Portfolio Select Series. Portfolio Review First Quarter 2017

Transcription

1 Portfolio Select Series Portfolio Review First Quarter 2017 Q1

2 Q4 3 Select Income Managed Portfolio 6 Select 80i20e Managed Portfolio 10 Select 70i30e Managed Portfolio 14 Select 60i40e Managed Portfolio 18 Select 50i50e Managed Portfolio 22 Select 40i60e Managed Portfolio Portfolio Select Series Best Fund of Funds Morningstar Awards 2013 Winner We are pleased to provide Portfolio Review, your latest quarterly report on Portfolio Select Series Portfolio Review provides an enhanced level of detail on the holdings and activity in the Portfolio Select Series funds. A separate report is available for each of the nine Portfolios. The information provided in Portfolio Review includes: Underlying fund allocations Top 10 holdings by individual security Performance Allocations by sector, region, asset class and market cap, and their change over the prior quarter. In addition, each report includes detailed commentary explaining the fund s performance for the quarter. The commentary is provided by CI Multi-Asset Management, CI s in-house team of investment professionals responsible for managing and monitoring the Portfolio Select Series portfolios. We hope you find Portfolio Review to be useful and informative. 26 Select 30i70e Managed Portfolio 30 Select 20i80e Managed Portfolio 34 Select 100e Managed Portfolio

3 Select Income Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (September 2010) 0.1% 0.9% -0.9% 3.8% 2.7% 3.8% N/A 3.7% 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 Multi-Asset Management 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 Income Managed Portfolio, including the allocations across asset class, currency exposure and bond maturity breakdown. The arrows indicate whether the allocation for each category has increased or decreased since the previous quarter-end. Asset Class Geographic Regions 54% 19% 14% 13% Government and investment-grade bonds High-yield bonds Cash REITs, trusts & equities 40.3% 33.5% 17.9% 2.3% 2.2% 0.9% 0.8% 0.7% 0.7% 0.6% Canada U.S. Cash and other countries U.K. Emerging markets Spain Japan Australia Switzerland France Currency Exposure Bond Term 75% 20% 3% 2% Canadian dollar U.S. dollar Other Euro 61.4 % 25.7% 12.9% 1-5 years 5-10 years 10+ years Portfolio Select Series 3

4 Select Income Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 97.7% Cash 2.3% Bond Information Portfolio yield (approx.) Duration in years 2.9% 4.7 Top Ten Holdings U.S. Treasury N/B 2.00% 15Nov26 1.8% U.S. N/B 2.875% 15Nov46 1.6% ishares Dow Jones U.S. Real Estate ETF 1.6% Ontario Province 2.85% 02Jun23 1.6% ishares 20+ Yr Treasury Bond ETF 1.4% Canada Gov t Bond 0.5% 01Feb19 1.3% Quebec Prov. Med Term Note 3.50% 01Dec22 1.3% Canada Gov t Bond 1.5% 01Mar20 1.3% Ontario Province 3.5% 02Jun24 1.2% Canada Gov t Bond 0.50% 01Mar22 1.1% 4 Portfolio Select Series

5 Select Income Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 0.9 % during the quarter, underperforming its benchmark (FTSE TMX Canada Universe Bond Index), which rose 1.2%. Our position in the U.S. dollar contributed to underperformance. Diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities added relative value. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest rate policy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy shortterm Canadian bonds. A year ago, holders of three-year Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixed-income component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer Yoonjai Shin, CFA, Vice-President and Portfolio Manager Marchello Holditch, CFA, Director Lewis Harkes, CFA, CAIA, Senior Analyst Byron Monaghan, CFA, CIPM, Senior Analyst Desta Tadesse, Analyst Zoe Li, Junior Analyst Portfolio Select Series 5

