annual financial statements – as at december 31, 2014 · independent auditor’s report ......

Annual Financial Statements – a s a t D e c e m b e r 3 1 , 2 0 1 4

Clarica Segregated Funds

issued by Sun Life Assurance Company of Canada

Overview .......................................................................................................................... 1

Independent Auditor’s Report ...................................................................................... 2

Equity Funds

Clarica CI Dividend Equity Benefit Fund ............................................................................... 3

Clarica CI Equity Fund B ........................................................................................................ 11

Clarica CI North American Equity Fund .............................................................................. 19

Income Fund

Clarica Income Fund 2 ........................................................................................................ 27

Notes to the Financial Statements ............................................................................. 35

Legal Notice .................................................................................................................... 39

A look inside

Enclosed are the Financial Statements for your segregated funds for

the year ended December 31, 2014. Inside is important information

about each fund, including its financial statements for the year and a

list of the top portfolio holdings of the underlying fund as of the end

of the year.

Additional information about your funds can be found on our website,

www.ci.com.

If you have any questions about your investments, please contact your

financial advisor. CI is proud to partner with advisors across Canada.

We believe investors are most successful when they follow an investment

plan developed with the assistance of a qualified advisor.

You may also contact CI Client Services at 1-800-792-9355.

Thank you for investing with us.

CANADA’S INVESTMENT COMPANY

CI has been investing on behalf of Canadians since 1965 and has

grown to become one of Canada’s largest investment fund companies.

We manage over $103 billion on behalf of two million Canadians.

CI is a subsidiary of CI Financial Corp., a TSX-listed financial services

firm with $132.6 billion in assets at December 31, 2014.

CI provides one of the industry’s widest selections of investment

products and services and a strong lineup of leading portfolio

management teams. Our portfolio management expertise is offered

through several platforms, including mutual funds, tax-efficient funds,

guaranteed solutions, alternative investments and managed solutions.

2 Queen Street East, Twentieth FloorToronto, Ontario M5C 3G7www.ci.com

Telephone: 416-364-1145Toll Free: 1-800-792-9355Facsimile: 416-364-6299

– 1 –

– 2 –Annual Financial Statements as at December 31, 2014

Clarica Segregated FundsIndependent Auditor’s Report

To the Contractholders of:

Clarica CI Dividend Equity Benefit Fund

Clarica CI Equity Fund B

Clarica CI North American Equity Fund

Clarica Income Fund 2

(collectively “the Funds”)

We have audited the accompanying financial statements of each of the Funds which comprise

the statements of financial position, comprehensive income, changes in net assets attributable to

contractholders and cash flows as at and for the periods indicated in Note 2 and the related notes,

which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements of

each of the Funds in accordance with International Financial Reporting Standards, and for such internal

control as management determines is necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements of each of the Funds based on

each of our audits. We conducted our audits in accordance with Canadian generally accepted auditing

standards. Those standards require that we comply with ethical requirements and plan and perform

an audit to obtain reasonable assurance about whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in each of our audits is sufficient and appropriate

to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements of each of the Funds present fairly, in all material respects, the

financial position, financial performance and cash flows of each of the Funds as at and for the periods

indicated in Note 2 in accordance with International Financial Reporting Standards.

Unaudited information

We have not audited the information in the Top 25 Holdings of Underlying Fund and in the Financial

Highlights and accordingly do not express an opinion on these schedules.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

June 15, 2015



2014 2013

- - 111 100 - - 275 177

1,349 2,303

1 1 383 346 2,119 2,927

66 58 33 30 33 30 - - 132 118

1,987 2,809

100.58 132.83

as at as at as at Dec. 31, 2014 Dec. 31, 2013 Jan. 1, 2013

16,658 15,726 14,056 161 129 101 1 - 2 - - - - - - 46 - - 1 1 - 16,867 15,856 14,159

- - - - 2 4 49 - - - - - - - - - - - 49 2 4 16,818 15,854 14,155

11,633 12,050 12,683

874.94 774.73 641.80

For inception date of the Fund, please refer to Note 1 in the Notes to the Financial Statements.The accompanying notes are an integral part of these financial statements.

Financial Statements (audited)

CIG - 8880

Statements of Financial Position (in $000’s except for per unit amounts)

Statements of Comprehensive Income for the years ended December 31 (in $000’s except for per unit amounts)

Assets Current assets Investments* Cash Fees rebate receivable Dividends receivable Interest receivable Receivable for investments sold Receivable for unit subscriptions

Liabilities Current liabilities Bank overdraft Payable for investments purchased Payable for unit redemptions Management fees payable Administration fees payable Insurance fees payable

Net assets attributable to contractholders

*Investments at cost

Net assets attributable to contractholders per unit: Class A

Income Net gain (loss) on investments Dividends Income distributions from investments Capital gain distributions from investments Net realized gain (loss) on sale of investments Change in unrealized appreciation (depreciation) in value of investments Other income Interest Fees rebate (Note 7)

Expenses (Note 7) Management fees Administration fees Insurance fees Harmonized sales tax

Increase (decrease) in net assets from operations attributable to contractholders

Increase (decrease) in net assets from operations attributable to contractholders per unit: Class A



The accompanying notes are an integral part of these financial statements.


2014 2013

15,854 14,155

1,987 2,809

94 81 (1,117) (1,191) (1,023) (1,110)

16,818 15,854

FundNet assets attributable to contractholders at the beginning of year Increase (decrease) in net assets from operations attributable to contractholders Unit transactions Proceeds from issuance of units Amounts paid on redemption of units

Net assets attributable to contractholders at the end of year

Statements of Changes in Net Assets Attributable to Contractholders for the years ended December 31 (in $000’s)

2014 2013

1,987 2,809

(275) (177)

(1,349) (2,303) 973 1,094 (329) (286) - - - - - - - - - - (1) 2 1,006 1,139

94 80 (1,068) (1,191) (974) (1,111)

32 28 129 101 161 129

- - 1 1

Statements of Cash Flows for the years ended December 31 (in $000’s)

Cash flows from (used in) operating activities Increase (decrease) in net assets from operations attributable to contractholders Adjustments for: Net realized (gain) loss on sale of investments Change in unrealized (appreciation) depreciation in value of investments Proceeds from sale of investments Purchase of investments (Increase) decrease in dividends receivable (Increase) decrease in interest receivable Increase (decrease) in management fees payable Increase (decrease) in administration fees payable Increase (decrease) in insurance fees payable (Increase) decrease in fees rebate receivable Net cash from (used in) operating activities

Cash flows from (used in) financing activities Proceeds from issuances of unitsAmounts paid on redemption of unitsNet cash from (used in) financing activities

Net increase (decrease) in cashCash (bank overdraft), beginning of yearCash (bank overdraft), end of year

