Imperial Canadian Dividend Income Pool. Annual Management Report of Fund Performance

Transcription

1 Imperia Canadian Dividend Income Poo 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: Imperia Canadian Dividend Income Poo (the Poo) seeks to provide monthy income and ong-term capita appreciation by investing primariy in income producing Canadian equity securities and income trust units Investment Strategies: The Poo adds vaue through prudent security seection based on fundamenta bottom-up anaysis and through the aocation of assets between common and preferred shares, income trust units, and other securities based on a review of economic and capita market conditions Risk The Poo is a Canadian neutra baanced fund that is suitabe for medium- to ong-term investors who can toerate medium investment risk For the period ended December 31, 2015, the Poo s overa eve of risk remains as discussed in the simpified prospectus Resuts of Operations The portfoio advisor of the Poo 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 Poo's net asset vaue decreased by 13% during the period, from $8,168,632 as at December 31, 2014 to $7,099,577 as at December 31, 2015 Net redemptions of $319,947 in the period, which incuded purchases of $133,486 due to rebaancing of a portfoio product that hods units of the Poo, and negative investment performance resuted in an overa decrease in net asset vaue Cass A units of the Poo posted a return of -86% for the period The Poo s primary benchmark, the S&P/TSX Composite Dividend Inde (the benchmark), returned -77% for the same period The Poo s return is after the deduction of fees and epenses, unike the benchmark Over the period, the Canadian equity market was negativey affected by decining oi and commodity prices The energy and materias sub-sectors were the worst-performing sectors, whie weaker bank stock performance refected ongoing concerns about energy- and housing-reated risks to the Canadian economy and bank oan portfoios In this economic environment, Canadian corporate earnings growth was weak and the S&P/TSX Dividend Composite Inde decined Canada s economy contracted in the first haf of 2015, and the Bank of Canada cut interest rates twice during the year Esewhere, steady US economic growth was offset by weak growth in Europe and China The US doar strengthened against a number of currencies on epectations that the US Federa Reserve Board (Fed) woud increase domestic interest rates in 2015 The Fed eventuay increased its federa funds rate by 25 basis points, and rea estate investment trusts (REITs) outperformed the broader equity markets in both the US and Canada Large overweight eposure to the underperforming heath care and energy sectors and arge underweight eposure to the outperforming consumer discretionary sector detracted from the Poo s performance In terms of rea estate, hodings with eposure to Aberta, particuary Dream Office REIT and Boardwak REIT, detracted significanty from performance, as these hodings were negativey affected by faing oi prices Significant individua detractors incuded TransAta Corp (TransAta), Teck Resources Ltd (Teck Resources), Westshore Terminas Investment Corp (Westshore Terminas), Pembina Pipeine Corp (Pembina), Jean Coutu Group (PJC) Inc (Jean Coutu), Coiers Internationa Group Inc (Coiers Internationa) and FirstService Corp (FirstService) TransAta was negativey affected by weaker power prices, economic uncertainty as a resut of ower energy prices and reguatory risk associated with Aberta s new government Uncertainty around China s growth and continued the strength of the US doar resuted in further weakness in commodity prices, which negativey affected Teck

