Semi-Annual Financial Statement as at June 30, 2010 Clarica Segregated Funds managed by CI Investments Inc. issued by Sun Life Assurance Company of Canada
A look inside Overview... 1 Equity Funds Clarica CI Dividend Equity Benefit Fund...2 Clarica CI Equity Fund B...6 Clarica CI North American Equity Fund...10 Income Funds Clarica Income Fund 2... 14 Notes to the Financial Statements... 17 Legal Notice... 19
2 Queen Street East, Twentieth Floor Toronto, Ontario M5C 3G7 www.ci.com Telephone: 416-364-1145 Toll Free: 1-800-268-9374 Facsimile: 416-364-6299 Enclosed are the Financial Statements for your CI Investments segregated funds for the period ending June 30, 2010. Inside is important information about each fund, including its financial statements for the period and a list of the top portfolio holdings of the underlying fund as of the end of the year. Additional information about your funds can be found on our website, www.ci.com. If you have any questions about your investments, please contact your financial advisor. CI is proud to partner with advisors across Canada. We believe investors are most successful when they follow an investment plan developed with the assistance of a qualified advisor. ABOUT CI INVESTMENTS CI has been investing on behalf of Canadians since 1965 and has grown to become one of Canada s largest investment fund companies. We manage over $64 billion on behalf of 1.7 million Canadians. CI is a subsidiary of CI Financial Corp., a TSX-listed financial services firm with $86 billion in fee-earning assets at June 30, 2010. CI provides one of the industry s widest selections of investment products and services and a strong lineup of leading portfolio management teams. Our portfolio management expertise is offered through several platforms, including mutual funds, tax-efficient funds, segregated funds, and managed solutions. You may also contact CI Client Services at 1-800-792-9355. Thank you for investing with us. 1
Clarica CI Dividend Equity Benefit Fund Top 25 Holdings of Underlying Mutual Fund (unaudited) No. of Shares/ Average Fair Face Amount Investment Cost ($) Value ($) 2,290,983 Toronto-Dominion Bank 139,941,537 158,032,007 134,000,001 Short-Term Notes 134,000,000 134,002,219 3,452,745 Suncor Energy Inc. 111,245,534 108,174,501 2,800,600 Canadian Natural Resources Ltd. 88,653,246 98,945,198 1,997,400 Barrick Gold Corp. 84,191,488 96,514,368 5,165,100 Talisman Energy Inc. 83,090,992 83,158,110 1,439,400 Royal Bank of Canada 79,785,347 72,977,580 2,203,900 BCE Inc. 66,603,485 68,453,134 1,548,300 Eli Lilly and Co. 64,712,316 55,216,371 3,528,600 Bank of America Corp. 54,681,557 53,979,286 1,335,980 TELUS Corp., Non-Voting Shares 51,333,228 51,461,950 795,700 Johnson & Johnson 54,827,749 50,027,723 1,295,400 Rogers Communications Inc., Class B 37,228,689 45,054,012 936,900 Goldcorp Inc. 35,926,463 43,668,909 566,700 Union Pacific Corp. 32,486,282 41,934,207 1,294,700 EnCana Corp. 42,685,226 41,741,128 649,800 Freeport-McMoRan Copper & Gold Inc., Class B (USD) 50,265,268 40,903,034 1,057,900 Merck & Co., Ltd. 40,564,877 39,382,945 2,468,700 Manulife Financial Corp. 47,976,518 38,141,415 454,500 Occidental Petroleum Corp. 35,167,782 37,328,261 947,635 Imperial Oil Ltd. 37,773,798 36,749,285 523,000 Canadian Imperial Bank of Commerce 34,673,735 34,591,220 632,400 Research In Motion Ltd. (USD) 45,036,989 33,163,030 4,035,300 Bank of America Corp., Warrants (16Jan19) 34,723,974 32,862,848 524,800 Canadian National Railway Co. 27,888,552 32,018,048 2 CIG - 8880
Clarica CI Dividend Equity Benefit Fund Financial Statements (unaudited) Statement of Investment Portfolio as at June 30, 2010 No. of Average Fair Units/Shares Investment Cost ($) Value ($) 1,184,646 Signature Select Canadian Fund (Class I) 13,066,568 14,440,838 Total Investments (99.6%) 13,066,568 14,440,838 Other Assets (net) (0.4%) 58,211 Total Net Assets (100.0%) 14,499,049 Statements of Net Assets as at June 30, 2010 and December 31, 2009 (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the periods ended June 30 (in $000 s) Statements of Changes in Net Assets for the periods ended June 30 (in $000 s) Assets Investments at fair value* Cash Receivable for unit subscriptions Receivable for securities sold Management fee rebate receivable Receivable for dividends and accrued interest Liabilities Bank overdraft Management fees payable Administration fees payable Filing fees payable Insurance fees payable Payable for securities purchased Payable for unit redemptions Net assets and unitholders equity *Investments at cost Net asset value per unit Schedule 1 Number of units outstanding (Unit transactions Schedule 2) 14,441 16,008 56 78 1 2 2 1 14,500 16,089-6 - 3-3 1 35 1 47 14,499 16,042 13,067 13,708 531.28 563.59 27,290 28,463 Income Income distribution from investments Interest Management fee rebate Expenses (Note 5) (Management expense ratios Schedule 3) Management fees Administrative fees Insurance fees Custody fees Legal fees Audit fees Goods and services tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments Realized gain (loss) on investments (a) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments from operations ( from operations per unit Schedule 4) 31 26 16 12 15 13-1 3 3 65 55 (65) (55) 107 (71) (926) 1,678 (819) 1,607 (884) 1,552 Net assets, beginning of period Capital transactions Proceeds from units issued Payments for units redeemed from operations Net assets, end of period 16,042 13,370 44 56 (703) (628) (659) (572) (884) 1,552 14,499 14,350 (a) Realized gain (loss) on investments Proceeds from sale of investments Investments at cost, beginning of period Investments purchased Investments at cost, end of period Cost of investments sold Realized gain (loss) on investments 754 651 13,708 14,917 6 23 13,714 14,940 13,067 14,218 647 722 107 (71) Percentages shown in brackets in the Statement of Investment Portfolio relate investments at fair value to total net assets of the Fund. The accompanying notes are an integral part of these financial statements. 3