Supplementary Information: Dividends received, net of withholding taxInterest received



Schedule of Investment Portfolio as at December 31, 2014 (audited)

No. of Average Fair Units/Shares Investment Cost ($) Value ($)

633,139 Signature Select Canadian Corporate Class (A Shares)† 11,632,971 16,657,889 Total Investments (99.0%) 11,632,971 16,657,889 Other Net Assets (Liabilities) (1.0%) 160,257 Net Assets Attributable to Contractholders (100.0%) 16,818,146

Top 25 Holdings of Underlying Fund (unaudited)


Cash & Equivalents 185,453,681 1,917,200 Toronto-Dominion Bank 76,342,104 106,423,772 1,565,850 The Bank of Nova Scotia 93,945,363 103,831,514 1,283,750 Royal Bank of Canada 85,227,162 103,008,100 7,233,213 Signature Cash Management Fund (Class C) 72,332,132 72,332,132 711,600 Canadian National Railway Co. 27,199,244 56,942,232 1,739,651 JPMorgan Chase & Co., Warrants (28Oct18) 21,543,162 42,034,223 1,623,200 UBS Group AG 31,579,725 32,407,869 522,560 Brookfield Asset Management Inc., Class A 14,661,882 30,423,443 306,600 NXP Semiconductor N.V. 15,651,392 27,210,910 557,900 Alimentation Couche-Tard Inc., Class B 6,208,531 27,164,151 429,600 Citigroup Inc. 19,831,091 27,003,457 195,600 Apple Inc. 16,236,657 25,080,535 411,250 Enbridge Inc. 20,433,400 24,568,075 206,337 Novartis AG, Registered Shares 12,295,435 22,261,293 527,450 Intel Corp. 12,131,566 22,235,445 69,000 Roche Holding AG 14,570,655 21,756,466 862,150 BHP Billiton PLC 28,831,194 21,676,299 594,550 Canadian Natural Resources Ltd. 20,968,534 21,356,236 668,820 Power Corp. of Canada 20,161,753 21,241,723 776,850 Cenovus Energy Inc. 25,282,807 18,621,095 213,500 KLA-Tencor Corp. 10,456,474 17,440,314 278,850 Loblaw Co., Ltd. 10,185,656 17,336,105 118,900 Thermo Fisher Scientific Inc. 16,129,665 17,305,168 1,016,400 EnCana Corp. 21,050,792 16,435,188

† The Underlying Fund is also managed by CI Investments Inc., the Manager of the Fund. Percentages shown in brackets in the Schedule of Investment Portfolio relate investments at fair value to net assets attributable to contractholders of the Fund. The accompanying notes are an integral part of these financial statements.




Fund Specific Notes to Financial Statements (audited)

Interest in Underlying Fund (Note 3)

The following tables present the Fund’s interest in the Underlying Fund.

as at December 31, 2014 Fair Value of Fair Value of the Fund’s Investment Ownership in the the Underlying Fund in the Underlying Fund Underlying FundUnderlying Fund (in $000’s) (in $000’s) (%) 1,715,234 16,658 1.0


as at January 1, 2013 Fair Value of Fair Value of the Fund’s Investment Ownership in the the Underlying Fund in the Underlying Fund Underlying FundUnderlying Fund (in $000’s) (in $000’s) (%) 1,453,725 14,056 1.0

Signature Select Canadian Corporate Class





Unit Transactions (Note 6)for the years ended December 31

Number of units at the beginning of yearUnits issued for cashUnits redeemed Number of units at the end of year


Class A 2014 2013 20,464 22,055 112 117 (1,354) (1,708) 19,222 20,464


Reconciliation of Equity as previously reported under Canadian GAAP to IFRS (Note 10) (in $000’s)

EquityEquity as reported under Canadian GAAPRevaluation of investments at FVTPLNet assets attributable to contractholders

as at as at Dec. 31, 2013 Jan. 1, 2013

15,854 14,155 - - 15,854 14,155

Reconciliation of Comprehensive Income as previously reported under Canadian GAAP to IFRS (Note 10) (in $000’s)

Comprehensive IncomeComprehensive income as reported under Canadian GAAPRevaluation of investments at FVTPLIncrease (decrease) in net assets from operations attributable to contractholders

for the year ended Dec. 31, 2013

2,809 - 2,809



Financial HighlightsThe following table shows selected key financial information about the Fund and is intended to help you understand the Fund’s financial performance for the past five years, as applicable.

The Fund’s Net Asset Value per UnitNet assets at December 31, of the year shown ($) (1)

Ratios and Supplemental Data Net assets ($000’s) (1)

Number of units outstanding (1)

Portfolio turnover rate (%) (2)

Management Expense Ratio Management expense ratio before taxes (%) (3)

Harmonized sales tax/Goods and services tax (%) (3)

Management expense ratio after taxes (%) (3)

Effective HST/GST rate for the year (%) (3)

*Historical figures are based on Canadian GAAP, for more details refer to footnote 4.


Financial Information (for the years ended December 31) (unaudited)

Class A 2014 2013 2012* 2011* 2010*

874.94 774.73 641.80 585.46 630.54

16,818 15,854 14,155 13,897 16,494 19,222 20,464 22,055 23,737 26,159 2.00 1.93 1.91 91.18 0.23

0.80 0.80 0.79 0.80 0.80 0.09 0.08 0.08 0.08 0.06 0.89 0.88 0.87 0.88 0.86 10.42 10.73 9.93 9.83 7.18

(1) This information is provided as at December 31, of the years shown.(2) The Fund’s portfolio turnover rate indicates how actively the Fund’s portfolio advisor manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the

course of the year. The higher a fund’s portfolio turnover rate in a year, the greater the trading costs payable by the fund in the year, and the greater the chance of an contractholder receiving taxable capital gains in the year. There is not necessarily

a relationship between a high turnover rate and the performance of a fund.(3) Management expense information is calculated based on expenses charged directly to the Fund plus, if applicable, expenses of the underlying fund, calculated on a weighted average basis on the percentage weighting of the underlying fund and

is expressed as an annualized percentage of average net assets for the years shown. As of July 1, 2010, Ontario combined the federal goods and services tax (“GST” - 5%) with the provincial retail sales tax (“PST” - 8%). The combination resulted

in a Harmonized sales tax (“HST”) rate of 13%. The Effective HST tax rate is calculated using the attribution percentage for each province based on contractholders residency and can be different from 13%. For any particular year, the rate shown

will be prorated based on the different rates in effect during that year. For the year ended December 31, 2010 the rate applied is 5% for the period January 1, 2010 to June 30, 2010 and the Fund’s Effective HST rate for the period starting

July 1, 2010. The rate shown for the year ended December 31, 2010 is the time weighted average of these rates.(4) For financial years beginning on or after January 1, 2013 the financial highlights are derived from the financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS requires net assets to be calculated

based on the last traded market price for financial assets and financial liabilities where the last traded price falls within the day’s bid-ask spread. Under IFRS there are no differences between the net assets calculated for purpose of processing

contractholders transactions and the net assets attributable to contractholders used for financial statement reporting purposes. For financial years before January 1, 2013, the financial highlights are derived from the financial statements prepared

in accordance with Canadian GAAP. Under Canadian GAAP net assets for financial statement purposes were calculated based on bid/ask price while for purpose of processing contractholders transactions net assets were calculated based on the

closing market price.




