Your Next Destination

understanding your

POCKET GUIDE

2

How Is Your Portfolio Doing? If you’re not sure, it may be due to a simple fact: Financial terminology is confusing. To be an informed and confident investor, and to have a relationship of trust with your advisor, it’s important for you to understand the standard terms used in most financial statements and in materials used in meetings with your advisor. You’ll spend less time wondering “How am I doing?” and more time talking about whether you’re on course to meet your short- and long-term financial goals.

First, focus on a few big-picture goals. You’ll want to review:

n A summary of your investment holdings and the overall asset allocation—does the mix of assets reflect your objectives?

“In other words”: How is my portfolio constructed? n Investment returns for your portfolio and the underlying holdings. What is my

long-term performance, both absolute and relative?

“In other words”: How is my portfolio performing? n Portfolio activity/principal reconciliation: How much money have I spent over

the past 12 months and since I opened the account? Was there a net value increase or decrease?

“In other words”: How is my portfolio working for me?

Let’s start by explaining the terminology in three very important categories that you may see on your statement or in meeting materials during discussions with your advisor.

You will see a presentation of the holdings in your portfolio—what asset class they are, what percentage of the total they represent, their projected income and current yield, and the activity in your portfolio—additions in and withdrawals out, and short- and long-term capital gains, for example. You’ll also see your investment results. Keep in mind that this information is a snapshot as of a recent date in the past—for example, previous month-end, quarter-end or year-end.

,

,

1. Currrent Asset Allocation Here you see the categories of cash, fixed income and equity. “In other words”: cash, bonds and stocks

What does $110,000 in estimated annual income on your fixed income mean?

“In other words”: Your bonds generally pay income to you twice a year. You may hear the word “coupon” used to refer to this. Originally, bonds were considered “bearer certificates”—physical possession of the certificate was proof of ownership, and the owner presented the paper coupon for payment. This is one place in your statement that is forward-looking, not backward-looking. While the value of your bonds was $2,750,000 as of year-end, if your coupon is 4%, you will receive $110,000, over the coming 12 months, unless the bonds mature or are called by the borrower.

What do the numbers in estimated annual income on your equity (stocks) mean?

“In other words”: These amounts are an estimate of the dividend payments that your equity investments will pay to you (your portfolio) during the coming 12 months. Dividends are usually paid on a quarterly basis.

What is yield?“In other words”: On your statement or in your meeting book, yield is the annual estimated income divided by the market value. In the case of your bonds, $110,000 divided by $2,750,000. To look at it in reverse, multiply the market value of $2,750,000 by 4% and you’ll receive income of $110,000. In the case of your equities, if the dividend yield were 1.69%, dividend income would be $119,000. Importantly, not all equities, however, pay a dividend, particularly faster growing or technology companies that are still investing in their businesses.

ALL VALUES AS OF YEAR-END

ASSET CATEGORY MARKET VALUE % OF TOTAL ESTIMATED ANNUAL INCOME % YIELD

Cash $200,000 2.0% $4,000 2.00%

Fixed Income $2,750,000 27.5% $110,000 4.00%

Tax-Exempt Fixed Income $2,000,000 20.0% $80,000 4.00%

Taxable Fixed Income $750,000 7.5% $30,000 4.00%

Equity $7,050,000 70.5% $119,000 1.69%

U.S. Large-Cap Equity $5,000,000 50.0% $100,000 2.00%

U.S. Small/Mid-Cap Equity $1,000,000 10.0% $5,000 0.50%

Developed International Equity $800,000 8.0% $12,000 1.50%

Emerging Market Equity $250,000 2.5% $2,000 0.80%

Total $10,000,000 100.0% $233,000 2.33%

For illustrative use only. Does not indicate a client would experience a particular level of income or yield.

Let’s look at a sample of each of these sections and what they mean to you.

