Monthly ReviewFOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO CLIENTS • WWW.CI.COM

NOVEMBER/DECEMBER EDITION 2015

Zanny Minton Beddoes: It appears that we’re in a perma-low rate world. Will we start the next economic downturn with interest rates close to zero?

Eric Bushell: It’s true, we observed with the September [U.S. Federal Reserve] meeting that we’re stuck with low rates. We’re stuck because there was a big private sector debt load in 2008 and now in 2015 there’s public sector debt, and an emerging market public/private sector debt load that makes it impossible really to raise rates too much without tipping over some of those borrowers.

Roger Mortimer: It’s a very tricky investing environment because available returns in all asset classes are going to be low and volatility’s going to be higher than it was historically and investors have to navigate that. There are no silver bullets in this environment.

Zanny: Has the investment community recognized that or are we still hoping that at some point returns can go back to where they used to be and this is sort of an aberration?

Robert Swanson: I think expectations are trailing lower but they’re probably still high. There’s a big belief among advisors and clients they can get traditional returns

by focusing on the capital markets and normal allocations. I think everyone has to bring their expectations lower.

Richard Jenkins: I have a little bit different perspective. The Economist once highlighted that interest rates for hundreds of years were between zero and 2%. Most financing was done by bonds and when something went wrong the bondholders lost their money. That was the norm for a long, long time before an unusual period in the 70s and

80s when a substantial portion of the world was in centralized control, which brought about a period of inflation and higher rates. To some degree since the Berlin Wall came down, we’ve gone back to the old normal, in my opinion.

Zanny: How have central banks become a much more important driver and is it unhealthy? Are they making things worse by taking on a broader role?

Eric: Unconventional monetary policy was effective in getting the term structure down, resuscitating the housing market and stabilizing the banking system. Those were all good things. But maybe policymakers played their hands too far and were taken captive by markets to continue to sustain the confidence for investment and growth.

Eric Bushell: As a money manager, one of the most important questions for me is how China will develop from here, across currency, interest rate, equity and commodity markets. China’s confidence and its ambition to develop into a global power are rising. There are signals to the world that on a military, commercial, economic and financial level, China is changing its position after 200 years of being subject to Western domination. They’re throwing off that yoke and standing up and saying, “We want some respect.” At Signature, we believe that China has the wherewithal to navigate that complex adjustment. This is truly an extraordinary

opportunity to hear an insider’s view of how China sees the world. So thank you very much Charles for coming from Beijing.

Charles Liu: Happy to be here.

Eric: Everyone’s aware of China’s explosive export growth and the domestic fixed-asset investment over the past few decades. Now we’re at an inflection point under new leadership. What’s your read on President Xi Jinping’s vision for China?

Charles: I think his vision, first and foremost, is about the legacy he will leave after he finishes his 10-year term. He’s got another eight years to go. He would like

to leave China as a transformed nation and economy. On the economic side, the last 10-15 years really saw GDP grow to the point where China is now a dominant force on the world stage. When China stops buying iron ore, Brazil and Australia go into a tailspin. Xi Jinping is aiming for China to be recognized for that weight and to be allowed to participate in the international organizations, as it should.

Since 2011 there have been discussions about China getting a bigger position in

the World Bank and the International Monetary Fund, but nothing has happened because the U.S. Congress blocks it every year. So China has set up its own Asian infrastructure investment bank. It’s starting to develop new multilateral and bilateral organizations.

China now has the best high-speed rail system in the world. It has nice new airports.

Investing in a low rate, low-growth world

China in focus

ROUNDTABLE

KEYNOTE PRESENTATION

continued on page 3

continued on page 4

Outlook for value gets brighterpg. 5

Opportunity in energy pg.7

CI Investments’ fifth annual Leadership Forum, which took place in Dallas in early October, included a timely roundtable discussion among some of the company’s top portfolio managers, moderated by Zanny Minton Beddoes, Editor-in-Chief of The Economist. Highlights of that discussion, featuring Eric Bushell, Chief Investment Officer of Signature Global Asset Management, Robert Swanson, Principal and Chief Market Strategist of Cambridge Global Asset Management, Roger Mortimer, Senior Portfolio Manager at Harbour Advisors, and Richard Jenkins, Chairman and Portfolio Manager of Black Creek Investment Management, appear here.

From left to right: Robert Swanson, Richard Jenkins, Zanny Minton Beddoes, Roger Mortimer and Eric Bushell.

CI’s Leadership Forum featured a conversation between Eric Bushell, Chief Investment Officer of Signature Global Asset Management, and Charles Liu Yang Sheng, founder of HAO Capital, a private equity firm investing in growth companies in China with over $600 million under management.

Born in Taiwan, Mr. Liu graduated from Princeton University with a BA in Economics in 1972 and attended the Juris Doctor Program of New York University School of Law. He relinquished his Taiwan passport and U.S. Permanent Residency in 1975 to adopt the nationality and passport of the People’s Republic of China. Prior to forming HAO Capital, Mr. Liu was Managing Director of Lazard Asia from 1992-1999. From 1975-1991, he served in various capacities in the United Nations system of organizations, principally as negotiation secretary on economic matters and development projects in the developing countries.

China’s economy is now a dominant force.

2 | Monthly Review • NOVEMBER/DECEMBER 2015

A long-standing Cambridge holding, TransForce is a leading North American transportation and logistics provider with a 20-year track record of value creation. TransForce operates under a variety of key segments including: truckload, less-than-truckload, package and courier, waste management and logistics and other services.

A big part of Cambridge’s philosophy is rooted in the belief that the value of an organization comes from its business model and the economic moat that leads to its pricing power and potential to generate cash flow. But just as importantly, the team believes that the motivation behind a company’s management decisions should be aligned with those of its shareholders. In many instances, and in the case of Cambridge’s investment in TransForce, it’s very much about the people and culture of the organization. TransForce is well-known for creating value for shareholders by identifying strategic acquisitions and managing a growing network of wholly owned operating subsidiaries.

Cambridge: Can you explain how TransForce is different from its competitors?

Alain Bédard: TransForce is run a bit differently than other trucking companies. The evolution of TransForce represents a history of strategic acquisitions. We acquire successful companies that are distinctive leaders in their fields and we run them

based on generating free cash flow. The transportation world is essentially a service industry and a lot of trucking companies are focused mainly on the customer. We are too, but we also place a high level of concentration on executing consistent discipline in the interest of enhancing shareholder value. Ideally, you want to have an expanding service offering and extended reach into new markets, but if you don’t have happy shareholders, you’re not going to be able to serve your customers. This philosophy is incorporated company-wide. By putting the spotlight on both the customer and shareholder needs we are able to build and generate free cash flow. That has allowed us to buy back stock, pay down debt, pay out dividends and explore mergers and acquisition opportunities. Our story is that we are here to provide excellent service to our customers but our business decisions are always focused on the benefit of our shareholders.

Cambridge: How does this help you compete?

Alain: The big logistics companies in the U.S. are very focused on technology. Our first focus is on the people who make up our companies. A long time ago, I stressed the idea with my team that in order to win a Formula 1 race you need the car, but if you don’t have the right driver you’re not going to win that race. Our business has been built on trying to continuously acquire and motivate people so that we have the right person in the right role. Not to be misunderstood, that doesn’t mean having access to cutting-edge technology isn’t important. First we focus on the people, and then we make sure our people are

equipped with proper tools and resources. We purchase entities managed and staffed by talented individuals. Through strategic, profitable acquisitions and partnerships, we have added to our pool of talent in the right way and that has allowed us to stay competitive.

Cambridge: What’s your take on buying back stock vs. acquiring a company? How do you decide when each strategy is best to use?

