Select 30i70e Managed Portfolio. Portfolio Review Third Quarter 2013

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1 Portfolio Review Third Quarter 2013 Q3

2 Portfolio Managers Economic Overview After sending signals earlier this year that it would be scaling back its economic stimulus efforts, the U.S. Federal Reserve announced in September that it would be standing pat, citing a string of uninspiring U.S. jobs and economic data. The yield for the U.S. 10-year Treasury bond rose to nearly 3.0% in advance of the Fed s announcement, but fell back to about 2.7% following the change in guidance. The Bank of Canada also left rates unchanged, but Governor Stephen Poloz had a more upbeat outlook, citing growing confidence in the Canadian economy. Prices for interest-sensitive asset classes, including government bonds, investment-grade and high-yield corporate bonds, and real estate investment trusts, had declined sharply over the summer with the prospect of higher interest rates before rebounding somewhat late in the third quarter. Canadian equities, as represented by the S&P/TSX Composite Index, posted a 6.3% gain for the quarter, as the U.S. Fed s announcement that it would continue its stimulus plans briefly boosted the index to a two-year high. Although the materials sector had been deeply negative as a result of poor commodity prices and rising costs for most of the year, stock prices rose late in the third quarter on a more optimistic outlook. The health care, consumer discretionary, and financial sectors led the market with the strongest gains, while the utilities sector was the only one to have a negative return. Meanwhile, U.S. stocks, as reflected by the S&P 500 Index, finished the period with a 3.0% gain in Canadian dollar terms. Underlying Fund Allocations CI Income Fund 29.5% Select U.S. Equity Managed Fund 23.7% Select International Equity Managed Fund 20.7% Select Canadian Equity Managed Fund 19.7% Harbour Fund 4.6% Cash 1.8% Top Ten Holdings Canada Gov t 1.25% 01Mar18 1.2% Toronto-Dominion Bank 0.9% Microsoft Corp. 0.8% Bank of Nova Scotia 0.6% Suncor Energy Inc. 0.6% Schlumberger Ltd. 0.6% Mullen Group Ltd. 0.6% Canadian Natural Resources Ltd. 0.6% Boeing Co. 0.5% Roche 0.5% Despite ongoing political and fiscal issues in the Eurozone during the quarter, equity indexes rose in Germany, France and England. Japan s Nikkei Index rose 5.7%. Other Asian markets, including China, Hong Kong and South Korea, also had positive returns. The MSCI World Index gained 6.0% in Canadian dollars. 26 Portfolio Select Series

3 Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (November 2006) 2.1% 3.7% 6.0% 16.2% 7.9% 6.2% N/A 2.5% Asset Allocation Overview and Activity Different types of investments will respond differently to the markets, reinforcing the importance of a multi-level diversification strategy. A balanced asset mix ensures that investors are not dependent on any one asset class or security type to provide returns. CI Investment Consulting combines its portfolio construction expertise with ongoing comprehensive research and recommendations from State Street Global Advisors, a world leader in asset allocation, to create portfolios designed to capture evolving opportunities in the various asset classes. This report is designed to provide you with an up-to-date portfolio overview of the Select 30i70e Managed Portfolio, including the allocations across asset class, geographic region, equity sector and market capitalization. The arrows indicate whether the allocation for each category has increased or decreased since the previous quarter-end. Asset Class Geographic Regions 24.4% 20.3% 14.3% 12.1% 11.4% 6.3% 6.0% 3.4% 1.8% U.S. equity Canadian equity Cash European equity Canadian bond Asian equity Foreign bond Emerging markets equity Other equity 31.8% 28.0% 21.0% 4.1% 3.7% 3.3% 2.4% 2.4% 1.8% 1.4% Canada U.S. Cash & Other Japan Emerging markets United Kingdom Switzerland Germany France Australia Equity Market Cap Equity Industry Sector 80.3% 17.2% 2.5% Large-cap Mid-cap Small-cap 24.6% 13.4% 11.2% 10.8% 10.7% 9.7% 7.6% 5.9% 2.8% 2.8% 0.5% Financial services Energy Information technology Industrials Consumer discretionary Consumer staples Health care Materials Telecommunications Utilities Other Portfolio Select Series 27

