as at September 30, 2006 Harbour Funds 2006 Semi-Annual Report

Transcription

1 as at September 30, 2006 Harbour Funds 2006 Semi-Annual Report

2 A look inside Overview...1 Equity Funds Harbour Fund...2 Balanced Funds Harbour Growth & Income Fund...6 Notes to the Financial Statements...10 About the CI Funds Board of Governors and Letter from the CI Funds Board of Governors...14 Legal Notice...15 CI Investments Inc., the Manager of the Funds, appoints independent auditors to audit the Fund's Annual Financial Statements. Under Canadian securities laws (National Instrument ), if an auditor has not reviewed the Semi-Annual Financial Statements, this must be disclosed in an accompanying notice. The Funds' independent auditors have not performed a review of these Semi- Annual Financial Statements in accordance with standards established by the Canadian Institute of Chartered Accountants.

3 2 Queen Street East, Twentieth Floor Toronto, Ontario M5C 3G7 Telephone: Toll Free: Facsimile: CI Investments is pleased to present your 2006 Semi-Annual Report ABOUT CI INVESTMENTS for your mutual fund holdings. Inside is important information about each fund, including financial statements and a complete list of portfolio holdings as at September 30, Experience. Strength. Diversity. CI Investments has been investing on behalf of Canadians since 1965 and has grown to become one of Canada s largest fund companies, If you would prefer to receive future annual and semi-annual reports and other important documents electronically, you may sign up at the CI e-service Centre at This service gives you easy online access to up-to-date information about your account, and allows you to managing about $50 billion in assets. CI is a corporation controlled by CI Financial Income Fund, a diversified wealth management firm listed on the Toronto Stock Exchange. CI Financial had $75.8 billion in fee-earning assets at September 30, view and print documents such as this report and your statements, trade confirmations and tax receipts. CI Investments is known for providing the industry s widest selection of investment products and leading portfolio managers. If you have any questions about this report or your account, please contact your advisor or CI Client Services at or service@ci.com. Our portfolio management expertise is available through several different platforms including mutual and segregated funds, asset allocation programs and alternative investments. Our products are Thank you for investing with us. supported by a complete suite of investment services. CI is proud to partner with financial advisors across Canada who offer our funds to their clients. We believe investors are most successful when they follow a sound financial plan developed with the assistance of a qualified advisor. For more information on CI, please visit us online at 1

4 Harbour Fund Statement of Investment Portfolio as at September 30, 2006 (unaudited) No. of Shares/ Average Market Face Amount Cost ($) Value ($) FINANCIALS (26.1%) 2,100,000 AGF Management Ltd., Class B* 28,290,424 48,132,000 3,300,000 Bank of Nova Scotia* 81,072, ,532,000 1,600,000 Canadian Imperial Bank of Commerce* 91,630, ,800,000 2,500,000 Citigroup Inc. 143,361, ,809,707 1,000,000 Morgan Stanley 68,292,951 81,502,845 3,600,000 Royal Bank of Canada* 80,146, ,236,000 5,000,000 Royal Bank of Scotland Group PLC 179,815, ,428,428 2,500,000 Toronto-Dominion Bank* 98,525, ,050, ,134,501 1,098,490,980 ENERGY (21.0%) 3,400,000 Canadian Oil Sands Trust 25,180, ,388,000 2,800,000 EnCana Corp. 79,160, ,628,000 5,200,000 Ensign Energy Services Inc.* 35,393,270 96,460,000 1,200,000 GeoGlobal Resources Inc. 9,267,180 7,860,760 2,500,000 Patterson-UTI Energy Inc. 92,492,564 66,400,617 2,300,000 Petro-Canada 38,246, ,523,000 1,050,000 ShawCor Ltd.,, Sub-Voting Shares* 14,897,656 19,456,500 2,350,000 Suncor Energy Inc. 49,816, ,446,500 8,400,000 Talisman Energy Inc. 45,675, ,216, ,131, ,379,377 MATERIALS (14.5%) 3,000,000 Alcan Inc.* 125,319, ,650,000 1,300,000 Barrick Gold Corp.* 35,600,217 44,629,000 7,500,000 BHP Billiton Ltd.* 127,283, ,160,807 1,220,000 Cameco Corp.* 8,819,860 49,690,600 1,200,000 Goldcorp Inc.* 19,822,246 31,632,000 4,300,001 Norbord Inc.* 24,730,082 34,658,008 1,150,000 Potash Corp. of Saskatchewan* 60,804, ,423,000 1,200,000 Worthington Industries 28,942,654 22,884, ,321, ,728,153 CONSUMER DISCRETIONARY (6.5%) 625,000 Jones Apparel Group Inc. 27,729,661 22,664,520 1,250,000 RadioShack Corp. 30,730,263 26,968,264 2,200,000 Ross Stores Inc. 65,069,260 62,490,358 2,600,000 TJX Cos. Inc. 68,943,599 81,467,074 5,600,000 Yellow Pages Income Fund 77,667,660 78,960, ,140, ,550,216 CONSUMER STAPLES (5.2%) 2,615,000 Cadbury Schweppes PLC 22,706,952 31,111,408 3,500,000 Cott Corp. (USD)* 47,754,759 66,850,000 4,200,000 Diageo PLC 66,764,417 82,929, ,000 Nestle SA, Registered Shares 30,852,864 38,979, ,078, ,870,572 INDUSTRIALS (3.3%) 3,000,000 Canadian National Railway Co. 65,638, ,250,000 No. of Shares/ Average Market Face Amount Cost ($) Value ($) INFORMATION TECHNOLOGY (2.9%) 3,600,000 Cisco Systems Inc. 79,246,949 92,477,950 12,000,000 Nortel Networks Corp.* 40,734,255 30,600, ,981, ,077,950 HEALTH CARE (0.1%) 2,300,000 Aastrom Biosciences Inc. 4,084,723 2,982,438 WARRANTS (0.1%) 600,000 GeoGlobal Resources Inc., Warrants (09Sep07) - 7 Total Bonds & Equities (79.7%) 2,220,511,135 3,350,329,693 Short Term Notes (15.0%) 630,420, ,420,215 Total Investments (94.7%) 2,850,931,350 3,980,749,908 Other Assets (net) (5.3%) 221,615,836 Total Net Assets (100.0%) 4,202,365,744 *Denotes all or part of securities lent. The accompanying notes and supplementary schedules are an integral part of these financial statements. All common shares unless otherwise noted. Percentages shown in brackets relate investments at market value to total net assets of the Fund. Semi-Annual Report as at September 30, CIG - 690