Clarica CI Dividend Equity Benefit Fund Financial Statements Supplementary Schedules (for the periods ended June 30 and December 31) (unaudited) Schedule 1 Net asset value per unit, end of period ($) 2008 2007 2006 2005 531.28 486.79 580.48 592.20 475.30 387.04 Schedule 2 Unit transactions Number of units, beginning of period Units issued for cash Units redeemed Number of units, end of period 28,463 30,788 81 128 (1,254) (1,438) 27,290 29,478 Schedule 3 Management expense ratios 1, 2 (%) Management and operating expenses Goods and services tax expenses Total management expense ratio 2008 2007 2006 2005 0.80 0.80 0.80 0.80 0.80 0.82 0.04 0.04 0.04 0.05 0.05 0.06 0.84 0.84 0.84 0.85 0.85 0.88 Schedule 4 from operations per unit 3 ($) (31.77) 51.50 1 Management expense information is calculated based on expenses charged directly to the Fund plus, if applicable, expenses of the underlying mutual fund, calculated on a weighted average basis on the percentage weighting of the underlying mutual fund and is expressed as an annualized percentage of average net assets for the periods shown. 2 Effective fiscal 2005, the fiscal year end of the underlying mutual fund changed from December 31 to March 31, 2006. As a result, the MER of the underlying mutual fund was based on the most recent audited MER at December 31, 2004. It was expected that the MER of the underlying mutual fund at December 31, 2005 would have been less than the prior year MER due to a decline in fees that occurred in September 2005. 3 from operations per unit of the class is calculated by dividing the increase (decrease) in net assets from operations of the Fund by the weighted average number of units outstanding of the class during the period. The accompanying notes are an integral part of these financial statements. 4
Clarica CI Dividend Equity Benefit Fund Fund Specific Financial Instruments Risks (Note 2) (Dollar amounts in thousands) (unaudited) During the six-month period the Fund s exposure to currency risk changed significantly as disclosed in the section below. For details relating to other price risk, credit risk, liquidity risk, interest rate risk and fair value hierarchy, refer to the audited annual financial statements as at December 31, 2009, as the Fund s exposure to those risks remains unchanged. Currency Risk The Fund bears the currency risk exposure of the underlying mutual fund. The underlying mutual fund is exposed to currency risk as some of the underlying mutual fund s assets are invested in stocks denominated in currencies other than Canadian dollars, the functional currency of the underlying mutual fund. The tables below summarize the underlying mutual fund s exposure to currency risk, net of derivative instruments, as applicable. as at June 30, 2010 Net Assets Currency (%) US Dollar 11.3 British Pound 2.1 Swiss Franc 1.9 Brazilian Real 0.9 Euro 0.6 Mexican Peso 0.6 Japanese Yen 0.4 Hong Kong Dollar 0.4 Australian Dollar 0.2 Total 18.4 as at December 31, 2009 Net Assets Currency (%) US Dollar 15.4 Euro 3.4 British Pound 2.9 Swiss Franc 1.3 Japanese Yen 0.8 Brazilian Real 0.7 Mexican Peso 0.2 Australian Dollar (0.2) Total 24.5 As at June 30, 2010, had the Canadian dollar strengthened or weakened by 10% in relation to all other foreign currencies held in the Fund, with all other variables held constant, the Fund's net assets would have decreased or increased, respectively, by approximately $266 (December 31, 2009 - $393). In practice, the actual results may differ materially from the sensitivity analysis due to other market circumstances and investment decisions made by the portfolio manager. The accompanying notes are an integral part of these financial statements. 5
Clarica CI Equity Fund B Top 25 Holdings of Underlying Mutual Fund (unaudited) No. of Shares/ Average Fair Face Amount Investment Cost ($) Value ($) 2,290,983 Toronto-Dominion Bank 139,941,537 158,032,007 134,000,001 Short-Term Notes 134,000,000 134,002,219 3,452,745 Suncor Energy Inc. 111,245,534 108,174,501 2,800,600 Canadian Natural Resources Ltd. 88,653,246 98,945,198 1,997,400 Barrick Gold Corp. 84,191,488 96,514,368 5,165,100 Talisman Energy Inc. 83,090,992 83,158,110 1,439,400 Royal Bank of Canada 79,785,347 72,977,580 2,203,900 BCE Inc. 66,603,485 68,453,134 1,548,300 Eli Lilly and Co. 64,712,316 55,216,371 3,528,600 Bank of America Corp. 54,681,557 53,979,286 1,335,980 TELUS Corp., Non-Voting Shares 51,333,228 51,461,950 795,700 Johnson & Johnson 54,827,749 50,027,723 1,295,400 Rogers Communications Inc., Class B 37,228,689 45,054,012 936,900 Goldcorp Inc. 35,926,463 43,668,909 566,700 Union Pacific Corp. 32,486,282 41,934,207 1,294,700 EnCana Corp. 42,685,226 41,741,128 649,800 Freeport-McMoRan Copper & Gold Inc., Class B (USD) 50,265,268 40,903,034 1,057,900 Merck & Co., Ltd. 40,564,877 39,382,945 2,468,700 Manulife Financial Corp. 47,976,518 38,141,415 454,500 Occidental Petroleum Corp. 35,167,782 37,328,261 947,635 Imperial Oil Ltd. 37,773,798 36,749,285 523,000 Canadian Imperial Bank of Commerce 34,673,735 34,591,220 632,400 Research In Motion Ltd. (USD) 45,036,989 33,163,030 4,035,300 Bank of America Corp., Warrants (16Jan19) 34,723,974 32,862,848 524,800 Canadian National Railway Co. 27,888,552 32,018,048 6 CIG - 8882