2 Imperia Canadian Dividend Income Poo Westshore Terminas reduced its revenue and earnings outook and cut its dividend as a resut of the weak heating oi and gas price environment Pembina was negativey affected by decining oi prices and concerns about its abiity to fund future growth Jean Coutu s share price decined on concerns about the impact of Quebec s generic drug egisation and rate-fees paid to pharmacists on the company s franchisee business mode Coiers Internationa and FirstService had previousy been one company which was spit in two eary in the period Moderate overweight eposure to teecommunication services and financias sectors (incuding ife insurance companies) contributed to the Poo s performance, as did moderate underweight eposure to the underperforming materias sector Moderate underweight eposure to god stocks aso contributed, as these stocks underperformed as a resut of a strong US doar In terms of rea estate hodings, sight eposure to US REITs contributed significanty to performance as these REITs benefited from the rising US doar Individua contributors incuded Aimentation Couche-Tard Inc (Aimentation), Agrium Inc (Agrium), Canadian Apartment Properties REIT (Canadian Apartment Properties) and BCE Inc (BCE) BCE deivered strong operating performance and an attractive dividend yied Other individua contributors incuded Simon Property Group Inc, which has high-quaity ma assets, and Federa Reaty Investment Trust, a high-quaity strip ma REIT in the US that was added mid-year Aimentation benefited from strong operationa resuts and improving fue retai margins Agrium s share price rose as a resut of its stabe retai franchise, the ramp-up of its new potash mine (Vanscoy) and its ower capita ependiture profie Canadian Apartment Properties share price rose as a resut of its steady (but ow) cash-fow growth, strategic acquisitions and geographicay diversified operations The Portfoio Advisor added Brookfied Asset Management Inc (Brookfied Asset Management), Eement Financia Corp (Eement Financia) and Brookfied Property Partners LP (Brookfied Property Partners) to the Poo Brookfied Asset Management was added based on its fee-growth profie and epectations of significant acquisitions The Portfoio Advisor epects Eement Financia to use equity proceeds to fund vaue-adding acquisitions The Portfoio Advisor added Canadian Pacific Raiway based on its quaity assets and above-average dividend yied The Portfoio Advisor beieves Brookfied Property Partners is trading at an attractive vauation The Portfoio Advisor increased the Poo s hodings in TELUS Corp (TELUS), Canadian Nationa Raiway Co (Canadian Nationa Raiway) and Boardwak REIT TELUS was added for its strong wireess and wire-ine franchises The Portfoio Advisor beieves Canadian Nationa Raiway and Boardwak REIT are trading at attractive vauations, and Boardwak REIT is increasing its dividend The Portfoio Advisor eiminated hodings in Barrick God Corp (Barrick God), Manitoba Teecom Services Inc (Manitoba Teecom), Finning Internationa Inc (Finning Internationa), Canadian Oi Sands Ltd (Canadian Oi Sands), SNC-Lavain Group Inc (SNC-Lavain), Chartwe Retirement and Ventas Inc (Ventas) The Portfoio Advisor has concerns about Barrick God's restructuring efforts in a ow commodity price environment Manitoba Teecom is facing a weak operationa outook, pension iabiity issues and another potentia dividend cut Finning Internationa was sod on epectations of weaker earnings growth as resource companies reduce capita ependitures The Portfoio Advisor eiminated Canadian Oi Sands and SNC-Lavain in ight of weak commodity prices Chartwe Retirement was re-cassified as a heath care hoding and was thus no onger part of the Poo s mandate Ventas was eiminated in response to concerns about the risk of heath care REITs The Portfoio Advisor decreased hodings in Suncor Energy Inc (Suncor), Open Tet Corp (Open Tet), Empire Co Ltd (Empire), Canadian Natura Resources Ltd (Canadian Natura Resources), Aied Properties REIT (Aied Properties) and Dream Goba REIT (Dream Goba) Suncor and Open Tet were trimmed, in part, to manage risk Empire was trimmed based on its weaker earnings growth outook Canadian Natura Resources, Aied Properties and Dream Goba were trimmed on vauation concerns Recent Deveopments During the period, there were no events or activities that had a materia impact on the Poo Reated Party Transactions Canadian Imperia Bank of Commerce (CIBC) and its affiiates have the foowing roes and responsibiities with respect to the Poo, and receive the fees described beow in connection with their roes and responsibiities Manager CIBC is the Manager of the Poo CIBC receives management fees with respect to the day-to-day business and operations of the Poo The Poo pays the Manager a maimum annua management fee rate of 025% of the net asset vaue of the Poo, as described in the section entited Management Fees Trustee CIBC Trust Corporation (CIBC Trust), a whoy-owned subsidiary of CIBC, is the trustee (the Trustee) of the Poo The Trustee hods tite to the property (cash and securities) of the Poo on behaf of its unithoders Portfoio Advisor The portfoio advisor provides, or arranges to provide, investment advice and portfoio management services to the Poo CAMI, a whoy-owned subsidiary of CIBC, is the portfoio advisor of the Poo Discretionary Managers As at the date of this report, units of the Poo are offered through discretionary investment management services provided by certain subsidiaries of CIBC (coectivey, the Discretionary Managers) The Discretionary Managers may incude CIBC Trust and CAMI The Discretionary Managers arrange to purchase, switch, and redeem units of the Poo on behaf of their cients who have entered into discretionary investment management agreements with one of the 2