5 Harbour Fund Financial Statements Statements of Net Assets (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the six months ended September 30 (in $000 s except for per unit amounts) (unaudited) Assets Investments at market value Cash and short term investments Margin for short sales Income taxes recoverable Daily variation margin on derivative investments Unrealized gain on derivative investments Receivable for unit subscriptions Receivable for securities sold Dividends and accrued interest receivable Liabilities Bank overdraft Management fees payable Accrued expenses Unrealized loss on derivative investments Premium received from options contract Payable for securities purchased Payable for unit redemptions Investments sold short at market value Distributions payable Net assets and unitholders' equity Net assets per class Net asset value per unit Number of units outstanding (see Schedule of Fund Unit Transactions) as at as at Sept. 30, 2006 March 31, 2006 (unaudited) (audited) 3,350,330 3,560, , ,982 9,077 11,245 10,437 5,496 4,209,957 4,298, ,573 8,207 7,591 8,207 4,202,366 4,290,512 3,117,526 3,209,691 48,107 44,159 1,036,733 1,036, ,678, ,929,054 2,594,367 2,329,183 52,148,682 51,325,870 Income Dividends Interest Securities lending Derivative income (loss) Income distribution from investments Less: Foreign withholding taxes Expenses Management fees Administrative fees Custody fees Legal fees Audit fees Goods and services tax Net income (loss) for the period Realized and unrealized gain (loss) on investments (see Schedule of Commissions) Realized gain (loss) on investments Foreign exchange gain (loss) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments per class per unit 35,641 28,788 19,923 10, (2,084) (1,643) 53,691 37,653 31,641 24,926 3,190 2,508 2,263 1,920 37,094 29,354 16,597 8, ,555 55,393 (1,011) 360 (285,834) 303,061 (122,290) 358,814 (105,693) 367,113 (87,713) 277,198 (1,024) 3,127 (16,956) 86,788 (0.57) 1.89 (0.42) 1.86 (0.33) 2.01 Semi-Annual Report as at September 30,

6 Harbour Fund Financial Statements Statements of Changes in Net Assets for the six months ended September 30 (in $000 s) (unaudited) Statements of Changes in Net Assets (cont d) for the six months ended September 30 (in $000 s) (unaudited) Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 3,209,691 2,307, , ,003 (364,958) (296,318) - 132,769 (4,452) 198,454 (87,713) 277,198 3,117,526 2,782,856 Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 1,036, , , ,308 (102,996) (93,547) 17,027 28,761 (16,956) 86,788 1,036, ,618 Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 44,159 22,826 12,355 7,235 (7,383) (2,907) 4,972 4,328 (1,024) 3,127 48,107 30,281 Total Fund Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 4,290,512 3,015, , ,546 (475,337) (392,772) - 132,769 17, ,543 (105,693) 367,113 4,202,366 3,613,755 Semi-Annual Report as at September 30,

7 Harbour Fund Financial Statements Supplementary Schedules Schedule of Fund Unit Transactions for the six months ended September 30 (unaudited) Schedule of Securities Lending as at September 30, 2006 ($000 s) (unaudited) 2006 Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 156,929, ,053,725 17,894,967 21,527,139 (18,145,087) (17,591,543) - 7,670, ,678, ,659,389 Loaned Collateral (non-cash) Income 497, , Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 2,329,183 1,532, , ,037 (393,731) (185,102) 2,594,367 1,813,378 Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 51,325,870 43,725,200 5,986,999 7,336,811 (5,164,187) (5,769,839) 52,148,682 45,292,172 Schedule of Commissions for the six months ended September 30 ($000 s) (unaudited) Brokerage commissions Soft Dollar commissions A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. This amount has been estimated by the Manager of the Fund and has been shown for the period ending September 30, Semi-Annual Report as at September 30,

