CompX International Inc. Annual Report 2012

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FY2012 Annual Report · CompX International Inc.

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Annual Report
December 31, 2012

2012

Table of Contents

Financial Highlights

Letter to Shareholders

Ten-Year Historical Financial Highlights

Subsidiary Proﬁ les

Management’s Discussion and Analysis

Consolidated Financial Statements

Management’s Report to Shareholders

Independent Auditors’ Report

Notes to Consolidated Financial Statements

Corporate Directory

Corporate Information

Front cover image: Percé Rock, Gaspé, Québec

CI Financial Corp. is a diversiﬁ ed wealth management ﬁ rm and Canada’s third-largest investment fund company. Independent

and Canadian-owned, CI provides a comprehensive selection of top-quality investment products and services. CI has two

million clients and manages or administers approximately $105 billion in assets (as at March 31, 2013). CI operates primarily

through subsidiaries CI Investments Inc. and Assante Wealth Management (Canada) Ltd.

CI Investments offers the industry’s broadest selection of investment funds under the CI, Black Creek, Cambridge, Harbour,

Red Sky, Signature, Synergy, Portfolio Series, Portfolio Select Series and SunWise Essential Series 2 banners.

Assante Wealth Management provides ﬁ nancial advisory services through a national network of 750 professional ﬁ nancial

advisors. Stonegate Private Counsel, a division of CI Private Counsel LP, provides wealth planning services to high net worth

individuals and families.

CI’s other businesses include Perimeter Markets Inc., which operates alternative marketplaces for trading Canadian ﬁ xed-

income products under the CBID brand. CI also owns interests in Altrinsic Global Advisors, LLC, a global investment manager

based in Greenwich, Connecticut, and in Toronto-based alternative asset managers Red Sky Capital Management Ltd. and

Lawrence Park Capital Partners Ltd.

Financial Highlights

( in millions of dollars, except share amounts)

As at December 31, 2012

As at December 31, 2011

% change

Assets under management

Total assets

Shares outstanding

75,723

98,922

69,558

91,102

282,914,642

283,567,039

( in millions of dollars, except share amounts)

As at December 31, 2012

As at December 31, 2011

% change

For the year ended

Average assets under management

Management fees

Total revenues

SG&A

Trailer fees

Net income

Earnings per share

EBITDA*

EBITDA* per share

Dividends recorded per share

Average shares outstanding

72,606

1,277.7

1,457.8

286.0

374.0

352.2

1.24

703.6

2.48

0.96

72,186

1,302.8

1,496.3

290.8

379.5

376.9

1.31

726.2

2.53

0.89

283,389,571

286,997,604

(2)

(3)

(2)

(1)

(7)

(5)

(3)

(2)

(1)

* EBITDA (Earnings before interest, taxes, depreciation and amortization) is not a standardized earnings measure prescribed by IFRS;
however, management believes that most of its shareholders, creditors, other stakeholders and investment analysts prefer to include
the use of this performance measure in analyzing CI’s results. CI’s method of calculating this measure may not be comparable to
similar measures presented by other companies.

CIX VS S&P/TSX COMPOSITE INDEX TOTAL RETURN (IPO IN JUNE 1994 = 100)

3,500

3,000

2,500

2,000

1,500

1,000

500

2,711

2,760

2,425

2,445

2,595

2,535

S&P/TSX Composite Index

CIX

3,125

942
195

’03

1,339

1,468

244

284

’04

’05

May 31

1,562

354

395

434

291

392

461

421

451

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

ASSETS UNDER MANAGEMENT ($ BILLIONS)

56.9

49.1

44.2

28.8

62.7

67.2

64.2

52.8

72.8

69.6

75.7

’03

’04

’05

May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

CIX SHARE PRICE ($)

31.03

26.72

28.07

22.00

22.50

21.10

24.93

16.44

17.30

11.90

14.50

’03

’04

’05

May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

DIVIDENDS PER SHARE ($)

2.50

2.00

1.50

1.00

0.50

2.25

1.74

1.155

0.675

0.70

0.77

0.63

0.89

0.955

0.29

’03

0.405

’04

’05

May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

Letter to Shareholders

DEAR SHAREHOLDERS,

Your company had an excellent year in 2012. In the face of continued volatility in ﬁ nancial markets and lingering doubts

about the strength of the global economy, CI Financial delivered strong results. Most notably, our assets under management

grew 9% year over year to reach a new record, our net sales increased 200%, and our cash ﬂ ow supported an increase in

the dividend and a continued strengthening of our ﬁ nancial position.

Although 2012 marked the fourth year of recovery following the global ﬁ nancial crisis, investor conﬁ dence was still

sensitive to the latest news. Equity markets fell sharply in the second quarter and were choppy over the following months

in response to concerns over the ongoing European debt issues, the pace of growth in the U.S. and China, as well as the

U.S. presidential election and the “ﬁ scal cliff.”

In the fourth quarter, however, share prices staged a decisive rally that continued into the ﬁ rst quarter of 2013. For the year,

the S&P/TSX Composite Index gained 7.2%, while the S&P 500 Index rose 13.5% and the MSCI World Index was up 14.1%

(all in Canadian dollars). It’s worthwhile noting that the Canadian index underperformed U.S. stocks for the second year

in a row and remains below both its 2011 high and its all-time high reached in 2008. Meanwhile, in the U.S., the Dow Jones

Industrial Average and the S&P 500 Index powered to new closing highs in March 2013. These moves signalled a meaningful

shift in sentiment, as investors seemed to accept that the recovery is genuine and Europe has its debt problems more or

less under control.

At CI, we stuck to our game plan, investing in our portfolio management teams, product lineup, technology, the training

and development of staff, and sales and marketing. You can see our long-term strategy outlined in the next section. The

result of these efforts has been that CI has continued to grow and build on its success, while many competitors have

retrenched and shrunk. And with the recent turn in the markets, CI was well positioned to reap the rewards. In the ﬁ rst

quarter of 2013, CI posted its highest level of ﬁ rst quarter net sales in seven years.

CI’S LONG-TERM STRATEGY

 Product quality and diversity. By providing a broad selection of high-quality products and services to Canadian

investors, we reduce our dependence on any single market sector, product or portfolio manager and ensure we are

well positioned to respond to the changing needs of investors. More importantly, it enhances our relationships with

advisors by allowing them to meet their clients’ needs through a single supplier.

 Talented and experienced investment managers. CI has signiﬁ cant assets under management, and we use this size

and scale to attract and retain the best investment managers in the industry. We select portfolio managers based on

a reputation for skilled investment management and their long-term track records.

 Operational and performance excellence. This includes the prudent and efﬁ cient management of our funds and our

company, the development of high-quality products and a well-known brand.

 Superior service. By exceeding the service expectations of our investors and our multiple distribution networks, we aim

to solidify these relationships and maintain a reputation for sound management.

 Skill and knowledge. CI’s managers and employees possess the specialized knowledge and experience to anticipate

client needs, develop appropriate products and market those products effectively. CI provides training programs to

ensure that the expertise of its employees and advisors remains at a high level.

FINANCIAL RESULTS

Robust asset growth

Assets under management were $75.7 billion at December 31, 2012, a robust increase of 9% from $69.6 billion a year earlier.

This was a month-end record for CI and compares to the increase of 7.2% for the S&P/TSX Composite Index. Total assets,

which include assets under administration, were $98.9 billion at year-end, which is also a gain of 9%. With the strong

performance of our funds early this year, assets under management grew another 6% to $80.5 billion at March 31, 2013, and

total assets reached $104.7 billion.

Average assets under management also reached a record level of $72.6 billion in 2012, though the year-over-year gain was

1%. This reﬂ ects the pattern of market volatility throughout 2012, as the growth in our assets was not achieved in a steady,

upwards progression.

Reﬂ ecting the change in average assets, revenues for the year were ﬂ at, at $1.5 billion. Net income was $352.2 million in

2012, down 7% from $376.9 million in the prior year. Earnings per share were down 5% to $1.24 from $1.31 in 2011. However,

there were two items that affected this comparison: CI received an insurance settlement of $3.5 million in 2011, and there

was an $18 million non-cash tax adjustment in 2012, resulting from an increase in future corporate income taxes imposed by

the Ontario government. Adjusting for those two items means that the decline in net income was less than 1%. In looking

at pre-tax operating earnings per share, which is designed to show CI’s underlying proﬁ tability before taxes and other

items, we see that this measure was $2.26 in 2012 and $2.28 in 2011 – again, a change of less than 1%.

One of the themes in our industry in recent years has been the dominance of income funds in the sales charts as investors

have continued to shun equity funds since the severe bear market of 2008-09. Statistics provided by research ﬁ rm Investor

Economics Inc. indicate that net sales of funds classiﬁ ed as ﬁ xed-income and income balanced accounted for 137% of

industry net sales in 2012 (excluding money market funds).

CI is well represented in the income segment with a number of funds with good performance and sales. However, income

funds have lower management fees than balanced or equity funds. Our institutional products, which are becoming an

increasingly important part of our business, also have lower management fees than most retail funds. What this means for

our results is that funds with lower fees are becoming a larger part of our overall asset mix.

A high level of efﬁ ciency

CI has been able to offset this trend and maintain its proﬁ tability through the strict control of expenses. Selling, general

and administrative expenses expressed as percentage of average assets under management declined 3% to 39 basis points

in 2012 from 40 basis points in 2011. We are proud of this achievement by our staff, especially given that it occurred while

assets under management grew by 9% and we increased our expenditure in key areas of our operations, including portfolio

management and sales and marketing.

Free cash ﬂ ow amounted to $423.9 million in 2012 and it was used to strengthen the ﬁ nancial position of the company

by paying down debt and to return cash to you, our shareholders, through share repurchases and dividends.

During the year, CI’s debt, net of cash and marketable securities not needed for regulatory capital, was reduced by $204.2

million to $526.5 million, which included the repayment of $250 million in debentures that matured in December 2012,

partially offset by an increase in our credit facility. This level of debt is quite manageable for CI, leaving us with the capacity

to ﬁ nance acquisitions or other strategic opportunities. It represents a ratio of net debt to EBITDA (earnings before interest,

taxes, depreciation and amortization) of 0.7:1 – a decrease from 1.1:1 a year earlier.

Creating wealth for shareholders

In 2012, we repurchased 1.4 million shares at a cost of $30.5 million, and paid dividends of $269.2 million. The dividend

rate was raised to $0.08 per month per share from $0.075 during the year, with a further increase to $0.085 effective

March 2013.

CI has been consistent in boosting its dividend as our business has grown. Our annual dividend payment has increased

from $0.57 per share in 2009, when CI converted back to a corporation from an income trust, to its current rate of $1.02

per share – an increase of 79%. At the same time, we have been prudent in ensuring that the dividend is supported by our

cash ﬂ ow. As a percentage of free cash ﬂ ow, our dividend payout ratio in 2012 was 63%, compared to 59% in the prior year.

This is driven by our long-term commitment to return cash not required to ﬁ nance the company’s operations and growth

to our shareholders, and we believe that our record in this is matched by few companies. Since our $25 million initial public

offering in 1994, CI has returned $4.2 billion to shareholders, consisting of $3.0 billion in dividends and distributions and $1.2

billion in share repurchases (as of February 28, 2013).

In 2012, CI’s share price responded to the improving ﬁ nancial markets and our asset growth, appreciating to $24.93 from

$21.10 over the 12-month period. The return including dividends during the year was 23.3%. With rising markets in early

2013, CI’s share price appreciated a further 13.7% to $28.10, and our market capitalization reached $8.0 billion as of March 31.

We are especially proud of CI’s long-term return. From the June 1994 IPO to the end of March 2013, CI has returned 3,454%,

versus 366% for the S&P/TSX Composite Index and 1,135% for the ﬁ nancial services sub-index. This equates to a compound

annual growth rate of 20.9%, making CI one of the Top 5 performing stocks on the index over that period.

OPERATING RESULTS

Net sales increase 200%

CI had impressive sales in 2012, reaching $10.6 billion in gross sales – the ﬁ rst time we exceeded $10 billion since 2008 – and

$973 million in net sales. This represents increases of 16.1% and 201%, respectively, over the year before. Industry net sales

as reported by the Investment Funds Institute of Canada rose 43% to $30.4 billion.

Approximately three-quarters of our net sales for the year were posted in the fourth quarter, accompanying the

improvement in investor conﬁ dence and the turnaround in the markets. As we said at the start of this letter, CI is well

positioned to beneﬁ t from the change in sentiment given the performance of our portfolio managers and the quality and

breadth of our product lineup.

The sources of our sales were quite diversiﬁ ed, with both the institutional and retail divisions contributing. On the retail

side, our key distribution partners all contributed to our tally of net sales. (See below for a more detailed discussion of our

distribution strategy.)

When we look at our sales by product, there are a few observations we would like to share. By asset class, income-related

funds continued to dominate our sales. There are signs of a growing interest in equity funds, though this comes after stocks

have already experienced a four-year bull market. (The S&P 500 Index, for example, gained 133% from its March 2009 low

to the end of March 2013.) By product platform, segregated funds, which combine mutual funds with insurance-based

guarantees, continue to provide good gross sales but remain in net redemptions. Though these funds provide unique

beneﬁ ts, their appeal has been diminished as insurance companies have been forced to reduce beneﬁ ts and increase prices

to reﬂ ect the increased costs of providing the guarantees. In addition, many policies within our older segregated fund

families continue to mature.

Meanwhile, our managed solutions are attracting strong ﬂ ows. These include CI Private Investment Management, a program

aimed at higher net worth investors, and our portfolio solutions, which include Portfolio Select Series, the award-winning

Portfolio Series and, in the Assante channel, Evolution Private Managed Accounts. The shift to portfolio solutions, also

known as wrap or fund-of-funds products, has been a notable industry phenomenon. According to Investor Economics,

fund wraps have experienced a compound annual growth rate in assets of 9.0% since 2007, versus 1.1% for stand-alone

mutual funds. As we often say, a portfolio program is only as good as its underlying funds and so CI’s products in this

category stand out for the quality of performance and portfolio management. CI Investment Consulting, which oversees

our managed solutions, also adds signiﬁ cant value through asset allocation, risk management and currency management.

The sales momentum of the fourth quarter has accelerated in 2013, with CI posting excellent sales and the best ﬁ rst

quarter for net sales in seven years.

Outstanding performance

As we noted earlier, the solid performance of our funds is a crucial factor in our sales and CI has provided consistent,

above-average returns. At December 31, 2012, 60% of our long-term assets under management were ﬁ rst or second quartile

over one year and 81% were in the top two quartiles over 10 years. This strength is seen across our portfolio management

lineup, from teams such as Signature Global Advisors, Cambridge Advisors, Harbour Advisors and Black Creek Investment

Management. Notable highlights in 2012 include Cambridge Canadian Growth Companies Fund and Cambridge Pure

Canadian Equity Fund, which were up 40.5% and 34.3%, respectively, and Black Creek International Equity Fund, which

gained 30.5% (all Class A versions).

CI’s performance continues to be recognized by industry awards. CI was the recipient of two 2012 Morningstar Canadian

Investment Awards, with Portfolio Series winning Best Fund of Funds for the second consecutive year and Signature High

Income Fund winning its fourth trophy. CI and its portfolio managers have taken home 33 Morningstar Canadian Investment

Awards over the past 10 years. CI funds also earned eight Lipper Fund Awards in 2012 and another seven in 2013. CI has

received 46 Lipper Fund Awards, which recognize funds that have excelled in delivering consistently strong risk-adjusted

performance relative to peers, since the start of the program in Canada in 2007.