Alain: In 2015, we bought back a lot of our stock. The market correction that occurred in the transportation industry caused stock levels to fall and that was a driving factor for that decision. We understand the value of our stock because it’s our company, so it was to our benefit to buy it back when it was cheap. The other reason was related to the fact that in 2014 we had already invested in TransForce’s largest acquisitions to date by purchasing Contrans, Vitran, and Clarke. There are limits to what you can do in terms of M&A activity in a period of time, so then you’ve got to slow down, digest and focus on integrating the new businesses. Overall in a given year, my number one priority is being the cash manager of our business. I look for strategies that support our shareholders and we give back about 20% of our free cash flow.

Cambridge: What’s your approach towards growth?

At TransForce, growth essentially means growing our profitability. Our strategy is always going to involve protecting the bottom line and to yield as much cash flow as possible. For example, let’s talk about the acquisitions we made in the less-than-truckload (LTL) world recently. The LTL market in Canada is shrinking and we saw this as an opportunity to invest more in the intermodal LTL space. In this case, it’s all rail based so we don’t have to spend more on line haul trucks, and most of our operation is done through third parties on the pick-up and delivery end. Although profit may only be around six or seven points EBITDA, at least we don’t have hundreds of millions of dollars of capital expenditures in trailers and trucks to absorb. So that is a bit of insight into the view we take on growth compared to other major Canadian transportation organizations. Our philosophy is based mainly on return on capital and cash flow and not as much on growing the top line.

This conversation was condensed and edited.

As the seasons transition from fall to winter, we at CI Investments have been working hard to keep you up to date on the latest developments in the markets, our company and across our industry.

For example, the feedback for this year’s Leadership Forum, our largest and most important educational initiative, has been excellent. More than 800 advisors joined us in Dallas in early October for this comprehensive event, designed to support and enhance their practices. If you were unable to attend or would like to revisit some of the valuable content from the conference, audio playbacks of the presentations are available at www.eventmobi.com/cileadership2015. This issue of Monthly Review also features summaries of some of the event’s key sessions.

Our commitment to communicating with you extends throughout the fall and into 2016. We hope you were in attendance to hear from Cambridge Global Asset Management and our newly expanded Tax, Retirement and Estate Planning team during CI Fall Roadshow, which stopped in 23 cities across Canada throughout the month of November. There will be another opportunity to catch up with the latest thinking from our top portfolio management teams early next year, when we broadcast our Digital Roadshow on January 19-21 – stay tuned for a schedule and more information.

In the meantime, CI continues to gain accolades for its products, portfolio management and service. I would like to congratulate Richard Jenkins of Black Creek Investment Management, who was recently named Morningstar Foreign Equity Fund Manager of the Year, and Greg Dean and Stephen Groff of Cambridge Global Asset Management, co-winners of the Breakout Fund Manager of the Year award. In addition, two Cambridge funds took top honours in their categories at the recent Morningstar Awards ceremony, and CI Investments was a finalist for the Advisors’ Choice Investment Fund Company of the Year.

Finally, in a new era of regulatory change, one of the dominant trends we are seeing is a growing preference for managed solutions. CI offers a comprehensive range of diversified, tax-efficient and well-managed programs in this category to meet the needs of your clients. These include the award-winning Portfolio Series and Portfolio Select Series, and Private Investment Management (PIM) for high net worth investors. If you would like more information about these or any of the products in our lineup, please do not hesitate to call your CI Sales Team.

Thank you for your continued support.

Sincerely,

Leading the way

Derek J. GreenPresident, CI Investments

LETTER TO ADVISORS

C-SUITE CONVERSATION

TransForce: management matters

From left to right: Alain Bédard, Stephen Groff and Brandon Snow.

At the 2015 Leadership Forum, top executives took the main stage along with CI’s portfolio management teams for our C-Suite Conversation series. This year, Brandon Snow, Principal and Co-Chief Investment Officer and Stephen Groff, Principal and Portfolio Manager of Cambridge Global Asset Management, sat down with TransForce President and CEO Alain Bédard for an insightful discussion.

3 | Monthly Review • NOVEMBER/DECEMBER 2015

Now that sense of the policymaker as backstop seems to be breaking. I see more of a willingness on the part of market players and foreign exchange and rates markets to test the central banks’ strength, their potency, the conviction of their words.

Bob: [U.S. Federal Reserve Board Chair] Janet Yellen shot herself in the foot with not raising rates [in September], because she had telegraphed what the Fed was planning to do for months in advance. It now appears that she acquiesced in response to a market environment, so she’s beholden to the market. The market will drive the Fed to get the outcome that it wants. It will be very difficult for her to re-establish credibility and have sway in the marketplace.

Zanny: But the Fed has a mandate – full employment and stable prices. We can argue that we’re getting close to full employment, but inflation is way below the target. So was it wrong to set the expectations that rates would rise in the first place?

Richard: I think its incredibly naïve to think that the Fed’s mandate can be fulfilled by looking only at the United States. It seems like they just woke up to the fact that they’re beholden to the “global” markets. With China pegged to the U.S. dollar, the Fed is effectively the central bank for 1.8 billion people, not for 300 million people.

Eric: In the 1920s, it was First World War debt loads in Europe that prevented the Fed from raising rates and allowing the leverage bubble to manifest, which had massive costs in the form of the Depression. If the Fed is going to properly review its mandate and add a global financial stability element, I believe it’s effectively in place already. But if it becomes overt it should come hand in hand with an extended macro-prudential suite of tools to mitigate domestic leverage spillovers. And there are a whole bunch of new laws and rules they would have to put in place for this change.

Zanny: Every central banker says the central bank’s job is to focus on inflation, but we need to have all kinds of macro-prudential tools. Do you think it is feasible for central bankers to say we have the macro-prudential tools to prevent excess credit, to prevent bubbles and so forth without using interest rates?

Roger: It typically takes a crisis to get the coordination necessary to implement real change. The Fed is playing with a very limited toolbox of last year’s tools that are no longer effective in today’s environment. So whether the Fed raises 25 basis points or not doesn’t really make any difference, growth is low globally and will stay low globally. By perpetuating a low interest rate environment the Fed has promoted

a misallocation of capital and a building of excess resources for very low returns, which is ultimately deflationary.

Bob: A lot of the policies that they’re putting in place to try to mitigate risk are actually creating more risks. Think about the whole bond liquidity issue that we’re faced with, that was originally designed to make banks have greater capitalization. Now liquidity is being removed from the fixed-income markets as a knock-on effect of that. So they are fighting last year’s war and creating tomorrow’s problems with some of these policies.

Zanny: There is a lot of uncertainty about where the European Union is going. Collectively, it’s the biggest economy in the world. How do you see the potential, the opportunities and the political risks?

Eric: Europe is mind-numbing. I have put an enormous amount of time into trying to understand the new bank union and I think it is a complete bluff. There’s no risk sharing. It’s meant to look like there was a win and neutralization of risk in terms of deposit insurance and so on, but it’s just nothing of the sort. Through the Greek crisis this summer European leaders were forced to look deeply into the heart, the dark hidden secrets of what their real view is of Europe and they found they didn’t share the same concept. I believe that Europe, in fact, has already ruptured, and now we’re just going through the mechanics of finally dismantling the place.

Richard: Yet investing in Europe has been incredibly profitable. You don’t go to Europe because you want wonderful exposure to the Italian economy. Population growth is zero, taxation enforcement is also zero. You go there because European companies are significantly more international than American, Canadian or even British companies. You go there to find a technological market leader at what it does, and if you can get it at a decent price it can be very very profitable. That’s the importance of differentiating between investing in an economy and a company.