8 Harbour Growth & Income Fund Statement of Investment Portfolio as at September 30, 2006 (unaudited) No. of Shares/ Average Market Face Amount Cost ($) Value ($) FINANCIALS (20.3%) 1,000,000 AGF Management Ltd., Class B* 14,815,291 22,920,000 2,700,000 Bank of Nova Scotia* 95,927, ,708,000 1,400,000 Canadian Imperial Bank of Commerce* 95,695, ,950,000 2,000,000 Citigroup Inc. 112,229, ,047, ,000 Morgan Stanley 46,663,423 57,051,991 3,000,000 Royal Bank of Canada 92,625, ,530,000 3,500,000 Royal Bank of Scotland Group PLC 125,747, ,699,900 2,300,000 Toronto-Dominion Bank 103,092, ,766, ,797, ,673,657 ENERGY (12.7%) 1,750,000 Canadian Oil Sands Trust 16,238,282 52,185,000 1,980,000 EnCana Corp. 66,567, ,979,800 2,400,000 Ensign Energy Services Inc.* 20,791,354 44,520,000 1,800,000 Patterson-UTI Energy Inc. 64,821,840 47,808,444 1,500,000 Petro-Canada 40,547,528 67,515, ,000 ShawCor Ltd.,, Sub-Voting Shares* 8,767,728 11,118,000 1,550,000 Suncor Energy Inc. 61,947, ,294,500 5,400,000 Talisman Energy Inc. 52,580,208 98,496, ,261, ,916,744 MATERIALS (8.4%) 1,600,000 Alcan Inc.* 62,561,574 71,280,000 1,000,000 Barrick Gold Corp. 28,801,473 34,330,000 4,000,000 BHP Billiton Ltd.* 68,296,160 85,419, ,000 Cameco Corp.* 7,539,208 30,140, ,000 Goldcorp Inc.* 11,701,912 18,452,000 2,000,000 Norbord Inc.* 12,262,714 16,120, ,000 Potash Corp. of Saskatchewan* 46,695,664 92,816, ,000 Worthington Industries 19,085,432 15,256, ,944, ,813,789 CONSUMER DISCRETIONARY (5.0%) 450,000 Jones Apparel Group Inc. 17,126,718 16,318, ,000 RadioShack Corp. 18,443,114 16,180,958 1,500,000 Ross Stores Inc. 44,343,247 42,607,063 1,400,000 TJX Cos. Inc. 38,190,223 43,866,886 7,000,000 Yellow Pages Income Fund 92,132,337 98,700, ,235, ,673,362 CONSUMER STAPLES (3.3%) 1,595,200 Cadbury Schweppes PLC 15,141,683 18,978,553 3,000,000 Cott Corp. (USD)* 41,284,971 57,300,000 2,400,000 Diageo PLC 39,339,030 47,388,247 50,000 Nestle SA, Registered Shares 15,930,370 19,489, ,696, ,156,666 GOVERNMENT BONDS (3.3%) 7,749,000 Canadian Government Bond 11% 06/01/2009* 10,335,239 9,132,894 65,000,000 Canadian Government Bond % 12/01/ ,511, ,750,756 16,987,000 Canadian Government Bond 9% 03/01/ ,625,742 20,481, ,472, ,365,386 No. of Shares/ Average Market Face Amount Cost ($) Value ($) INDUSTRIALS (2.6%) 1,700,000 Canadian National Railway Co. 40,405,169 79,475,000 1,200,000 Russel Metals Inc.* 5,866,936 32,400,000 46,272, ,875,000 INFORMATION TECHNOLOGY (1.8%) 2,200,000 Cisco Systems Inc. 48,371,799 56,514,303 7,500,000 Nortel Networks Corp.* 25,462,350 19,125,000 73,834,149 75,639,303 Total Bonds & Equities (57.4%) 1,860,512,467 2,477,113,907 Short Term Notes (30.0%) 1,294,669,604 1,294,669,604 Total Investments (87.4%) 3,155,182,071 3,771,783,511 Other Assets (net) (12.6%) 547,038,561 Total Net Assets (100.0%) 4,318,822,072 *Denotes all or part of securities lent. The accompanying notes and supplementary schedules are an integral part of these financial statements. All common shares unless otherwise noted. Percentages shown in brackets relate investments at market value to total net assets of the Fund. Semi-Annual Report as at September 30, CIG - 691

9 Harbour Growth & Income Fund Financial Statements Statements of Net Assets (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the six months ended September 30 (in $000 s except for per unit amounts) (unaudited) Assets Investments at market value Cash and short term investments Margin for short sales Income taxes recoverable Daily variation margin on derivative investments Unrealized gain on derivative investments Receivable for unit subscriptions Receivable for securities sold Dividends and accrued interest receivable Liabilities Bank overdraft Management fees payable Accrued expenses Unrealized loss on derivative investments Premium received from options contract Payable for securities purchased Payable for unit redemptions Investments sold short at market value Distributions payable Net assets and unitholders' equity Net assets per class Class Z Net asset value per unit Class Z Number of units outstanding (see Schedule of Fund Unit Transactions) Class Z as at as at Sept. 30, 2006 March 31, 2006 (unaudited) (audited) 2,477,114 2,660,571 1,819,267 1,267,473 17,181 19,510 11,097 6,298 4,324,659 3,953, ,825 4,875 5,837 4,875 4,318,822 3,948,977 2,816,813 2,598,121 25,036 21,808 1,290,674 1,131, , , ,645, ,551,730 1,595,883 1,380,581 78,375,372 68,673,746 12,754,162 13,376,335 Income Dividends Interest Securities lending Derivative income (loss) Income distribution from investments Less: Foreign withholding taxes Expenses Management fees Administrative fees Custody fees Legal fees Audit fees Goods and services tax Net income (loss) for the period Realized and unrealized gain (loss) on investments (see Schedule of Commissions) Realized gain (loss) on investments Foreign exchange gain (loss) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments per class Class Z per unit Class Z 25,575 17,368 38,428 18, (1,321) (976) 62,849 35,296 28,540 18,263 2,904 1,860 2,039 1,408 33,483 21,531 29,366 13, ,988 12,205 (1,069) (385) (182,585) 202,781 (63,666) 214,601 (34,300) 228,366 (32,091) 142,735 (179) ,123 (2,117) 15,728 (0.22) 1.34 (0.11) 1.32 (0.01) 1.40 (0.16) 1.08 Semi-Annual Report as at September 30,