In addition, CI Investments was one of the three top ﬁ rms in the 2012 Brendan Wood International Canadian investment

rankings, with seven of our professionals being named “TopGun Investment Minds.” TopGun status recognizes investment

professionals “who on a competitive basis ranked highest for investment wisdom and professionalism.”

Exceptional portfolio management

In conjunction with providing a wide selection of product platforms and fund mandates, CI follows a strategy of providing

a broad choice of portfolio management teams offering a variety of investment approaches and specialties. CI has

relationships with 18 portfolio management teams, of which three are in-house – Signature, Cambridge and Harbour – and

the remainder are sub-advisors. CI holds minority interests in three – Altrinsic Global Advisors of Greenwich, Connecticut,

and Toronto-based alternative asset managers Red Sky Capital Management, which focuses on North American equities,

and Lawrence Park Capital Partners, which boasts a unique approach to ﬁ xed-income investing. CI Investment Consulting,

an in-house group of analysts, monitors the portfolio management teams, and oversees our managed solutions.

Over the long-term, our three in-house teams have performed well and their share of our overall assets under management

has increased. Today, their share stands at about 75% of total. We continue to invest in building the expertise of our in-

house teams, and the example of Cambridge Advisors illustrates the success of our approach. Cambridge was founded

in January 2008 under the direction of veteran portfolio manager Alan Radlo and has ofﬁ ces in Boston and Toronto.

Mr. Radlo was joined by senior Portfolio Managers Robert Swanson and Brandon Snow in 2011. In just ﬁ ve years, the team

has established an excellent track record of performance and attracted over $6 billion in assets. The potential for growth

in the Cambridge family remains outstanding, in both the retail and institutional channels.

Our stakes in Red Sky and Lawrence Park were purchased in 2010 and March 2012, respectively, as part of our efforts

to diversify our sources of growth. CI provides administrative services for each ﬁ rm’s hedge fund and our backing has

assisted them in raising assets. We have continued to develop our relationships with them by retaining each ﬁ rm to manage

a portion of the portfolio of an existing CI fund. In addition, we launched Red Sky Canadian Equity Corporate Class to

provide exclusive exposure to the Red Sky team. We expect to launch a dedicated Lawrence Park income fund later

this year.

CI’s portfolio management strategy not only allows for diversity and fosters performance, but also offers a deep roster of

talent to launch new products and provide continuity of management. For example, in 2012, our sub-advisory relationship

with Barometer Capital ended, and the portfolios they managed were switched to Cambridge Advisors in a seamless

transfer of responsibilities.

Quality and choice

CI continually reviews its product lineup to ensure it remains relevant to the marketplace and meets the needs of

Canadian investors. In 2012, our new retail products included:

 Cambridge Income Fund, the ﬁ rst income fund managed by the Cambridge team. It has attracted over $580 million in

assets in just over a year.

 Signature High Yield Bond Fund, which offers dedicated exposure to this asset class.
 Signature Global Dividend Fund, which provides conservative exposure to high-quality dividend-paying global companies

and which we believe is especially timely today, as investors become more open to increasing their investments in

equities.

 Red Sky Canadian Equity Corporate Class, a North American equity fund.
 SunWise Essential Series 2, a segregated fund program offered in partnership with Sun Life Financial. This program,

launched to replace SunWise Essential Series, which was closed to new investors, maintains CI and Sun Life’s presence

in this market.

We also made a signiﬁ cant change to our fund lineup by merging the Castlerock-branded funds into the CI lineup. When

we purchased Hartford Investments Canada Corp. in December 2010, we were able to integrate its corporate operations

immediately, but were not in a position to integrate the funds, which were being administered by a third-party service

provider. We created the Castlerock brand and operated the funds as a separate division of CI.

In mid-2012, we moved the funds to the CI administrative platform, which allowed us to reduce duplication in our lineup

by merging 18 Castlerock and CI funds into other CI funds, and to replace the variable operating expenses of the former

Castlerock funds with a lower ﬁ xed administration fee – beneﬁ ting the investors in those funds. The funds were also

renamed and we are no longer using the Castlerock brand.

This was the ﬁ nal step in integrating this very successful acquisition, which though small relative to CI’s assets, was beneﬁ cial

in growing our assets and developing and strengthening valuable relationships in portfolio management and distribution.

Building strong partnerships

CI has been successful over the past 10 to 15 years in developing multiple channels of distribution for its funds and its

investment management expertise. This strategy has been an important driver of CI’s growth and differentiates us from

other independent fund companies.

Today, our distribution strategy has three central pillars: building the Assante dealership into the premier wealth planning

organization in Canada; growing our retail investment fund business through an intense focus on selected distribution

partners; and expanding our presence in the institutional market through CI Institutional Asset Management.

Assante

Assante continued to grow through 2012, building upon its status as one of Canada’s pre-eminent ﬁ nancial advisory ﬁ rms.

Assets at Assante and Stonegate Private Counsel increased 8.0% over the year to $24.3 billion, reﬂ ecting the improving

performance of ﬁ nancial markets and increasing levels of investment from our clients. Assante’s advisors maintain a focus

on the conservative management of the ﬁ nancial affairs of Canadian families. Assante continues to attract new clients

and additional assets from existing clients as Canadians continue to seek out holistic ﬁ nancial advice. Assante clients were

well served through the volatile environment of the past few years by our emphasis on investing discipline and patience.

Our advisors provide diversiﬁ ed portfolio solutions, backed by the expertise of leading money managers, including the

portfolio management teams of CI Investments. Strong ﬁ nancial markets and increasing sales through the ﬁ rst three

months of this year increased assets to $25.3 billion as at March 31, 2013.

Assante sets itself apart from its competitors by providing extensive resources related to meeting the wealth management

needs of its clients. Assante’s commitment to an integrated approach to wealth management that incorporates all aspects

of managing a client’s ﬁ nances – risk management, estate planning and tax planning, in addition to sound investment

management – is demonstrated through its programs and services. Assante assists its advisors in providing this advanced

level of service through a large in-house staff that includes tax, insurance, estate planning and other experts. In addition,

Assante has launched a practice management initiative providing its clients with clear roadmaps for achieving their wealth

management objectives. An extension of this program is ongoing professional development for Assante advisors, both new

and experienced, in areas such as compliance and advanced ﬁ nancial planning topics.

Assante continues a comprehensive communications program for advisors and clients that provides timely insights from

portfolio managers on market developments and the positioning of their mandates, as well as relevant information on

issues such as income, estate and succession planning. Through initiatives such as the Wealth Matters series, Assante

continues to demonstrate its leadership and a focus on delivering valued advice to Canadians.

Assante’s recruiting efforts consist of a two-pronged focus on attracting experienced advisors who embrace its philosophy

of wealth management, as well as younger advisors who will provide ongoing relationship continuity for clients as part of

existing advisory teams. Assante continued to add new advisors in its network in 2012.

Sound advice coupled with ﬁ nancial stability and operating efﬁ ciency is critical in fostering trusting relationships with

clients in the continued uncertainty of today’s environment. Assante’s competitive advantages include the security of CI’s

ﬁ nancial strength, the beneﬁ ts of CI’s experience and support in operations, technology, client services and sales, as well as

its portfolio management expertise and products. With this solid foundation, Assante is pursuing a growth strategy based

on continuing recruitment and fostering the growth of our advisors’ practices through the provision of wealth planning

expertise, enhanced systems support and sophisticated portfolio solutions.

Distribution Partners

In distributing its retail funds, CI maintains solid relationships with ﬁ nancial advisors at numerous ﬁ rms across Canada.

However, our size and ﬁ nancial resources enable us to provide additional sales support and service to certain preferred

partners: Assante, Sun Life advisors and Edward Jones. Our preferred partners continue to make signiﬁ cant contributions

to our sales and growth. Our goal is to strengthen our existing relationships and extend this model into new channels.

CIIAM

CI Institutional Asset Management (CIIAM) experienced 12% growth during the year due to strong net sales and portfolio

returns, and ended the year with $11.5 billion in assets under management. CIIAM operates in two general institutional

markets: Alliance, which typically involves sub-advising mandates or participating in fund-of-fund programs at other

ﬁ nancial institutions, and the more traditional area of pensions, foundations and endowments. The Alliance part of

our operations was awarded two sizable new mandates in 2012. Our pensions and endowments business experienced

another excellent year of client growth with six new clients, bringing the total to 20 new clients won in the past two years

in this segment.

As part of its growth strategy, CIIAM has boosted our commitment to a true multi-manager, multi-product institutional

offering with a core Canadian equity fund, a global equity mandate and a series of target date funds joining our balanced

mandate on our product shelf. The target date funds, the CI LifeCycle Portfolios, which were launched in 2012, are important

solutions for deﬁ ned contribution pension plans as well as other types of employer-sponsored group savings plans.

Driving growth through sales and marketing

CI has successfully established enduring relationships with the thousands of advisors who sell our funds. This is a credit

to our staff in our administration, client services and sales and marketing departments who provide crucial day-to-day

support to advisors. However, our industry has become increasingly competitive and we are not taking advisors and

investors for granted.

Sales and marketing is one area where we have increased our commitment to providing superior support and service.

We have responded with initiatives that build awareness of the CI brand, and with a signiﬁ cant expansion of events and

communication efforts that deepen our connections to our clients. In 2012, these initiatives included:

 A national advertising campaign for CI Investments with commercials airing on television, radio and websites during the

critical RRSP season. The commercials emphasized CI’s attributes of size, experience, expertise, and a strong product

lineup and ended with the message: “CI – Canada’s Investment Company.” With the success of this initiative, we

instituted a similar campaign with even broader reach in early 2013.

 Our second annual Leadership Forum, a three-day conference in Las Vegas that was attended by approximately

800 advisors. Our portfolio managers and CI employees provided extensive information about the markets and our

investment products. We believe that the Leadership Forum has become one of the most highly regarded educational

events in our industry and the 2013 edition is scheduled for October in Los Angeles.

 Three national roadshows, in which portfolio management teams presented to advisors in cities from coast to coast.
 Two digital roadshows, in which our portfolio managers participated in a full afternoon of webcast presentations.
 The launch of the Monthly Review, a newsletter for advisors that contains information about our funds in an eye-

catching newspaper format.

 Expanded communications between our portfolio managers and advisors through online platforms such as podcasts,

videocast and online presentations. And, in February 2013, Cambridge Advisors started CI’s ﬁ rst portfolio managers’ blog.

These efforts complement our more traditional written commentaries and in-person events such as dealer branch meetings.
 The hiring of a highly qualiﬁ ed wealth management expert to provide tax, estate planning and other wealth planning

information to advisors.

OUTLOOK

In a recent report on the state of the investment fund industry, Investor Economics noted that fewer than half of the

companies in our industry reported positive net inﬂ ows in 2012. Notably, this occurred in a year when global equity

markets experienced double-digit returns and the Canadian fund industry as a whole reported approximately $30 billion

in net sales. In fact, the research ﬁ rm says, the percentage of companies in net redemptions increased to 54% from 38%

over the past two years.

Clearly, the divisions in our industry are growing ever larger as sales are increasingly concentrated with a smaller number

of ﬁ rms. CI has anticipated this and other trends highlighted by the Investor Economics report for over a decade and our

strategic direction has ensured that CI remains an industry leader. As we described in this letter, we continue to build on

our competitive advantages, which include:

 An exceptional portfolio management lineup
 Outstanding fund performance
 Economies of scale
 Financial strength
 Extensive and experienced sales and marketing operations
 Strong and diverse distribution relationships
 Increasing brand awareness
 An entrepreneurial corporate culture.

Our exceptional sales and asset growth in 2012 and the ﬁ rst three months of 2013 is a testament to the validity of our

long-term strategy and the strength of our position within the industry. CI has never been better equipped to compete.

We are operating at a high level across all aspects of our business and providing incredible value to our clients. CI remains

Canada’s premier independent wealth management company, and we see many opportunities for continued growth at

your company.

In closing, we thank our employees and portfolio managers for their dedication, and our fund investors, advisors and our

shareholders for their support.

Sincerely,

William T. Holland

Chairman

MARCH 31, 2013

Stephen A. MacPhail

President and Chief Executive Ofﬁ cer

Ten-Year Historical Financial Highlights
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

( from continuing operations)

Assets under management, end of year
Assets under administration
Total assets

Net sales of funds

Management fees
Other income
Total revenues

Selling, general and administrative
Trailer fees
Other expenses
Total expenses

Income taxes
Net income
EBITDA*

Earnings per share
EBITDA* per share
Dividends per share

2012

75,723
23,199
98,922

Years Ended Dec. 31

2011

2010

69,558
21,544
91,102

72,825
22,497
95,322

2009

64,226
21,489
85,715

973

323

1,059

1,451

1,277.7
180.1
1,457.8

286.0
374.0
294.0
954.0

151.6
352.2
703.6

1.24
2.48
0.96

1,302.8
193.5
1,496.3

1,193.0
186.7
1,379.7

1,041.5
177.0
1,218.5

290.8
379.5
304.9
975.2

144.2
376.9
726.2

1.31
2.53
0.89

263.6
346.2
295.4
905.2

146.0
328.6
669.7

1.14
2.32
0.77

278.9
299.7
298.4
877.0

45.3
296.2
539.3

1.01
1.84
0.63

Shareholders’ equity, end of year
Shares outstanding, end of year

1,676.0
282,914,642

1,620.2
283,567,039

1,566.1
287,434,257

1,610.9
291,821,114

*EBITDA (earnings before interest, taxes, depreciation and amortization) is not a standardized earnings measure prescribed by IFRS;
however, management believes that most of its shareholders, creditors, other stakeholders and investment analysts prefer to include
the use of this performance measure in analyzing CI’s results. CI’s method of calculating this measure may not be comparable to similar
measures presented by other companies.

