12 Mar. 13 Mar. 14 Mar. 15 Mar. 16 Mar. 17 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 18 Sept. 18 Class F4 Class F5 Class I Class O Mar. 18 Sept. 18 Mar. 18 Sept. 18 Mar. 9 Mar. Mar. 11 Mar. 12 Mar. 13 Mar. 14 Mar. 15 Mar. 16 Mar. 17 Mar. 18 Sept. 18 Mar. 16 Mar. 17 Mar. 18 Sept. 18

12 Class P Mar. 18 Sept Class W Mar. 18 Sept return is for the period from May 1, 17 to March 31, return is for the period from July 29, 15 to March 31, return is for the period from July 27, 17 to March 31,

13 SUMMARY OF INVESTMENT PORTFOLIO as at September, 18 Category % of Net Assets Category % of Net Assets Top 25 Holdings % of Net Assets Country allocation U.S.A Netherlands Bermuda Israel Other Net Assets (Liabilities)....4 Cash & Equivalents....3 Canada.... Sector allocation Industrials.... Financials Information Technology Consumer Discretionary Health Care Real Estate Materials Consumer Staples Energy Other Net Assets (Liabilities)....4 Cash & Equivalents....3 Private Placements.... Centene Corp XPO Logistics Inc Toro Co Encompass Health Corp Universal Health Services Inc., Class B Sabre Corp Bank OZK AMETEK Inc Eagle Bancorp Inc Credit Acceptance Corp Universal Display Corp Coherent Inc Axos Financial Inc Jones Lang LaSalle Inc CarMax Inc LogMeIn Inc Markel Corp LCI Industries Casey s General Stores Inc Core Laboratories N.V LGI Homes Inc Western Alliance Bancorp Service Corp International Hexcel Corp Geo Group Inc Total Net Assets (in $ s) $92,724 The summary of investment portfolio may change due to ongoing portfolio transactions of the Fund and updates will be available on a quarterly basis. A NOTE ON FORWARD-LOOKING STATEMENTS This report may contain forward-looking statements about the Fund, its future performance, strategies or prospects, and possible future Fund action. The words may, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance. Forward-looking statements involve inherent risks and uncertainties, both about the Fund and general economic factors, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made by the Fund. These factors include, but are not limited to, general economic, political and market factors in Canada, the United States and internationally, interest and foreign exchanges rates, global equity and capital markets, business competition, technological changes, changes in laws and regulations, judicial or regulatory judgments, legal proceedings and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. All opinions contained in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility. 13