6 Select 80i20e Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (November 2006) 0.4% 1.6% 0.7% 5.7% 3.4% 5.1% 3.8% 3.9% 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 Multi-Asset Management 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 80i20e 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 29.6% 29.6% 12.2% 11.8% 7.8% 4.9% 1.7% 1.4% 1.0% Foreign Bond Canadian bond Cash U.S. equity Canadian equity European equity Asian equity Emerging markets equity Other equity 37.3% 34.4% 17.7% 3.0% 2.6% 1.3% 1.0% 0.9% 0.9% 0.8% Canada U.S. Cash and other countries Emerging markets U.K. Japan Switzerland Spain France Bermuda Equity Market Cap Equity Industry Sector 84.4% 12.4% 3.2% Large-cap Mid-cap Small-cap 20.0% 11.8% 10.6% 10.5% 10.0% 9.2% 7.3% 6.7% 6.4% 4.6% 2.4% 0.5% Financial services Industrials Energy Consumer discretionary Information technology Real estate Consumer staples Health care Utilities Materials Telecommunication services Other 6 Portfolio Select Series

7 Select 80i20e Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 79.0% Select U.S. Equity Managed Fund 7.5% Select International Equity Managed Fund 6.6% Select Canadian Equity Managed Fund 6.1% Cash 0.8% Top Ten Holdings U.S. Treasury 2.25% 15Feb27 2.0% U.S. Treasury N/B 2.00% 15Nov26 1.4% U.S. N/B 2.875% 15Nov46 1.3% ishares Dow Jones U.S. Real Estatem ETF 1.3% Ontario Province 2.85% 02Jun23 1.3% ishares 20+ Yr Treasury Bond ETF 1.1% Canada Gov t Bond 0.5% 01Feb19 1.1% Quebec Prov. Med Term Note 3.50% 01Dec22 1.0% Canada Gov t Bond 1.5% 01Mar20 1.0% Ontario Province 3.5% 02Jun24 0.9% Portfolio Select Series 7

8 Select 80i20e Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 1.6% during the quarter, outperforming its benchmark (80% FTSE TMX Canada Universe Bond Index, 20% S&P/TSX Composite Index), which rose 1.5%. Our diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities contributed to outperformance. Within the portfolio s equity portion, the international equity pool added relative value. An underweight allocation to Canadian equity and overweight to foreign equity also added value. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest rate policy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy short-term Canadian bonds. A year ago, holders of threeyear Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixedincome component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year 8 Portfolio Select Series

9 Select 80i20e Managed Portfolio Corporate Class investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. Our equity allocation is more diversified than that of the Canadian economy and the S&P/TSX Composite Index. We generally do not invest heavily in the energy sector, as the revenue and profit of these companies are influenced considerably more by global oil prices than by the merits of their operations. Oil demand is expected to remain weak for the foreseeable future, due to the slowdown in China and increased energy efficiency achieved by consumers. We remain cautious about this sector, preferring high-quality players that can withstand lower oil prices, as opposed to the high-cost producers. While this can lead to less price appreciation potential, it also means less downside. Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer Yoonjai Shin, CFA, Vice-President and Portfolio Manager Marchello Holditch, CFA, Director Lewis Harkes, CFA, CAIA, Senior Analyst Byron Monaghan, CFA, CIPM, Senior Analyst Desta Tadesse, Analyst Zoe Li, Junior Analyst Portfolio Select Series 9

10 Select 70i30e Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (November 2006) 0.6% 1.9% 1.3% 6.5% 3.5% 5.6% 3.8% 3.9% 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 Multi-Asset Management 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 70i30e 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 26.7% 25.4% 14.3% 11.5% 10.3% 6.5% 2.0% 1.9% 1.4% Foreign bond Canadian bond U.S. equity Cash Canadian equity European equity Asian equity Emerging markets equity Other equity 35.6% 34.3% 17.8% 3.5% 2.8% 1.8% 1.2% 1.1% 1.1% 0.9% Canada U.S. Cash and other countries Emerging markets U.K. Japan Switzerland Spain France Bermuda Equity Market Cap Equity Industry Sector 84.7% 13.0% 2.3% Large-cap Mid-cap Small-cap 20.9% 11.4% 11.2% 11.1% 10.9% 7.5% 7.2% 6.5% 5.5% 5.1% 2.2% 0.5% Financial services Industrials Consumer discretionary Information technology Energy Consumer staples Health care Real estate Utilities Materials Telecommunication services Other 10 Portfolio Select Series