TOTAL ASSETS ($ BILLIONS)
100

TOTAL REVENUES ($ MILLIONS)
2000

98.9

95.3

91.1

90.1 92.8

85.7

71.3

81.5

72.8

63.6

28.8

1,323.4

1,195.1

1,503.0

1,366.2

1,379.7

1,218.5

1,496.3

1,457.8

954.5

805.0

1500

1000

668.4

500

’03

’04
’05
May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

’03

’04
’05
May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

Years Ended Dec. 31
2007
2008

Seven Months Ended
Dec. 31, 2006

Years Ended May 31

2006

2005

2004

2003

52,801
18,449
71,250

67,171
25,657
92,828

62,737
27,319
90,056

56,905
24,563
81,468

49,055
23,751
72,806

44,223
19,349
63,572

28,773
-
28,773

1,740

1,898

437

3,111

1,717

898

(596)

1,163.8
202.4
1,366.2

1,292.7
210.3
1,503.0

256.4
336.1
340.0
932.5

(17.5)
451.2
638.6

1.62
2.29
1.74

291.1
369.1
291.7
951.9

(54.4)
605.5
724.3

2.15
2.57
2.25

693.8
111.2
805.0

147.8
193.3
140.3
481.4

(31.1)
354.7
403.5

1.25
1.42
1.155

1,110.0
213.4
1,323.4

994.6
200.5
1,195.1

353.6
291.0
204.2
848.8

165.6
309.0
577.4

1.08
2.02
0.70

328.1
250.7
168.3
747.1

163.2
284.7
529.5

0.97
1.81
0.675

820.7
133.8
954.5

256.8
197.8
108.1
562.7

170.7
221.0
442.2

0.82
1.65
0.405

595.8
72.6
668.4

203.3
147.4
197.8
548.5

49.0
71.0
297.4

0.32
1.32
0.29

1,601.7
292,492,805

1,450.7
281,514,003

1,371.1
280,132,687

1,545.0
285,680,519

1,472.8
286,643,091

1,533.9
295,199,027

632.7
235,525,648

EARNINGS PER SHARE ($)
2.50

EBITDA* PER SHARE ($)
3.00

2.15

1.62

1.25

1.08

0.97

0.82

1.31

1.24

1.14

1.01

2.00

1.50

1.00

0.50

0.32

2.50

2.00

1.50

1.00

0.50

2.57

2.29

2.53

2.48

2.32

2.02

1.81

1.84

1.65

1.32

1.42

’03

’04
’05
May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

’03

’04
’05
May 31

’06

’06†

’07

’08

’09
Dec. 31

’10

’11

’12

† Dec. 2006, seven month period.

Subsidiary Proﬁ les

CI INVESTMENTS INC.

CI Investments is one of Canada’s largest investment management companies, with approximately $80 billion in assets

under management (at March 31, 2013) on behalf of two million Canadians. We are known for our comprehensive and high-

quality selection of investment products and services, operational excellence and efﬁ ciency, and a broad lineup of leading

portfolio management teams. CI Investments has demonstrated a record of innovation and an ability to adapt to meet the

changing demands of the marketplace and its clients.

We partner with independent ﬁ nancial advisors and third-party institutions in the distribution of our products and services,

which include mutual funds, segregated funds, managed solutions, structured products and alternative investments. Our

brands include CI, Harbour, Signature, Synergy, Cambridge, Black Creek, Red Sky, Portfolio Series, Portfolio Select Series,

CI Private Investment Management, and SunWise Essential Series 2. In addition, we manage portfolio solutions under the

United Financial brand, which are available through advisors with Assante Wealth Management. We service the institutional

marketplace through a dedicated division, CI Institutional Asset Management.

CI’s strength is founded on the expertise and experience of its portfolio managers. Our managers, a mix of in-house teams

and sub-advisors, represent the full spectrum of investment disciplines, from value to growth. Our in-house investment

managers include: Signature Global Advisors, led by Eric Bushell; Harbour Advisors, led by Gerry Coleman and Stephen

Jenkins; and Cambridge Advisors, led by Alan Radlo. CI and its managers have been recognized through 33 Morningstar

Canadian Investment Awards over the past 10 years, including the prestigious Analysts’ Choice Investment Fund Company

of the Year in 2006, 2007 and 2009, as well as Morningstar Fund Manager of the Decade in 2010 and Morningstar Fund

Manager of the Year in 2009 for Mr. Bushell. Mr. Coleman is a two-time Fund Manager of the Year, receiving the award

in 2001 and 2008. CI has also been the recipient of 46 Lipper Fund Awards, which recognize funds that have excelled in

delivering consistently strong risk-adjusted performance relative to peers.

ASSANTE WEALTH MANAGEMENT (CANADA) LIMITED

Assante Wealth Management is a leading provider of fully integrated wealth management solutions for afﬂ uent Canadians.

With 750 advisors across Canada, our independent advisory network is one of the largest in the country. We serve over

300,000 clients nationwide, administering $24 billion in assets (at March 31, 2013) on their behalf.

The success of Assante is closely linked to our advisors and the strong partnership we have developed with them. Backed

by a wealth of resources, including investment analysts, portfolio managers, tax lawyers, accountants, estate planning

and insurance specialists and wealth planners, Assante advisors provide a comprehensive and integrated approach to

wealth management.

We also support our advisors by providing an industry-leading suite of products and solutions. This includes the United

Financial brand of solutions, Evolution Private Managed Accounts and Optima Strategy, which are managed by CI Investments

Inc. and are available exclusively through Assante advisors. For high net worth clients with more complex wealth planning

needs, Assante offers the Private Client Managed Portfolios through the United Financial division of CI Private Counsel LP.

Our services are offered through Assante Capital Management, an investment dealer, and Assante Financial Management,

a mutual fund dealer, which together operate under the brand name Assante Wealth Management. Stonegate Private

Counsel, a division of CI Private Counsel LP, is a group of experienced professionals who provide wealth planning and inter-

generational ﬁ nancial services to high net worth individuals and families.

Management’s
Discussion and Analysis

December 31, 2012

CI Financial Corp.

This Management’s Discussion and Analysis (“MD&A”) dated February 14, 2013 presents an analysis of the ﬁ nancial position

of CI Financial Corp. and its subsidiaries (“CI”) as at December 31, 2012, compared with December 31, 2011, and the results

of operations for the year ended and quarter ended December 31, 2012, compared with the year ended and quarter ended

December 31, 2011 and the quarter ended September 30, 2012.

CI’s consolidated ﬁ nancial statements have been prepared in accordance with International Financial Reporting Standards

(“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Amounts are expressed in Canadian dollars. The

principal subsidiaries referenced herein include CI Investments Inc. (“CI Investments”) and Assante Wealth Management

(Canada) Ltd. (“AWM”). The Asset Management segment of the business includes the operating results and ﬁ nancial

position of CI Investments and its subsidiaries, including CI Private Counsel LP (“CIPC”). The Asset Administration segment

includes the operating results and ﬁ nancial position of AWM and its subsidiaries, including Assante Capital Management

Ltd. (“ACM”) and Assante Financial Management Ltd. (“AFM”).

This MD&A contains forward-looking statements concerning anticipated future events, results, circumstances, performance

or expectations with respect to CI and its products and services, including its business operations, strategy and ﬁ nancial

performance and condition. When used in this MD&A, such statements use such words as “may”, “will”, “expect”, “believe”,

and other similar terms. These statements are not historical facts but instead represent management beliefs regarding future

events, many of which, by their nature are inherently uncertain and beyond management control. Although management

believes that the expectations reﬂ ected in such forward-looking statements are based on reasonable assumptions, such

statements involve risks and uncertainties. Factors that could cause actual results to differ materially from expectations

include, among other things, general economic and market conditions, including interest and foreign exchange rates, global

ﬁ nancial markets, changes in government regulations or in tax laws, industry competition, technological developments

and other factors described under “Risk Factors” or discussed in other materials ﬁ led with applicable securities regulatory

authorities from time to time. The material factors and assumptions applied in reaching the conclusions contained in these

forward-looking statements include that the investment fund industry will remain stable and that interest rates will remain

relatively stable. The reader is cautioned against undue reliance on these forward-looking statements. For a more complete

discussion of the risk factors that may impact actual results, please refer to the “Risk Factors” section of this MD&A and to

the “Risk Factors” section of CI’s Annual Information Form which is available at www.sedar.com.

This MD&A includes several non-IFRS ﬁ nancial measures that do not have any standardized meaning prescribed by IFRS

and may not be comparable to similar measures presented by other companies. However, management believes that most

shareholders, creditors, other stakeholders and investment analysts prefer to include the use of these ﬁ nancial measures

in analyzing CI’s results. These non-IFRS measures and reconciliations to IFRS, where necessary, are shown as highlighted

footnotes to the discussion throughout the document.

TABLE 1: SELECTED ANNUAL INFORMATION

(millions, except per share amounts)

Total revenue

Total expenses

Income before income taxes

Income taxes

Net income

Earnings per share

Diluted earnings per share

Dividends recorded per share

FISCAL YEARS ENDING DECEMBER 31

2012

2011

2010

$1,457.8

$1,496.3

$1,379.7

954.0

$503.8

151.6

$352.2

$1.24

$0.96

975.2

$521.1

144.2

$376.9

$1.31

$0.89

905.1

$474.6

146.0

$328.6

$1.14

$1.13

$0.77

EBITDA (see Table 7)

$703.6

$726.2

$669.7

Total assets

Gross debt

Net debt (gross debt less excess cash)

Average shares outstanding

Shares outstanding

Share price

Market capitalization

$2,971.6

$3,085.0

$3,206.4

$594.4

$526.5

283.4

282.9

$24.93

$7,053.1

$780.4

$730.7

287.0

283.6

$21.10

$5,983.3

$870.4

$789.1

289.1

287.4

$22.50

$6,467.3

TABLE 2: SUMMARY OF QUARTERLY RESULTS

(millions of dollars, except per share amounts)

2012

2011

INCOME STATEMENT DATA

Management fees

Administration fees

Other revenues

Total revenues

325.8

318.8

313.5

319.6

312.1

321.4

337.3

332.0

31.7

13.8

30.1

12.6

31.3

14.0

32.8

13.8

30.6

14.0

31.6

14.4

33.2

15.0

36.8

17.9

371.3

361.5

358.8

366.2

356.7

367.4

385.5

386.7

Selling, general & administrative

Trailer fees

Investment dealer fees

Amortization of deferred sales commissions

Interest expense

Other expenses

Total expenses

73.2

95.8

24.7

40.4

6.2

1.7

69.9

93.5

23.3

40.4

6.3

2.5

70.7

91.6

24.5

41.0

6.1

1.9

72.2

93.0

25.8

41.4

6.3

1.6

70.2

90.8

23.8

40.5

6.8

1.6

72.2

93.7

24.8

41.1

7.0

3.0

75.1

98.3

26.0

41.3

6.7

2.4

73.3

96.6

29.1

41.4

7.0

2.5

242.0

235.9

235.8

240.3

233.7

241.8

249.8

249.9

Income before income taxes

129.3

125.6

123.0

125.9

123.0

125.6

135.7

136.8

Income taxes

Net income

Earnings per share

Diluted earnings per share

34.3

95.0

0.34

34.3

91.3

0.32

51.7

71.3

0.25

31.3

94.6

0.33

35.2

87.8

0.31

34.8

90.8

0.32

0.31

37.4

98.3

36.7

100.1

0.34

0.35

Dividends recorded per share

0.240

0.235

0.225

0.215

BUSINESS OVERVIEW

CI is a diversiﬁ ed wealth management ﬁ rm and one of Canada’s largest independent investment fund companies. The

principal business of CI is the management, marketing, distribution and administration of mutual funds, segregated funds,

structured products and other fee-earning investment products for Canadian investors. They are distributed primarily

through brokers, independent ﬁ nancial planners and insurance advisors, including ACM and AFM ﬁ nancial advisors. CI

operates through two business segments, Asset Management and Asset Administration. The Asset Management segment

provides the majority of CI’s income and derives its revenue principally from the fees earned on the management of

several families of mutual, segregated, pooled and closed-end funds, structured products and discretionary accounts. The

Asset Administration segment derives its revenue principally from commissions and fees earned on the sale of mutual

funds and other ﬁ nancial products and ongoing service to clients.

BUSINESS STRATEGY

CI maximizes shareholder value by increasing and retaining assets under management and assets under administration

on which it earns an acceptable margin. Management believes this can be achieved by focusing on the following factors:

quality and diversity of products offered by CI; experience and depth of investment managers; performance of the funds;

service levels provided to dealers and investors; and the skill and knowledge of its employees.

CI offers investors a wide range of Canadian and international investment products through a network of investment dealers,

mutual fund dealers, and insurance agents, which include advisors with AWM and Sun Life Financial. Several acquisitions of

fund management companies have allowed CI to offer investors what management believes to be the broadest selection of

investment funds in the Canadian mutual fund industry, including the largest lineup of segregated funds.

CI uses three teams of in-house and 15 external investment managers to provide investment advice regarding the portfolios

of the funds. These investment managers typically have long careers in the industry as well as extensive track records with

CI. This lineup of investment managers provides a wide selection of styles and areas of expertise for CI’s funds.

CI selects managers with a reputation for skilled investment management. CI has signiﬁ cantly sized mandates available

to attract the top talent in this ﬁ eld. Many of CI’s investment managers have provided excellent long-term performance

for our largest funds. However, CI can and will make changes to its investment managers when unsatisfactory investment

performance has occurred.

CI is the manager of the funds and provides services that include managing or arranging for the management of investment

portfolios, marketing of the funds, maintaining securityholders’ records and accounts, reporting to the securityholders

and processing transactions relating to securities of the funds. CI has invested in information systems and internal training

of staff to an extent which ensures it provides accurate and timely service to dealers and agents selling CI’s products and

to investors.

Management of CI has the specialized skills and knowledge to focus on several key objectives. These include: meeting the

needs of its clients, developing new products, enhancing investor awareness and increasing market share by marketing to

investment dealers, mutual fund dealers and life insurance agents.

KEY PERFORMANCE DRIVERS

CI’s results are driven primarily by the level of its assets under management, which are in turn driven by the returns earned

by its funds and the net sales of its funds. The margin earned on these assets under management determines, to a large

extent, CI’s proﬁ tability.

The returns of each fund reﬂ ect the returns of equities and bonds or other securities held by the fund. These returns will

reﬂ ect the returns of equity and bond indexes plus the over or under performance of the investment manager of each

fund. In years when markets decline (such as 2008) CI’s assets will decline. Conversely, CI’s assets will appreciate in years

when markets perform well. For a particular period, the average assets under management will drive CI’s results as CI

receives the majority of its fees on a daily basis.

Fund sales and acquisitions also affect CI’s assets under management. While sales results help increase assets under

management, they are also an indicator of the level of demand for CI’s products and our success in delivering attractive

products.

CI uses several performance indicators to assess its results. These are described throughout the results of operations and

the discussion of the two operating segments and include the following: net income, earnings per share, pre-tax operating

earnings, EBITDA, EBITDA margin, and dealer gross margin.

2012 OVERVIEW

CI’s average assets under management for 2012 increased 1% from 2011 as a result of the strong performance of CI’s funds

and $973 million in net sales. However, a greater factor in CI’s performance this year was the continued trend of investor

preference for ﬁ xed income products, which generally carry a lower management fee. As well, a larger proportion of CI’s

assets under management are now institutional mandates, which carry a lower management fee. The resulting change in

asset mix reduced management fee revenues by 2% notwithstanding the increase in average assets under management.

This was mitigated by a similar impact on trailer fee expense, which fell 1% year over year, and management’s efforts

to control spending in which selling, general and administrative (“SG&A”) expenses dropped 2% during the year. However,

pre-tax operating earnings, as set out in Table 6, still declined 2% in 2012 versus 2011.

While markets in 2012 faced challenges, including lingering concerns over the European debt crisis, the slowing Chinese

economy, and the U.S. “ﬁ scal cliff,” volatility eventually subsided and investors responded. Industry gross sales of funds

picked up in 2012 and CI’s gross sales increased 16% year over year and net sales increased 201% year over year.

CI continued to be the third-largest investment fund company in Canada with assets under management of $75.7 billion at

December 31, 2012. CI’s market share is approximately 9%.

According to Morningstar, CI led the entire industry with the most four and ﬁ ve-star rated funds (including multiple

versions) for all of 2012 and has ranked either ﬁ rst or second place for the past 10 years. In addition, CI and its own portfolio

managers have won 47 Canadian Investment Awards since 1998 and 39 Lipper Awards since 2007.