Clarica CI Equity Fund B Financial Statements (unaudited) Statement of Investment Portfolio as at June 30, 2010 No. of Average Fair Units/Shares Investment Cost ($) Value ($) 1,348,484 Signature Select Canadian Fund (Class I) 14,921,759 16,438,021 Total Investments (99.7%) 14,921,759 16,438,021 Other Assets (net) (0.3%) 53,398 Total Net Assets (100.0%) 16,491,419 Statements of Net Assets as at June 30, 2010 and December 31, 2009 (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the periods ended June 30 (in $000 s) Statements of Changes in Net Assets for the periods ended June 30 (in $000 s) Assets Investments at fair value* Cash Receivable for unit subscriptions Receivable for securities sold Management fee rebate receivable Receivable for dividends and accrued interest Liabilities Bank overdraft Management fees payable Administration fees payable Filing fees payable Insurance fees payable Payable for securities purchased Payable for unit redemptions Net assets and unitholders equity *Investments at cost Net asset value per unit Schedule 1 Number of units outstanding (Unit transactions Schedule 2) 16,438 17,770 58 89-2 4-16,500 17,861 1 13-1 - 3-2 8-9 19 16,491 17,842 14,922 15,263 307.13 326.27 53,695 54,686 Income Income distribution from investments Interest Management fee rebate Expenses (Note 5) (Management expense ratios Schedule 3) Management fees Administrative fees Insurance fees Custody fees Legal fees Audit fees Goods and services tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments Realized gain (loss) on investments (a) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments from operations ( from operations per unit Schedule 4) 70 57 7 4 17 14-1 5 4 99 80 (99) (80) 57 (61) (991) 1,799 (934) 1,738 (1,033) 1,658 Net assets, beginning of period Capital transactions Proceeds from units issued Payments for units redeemed from operations Net assets, end of period 17,842 14,319 99 117 (417) (415) (318) (298) (1,033) 1,658 16,491 15,679 (a) Realized gain (loss) on investments Proceeds from sale of investments Investments at cost, beginning of period Investments purchased Investments at cost, end of period Cost of investments sold Realized gain (loss) on investments 425 392 15,263 16,022 27 41 15,290 16,063 14,922 15,610 368 453 57 (61) Percentages shown in brackets in the Statement of Investment Portfolio relate investments at fair value to total net assets of the Fund. The accompanying notes are an integral part of these financial statements. 7
Clarica CI Equity Fund B Financial Statements Supplementary Schedules (for the periods ended June 30 and December 31) (unaudited) Schedule 1 Net asset value per unit, end of period ($) 2008 2007 2006 2005 307.13 282.21 337.68 345.59 278.22 227.21 Schedule 2 Unit transactions Number of units, beginning of period Units issued for cash Units redeemed Number of units, end of period 54,686 56,782 305 454 (1,296) (1,679) 53,695 55,557 Schedule 3 Management expense ratios 1, 2 (%) Management and operating expenses Goods and services tax expenses Total management expense ratio 2008 2007 2006 2005 1.08 1.08 1.08 1.08 1.08 1.10 0.05 0.05 0.05 0.06 0.07 0.08 1.13 1.13 1.13 1.14 1.15 1.18 Schedule 4 from operations per unit 3 ($) (19.01) 29.57 1 Management expense information is calculated based on expenses charged directly to the Fund plus, if applicable, expenses of the underlying mutual fund, calculated on a weighted average basis on the percentage weighting of the underlying mutual fund and is expressed as an annualized percentage of average net assets for the periods shown. 2 Effective fiscal 2005, the fiscal year end of the underlying mutual fund changed from December 31 to March 31, 2006. As a result, the MER of the underlying mutual fund was based on the most recent audited MER at December 31, 2004. It was expected that the MER of the underlying mutual fund at December 31, 2005 would have been less than the prior year MER due to a decline in fees that occurred in September 2005. 3 from operations per unit of the class is calculated by dividing the increase (decrease) in net assets from operations of the Fund by the weighted average number of units outstanding of the class during the period. The accompanying notes are an integral part of these financial statements. 8
Clarica CI Equity Fund B Fund Specific Financial Instruments Risks (Note 2) (Dollar amounts in thousands) (unaudited) During the six-month period the Fund s exposure to currency risk changed significantly as disclosed in the section below. For details relating to other price risk, credit risk, liquidity risk, interest rate risk and fair value hierarchy, refer to the audited annual financial statements as at December 31, 2009, as the Fund s exposure to those risks remains unchanged. Currency Risk The Fund bears the currency risk exposure of the underlying mutual fund. The underlying mutual fund is exposed to currency risk as some of the underlying mutual fund s assets are invested in stocks denominated in currencies other than Canadian dollars, the functional currency of the underlying mutual fund. The tables below summarize the underlying mutual fund s exposure to currency risk, net of derivative instruments, as applicable. as at June 30, 2010 Net Assets Currency (%) US Dollar 11.3 British Pound 2.1 Swiss Franc 1.9 Brazilian Real 0.9 Euro 0.6 Mexican Peso 0.6 Japanese Yen 0.4 Hong Kong Dollar 0.4 Australian Dollar 0.2 Total 18.4 as at December 31, 2009 Net Assets Currency (%) US Dollar 15.4 Euro 3.4 British Pound 2.9 Swiss Franc 1.3 Japanese Yen 0.8 Brazilian Real 0.7 Mexican Peso 0.2 Australian Dollar (0.2) Total 24.5 As at June 30, 2010, had the Canadian dollar strengthened or weakened by 10% in relation to all other foreign currencies held in the Fund, with all other variables held constant, the Fund's net assets would have decreased or increased, respectively, by approximately $302 (December 31, 2009 - $437). In practice, the actual results may differ materially from the sensitivity analysis due to other market circumstances and investment decisions made by the portfolio manager. The accompanying notes are an integral part of these financial statements. 9