11 Select 70i30e Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 65.9% Select U.S. Equity Managed Fund 10.8% Select Canadian Equity Managed Fund 10.0% Select International Equity Managed Fund 9.8% Signature Global Bond Fund 2.8% Cash 0.7% Top Ten Holdings U.S. Treasury 2.25% 15Feb27 1.7% U.S. Treasury N/B 2.00% 15Nov26 1.2% Ontario Province 2.85% 02Jun23 1.1% U.S. N/B 2.875% 15Nov46 1.1% ishares Dow Jones U.S. Real Estate ETF 1.1% Quebec Prov. Med Term Note 3.50% 01Dec22 1.0% ishares 20+ Yr Treasury Bond ETF 0.9% Canada Gov t Bond 0.5% 01Feb19 0.9% Ontario Province 2.4% 02Jun26 0.8% Canada Gov t Bond 1.5% 01Mar20 0.8% Portfolio Select Series 11

12 Select 70i30e Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 1.9% during the quarter, matching its benchmark (70% FTSE TMX Canada Universe Bond Index, 20% S&P/TSX Composite Index, 10% MSCI World Index C$). Our diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities contributed to relative value. Within the portfolio s equity portion, the international equity pool made a positive contribution. An underweight allocation to Canadian equity and overweight to foreign equity also added value. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest ratepolicy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy shortterm Canadian bonds. A year ago, holders of three-year Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixed-income component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. Our equity allocation is more diversified than that of the Canadian economy and the S&P/TSX Composite Index. We generally do not invest heavily in the energy sector, as 12 Portfolio Select Series

13 Select 70i30e Managed Portfolio Corporate Class the revenue and profit of these companies are influenced considerably more by global oil prices than by the merits of their operations. Oil demand is expected to remain weak for the foreseeable future, due to the slowdown in China and increased energy efficiency achieved by consumers. We remain cautious about this sector, preferring high-quality players that can withstand lower oil prices, as opposed to the high-cost producers. While this can lead to less price appreciation potential, it also means less downside. Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer Yoonjai Shin, CFA, Vice-President and Portfolio Manager Marchello Holditch, CFA, Director Lewis Harkes, CFA, CAIA, Senior Analyst Byron Monaghan, CFA, CIPM, Senior Analyst Desta Tadesse, Analyst Zoe Li, Junior Analyst Portfolio Select Series 13

14 Select 60i40e Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (September 2006) 0.7% 2.2% 2.0% 7.2% 3.8% 6.2% 3.7% 3.9% 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 Multi-Asset Management 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 60i40e 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 23.5% 21.2% 17.4% 11.9% 11.7% 7.9% 2.4% 2.3% 1.7% Foreign bond Canadian bond U.S. equity Cash Canadian equity European equity Emerging markets equity Asian equity Other equity 34.6% 32.9% 18.9% 3.9% 2.9% 2.1% 1.3% 1.2% 1.2% 1.0% U.S. Canada Cash and other countries Emerging markets U.K. Japan Switzerland France Spain Bermuda Equity Market Cap Equity Industry Sector 85.2% 13.0% 1.8% Large-cap Mid-cap Small-cap 21.2% 12.1% 11.8% 11.2% 10.8% 7.8% 7.5% 5.3% 4.9% 4.8% 2.1% 0.5% Financial services Information technology Consumer discretionary Industrials Energy Health care Consumer staples Materials Real estate Utilities Telecommunication services Other 14 Portfolio Select Series

15 Select 60i40e Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 53.4% Select U.S. Equity Managed Fund 14.9% Select International Equity Managed Fund 12.7% Select Canadian Equity Managed Fund 12.5% Signature Global Bond Fund 4.7% Cash 1.8% Top Ten Holdings U.S. Treasury 2.25% 15Feb27 1.4% U.S. Treasury N/B 2.00% 15Nov26 1.0% Ontario Province 2.85% 02Jun23 0.9% Quebec Prov. Med Term Note 3.50% 01Dec22 0.9% U.S. N/B 2.875% 15Nov46 0.9% ishares Dow Jones U.S. Real Estate ETF 0.9% U.S. Treasury N/B 1.75% 30Nov21 0.8% Ontario Province 2.4% 02Jun26 0.8% ishares 20+ Yr Treasury Bond ETF 0.7% Canada Gov t Bond 0.5% 01Feb19 0.7% Portfolio Select Series 15