3 Imperia Canadian Dividend Income Poo Discretionary Managers The Discretionary Managers are the registered unithoders of the Poos for the purposes of receiving a unithoder materias and having the right to vote a proies with respect to units of the Poo Units of the Poo are aso offered to investors in connection with certain products offered by affiiated deaers pursuant to the terms of the account agreements governing such products There are no compensation arrangements with these deaers in respect of the sae of units of the Poo However, CIBC Trust receives fees from its cients for offering discretionary management services and, from these fees, CIBC Trust may pay affiiated deaers and other CIBC members for services provided in connection with the cient s discretionary investment managed account, which may hod units of the Poo CIBC receives fees from CIBC Trust for the services of CIBC advisors that assist investors with opening discretionary investment management accounts where CIBC Trust acts as the Discretionary Manager and for acting as the investors ongoing reationship manager CIBC is responsibe for the remuneration of the CIBC advisors and may pay the CIBC advisors out of such fees Further detais of the arrangement between CIBC and CIBC Trust may be found in the discretionary investment management agreement between CIBC Trust and investors CAMI receives fees from their cients for offering discretionary investment managed accounts, which may hod units of the Poo, and may pay a portion of such fees to their investment counseors 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 Word Markets Inc (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 and other securities and certain derivative products (incuding forwards) to the Poo 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 Poo or reate directy to the eecution of portfoio transactions on behaf of the Poo In addition, CIBC may enter into commission recapture arrangements with certain deaers with respect to the Poo Any commission recaptured wi be paid to the Poo During the period, the Poo paid brokerage commissions and other fees of $429,520 to CIBC WM; the Poo did not pay any brokerage commissions or other fees 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 Poo Transactions The Poo 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; 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; invest in or hod debt securities of CIBC or issuers reated to a portfoio sub-advisor purchased 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 Poo (the Custodian) The Custodian hods a cash and securities for the Poo 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 Poo incuding record-keeping and processing of foreign echange transactions The Custodian may hire sub-custodians for the Poo The fees and spreads for services of the Custodian directy reated to the eecution of portfoio transactions by the Poo 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 Poo during that month A other fees and spreads for the services of the Custodian are paid by the Manager 3

4 Imperia Canadian Dividend Income Poo and charged to the Poo 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 Poo, incuding securities ending, fund accounting and reporting, and portfoio vauation Such servicing fees are paid by the Manager and charged to the Poo on a recoverabe basis CIBC indirecty owns a 50% interest in CIBC GSS 4

5 Imperia Canadian Dividend Income Poo Financia Highights The foowing tabes show seected key financia information about the Poo and are intended to hep you understand the Poo s financia performance for the period ended December 31 The Poo's Net Assets per Unit¹ - Cass A Units Net Assets, beginning of period $ 1359 $ 1354 $ 1261 $ 1225 $ 1304 Increase (decrease) from operations: Tota revenue $ 044 $ 046 $ 045 $ 042 $ 041 Tota epenses (003) (003) (001) (001) (001) Reaized gains (osses) for the period (038) Unreaized gains (osses) for the period (117) (047) Tota increase (decrease) from operations 2 $ (114) $ 098 $ 186 $ 115 $ (003) Distributions: From income (ecuding dividends) $ 001 $ 001 $ 002 $ 001 $ 002 From dividends From capita gains Return of capita Tota Distributions 3 $ 093 $ 101 $ 089 $ 078 $ 082 Net Assets, end of period $ 1156 $ 1359 $ 1354 $ 1260 $ This information is derived from the Poo's audited annua financia statements The Poo adopted Internationa Financia Reporting Standards (IFRS) on January 1, 2014 Previousy, the Poo 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 Poo 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 Poo 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 Poo'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 Poo, or both Ratios and Suppementa Data - Cass A Units Tota Net Asset Vaue (000s) 4 $ 7,099,577 $ 8,168,632 $ 7,304,905 $ 6,537,085 $ 5,154,504 Number of Units Outstanding 4 614,137, ,152, ,341, ,273, ,319,999 Management Epense Ratio 5 017% 014% 008% 007% 008% Management Epense Ratio before waivers or absorptions 6 031% 031% 032% 032% 032% Trading Epense Ratio 7 004% 003% 004% 007% 003% Portfoio Turnover Rate 8 403% 1402% 1932% 7611% 951% Net Asset Vaue per Unit $ 1156 $ 1359 $ 1354 $ 1261 $ 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 poo (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 Imperia Canadian Dividend Income Poo Management Fees The Poo, either directy or indirecty, pays an annua management fee to CIBC to cover the costs of managing the Poo Management fees are based on the net asset vaue of the Poo 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 Poo The Poo 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 the period ended December 31, 2015, 100% of the management fees coected from the Poo was attributabe to genera administration, investment advice, and profit 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 Poo s returns are after the deduction of fees and epenses See the section entited Financia Highights for the management epense ratio Year-by-Year Returns The bar chart shows the annua performance of the Poo for each of the periods shown, and iustrates how the performance has changed from period to period The bar chart shows, in percentage terms, how an investment made on January 1 woud have increased or decreased by December 31, uness otherwise indicated Cass A Units Annua Compound Returns This tabe shows the annua compound return of each cass of units of the Poo for each indicated period ended on December 31, 2015 The annua compound tota return is aso compared to the Poo s benchmark(s) During the period, the Poo's primary and bended benchmarks were changed to better refect the Poo's strategic asset mi The Poo's current primary benchmark is the S&P/TSX Composite Dividend Inde The Poo's previous primary benchmark is the S&P/TSX Composite Inde The Poo s current bended benchmark (Bended Benchmark) is comprised of the foowing: 95% S&P/TSX Composite Dividend Inde 5% S&P/TSX Capped Rea Estate Inde 6