Clarica CI North American Equity Fund Top 25 Holdings of Underlying Mutual Fund (unaudited) No. of Shares/ Average Fair Face Amount Investment Cost ($) Value ($) 2,290,983 Toronto-Dominion Bank 139,941,537 158,032,007 134,000,001 Short-Term Notes 134,000,000 134,002,219 3,452,745 Suncor Energy Inc. 111,245,534 108,174,501 2,800,600 Canadian Natural Resources Ltd. 88,653,246 98,945,198 1,997,400 Barrick Gold Corp. 84,191,488 96,514,368 5,165,100 Talisman Energy Inc. 83,090,992 83,158,110 1,439,400 Royal Bank of Canada 79,785,347 72,977,580 2,203,900 BCE Inc. 66,603,485 68,453,134 1,548,300 Eli Lilly and Co. 64,712,316 55,216,371 3,528,600 Bank of America Corp. 54,681,557 53,979,286 1,335,980 TELUS Corp., Non-Voting Shares 51,333,228 51,461,950 795,700 Johnson & Johnson 54,827,749 50,027,723 1,295,400 Rogers Communications Inc., Class B 37,228,689 45,054,012 936,900 Goldcorp Inc. 35,926,463 43,668,909 566,700 Union Pacific Corp. 32,486,282 41,934,207 1,294,700 EnCana Corp. 42,685,226 41,741,128 649,800 Freeport-McMoRan Copper & Gold Inc., Class B (USD) 50,265,268 40,903,034 1,057,900 Merck & Co., Ltd. 40,564,877 39,382,945 2,468,700 Manulife Financial Corp. 47,976,518 38,141,415 454,500 Occidental Petroleum Corp. 35,167,782 37,328,261 947,635 Imperial Oil Ltd. 37,773,798 36,749,285 523,000 Canadian Imperial Bank of Commerce 34,673,735 34,591,220 632,400 Research In Motion Ltd. (USD) 45,036,989 33,163,030 4,035,300 Bank of America Corp., Warrants (16Jan19) 34,723,974 32,862,848 524,800 Canadian National Railway Co. 27,888,552 32,018,048 10 CIG - 8881
Clarica CI North American Equity Fund Financial Statements (unaudited) Statement of Investment Portfolio as at June 30, 2010 No. of Average Fair Units/Shares Investment Cost ($) Value ($) 2,164,648 Signature Select Canadian Fund (Class I) 24,329,827 26,387,056 Total Investments (99.5%) 24,329,827 26,387,056 Other Assets (net) (0.5%) 121,166 Total Net Assets (100.0%) 26,508,222 Statements of Net Assets as at June 30, 2010 and December 31, 2009 (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the periods ended June 30 (in $000 s) Statements of Changes in Net Assets for the periods ended June 30 (in $000 s) Assets Investments at fair value* Cash Receivable for unit subscriptions Receivable for securities sold Management fee rebate receivable Receivable for dividends and accrued interest Liabilities Bank overdraft Management fees payable Administration fees payable Filing fees payable Insurance fees payable Payable for securities purchased Payable for unit redemptions Net assets and unitholders equity *Investments at cost Net asset value per unit Schedule 1 Number of units outstanding (Unit transactions Schedule 2) 26,387 29,429 127 159-2 4-26,518 29,590-16 - 2-5 - 1 10-10 24 26,508 29,566 24,330 25,676 466.27 494.78 56,852 59,757 Income Income distribution from investments Interest Management fee rebate Expenses (Note 5) (Management expense ratios Schedule 3) Management fees Administrative fees Insurance fees Custody fees Legal fees Audit fees Goods and services tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments Realized gain (loss) on investments (a) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments from operations ( from operations per unit Schedule 4) 86 72 11 9 29 24-1 6 5 132 111 (132) (111) 208 (96) (1,696) 3,040 (1,488) 2,944 (1,620) 2,833 Net assets, beginning of period Capital transactions Proceeds from units issued Payments for units redeemed from operations Net assets, end of period 29,566 24,086 155 186 (1,593) (762) (1,438) (576) (1,620) 2,833 26,508 26,343 (a) Realized gain (loss) on investments Proceeds from sale of investments Investments at cost, beginning of period Investments purchased Investments at cost, end of period Cost of investments sold Realized gain (loss) on investments 1,596 730 25,676 27,369 42 47 25,718 27,416 24,330 26,590 1,388 826 208 (96) Percentages shown in brackets in the Statement of Investment Portfolio relate investments at fair value to total net assets of the Fund. The accompanying notes are an integral part of these financial statements. 11