10 Harbour Growth & Income Fund Financial Statements Statements of Changes in Net Assets for the six months ended September 30 (in $000 s) (unaudited) Statements of Changes in Net Assets (cont d) for the six months ended September 30 (in $000 s) (unaudited) Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 2,598,121 1,423, , ,628-4,785 (264,924) (175,351) - 252, , ,383 - (1,337) - (3,505) - (4,842) (32,091) 142,735 2,816,813 2,029,520 Class Z Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 197, ,883 9,362 9, (18,478) (19,633) (9,116) (8,906) - (236) - (620) - (856) (2,117) 15, , ,849 Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 21,808 5,695 10,149 6, (6,742) (1,350) 3,407 5,097 - (24) - (63) - (87) (179) ,036 11,485 Total Fund Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 3,948,977 2,225, , ,653-17,905 (318,585) (203,679) - 252, , ,200 - (4,963) - (13,012) - (17,975) (34,300) 228,366 4,318,822 3,049,600 Net assets, beginning of period Capital transactions Proceeds from units issued Reinvested distributions Amounts paid for units redeemed Fund merger Distributions to investors From realized gains From net income From return of capital Net assets, end of period 1,131, , , ,780-12,191 (28,441) (7,345) 159, ,626 - (3,366) - (8,824) - (12,190) 87 69,123 1,290, ,746 Semi-Annual Report as at September 30,

11 Harbour Growth & Income Fund Financial Statements Supplementary Schedules Schedule of Fund Unit Transactions for the six months ended September 30 (unaudited) Schedule of Securities Lending as at September 30, 2006 ($000 s) (unaudited) 2006 Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 144,551,730 94,218,060 29,002,682 24,850, ,729 (14,908,792) (11,261,108) - 15,909, ,645, ,018,782 Loaned Collateral (non-cash) Income 358, , Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 1,380, , , ,567-5,974 (429,455) (96,895) 1,595, ,585 Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 68,673,746 44,185,470 11,428,419 10,153, ,279 (1,726,793) (516,174) 78,375,372 54,666,611 Class Z Balance, beginning of period Units issued for cash Units issued for reinvested distributions Units redeemed Units issued on fund merger Balance, end of period 13,376,335 14,898, , ,895-65,000 (1,261,042) (1,540,634) 12,754,162 14,199,380 Schedule of Commissions for the six months ended September 30 ($000 s) (unaudited) Brokerage commissions Soft Dollar commissions A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. This amount has been estimated by the Manager of the Fund and has been shown for the period ending September 30, Semi-Annual Report as at September 30,