Bob: When multinationals complain about the strong U.S. dollar, that means that somebody must be getting the benefit over in Europe. So we look for the companies that will benefit from the weaker euro. The order book and the backlogs are building for some European companies. There are opportunities regardless of what’s going on in the political and economic landscape.

Zanny: What about the emerging world? Has it been so oversold that maybe now is the time to sort of look at those incredibly cheap assets?

Roger: The consensus thesis for the emerging world would be that with a combination of attractive demographics and high perceived growth and widely available low-cost debt, a lot of the demand has been pulled forward, such that emerging markets have grown above trend for a period of time. They’re overbuilt, they’re over-levered and it’s going to take some time for that to work off. Obviously, the biggest point of stress in the emerging markets would relate to the fact that there’s a lot of U.S. dollar borrowing in the emerging markets. So a rising U.S. dollar tightens credit conditions there and creates the potential for unpredictable outcomes.

Zanny: Are there any emerging markets or sectors that you are optimistic about?

Richard: I think India’s two steps forward, one and a half back. There is significant financial reform going on in India against the backdrop of technological leaps forward. It has a young population, and education and health levels are getting significantly better. While China has already crossed that threshold from subsistence to capital growth, India is just hitting that.

Zanny: Let’s focus a bit on commodities and where you think we are in the commodity cycle. Are we in a sustained period of low energy and commodity prices, or will they bottom out fairly soon?

Bob: We’re definitely in a cyclical downturn, and I don’t think it will be over any time soon because of the leveraging that’s taken place within the commodity space. We have to see restructuring in those industries and within those companies and that takes time. Historically it’s been roughly a 10-year cycle. Maybe it has another three years to run before we bottom out. With low consumption, it will probably be a longer lag before we see the ultimate turn in the commodity cycle.

Roger: Canada’s particularly dependent on energy from an economic perspective and obviously has the combined challenge of lower global demand, OPEC action suppressing price with political challenges at home and with the United States that are inhibiting Canada’s ability to extract maximum value. I agree that these tend not to be situations that resolve themselves particularly quickly. The implication for Canada is the economy spins more slowly, the currency then weakens and the country becomes less attractive to foreign investors. And we’ve seen a lot of that priced in already.

Zanny: We have an aging population that wants predictable returns without volatility. Given the low rate structure, how do you invest in this environment?

Bob: We keep stressing throughout our team that we’ve got to be open-minded. We talk about the portfolios being well diversified by geography, sector, asset class and style within the equity portfolios. In fixed income, we have a mix of Treasuries, investment-grade and high-yield debt, but we maintain the flexibility to manoeuver in what seems to be an extraordinarily

quickly changing environment. And then we always factor in valuation, of course. It’s a long list but, you know, when you start looking where the good companies are it gets pretty narrow pretty quickly.

Roger: It’s an environment that is ideally suited to a balanced strategy, in that conservative investors want to protect their capital and have the opportunity to grow it. There’s no single asset class that you can allocate capital to that is going to offer that. And so a combination of diversification and a choice of different asset classes for different reasons – some may be included in the portfolio largely for their ability to protect capital but offer very low return and others may offer a higher return but embrace significantly more volatility. And – a self-serving statement – the argument

for professional management in a risk-managed strategy has never been stronger.

Eric: It’s easy to hate the market, but there obviously are exciting things too that are going on. For instance, the development by big pharma of immuno-oncology is a massive breakthrough in the treatment of cancer. Companies like Roche and Novartis are leading that charge. Europe has a number of giants in this square and incredible technology and innovation. What’s happening with driver-less cars is pushing all kinds of new developments and really moving power from automakers to the suppliers that have the technology to take this next leap. So they’re going to be in a position of leverage against their suppliers and get pricing and bring innovation. So these are the key ingredients. I think innovation is the winning formula for the equity strategy.

Richard: Also keep in mind that volatility can be your friend. Share prices going up and down is not volatility. Volatility is a company going up and down in big trouble. A company going broke. We need to make that big distinction and use it to our advantage.

Investing in a low rate, low-growth world continued from page 1

ROUNDTABLE

It typically takes

a crisis to get the

coordination necessary

to implement real

change. The Fed is

playing with a very

limited toolbox of last

year’s tools that are

no longer effective in

today’s environment.

”

“

The development

by big pharma of

immuno-oncology

is a massive

breakthrough in the

treatment of cancer.

Companies like

Roche and Novartis

are leading

that charge. ”

“

Fed policy affects global markets.

Innovation will drive returns.

4 | Monthly Review • NOVEMBER/DECEMBER 2015

And it has the infrastructure necessary to develop the next phase of the economy. Xi Jinping would like to develop a more consumption-driven economy, which we’re beginning to see. Five years ago only about 34% of the GDP was on the service side. Today it’s 50%. There will be no more investment in infrastructure to drive growth and that’s very, very clear. As I tell my friends, don’t expect another four trillion-renminbi stimulus program like the one that occurred in 2008.

Eric: Anti-corruption has been a big theme over the last two to three years. What’s driving that and is there a subtext to that in relation to Xi Jinping sort of securing that power structure?

Charles: He has a lot of support. About 90% of the people are behind it, and 10% are maybe more cynical and form interest groups of their own.

How do you set up a new structure that potentially will forestall the development of corruption? By breaking up the monopolies. For example, the three cell phone companies, China Mobile, China Telecom and China Unicom have just been told to spin off all their cell towers and just be service providers. In addition, 16 virtual private operator licenses have been given to the likes of Alibaba and Tencent, WeChat and so on.

Eric: There is still a lot of skepticism over whether, in fact, Xi Jinping is a determined reformer. When will we get the reveal on this?

Charles: It doesn’t happen by big announcement. It happens by little moves every day. The breaking up of the monopolies is one thing, the enthusiasm for promoting start-ups, and letting more young people do business.

Eric: Xi Jinping was in the United States just two weeks ago and he made a pit stop in Silicon Valley. Was it more than a photo op? Was he striking an access deal so that U.S. technology companies can sell their gear into China?

Charles: They have been. Much of Apple’s profits are now coming from China. Tim Cook has been saying they would like to have more access. Google would like to have more access. Facebook would like to have more access.

Eric: Is it your sense that a deal’s been brokered or will it come in fits and starts?

Charles: I think it’s going to be more complicated because, and this is a personal opinion, a lot of social media is garbage. It’s basically just to try to sell eyeballs for advertising. It doesn’t make the world a better place. And I think many people in China believe that at very senior levels. Not only that, it can potentially cause social problems. China is a place today where you can basically see people from different centuries living under the same roof. People from the 19th century, who are still thinking about planting the fields and who don’t have the education, live alongside young kids who are brought up in this century. It’s a very complicated society and social media can potentially cause a lot of problems under those circumstances.

In terms of R&D, a significant amount of money will have to go into more fundamental research, which China is really not good at. But many of the Chinese who have been educated in America, Britain and Germany in very good fundamental R&D are moving back to China because that’s where the opportunities are.

Eric: Technology acquisition is happening in a variety of ways. Isn’t it a central strategy for developing the economy to acquire Western technologies, whether though transactions or through cyber [surveillance]?

Charles: The four trillion-renminbi spending program in 2008, plus 11 trillion more in bank loans that went into infrastructure, was really to stimulate the economy because the Western crisis meant less export possibilities to the U.S. and Europe. Today there is a massive stimulus program that’s going into not infrastructure but the likes of semiconductor research or the acquisition of Western companies in new and advanced technologies that can be applied in China.

The cyber spying stuff is just propaganda. The U.S. media is talking about it, but we know from Snowden how much cyber [surveillance] the U.S. does. Every government in the world does it. You can point your finger at China, but I can also point my fingers to the London bankers who fixed Libor rates or Volkswagen who fixes its software. Using it to bash China is ridiculous.