16 Select 60i40e Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 2.2% during the quarter, slightly underperforming its benchmark (60% FTSE TMX Canada Universe Bond Index, 20% S&P/TSX Composite Index, 20% MSCI World Index C$), which rose 2.3%. Our position in the U.S. dollar contributed to underperformance. Diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities contributed to relative value. Within the portfolio s equity portion, the international equity pool added relative value. An underweight allocation to Canadian equity and overweight to foreign equity also added value. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest rate policy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy shortterm Canadian bonds. A year ago, holders of three-year Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixed-income component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. Our equity allocation is more diversified than that of the Canadian economy and the S&P/TSX Composite Index. 16 Portfolio Select Series

17 Select 60i40e Managed Portfolio Corporate Class We generally do not invest heavily in the energy sector, as the revenue and profit of these companies are influenced considerably more by global oil prices than by the merits of their operations. Oil demand is expected to remain weak for the foreseeable future, due to the slowdown in China and increased energy efficiency achieved by consumers. We remain cautious about this sector, preferring high-quality players that can withstand lower oil prices, as opposed to the high-cost producers. While this can lead to less price appreciation potential, it also means less downside. Select Canadian Equity Managed Fund underperformed 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 riskadjusted return potential. Underweight exposure to Canadian banks and our holdings in the resources sectors detracted from relative performance. Our long-term outlook for emerging markets remains favourable, particularly in the Asia-Pacific region, where economic fundamentals are relatively robust and equity market valuations appear attractive. We continue to have a modest allocation to emerging market equities to balance our objectives of reducing risk, while increasing potential returns for investors. Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer Yoonjai Shin, CFA, Vice-President and Portfolio Manager Marchello Holditch, CFA, Director Lewis Harkes, CFA, CAIA, Senior Analyst Byron Monaghan, CFA, CIPM, Senior Analyst Desta Tadesse, Analyst Zoe Li, Junior Analyst Select U.S. Equity Managed Fund underperformed its benchmark, the S&P 500 Index. The fund favours areas of the market that are tied to economic growth, while maintaining underweight positions in defensive sectors. Our overweight exposure to energy and our positions in the consumer sectors detracted from relative value. Select International Equity Managed Fund outperformed the MSCI EAFE Index. Our positions in the financials and consumer discretionary sectors contributed to relative value, as did our exposure to emerging markets. The international equity portion had overweight allocations to information technology and consumer discretionary, with underweight positions in materials and industrials. Geographically, it had overweight positions in emerging markets, mainly in Asia and Latin America, and underweight allocations to the U.K., Australia and Germany. Portfolio Select Series 17

18 Select 50i50e Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (November 2006) 0.8% 2.4% 2.7% 8.2% 4.1% 6.8% 3.8% 3.9% 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 Multi-Asset Management 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 50i50e 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 20.0% 19.9% 17.3% 14.3% 11.4% 9.4% 3.0% 2.6% 2.1% Foreign bond U.S. equity Canadian bond Canadian equity Cash European equity Emerging markets equity Asian equity Other equity 34.3% 31.6% 19.2% 4.2% 3.0% 2.4% 1.5% 1.4% 1.3% 1.2% U.S. Canada Cash and other countries Emerging markets U.K. Japan Switzerland France Spain Netherlands Equity Market Cap Equity Industry Sector 85.3% 13.3% 1.4% Large-cap Mid-cap Small-cap 21.7% 12.5% 12.1% 11.0% 11.0% 8.0% 7.6% 5.5% 4.4% 3.8% 2.1% 0.3% Financial services Information technology Consumer discretionary Energy Industrials Health care Consumer staples Materials Utilities Real estate Telecommunication services Other 18 Portfolio Select Series

19 Select 50i50e Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 42.6% Select U.S. Equity Managed Fund 18.0% Select Canadian Equity Managed Fund 16.4% Select International Equity Managed Fund 15.8% Signature Global Bond Fund 5.5% Cash 1.8% Top Ten Holdings U.S. Treasury 2.25% 15Feb27 1.2% Ontario Province 2.85% 02Jun23 0.8% U.S. Treasury N/B 2.00% 15Nov26 0.8% U.S. Treasury N/B 1.75% 30Nov21 0.8% Quebec Prov. Med Term Note 3.50% 01Dec22 0.8% Ontario Province 2.4% 02Jun26 0.7% U.S. N/B 2.875% 15Nov46 0.7% ishares Dow Jones U.S. Real Estate ETF 0.7% Royal Bank of Canada 0.6% Japan Gov t Two Year Bond 0.1% 15Mar19 0.6% Portfolio Select Series 19