12 Notes to the Financial Statements - CI Mutual Funds As at September 30, 2006 (unaudited) 1. THE FUNDS The following funds are open-ended mutual fund trusts created under the laws of Ontario by declarations of trust or share classes of a corporation incorporated under the laws of Ontario. CI Funds Inception Date of Units Inception Date of Units Inception Date of Units CI Alpine Growth Equity Fund May 1, 1997 December 13, 1999 CI American Equity Fund May 25, 1989 July 17, 2000 July 31, 2001 CI American Small Companies Fund September 9, 1985 July 17, 2000 July 31, 2001 CI American Value Fund May 27, 1957 November 17, 2000 November 1, 1996 CI Canadian Asset Allocation Fund September 1, 1992 November 17, 2000 November 1, 1996 CI Canadian Bond Fund January 20, 1993 July 17, 2000 July 31, 2001 CI Canadian Investment Fund November 16, 1932 November 17, 2000 November 1, 1996 CI Canadian Small/Mid Cap Fund November 1, 1992 December 13, 1999 CI Emerging Markets Fund September 10, 1991 July 17, 2000 July 31, 2001 CI European Fund September 10, 1991 July 31, 2001 May 25, 2004 CI Global Fund February 28, 1986 July 17, 2000 July 31, 2001 CI Global Bond Fund August 31, 1992 July 17, 2000 July 31, 2001 CI Global High Dividend Advantage Fund January 20, 2006 January 20, 2006 January 20, 2006 CI Global Small Companies Fund April 7, 1993 July 17, 2000 July 31, 2001 CI Global Value Fund June 12, 1996 July 17, 2000 July 31, 2001 CI International Balanced Fund September 29, 1994 July 17, 2000 July 31, 2001 CI International Fund August 5, 1999 July 17, 2000 August 29, 2003 CI International Value Fund June 12, 1996 July 31, 2001 July 31, 2001 CI Long-Term Bond Fund June 15, 1989 November 17, 2000 November 1, 1996 CI Money Market Fund October 1, 1990 July 31, 2001 July 31, 2001 CI Mortgage Fund May 1, 1993 December 13, 1999 CI Pacific Fund October 31, 1981 July 17, 2000 July 31, 2005 CI Short-Term Bond Fund May 31, 1976 November 17, 2000 November 1, 1996 CI US Money Market Fund January 30, 1995 Portfolio Select Series Select Staging Fund November 7, 2005 November 7, 2005 Harbour Funds Harbour Fund June 27, 1997 July 17, 2000 July 31, 2001 Harbour Growth & Income Fund June 27, 1997 July 31, 2001 July 31, 2001 Signature Funds Signature Canadian Balanced Fund June 25, 1997 July 17, 2000 July 18, 2003 Signature Canadian Resource Fund April 11, 1997 July 31, 2001 Signature Corporate Bond Fund December 17, 2001 July 15, 2003 July 15, 2003 Signature Dividend Fund October 29, 1996 July 31, 2001 August 29, 2003 Signature High Income Fund December 18, 1996 July 31, 2001 August 28, 2002 Signature Income & Growth Fund October 14, 1994 July 31, 2001 March 29, 2005 Signature Select Canadian Fund May 13, 1998 July 17, 2000 July 31, 2001 Synergy Funds Synergy American Fund August 31, 1992 July 17, 2000 July 31, 2001 Synergy Focus Canadian Equity Fund April 10, 2000 November 13, 2000 _ (Formerly Synergy Extreme Canadian Equity Fund) Synergy Focus Global Equity Fund January 26, 2001 January 26, 2001 _ (Formerly Synergy Extreme Global Equity Fund) Synergy Tactical Asset Allocation Fund September 18, 1998 November 13, 2000 August 22, 2002 Portfolio Series Funds Portfolio Series Balanced Fund November 9, 1988 November 17, 2000 November 1, 1996 (Formerly CI Canadian Balanced Portfolio) Portfolio Series Conservative Fund December 1, 1997 November 17, 2000 December 1, 1997 (Formerly CI Canadian Conservative Portfolio) Portfolio Series Income Fund December 1, 1997 November 17, 2000 December 1, 1997 (Formerly CI Canadian Income Portfolio) Portfolio Series Balanced Growth Fund December 17, 2001 December 17, 2001 November 8, 2005 (Formerly CI Global Balanced Portfolio) Portfolio Series Conservative Balanced Fund December 17, 2001 December 17, 2001 October 31, 2005 (Formerly CI Global Conservative Portfolio) Portfolio Series Growth Fund December 17, 2001 December 17, 2001 October 11, 2002 (Formerly CI Global Growth Portfolio) Portfolio Series Maximum Growth Fund December 17, 2001 December 17, 2001 October 31, 2005 (Formerly CI Global Maximum Growth Portfolio) Semi-Annual Report as at September 30,

13 Notes to the Financial Statements - CI Mutual Funds The following Funds offered Insight units to investors commencing on July 15, CI American Value Fund CI International Fund CI Canadian Bond Fund CI International Value Fund CI Canadian Investment Fund CI Money Market Fund CI Global Bond Fund Signature Corporate Bond Fund CI Global Fund Signature Select Canadian Fund CI Global Small Companies Fund CI Explorer Fund CI Alpine Growth Equity Fund, CI Canadian Small/Mid Cap Fund and CI Mortgage Fund offered Class B units to investors commencing on December 13, Signature Dividend Fund offered Class X units and Class Y units to investors commencing August 29, Harbour Growth & Income Fund and Signature Dividend Fund offered Class Z units to investors commencing on August 29, Signature Select Canadian Fund and Signature Canadian Balanced Fund offered Class Z Units to investors commencing on August 2, CI Money Market Fund offered Class M units to investors commencing October 18, Select Staging Fund offered Class W units to investors commencing November 7, The date of inception of each Fund is shown above. units are available to all investors. units are available to certain investors including those who participate in fee-based programs through their financial advisers or who are members of certain groups. units are available to institutional clients and investors who have entered into Account Agreements with CI Investments Inc. (formerly, CI Mutual Funds Inc.). Insight units are issued to investors of the Insight Program, for use in fee-based accounts. Class X, Class Y or Class Z units were issued to certain investors in connection with various mutual fund reorganizations and are generally only available for purchase by those investors. Effective as of close of business on July 28, 2006 the following funds were merged: Terminated Funds CI Explorer Fund CI Canadian Growth Portfolio CI Canadian Maximum Growth Portfolio Continuing Funds CI American Small Companies Fund Portfolio Series Balanced Growth Fund (Formerly CI Global Balanced Portfolio) Portfolio Series Maximum Growth Fund (Formerly CI Global Maximum Growth Portfolio) The purchase method of accounting has been adopted for the merger of the Funds. Under this method, one of the Funds in each merger is identified as the acquiring Fund, and is known as the Continuing Fund, and any other Fund involved in the merger is known as the Terminated Fund. The mergers were effected by transferring the net assets of the Terminated Funds in exchange for securities of the Continuing Funds. The value of the securities of the Continuing Funds issued in connection with these mergers was equal to the market value of the net assets transferred from the Terminated Funds. The Terminated Funds are not included in these financial statements. The Investment Portfolios for each of the Funds are as at September 30, 2006 and the Statements of Net Assets are as at September 30, 2006 and March 31, The Statements of Operations, Changes in Net Assets and Schedule of Fund Unit Transactions for each Fund are for the period from April 1, 2006 to September 30, 2006 and April 1, 2005 to September 30, 2005 except for CI Global High Dividend Advantage Fund where information presented is for the period from April 1, 2006 to September 30, 2006 only. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies of the Funds: (a) Valuation of Investments Listed securities are valued on each business day at their latest available sale price. In the absence of recorded sales on that day, they are valued at the average of the last recorded bid and ask prices where appropriate. Unlisted securities are valued on each business day based on price quotations from recognized investment dealers, or failing that, management s best estimate of fair value. Short-term fixed income securities are valued at cost which, together with accrued interest, approximates market value. Mutual funds are valued on each business day at their closing net asset value. (b) Foreign Exchange Foreign currency amounts are translated into Canadian dollars as follows: market value of investments, forward currency contracts, other assets and liabilities at the closing rate of exchange on each business day; income, expenses and purchases, sales and settlements of investments at the rate of exchange prevailing on the respective dates of such transactions. (c) Investment Transactions and Income Recognition Investment transactions are accounted for on the trade date for financial reporting purposes and any realized gains and losses from such transactions are calculated on an average cost basis. Dividend income and distributions from investments are recognized on the ex-dividend/ex-distribution date and interest income on the accrual basis. Distributions received from investment trust holdings are recorded as income, capital gains or a return of capital, based on the best information available to the Manager. Due to the nature of these investments, actual allocations could vary from this information. Distributions from investment trusts that are treated as a return of capital for income tax purposes reduce the average cost of the underlying investment trust on the Statement of Investments. Distributions received from investment fund holdings are recognized by the funds in the same form in which they were received from the underlying funds. (d) Net Asset Value Per Unit Net asset value per unit for each class is calculated at the end of each day on which the Toronto Stock Exchange is open for business by dividing the net assets of each class by its outstanding units. The net asset value of each class is computed by calculating the value of that class s proportionate share of the Fund s assets less that class s proportionate share of the Fund s common liabilities and less class specific liabilities. Expenses directly attributable to a class are charged to that class. Other income and expenses are allocated to each class proportionately based upon the relative net asset value of each class. (e) Futures, Forward, Option and Swap Contracts Futures, forward, option and swap contracts are marked-to-market on each valuation day according to the gain or loss that would be realized if the contracts were closed out. All gains or losses arising from futures, forward, option and swap contracts are recorded as unrealized appreciation/depreciation of investments until the contracts are closed out or expire, at which time the gains (losses) are realized. (f) Short Selling The value of any short sale is determined by calculating the daily marked-to-market gain or loss on the short sale. The cash proceeds of a short sale will be recorded as a deferred debit. The market value of the securities sold short will be recorded as a deferred credit. The gain or loss will be calculated by subtracting (i) the sum of the market value of the securities sold short plus any recorded costs of borrowing, from (ii) the sum of the cash proceeds of the short sale plus any recorded interest earned on the cash proceeds. Semi-Annual Report as at September 30,