Concentration Risk (cont’d)

as at January 1, 2013 Categories Net Assets (%)Long Positions:Financials 27.7Energy 16.4Consumer Staples 10.0Materials 9.9Health Care 7.1Information Technology 5.5Industrials 5.4Exchange-Traded Funds 5.4Short-Term Investments 4.1Consumer Discretionary 3.9Telecommunication Services 2.2Cash & Equivalents 1.3Utilities 1.3Other Net Assets (Liabilities) 0.4Private Placements 0.2Foreign Currency Forward Contracts (0.2)Total Long Positions 100.6

Short Positions:Health Care (0.6)Total Short Positions (0.6)

Credit RiskThe Fund indirectly bears the credit risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund had insignificant exposure to credit risk as it invested predominantly in stocks.

The Underlying Fund was invested in fixed income securities, preferred securities and derivative instruments, if any, with the following credit ratings, as per the table below.

as at January 1, 2013 Credit Rating^ Net Assets (%)AAA/Aaa/A++ 4.0Not Rated 0.7Total 4.7

^ Credit ratings are obtained from Standard & Poor’s, where available, otherwise ratings are obtained from: Moody’s

Investors Service or Dominion Bond Rating Services, respectively.

Other Price Risk The Fund indirectly bears the other price risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund was exposed to other price risk as its holdings were sensitive to changes in general economic conditions in Canada. The Underlying Fund was invested in Canadian stocks.

As at December 31, 2014, had the Canadian markets increased or decreased by 10% (December 31, 2013 and January 1, 2013 - 10%), with all other variables held constant, net assets attributable to contractholders of the Fund would have increased or decreased, respectively, by approximately $1,666,000 (December 31, 2013 - $1,573,000 and January 1, 2013 - $1,406,000). In practice, actual results may differ from this analysis and the difference may be material.

Concentration RiskThe Signature Select Canadian Corporate Class’ financial instruments were concentrated in the following segments:

as at December 31, 2014 Categories Net Assets (%)Long Positions:Financials 28.5Cash & Equivalents 10.8Industrials 9.4Information Technology 9.1Consumer Staples 8.3Energy 7.6Consumer Discretionary 6.5Health Care 5.8Funds 4.2Warrants 3.3Materials 3.1Telecommunication Services 1.6Utilities 1.4Private Placements 0.8Foreign Currency Forward Contracts 0.2Other Net Assets (Liabilities) 0.1Total Long Positions 100.7

Short Positions:Financials (0.7)Total Short Positions (0.7)

as at December 31, 2013 Categories Net Assets (%)Financials 25.3Energy 14.9Health Care 10.6Consumer Staples 10.6Industrials 8.7Information Technology 6.3Funds 6.0Cash & Equivalents 4.9Materials 3.8Consumer Discretionary 3.5Warrants 2.9Utilities 1.9Telecommunication Services 0.7Private Placements 0.3Foreign Currency Forward Contracts (0.4)


Financial Instruments Risks (Note 9)




Interest Rate RiskThe Fund indirectly bears the interest rate risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund had insignificant exposure to interest rate risk as substantially all of its assets were invested in stocks.

Fair Value Hierarchy

The tables below summarize the inputs used by the Fund in valuing the Fund’s investments carried at fair value.

Long Positions at fair value as at December 31, 2014 Level 1 Level 2 Level 3 Total (in $000’s) (in $000’s) (in $000’s) (in $000’s)Underlying Fund 16,658 - - 16,658 Total 16,658 - - 16,658


There were no transfers between Level 1, 2 and 3 during the years ended December 31, 2014 and 2013.

Long Positions at fair value as at January 1, 2013 Level 1 Level 2 Level 3 Total (in $000’s) (in $000’s) (in $000’s) (in $000’s)Underlying Fund 14,056 - - 14,056Total 14,056 - - 14,056

Currency RiskThe Fund indirectly bears the currency risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund was exposed to currency risk, as some of its investments were denominated in currencies other than Canadian dollars, the functional currency of the Fund and the Underlying Fund. As a result, the Fund was affected by fluctuations in the value of such currencies relative to the Canadian dollar.

The tables below summarize the Underlying Fund’s exposure to currency risk.

as at December 31, 2014 Currency Net Assets (%)US Dollar 38.0 Japanese Yen 2.0 British Pound 1.4 Swiss Franc 1.3 Euro 1.0 Swedish Krona 1.0 Korean Won 0.2 Hong Kong Dollar 0.1 Total 45.0

as at December 31, 2013 Currency Net Assets (%)US Dollar 23.8 Swiss Franc 2.5 Japanese Yen 1.5 British Pound 1.5 Euro 1.0 Swedish Krona 0.7 Hong Kong Dollar 0.6 Thai Baht 0.5 Brazilian Real 0.4 Mexican Peso 0.4 Korean Won 0.2 South Africa Rand 0.2Total 33.3

as at January 1, 2013 Currency Net Assets (%)US Dollar 22.5 Swiss Franc 3.3 Brazilian Real 0.8 Thai Baht 0.8 Euro 0.7 Japanese Yen 0.6 British Pound 0.6 Hong Kong Dollar 0.6 Mexican Peso 0.5 Swedish Krona 0.2 Australian Dollar 0.1 Indonesian Rupiah 0.1 Total 30.8

As at December 31, 2014, had the Canadian dollar strengthened or weakened by 10% (December 31, 2013 and January 1, 2013 - 10%) in relation to all other foreign currencies held in the Underlying Fund, with all other variables held constant, net assets attributable to contractholders of the Fund would have decreased or increased, respectively, by approximately $750,000 (December 31, 2013 - $524,000 and January 1, 2013 - $433,000). In practice, the actual results may differ from this analysis and the difference may be material.