KEY EVENTS

In February, CI announced that it had acquired a signiﬁ cant minority stake in Lawrence Park Capital Partners Ltd., an

alternative asset manager focusing on ﬁ xed-income and credit strategies. This relationship is part of CI’s strategy to seek

selected growth opportunities in the alternative asset management space.

In May, CI held its second annual sales conference, a four-day event attended by over 800 leading investment advisors.

This was an opportunity for advisors to watch presentations and participate in discussions covering economic and ﬁ nancial

issues, and to learn more about CI’s investment products. CI’s sales team, senior management and several portfolio

managers presented their outlooks, opinions and strategies to these key distributors of CI’s funds.

CI introduced several new products during the year as it continued its strategy to provide a broad shelf of products to

its clients and their ﬁ nancial advisors. In January, CI partnered with Sun Life Financial to enhance the SunWise Essential

Series segregated fund program which includes an option to receive guaranteed income for life as early as age 55. CI

Private Investment Management was also added to the program in order to meet the needs of higher net worth investors.

In October, the institutional division of CI Investments announced the offering of CI LifeCycle Portfolios, a multi-asset

class, multi-manager program of seven target date retirement funds that is designed to service pension plan sponsors

and members.

CI continued to expand its in-house portfolio management teams, particularly within the Cambridge team, adding three

new members and the Signature team, adding four new members during the year. This expansion of internal portfolio

management expertise should be viewed in conjunction with the move to reduce the number of external sub-advisory

mandates that have been inherited as part of previous asset management company acquisitions. These changes are made

to improve performance of the funds as well as to reduce SG&A expenses over the long term.

ASSETS AND SALES

Total assets, which include mutual, segregated and hedge funds, separately managed accounts, structured products,

pooled assets and assets under administration were $98.9 billion at December 31, 2012, an increase of 9% from $91.1 billion

at December 31, 2011. As shown in Table 3, these assets consisted of $75.7 billion in assets under management and $23.2

billion in assets under administration at December 31, 2012, which increased 9% and 8%, respectively during the year,

primarily due to market performance.

TABLE 3: TOTAL ASSETS

(in billions)

Dec. 31, 2012

Dec. 31, 2011

% change

As at

Assets under management

Assets under administration*

Total assets under management

$75.7

23.2

$98.9

$69.6

21.5

$91.1

*Includes $10.9 billion and $9.8 billion of managed assets in CI and United funds in 2012 and 2011, respectively.

Assets under management form the majority of CI’s total assets and provide most of its revenue and net income. The

change in assets under management during each of the past two years is detailed in Table 4. Gross sales increased in 2012

as CI won additional institutional mandates and strong fund performance led to higher retail sales.

TABLE 4: CHANGE IN ASSETS UNDER MANAGEMENT

(in billions)

Assets under management at January 1

Gross sales

Redemptions

Net sales

Market performance

2012

2011

$69.6

$72.8

10.6

9.6

1.0

5.1

9.1

8.8

0.3

(3.5)

Assets under management at December 31

$75.7

$69.6

Average assets under management for the year

$72.6

$72.2

Table 5 sets out the levels and changes in CI’s average assets under management and the gross and net sales for the relevant

periods. As most of CI’s revenues and expenses are based on assets throughout the year, average asset levels are critical

to the analysis of CI’s ﬁ nancial results.

TABLE 5: CHANGE IN AVERAGE ASSETS UNDER MANAGEMENT

(in billions)

Quarter ended

Dec. 31, 2012

Sept. 30, 2012

Dec. 31, 2011

Average assets under management for the quarter

$74.323

Change to December 31, 2012

$72.437

2.6%

$69.349

7.2%

Gross sales

Net sales

$3.5

$0.7

$2.4

$0.4

$1.7

($0.4)

The Investment Funds Institute of Canada (IFIC) reported $30.4 billion in industry net sales of mutual funds for the year

ended December 31, 2012, up $9.2 billion from net sales of $21.2 billion in the same period for 2011. Total industry assets as

reported by IFIC at December 31, 2012 of $849.7 billion were up 10% from $769.7 billion at December 31, 2011.

RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2012

For the year ended December 31, 2012, CI reported net income of $352.2 million ($1.24 per share) versus $376.9 million ($1.31

per share) for the year ended December 31, 2011. Included in 2011 was $4.9 million ($3.5 million after-tax) in revenue from an

insurance settlement and 2012 included an $18.8 million non-cash future tax provision. Adjusting for these items, the year-

over-year decline in net income was only $2.4 million, or less than 1%.

CI’s pre-tax operating earnings, as set out in Table 6, adjust for the impact of gains and losses on marketable securities,

performance fees and non-recurring items. Redemption fee revenue and the amortization of deferred sales commissions

and fund contracts are netted out to remove the impact of ﬁ nancing back-end assets under management. Pre-tax operating

earnings were $641.5 million in 2012, a decrease of 2% from 2011, reﬂ ecting the decline in management fee revenue as a

result of the change in asset mix toward ﬁ xed-income products.

In 2012, CI recorded $151.6 million in income tax expense for an effective tax rate of 30.1%. In the second quarter of 2012,

CI recorded a non-cash future income tax provision of $18.8 million. Adjusting for this, CI’s effective tax rate for 2012 was

26.4%, compared to an effective tax rate of 27.7% in 2011. CI’s statutory rate for 2012 was 26.5% versus 28.2% in 2011.

For the year ended December 31, 2012, redemption fee revenue was $27.4 million compared with $28.6 million for the year

ended December 31, 2011. The decrease is a result of a decline in redemptions of deferred load funds that are subject to

redemption fees.

Other income for the year ended December 31, 2012 was $26.7 million compared to $32.6 million in the prior year. The

decline was primarily due to the non-recurring $4.9 million in insurance proceeds received in 2011.

Amortization of deferred sales commissions and fund contracts was $165.4 million in 2012, a decrease from $166.7 million

in 2011. This represents the average amount of deferred sales commissions paid in the last seven years plus a small amount

of accelerated amortization as deferred load units are redeemed ahead of their seven-year scheduled term. The level of

spending on deferred sales commissions has declined from that of the prior year.

Interest expense of $24.9 million was recorded for the year ended December 31, 2012 compared with $27.5 million for the

year ended December 31, 2011. The decrease in interest expense reﬂ ects lower average debt levels during 2012, as discussed

under “Liquidity and Capital Resources.”

Other expenses for the year ended December 31, 2012 were $5.3 million compared to $6.9 million in the prior year. The

decline from the prior year is primarily a result of the elimination of capital taxes payable by CI mid-way through 2011.

As illustrated in Table 7, EBITDA for the year ended December 31, 2012 was $703.6 million ($2.48 per share) compared with

$726.2 million ($2.53 per share) for the year ended December 31, 2011. The 3% decline is consistent with the above discussion

on pre-tax operating earnings. EBITDA as a percentage of total revenues (EBITDA margin) for 2012 was 48.3%, consistent

with that of 2011.

TABLE 6: PRE-TAX OPERATING EARNINGS

CI uses pre-tax operating earnings to assess its underlying proﬁ tability. CI deﬁ nes pre-tax operating earnings as income

before income taxes less redemption fee revenue, non-recurring items, performance fees and investment gains, plus

amortization of deferred sales commissions (DSC) and fund contracts.

(in millions, except per share amounts)

Dec. 31, 2012

Sept. 30, 2012 Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011

Quarter ended Quarter ended Quarter ended

Year ended

Income before income taxes

$129.3

$125.6

$123.0

$503.8

$521.1

Less:

Redemption fees

Non-recurring item(s)

Gain (loss) on marketable securities

Add:

Amortization of DSC and fund contracts

Pre-tax operating earnings

per share

6.1

–

0.1

40.9

$164.0

$0.58

6.5

–

40.9

$160.0

$0.56

6.9

–

(0.1)

41.1

$157.3

$0.55

27.4

–

0.3

165.4

$641.5

$2.26

28.6

4.9

(0.5)

166.7

$654.8

$2.28

QUARTER ENDED DECEMBER 31, 2012

For the quarter ended December 31, 2012, CI reported net income of $95.0 million ($0.34 per share) versus $87.8 million

($0.31 per share) for the quarter ended December 31, 2011 and $91.3 million ($0.32 per share) for the quarter ended

September 30, 2012. Average assets under management for the fourth quarter of 2012 were up 2.6% from the level of

the third quarter and 7.2% from the fourth quarter of 2011.

Pre-tax operating earnings were $164.0 million in the fourth quarter of 2012, an increase of 4% from $157.3 million in the

fourth quarter of 2011 and 2% higher than the $160.0 million in the prior quarter. These increases reﬂ ect the change in

assets under management as well as the change in asset mix, which reduced management fee revenues.

For the fourth quarter of 2012, CI recorded $34.3 million in income tax expense for an effective tax rate of 26.5%,

compared to $35.2 million in the fourth quarter of 2011 for an effective tax rate of 28.6%. The third quarter of 2012

included $34.3 million in income tax expense, for an effective tax rate of 27.3%. The decrease in the year over year

effective tax rates reﬂ ects the decrease in statutory tax rates.

For the quarter ended December 31, 2012, redemption fee revenue was $6.1 million compared with $6.9 million for the

quarter ended December 31, 2011 and $6.5 million from the quarter ended September 30, 2012. The decrease from these

prior periods relates to a decrease in redemptions from deferred load funds.

TABLE 7: EBITDA AND EBITDA MARGIN

CI uses EBITDA (earnings before interest, taxes, depreciation and amortization) to assess its underlying proﬁ tability prior

to the impact of its ﬁ nancing structure, income taxes and the amortization of deferred sales commissions, fund contracts

and capital assets. This also permits comparisons of companies within the industry, before any distortion caused by different

ﬁ nancing methods, levels of taxation and mix of business between front-end and back-end sales commission assets under

management. EBITDA is a measure of operating performance, a facilitator for valuation and a proxy for cash ﬂ ow.

(in millions, except per share amounts)

Dec. 31, 2012

Sept. 30, 2012

Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011

Quarter ended Quarter ended Quarter ended

Year ended

Net income

Add (deduct):

Interest expense

Income tax expense

Amortization of DSC and fund contracts

Amortization of other items

EBITDA

per share

EBITDA margin (as a % of revenue)

$95.0

$91.3

$87.8

$352.2

$376.9

6.2

34.3

40.9

2.4

$178.8

$0.63

48.2%

6.3

34.3

40.9

2.4

$175.2

$0.62

48.5%

6.8

35.2

41.1

2.7

$173.6

$0.61

48.7%

24.9

151.6

165.4

9.5

$703.6

$2.48

48.3%

27.5

144.2

166.7

10.9

$726.2

$2.53

48.5%

Amortization of deferred sales commissions and fund contracts was $40.9 million in the fourth quarter of 2012, a

decrease from $41.1 million in the fourth quarter of 2011 and unchanged from the third quarter of 2012. The trend of lower

amortization expense is consistent with the trend in lower spending on deferred sales commissions in recent years.

Interest expense of $6.2 million was recorded for the quarter ended December 31, 2012 compared with $6.8 million for

the quarter ended December 31, 2011 and $6.3 million for the quarter ended September 30, 2012. As mentioned earlier,

the decrease in interest expense from the prior year period reﬂ ected lower average debt levels, as discussed under

“Liquidity and Capital Resources.”

As illustrated in Table 7, EBITDA for the quarter ended December 31, 2012 was $178.8 million ($0.63 per share) compared

with $173.6 million ($0.61 per share) for the quarter ended December 31, 2011 and $175.2 million ($0.62 per share) for the

quarter ended September 30, 2012. The 3% year-over-year increase in quarterly EBITDA reﬂ ects the increase in average

assets under management offset by the effect of the change in asset mix. EBITDA as a percentage of total revenues

(EBITDA margin) for the fourth quarter of 2012 was 48.2%, down slightly from 48.7% in the last quarter of 2011 and 48.5%

in the prior quarter.

ASSET MANAGEMENT SEGMENT

The Asset Management segment is CI’s principal business segment and includes the operating results and ﬁ nancial

position of CI Investments and CIPC.

TABLE 8: RESULTS OF OPERATIONS – ASSET MANAGEMENT SEGMENT

The following table presents the operating results for the Asset Management segment:

(in millions)

Dec. 31, 2012

Sept. 30, 2012

Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011

Quarter ended Quarter ended Quarter ended

Year ended

Management fees

Other revenue

Total revenue

Selling, general and administrative

Trailer fees

Amortization of deferred sales commissions

and fund contracts

Other expenses

Total expenses

Income before taxes

$325.8

10.1

$335.9

$59.6

99.7

41.6

0.3

$318.8

9.0

$327.8

$57.7

97.4

41.6

1.1

$312.1

10.2

$322.3

$57.3

94.3

41.8

0.8

$201.2

$197.8

$194.2

$1,277.7

$1,302.8

39.0

45.5

$1,316.7

$1,348.3

$233.3

389.1

168.1

2.0

$792.5

$235.9

394.1

169.7

4.1

$803.8

and non-segmented items

$134.7

$130.0

$128.1

$524.2

$544.5

YEAR ENDED DECEMBER 31, 2012

Revenues

Revenues from management fees were $1,278 million for the year ended December 31, 2012, a decrease of 2% from $1,303

million for the year ended December 31, 2011. While average assets under management were up 1% year over year, the

change in asset mix toward ﬁ xed-income products and institutional mandates reduced the average management fee rate

in 2012 to 1.760% from 1.805% in 2011.

For the year ended December 31, 2012, other revenue was $39.0 million versus $45.5 million for the year ended December 31,

2011. The largest component of other revenue is redemption fees. Redemption fees were $27.4 million for 2012 compared

with $28.6 million for 2011. The prior year also included $4.9 million in proceeds from an insurance settlement.

Expenses

SG&A expenses for the Asset Management segment were $233.3 million for the year ended December 31, 2012, a decrease

from $235.9 million for the year ended December 31, 2011. As a percentage of average assets under management, SG&A

expenses were 0.321% in 2012 and 0.327% in 2011, as spending declined 1.1% and average assets were up 0.6%. Although

spending was increased on certain product initiatives and on in-house portfolio management teams, offsetting cost

savings were found in other areas of the business.

Trailer fees were $389.1 million for 2012 compared with $394.1 million for 2011. Net of inter-segment amounts, this expense

was $374.0 million for the year ended December 31, 2012 versus $379.5 million for the year ended December 31, 2011. The

decline in trailer fee expense is a result of the change in asset mix, as lower trailer fees are paid on ﬁ xed-income products

compared to equity products, and institutional funds where trailers are typically not paid.

Amortization of deferred sales commissions and fund contracts was $168.1 million for 2012, down from $169.7 million for

the prior year. This change is consistent with the change in deferred sales commissions paid in recent years and the amount

of accelerated amortization related to redemptions of deferred load funds.

Other expenses were $2.0 million for the year ended December 31, 2012 compared to $4.1 million in the year ended

December 31, 2011. The decline in these expenses is primarily due to the legislated elimination of capital taxes on CI in 2011.

Income before income taxes and interest expense for CI’s principal segment was $524.2 million for 2012, compared

with $544.5 million in 2011. The decrease from the prior year is primarily due to the change in asset mix which reduced

management fee revenue.