Clarica CI North American Equity Fund Financial Statements Supplementary Schedules (for the periods ended June 30 and December 31) (unaudited) Schedule 1 Net asset value per unit, end of period ($) 2008 2007 2006 2005 466.27 427.56 510.77 521.53 418.98 341.39 Schedule 2 Unit transactions Number of units, beginning of period Units issued for cash Units redeemed Number of units, end of period 59,757 63,103 316 489 (3,221) (1,980) 56,852 61,612 Schedule 3 Management expense ratios 1, 2 (%) Management and operating expenses Goods and services tax expenses Total management expense ratio 2008 2007 2006 2005 0.88 0.88 0.88 0.88 0.88 0.90 0.04 0.04 0.04 0.05 0.06 0.06 0.92 0.92 0.92 0.93 0.94 0.96 Schedule 4 from operations per unit 3 ($) (27.72) 45.37 1 Management expense information is calculated based on expenses charged directly to the Fund plus, if applicable, expenses of the underlying mutual fund, calculated on a weighted average basis on the percentage weighting of the underlying mutual fund and is expressed as an annualized percentage of average net assets for the periods shown. 2 Effective fiscal 2005, the fiscal year end of the underlying mutual fund changed from December 31 to March 31, 2006. As a result, the MER of the underlying mutual fund was based on the most recent audited MER at December 31, 2004. It was expected that the MER of the underlying mutual fund at December 31, 2005 would have been less than the prior year MER due to a decline in fees that occurred in September 2005. 3 from operations per unit of the class is calculated by dividing the increase (decrease) in net assets from operations of the Fund by the weighted average number of units outstanding of the class during the period. The accompanying notes are an integral part of these financial statements. 12
Clarica CI North American Equity Fund Fund Specific Financial Instruments Risks (Note 2) (Dollar amounts in thousands) (unaudited) During the six-month period the Fund s exposure to currency risk changed significantly as disclosed in the section below. For details relating to other price risk, credit risk, liquidity risk, interest rate risk and fair value hierarchy, refer to the audited annual financial statements as at December 31, 2009, as the Fund s exposure to those risks remains unchanged. Currency Risk The Fund bears the currency risk exposure of the underlying mutual fund. The underlying mutual fund is exposed to currency risk as some of the underlying mutual fund s assets are invested in stocks denominated in currencies other than Canadian dollars, the functional currency of the underlying mutual fund. The tables below summarize the underlying mutual fund s exposure to currency risk, net of derivative instruments, as applicable. as at June 30, 2010 Net Assets Currency (%) US Dollar 11.3 British Pound 2.1 Swiss Franc 1.9 Brazilian Real 0.9 Euro 0.6 Mexican Peso 0.6 Japanese Yen 0.4 Hong Kong Dollar 0.4 Australian Dollar 0.2 Total 18.4 as at December 31, 2009 Net Assets Currency (%) US Dollar 15.4 Euro 3.4 British Pound 2.9 Swiss Franc 1.3 Japanese Yen 0.8 Brazilian Real 0.7 Mexican Peso 0.2 Australian Dollar (0.2) Total 24.5 As at June 30, 2010, had the Canadian dollar strengthened or weakened by 10% in relation to all other foreign currencies held in the Fund, with all other variables held constant, the Fund's net assets would have decreased or increased, respectively, by approximately $486 (December 31, 2009 - $724). In practice, the actual results may differ materially from the sensitivity analysis due to other market circumstances and investment decisions made by the portfolio manager. The accompanying notes are an integral part of these financial statements. 13
Clarica Income Fund 2 Top 25 Holdings of Underlying Mutual Fund (unaudited) No. of Shares/ Average Fair Face Amount Investment Cost ($) Value ($) 126,000,001 Short-Term Notes 126,000,000 126,003,178 64,834,000 Canadian Government Bond, Series YR94 3.75% 06/01/2019 66,212,275 68,600,870 55,335,000 Canadian Government Bond 2.5% 06/01/2015 54,700,028 55,779,261 38,657,000 Canadian Government Bond 5.75% 06/01/2029 47,934,024 49,921,586 43,490,000 Province of Ontario 4.2% 06/02/2020 42,999,987 44,294,354 36,557,000 55 Ontario School Board Trust 5.9% 06/02/2033 38,561,987 40,949,464 36,970,000 Canadian Government Bond, Series YN80 3.5% 06/01/2013 38,527,550 38,701,088 29,710,000 Canadian Government Bond 4% 06/01/2016 31,552,876 32,037,970 28,486,000 Canadian Government Bond 3.75% 09/01/2011 29,766,842 29,366,292 28,955,000 Canadian Government Bond 1.25% 06/01/2011 29,090,340 29,024,978 26,970,000 Canadian Government Bond 2% 09/01/2012 26,998,003 27,230,941 26,220,000 Canadian Government Bond 2% 12/01/2014 25,314,369 25,937,807 19,435,000 Canadian Government Bond, Series XW98 5% 06/01/2037 22,940,454 23,916,954 20,670,000 Province of Quebec 5.75% 12/01/2036 23,130,848 23,870,489 23,370,000 Canadian Government Bond 1% 09/01/2011 23,255,954 23,351,860 20,815,000 Canadian Government Bond, Series YL25 4.25% 06/01/2018 22,083,416 22,803,791 20,065,000 Province of Quebec 4.5% 12/01/2017 20,822,855 21,220,765 19,525,000 Bank of Ireland 2.75% 03/02/2012 20,579,307 20,628,291 27,000,000 Royal Bank of Scotland, Callable 5.37% 05/12/2049 23,825,409 19,710,000 17,950,000 EUROFIMA 5.15% 12/13/2019 18,412,852 19,256,497 18,330,000 Province of Ontario 4.4% 06/02/2019 18,944,055 19,089,497 16,523,899 New Brunswick F-M Project Co., Inc., Callable 6.47% 11/30/2027 18,406,969 19,045,528 13,711,000 Canadian Government Bond 5.75% 06/01/2033 17,181,533 18,111,631 11,373,000 Canadian Government Bond 8% 06/01/2027 16,244,688 17,759,660 16,725,000 African Development Bank 4.85% 07/24/2012 17,841,394 17,706,124 14 CIG - 8883