2014 2013

- - 144 126 - - 249 171

1,845 2,967

1 1 489 433 2,728 3,698

169 150 17 15 42 37 - - 228 202

2,500 3,496

56.36 75.07


21,731 20,045 17,464 89 72 61 1 1 2 - - - - - - - - - 2 2 2 21,823 20,120 17,529

- - - 3 4 6 - 1 1 - - - - - - - - - 3 5 7 21,820 20,115 17,522

15,218 15,377 15,763

500.19 443.99 368.65



CIG - 8882
















2014 2013

20,115 17,522

2,500 3,496

252 210 (1,047) (1,113) (795) (903)

21,820 20,115




2014 2013

2,500 3,496

(249) (171)

(1,845) (2,966) 924 1,011 (517) (457) - - - - - - - - - - - 1 813 914

252 210 (1,048) (1,113) (796) (903)

17 11 72 61 89 72

- - 1 1










825,972 Signature Select Canadian Corporate Class (A Shares)† 15,218,302 21,731,325 Total Investments (99.6%) 15,218,302 21,731,325 Other Net Assets (Liabilities) (0.4%) 88,599 Net Assets Attributable to Contractholders (100.0%) 21,819,924











Class A 2014 2013 45,305 47,531 528 521 (2,210) (2,747) 43,623 45,305



as at as at Dec. 31, 2013 Jan. 1, 2013

20,115 17,522 - - 20,115 17,522




3,496 - 3,496















Class A 2014 2013 2012* 2011* 2010*

500.19 443.99 368.65 337.20 363.94

21,820 20,115 17,522 16,842 19,235 43,623 45,305 47,531 49,947 52,852 2.45 2.43 2.23 91.48 0.37

1.08 1.08 1.07 1.08 1.08 0.11 0.11 0.11 0.11 0.08 1.19 1.19 1.18 1.19 1.16 10.75 11.07 10.38 10.43 7.65














2014 2013

- - 196 173 - - 542 368

2,298 3,949

1 1 665 601 3,702 5,092

172 155 23 21 57 52 - - 252 228

3,450 4,864

88.11 115.93


28,706 27,173 24,530 159 137 121 1 1 3 - - - - - - - - - 1 1 1 28,867 27,312 24,655

- - - 4 7 7 - - - - - - - - - - - - 4 7 7 28,863 27,305 24,648

20,065 20,830 22,136

766.66 679.13 562.78



CIG - 8881
















2014 2013

27,305 24,648

3,450 4,864

439 714 (2,331) (2,921) (1,892) (2,207)

28,863 27,305




2014 2013

3,450 4,864

(542) (368)

(2,298) (3,949) 1,926 2,224 (622) (550) - - - - - - - - - - - 2 1,914 2,223

439 714 (2,331) (2,921) (1,892) (2,207)

22 16 137 121 159 137

- - 1 1










1,091,050 Signature Select Canadian Corporate Class (A Shares)† 20,064,861 28,705,532 Total Investments (99.5%) 20,064,861 28,705,532 Other Net Assets (Liabilities) (0.5%) 157,011 Net Assets Attributable to Contractholders (100.0%) 28,862,543











as at December 31, 2014 Fair Value of Fair Value of the Fund’s Investment Ownership in the the Underlying Fund in the Underlying Fund Underlying FundUnderlying Fund (in $000’s) (in $000’s) (%) 1,715,234 28,706. 1.7












Class A 2014 2013 40,206 43,796 596 1,137 (3,155) (4,727) 37,647 40,206



as at as at Dec. 31, 2013 Jan. 1, 2013

27,305 24,648 - - 27,305 24,648




4,864 - 4,864















Class A 2014 2013 2012* 2011* 2010*

766.66 679.13 562.78 513.63 553.02

28,863 27,305 24,648 24,690 29,502 37,647 40,206 43,796 48,069 53,348 2.18 2.14 1.91 91.21 0.22

0.88 0.88 0.88 0.88 0.88 0.09 0.09 0.08 0.09 0.07 0.97 0.97 0.96 0.97 0.95 10.60 10.79 10.79 10.73 7.79



























As at December 31, 2014, had the Canadian dollar strengthened or weakened by 10% (December 31, 2013 and January 1, 2013 - 10%) in relation to all other foreign currencies held in the Underlying Fund, with all other variables held constant, net assets attributable to contractholders of the Fund would have decreased or increased, respectively, by approximately $1,292,000 (December 31, 2013 - $905,000 and January 1, 2013 - $756,000). In practice, the actual results may differ from this analysis and the difference may be material.




2014 2013

- - 55 62 6 1 5 9

72 (77)

- - - - 138 (5)

11 12 2 3 3 3 2 2 18 20

120 (25)

18.75 (3.51)


1,533 1,497 1,684 5 6 - - - - - - - - - - - - 10 - - 3 1,538 1,503 1,697

- - 3 - - 3 - - - - - - - - - - - - - - 6 1,538 1,503 1,691

1,433 1,469 1,579

247.46 228.82 232.31



CIG - 8883
















2014 2013

1,503 1,691

120 (25)

20 276 (105) (439) (85) (163)

1,538 1,503




2014 2013

120 (25)

(5) (9)

(72) 77 103 258 (62) (132) - - - - - - - - - - - - 84 169

20 279 (105) (439) (85) (160)

(1) 9 6 (3) 5 6

- - - -










143,276 Signature Canadian Bond Fund (Class I)† 1,432,778 1,533,050 Total Investments (99.7%) 1,432,778 1,533,050 Other Net Assets (Liabilities) (0.3%) 5,303 Net Assets Attributable to Contractholders (100.0%) 1,538,353



99,120,000 Province of Ontario 4.2% 06/02/2020 110,009,504 110,704,251 59,995,000 Government of Canada 5% 06/01/2037 82,652,848 88,124,590 73,845,000 Province of Quebec 4.5% 12/01/2019 82,739,587 83,103,651 81,112,000 Province of Ontario 2.1% 09/08/2018 82,051,479 82,720,033 69,841,000 Province of Quebec 4.25% 12/01/2021 76,758,765 78,899,163 77,086,000 Government of Canada 1.5% 02/01/2017 77,821,311 77,857,342 74,710,000 Government of Canada 1.75% 09/01/2019 75,599,272 76,088,400 63,615,000 Province of Ontario 4.2% 03/08/2018 69,823,729 68,991,144 62,040,000 Canada Housing Trust No.1, 1.95% 06/15/2019 62,098,930 63,034,331 Cash & Equivalents 61,049,245 43,730,000 Province of Quebec 6% 10/01/2029 53,301,185 58,858,214 55,928,000 Province of British Columbia 3.2% 06/18/2044 52,520,761 56,433,299 49,055,000 Province of Quebec 3.75% 09/01/2024 51,978,842 53,510,305 47,057,000 Government of Canada 2.5% 06/01/2024 49,203,407 49,942,939 31,756,000 Province of British Columbia 6.35% 06/18/2031 44,302,237 45,683,236 39,565,000 Canada Housing Trust No.1, 1.75% 06/15/2018 39,394,993 39,998,317 25,925,000 55 Ontario School Board Trust 5.9% 06/02/2033 29,428,239 34,333,352 31,830,000 The Royal Bank of Scotland PLC, Callable 5.37% 11/29/2049 27,808,122 30,835,313 21,960,000 Province of Nova Scotia 4.7% 06/01/2041 26,734,522 27,208,828 24,573,000 Government of Canada 2.75% 06/01/2022 25,943,251 26,529,902 20,144,000 Federal Republic of Austria 5.375% 12/01/2034 22,998,800 25,223,667 22,951,000 Province of Quebec 3.5% 12/01/2045 21,803,356 23,639,276 19,432,000 Province of British Columbia 3.7% 12/18/2020 20,755,867 21,395,351 19,640,000 Province of Ontario 3.5% 06/02/2024 20,310,322 21,096,101 2,004,931 Signature Cash Management Fund (Class C) 20,049,311 20,049,311