Eric: So there’s this notion that there is political pressure on the government to always hit this magical 7% growth rate. Are they willing to let the economy slow down then?

Charles: Ten years ago China’s GDP was less than half of what it is today. I think 5% is fine if it’s focused on higher-quality growth, on more efficient production. Efficient production doesn’t give you GDP growth and this is what the rest of the world is asking China to do – to have higher quality, more efficient GDP units.

Eric: So you’re not sensing any kind of panic around the economy?

Charles: Not at all. I think the only panicked ones are those who speculate in the stock market. But the Chinese stock market has never had anything to do with the real economy.

Eric: What about the One Belt, One Road regional development infrastructure? Is that something that will come either soon enough or in large enough magnitude to rescue that commodity complex?

Charles: I don’t think it will rescue the commodity complex or really do much for Brazil and Australia, but it is very strategic. If you have a serious overcapacity in the industrial side, especially the heavy industries in infrastructure, and you also have $3.5 trillion of hard currency, you can lend that money to your neighbouring countries to build infrastructure. So it gives China exports, and the surrounding region can enrich itself through infrastructure development.

Eric: Western market participants also take issue with the debt loads for local governments and state-owned enterprises. The debt from that stimulus package in 2008 is huge. Do you think that China can safely defuse the debt risks to the society?

Charles: I think you never go bankrupt building infrastructure, so if you take out the debt for things like highways, railways, railway stations and so on, the potential problem debt is only about 20-25% of the total debt load. Infrastructure debt, because of the stimulus program that Hank Paulson begged the Chinese to do, will end up with a potential return but it will be stretched out.

Clearing out the other portions are more problematic. If the renminbi goes softer, then the couple hundred billion of corporate debt that was taken out in the last couple of years based on 1.8% interest may present some problems because it must be repaid in U.S. dollar terms.

Eric: You’re suggesting that the U.S. and the world got the benefit of the Chinese stimulus bailout.

Charles: I think absolutely that’s the view in Beijing. Many of the top leaders think the U.S. had pneumonia but China took the medicine and it was a big mistake. From 2000 to 2005, China saw massive growth in the private sector, whereas the state-owned companies were limited still

to a couple of the strategic industries. But the stimulus program in 2008 had to go through state-owned companies. It needed to be implemented very quickly. It made the state-owned side much more dominant, even more monopolistic, and crowded out the private sector in terms of more capital and resources.

Eric: There were a couple of big developments in Chinese financial markets this summer, with a steep drop in the stock market, a currency devaluation and a new currency mechanism introduced.

Charles: Just like bankers everywhere, when they see a grey area opportunity to make fast bucks they do it. And this is what happened to a lot of bankers in China. They were offering leverage to buy stock in the grey market. Eighty per cent of Chinese stock market players are unsophisticated individuals. By April, the central government realized something was amiss because it wasn’t supposed to be so much leverage in the market. But they were a little clumsy in how they addressed it. It was very abrupt and a lot of liquidation had to take place.

Eric: Will the renminbi go lower?

Charles: I think there’s a chance, subject to what happens in the rest of the world of course, it could decline another 3-5%. Generally speaking, over the next couple of years it should be stable. But with geopolitics you never know.

Eric: The closing question here is about whether China has an opportunity to make a mark with the climate change question. What are your expectations there?

Charles: The commitment is very real from what I can see. Take for example the reduction in coal use. If the Germans can do it, why can’t we?

The biggest thing is what will happen in the end of this year in Paris, at the global environment conference. You will find for the first time China deviating from the standard developing country position. China and India and South Africa and Pakistan and Indonesia in the past have been totally aligned in saying that it is the developed countries that have been polluting for a century and they cannot tell us now we cannot develop. I expect China to make a strong commitment to reducing its carbon emissions and addressing global warming.

This conversation was edited and condensed.

China in focus continued from page 1

KEYNOTE PRESENTATION

“I expect China to

make a strong commitment

to reducing its carbon

emissions and addressing

global warming.”

Consistent leadership

Advisors continue to make CI Investments one of their top choices among Canada’s fund companies.

For the second year in a row, CI Investments has been highly ranked in a national survey of advisors conducted by Wealth Professional magazine. In the 2015 survey, advisors rated CI among the top three companies in eight of 10 categories. In particular, CI was favoured for its product range, product performance, marketing, and fees.

At the core of our business is the long-standing partnership we have built with advisors. We thank you for your support and continue to strive to earn your business every day.

Visit us at ci.com or contact us at 1-800-268-9374.

From left to right: Charles Liu and Eric Bushell.

5 | Monthly Review • NOVEMBER/DECEMBER 2015

Shan

ghai

Com

posi

te In

dex

(blu

e) Margin D

ebts % G

DP (green)

Dec

-11

5,000

4,000

3,000

2,000

1,000

0

5%

4%

3%

2%

1%

0%

Nov

-12

Oct

-13

Sep

-14

Aug

-15

Recent market volatility has provided Harbour Advisors with the opportunity to invest in new and existing equity positions at attractive valuations, the team members said at CI’s Leadership Forum in early October.

“We have seen some genuine bargains,” said Stephen Jenkins, Senior Portfolio Manager with Harbour. “Holding cash can provide downside protection, but when we get a chance to put that cash to work and be more fully invested, it points to better returns on a relative and absolute basis down the road.”

Harbour’s value-based discipline is based on extensive bottom-up stock research. The team invests in quality businesses that tend to be leaders in their industries and are growing over time. Harbour seeks companies with experienced, capable management teams that are aligned with shareholders, and waits patiently for those businesses to become available at a discount.

“We are long-term investors. We only get involved in a company when the valuation offers a margin of safety to what we deem to be the fair value based on a long-term assesment of the underlying business,” Stephen said. “Because much of our homework has already been done, it allows us to move quickly with a lot of clarity and conviction when the valuation is right.”

The broad equity market decline throughout the fall of this year allowed the team to add to several existing holdings in the Harbour equity portfolios, and to initiate a number of new positions.

The cash weighting in Harbour Global Equity Corporate Class peaked near the end of April at about 24%, and declined to 12% as of the end of September. The managers added to existing positions including Apple, Swatch, Dollar Tree, Michelin and Honeywell. Harbour Fund’s cash position declined from about 21% to 13%, and the team added to positions in Apple, CGI, Honeywell, Google and Royal Bank.

New positions added to the equity portfolios include health care companies Johnson & Johnson and McKesson, both high-quality businesses with dominant industry positions. New companies added in the financials sector include Citigroup and UBS, which have both undergone extensive restructuring since the financial crisis and are now in a position to return capital to shareholders in the form of dividends and share buybacks.

The lower price of oil is contributing to additional demand, and Harbour expects supply and demand to become more balanced in the coming months. The team has begun to invest in some discounted energy-related companies in its equity portfolios, including oilfield service company Secure Energy, and in some global industrial leaders that supply the sector, including Intertek, Weir Group, and Flowserve.

Harbour’s balanced portfolios – Harbour Growth & Income Fund and Harbour Global Growth & Income Corporate Class – are good options for conservative investors who recognize that traditional

bond investments are unlikely to provide adequate returns in a low interest rate environment, and that bonds can lose money as interest rates start to rise, said Roger Mortimer, Senior Portfolio Manager.

“Constructing a balanced portfolio that offers stability and capital protection while generating a return of more than 2% has become a lot more complicated,” Roger said. “We are suggesting that you offload that challenge to us.”