Clarica Income Fund 2 Financial Statements (unaudited) Statement of Investment Portfolio as at June 30, 2010 No. of Average Fair Units/Shares Investment Cost ($) Value ($) 165,823 Signature Canadian Bond Fund (Class I) 1,628,248 1,699,686 Total Investments (99.9%) 1,628,248 1,699,686 Other Assets (net) (0.1%) 611 Total Net Assets (100.0%) 1,700,297 Statements of Net Assets as at June 30, 2010 and December 31, 2009 (in $000 s except for per unit amounts and units outstanding) Statements of Operations for the periods ended June 30 (in $000 s) Statements of Changes in Net Assets for the periods ended June 30 (in $000 s) Assets Investments at fair value* Cash Receivable for unit subscriptions Receivable for securities sold Management fee rebate receivable Receivable for dividends and accrued interest Liabilities Bank overdraft Management fees payable Administration fees payable Filing fees payable Insurance fees payable Payable for securities purchased Payable for unit redemptions Net assets and unitholders equity *Investments at cost Net asset value per unit Schedule 1 Number of units outstanding (Unit transactions Schedule 2) 1,700 1,649-3 1,700 1,652-2 - 2 1,700 1,650 1,628 1,624 204.44 195.36 8,317 8,444 Income Income distribution from investments Interest Management fee rebate Expenses (Note 5) (Management expense ratios Schedule 3) Management fees Administrative fees Insurance fees Custody fees Legal fees Audit fees Goods and services tax Net investment income (loss) for the period Realized and unrealized gain (loss) on investments Realized gain (loss) on investments (a) Capital gain distribution from investments Change in unrealized appreciation (depreciation) of investments Net gain (loss) on investments from operations ( from operations per unit Schedule 4) 38 39 38 39 6 6 1-2 2-1 9 9 29 30 1 1 47-48 1 77 31 Net assets, beginning of period Capital transactions Proceeds from units issued Payments for units redeemed from operations Net assets, end of period 1,650 1,601 1 1 (28) (14) (27) (13) 77 31 1,700 1,619 (a) Realized gain (loss) on investments Proceeds from sale of investments Investments at cost, beginning of period Investments purchased Investments at cost, end of period Cost of investments sold Realized gain (loss) on investments 36 23 1,624 1,584 39 40 1,663 1,624 1,628 1,602 35 22 1 1 Percentages shown in brackets in the Statement of Investment Portfolio relate investments at fair value to total net assets of the Fund. The accompanying notes are an integral part of these financial statements. 15
Clarica Income Fund 2 Financial Statements Supplementary Schedules (for the periods ended June 30 and December 31) (unaudited) Schedule 1 Net asset value per unit, end of period ($) 2008 2007 2006 2005 204.44 189.57 182.33 172.99 166.57 168.06 Schedule 2 Unit transactions Number of units, beginning of period Units issued for cash Units redeemed Number of units, end of period 8,444 8,610 6 6 (133) (77) 8,317 8,539 Schedule 3 Management expense ratios 1, 2 (%) Management and operating expenses Goods and services tax expenses Total management expense ratio 2008 2007 2006 2005 1.12 1.12 1.12 1.13 1.12 1.14 0.06 0.06 0.06 0.07 0.07 0.08 1.18 1.18 1.18 1.20 1.19 1.22 Schedule 4 from operations per unit 3 ($) 9.06 3.56 1 Management expense information is calculated based on expenses charged directly to the Fund plus, if applicable, expenses of the underlying mutual fund, calculated on a weighted average basis on the percentage weighting of the underlying mutual fund and is expressed as an annualized percentage of average net assets for the periods shown. 2 Effective fiscal 2005, the fiscal year end of the underlying mutual fund changed from December 31 to March 31, 2006. As a result, the MER of the underlying mutual fund was based on the most recent audited MER at December 31, 2004. It was expected that the MER of the underlying mutual fund at December 31, 2005 would have been less than the prior year MER due to a decline in fees that occurred in September 2005. 3 from operations per unit of the class is calculated by dividing the increase (decrease) in net assets from operations of the Fund by the weighted average number of units outstanding of the class during the period. The accompanying notes are an integral part of these financial statements. 16
Clarica Segregated Funds Notes to the Financial Statements (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles ( Canadian GAAP ). Significant accounting policies used in preparing the semiannual financial statements are consistent with those used in preparing the annual financial statements. The semi-annual financial statements should be read in conjunction with the Funds December 31, 2009 annual financial statements. The Statement of Investment Portfolio for each of the Funds is as at June 30, 2010 and the Statements of Net Assets are as at June 30, 2010 and December 31, 2009. The Statements of Operations and Statements of Changes in Net Assets for each Fund are for the periods ended June 30, 2010 and 2009. The Supplementary Schedules to the Financial Statements for each Fund are for six months ended June 30, 2010 and for each of the most recent five periods ended June 30 for schedule 1 and December 31 for schedule 3, and for periods ended June 30, 2010 and 2009 for schedules 2 and 4. The Fund s Specific Financial Instruments Risks for each of the Funds are as at June 30, 2010 and December 31, 2009, where applicable. (a) Accounting Changes Fiscal Year 2009 The Canadian Institute of Chartered Accountants ( CICA ) amended Section 3862 Financial Instruments Disclosures ( Amended Section 3862 ). Amended Section 3862 became effective for annual financial statements relating to fiscal years ending after September 30, 2009. Section 3862 requires expanded disclosures pertaining to the fair value measurements of financial instuments and the management of liquidity risk and establishes a three-tier hierarchy framework based on inputs used to value the Funds financial