Signature Canadian Bond Fund









Class A 2014 2013 6,569 7,280 83 1,192 (436) (1,903) 6,216 6,569



as at as at Dec. 31, 2013 Jan. 1, 2013

1,503 1,691 - - 1,503 1,691




(25) - (25)















Class A 2014 2013 2012* 2011* 2010*

247.46 228.82 232.31 223.79 207.91

1,538 1,503 1,691 1,806 1,638 6,216 6,569 7,280 8,069 7,876 4.05 7.85 7.09 4.28 5.31

1.12 1.12 1.12 1.12 1.12 0.12 0.12 0.11 0.11 0.08 1.24 1.24 1.23 1.23 1.20 10.68 11.02 9.76 9.46 7.18















Credit Risk (cont’d)The Underlying Fund was invested in fixed income securities, preferred securities and derivative instruments, if any, with the following credit ratings, as per the tables below.

as at December 31, 2014 Credit Rating^ Net Assets (%)AAA/Aaa/A++ 26.6 AA/Aa/A+ 21.7 A 27.5 BBB/Baa/B++ 17.4 BB/Ba/B+ 2.7 Not Rated 0.5 Total 96.4

as at December 31, 2013 Credit Rating^ Net Assets (%)AAA/Aaa/A++ 36.3 AA/Aa/A+ 15.5 A 21.0 BBB/Baa/B++ 17.8 BB/Ba/B+ 3.2 B 0.2 CCC/Caa/C++ 0.1 Not Rated 3.3Total 97.4

as at January 1, 2013Credit Rating^ Net Assets (%)AAA/Aaa/A++ 33.1 AA/Aa/A+ 14.0 A 27.2 BBB/Baa/B++ 16.4 BB/Ba/B+ 2.3 Not Rated 5.8 Total 98.8



Other Price Risk The Fund indirectly bears the other price risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund did not have a significant exposure to other price risk as the Underlying Fund was invested in fixed income securities.


Concentration RiskThe Signature Canadian Bond Fund’s financial instruments were concentrated in the following segments:

as at December 31, 2014 Categories Net Assets (%)Corporate Bonds 40.5Provincial Bonds 33.0Canadian Government Bonds 17.6Foreign Government Bonds 2.3Cash & Equivalents 2.3Municipal Bonds 2.1Asset Backed Securities 0.9Funds 0.7Other Net Assets (Liabilities) 0.5Consumer Discretionary 0.1

as at December 31, 2013 Categories Net Assets (%)Corporate Bonds 42.5Canadian Government Bonds 27.3Provincial Bonds 20.3Foreign Government Bonds 4.5Municipal Bonds 1.8Cash & Equivalents 1.6Asset Backed Securities 1.0Other Net Assets (Liabilities) 0.9Consumer Discretionary 0.1

as at January 1, 2013 Categories Net Assets (%)Corporate Bonds 40.3Canadian Government Bonds 25.6Provincial Bonds 20.8Foreign Government Bonds 7.2Municipal Bonds 2.2Short-Term Investments 1.7Asset Backed Securities 1.1Cash & Equivalents 0.9Other Net Assets (Liabilities) 0.3Foreign Currency Forward Contracts (0.1)

Credit RiskThe Fund indirectly bears the credit risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund was exposed to credit risk as it invested in fixed income securities.






Interest Rate Risk (cont’d)

as at January 1, 2013 Less than 1 - 3 3 - 5 Greater than 1 Year Years Years 5 Years Total (%) (%) (%) (%) (%)Interest Rate Exposure 6.7 15.6 14.6 62.7 99.6

As at December 31, 2014, had the prevailing interest rates increased or decreased by 0.25% (December 31, 2013 and January 1, 2013 - 0.25%), with all other variables held constant, net assets attributable to contractholders of the Fund would have indirectly decreased or increased, respectively, by approximately $26,000 (December 31, 2013 - $24,000 and January 1, 2013 - $27,000). In practice, the actual results may differ from this analysis and the difference may be material.







Currency Risk (cont’d)The tables below summarize the Underlying Fund’s exposure to currency risk.

as at December 31, 2014 Currency Net Assets (%)US Dollar 0.7 New Zealand Dollar 0.2 British Pound 0.1 Total 1.0

as at December 31, 2013 Currency Net Assets (%)US Dollar 2.3 New Zealand Dollar 0.4 British Pound 0.1 Total 2.8

as at January 1, 2013 Currency Net Assets (%)US Dollar 1.7 New Zealand Dollar 0.3 Euro 0.1 British Pound 0.1 Total 2.2


Interest Rate RiskThe Fund indirectly bears the interest rate risk exposure of the Underlying Fund. As at December 31, 2014, December 31, 2013 and January 1, 2013, the Underlying Fund was exposed to interest rate risk as it invested in fixed income securities.

The tables below summarize the Underlying Fund’s exposure to interest rate risk, categorized by the contractual maturity date.

as at December 31, 2014 Less than 1 - 3 3 - 5 Greater than 1 Year Years Years 5 Years Total (%) (%) (%) (%) (%)Interest Rate Exposure 3.6 11.0 24.0 60.1 98.7

as at December 31, 2013 Less than 1 - 3 3 - 5 Greater than 1 Year Years Years 5 Years Total (%) (%) (%) (%) (%)Interest Rate Exposure 2.4 10.5 26.9 59.1 98.9



1. THE FUNDS

The following Clarica Segregated Funds were created by a board resolution of Sun Life Assurance

Company of Canada (“Sun Life”) or its predecessor; Clarica Life Insurance Company (“Clarica”) as the

dates as indicated below:

Funds Date

Clarica CI Dividend Equity Benefit Fund September 1, 1963

Clarica CI Equity Fund B October 1, 1971

Clarica CI North American Equity Fund March 1, 1962

Clarica Income Fund 2 June 1, 1974

(“the Fund” or collectively “the Funds” or “the Clarica Segregated Funds”)

Sun Life, a wholly owned subsidiary of Sun Life Financial Inc., is the sole issuer of the individual

variable insurance contract providing for investment in each Fund. The assets of each of the Funds are

owned by Sun Life and are segregated from Sun Life’s other assets. The Funds are not separate legal

entities but are separate reporting entities.