Harbour Growth & Income Fund, for example, was invested about 10% in cash and 27% in government and investment-grade corporate bonds at the end of September. The remaining 63% of the fund was invested in a diversified mix of high-quality equities. These stocks are broken into three groups – low-growth companies that generate high cash flow and pay high dividends, companies with lower payout ratios that also reinvest cash in their businesses, and growing companies that do not pay a dividend but are expected to have higher valuations down the road. The fund’s equity exposure is heavily weighted toward U.S. market-leading companies and Canadian companies with global operations. It has limited investments in commodity-related businesses to help reduce volatility.

This balanced strategy has performed as expected over the past year and a half, Roger said. While Harbour Growth & Income Fund captured about two-thirds of the S&P/TSX Composite Index gain from February 2014 to September 2014, it protected those gains by declining far less than the market during the subsequent downturn.

Harbour’s value style of investing has underperformed the broader market over the past few years, a period that has been reminiscent of the late 1990s, Stephen said. Harbour’s portfolios initially underperformed during the technology bubble phase, but the market collapse in 2000 allowed them to become fully invested, and they began a period of outperformance that lasted several years.

“As in past periods, we remain true to our style and discipline and believe patience pays off,” Stephen said. “The last two years, in particular, have seen high-multiple, market-leading momentum and growth stocks significantly outperform. That leadership now appears to be fading and opportunities are being created.”

The current investment environment differs from the one experienced before the financial crisis of 2008-09, John Hock, Chief Investment Officer of Altrinsic Global Advisors, said during a recent Leadership Forum presentation. The recession that followed the crisis was not typical, as it was balance-sheet driven and highly deflationary in nature. The last time the world experienced something similar was during the Great Depression of the 1930s. Policymakers’ response to the more recent financial crisis was extraordinary, particularly in the United States and China. In the U.S., quantitative easing (QE) was used to boost confidence and inflate asset prices, which it succeeded in doing. In China, there was massive spending in an effort to stimulate GDP and although it helped growth, it also delayed the country’s transition from an investment-led economy to one that is consumption-led.

Today, market gains are climbing higher despite tepid earnings growth. The gains in most regions are being driven by price-earnings multiple expansion, which can be unreliable, rather than earnings or dividends. Altrinsic believes investors’ “Texas-sized” expectations must be reset.

Market gains vary in composition by region, and Japan is one of few countries that has achieved most of its gain through earnings growth.

Signs of desperation in ChinaChina’s post-crisis stimulus program produced a significant debt problem that policymakers more recently tried to fix by inflating equity prices. This stimulated the Shanghai Composite Index, but also increased margin debt (see chart). China’s debt-to-GDP ratio increased nearly 70% in five years and there is significant overcapacity. John sees two possible outcomes for China: it will experience a long, drawn-out normalization to its environment, similar to what happened in Japan but on a smaller scale, or the country will experience a severe crisis similar to the U.S. in the 1930s. Some headlines are pointing to a crisis in China, but John believes this is unlikely given the country’s

massive foreign exchange reserves. Altrinsic is currently looking to invest in companies with direct ties to China.

“Headlines usually create the opposite opportunities,” John said.

What’s new in a post-QE world?Valuations are very dependent on interest rates. The ideal time to invest in equities is when inflation is in the 1-3% range. John believes the current P/E of 15.8 times for the S&P 500 Index is in a good range with low inflation that is steady and measured. Risks will arise if there is deflation, or if we experience meaningful inflation.

Increased volatility appears to be the new norm, and several asset classes, including commodities, bonds, equities and currency, have experienced significant declines. However, John’s view is that an increase in volatility from suppressed levels is a good thing. Volatility decreased for a

few years up to mid-2014. During that time, passive strategies such as levered ETFs experienced a tailwind, but most active investors did not do as well.

Altrinsic believes that innovations in the health care sector are offering good opportunities. The productivity and efficiency of $1 spent on research and development is now much greater than it was in the past, John said. Drug development is also more targeted for specific needs, with a faster time to market. Atrinsic’s portfolios have significant exposure to health care.

Japan also offers some good opportunities and Altrinsic is encouraged by developments at the macro level. But things are also improving at the company-specific level. For years, Japanese companies did not prioritize investor concerns or return on equity, but this is changing. Lending growth in Japan is also improving from depressed levels.

New opportunities are also arising in emerging markets. For the past few years, Altrinsic has not invested much in emerging markets, but in recent months the team has found some compelling opportunities, particularly in India. There are massive reforms on the way and the companies in Altrinsic’s portfolios are investor-focused.

Roger MortimerSenior Portfolio Manager

Stephen JenkinsSenior Portfolio Manager

John HockChief Investment Officer

As of 08/31/15 Source: Bloomberg

A significant increase in margin debt this year has added to China’s debt burden.

MANAGER UPDATE

MANAGER UPDATE

Outlook for value gets brighter

Investing for a post-QE worldChina – Signs of desperation

6 | Monthly Review • NOVEMBER/DECEMBER 2015

Consistency is key

Correlations between asset classes normalizing

MANAGER UPDATE

MANAGED SOLUTIONS

Source: Capital IQ

Buy discipline – ATCO Ltd.

More market volatility is likely on the way and it will be harder to earn returns, but volatility also creates opportunity, said Joe Jugovic, Chief Investment Officer of QV Investors. QV continues to look for strong companies that provide stability and growing income that may be overlooked by the market and analysts.

“Active management will have to come back into vogue over the next few years,” he said at CI’s Leadership Forum. “It’s getting harder to find, but there are some pockets in the market where managers can really create value for investors.”

QV Investors’ investment philosophy is to buy good businesses with strong management, hold on to them for the long term and let their earnings and book value compound. QV is portfolio advisor to CI Can-Am Small Cap Corporate Class and other mandates at CI. The QV team aims to create portfolios of sustainable businesses that are run conservatively and

provide consistent growth with below-average risk. QV looks to preserve investor capital in down markets, believes that diversification is important and that having weightings over approximately 25% in any one sector leads to increased risk.

An example of a holding that has been through multiple market downturns and still continues to grow is ATCO Group, a Western Canadian-based natural gas, utility and infrastructure company with a market cap of about $10 billion. The company has been prudently managed for over three decades and its management team has over $1.5 billion invested in the company. About 70% of the company’s cash flow stems from long-term utility contracts and is unrelated to the price of oil. Atco is a well-managed business that stays under the radar and consistently grows over time, along with its dividend per share, thus reducing the portfolio’s risk for loss. While the market has a negative view on energy and is selling stocks like ATCO down, QV sees opportunities in this sector.

Finding valueCentral banks have been the primary driver of asset values in the last few years and have influenced investors to take on more risk. Markets have climbed because investors

have been given a false impression that central banks will do “whatever it takes” for them to continue earning returns from stocks. In Joe’s view, the asset price inflation induced by monetary stimulus could continue to result in volatility three to four years from now.

“Central bankers have been successful in driving up the prices of stocks, real estate and other assets,” Joe said. “But globally, many economies are still struggling.”

QV is starting to see more divergence among equity markets, with the U.S. gaining while stock prices in Europe and other developed economies moderate. The Canadian market, meanwhile, has underperformed the U.S. for the past six years and may continue to do so. Although valuations in the U.S. market are generally

high, QV is more concerned about the prospect for sustainable dividend yields than the price it pays for an individual security, Joe said.

“We aren’t expecting to get much in the way of returns from higher multiples going forward,” he said. “It will have to come more from earnings, especially if interest rates remain low.”

Outlook for CanadaThere have been frequent predictions of a decline in the Canadian housing market over the past six years. However, in each year that a decline was predicted, an increase occurred, Joe said. If there is going to be a decline in the housing market, it will likely be the result of an unexpected event.

“The Canadian banks have been mired in the possibility of a housing correction for several years. But companies usually do not get beaten down when there’s been forecasts for years that they’ve got a problem with their business. It’s usually something that comes from the side that nobody’s talking about that really hurts those businesses.”