4 Portfolio Commentary The portfolio gained 3.7% during the quarter, underperforming its benchmark (30% DEX Universe Bond Index, 28% S&P/TSX Composite Index, 21% MSCI World Index C$ and 21% MSCI World Index local currency), which rose 4.4%. The equity component underperformed the benchmark, but contributed to absolute performance. Within the income section, allocations to income-producing equities and high-yield bonds contributed to performance. During the quarter, global bond markets gained following the U.S. Federal Reserve s decision not to cut back on its asset-buying program. Income-generating equities rebounded after Fed Chairman Ben Bernanke gave assurances that this key stimulus measure will be retained. The U.S. dollar weakened against the Canadian dollar and other major foreign currencies amid the prospect of continued stimulus. Our globally diversified basket of income-generating equities contributed to performance. We currently favour high-quality dividend-paying companies. Government bond holdings had the weakest returns, but our significant underweight allocation to this asset class added to relative performance. For the portfolio s income portion, the target allocation is 20% in each of Canadian government bonds, foreign government bonds, investment-grade corporate bonds, high-yield corporate bonds, and high-yielding equities. Over the quarter, we tactically increased our government and investment-grade bond positions as yields began to look attractive relative to cash. We also selectively added to our high-yield bond allocation as valuations become more attractive. We maintained a large cash position to reduce volatility and to provide flexibility to invest. We are continuing to favour corporate bonds, global bonds and currencies, while maintaining underweight allocations to Canadian government bonds. Having a diversified and flexible framework allows us to take advantage of changes in valuations in the market and continue providing steady income returns with low volatility. We expect to achieve modest growth and inflation protection through our allocation to high-quality dividend-paying equities. The equity portion of the portfolio contributed to performance, but lagged the benchmark due to underperformance by the Canadian and international components. Among the equity funds, Select U.S. Equity Managed Fund made the largest contribution to relative performance. Global equity markets were propelled by Europe s emergence from recession and rising corporate profitability in the United States. Growth-oriented sectors such as industrials and information technology outpaced more defensive sectors. The resource-heavy S&P/TSX Composite Index received a boost from positive economic statistics from China that eased concerns over a significant slowdown in the world s second-largest economy. Higher resources prices and continued monetary stimulus provided a shot in the arm to emerging markets. The sector allocation of the portfolio s overall equity portion is more diversified than that of the Canadian economy and the S&P/TSX Composite Index, which has over 70% of its value concentrated in three sectors: energy, materials and financials. We continue to focus on company fundamentals and valuations to add value and avoid undue concentration in any one sector. From a regional perspective, the equity portion continued to have an overweight allocation to the U.S., although we marginally reduced our position there. We had an underweight allocation to Canada and a neutral position in international equities. U.S. equities are supported by a diverse economy, with large exposure to global markets and strong representation in all major industrial sectors, making it an attractive asset class on a risk-adjusted basis. 28 Portfolio Select Series

5 Select Canadian Equity Managed Fund is positioned quite differently from its benchmark, the S&P/TSX Composite Index. The fund has underweight allocations to the resources and financials sectors, and overweight positions in other areas such as information technology, consumer staples and consumer discretionary positioning that we believe enhances risk-adjusted return potential. The fund underperformed due to holdings in materials and an overweight position in consumer staples. The portion of the fund managed by Tetrem Capital Management was the largest contributor to performance on an absolute basis, benefiting from security selection in the energy and industrials sectors. Select U.S. Equity Managed Fund outperformed its benchmark, the S&P 500 Index, due in large part to its positions in energy and financials. The portion managed by Picton Mahoney Asset Management added the most value, due to security selection in energy and financials positions. The fund favours areas of the market that are tied to economic growth, while maintaining underweight positions in defensive sectors. We also added value through tactical hedging of our U.S.-dollar exposure. Our allocation to emerging markets contributed to performance, offsetting this sector s losses in the previous quarter. This was due in large part to positive economic data in China and lower expectations for the degree of economic-stimulus tapering by the U.S. Federal Reserve. Our long-term outlook remains favourable for these countries, particularly China, where we expect to see businesses continuing to benefit from rising personal wealth and domestic consumption. Historically, emerging market equities have offered higher returns at the expense of additional volatility. While we expect this trade-off to continue, we believe the long-term rewards justify the risks. Alfred Lam, CFA, Vice-President and Portfolio Manager Yoonjai Shin, CFA, Director Marchello Holditch, Senior Analyst Lewis Harkes, CFA, Senior Analyst Andrew Ashworth, Analyst Select International Equity Fund slightly underperformed the MSCI EAFE Index. The portion managed by Altrinsic Global Advisors made the largest absolute contribution, thanks to security selection in industrials and energy. The fund had overweight allocations to information technology and consumer staples, a significant cash position, and underweight allocations to materials and industrials. Geographically, the international fund had overweight positions in emerging markets, mainly in Asia and Latin America, and underweight allocations to the U.K., Australia, France and the peripheral European countries. Portfolio Select Series 29