20 Select 50i50e Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 2.4% during the quarter, outperforming its benchmark (50% FTSE TMX Canada Universe Bond Index, 20% S&P/TSX Composite Index, 15% MSCI World Index C$, 15% MSCI World Index local currency), which rose 2.1%. Our diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities contributed to outperformance. Within the portfolio s equity portion, the international equity pool added relative value. An underweight allocation to Canadian equity and overweight to foreign equity also added value. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest rate policy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy shortterm Canadian bonds. A year ago, holders of three-year Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixed-income component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. 20 Portfolio Select Series

21 Select 50i50e Managed Portfolio Corporate Class Our equity allocation is more diversified than that of the Canadian economy and the S&P/TSX Composite Index. We generally do not invest heavily in the energy sector, as the revenue and profit of these companies are influenced considerably more by global oil prices than by the merits of their operations. Oil demand is expected to remain weak for the foreseeable future, due to the slowdown in China and increased energy efficiency achieved by consumers. We remain cautious about this sector, preferring high-quality players that can withstand lower oil prices, as opposed to the high-cost producers. While this can lead to less price appreciation potential, it also means less downside. Select Canadian Equity Managed Fund underperformed 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. Underweight exposure to Canadian banks and our holdings in the resources sectors detracted from relative performance. Our long-term outlook for emerging markets remains favourable, particularly in the Asia-Pacific region, where economic fundamentals are relatively robust and equity market valuations appear attractive. We continue to have a modest allocation to emerging market equities to balance our objectives of reducing risk, while increasing potential returns for investors. Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer Yoonjai Shin, CFA, Vice-President and Portfolio Manager Marchello Holditch, CFA, Director Lewis Harkes, CFA, CAIA, Senior Analyst Byron Monaghan, CFA, CIPM, Senior Analyst Desta Tadesse, Analyst Zoe Li, Junior Analyst Select U.S. Equity Managed Fund underperformed its benchmark, the S&P 500 Index. The fund favours areas of the market that are tied to economic growth, while maintaining underweight positions in defensive sectors. Our overweight exposure to energy and our positions in the consumer sectors detracted from relative value. Select International Equity Managed Fund outperformed the MSCI EAFE Index. Our positions in the financials and consumer discretionary sectors contributed to relative value, as did our exposure to emerging markets. The international equity portion had overweight allocations to information technology and consumer discretionary, with underweight positions in materials and industrials. Geographically, it had overweight positions in emerging markets, mainly in Asia and Latin America, and underweight allocations to the U.K., Australia and Germany. Portfolio Select Series 21

22 Select 40i60e Managed Portfolio Corporate Class Portfolio Performance (Class A) 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years 10 Years Since Inception (November 2006) 0.9% 2.7% 3.6% 9.3% 4.6% 7.5% 3.8% 4.0% 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 Multi-Asset Management 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 40i60e 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 23.2% 16.1% 16.1% 13.7% 11.4% 10.9% 3.5% 3.0% 2.1% U.S. equity Foreign bond Canadian equity Canadian bond Cash European equity Emerging markets equity Asian equity Other equity 34.6% 29.8% 19.8% 4.5% 3.1% 2.5% 1.7% 1.5% 1.3% 1.3% U.S. Canada Cash and other countries Emerging markets U.K. Japan Switzerland France Netherlands Bermuda Equity Market Cap Equity Industry Sector 85.5% 13.3% 1.2% Large-cap Mid-cap Small-cap 21.8% 12.9% 12.3% 10.9% 10.9% 8.3% 7.6% 5.6% 4.1% 3.1% 2.0% 0.5% Financial services Information technology Consumer discretionary Energy Industrials Health care Consumer staples Materials Utilities Real estate Telecommunication services Other 22 Portfolio Select Series