instruments to enhance disclosure about fair value measurement. The Funds adopted the Amended Section 3862 on January 1, 2009. The adoption of amended Section 3862 has no impact on valuation policies, or the calculation of the Funds Net Assets. The Funds invest solely in units of underlying mutual funds and these investments are all classified as Level 1 as the fair values are based on unadjusted quoted prices in active markets for the units in these underlying mutual funds. There were no transfers between the three Levels during the period. In January 2009, the CICA issued Emerging Issues Committee Abstract 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities ("EIC 173"). EIC 173 provides guidance on how to take into account credit risk of an entity and its counterparty when determining the fair value of financial assets and financial liabilities. As required by EIC 173, the Funds have applied the new guidance retrospectively without restatement of prior periods to all financial assets and financial liabilities measured at fair value. The adoption of EIC 173 did not have any impact on the financial statements as the Manager determined that the fair value ascribed to the financial assets and financial liabilities in these financial statements incorporates appropriate adjustments for the levels of credit risk. Fiscal Year 2008 CICA issued Section 3862 Financial Instruments Disclosures and Section 3863 Financial Instruments Presentation in place of Section 3861 Financial Instruments Disclosure and Presentation. Section 3862 and 3863 became effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. These sections establish standards for disclosure of financial instruments including the nature and extent of risks arising from financial instruments to which the Funds are exposed during the reporting period. Adoption of Section 3862 and 3863 has no impact on valuation policies, nor the way the Funds Net Assets are calculated. Section 1535 Capital Disclosures establishes standards for disclosing information about an entity s capital and how it is managed. The standard became effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The adoption of Section 1535 has no impact on the Funds Net Assets. (b) Valuation of Investments Investments are categorized as held for trading in accordance with Section 3855, Financial Instruments Recognition and Measurement ( Section 3855 ) and are recorded at their fair value. Underlying funds are valued on each business day at their Net Asset Value as reported by the fund manager. Section 3855, requires the fair value of financial instruments to be measured based on investments bid/ask price depending on type of investment and investment position (long/short). The Canadian Securities Administrators ("CSA") amended section 14.2 of National Instrument 81-106 on September 5, 2008. The amended section 14.2 requires the net asset value of an investment fund to be calculated using the fair value of the fund's assets and liabilities. Section 3855 results in a different valuation method for calculating daily net asset value. For the purpose of processing unitholder transactions, net asset value is calculated based on the closing market price (referred to as Net Asset Value ), while for financial statement purposes net asset value is calculated based on bid/ask price (referred to as Net Assets ). The CSA requires investment funds to provide in their financial statements an explanation of the difference between the Net Asset Value per unit and the Net Assets per unit. As each of the Funds invest solely in units of an underlying mutual fund, Section 3855 does not impact the Fund s valuation of investments since the Fund s investments are priced based on the Net Asset Value per unit of the underlying mutual fund which reflects actual and regularly occurring market transactions on an arm s length basis. Accordingly, the Funds Net Asset Value per unit and the Net Assets per unit figures are the same. 2. FINANCIAL INSTRUMENTS RISK AND CAPITAL MANAGEMENT Risk Management The Funds invest solely in units of underlying mutual funds and are exposed to a variety of financial instruments risks: credit risk, liquidity risk and market risk (including interest rate risk, currency risk and other market risk). The level of risk to which each Fund is exposed depends on the investment objective and the type of investments held by the underlying mutual fund. The value of investments within an underlying mutual fund portfolio can fluctuate daily as a result of changes in prevailing interest rates, economic and market conditions and company specific news related to investments held by the underlying mutual fund. The manager of the underlying mutual fund may minimize potential adverse effects of these risks by, but not limited to, regular monitoring of the underlying mutual fund s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated objectives, and through the usage of derivatives to hedge certain risk exposures. During the six-month period some Funds exposure to financial instruments risks changed significantly as per details disclosed in the "Fund Specific Financial Instruments Risks" section of the financial statements. For details relating to financial instruments risks exposure for remaining Funds refer to the audited annual financial statements as at December 31, 2009, as these Funds exposure to financial instruments risks remained unchanged through the period. Other Price Risk Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk). The value of each investment is influenced by the outlook of the issuer and by general economic and political conditions, as well as industry and market trends. All securities present a risk of loss of capital. 17