14 Notes to the Financial Statements - CI Mutual Funds (g) Increase (Decrease) in Net Assets from Operations per Unit per unit in the Statements of Operations is calculated by dividing the increase (decrease) in net assets from operations of the Fund by the weighted average number of units outstanding during the period. (h) Use of Estimates The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. (i) AcG-15 Variable Interest Entities The Funds have adopted the provisions of Accounting Guideline 15, which requires a fund to disclose its investment in an underlying fund when it is the primary beneficiary of that fund. (j) In accordance with their investment policy, certain funds may invest in units of another investment fund. Funds that own more than 50% of the units of an underlying investment fund are deemed to be primary beneficiaries of that investment fund. The Portfolio Series Balanced Fund has investments in the underlying investment funds at September 30, 2006: Ownership % of Underlying Fund Underlying Fund CI American Managers Corporate Class (I Shares) 25.2 Synergy American Fund () 24.0 CI American Value Corporate Class (I Shares) 30.8 CI Global Bond Fund () 22.9 CI International Fund () 22.4 Signature Corporate Bond Fund () 28.2 CI International Value Fund () 20.7 CI American Equity Fund () 19.9 CI Canadian Bond Fund () 15.7 The Portfolio Series Balanced Fund together with related funds hold more than 50% of the above underlying funds, and as such, the Portfolio Series Balanced Fund is deemed to be the primary beneficiary of the above underlying funds through its largest ownership interest. Consolidation of the Portfolio Series Balanced Fund interest in the underlying investment funds above has been made for the six-month period ending September 30, 2006, however, consolidation has not been retroactively applied to any prior periods. Comparatives Certain prior period amounts have been reclassified to conform to the current period s financial statement presentation. 3. INCOME TAXES The Funds qualify as mutual fund trusts under the provisions of the Income Tax Act (Canada) and, accordingly, are not subject to tax on net income, including net realized capital gains for the taxation year, which is paid or payable to unitholders at the end of the taxation year. However, such part of each Fund s taxable income and net realized capital gains that is not so paid or payable will be taxable to that Fund. Income tax on net realized capital gains not paid or payable will generally be recoverable by virtue of refunding provisions contained in the Income Tax Act (Canada) and provincial income tax legislation, as redemptions occur. It is the intention of each Fund to pay all net taxable income and sufficient net realized capital gains so that the Fund will not be subject to income tax. Occasionally, a Fund may distribute more than it earns. This excess distribution is a return of capital and is not taxable to unitholders. Net capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non-capital losses may be carried forward ten years. 4. MANAGEMENT FEES AND OTHER EXPENSES CI Investments Inc. is the Manager of each Fund and, in consideration of management fees received, provides management services required in the day-to-day operations of the Funds including management of the investment portfolios of the Funds. The management fee is calculated on the net assets of each Fund at the end of each business day and is paid daily. Prior to September 2005, each Fund was responsible for all operating and administrative expenses including audit and legal fees, registry and transfer agency fees, custody fees, expenses relating to reporting and making distributions to unitholders, all other costs and fees imposed by statute or regulation and expenses of all communications with unitholders. Effective September 2005, the manager bears all of the operating expenses of the Funds (other than certain taxes, borrowing costs and new governmental fees) in return for fixed annual administration fees (the Administration Fees ). Each Administration Fee is calculated as a fixed annual percentage of the net asset value of each class of the Fund at the end of each business day and is paid daily. Administration Fees (%) CI Mutual Funds CI Alpine Growth Equity Fund 0.20 CI American Equity Fund 0.21 CI American Small Companies Fund 0.21 CI American Value Fund 0.21 CI Canadian Asset Allocation Fund 0.20 CI Canadian Bond Fund 0.17 CI Canadian Investment Fund 0.20 CI Canadian Small/Mid Cap Fund 0.20 CI Emerging Markets Fund 0.22 CI European Fund 0.22 CI Global Fund 0.22 CI Global Bond Fund 0.18 CI Global High Dividend Advantage Fund 0.20 CI Global Small Companies Fund 0.22 CI Global Value Fund 0.22 CI International Balanced Fund 0.22 CI International Fund 0.22 CI International Value Fund 0.22 CI Long-Term Bond Fund 0.17 CI Money Market Fund nil CI Mortgage Fund 0.20 CI Pacific Fund 0.22 CI Short-Term Bond Fund 0.17 CI US Money Market Fund nil Select Staging Fund nil Harbour Funds Harbour Fund 0.20 Harbour Growth & Income Fund 0.20 Signature Funds Signature Canadian Balanced Fund 0.20 Signature Canadian Resource Fund 0.20 Signature Corporate Bond Fund 0.20 Signature Dividend Fund 0.20 Semi-Annual Report as at September 30,