7 Imperia Canadian Dividend Income Poo The Poo s previous bended benchmark (Previous Bended Benchmark) is comprised of the foowing: 95% S&P/TSX Composite Inde 5% S&P/TSX Capped Rea Estate Inde 1 Year 3 Years 5 Years 10 Years* or Since Inception* Inception Date Cass A units -86% 43% 44% 47% May 15, 2003 S&P/TSX Composite Dividend Inde -77% 51% 34% 48% S&P/TSX Composite Inde -83% 46% 23% 44% Bended Benchmark -104% 40% 30% 46% Previous Bended Benchmark -81% 44% 26% 45% * If a cass of units has been outstanding for ess than 10 years, the annua compound return since inception is shown S&P/TSX Capped Rea Estate Inde is intended to represent the Canadian rea estate sector and incudes companies isted on the TSX that are engaged in rea estate management and deveopment Any constituent s reative weight is capped at 25% S&P/TSX Composite Dividend Inde aims to provide a broad-based benchmark of Canadian dividend-paying stocks It incudes a stocks in the S&P/TSX Composite Inde with positive annua dividend yieds as of the atest rebaancing of the S&P/TSX Composite Inde S&P/TSX Composite Inde is intended to represent the Canadian equity market and incudes the argest companies isted on the TSX A discussion of the reative performance of the Poo compared to its primary benchmark(s) can be found in Resuts of Operations 7

8 Imperia Canadian Dividend Income Poo 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 Financias 486 Energy 177 Teecommunication Services 71 Industrias 61 Consumer Discretionary 50 Materias 48 Consumer Stapes 35 Utiities 30 Information Technoogy 20 Cash & Cash Equivaents 15 Heath Care 05 Other Assets, ess Liabiities 02 % of Net Asset Top Positions Vaue Toronto-Dominion Bank (The) 69 Roya Bank of Canada 65 Canadian Nationa Raiway Co 47 Canadian Imperia Bank of Commerce 39 BCE Inc 36 Bank of Nova Scotia 36 Manuife Financia Corp 35 Sun Life Financia Inc 31 Bank of Montrea 29 Suncor Energy Inc 26 TELUS Corp 26 TransCanada Corp 25 Brookfied Asset Management Inc, Cass 'A' 25 Canadian Natura Resources Ltd 25 Magna Internationa Inc, Cass 'A' 23 Enbridge Inc 19 Agrium Inc 16 H&R REIT 16 Aimentation Couche-Tard Inc, Cass 'B' 15 AtaGas Ltd 15 Cash & Cash Equivaents 15 Canadian Apartment Properties REIT 15 Power Financia Corp 12 Intact Financia Corp 11 RioCan REIT 11 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 Imperia Poos CIBC 18 York Street, Suite 1300 Toronto, Ontario M5J 2T Website wwwcibccom/mutuafunds