2. Portfolio Activity, also described as Principal Reconciliation

This page shows where your portfolio started the year—“beginning market value”—and where it ended—“ending market value.” It also shows whether you made any additions (or contributions) to your portfolio, as well as money you withdrew (the figures in parentheses) for various reasons. Principal change and investment income are two important points.

“In other words”: Principal change shows the appreciation (or depreciation) of your investments resulting from the market’s performance over the course of the year. Investment income shows the interest income on bonds and dividends from equities paid during the year. Combined, they make up your total return. Total return is important because it shows an investment’s true growth over time.

Why should I care about capital gains in my portfolio?“In other words”: If your portfolio included shares of XYZ Company that were purchased for $5,000 and sold for $7,000, you had a capital gain of $2,000. That’s a realized capital gain. The gain—the difference between what it’s worth today versus what you paid for it —is unrealized unless it’s actually sold. Until it’s sold, it’s only a gain “on paper.” Once it’s sold, you’ll probably pay capital gains taxes on it. But remember that realized capital losses can offset gains, potentially lowering your amount of capital gains taxes.

ALL VALUES AS OF YEAR-END YTD

BEGINNING MARKET VALUE $9,175,000

Additions $500,000

Withdrawals ($100,000)

Taxes ($50,000)

Fees ($45,000)

Net Additions/(Withdrawals) $305,000

Adjusted Market Value $9,480,000

Principle Change $400,000

Investment Income $120,000

Total Return $520,000

Ending Market Value $10,000,000

Short-Term Capital Gains ($10,000)Long-Term Capital Gains $50,000Net Realized Capital Gains $40,000

For illustrative use only. Does not indicate a client would experience a particular level of income or yield.

3. Investment Results

This page shows your total return broken out by type of investment—a figure for total bonds and total equities, and also by the type of equity within the equity category. In this example, you had a total return as of year-end of 5.5%, made up of the total return from several different asset classes, which includes dividends and interest income, as well as market appreciation or decline.

“In other words”: While it’s important to focus on the total return for your entire portfolio—the overall measure of “How am I doing?”—it’s helpful to know where the total return comes from by type of investment. Your investments should always be compared to a particular benchmark. The benchmarks shown here are the most common indexes for broad asset classes. An index is a “basket” of equities created by an index provider such as Standard & Poor’s, Morgan Stanley Capital International (MSCI) or Russell. Capitalization, or “cap,” refers to the market value of the shares outstanding of a publicly traded company—the share price times the number of shares outstanding. It’s used to rank the size of companies, as opposed to sales or total asset figures.

n U.S. large-cap equities: The Standard & Poor’s (S&P) 500 Index consists of 500 large U.S. companies whose common stock is listed on the New York Stock Exchange or the NASDAQ exchange.

ALL VALUES AS OF YEAR-END YTD

TOTAL RETURN 5.5%

Total Fixed Income Return 1.0%

Barclays Gov/Corp Intermediate Index -1.0%

Barclays 1-10 Year Muni Index 0.1%

Total Equity Return 6.0%

U.S. Large-Cap Equity Return 7.0%

S&P 500 Index 5.0%

U.S. Mid-Cap Equity Return 5.0%

Russell Mid-Cap Index 6.0%

Developed International Equity Return -1.0%

MSCI EAFE Index -3.5%

Emerging Markets Equity Return -7.0%

MSCI Emerging Markets Index -8.0%

For illustrative use only. Does not indicate a client would experience a particular level of return.

Time-Weighted Investment Returns

6

n U.S. mid-cap equities: The Russell Mid-Cap Index measures performance of the 800 smallest companies in the broader Russell 1000 Index.

n Developed international equities: The MSCI EAFE (Europe, Australasia, Far East) Index measures the performance of 21 developed markets excluding the U.S. and Canada.

n Emerging markets equities: Equities from 23 countries that are considered “emerging” are measured by the MSCI Emerging Markets Index. Emerging markets include countries such as Brazil, Chile, the Czech Republic, Greece, Taiwan, Thailand and—believe it or not—China.