Clarica Segregated Funds Notes to the Financial Statements (cont d) (unaudited) Other assets and liabilities are monetary items that are short-term in nature and therefore are not subject to significant other price risk. Interest Rate Risk Interest rate risk is the risk that the fair value of interest-bearing investments will fluctuate due to changes in prevailing levels of market interest rates. As a result, the value of the underlying mutual funds that invest in debt securities and/or income trusts will be affected by changes in applicable interest rates. If interest rates fall, the fair value of existing debt securities may increase due to the increase in yield. On the other hand, if interest rates rise, the yield of existing debt securities decrease which may then lead to a decrease in their fair value. The magnitude of the decline will generally be greater for long-term debt securities than for short-term debt securities. 3. FUTURE ACCOUNTING STANDARDS International Financial Reporting Standards On February 13, 2008, the Canadian Accounting Standards Board ( AcSB ) confirmed that the use of International Financial Reporting Standards ( IFRS ) will be required in 2011 for all publicly accountable profit-oriented enterprises. IFRS will replace GAAP. On June 30, 2010, the AcSB proposed deferral of the IFRS changeover date by one year. Based on the proposed change the IFRS would become effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2012 instead of January 1, 2011. The proposed changed is expected to be finalized in September 2010. Interest rate risk also applies to underlying mutual funds that invest in convertible securities. The fair value of these securities varies inversely with interest rates, similar to other debt securities. However, since they may be converted into common shares, convertible securities are generally less affected by interest rate fluctuations than other debt securities. Currency Risk Currency risk arises from financial instruments that are denominated in a currency other than the functional currency of the underlying mutual funds. As a result, the underlying mutual funds may be exposed to the risk that the value of securities denominated in other currencies will fluctuate due to changes in exchange rates. Equities in foreign markets are also exposed to currency risk as the prices denominated in foreign currencies are converted to the underlying mutual funds functional currency to determine their fair value. Credit Risk Credit risk is the risk that a security issuer or counterparty to a financial instrument will fail to meet its financial obligations. The fair value of a debt instrument includes consideration of the credit worthiness of the debt issuer. The maximum credit risk exposure of the Funds other assets are represented by their carrying amount as disclosed in the Statements of Net Assets. Liquidity Risk The underlying mutual funds are exposed to daily cash redemption of redeemable units. Therefore, the underlying mutual funds invest the majority of their assets in investments that are traded in active markets and can be readily disposed of. In addition, the underlying mutual funds retain sufficient cash and cash equivalents positions to maintain liquidity. From time to time, the underlying mutual funds may enter into derivative contracts or invest in unlisted securities that may not trade in an organized market and may be illiquid. The Funds are also exposed to daily cash redemption therefore the Funds retain sufficient cash position to maintain liquidity. Capital Management The Manager considers the Funds capital to consist of the net assets and unitholders equity. The Manager manages the capital of the Funds in accordance with the Funds investment objectives, policies and restrictions, as outlined in the Funds prospectus, while maintaining sufficient liquidity to meet unitholder redemptions. The Funds do not have any externally imposed capital requirements. 18
Clarica Segregated Funds Legal Notice NOTICE: Should you require additional copies of these Semi-Annual Financial Statements or have received more than one copy, please contact CI Investments Inc. or your advisor. Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies, is the sole issuer of the individual variable insurance contracts providing for investment in Clarica Segregated Funds. A description of the key features of the applicable individual variable insurance contract is contained in the Information Folder. SUBJECT TO ANY APPLICABLE DEATH AND MATURITY GUARANTEES, ANY AMOUNT THAT IS ALLOCATED TO A SEGREGATED FUND IS INVESTED AT THE RISK OF THE CONTRACTHOLDER AND MAY INCREASE OR DECREASE IN VALUE. CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. Clarica is a registered trademark of Sun Life Assurance Company of Canada. INFORMATION FOLDER: CI would be pleased to provide, without charge, the most recent Information Folder upon request to CI s Toronto office. 19
Sun Life Assurance Company of Canada 227 King Street South P.O. Box 1601 STN Waterloo Waterloo, Ontario N2J 4C5 2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I www.ci.com Head Office / Toronto 416-364-1145 1-800-268-9374 Calgary 403-205-4396 1-800-776-9027 Montreal 514-875-0090 1-800-268-1602 Vancouver 604-681-3346 1-800-665-6994 Client Services English: 1-800-563-5181 French: 1-800-668-3528 CLARICASEG_SA_08/10E