The Canadian dollar has fallen about 35 cents vs. the U.S. dollar in the last few years, which has put a lot of negative pressure on the Canadian stock market. Joe believes the dollar will remain under pressure for the next 12 months, but also believes that it is close to a point of stability and he does not expect another significant drop in value.

Following an extended period during which assets have been closely correlated, there are indications that the relationships between different asset classes are starting to normalize, CI Investment Consulting said during its Leadership Forum presentation in Dallas.

“Stocks and bonds have dropped in tandem on several occasions over the past few years. That is not typical, and it presents a challenge for investors who rely on diversification,” said Vice-President and Associate Portfolio Manager Yoonjai Shin. “We think this was because of the market’s expectation that interest rates in the United States would be raised despite a sluggish global economy. Now that the U.S. Federal Reserve has shown it will be more sensitive to market conditions, the expectations for rate increases have been pushed back. Investors should now feel more comfortable investing in the bond market particularly when they are fearful, leading to a normalization of correlations.”

Should we see further equity market volatility in the coming months, we believe that bonds will start to act as a better offset, Yoonjai said.

CI Investment Consulting is the portfolio management team responsible for the design and management of CI’s managed solutions platforms, including Portfolio Series, Portfolio Select Series and Private Investment Management. With $33 billion in assets under management, the team applies a unique and comprehensive process to generate strong risk-adjusted

returns for clients. The group manages the asset allocation, selects underlying portfolio managers and manages risk on multiple levels.

U.S. growth to be limitedGrowth in many parts of the global economy remains weak and is still dependent on central bank stimulus. While the U.S. economy has been performing well, its growth will likely be limited by the rising value of the U.S. dollar relative to other global currencies, due to the impact on

exports and foreign corporate earnings. As a result, CI Investment Consulting expects monetary policy to remain accommodative for an extended period of time.

Equity valuations remain reasonable, with stocks in the U.S. S&P 500 Index trading at around 15 times earnings, Yoonjai said. However, extremely low bond yields mean that investors must be very active within the income portions of their portfolios to generate acceptable returns without taking undue risk.

Joe JugovicPresident, Chief Investment Officer and Chief Executive Officer

Yoonjai ShinVice-President and Associate Portfolio Manager

30

25

20

15

10

5

0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Book value per share Return on equity (%) Dividends/share

16

10

8

6

4

2

0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

14

12

1.00

0.10

0.00

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0.200.300.400.50

0.600.700.80

0.90

Bonds will help to offset equity volatility.

7 | Monthly Review • NOVEMBER/DECEMBER 2015

MANAGER UPDATE

Consistency is key

Correlations between asset classes normalizing

ADVISOR SUPPORT

Opportunity in energy

Oversupply is challenging the crude oil market in the near term. However, we believe that sentiment is far too negative on the potential timing and magnitude of an inevitable oil price recovery. This pessimism has pushed relative price-to-book valuations for energy-related stocks to 90-year lows. As contrarian value investors, we view this as an excellent investment opportunity and are selectively building diversified energy exposure within our broader portfolios.

We are seeing definitive signs that a recovery in oil prices is underway, while acknowledging that trying to call the bottom is a fool’s game. The two main drivers of oil prices are demand, which is growing, and supply, which is beginning to respond to lower oil prices. Global oil production is about 95 million barrels per day, which naturally declines by 5%+ each year unless new capital is added. The drop in oil prices has led to significant capital spending reductions rather than additions. This decreases supply, while demand continues to grow, which will eventually boost the price of oil, proving that the cure for lower oil prices…is lower oil prices.

DemandOil demand has consistently grown over the past 20 years and remains strong today [Exhibit 1]. International Energy Agency (IEA) expectations are for demand growth of almost 2% in 2015, or 1.8 million barrels per day, the largest increase in five years. Expectations in 2016 are for demand to grow by 1.2 million barrels per day, another strong year. Lower oil prices are stimulating demand, which sets the stage for oil prices to recover.

SupplyThe supply response for U.S. shale oil typically lags the price of oil by roughly nine months, and we believe this lag is often overlooked by investors. A U.S. supply response was never going to occur

in tandem with the oil price decline, but it is happening. Companies came into this year well capitalized and well hedged, allowing them to maintain their existing drilling budgets. In short, companies had cash from the strength of oil prices in 2014 and they were going to spend it. The market is extrapolating the supply levels seen in the first half of 2015 as evidence that oil prices will remain lower for longer. This view ignores the fact that it takes at least six months for a drop in the rig count to actually impact production. The rig count is dropping, supply is rolling over and oil producers are facing steep “decline rates” – the natural speed at which wells are depleted – setting the stage for the market to become balanced in the months ahead. Through the start of October, the U.S. rig count is down 59% from its peak, one of the most severe declines in history, even exceeding the oil bust of the 1980s.

While OPEC members Saudi Arabia and Iraq have been increasing supply, the oil cartel’s spare capacity is at multi-year lows. This has historically been a bullish signal. The market is also concerned about the potential impact of Iranian sanctions being lifted. However, this production will ultimately be absorbed given continued demand growth and would only delay the oil price recovery rather than prevent it.

While supply has been resilient from North America and OPEC, the market tends to ignore that the rest of the world accounts for about 40 million barrels per day of supply. This production has likely peaked and faces potentially serious declines given the massive reduction in capital investment. The longer oil prices remain low, the more investments are deferred, setting the stage for a sustainable recovery.

Portfolio positioningTetrem’s portfolios offer diversified energy exposure, owning the more defensive, well-capitalized companies, as well as those more levered to an eventual oil price recovery. Energy equities have been uniformly shunned as investors overlook the competitive differences between the individual companies. Our approach

remains focused on owning those companies best equipped to emerge from the downturn in a stronger competitive position, while also owning those offering the greatest upside on any sort of oil price relief. Examples of our portfolio holdings include:

• Suncor Energy, which has one of the strongest free cash flow profiles in the industry and one of the most profitable downstream operations in North America. The company is aggressively reducing costs and making permanent productivity improvements. Suncor’s base oil sands cost per barrel in the second quarter of this year was only $28 (down 18% year over year) and it raised its dividend 4% as other companies cut theirs.

• Tourmaline Oil, a low-cost gas producer with leading production growth and a pristine balance sheet. The drop in oil prices is leading to service price concessions for Tourmaline, allowing it to drill for less. The company is using the downturn to consolidate key resource plays at attractive prices.

• Vermilion Energy offers unique exposure to highly profitable European gas. Gas prices in Europe are three times higher than in North America. The ramp-up of an offshore natural gas asset over the next year should provide an increase in cash flow that will increase financial flexibility. Vermillion offers a

5.3% dividend yield that it is capable of increasing, even in a lower-for-longer oil price environment.

• Paramount Resources has tremendous asset and infrastructure value that is being ignored by the market. Paramount’s crown jewel is its condensate operation, which has great potential. Management’s interests are aligned with investors, as insiders own 50% of the shares outstanding – the highest level of insider ownership within our energy universe.

• EOG Resources offers an excellent combination of resource and management quality. It has the highest-quality U.S. shale exploration and production, is a top-ranked operator with immense scale in the most desirable shale basins, and one of the lowest-cost producers. EOG has historically led productivity gains and is best suited to outperform under a variety of oil price scenarios.

We acknowledge the headline-grabbing bear cases out there, such as one prominent sell-side firm’s worst-case scenario of $20 oil. However, even they assign a low probability to this case. We are confident that $20 oil is unsustainable as this would destroy supply, providing an even more phenomenal buying opportunity.

The mission of CI’s Tax, Retirement and Estate Planning team is to enhance the tax, retirement and estate

planning experience of investors through education and communication. For wherever life takes your clients.