Sun Life has appointed CI Investments Inc. (the “Manager”) to perform certain administrative and

management services on its behalf in relation to the Funds and the contracts. The head office of

CI Investments Inc. is located at 2 Queen Street East, Toronto, Ontario, M5C 3G7. CI Investments Inc.

is a subsidiary of CI Financial Corp.

All Funds had a Retail Class and an Institutional Class, and effective January 17, 2003, the Institutional

Classes for all Funds were fully redeemed. The Funds were converted from an asset based fund

structure to a fund of fund structure on February 10, 2003.

The financial statements are presented in Canadian dollars.

These financial statements were authorized for issue by the Manager on June 15, 2015.

2. BASIS OF PRESENTATION AND ADOPTION OF IFRS

These financial statements have been prepared in compliance with International Financial Reporting

Standards (“IFRS”) as published by the International Accounting Standards Board (“IASB”). The Fund

adopted this basis of accounting on January 1, 2014 as required by Canadian securities legislation

and the Canadian Accounting Standards Board. Previously, the Fund prepared its financial statements

in accordance with Canadian generally accepted accounting principles as defined in the Part V of

the CPA Canada Handbook - Accounting (“Canadian GAAP”). The comparative information has been

restated from Canadian GAAP to comply with IFRS. The Fund has consistently applied the accounting

policies used in the preparation of its opening IFRS statement of financial position at January 1, 2013

and throughout all periods presented, as if these policies had always been in effect. Note 10 discloses

the impact of the transition to IFRS on the Fund’s reported financial position, financial performance

and cash flows, including the nature and effect of significant changes in accounting policies from

those used in the Fund’s financial statements for the year ended December 31, 2013 prepared under

Canadian GAAP.

The Statements of Financial Position are as at December 31, 2014, December 31, 2013 and January 1,

2013. The Statements of Comprehensive Income, Statements of Changes in Net Assets Attributable to

Contractholders and Statements of Cash Flows are for the years ended December 31, 2014 and 2013.

Schedule of Investment Portfolio is as at December 31, 2014. The Fund Specific Notes to Financial

Statements for each Fund consist of Interest in Underlying Fund as at December 31, 2014, December 31,

2013 and January 1, 2013, Unit Transactions as at December 31, 2014 and 2013, Reconciliation of

Equity as previously reported under Canadian GAAP to IFRS as at December 31, 2013 and January 1,

2013, Reconciliation of Comprehensive Income as previously reported under Canadian GAAP to IFRS

for the year ended December 31, 2013 and Financial Instruments Risks as at December 31, 2014,

December 31, 2013 and January 1, 2013, as applicable.

3. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies of the Funds:

a. Classification and recognition of financial instruments

The Funds recognize financial instruments at fair value upon initial recognition, plus transaction

costs in the case of financial instruments measured at amortized cost. Purchases and sales of

financial assets are recognized at their trade date. The Funds’ investments are measured at fair value

through profit or loss (“FVTPL”). The Funds’ obligations for net assets attributable to contractholders

are presented at the redemption amount. All other financial assets and liabilities are measured at

amortized cost. Under this method, financial assets and liabilities reflect the amount required to be

received or paid, discounted, when appropriate, at the contract’s effective rates of interest. There

were no differences between the net asset value (“NAV”) used for transactions with contractholders

and the net assets attributable to contractholders used for reporting purposes under IFRS.

b. Fair value of financial investments

At the financial reporting date, listed securities are valued based on the last traded market price

for financial assets and financial liabilities where the last traded price falls within the day’s bid-ask

spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager

determines the point within the bid-ask spread that is most representative of fair value based on the

existing marked conditions. Unlisted securities are valued based on price quotations from recognized

investment dealers, or failing that, their fair value is determined by the Manager on the basis of the

latest reported information available. Underlying Funds are valued on each business day at their net

asset value as reported by the Underlying Funds’ manager.

c. Financial assets at fair value

The Funds classify their investments in Underlying Funds as financial assets at fair value through

profit or loss.

This category has two sub-categories: financial assets held for trading; and those designated at fair

value through profit or loss at inception.

Financial assets held for trading

A financial asset is classified as held for trading (“HFT”) if it is acquired or incurred principally

for the purpose of selling or repurchasing in the near term or if no initial recognition is part of

a portfolio of identifiable financial investments that are managed together and for which there is

evidence of a recent actual pattern of short-term profit taking. The Funds’ derivative instruments

are categorized as HFT. As at December 31, 2014, December 31, 2013 and January 1, 2013, the

Funds did not hold any financial assets categorized as HFT.

Financial assets designated at fair value through profit or loss at inception

Financial assets designated at fair value through profit or loss at inception, are financial

instruments that are not classified as HFT but are managed, and their performance is evaluated

on a fair value basis in accordance with the Funds’ documented investment strategy. As at

December 31, 2014, December 31, 2013 and January 1, 2013, all financial instruments held by

the Funds were designated as FVTPL.

Clarica Segregated FundsNotes to the Financial Statements


d. Foreign exchange

The Funds subscriptions and redemptions are denominated in Canadian dollars, which is also the

Funds’ functional and presentation currency.

e. Cost of investments

Cost of investments represents the amount paid for each security, and is determined on an average

cost basis.

f. Investment transactions

Investment transactions are accounted for on the trade date. Realized gains and losses on sales of

investments and unrealized appreciation or depreciation in value of investments are calculated on an

average cost basis.

g. Income recognition

Distributions from investments are recorded on the ex-distribution date and interest income is accrued

on a daily basis.

Distributions received from investment fund holdings are recognized by the Funds in the same form in

which they were received from the Underlying Funds.

h. Consolidated financial statements

Under IFRS 10, Consolidated Financial Statements, a Fund is required to provide consolidated financial

statements if it has control over the entities it invests in. In October 2013, the IASB issued an

“Investment Entity” amendment to IFRS 10, which provides an exception to consolidation for an entity

that meets the definition of Investment Entity. The Manager has determined that all Funds satisfy the

criteria of an Investment Entity.

i. Investments in associates, joint ventures, subsidiaries and structured entities

Subsidiaries are entities, including investments in other investment entities, over which the Fund

has control. A Fund controls an entity when it is exposed to, or has rights to, variable returns from

its involvement with the entity, and has the ability to affect those returns through its power over the

entity. Associates and joint ventures are investments over which a Fund has significant influence or

joint control. Conversely, structured entities are entities that have been designed such that voting

or similar rights are not the dominant factors in determining control over the entity, such as when

voting rights relate to administrative tasks only and the relevant activities are directed by means of

contractual arrangements.