QUARTER ENDED DECEMBER 31, 2012

Revenues

Revenues from management fees were $325.8 million for the quarter ended December 31, 2012, an increase of 4% from

$312.1 million for the quarter ended December 31, 2011 and 2% from $318.8 million for the quarter ended September 30,

2012. The changes were mainly attributable to increases in average assets under management, which were up 7.2% and up

2.6% from the quarters ended December 31, 2011 and September 30, 2012, respectively. The average management fee rate

declined from 1.786% in the fourth quarter of 2011 to 1.751% in the third quarter of 2012 and to 1.744% in the fourth quarter

of 2012, again as a result of the change in asset mix.

For the quarter ended December 31, 2012, other revenue was $10.1 million versus $10.2 million and $9.0 million for the

quarters ended December 31, 2011 and September 30, 2012, respectively. The largest component of other revenue is

redemption fees, which were $6.1 million for the quarter ended December 31, 2012 compared with $6.9 million and $6.5

million for the quarters ended December 31, 2011 and September 30, 2012, respectively.

Expenses

SG&A expenses for the Asset Management segment were $59.6 million for the quarter ended December 31, 2012, an increase

from $57.3 million for the fourth quarter in 2011 and from $57.7 million for the quarter ended September 30, 2012. As a

percentage of average assets under management, SG&A expenses were 0.319% for the quarter ended December 31, 2012,

down from 0.328% for the quarter ended December 31, 2011 and up slightly from 0.317% for the quarter ended September

30, 2012. Generally, the decrease in this rate over time results from CI’s ongoing drive to ﬁ nd operating efﬁ ciencies in its

ﬁ xed costs, which account for a large proportion of CI’s total costs. At the same time, in any given quarter, management

may choose to increase or decrease discretionary spending.

Trailer fees were $99.7 million for the quarter ended December 31, 2012 compared with $94.3 million for the quarter ended

December 31, 2011 and $97.4 million for the quarter ended September 30, 2012. Net of inter-segment amounts, this expense

was $95.8 million for the quarter ended December 31, 2012 versus $90.8 million for the fourth quarter of 2011 and $93.5

million for the third quarter of 2012. The increase from the comparable periods is primarily due to the respective increases

in average assets under management, tempered by the changes in asset mix.

Amortization of deferred sales commissions and fund contracts, before intersegment eliminations, was $41.6 million for

the quarter ended December 31, 2012, down from $41.8 million in the same quarter last year and unchanged from the

previous quarter. This decrease is consistent with the decrease in deferred sales commissions paid in the past several years.

Income before income taxes and interest expense for CI’s principal segment was $134.7 million for the quarter ended

December 31, 2012 compared with $128.1 million in the same period in 2011 and $130.0 million in the previous quarter.

Income has generally increased in line with the increase in average assets under management over the comparable periods.

ASSET ADMINISTRATION SEGMENT

The Asset Administration segment includes the operating results and ﬁ nancial position of AWM and its subsidiaries.

TABLE 9: RESULTS OF OPERATIONS – ASSET ADMINISTRATION SEGMENT

The following table presents the operating results for the Asset Administration segment:

(in millions)

Dec. 31, 2012

Sept. 30, 2012

Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011

Quarter ended Quarter ended Quarter ended

Year ended

Administration fees

Other revenue

Total revenue

Selling, general and administrative

Investment dealer fees

Amortization of fund contracts

Other expenses

Total expenses

Income before taxes

$55.2

3.7

$58.9

$13.6

43.6

0.4

0.8

$58.4

$52.6

3.6

$56.2

$12.3

41.3

0.4

0.8

$54.8

$52.5

3.8

$56.3

$12.9

41.5

0.4

0.2

$220.7

15.0

$235.7

$52.7

174.5

1.6

3.2

$226.2

15.6

$241.8

$54.8

179.5

1.5

2.8

$55.0

$232.0

$238.6

and non-segmented items

$0.5

$1.4

$1.3

$3.7

$3.2

YEAR ENDED DECEMBER 31, 2012

Revenues

Administration fees are earned on assets under administration in the AWM business and from the administration of third-

party business. These fees were $220.7 million for the year ended December 31, 2012, a decrease of 2% from $226.2 million for

the same period last year. Net of inter-segment amounts, administration fee revenue was $126.0 million for the year ended

December 31, 2012, down from $132.3 million for the year ended December 31, 2011. The decrease from the prior year is a

result of lower commission revenue earned on the sale of mutual funds and other securities. Administration fees should be

considered in conjunction with investment dealer fees, an expense that represents the payout to ﬁ nancial advisors.

Other revenues earned by the Asset Administration segment are generally derived from non-advisor related activities.

For 2012, other revenues were $15.0 million, decreasing slightly from $15.6 million for 2011.

Expenses

Investment dealer fees represent the payout to advisors on revenues they generate and were $174.5 million for the year

ended December 31, 2012, compared to $179.5 million for the year ended December 31, 2011. The decrease in these fees

relates directly to the decrease in administration fee revenues discussed above.

As detailed in Table 10, dealer gross margin was $46.2 million or 21.0% of administration fee revenue for 2012, compared

to $46.7 million or 20.6% for 2011. The change in gross margin from the prior period relates to the change in average

investment dealer fees paid out to ﬁ nancial advisors on their administration fees. Generally, as an advisor’s assets under

administration and administration fee revenues grow, the payout rates to the respective advisor will correspondingly

increase up to a maximum payout rate.

SG&A expenses for the segment were $52.7 million for the year ended December 31, 2012 compared to $54.8 million in the

year ended December 31, 2011. The level of discretionary spending decreased during 2012 compared to 2011.

The Asset Administration segment had income before income taxes and non-segmented items of $3.7 million for 2012, up

from $3.2 million in 2011. This increase is a result of the decline in SG&A spend and dealer gross margin rose slightly year

over year.

TABLE 10: DEALER GROSS MARGIN

CI monitors its operating proﬁ tability on the revenues earned within its Asset Administration segment by measuring the

dealer gross margin, which is calculated as administration fee revenue less investment dealer fees, divided by administration

fee revenue. CI uses this measure to assess the margin remaining after the payout to advisors.

(in millions)

Dec. 31, 2012

Sept. 30, 2012

Dec. 31, 2011

Dec. 31, 2012

Dec. 31, 2011

Quarter ended Quarter ended Quarter ended

Year ended

Administration fees

Less:

$55.2

$52.6

$52.5

$220.7

$226.2

Investment dealer fees

43.6

41.3

41.5

174.5

179.5

Dealer gross margin

$11.6

21.1%

$11.3

21.4%

$11.0

21.0%

$46.2

21.0%

$46.7

20.6%

QUARTER ENDED DECEMBER 31, 2012

Revenues

Administration fees were $55.2 million for the quarter ended December 31, 2012, an increase of 5% from $52.5 million for the

same period last year and an increase of 5% from the prior quarter. Net of inter-segment amounts, administration fee revenue

was $31.7 million for the quarter ended December 31, 2012, up from $30.6 million for the quarter ended December 31, 2011 and

from $30.1 million in the previous quarter. The increase from the prior year was primarily attributable to an increase in assets

under administration during the fourth quarter of 2012 leading to higher trailer commissions earned.

As mentioned above, other revenues earned by the Asset Administration segment are mainly comprised of non-advisor

related activities. For the quarter ended December 31, 2012, other revenues were $3.7 million, down from $3.8 million for

the fourth quarter of 2011 and up from $3.6 million in the third quarter of 2012.

Expenses

Investment dealer fees were $43.6 million for the quarter ended December 31, 2012, compared to $41.5 million for the

fourth quarter of 2012 and $41.3 million for the quarter ended September 30, 2012.

As detailed in Table 10, dealer gross margin was $11.6 million or 21.1% of administration fee revenue for the quarter ended

December 31, 2012 compared to $11.0 million or 21.0% for the fourth quarter of 2011 and $11.3 million or 21.4% for the

previous quarter. The changes in gross margin from the comparable quarters correspond to the level of payout to ﬁ nancial

advisors on their 12-month rolling administration fee revenues.

SG&A expenses for the segment were $13.6 million for the quarter ended December 31, 2012 compared to $12.9 million in

the fourth quarter of 2011 and $12.3 million in the third quarter of 2012, as the spending on marketing initiatives increased

during the quarter.

The Asset Administration segment had income before income taxes and non-segmented items of $0.5 million for the

quarter ended December 31, 2012, down from $1.3 million for the fourth quarter of 2011 and from $1.4 million for the prior

quarter. The decline in the fourth quarter of 2012 was due to the increase in SG&A expenses exceeding the increase in

gross margin.

LIQUIDITY AND CAPITAL RESOURCES

As detailed in Table 11, CI generated $548.1 million of operating cash ﬂ ow in the year ended December 31, 2012 down

$26.6 million from $574.7 million in 2011. CI measures its operating cash ﬂ ow before the change in working capital and the

actual cash amount paid for interest and income taxes, as these items often distort the cash ﬂ ow generated during the

period. Working capital is affected by seasonality, interest is primarily paid semi-annually, and tax instalments paid may

differ materially from the cash tax accrual. CI’s main uses of capital are the ﬁ nancing of deferred sales commissions, the

payment of dividends on its shares, the funding of capital expenditures and the repurchase of shares through its normal

course issuer bid program. At current levels of cash ﬂ ow and anticipated dividend payout rates, CI produces sufﬁ cient

cash to meet its obligations and pay down debt.

TABLE 11: SUMMARY OF CASH FLOWS

(in millions)

Operating Cash Flow

Less:

Deferred sales commission paid

Marketable securities, net

Capital expenditures

Share repurchases

Dividends paid

Debt repaid

Working capital and other

Net change in cash

Cash at January 1

Cash at December 31

Year ended

Dec. 31, 2012

Dec. 31, 2011

$548.1

$574.7

124.2

21.5

5.6

30.5

269.2

187.0

8.6

646.6

(98.5)

122.6

$24.1

141.2

11.6

21.5

95.2

254.2

90.9

54.0

668.6

(93.9)

216.5

$122.6

CI paid sales commissions of $124.2 million in 2012 compared to $141.2 million in 2011. The decrease in sales commissions

from the prior year is consistent with the trend to lower sales of deferred load funds.

CI invested $26.8 million in marketable securities in 2012. During the same period, CI received proceeds of $5.3 million

from the disposition of marketable securities, resulting in a gain of $0.3 million. The fair value of marketable securities

at December 31, 2012 was $66.2 million. Marketable securities are comprised of seed capital investments in its funds and

strategic investments.

During the year ended December 31, 2012, CI incurred capital expenditures of $5.6 million, primarily relating to leasehold

improvements and investments in technology.

During the year, CI repurchased 1.4 million shares at a cost of $30.5 million under its normal course issuer bid. CI declared

dividends of $271.9 million ($269.2 million paid), which was less than net income for the year by $80.3 million. At year end,

CI’s dividend payments were $0.08 per share per month, or approximately $272 million per ﬁ scal year.

The statement of ﬁ nancial position for CI at December 31, 2012 reﬂ ects total assets of $2.972 billion, a decrease of $113.0

million from $3.085 billion at December 31, 2011. This change can be attributed to a decrease in current assets of $71.2

million and a decrease in long-term assets of $42.2 million.

CI’s cash and cash equivalents decreased by $98.4 million in 2012 primarily due to the repayment of a debenture that

matured on December 17, 2012. Marketable securities increased by $24.1 million due to a $20.0 million investment along

with some smaller investments. Accounts receivable and prepaid expenses remain relatively unchanged at $70.6 million

compared to $70.2 million.

Deferred sales commissions decreased $38.9 million to $452.3 million as a result of the $163.1 million in amortization

expense offset by the $124.2 million in sales commissions paid. Capital assets decreased $2.7 million during the year as a

result of $8.3 million amortized during the year offset by $5.6 million in capital additions.

Total liabilities decreased by $169.2 million during 2012 to $1.296 billion at December 31, 2012. The primary contributors to

this change were a $186.0 million decrease in long-term debt offset by a $17.8 million increase in future income taxes. The

increase in future income taxes relates to the Ontario government’s decision to rescind previously legislated reductions

in corporate tax rates.

On December 17, 2012, CI repaid $250 million of debentures that matured. At December 31, 2012, CI had $500 million in

outstanding debentures at an average interest rate of 3.51% with a carrying value of $498.4 million. In addition, CI had

$96.0 million drawn against its credit facility at an average rate of 1.83%. At December 31, 2011, CI had $780.4 million of

debt outstanding at an average rate of 3.19%. Net of cash and marketable securities, debt was $504.1 million at December

31, 2012, down from $615.7 million at December 31, 2011. The average debt level for the year ended December 31, 2012 was

approximately $749 million, compared to $848 million for 2011.

As mentioned earlier, at December 31, 2012 CI had drawn $96.0 million against its $250 million credit facility. Principal

repayments on any drawn amounts are only required should the bank decide not to renew the facility on its anniversary,

in which case 6.25% of the principal would be repaid at each calendar quarter-end, with the balance payable at the end

of the credit facility term (March 14, 2015). These payments would be payable beginning March 31, 2013 should the bank

not renew the facility.

CI’s current ratio of debt (net of excess cash) to EBITDA is at 0.7 to 1, well below CI’s long-term target of 1 to 1. CI expects

that, absent acquisitions in which debt is increased, excess cash ﬂ ow will be used to pay down debt and the ratio of debt

to EBITDA will trend lower. CI is within its ﬁ nancial covenants with respect to its credit facility, which requires that the

debt-to-EBITDA ratio remain below 2.5 to 1, and assets under management not fall below $40 billion, based on a rolling

30-day average.

Shareholders’ equity increased by $55.8 million in 2012 to $1.676 billion at December 31, 2012 which approximates net

income less dividends and share repurchases.

RISK MANAGEMENT

There is risk inherent in the conduct of a wealth management business. Some factors which introduce or exacerbate risk

are within the control of management and others are by their nature outside of direct control but must still be managed.

Effective risk management is a key component to achieving CI’s business objectives. It requires management to identify

and anticipate risks in order to develop strategies and procedures which minimize or avoid negative consequences.

Management has developed an approach to risk management that involves executives in each core business unit and

operating area of CI. These executives identify and evaluate risks, applying both a quantitative and a qualitative analysis

and then assess the likelihood of occurrence of a particular risk. The ﬁ nal step in the process is to identify mitigating

factors or strategies and a course for implementing mitigation procedures.

The disclosures below provide a summary of the key risks and uncertainties that affect CI’s ﬁ nancial performance. For a

more complete discussion of the risk factors which may adversely impact CI’s business, please refer to the “Risk Factors”

section of CI’s Annual Information Form, which is available at www.sedar.com.

MARKET RISK

Market risk is the risk of a ﬁ nancial loss resulting from adverse changes in underlying market factors, such as interest rates, foreign

exchange rates, and equity and commodity prices. A description of each component of market risk is described below:

 Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
 Foreign exchange rate risk is the risk of gain or loss due to volatility of foreign exchange rates.
 Equity risk is the risk of gain or loss due to the changes in prices and volatility of individual equity instruments

and equity indexes.

CI’s ﬁ nancial performance is indirectly exposed to market risk. Any decline in ﬁ nancial markets or lack of sustained

growth in such markets may result in a corresponding decline in performance and may adversely affect CI’s assets under

management, management fees and revenues, which would reduce cash ﬂ ow to CI and ultimately impact CI’s ability to

pay dividends.