The presentations and articles listed below are available through the group and cover off a wide array of tax,

retirement and estate planning opportunities and issues for clients. Presentations are delivered by the team to

advisor audiences. To engage the Tax, Retirement and Estate Planning team, please contact your CI Sales team

and look for the launch of a dedicated team website in 2016!

Presentations Articles

Business Owners and Incorporated Professionals

1. Tax and Estate Planning for Business Owners2. Taxation of Corporate Income3. Holdco, Opco and Pepsico4. The Power of 5 – Working with the Corporate Investor

1. Corporate Investments & the Role of the RDTOH2. How is Investment Income Taxed in a CCPC?

Estate and Succession Planning

1. Death of a Taxpayer2. Testamentary Trusts are Not Dead3. Estate planning – New Rules Governing Probate and Estate Taxation (Ontario)4. An Advisor’s Role – The First Year after a Client has Died5. Planning for a Disabled Dependent6. Planning for Cottage Succession7. Registered Products and Insurance – A Review of Beneficiary Designations8. Five Steps to Estate Planning9. The Role of the Executor10. Wealth Planning Using Trusts11. Trusts 101

1. Testamentary Trusts2. Executor Checklist3. New Probate Rules for Ontario4. Advisor Checklist – Death of a Client5. Protecting an Executor or Trustee

Snowbird and Other U.S Tax Considerations

1. U.S. Tax Ties – Not Beware, Rather Be Aware2. Vacation Property Planning in Canada & the U.S.3. Cross-Border (Canada/U.S.) Tax Planning

1. U.S. Tax Ties Part 1 – Snowbird2. U.S. Tax Ties Part 2 – U.S. Taxpayer3. PFIC – Passive Foreign Investment Company reporting

for U.S. Persons

Tax Efficient Investing

1. Corporate Class Funds – A Tax Efficient Investment Solution2. Tax-Free Savings Accounts (TFSAs)3. Year-End & RRSP Season Tax Planning Strategies4. Leveraging and Interest Deductibility5. Income-Splitting Strategies6. Federal and Provincial Budget Reviews

1. Personal Tax Quick Reference Card2. Corporate Tax Quick Reference Card3. Choosing an Appropriate Investment Solution – Corporate Class & T-Class

Philanthropy1. Seven Sins to Beware of in Charitable Gifting Through Your Estate2. Philanthropy – The Benefits of Planned Giving

1. Tax-Efficient Philanthropy – Sharing of Donation Credits at Death2. Philanthropic Considerations in Your Estate Plan

Retirement

1. The Sandwich Generation – Valued Clients2. Retirement Income Planning – Canada’s Retirement Landscape & Impact to Your

(or Your Client’s) Wallet3. Public Pensions – A Review (OAS, GIS, Allowance, Allowance for Survivor, CPP)4. Severance/Retiring Allowance Planning5. The Power of 5 – the Need for Flexible, Realistic Retirement

1. Tackling the OAS Clawback2. 10 Questions to Prompt the Retirement Thinking Conversation3. 10 Answers to Prompt the Retirement Thinking Conversation4. Tax Talk – Plan for Retirement & Keep it Flexible

199365

70

75

80

85

90

95

100

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Crude Oil – World Demand – Forward Estimates

Crude Oil – World Demand

Source: International Energy Agency

Exhibit 1: Crude oil demand

8 | Monthly Review • NOVEMBER/DECEMBER 2015

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ®CI Investments, the CI Investments design, Signature Global Asset Management, Harbour Advisors, Harbour Funds and Cambridge are registered trademarks of CI Investments Inc. Portfolio Series and the Portfolio Select Series design are trademarks of CI Investments Inc. Cambridge Global Asset Management is a business name of CI Investments Inc. used in connection with its subsidiary, CI Global Investments Inc. Certain portfolio managers of Cambridge Global Asset Management are registered with CI Investments Inc. This report may contain forward-looking statements about the fund, its future performance, strategies or prospects, and possible future fund action. These statements reflect the portfolio managers’ current beliefs and are based on information currently available to them. Forward-looking statements are not guarantees of future performance. We caution you not to place undue reliance on these statements as number of factors could cause actual events or results to differ materially from those expressed in any forward-looking statement, including economic, political and market changes and other developments. Published November 2015. 1511-1887_E

CI Fund CodesCLASS A

Mutual Fund Trust Corporate Class

Mandate Portfolio Manager ISC DSC LL ISC DSC LL$C $US $C $US $C $US $C $US $C $US $C $US

Fixed IncomeSignature Global Bond Signature Global Asset Management 624 110 623 540 1623 1540 2302 2502 3302 3502 1302 1512Signature Canadian Bond Signature Global Asset Management 837 847 1847 2303 2503 3303 3503 1303 1503Signature Corporate Bond Signature Global Asset Management 9010 9060 1150 2308 2508 3308 3508 1308 1508Diversified IncomeCambridge High Income Cambridge Global Asset Management 6803 6813 6823CI Income CI Investment Consulting 2339 3339 1339Select Income Managed Corporate Class CI Investment Consulting 2290 3290 1420Signature Dividend Signature Global Asset Management 610 810 1810 2305 2505 3305 3505 1305 1505Signature Diversified Yield II Signature Global Asset Management 11111 574 11161 824 11461 1824Signature High Income Signature Global Asset Management 686 786 1786 2304 2504 3304 3504 1304 1504Canadian BalancedSignature Income & Growth Signature Global Asset Management 6116 6166 1166 2309 2509 3309 3509 1309 1514Cambridge Asset Allocation Corporate Class Cambridge Global Asset Management 2322 2517 3322 3517 1522 1217Harbour Growth & Income Harbour Advisors 691 891 1891 2310 2513 3310 3513 1310 1518Signature Canadian Balanced Signature Global Asset Management 685 785 1785Portfolio SeriesPortfolio Series Income CI Investment Consulting 7740 7745 1745Portfolio Series Conservative CI Investment Consulting 7770 7775 1775Portfolio Series Conservative Balanced CI Investment Consulting 2600 2700 3600 3700 1600 1707Portfolio Series Balanced CI Investment Consulting 7710 7715 1715Portfolio Series Balanced Growth CI Investment Consulting 2601 2701 3601 3701 1601 1708Portfolio Series Growth CI Investment Consulting 2602 2702 3602 3702 1602 1702Portfolio Series Maximum Growth CI Investment Consulting 2603 2703 3603 3703 1603 1704Canadian EquityCambridge Canadian Equity Corporate Class Cambridge Global Asset Management 2321 2516 3321 3516 1521 1216Cambridge Canadian Growth Companies** Cambridge Global Asset Management 11108 11158 11458CI Canadian Dividend Tetrem Capital Management 11114 11164 11464Cambridge Canadian Dividend Cambridge Global Asset Management 11112 11162 11462CI Canadian Investment Tetrem Capital Management 7420 7425 1425 2307 2507 3307 3507 1307 1507Harbour Harbour Advisors 690 890 1890 290 390 790 490 1790 1490Harbour Voyageur Corporate Class Harbour Advisors 2576 2586 3576 3586 1576 1586Signature Select Canadian Signature Global Asset Management 677 777 1777 150 164 151 017 1151 1117Synergy Canadian Corporate Class Picton Mahoney Asset Management 6103 2510 6153 3510 1153 1515U.S. EquityCambridge American Equity Cambridge Global Asset Management 212 312 812 612 1812 1612 294 394 794 194 1794 1194CI American Managers Corporate Class CI Investment Consulting 209 309 709 409 1709 1409CI American Value Epoch Investment Partners 7500 7505 1510 510 512 511 513 1511 1513Cambridge U.S. Dividend Cambridge Global Asset Management 11113 21113 11163 21163 11463 21463Global EquityBlack Creek Global Leaders Black Creek Investment Management 11106 21106 11156 21156 11456 21456 2574 2584 3574 3584 1574 1584Black Creek International Equity Black Creek Investment Management 11118 21118 11168 21168 11468 21468 2575 2585 3575 3585 1575 1585Cambridge Global Equity Corporate Class Cambridge Global Asset Management 2323 2518 3323 3518 1523 1218CI Global Value Altrinsic Global Advisors 680 180 880 580 1880 1580 206 306 706 406 1706 1406Harbour Global Equity Corporate Class Harbour Advisors 2300 2500 3300 3500 1300 1500Signature Global Dividend Signature Global Asset Management 578 579 878 879 1778 1788 2578 2588 3578 3588 1578 1588Signature Select Global Signature Global Asset Management 588 589 888 889 1688 1689 2388 2389 3388 3389 1388 1389Global BalancedBlack Creek Global Balanced Black Creek Investment Management 11115 21115 11165 21165 11465 21465 2573 2583 3573 3583 1573 1583Harbour Global Growth & Income Corporate Class Harbour Advisors 2306 2506 3306 3506 1306 1506Signature Global Income & Growth Signature Global Asset Management 2111 2402 3111 3402 1111 1402 2312 2515 3312 3515 1312 1520