For all Funds that invest in Underlying Funds, the Manager has determined that the bottom investee

funds meet the definition of a structured entity to the top (investing) funds.

Information related to Funds’ interest in Underlying Funds for each Fund appears under the Fund

Specific Notes to Financial Statements.

j. Net asset value per unit

Net asset value per unit is calculated at the end of each day on which the Toronto Stock Exchange is

open for business by dividing the total net asset value by its outstanding units.

k. Cash

Cash is comprised of cash on deposit.

l. Increase (decrease) in net assets from operations attributable to contractholders per unit

Increase (decrease) in net assets from operations attributable to contractholders per unit is calculated

by dividing the increase (decrease) in net assets from operations attributable to contractholders by the

weighted average number of units outstanding of that class during the year.

m. Non-zero amounts

Some of the balances reported in the financial statements include amounts that are rounded to zero.

n. Future accounting changes

IFRS 9, Financial Instruments

The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will

replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for

classification and measurement, a single, forward-looking ‘expected loss’ impairment model and

a substantially reformed approach to hedge accounting. The new single, principle based approach

for determining the classification of financial assets is driven by cash flow characteristics and the

business model in which an asset is held. The new model also results in a single impairment model

being applied to all financial instruments, which will require more timely recognition of expected credit

losses. It also includes changes in respect of own credit risk in measuring liabilities elected to be

measured at fair value, so that gains caused by the deterioration of an entity’s own credit risk on such

liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning on

or after January 1, 2018, however is available for early adoption. In addition, the own credit changes

can be early applied in isolation without otherwise changing the accounting for financial instruments.

The Fund is in the process of assessing the impact of IFRS 9 and has not yet determined when it will

adopt the new standard.

4. USE OF ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of financial statements in accordance with IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and reported

amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses

during the reporting year. The following discusses the most significant accounting judgments and

estimates that the Funds have made in preparing the financial statements:

Classification and measurement of investments and application of the fair value option.

In classifying and measuring financial instruments held by the Funds, the Manager is required to

make significant judgments about whether or not the business of the Funds is to invest on a total

return basis for the purpose of applying the fair value option for the financial assets under IAS39,

Financial instruments – Recognition and Measurement. The most significant judgment made

includes the determination that certain investments are held-for-trading and that the fair value

option can be applied to those which are not.

5. INCOME TAXES

The Funds are deemed to be inter-vivos trusts under the provisions of the Income Tax Act (Canada) and

are deemed to have allocated their income to the beneficiaries. Each Fund’s net capital gains/(losses)

are deemed to be those of the beneficiaries. Accordingly, the Funds are not subject to income tax on

their net income, including net realized capital gains for the year.

A Fund may elect each year to realize capital gains/(losses) for the taxation year, to optimize the

allocation of capital gains/(losses) between redeeming and continuing beneficiaries.

Clarica Segregated FundsNotes to the Financial Statements (cont’d)


6. CONTRACTHOLDERS UNITS

Units issued and outstanding represent the capital of each Fund.

The relevant changes pertaining to subscriptions and redemptions of each Fund’s units are disclosed

in the Statements of Changes in Net Assets Attributable to Contractholders. In accordance with the

objectives and risk management policies outlined in Note 9, the Funds endeavor to invest subscriptions

received in appropriate investments while maintaining sufficient liquidity to meet redemptions by

disposal of investments when necessary.

Unit Transactions information for each Fund appears under the Fund Specific Notes to Financial Statements.

7. MANAGEMENT FEES AND OTHER EXPENSES

The Manager, in consideration of management fees received, provides management services that are

required in the day-to-day operation of the Funds, including management of the investment portfolios

of those Funds that invest in Underlying CI Funds.

The management fee is calculated as an annual percentage of the total net asset value of each Fund

at the end of each business day and is paid at the end of each month.

A Fund that invests in units of an Underlying Fund will not pay a duplicate management and administration

fee on the portion of assets that are invested in units of the Underlying Fund. During the reporting year,

a Fund may have received a management and/or administration fee rebate from an Underlying Fund.

The rebates are included in “Fees rebate receivable” and in “Fees rebate” as reflected in the Statements

of Financial Position and Statements of Comprehensive Income of each Fund, as applicable.

The management fees and the fee rebates reported in the Statements of Comprehensive Income of

each Fund are each presented on a gross basis.

In addition to the management fee, the Funds and the Underlying Funds also bear all operating and

administrative expenses including audit and legal fees, transfer agency fees, custody fees, expenses

relating to reporting and making distributions to contractholders, all other costs and fees imposed by

statute or regulation and expenses of all communications with contractholders.

The Funds pay an insurance fee to Sun Life. The insurance fee of each class of the Fund is a charge by

Sun Life for the applicable Guarantee Option in respect of that Fund Class. The insurance fees payable

at year-end are included in the “Insurance fees payable” in the Statements of Financial Position,

while insurance fees expense for the year are included in the “Insurance fees” in the Statements of

Comprehensive Income.

8. RELATED PARTY TRANSACTIONS

A Fund may invest in an Underlying Fund that is also managed by CI Investments Inc., the Manager of

the Funds. For details refer to the Schedule of Investment Portfolio of each Fund.

The management fees paid to CI Investments Inc. are also considered a related party transaction. For

more details refer to Note 7.

9. FINANCIAL INSTRUMENTS RISK

Risk management

The Funds invest in units of Underlying Funds and are exposed to a variety of financial instruments

risks: credit risk, liquidity risk and market risk (including other price risk, currency risk and interest rate

risk). The level of risk to which each Fund is exposed depends on the investment objective and the

type of investments held by the Underlying Funds. The value of investments within an Underlying Fund

portfolio can fluctuate daily as a result of changes in prevailing interest rates, economic and market

conditions and company specific news related to investments held by the Underlying Fund and this will

affect the value of each of the Funds. The Manager of the Underlying Funds may minimize potential

adverse effects of these risks by, but not limited to, regular monitoring of the Underlying Funds’

positions and market events, diversification of the investment portfolio by asset type, country, sector,

term to maturity within the constraints of the stated objectives, and through the usage of derivatives

to hedge certain risk exposures.

Concentration risk

Concentration risk arises as a result of the concentration of exposures within the same category,

whether it is a geographical allocation, asset type, industry sector or counterparty.

Credit risk

Credit risk is the risk that a security issuer or counterparty to a financial instrument will fail to meet

its financial obligations. The fair value of a debt instrument includes consideration of the credit

worthiness of the debt issuer. The carrying amount of debt instruments represents the credit risk

exposure of each Underlying Fund. Credit risk exposure for derivative instruments is based on each

Underlying Fund’s unrealized gain on the contractual obligations with the counterparty as at the

reporting date. The credit risk exposure of the Funds’ other assets are represented by their carrying

amount as disclosed in the Statements of Financial Position.