15 Notes to the Financial Statements - CI Mutual Funds (cont d) Administration Fees (%) Signature Funds Signature High Income Fund 0.20 Signature Income & Growth Fund 0.20 Signature Select Canadian Fund RELATED PARTY TRANSACTIONS Sun Life Financial Inc. ( Sun Life ) owns a significant interest in CI Financial Income Fund, the parent company of the Manager, and is therefore considered a related party to the Funds. Sun Life does not hold investments in the Funds. Synergy Mutual Funds Synergy American Fund 0.21 Synergy Focus Canadian Equity Fund 0.20 (Formerly Synergy Extreme Canadian Equity Fund) Synergy Focus Global Equity Fund 0.22 (Formerly Synergy Extreme Global Equity Fund) Synergy Tactical Asset Allocation Fund 0.22 CI Portfolio Series Funds Portfolio Series Balanced Fund 0.20 (Formerly CI Canadian Balanced Portfolio) Portfolio Series Conservative Fund 0.20 (Formerly CI Canadian Conservative Portfolio) Portfolio Series Income Fund 0.17 (Formerly CI Canadian Income Portfolio) Portfolio Series Balanced Growth 0.22 (Formerly CI Global Balanced Portfolio) Portfolio Series Conservative Balaced Fund 0.22 (Formerly CI Global Conservative Portfolio) Portfolio Series Growth Fund 0.22 (Formerly CI Global Growth Portfolio) Portfolio Series Maximum Growth Fund 0.22 (Formerly CI Global Maximum Growth Portfolio) Prior to 2003, in order to reduce the effective Management Expense Ratios of certain funds some of the management fees and/or operating expenses may have been waived by the Manager. 5. SECURITIES LENDING Certain Funds have entered into a securities lending program with their custodian, RBC Dexia Investor Services Trust ("RBC Dexia"). The aggregate market value of all securities loaned by a Fund cannot exceed 50% of the assets of the Fund. A Fund will receive collateral of at least 102% of the value of securities on loan. Collateral will generally be comprised of cash and obligations of or guaranteed by the Government of Canada or a province thereof, or by the United States government or its agencies, but may include obligations of other governments with appropriate credit ratings. RBC Dexia has indemnified the Funds against the credit risk of the borrowers. For those Funds participating in the program, amounts for securities loaned, the collateral received, and the income collected appear on the fund specific schedules in the financial statements and income from securities lending is included in "Securities lending" in the Statements of Operations. 6. REINVESTMENT OF DISTRIBUTIONS When a Fund pays a distribution to a unitholder, it will be paid in the same currency in which the units are held. Distributions are automatically reinvested without charge in the same Fund. The Manager may change the distribution policy at its discretion. Further information regarding reinvestment of distributions can be found in the Fund s Simplified Prospectus. 7. SHORT SELLING RISK There is no assurance that securities will decline in value during the period of the short sale sufficient to offset the interest paid by the mutual fund and make a profit for the mutual fund, and securities sold short may instead increase in value. The mutual fund may also experience difficulties repurchasing and returning the borrowed securities if a liquid market for the securities does not exist. The lender from whom the mutual fund has borrowed securities may go bankrupt and the mutual fund may lose the collateral it has deposited with the lender. Semi-Annual Report as at September 30,