Class A Performance as at October 31, 2015 YTD 1 Month 3 Month 6 Month 1YR 3YR 5YR 10YR Since Inception

Fixed IncomeSignature Global Bond 9.4 -2.1 0.6 5.7 11.4 5.3 3.8 4.2 4.1 (AUG. 92)Signature Canadian Bond 1.3 -0.3 -1.7 -0.9 3.1 2.4 3.2 3.7 5.5 (JAN. 93)Signature Corporate Bond 2.1 1.2 -1.3 -1.2 1.6 4.2 4.8 5.0 4.6 (DEC. 01)Diversified IncomeCambridge High Income 3.6 2.0 -0.7 0.9 3.3 8.3 7.9 8.1 9.9 (JUL. 04)Select Income Managed Corporate Class 2.3 1.2 -1.1 -0.4 3.0 4.2 3.9 N/A 4.1 (SEP. 10)Signature Diversified Yield* 1.0 2.0 -3.5 -3.8 1.3 6.2 5.5 N/A 6.4 (NOV. 09)Signature Dividend -0.7 4.3 -4.0 -4.0 1.4 9.5 7.5 5.5 6.7 (OCT. 96)Signature Diversified Yield II 1.2 1.8 -3.6 -3.8 1.7 7.2 N/A N/A 6.7 (FEB. 11)Signature High Income -0.5 1.6 -3.2 -4.5 -0.7 6.0 6.7 6.4 9.1 (DEC. 96)Canadian BalancedSignature Income & Growth -0.7 1.3 -5.0 -4.4 0.5 7.8 6.4 5.9 6.8 (NOV. 00)Cambridge Asset Allocation Corporate Class 4.7 2.0 -0.6 0.5 7.2 11.2 8.4 N/A 6.0 (DEC. 07)Harbour Growth & Income -0.4 2.0 -2.5 -2.2 0.0 6.1 4.2 4.0 5.2 (JUN. 97)Signature Canadian Balanced -0.5 0.9 -4.3 -3.8 1.3 7.7 5.9 5.9 7.4 (JUN. 97)Portfolio SeriesPortfolio Series Income 3.9 1.2 -1.4 0.6 5.0 6.9 6.0 5.4 5.4 (DEC. 97)Portfolio Series Conservative 3.5 1.7 -2.4 -0.4 4.9 8.0 6.2 5.0 5.3 (DEC. 97)Portfolio Series Conservative Balanced 3.7 2.2 -2.4 -0.5 5.4 9.3 6.9 5.0 5.1 (DEC. 01)Portfolio Series Balanced 4.0 2.5 -2.8 -0.6 5.8 10.1 7.3 5.1 7.0 (NOV. 88)Portfolio Series Balanced Growth 4.1 3.0 -3.2 -1.0 6.0 11.0 7.7 5.0 4.9 (DEC. 01)Portfolio Series Growth 4.3 3.6 -3.3 -1.1 6.5 12.2 8.3 5.0 4.6 (DEC. 01)Portfolio Series Maximum Growth 5.1 4.3 -3.6 -1.0 7.3 14.1 9.2 5.0 4.2 (DEC. 01)Canadian EquityCambridge Canadian Equity Corporate Class 2.5 3.4 -1.0 -1.0 6.3 14.9 12.8 N/A 8.0 (DEC. 07)Cambridge Canadian Growth Companies** -1.8 3.9 -3.3 -5.5 1.5 18.0 N/A N/A 19.6 (FEB. 11)CI Canadian Dividend -2.8 5.2 -0.6 -3.8 -3.5 8.1 7.1 5.7 5.8 (FEB. 05)Cambridge Canadian Dividend 6.3 3.5 1.4 1.9 10.3 13.4 9.1 7.3 8.2 (FEB. 05)CI Canadian Investment -1.9 4.6 -3.1 -4.8 -1.1 10.3 5.6 5.0 8.4 (NOV. 32)Harbour -2.6 2.9 -3.3 -6.2 -3.6 5.1 4.2 4.7 6.7 (JUN. 97)Harbour Voyageur Corporate Class 1.6 3.8 -3.6 -3.6 2.1 8.5 N/A N/A 9.0 (AUG. 11)Signature Select Canadian -0.9 4.2 -4.3 -5.3 0.9 10.1 7.0 6.3 9.3 (MAY 98)Synergy Canadian Corporate Class 1.4 3.0 -5.0 -3.8 2.5 11.2 7.0 5.5 8.6 (DEC. 97)U.S. EquityCambridge American Equity 9.8 6.4 1.9 7.6 13.2 23.3 13.6 4.8 7.4 (MAY 89)CI American Managers® Corporate Class 9.9 6.5 -1.3 3.8 14.3 22.2 15.2 6.5 4.8 (JUL. 00)CI American Value 9.5 5.9 -2.4 5.6 16.7 23.1 15.5 7.2 8.8 (MAY 57)Cambridge U.S. Dividend 12.3 5.8 3.3 9.0 18.6 22.4 15.8 N/A 7.7 (JUN. 06)Global EquityBlack Creek Global Leaders 15.1 5.8 -3.9 2.9 18.6 22.3 12.0 7.2 6.0 (FEB. 05)Black Creek International Equity 17.8 5.8 -4.1 2.2 17.9 21.1 12.4 N/A 13.3 (SEP. 08)Cambridge Global Equity Corporate Class 4.9 3.9 -6.7 -1.4 7.8 16.8 10.6 N/A 7.1 (DEC. 07)CI International Value 14.5 6.1 -5.0 -0.1 16.6 14.7 8.1 3.8 2.5 (JUN. 96)Harbour Global Equity Corporate Class 3.1 3.0 -5.8 -4.2 3.3 12.2 9.8 4.5 3.6 (DEC. 01)Signature Select Global 7.6 4.1 -5.6 0.4 11.0 15.4 10.1 N/A 11.0 (JUL. 10)Global BalancedBlack Creek Global Balanced 12.3 3.2 -3.4 1.7 13.3 16.4 10.3 N/A 6.1 (FEB. 07)Harbour Global Growth & Income Corporate Class 5.4 3.1 -1.8 3.3 8.6 13.5 9.5 5.0 4.9 (DEC. 02)Signature Global Income & Growth 6.8 0.2 -4.6 0.8 9.7 12.2 8.7 N/A 4.3 (FEB. 07)

* Closed. ** Soft capped.

FSC FPO