Liquidity risk

Liquidity risk is the risk that a Fund may not be able to settle or meet its obligations, on time or at

a reasonable price. The Funds are exposed to daily cash redemption of redeemable units. The Funds

invest all of their assets in Underlying Funds which can be readily disposed of.

Market risk

The Funds’ investments are subject to market risk which is the risk that the fair value of future cash

flows of a financial instrument will fluctuate due to changes in market conditions.

i. Other Price Risk

Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes

in market prices (other than those arising from interest rate risk or currency risk). The value of

each investment is influenced by the outlook of the issuer and by general economic and political

conditions, as well as industry and market trends. All securities present a risk of loss of capital.

Other assets and liabilities are monetary items that are short-term in nature and therefore are not

subject to other price risk.

ii. Currency Risk

Currency risk arises from financial instruments that are denominated in a currency other than,

Canadian dollars, the functional currency of the Funds and the Underlying Funds. As a result, the

Underlying Funds may be exposed to the risk that the value of securities denominated in other

currencies will fluctuate due to changes in exchange rates. Equities traded in foreign markets are

also exposed to currency risk as the prices denominated in foreign currencies are converted to

Underlying Funds’ functional currency to determine their fair value.

iii. Interest Rate Risk

Interest rate risk is the risk that the fair value of interest-bearing investments will fluctuate due

to changes in prevailing levels of market interest rates. As a result, the value of the Underlying



Funds that invest in debt securities and/or income trusts will be affected by changes in applicable

interest rates. If interest rates fall, the fair value of existing debt securities may increase due to the

increase in yield. Alternatively, if interest rates rise, the yield of existing debt securities decrease

which may then lead to a decrease in their fair value. The magnitude of the decline will generally

be greater for long-term debt securities than for short-term debt securities.

Interest rate risk also applies to convertible securities. The fair value of these securities varies

inversely with interest rates, similar to other debt securities. However, since they may be

converted into common shares, convertible securities are generally less affected by interest rate

fluctuations than other debt securities.

Fair value hierarchy

The Funds are required to classify financial instruments measured at fair value using a fair value

hierarchy. Investments whose values are based on quoted market prices in active markets are

classified as Level 1. This level includes publicly traded equities, exchange traded and retail mutual

funds, exchange traded warrants, futures contracts and traded options.

Financial instruments that trade in markets that are not considered to be active but are valued based

on quoted market prices, dealer quotations or alternative pricing sources supported by observable

inputs are classified as Level 2. These include, fixed income securities, mortgage backed securities

(“MBS”), short-term instruments, non-traded warrants, over-the-counter options, structured notes of

indexed securities, if applicable, foreign currency forward contracts and swap instruments.

Investments classified as Level 3 have significant unobservable inputs. Level 3 instruments include

private equities, private term loans, private equity funds and certain derivatives. As observable prices

are not available for these securities, the Funds may use a variety of valuation techniques to derive

the fair value.

The Funds invest only in other investment funds and these investments are classified as Level 1.

Details of individual Fund’s exposure to financial instruments risks including concentration risk and the

fair value hierarchy classifications are available in the Fund Specific Notes to Financial Statements

of each Fund.

10. TRANSITION TO IFRS

The effects of the Funds’ transition to IFRS are as follows:

Transition elections

The only voluntary exemption adopted by the Funds’ upon transition was the ability to designate a

financial asset or financial liability at fair value through profit and loss. All financial assets designated

at FVTPL upon transition were previously carried at fair value under Canadian GAAP as required by

Accounting Guideline 18, Investment Companies.

Statement of cash flows

Under Canadian GAAP, the Funds were exempt from providing a statement of cash flows. IAS 1,

Presentation of Financial Statements, requires that a complete set of financial statements include a

statement of cash flows for the current and comparative years.

Classification of units issued by the Funds

Under Canadian GAAP, the Funds accounted for their units as equity. Under IFRS, IAS 32, Financial

Instruments: Presentation, requires that units of an entity which include a contractual obligation

for the Issuer to repurchase or redeem the units for cash or another financial asset be classified as

financial liability. The Funds units have been reclassified as financial liabilities on transition to IFRS.

Revaluation of investments at FVTPL

Under Canadian GAAP, the Funds measured the fair values of their investments in accordance with

Section 3855, Financial Instruments – Recognition and Measurement, which required the use of bid

prices for long positions and ask prices for short positions; to the extent such prices are available.

Under IFRS, the Funds measure the fair values of their investments using the guidance in IFRS 13, Fair

Value Measurement, which requires that if an asset or a liability has a bid price and an ask price,

then its fair value is to be based on a price within the bid-ask spread that is most representative of

fair value. As the Funds’ invest only in the Underlying Funds which are valued at net asset value as

reported by the Underlying Funds’ manager under Canadian GAAP as well as IFRS no adjustments

were recognized upon Funds’ transition to IFRS.

Details of the revaluation of investments at FVTPL for each of the Funds are available in the Fund

Specific Notes to Financial Statements of each Fund.

Reclassification adjustments

The Funds did not have any reclassified amounts to their financial statements presentation upon

transition to IFRS.


Annual Financial Statements as at December 31, 2014

NOTICE: Should you require additional copies of these Annual Financial Statements or have received

more than one copy, please contact CI Investments Inc. or your advisor.

Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies,

is the sole issuer of the individual variable insurance contracts providing for investment in Clarica

Segregated Funds. A description of the key features of the applicable individual variable insurance

contract is contained in the Information Folder. SUBJECT TO ANY APPLICABLE DEATH AND

MATURITY GUARANTEES, ANY AMOUNT THAT IS ALLOCATED TO A SEGREGATED FUND

IS INVESTED AT THE RISK OF THE CONTRACTHOLDER AND MAY INCREASE OR DECREASE

IN VALUE.

®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. ®Clarica is a registered trademark of Sun Life Assurance Company of Canada.

INFORMATION FOLDER: CI would be pleased to provide, without charge, the most recent

Information Folder upon request to CI’s Toronto office.

Clarica Segregated FundsLegal Notice

– 39 –

CLSEG_AR_06/15E

2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I www.ci.comHead Office / Toronto416-364-1145 1-800-792-9355

Calgary 403-205-43961-800-776-9027

Montreal 514-875-0090 1-800-268-1602

Vancouver 604-681-3346 1-800-665-6994

Client Services English: 1-800-792-9355 French: 1-800-668-3528

Sun Life Assurance Company of Canada

227 King Street SouthP.O. Box 1601 STN WaterlooWaterloo, Ontario N2J 4C5

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