Asset Management Segment

CI is subject to market risk throughout its Asset Management business segment. The following is a description of how CI

mitigates the impact this risk has on its ﬁ nancial position and operating earnings.

Management of market risk within CI’s assets under management is the responsibility of the Chief Operating Ofﬁ cer, with

the assistance of the Chief Compliance Ofﬁ cer. CI has a control environment that ensures risks are reviewed regularly and

that risk controls throughout CI are operating in accordance with regulatory requirements. CI’s compliance group carefully

reviews the exposure to interest rate risk, foreign currency risk and equity risk. When a particular market risk is identiﬁ ed,

portfolio managers of the funds are directed to mitigate the risk by reducing their exposure.

At December 31, 2012, approximately 26% of CI’s assets under management were held in ﬁ xed-income securities, which

are exposed to interest rate risk. An increase in interest rates causes market prices of ﬁ xed-income securities to fall, while

a decrease in interest rates causes market prices to rise. CI estimates that a 50 basis point change in the value of these

securities would cause a change of about $1 million in annual pre-tax earnings in the Asset Management segment.

At December 31, 2012, about 65% of CI’s assets under management were based in Canadian currency, which diminishes the

exposure to foreign exchange risk. However, at the same time, approximately 20% of CI’s assets under management were

based in U.S. currency. Any change in the value of the Canadian dollar relative to U.S. currency will cause ﬂ uctuations

in CI’s assets under management upon which CI’s management fees are calculated. CI estimates that a 10% change in

Canadian/U.S. exchange rates would cause a change of about $16 million in the Asset Management segment’s annual

pre-tax earnings.

About 67% of CI’s assets under management were held in equity securities at December 31, 2012, which are subject to

equity risk. Equity risk is classiﬁ ed into two categories: general equity risk and issuer-speciﬁ c risk. CI employs internal and

external fund managers to take advantage of these individuals’ expertise in particular market niches, sectors and products

and to reduce issuer-speciﬁ c risk through diversiﬁ cation. CI estimates that a 10% change in the prices of equity indexes

would cause a change of about $56 million in annual pre-tax earnings.

Asset Administration Segment

CI’s Asset Administration business is exposed to market risk. The following is a description of how CI mitigates the impact

this risk has on its ﬁ nancial position and results of operations.

Risk management for administered assets is the responsibility of the Chief Compliance Ofﬁ cer and senior management.

Responsibilities include ensuring policies, processes and internal controls are in place and in accordance with regulatory

requirements. CI’s internal audit department reviews CI’s adherence to these policies and procedures.

CI’s operating results are not materially exposed to market risk impacting the asset administration segment given that this

segment usually generates less than 1% of the total income before non-segmented items (this segment had income of $3.7

million before income taxes and non-segmented items for the year ended December 31, 2012). Investment advisors regularly

review their client portfolios to assess market risk and consult with clients to make appropriate changes to mitigate it. The

effect of a 10% change in any component of market risk (comprised of interest rate risk, foreign exchange risk and equity risk)

would have resulted in a change of less than $1 million to the Asset Administration segment’s pre-tax earnings.

CREDIT RISK

Credit risk is the risk of loss associated with the inability of a third party to fulﬁ ll its payment obligations. CI is exposed

to the risk that third parties that owe it money, securities or other assets will not perform their obligations. These parties

include trading counterparties, customers, clearing agents, exchanges, clearing houses and other ﬁ nancial intermediaries,

as well as issuers whose securities are held by CI. These parties may default on their obligations due to bankruptcy, lack

of liquidity, operational failure or other reasons. CI does not have a signiﬁ cant exposure to any individual counterparty.

Credit risk is mitigated by regularly monitoring the credit performance of each individual counterparty and holding

collateral where appropriate.

One of the primary sources of credit risk arises when CI extends credit to clients to purchase securities by way of margin

lending. Margin loans are due on demand and are collateralized by the ﬁ nancial instruments in the client’s account. CI

faces a risk of ﬁ nancial loss in the event a client fails to meet a margin call if market prices for securities held as collateral

decline and if CI is unable to recover sufﬁ cient value from the collateral held. The credit extended is limited by regulatory

requirements and by CI’s internal credit policy. Credit risk is managed by dealing with counterparties CI believes to be

creditworthy and by actively monitoring credit and margin exposure and the ﬁ nancial health of the counterparties. CI has

concluded that current economic and credit conditions have not signiﬁ cantly impacted its ﬁ nancial assets.

LIQUIDITY RISK

Liquidity risk is the risk that CI may not be able to generate sufﬁ cient funds and within the time required in order to meet

its obligations as they come due. While CI currently has access to ﬁ nancing, unfavourable market conditions may affect

the ability of CI to obtain loans or make other arrangements on terms acceptable to CI.

STRATEGIC RISKS

Strategic risks are risks that directly impact the overall direction of CI and the ability of CI to successfully implement

proposed strategies. The key strategic risk is the risk that management fails to anticipate, and respond to changes in the

business environment including demographic and competitive changes. CI’s performance is directly affected by ﬁ nancial

market and business conditions, including the legislation and policies of the governments and regulatory authorities having

jurisdiction over CI’s operations. These are beyond the control of CI; however, an important part of the risk management

process is the on-going review and assessment of industry and economic trends and changes. Strategies are then designed

to mitigate the impact of any anticipated changes, including the introduction of new products and cost control strategies.

DISTRIBUTION RISK

CI distributes its investment products through a number of distribution channels including brokers, independent ﬁ nancial

planners and insurance advisors. CI’s access to these distribution channels is impacted by the strength of the relationship

with certain business partners and the level of competition faced from the ﬁ nancial institutions that own those channels.

While CI continues to develop and enhance existing relationships, there can be no assurance that CI will continue to enjoy

the level of access that it has in the past, which would adversely affect its sales of investment products.

OPERATIONAL RISKS

Operational risks are risks related to the actions, or failure in the processes, that support the business including

administration, information technology, product development and marketing. The administrative services provided by CI

depend on software supplied by third-party suppliers. Failure of a key supplier, the loss of these suppliers’ products, or

problems or errors related to such products would have a material adverse effect on the ability of CI to provide these

administrative services. Changes to the pricing arrangement with such third-party suppliers because of upgrades or other

circumstances could have an adverse effect upon the proﬁ tability of CI. There can be no assurances that CI’s systems

will operate or that CI will be able to prevent an extended systems failure in the event of a subsystem component or

software failure or in the event of an earthquake, ﬁ re or any other natural disaster, or a power or telecommunications

failure. Any systems failure that causes interruptions in the operations of CI could have a material adverse effect on its

business, ﬁ nancial condition and operating results. CI may also experience losses in connection with employee errors.

Although expenses incurred by CI in connection with employee errors have not been signiﬁ cant in the past, there can be

no assurances that these expenses will not increase in the future.

TAXATION RISK

CI is subject to various uncertainties concerning the interpretation and application of Canadian tax laws. If tax authorities

disagree with CI’s application of such tax laws, CI’s proﬁ tability and cash ﬂ ows could be adversely affected. CI Investments

is considered a large case ﬁ le by the Canada Revenue Agency, and as such, is subject to audit each year. There is a

signiﬁ cant lag between the end of a ﬁ scal year and when such audits are completed. Therefore, at any given time, several

years may be open for audit and/or adjustment.

COMPETITION

CI operates in a highly competitive environment, with competition based on a variety of factors, including the range

of products offered, brand recognition, investment performance, business reputation, ﬁ nancing strength, the strength

and continuity of institutional, management and sales relationships, quality of service, level of fees charged and level

of commissions and other compensation paid. CI competes with a large number of mutual fund companies and other

providers of investment products, investment management ﬁ rms, broker-dealers, banks, insurance companies and other

ﬁ nancial institutions. Some of these competitors have greater capital and other resources, and offer more comprehensive

lines of products and services than CI. The trend toward greater consolidation within the investment management

industry has increased the strength of a number of CI’s competitors. Additionally, there are few barriers to entry by new

investment management ﬁ rms, and the successful efforts of new entrants have resulted in increased competition. CI’s

competitors seek to expand market share by offering different products and services than those offered by CI. While CI

continues to develop and market new products and services, there can be no assurance that CI will maintain its current

standing or market share, and that may adversely affect the business, ﬁ nancial condition or operating results of CI.

REGULATORY AND LEGAL RISK

Certain subsidiaries of CI are heavily regulated in all jurisdictions where they carry on business. Laws and regulations

applied at the national and provincial level generally grant governmental agencies and self-regulatory bodies broad

administrative discretion over the activities of CI, including the power to limit or restrict business activities as well as

impose additional disclosure requirements on CI products and services. Possible sanctions include the revocation or

imposition of conditions on licenses to operate certain businesses, the suspension or expulsion from a particular market

or jurisdiction of any of CI’s business segments or its key personnel or ﬁ nancial advisors, and the imposition of ﬁ nes and

censures. It is also possible that the laws and regulations governing a subsidiary’s operations or particular investment

products or services could be amended or interpreted in a manner that is adverse to CI. To the extent that existing or

future regulations affecting the sale or offering of CI’s product or services or CI’s investment strategies cause or contribute

to reduced sales of CI’s products or lower margins or impair the investment performance of CI’s products, CI’s aggregate

assets under management and its revenues may be adversely affected.

Certain subsidiaries of CI are subject to minimum regulatory capital requirements. This may require CI to keep sufﬁ cient cash

and other liquid assets on hand to maintain capital requirements rather than using them in connection with its business.

Failure to maintain required regulatory capital by CI may subject it to ﬁ nes, suspension or revocation of registration by

the relevant securities regulator. A signiﬁ cant operating loss by a registrant subsidiary or an unusually large charge against

regulatory capital could adversely affect the ability of CI to expand or even maintain its present level of business, which

could have a material adverse effect on CI’s business, results of operations, ﬁ nancial condition and prospects.

Given the nature of CI’s business, CI may from time to time be subject to claims or complaints from investors or others

in the normal course of business. The legal risks facing CI, its directors, ofﬁ cers, employees or agents in this respect

include potential liability for violations of securities laws, breach of ﬁ duciary duty and misuse of investors’ funds. Some

violations of securities laws and breach of ﬁ duciary duty could result in civil liability, ﬁ nes, sanctions, or expulsion from a

self-regulatory organization or the suspension or revocation of CI’s subsidiaries’ right to carry on their existing business. CI

may incur signiﬁ cant costs in connection with such potential liabilities.

COMMITMENT OF FINANCIAL ADVISORS AND OTHER KEY PERSONNEL

The market for ﬁ nancial advisors is extremely competitive and is increasingly characterized by frequent movement by

ﬁ nancial advisors among different ﬁ rms. Individual ﬁ nancial advisors of AWM have regular direct contact with clients,

which can lead to a strong and personal client relationship based on the client’s trust in the individual ﬁ nancial advisor.

The loss of a signiﬁ cant number of ﬁ nancial advisors could lead to the loss of client accounts which could have a material

adverse effect on the results of operations and prospects of AWM, and, in turn, CI. Although AWM uses or has used a

combination of competitive compensation structures and equity with vesting provisions as a means of seeking to retain

ﬁ nancial advisors, there can be no assurance that ﬁ nancial advisors will remain with AWM.

The success of CI is also dependent upon, among other things, the skills and expertise of its human resources including

the management and investment personnel and its personnel with skills related to, among other things, marketing, risk

management, credit, information technology, accounting, administrative operations and legal affairs. These individuals

play an important role in developing, implementing, operating, managing and distributing CI’s products and services.

Accordingly, the recruitment of competent personnel, continuous training and transfer of knowledge are key activities

that are essential to CI’s performance. In addition, the growth in total assets under management in the industry and the

reliance on investment performance to sell ﬁ nancial products have increased the demand for experienced and high-

performing portfolio managers. Compensation packages for these managers may increase at a rate well in excess of

inﬂ ation and well above the rates of increase observed in other industries and the rest of the labour market. CI believes

that it has the resources necessary for the operation of CI’s business. The loss of these individuals or an inability to attract,

retain and motivate a sufﬁ cient number of qualiﬁ ed personnel could adversely affect CI’s business.

INFORMATION REGARDING GUARANTORS

The following tables provide unaudited consolidated ﬁ nancial information for CI, CI Investments and non-guarantor

subsidiaries for the periods identiﬁ ed below, presented with a separate column for: (i) CI; (ii) CI Investments, (iii) the non-

guarantor subsidiaries of CI on a combined basis [the “Other Subsidiaries”); (iv) consolidating adjustments; and (v) the total

consolidated amounts.

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31* (unaudited)

(in millions of dollars)

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

CI Financial

CI Investments

Subsidiaries

Adjustments

Amounts

Other

Consolidating

Consolidated

Total

Revenue

Net income

225.3

669.8 1,289.5

1,358.4

389.0

395.7

(446.1)

(927.6) 1,457.7

1,496.3

211.0

654.4

312.8

380.0

39.3

37.1 (210.9)

(694.6)

352.2

376.9

*Some comparative ﬁ gures have been reclassed to conform to the presentation in the current year.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DATA AS AT DECEMBER 31* (unaudited)

(in millions of dollars)

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

CI Financial

CI Investments

Subsidiaries

Adjustments

Amounts

Other

Consolidating

Consolidated

Total

Current assets

215.6

486.8

206.2

170.2

196.4

199.9

(329.6)

(497.1)

288.6

359.8

Non-current assets

1,836.2

1,697.5 2,875.6

2,936.1

176.3

137.4 (2,205.1) (2,045.8) 2,683.0

2,725.2

Current liabilities

70.0

301.9

116.1

106.9

152.9

150.4

(16.5)

(3.3)

322.5

555.9

Non-current liabilities

270.7

222.1 1,129.8

1,302.0

0.5

0.2

(427.9)

(615.4)

973.1

908.9

*Some comparative ﬁ gures have been reclassed to conform to the presentation in the current year.

RELATED PARTY TRANSACTIONS

The Bank of Nova Scotia (“Scotiabank”) owns approximately 37% of the common shares of CI, and is therefore considered a

related party. CI has entered into transactions related to the advisory and distribution of its mutual funds with Scotiabank.

These transactions are in the normal course of operations and are recorded at the agreed upon exchange amounts. During

the three and 12 months ended December 31, 2012, CI incurred charges for deferred sales commissions of $1.0 million and

$4.9 million, respectively [three and 12 months ended December 31, 2011 – $1.0 million and $4.9 million, respectively] and

trailer fees of $5.1 million and $20.3 million, respectively [three and 12 months ended December 31, 2011 – $5.0 million and

$20.0 million, respectively] which were paid or payable to Scotiabank. The balance payable to Scotiabank as at December

31, 2012 of $1.7 million [December 31, 2011 – $1.7 million] is included in accounts payable and accrued liabilities.

SHARE CAPITAL

As at December 31, 2012, CI had 282,914,642 shares outstanding.

At December 31, 2012, 6.4 million options to purchase shares were outstanding, of which 2.4 million options were exercisable.

CONTRACTUAL OBLIGATIONS

The table that follows summarizes CI’s contractual obligations at December 31, 2012.