“In other words”: When you compare the performance of your asset classes to the benchmark, it’s important to keep in mind that you’re making a relative comparison—the percentage return of your investments vs. the benchmark’s return. But the absolute performance—“How much did this investment earn for me?”—is also important. Let’s say that you’ve set the goal of having your investments generate $200,000 a year so you can pay for your grandchildren’s education and make several sizeable gifts to a favorite charity. If that’s the case and your investment returned a percentage amount equal to or above your goal, absolute performance can be a good personal benchmark. On the other hand, if your portfolio has been returning 6% per year, but your withdrawals represent 10% of your portfolio assets, you will see the value of your portfolio decline over time. n

7

Good Resources for Further Knowledge:Economics A-Z Terms: www.economist.com

100 Economic Terms: quizlet.com/460890/100-economics-terms-flash-cards/

Economic Indicators to Know, Investopedia: investopedia.com

“Economics for Dummies,” Sean Flynn, Ph.D., For Dummies

“Economics Through Everyday Life,” Anthony Clark, Zephyros Press

NPR’s “Planet Money” podcasts

“Stacking Benjamins” podcasts

“Freakonomics Radio” podcasts

Money Magazine

Kiplinger’s Personal Finance Magazine

8

Asset Allocation: Why Does It Matter?

At CIBC Private Wealth Management, we know from experience that the best way to preserve and grow your assets is to offer a broad opportunity set across asset classes, geographic regions and managers. We live in a complex world with global issues, so our responsibility to our clients is to know and understand what that means for investments, and to act accordingly.

Asset allocation is the process of combining internal (managed by CIBC Private Wealth Management) and external (managed by other investment managers selected by CIBC Private Wealth Management) investment management expertise to create a long-term plan designed to meet your objectives. In 1999, we formed the firm’s Asset Allocation Committee (AAC) to provide value through a “heads together” approach to developing asset allocation recommendations. Our team of experienced analysts and portfolio managers scrutinizes economic, political and market events around the globe, both gradual and sudden, and then identifies what we think are the best opportunities across all asset classes to be represented in your portfolio.

Asset allocation is not a one-size fits all strategy, but it is one of the most important parts of portfolio management to help you reach goals. A sound asset allocation strategy across the spectrum of the main asset classes of stocks, bonds and cash or cash equivalents will consider your goals, risk tolerance and investment horizon. Each asset class has a different level of risk and return and therefore will perform differently over time.

Take a look at the pie charts on the next page to see how different asset allocation can be for individuals with different criteria.

9

One’s destination is never a place, but a

new way of seeing things.

12

CIBC Private Wealth Management includes CIBC National Trust Company (a limited-purpose national trust company), CIBC Delaware Trust Company (a Delaware limited-purpose trust company), CIBC Private Wealth Advisors, Inc. (a registered investment adviser)—all of which are wholly owned subsidiaries of CIBC Private Wealth Group, LLC—and the private wealth division of CIBC Bank USA. All of these entities are wholly owned subsidiaries of Canadian Imperial Bank of Commerce.

This document is intended for informational purposes only, and the material presented should not be construed as an offer or recommendation to buy or sell any security. Concepts expressed are current as of the date of this document only and may change without notice. Such concepts are the opinions of our investment professionals, many of whom are Chartered Financial Analyst® (CFA®) charterholders or CERTIFIED FINANCIAL PLANNER™ professionals. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the U.S.

There is no guarantee that these views will come to pass. Past performance does not guarantee future comparable results. The tax information contained herein is general and for informational purposes only. CIBC Private Wealth Management does not provide legal or tax advice, and the information contained herein should only be used in consultation with your legal, accounting and tax advisers. To the extent that information contained herein is derived from third-party sources, although we believe the sources to be reliable, we cannot guarantee their accuracy. The CIBC logo is a registered trademark of CIBC, used under license. Approved 2695-18.

Investment Products Offered are Not FDIC-Insured, May Lose Value and are Not Bank Guaranteed.

us. cibc.com/private-wealth