23 Select 40i60e Managed Portfolio Corporate Class Underlying Fund Allocations CI Income Fund 33.5% Select U.S. Equity Managed Fund 21.9% Select Canadian Equity Managed Fund 19.1% Select International Equity Managed Fund 18.9% Signature Global Bond Fund 4.7% Cash 2.0% Top Ten Holdings U.S. Treasury 2.25% 15Feb27 0.9% Royal Bank of Canada 0.7% Toronto-Dominion Bank 0.7% Microsoft Corp. 0.7% Apple Inc. 0.6% U.S. Treasury N/B 1.75% 30Nov21 0.6% Ontario Province 2.85% 02Jun23 0.6% Quebec Prov. Med Term Note 3.50% 01Dec22 0.6% U.S. Treasury N/B 2.00% 15Nov26 0.6% Ontario Province 2.4% 02Jun26 0.6% Portfolio Select Series 23

24 Select 40i60e Managed Portfolio Corporate Class Portfolio Commentary The portfolio gained 2.7% during the quarter, outperforming its benchmark (40% FTSE TMX Canada Universe Bond Index, 24% S&P/TSX Composite Index, 18% MSCI World Index C$, 18% MSCI World Index local currency), which rose 2.3%. Our international equity pool added relative value. An underweight allocation to Canadian equity and overweight to foreign equity also added value. In the portfolio s income portion, diversified exposure to high-yield corporate bonds and high-quality dividend-paying equities contributed to outperformance. Global equity markets gained despite political uncertainty about U.S. fiscal policy, the pending Brexit negotiation and the looming French elections. Canadian equities underperformed their global counterparts, as lower oil prices hurt the energy sector. Despite an interest rate hike by the U.S. Federal Reserve in March, the bond market for the most part held its ground. Credit spreads on high-yield, investment-grade and emerging market debt tightened. The U.S. dollar fell as fears grew that the Trump administration s agenda, which includes tax reform and fiscal stimulus, could be hampered by disunity within the Republican Party. Business and consumer sentiment indicators remained elevated, though quantitative economic data remained largely unchanged. Our portfolio is diversified by country and currency; as a result, we are not overly exposed to any single country s debt yield curve or interest rate policy. We also diversify the portfolio by credit quality and term to maturity with about one-half of our fixed-income investments presently in corporate bonds. We took advantage of shifts in the yield curve to buy shortterm Canadian bonds. A year ago, holders of three-year Government of Canada issues received no premium over cash. That premium now is about 40 basis points. In addition, the portfolio has a U.S. dollar position, which has ranged in size from as low as 6%, when it traded above $1.40 Canadian, to as high as 30%, when it dipped below C$1.30. Normally when U.S. interest rates rise dramatically, the U.S. dollar strengthens. While this means the portfolio s fixed-income component will lose value, this is offset by currency gains. From time to time, we may also use derivatives, gold or floating-rate fixed-income investments to hedge risks within the portfolio. Derivatives can be a costly tactic and, as such, we generally use them infrequently. Equities usually are not a focus for conservative investors. The current outlook suggests this asset class will experience more short-term volatility, and it may take at least seven to eight years to produce a return that is acceptable relative to the risk. However, a pure fixed-income portfolio in this low-yield, volatile market also is too risky for conservative investors. We estimate that, in any given year, the downside for the core Canadian bond markets, as represented by the FTSE TMX Canada Universe Bond Index, is about 5%. This downside risk can be offset by hedging the position. The best solution for a conservative investor is a conservative portfolio, not a fixed-income portfolio. Select Income Managed Corporate Class is a multi-asset-class, conservative portfolio. In addition to fixed-income assets, it holds dividend-paying equities, real estate investment trusts, infrastructure securities and the U.S. dollar, and it is this diversity that can offset interest rate risk. It is suitable for investors who have a two- to three-year investment horizon, and who want return of capital not just return on capital. The next six months to a year will continue to be all about U.S. President Donald Trump. The markets have accepted his planned policies at face value, and will monitor his progress closely. Current equity valuations have, for the most part, priced in the rosy picture that delivered his election victory. The risk is if Trump and his government underdeliver, which is likely to cause equity prices to drop and wipe out the Trump Bump. Fortunately, sovereign bond prices also reflect the same expectations, and have priced in the expected rate hikes. Investors have demanded higher yield (which has led to lower bond prices) to compensate for the higher inflation a stronger economy would bring. If Trump fails to deliver, sovereign bonds are likely to perform well. Our equity allocation is more diversified than that of the Canadian economy and the S&P/TSX Composite Index. 24 Portfolio Select Series