PAYMENTS DUE BY YEAR

(millions of dollars)

Credit facility

Debentures

Operating leases

Total

1 year

or less

24.0

—

11.0

35.0

Total

96.0

500.0

104.9

700.9

5 years

More than

24.0

200.0

9.6

233.6

48.0

—

9.1

—

300.0

9.0

57.1

309.0

—

8.6

—

57.6

SIGNIFICANT ACCOUNTING ESTIMATES

The December 31, 2012 Consolidated Financial Statements have been prepared in accordance with IFRS. For a discussion of

all signiﬁ cant accounting policies, refer to Note 1 of the Notes to the Consolidated Financial Statements. Included in the

Notes to the Consolidated Financial Statements is Note 3 which provides a discussion regarding the recoverable amount

of CI’s goodwill and intangible assets compared to its carrying value.

CI carries signiﬁ cant goodwill and intangible assets on its balance sheet. CI uses valuation models that use estimates of

future market returns and sales and redemptions of investment products as the primary determinants of fair value. CI also

uses a valuation approach based on a multiple of assets under management and assets under administration for each of

CI’s operating segments. The multiple used by CI reﬂ ects recent transactions and research reports by independent equity

research analysts. CI has renewed these key variables in light of the current economic climate. Estimates of sales and

redemptions are very likely to change as economic conditions either improve or deteriorate, whereas estimates of future

market returns are less likely to do so. The models are most sensitive to current levels of assets under management and

administration as well as estimates of future market returns. While these balances are not currently impaired, a decline

of 20% in the fair value of certain models may result in an impairment of goodwill or other intangibles recorded on the

statement of ﬁ nancial position.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Chief Executive Ofﬁ cer (“CEO”) and the Chief Financial Ofﬁ cer (“CFO”), together with management, are responsible for

the design of CI’s disclosure controls and procedures. Management has evaluated, with participation of the CEO and CFO, the

effectiveness of the disclosure controls and procedures as at December 31, 2012. Based on this evaluation, the CEO and CFO

have concluded that they are reasonably assured these Disclosure Controls and Procedures were effective and that material

information relating to CI was made known to them within the time periods speciﬁ ed under applicable securities legislation.

Management, under the supervision of the CEO and CFO, is responsible for the design and maintenance of adequate

internal controls over ﬁ nancial reporting for the purposes of providing reasonable assurance regarding the reliability of

ﬁ nancial reporting and the preparation of ﬁ nancial statements for external purposes in accordance with IFRS. However, due

to its inherent limitations, internal controls over ﬁ nancial reporting can only provide reasonable, not absolute, assurance

that the ﬁ nancial statements are free of misstatements. The COSO framework was used to assist management, along with

the CEO and CFO, in the evaluation of these internal control systems. Management, under the direction of the CEO and

CFO, have concluded that the internal controls over ﬁ nancial reporting are effective. Management used various tools to

evaluate internal controls over ﬁ nancial reporting which included interaction with key control systems, review of policy and

procedure documentation, observation or reperformance of control procedures to evaluate the effectiveness of controls

and concluded that these controls are effective. For the year ended December 31, 2012, there have been no changes to the

internal controls over ﬁ nancial reporting that have materially affected, or are reasonably likely to affect, internal controls

over ﬁ nancial reporting.

Additional information relating to CI, including the most recent audited ﬁ nancial statements, management information circular and
annual information form are available on SEDAR at www.sedar.com.

Consolidated
Financial Statements

December 31, 2012

CI Financial Corp.

MANAGEMENT’S REPORT TO SHAREHOLDERS

Management of CI Financial Corp. [“CI”] is responsible for the integrity and objectivity of the consolidated ﬁ nancial

statements and all other information contained in this document. The consolidated ﬁ nancial statements have been

prepared in accordance with International Financial Reporting Standards and are based on management’s best information

and judgment.

In fulﬁ lling its responsibilities, management has developed internal control systems and procedures designed to provide

reasonable assurance that CI’s assets are safeguarded, that transactions are executed in accordance with appropriate

authorization, and that accounting records may be relied upon to properly reﬂ ect CI’s business transactions.

The Audit Committee of the Board of Directors is composed of outside directors who meet periodically and independently

with management and the auditors to discuss CI’s ﬁ nancial reporting and internal control. The Audit Committee reviews

the ﬁ nancial information prepared by management and the results of the audit by the auditors prior to recommending the

consolidated ﬁ nancial statements to the Board of Directors for approval. The external auditors have unrestricted access

to the Audit Committee.

Management recognizes its responsibility to conduct CI’s affairs in the best interests of its shareholders.

Stephen A. MacPhail

Chief Executive Ofﬁ cer

Douglas J. Jamieson

Chief Financial Ofﬁ cer

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF CI FINANCIAL CORP.

We have audited the accompanying consolidated ﬁ nancial statements of CI Financial Corp. [“CI”], which comprise the

consolidated statements of ﬁ nancial position as at December 31, 2012 and 2011, and the consolidated statements of income

and comprehensive income, changes in shareholders’ equity and cash ﬂ ows for the years then ended, and a summary of

signiﬁ cant accounting policies and other explanatory information.

Management’s responsibility for the consolidated ﬁ nancial statements

Management is responsible for the preparation and fair presentation of these consolidated ﬁ nancial statements in

accordance with International Financial Reporting Standards, and for such internal control as management determines

is necessary to enable the preparation of consolidated ﬁ nancial statements that are free from material misstatement,

whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated ﬁ nancial statements based on our audits. We conducted

our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply

with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated

ﬁ nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

ﬁ nancial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks

of material misstatement of the consolidated ﬁ nancial statements, whether due to fraud or error. In making those risk

assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the

consolidated ﬁ nancial statements in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the consolidated ﬁ nancial statements.

We believe that the audit evidence we have obtained in our audits is sufﬁ cient and appropriate to provide a basis for our

audit opinion.

Opinion

In our opinion, the consolidated ﬁ nancial statements present fairly, in all material respects, the ﬁ nancial position of CI as at

December 31, 2012 and 2011, and its ﬁ nancial performance and its cash ﬂ ows for the years then ended in accordance with

International Financial Reporting Standards.

Toronto, Canada

February 14, 2013

Consolidated Statements
OF FINANCIAL POSITION

As at December 31

[in thousands of Canadian dollars]

ASSETS

Current

Cash and cash equivalents

Client and trust funds on deposit

Marketable securities

Accounts receivable and prepaid expenses

Total current assets

Capital assets, net [note 2]

Deferred sales commissions, net of accumulated

amortization of $492,856 [December 31, 2011 – $494,642]

Intangibles [note 3]

Other assets [note 4]

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current

Accounts payable and accrued liabilities

Provisions for other liabilities [note 6]

Dividends payable [note 8]

Client and trust funds payable

Income taxes payable [note 9]

Current portion of long-term debt [note 5]

Total current liabilities

Deferred lease inducement

Long-term debt [note 5]

Provisions for other liabilities [note 6]

Deferred income taxes [note 9]

Total liabilities

Shareholders’ equity

Share capital [note 7(a)]

Contributed surplus

Deﬁ cit

Accumulated other comprehensive income (loss)

Total shareholders’ equity

(see accompanying notes)

On behalf of the Board of Directors:

2012

24,137

127,712

66,155

70,597

288,601

2011

122,550

124,978

42,099

70,168

359,795

46,879

49,634

452,319

2,161,403

22,413

2,971,615

119,721

1,097

45,254

125,773

6,608

24,000

322,453

17,165

570,368

6,611

379,030

1,295,627

1,964,433

14,511

(303,126)

170

1,675,988

2,971,615

491,216

2,162,122

22,215

3,084,982

120,797

2,417

42,526

123,745

8,736

257,763

555,984

18,489

522,592

6,530

361,202

1,464,797

1,964,334

20,059

(362,377)

(1,831)

1,620,185

3,084,982

--------------------------------
William T. Holland
Director

--------------------------------
G. Raymond Chang
Director

Consolidated Statements
OF INCOME AND COMPREHENSIVE INCOME

For the years ended December 31

[in thousands of Canadian dollars, except per share amounts]

REVENUE

Management fees

Administration fees

Redemption fees

Gain (loss) on sale of marketable securities

Other income [note 4]

EXPENSES

Selling, general and administrative

Trailer fees [note 14]

Investment dealer fees

Amortization of deferred sales commissions

Amortization of intangibles

Interest [note 5]

Other [note 4]

Income before income taxes

Provision for income taxes [note 9]

Current

Deferred

Net income for the year

Other comprehensive income (loss), net of tax

Unrealized gain (loss) on available-for-sale ﬁ nancial assets,

net of income taxes of $287 [2011 – $(449)]

Reversal of losses to net income on available-for-sale

ﬁ nancial assets, net of income taxes of $19 [2011 – $125]

Total other comprehensive income (loss), net of tax

Comprehensive income

2012

2011

1,277,698

1,302,773

125,985

27,388

303

26,368

132,272

28,629

(489)

33,108

1,457,742

1,496,293

286,009

373,954

98,263

163,100

2,437

24,937

5,265

953,965

503,777

134,092

17,522

151,614

352,163

290,776

379,454

103,753

164,431

2,386

27,496

6,927

975,223

521,070

131,420

12,751

144,171

376,899

1,899

(2,656)

102

2,001

681

(1,975)

354,164

374,924

Basic and diluted earnings per share [note 7(c)]

$1.24

$1.31

(see accompanying notes)

Consolidated Statements
OF CHANGES IN SHAREHOLDERS’ EQUITY

For the years ended December 31

Share capital

Contributed

comprehensive

[note 7(a)]

surplus

Deﬁ cit

income (loss)

Accumulated

other

[in thousands of Canadian dollars]

Total

Balance, December 31, 2011

1,964,334

20,059

(362,377)

(1,831)

1,620,185

Comprehensive income

Dividends declared [note 8]

Shares repurchased

Issuance of share capital on exercise of options

Compensation expense for equity-based plans

Change during the year

—

(9,534)

9,633

—

(9,434)

3,886

352,163

(271,912)

(21,000)

—

2,001

—

(5,548)

59,251

2,001

354,164

(271,912)

(30,534)

199

3,886

55,803

Balance, December 31, 2012

1,964,433

14,511

(303,126)

170

1,675,988

Balance, December 31, 2010

1,984,488

21,846

(440,404)

144

1,566,074

Comprehensive income

Dividends declared [note 8]

Shares repurchased

Issuance of share capital on exercise of options

and vesting of deferred equity units

Compensation expense for equity-based plans

Change during the year

Balance, December 31, 2011

(see accompanying notes)

—

(32,729)

12,575

—

(20,154)

1,964,334

—

(8,787)

7,000

(1,787)

20,059

376,899

(1,975)

374,924

(236,407)

(62,465)

—

78,027

(362,377)

—

(236,407)

(95,194)

3,788

7,000

(1,975)

54,111

(1,831)

1,620,185

Consolidated Statements
OF CASH FLOWS

For the years ended December 31

[in thousands of Canadian dollars]

OPERATING ACTIVITIES (*)

Net income

Add (deduct) items not involving cash

Gain (loss) on sale of marketable securities

Equity-based compensation

Amortization of deferred sales commissions

Amortization of intangibles

Amortization and depreciation of other

Deferred income taxes

Cash provided by operating activities before changes

in operating assets and liabilities

Net change in non-cash working capital balances

Cash provided by operating activities

INVESTING ACTIVITIES

Purchase of marketable securities

Proceeds on sale of marketable securities

Additions to capital assets

Deferred sales commissions paid

Decrease (increase) in other assets

Additions to intangibles

Cash used in investing activities

FINANCING ACTIVITIES

Increase in long-term debt

Repayment of debentures

Repurchase of share capital

Issuance of share capital

Dividends paid to shareholders

Cash used in ﬁ nancing activities

Net decrease in cash and cash equivalents during the year

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

(*) Included in operating activities are the following:

Interest paid

Income taxes paid

(see accompanying notes)

2012

2011

352,163

376,899

(303)

3,886

163,100

2,437

9,328

17,522

548,133

(6,700)

541,433

(26,761)

5,315

(5,560)

(124,203)

(400)

(1,718)

489

7,000

164,431

2,386

10,773

12,751

574,729

(63,679)

511,050

(43,740)

32,082

(21,477)

(141,232)

7,745

(1,924)

(153,327)

(168,546)

63,000

(250,000)

(30,534)

199

(269,184)

(486,519)

(98,413)

122,550

24,137

25,101

136,165

9,092

(100,000)

(95,194)

3,812

(254,201)

(436,491)

(93,987)

216,537

122,550

27,507

213,326

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

CI Financial Corp. [“CI”] is incorporated under the laws of the Province of Ontario. CI’s primary business is the management

and distribution of a broad range of ﬁ nancial products and services, including mutual funds, segregated funds, ﬁ nancial

planning, insurance, investment advice, wealth management and estate and succession planning.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These consolidated ﬁ nancial statements of CI have been prepared in accordance with International Financial Reporting

Standards [“IFRS”] as issued by the International Accounting Standards Board [“IASB”].

These consolidated ﬁ nancial statements were authorized for issuance by the Board of Directors of CI on February 14, 2013.

Basis of presentation

The consolidated ﬁ nancial statements of CI have been prepared on a historical cost basis, except for certain ﬁ nancial

instruments that have been measured at fair value. The consolidated ﬁ nancial statements have been prepared on a going

concern basis. CI’s presentation currency is the Canadian dollar. The functional currency of CI and its subsidiaries is also

the Canadian dollar.

Basis of consolidation

The consolidated ﬁ nancial statements include the accounts of CI, CI Investments Inc. [“CI Investments”] and Assante

Wealth Management (Canada) Ltd. [“AWM”] and their subsidiaries, which are entities over which CI has control. Control

exists when CI has the power, directly or indirectly, to govern the ﬁ nancial and operating policies of an entity so as to

obtain beneﬁ ts from its activities. Hereinafter, CI and its subsidiaries are referred to as CI.

Revenue recognition

Revenue is recognized to the extent that it is probable that economic beneﬁ ts will ﬂ ow to CI and the revenue can be

reliably measured. Revenue is measured at the fair value of the consideration received or receivable. In addition to these

general principles, CI applies the following speciﬁ c revenue recognition policies:

Management fees are based upon the net asset value of the funds managed by CI and are recognized on an accrual basis.

Administration fees and other income are recognized as services are provided under contractual arrangements.

Administration fees include commission revenue, which is recorded on a trade date basis and advisory fees, which are

recorded when the services related to the underlying engagements are completed.

Redemption fees payable by securityholders of deferred sales charge mutual funds, the sales commission of which was

ﬁ nanced by CI, are recognized as revenue on the trade date of the redemption of the applicable mutual fund securities.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Financial instruments

Financial assets are classiﬁ ed at fair value through proﬁ t or loss [“FVPL”], available-for-sale [“AFS”] or loans and receivables.

Financial liabilities are classiﬁ ed as FVPL or other.

Financial instruments are recognized initially at fair value. Transaction costs that are directly attributable to the acquisition

or issue of a ﬁ nancial instrument classiﬁ ed as other than at FVPL are added to the carrying amount of the asset or liability.

The fair value of ﬁ nancial instruments is generally determined by reference to quoted market bid prices where an active

market exists. Where there is no active market, the fair value is determined using valuation techniques.

Financial instruments classiﬁ ed as FVPL are carried at fair value in the statement of ﬁ nancial position and any gains or

losses are recorded in net income in the period in which they arise. Financial instruments classiﬁ ed as FVPL include cash

and cash equivalents as well as an amount included in accounts payable and other liabilities.