6 Portfolio Select Series Portfolio Management Teams Altrinsic Global Advisors, LLC follows a fundamental value approach in which the team seeks out high-quality undervalued companies worldwide. Founded by John Hock and associates, Altrinsic is based in Greenwich, Connecticut, and manages over US$13 billion in assets. Cambridge Global Asset Management manages over $7 billion in assets and is led by Chief Investment Officer Alan Radlo and Portfolio Managers Robert Swanson and Brandon Snow. Combined, they have over 65 years of investment experience and have managed a number of multi-billion-dollar mutual fund portfolios. Cambridge Global Asset Management is a division of CI Investments and has offices in Boston and Toronto. Epoch Investment Partners, Inc. is a New York-based investment management firm founded by Wall Street veteran William Priest and associates. Epoch uses a unique value-based approach that focuses on companies with superior shareholder yield. It manages over US$24 billion. Harbour Advisors, a division of CI Investments, is led by Portfolio Managers Stephen Jenkins and Roger Mortimer. Harbour s approach entails buying high-quality businesses at a sensible price, and following a patient, long-term outlook. Harbour manages over $12 billion. QV Investors Inc. is a Calgary-based, employee-owned portfolio management firm that serves individual and institutional investors. QV follows a value-based approach in which it seeks companies with better returns and lower valuations than those of the market. The firm is led by Chief Investment Officer Leigh Pullen and manages $4 billion in assets. Signature Global Asset Management s advantage is its approach in which asset class and sector specialists combine their research to develop a comprehensive picture of a company and its securities. The team of 32 investment professionals is led by Chief Investment Officer Eric Bushell, who was named Morningstar Fund Manager of the Decade in Signature manages over $40 billion. Picton Mahoney Asset Management is a portfolio management firm led by David Picton and Michael Mahoney. The use of quantitative analysis is the foundation of their approach. Picton Mahoney maintains a disciplined focus on fundamental change, coupled with strong risk controls and portfolio construction techniques. The firm manages about $7 billion. Tetrem Capital Management is an employee-owned investment management firm founded by Chief Investment Officer Daniel Bubis. It is based in Winnipeg and has an office in Boston. Tetrem uses a disciplined investment approach to invest in undervalued Canadian and U.S. companies. The firm manages about $5 billion.

7 For more information on Portfolio Select Series, please contact your CI Sales Representative or visit All commentaries are published by CI Investments Inc., the manager of all the funds described herein. They are provided as a general source of information and should not be considered personal investment advice or an offer or solicitation to buy or sell securities. Every effort has been made to ensure that the material contained in the commentaries is accurate at the time of publication. However, CI Investments Inc. cannot guarantee their accuracy or completeness and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. 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. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer and there can be no assurances that the CI Money Market Funds will maintain its net asset value per security at a constant amount or that the full amount of your investment in these funds will be returned to you. CI Investments, the CI Investments design, Synergy Mutual Funds, Harbour Advisors, Harbour Funds, Cambridge and American Managers are registered trademarks of CI Investments Inc. Portfolio Select Series, Portfolio Series, Signature Funds and Signature Global Asset Management are trademarks of CI Investments Inc. Cambridge Global Asset Management is the business name of CI Global Investments Inc. Certain portfolio managers of Cambridge Global Asset Management are registered with CI Investments Inc. Published October Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I Head Office / Toronto Calgary Montreal Vancouver Client Services English: French: FSC FPO _E (10/13)