16 About the CI Funds Board of Governors The CI Funds Board of Governors was voluntarily established by CI in 1998 making it one of the first such fund governance bodies in Canada. The Board of Governors acts as an independent governance body of all CI Funds, providing impartial judgment on conflicts of interest with a view to the best interests of the CI Funds and CI Funds investors. The Board of Governors recommends the best course of action to achieve a fair and reasonable result on any conflict of interest issues, and CI takes into account its recommendation in accordance with its fiduciary duty to the CI Funds. All of the members of the Board are independent of CI. The Board of Governors mandate is set out in a separate charter and reviewed annually by the Board to ensure its mandate conforms to the expectations and requirements of Canadian securities regulators. Along with dealing with conflicts of interest, the mandate provides that the Board acts as an audit committee for the CI Funds for the purpose of reviewing the financial statements of the CI Funds with the auditors of the CI Funds and reviews holdings, purchases and sales by the CI Funds of securities of Sun Life Financial Inc. and CI Financial Income Fund. The Board also reviews and discusses on a regular basis matters including compliance of the CI Funds with CI s relevant policies and procedures, approval of the CI Funds auditors and the fees paid to those auditors, and the performance of the Board and its members. The Board of Governors are compensated as recommended by the Canadian securities regulators in their rule and as set out in its mandate. These expenses are paid by CI and charged to the CI Funds as part of their fixed administration fee. The members of the Board of Governors are: William Harding, Managing Partner, Alpine Asset Advisors AG Governor since June 2005 Stuart P. Hensman, Corporate Director Governor since December 2004 Stephen T. Moore, Managing Director, Newhaven Asset Management Inc. Governor since September 2001 Sharon M. Ranson, President, The Ranson Group Governor since December 2004 Further information regarding the Board is available at including the Board s full mandate. The Board of Governors adheres to the guidelines set out by Canadian securities regulators in National Instrument Independent Review Committee for Investment Funds which will require all mutual funds in Canada to have independent review committees. Letter from the CI Funds Board of Governors Your CI Funds Board of Governors is pleased to report on its activities in respect of the period ended March 31, 2006 and September 30, 2006 and to date. The Governors are appointed pursuant to the Declarations of Trust governing the CI Funds that are trusts, and constitute the board of directors of CI Corporate Class Limited. The Governors have reviewed, commented on and approved the CI Code of Ethics and Conduct, which establishes rules of conduct designed to ensure fair treatment of the CI Funds securityholders and that, at all times, the interests of the CI Funds and their securityholders are placed above personal interests of employees, officers and directors of the Manager and each of its subsidiaries and affiliates, the subadvisers, and the Governors, through the application of the highest standards of integrity and ethical business conduct. The CI Code of Ethics and Conduct requires the prior clearance of personal trades and restricts the ability of staff to trade any securities held by the CI Funds. The objective is not only to remove any potential for real conflict of interest but to avoid any perception of conflict. The Manager's year 2005 report on compliance with the CI Code of Ethics and Conduct and other relevant policies has been provided to the Governors in a timely and satisfactory manner. The Governors report that management has been open and cooperative, permitting the Governors to meet with subadvisers, to meet with individual department heads and personnel to review control mechanisms and compliance procedures, including those relating to the personal securities trading activity of employees, and to consider other matters that affect the CI Funds. During the period ended March 31, 2006, the Governors also acted as the audit committee of the CI Funds. The audit committee reviewed, with the CI Funds auditors, the planning, scope and results of the audit of the financial statements of the CI Funds for the period ended March 31, In June 2006, the Board of Governors received and accepted the Annual Reports of the CI Funds for the period ended March 31, Stephen T. Moore Chair, CI Funds Board of Governors November 1, 2006 Semi-Annual Report as at September 30,

17 Legal Notice Notice: Should you require additional copies of this Semi-Annual Report or have received more than one copy, please contact CI Investments Inc. (the Manager ) or your financial advisor. Commissions, trailing commissions, management fees and expenses all maybe 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. The commentaries contained herein 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 these commentaries is accurate at the time of publication. However, the Manager cannot guarantee its accuracy or completeness and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein. Redemption of Securities: Securities may be redeemed by securityholders on any business day by delivering to your financial advisor or the Manager a redemption request in writing, or in such other form as permitted by your financial advisor. If your redemption request is received by the Manager on any valuation date prior to 4:00 p.m. (Eastern time), then your securities being redeemed will be priced at the next valuation time following receipt by the Manager of the redemption request. If the proceeds of redemption exceed $10,000 or are to be paid to someone other than the registered owner, your signature must be guaranteed by a bank, trust company, investment dealer, or broker. If certificates representing the securities to be redeemed have been issued, the redemption request must be accompanied by the certificates, properly endorsed for redemption with the signature guaranteed in the manner described above. If the registered owner is a corporation, partnership, agent, fiduciary or surviving joint owner, additional documentation may be required. CI Funds, CI Investments, Harbour Funds, Global Managers and American Managers are registered trademarks of CI Investments Inc. The CI Investments design, Portfolio Select Series and Signature Funds are trademarks of CI Investments Inc. Simplified Prospectus: The Simplified Prospectus and Annual Information Form of a Fund are renewed annually. The Manager would be pleased to provide, without charge, the most recent Simplified Prospectus upon request to its Toronto office. Distribution or Dividend Reinvestment: Distributions or dividends from the Funds are automatically reinvested, free of any sales commissions or charges, in additional securities of the relevant Fund, unless you otherwise direct. You may withdraw from participation in the reinvestment plan at any time by delivering a written request to your financial advisor or to the Manager. Semi-Annual Report as at September 30,