Financial assets classiﬁ ed as AFS are carried at fair value in the statement of ﬁ nancial position. Movements in the fair

value are recorded in other comprehensive income until disposed, at which time the cumulative amount recorded in

comprehensive income is recognized in net income. Where there is objective evidence that an AFS asset is impaired, the

cumulative impairment loss is reclassiﬁ ed from other comprehensive income to net income with subsequent movements

also recognized in net income. Financial assets classiﬁ ed as AFS include marketable securities.

Loans and receivables and other ﬁ nancial liabilities are recognized at amortized cost using the effective interest rate

method. Such accounts include client and trust funds on deposits, accounts receivable, accounts payable and accrued

liabilities, dividends payable, client and trust funds payable and long-term debt.

All ﬁ nancial instruments recognized at fair value in the consolidated statement of ﬁ nancial position are classiﬁ ed into

three fair value hierarchy levels as follows:

Level 1 – valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities.


Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted

prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation

model that are observable for that instrument; and inputs that are derived from or corroborated by observable market

data by correlation or other means.

 Level 3 – valuation techniques with signiﬁ cant unobservable market inputs.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Derivatives and hedging

CI may enter into interest rate swap agreements to reduce its exposure to interest rate risk on its long-term debt. CI

does not enter into derivative ﬁ nancial instruments for trading or speculative purposes. At the inception of the swap

agreement, CI formally documents the hedging relationship, detailing the risk management objective and the hedging

strategy of the hedge. The documentation speciﬁ es the asset, liability or cash ﬂ ows being hedged, the related hedging

item, the nature of the speciﬁ c risk exposure or exposures being hedged, the intended term of the hedging relationship,

the method for assessing the effectiveness of the hedging relationship, and the method for measuring the ineffectiveness

of the hedging relationship. Derivative ﬁ nancial instruments that have been designated and qualify for hedge accounting

are classiﬁ ed as either cash ﬂ ow or fair value hedges.

Changes in the fair value of the interest rate swaps are recognized in the consolidated statement of income and comprehensive

income as other income. Similarly, changes in the fair value of the hedged item attributable to the hedged risk are also

recognized in the consolidated statement of income and comprehensive income as other income, with a corresponding

adjustment to the long-term debt in the consolidated statement of ﬁ nancial position. Hedge accounting is discontinued

prospectively if the hedging relationship no longer qualiﬁ es as an effective hedge or if the hedging item is settled. The

hedged item is no longer adjusted to reﬂ ect changes in fair value. Amounts previously recorded as cumulative adjustments

to the effective portion of gains and losses attributable to the hedged risk are amortized using the effective interest rate

method and recognized in the consolidated statement of income and comprehensive income over the remaining useful life

of the hedged item. Hedge accounting is also discontinued if the hedged item is sold or terminated before maturity. In such

a situation, the cumulative adjustments with respect to the effective portion of gains and losses attributable to the hedged

risk are immediately recorded in the consolidated statement of income and comprehensive income.

Cash and cash equivalents

Cash and cash equivalents include cash on deposit, highly liquid investments and interest bearing deposits with original

maturities of 90 days or less.

Client and trust funds

Client and trust funds on deposit include amounts representing cash held in trust with Canadian ﬁ nancial institutions for

clients in respect of self-administered Registered Retirement Savings Plans and Registered Retirement Income Funds, and

amounts received from clients for which the settlement date on the purchase of securities has not occurred or accounts

in which the clients maintain a cash balance. Client and trust funds on deposit also include amounts for client transactions

that are entered into on either a cash or margin basis and recorded on the trade date of the transaction. Amounts are

due from clients on the settlement date of the transaction for cash accounts. For margin accounts, CI extends credit to

a client for the purchase of securities, collateralized by the ﬁ nancial instruments in the client’s account. Amounts loaned

are limited by margin regulations of the Investment Industry Regulatory Organization of Canada [“IIROC”] and other

regulatory authorities, and are subject to CI’s credit review and daily monitoring procedures. The corresponding liabilities

related to the above accounts and transactions are included in client and trust funds payable.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Marketable securities

Marketable securities consist of investments in mutual fund securities and publicly traded companies. Marketable securities

are measured at fair value and recognized on trade date. Mutual fund securities are valued using the net asset value per

unit of each fund. The fair value of publicly traded companies is determined using quoted market prices. Realized and

unrealized gains and losses are recognized using average cost. Except for impairment losses, gains and losses in the fair value

of marketable securities are recorded as other comprehensive income (loss) until disposed of, at which time any gain or loss is

recorded in net income. When a decline in fair value is other than temporary and there is objective evidence of impairment,

the cumulative loss that had been recognized directly in other comprehensive income (loss) is removed and recognized in net

income, even though the ﬁ nancial asset has not been derecognized. Distributions from mutual fund securities are recorded

as other income. Distributions that are reinvested increase the cost base of the marketable securities.

Capital assets

Capital assets are recorded at cost less accumulated amortization. These assets are amortized over their estimated useful

lives as follows:

Computer hardware

Ofﬁ ce equipment

Straight-line over three years

Straight-line over ﬁ ve years

Leasehold improvements

Straight-line over the term of the lease

Deferred sales commissions

Commissions paid on sales of deferred sales charge mutual funds represent commissions paid by CI to brokers and dealers,

and are recorded on the trade date of the sale of the applicable mutual fund product. Deferred sales commissions are

amortized over the expected investment period of 24 to 84 months on a straight-line basis from the date recorded.

When redemptions occur, the actual investment period is shorter than expected, and the unamortized deferred

sales commission related to the original investment in the mutual funds is charged to net income and included in the

amortization of deferred sales commissions.

Intangible assets

Fund contracts

Fund administration contracts and fund management contracts [collectively, “fund contracts”] are recorded net of any

write-down for impairment. CI evaluates the carrying amounts of fund contracts for potential impairment by comparing the

recoverable amount with their carrying amounts. These evaluations are performed on an annual basis or more frequently

if events or changes in circumstances indicate a potential impairment. Any impairment would be written off to income.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Fund administration contracts are amortized on a straight-line basis over 25 years. Fund management contracts with a

ﬁ nite life are amortized on a straight-line basis over a period of up to 20 years, depending on the contractual terms of

such agreements and management’s best estimate of their useful lives. Fund management contracts with an indeﬁ nite

life are not amortized.

Goodwill

Goodwill is recorded as the excess of purchase price over identiﬁ able assets acquired. Following initial recognition,

goodwill is stated at cost less any accumulated impairment losses. Goodwill is evaluated for impairment at least annually

and any impairment is recognized immediately in income and not subsequently reversed. Goodwill is allocated to the

appropriate cash-generating unit for the purpose of impairment testing.

Other intangibles

Other intangibles include the costs of trademarks and computer software, capitalized where it is probable that future

economic beneﬁ ts that are attributable to the assets will ﬂ ow to CI and the cost of the assets can be measured reliably.

Computer software is recorded initially at cost and amortized over its expected useful life of two to ten years on a

straight-line basis. Trademarks have an indeﬁ nite life and are not amortized.

Equity-based compensation

CI uses the fair value method to account for equity-settled employee incentive share options. The value of the equity-

based compensation, as at the date of grant, is recognized over the applicable vesting period as compensation expense

with a corresponding increase in contributed surplus. When options are exercised, the proceeds received, together with

the amount in contributed surplus, are credited to share capital.

The amount recognized as an expense is adjusted to reﬂ ect the number of awards for which the related service conditions

are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that

do meet the related service condition at the vesting date.

Deferred lease inducements

Lease inducements are deferred and amortized on a straight-line basis over the term of the lease.

Income taxes

Current income tax liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries based

on the tax rates and laws enacted or substantively enacted at the statement of ﬁ nancial position date.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

The liability method of tax allocation is used in accounting for income taxes. Under this method, deferred income tax

assets and liabilities are determined based on differences between the carrying amount and tax basis of assets and

liabilities and measured using the substantively enacted tax rates and laws that will be in effect when the differences

are expected to reverse. Deferred tax assets are recognized to the extent that it is probable that taxable proﬁ ts will be

available against which deductible temporary differences can be utilized. Deferred tax liabilities are generally recognized

for all taxable temporary differences.

Deferred tax liabilities are recognized for taxable temporary differences arising in investments in subsidiaries and joint

ventures except where the reversal of the temporary difference can be controlled and it is probable that the difference

will not reverse in the foreseeable future. Deferred tax liabilities are not recognized on temporary differences that arise

from the initial recognition of goodwill which is not deductible for tax purposes. Deferred tax assets and liabilities are

not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other

than in a business combination.

Provisions for other liabilities

A provision for other liabilities is recognized if, as a result of a past event, CI has a present legal or constructive obligation

that can be estimated reliably, and it is probable that an outﬂ ow of economic beneﬁ ts will be required to settle the

obligation. In the event that the time value of money is material, provisions are determined by discounting the expected

future cash ﬂ ows at a pre-tax rate that reﬂ ects a current market assessment of the time value of money and the risks

speciﬁ c to the liability.

Foreign currency translation

Monetary assets and liabilities are translated into Canadian dollars using the exchange rates in effect at the statement

of ﬁ nancial position date. Non-monetary assets and liabilities are translated into Canadian dollars using historical

exchange rates. Revenue and expenses are translated at average rates prevailing during the month. Other foreign currency

transactions are translated into Canadian dollars using the exchange rate in effect on the transaction date. Translation

exchange gains and losses are included in other income in the month in which they occur.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Critical accounting estimates and judgements

In the process of applying CI’s accounting policies, management has made signiﬁ cant judgements involving estimates and

assumptions which are summarized as follows:

(i) Impairment of intangible assets

Indeﬁ nite life intangible assets, including goodwill, are tested for impairment annually or more frequently if changes in

circumstances indicate that the carrying amount may be impaired. The values associated with intangibles involve estimates

and assumptions, including those with respect to future cash inﬂ ows and outﬂ ows, discount rates and asset lives. These

estimates require signiﬁ cant judgement regarding market growth rates, fund ﬂ ow assumptions, expected margins and

costs which could affect CI’s future results if the current estimates of future performance and fair values change. These

determinations also affect the amount of amortization expense on fund contracts with ﬁ nite lives recognized in future

periods.

(ii) Deferred tax assets

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable proﬁ ts will be

available against which the losses can be utilized. Signiﬁ cant management judgement is required to determine the amount

of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable proﬁ ts together

with future tax planning strategies.

(iii) Provisions for other liabilities

Due to the nature of provisions, a considerable part of their determination is based on estimates and judgements,

including assumptions concerning the future. The actual outcome of these uncertain factors may be materially different

from the estimates, causing differences with the estimated provisions. Further details are provided in Note 6.

(iv) Share-based payments

The cost of employee services received (compensation expense) in exchange for awards of equity instruments recognized

is estimated using a Black-Scholes option valuation model which requires the use of assumptions. Further details regarding

the assumptions used in the option pricing model are provided in Note 7 [b].

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

2. CAPITAL ASSETS

Capital assets consist of the following:

Cost

Balance, December 31, 2010

Additions

Retired

Balance, December 31, 2011

Additions

Retired

Computer

Ofﬁ ce

Leasehold

hardware

equipment

improvements

18,872

4,371

(11,444)

11,799

607

(751)

12,401

1,880

(4,888)

9,393

791

(6)

Balance, December 31, 2012

11,655

10,178

Accumulated depreciation

Balance, December 31, 2010

Depreciation

Retired

Balance, December 31, 2011

Depreciation

Retired

Balance, December 31, 2012

Carrying amounts

At December 31, 2010

At December 31, 2011

At December 31, 2012

15,893

2,805

(11,444)

7,254

2,500

(751)

9,003

2,979

4,545

2,652

8,816

1,177

(4,888)

5,105

1,239

(6)

6,338

3,585

4,288

3,840

Total

79,341

21,477

(26,164)

74,654

5,560

(757)

79,457

41,408

9,776

(26,164)

25,020

8,315

(757)

32,578

37,933

49,634

46,879

48,068

15,226

(9,832)

53,462

4,162

—

57,624

16,699

5,794

(9,832)

12,661

4,576

—

17,237

31,369

40,801

40,387

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

3. INTANGIBLES

Intangible assets consist of the following:

Fund

management management

administration

contracts

Other

Goodwill

contracts

ﬁ nite life

indeﬁ nite life

intangibles

Total

Cost

Balance, December 31, 2010

1,119,926

37,600

27,500

999,082

20,422

2,204,530

Additions

—

1,924

Balance, December 31, 2011

1,119,926

37,600

27,500

999,082

22,346

2,206,454

Additions

—

1,718

Balance, December 31, 2012

1,119,926

37,600

27,500

999,082

24,064

2,208,172

Accumulated amortization

Balance, December 31, 2010

Amortization

Balance, December 31, 2011

Amortization

Balance, December 31, 2012

Carrying amounts

At December 31, 2010

At December 31, 2011

At December 31, 2012

Remaining term

—

1,119,926

10,552

1,504

12,056

1,504

13,560

27,048

25,544

24,040

14,906

775

15,681

775

16,456

12,594

11,819

11,044

N/A 15.9 – 16.4 yrs

14.3 yrs

—

999,082

N/A

41,946

2,386

44,332

2,437

46,769

2,162,584

2,162,122

2,161,403

16,488

107

16,595

158

16,753

3,934

5,751

7,311

N/A

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

(a) Cash-generating units

CI has two cash-generating units [“CGU”] for the purpose of assessing the carrying amount of the allocated goodwill

and intangible assets, being the asset management and asset administration operating segments as described in Note 15.

(b) Impairment testing of goodwill

As at December 31, 2012 and 2011, CI has allocated goodwill of $927,344 and $192,582 to the asset management and asset

administration operating segments, respectively. The recoverable amount of goodwill for the asset management and

asset administration operating segments as at December 31, 2012 and 2011 has been determined based on a fair value less

costs to sell calculation, using a valuation multiple applied to assets under management and assets under administration,

respectively. This methodology is commonly used in the marketplace by independent equity research analysts.

The calculation of the recoverable amounts exceeds the carrying amounts of both the asset management and the asset

administration operating segments, including goodwill. Recent equity market performance, recent market transactions

and CI’s current market capitalization provide additional evidence that the recoverable amount of these operating

segments is in excess of the carrying amounts.

As at December 31, 2012 and 2011, CI had indeﬁ nite life fund management contracts within the asset management CGU

of $999,082. These are contracts for the management of open end funds which have no expiry or termination provisions.

The fair value of indeﬁ nite life intangibles within the asset management operating segment as at December 31, 2012 and

2011 has been determined based on a value in use calculation, using 10 year forecasts and a terminal value for the period

thereafter. The key assumptions used in the forecast calculation include assumptions on market appreciation, net sales of

funds and operating margins. The terminal value has been calculated assuming a long-term growth rate of 2% per annum

in perpetuity [December 31, 2011 - 2%], based on a long-term real GDP growth rate. A discount rate of 7.25% per annum

[December 31, 2011 - 8.05%] has been applied to the recoverable calculation.

The calculation of the recoverable amount exceeds the carrying amount of indeﬁ nite life management contracts as at

December 31, 2012 and 2011. Recent equity market performance provides additional evidence that the recoverable amount

of indeﬁ nite life intangibles is in excess of the carrying amount.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

4. OTHER ASSETS, INCOME AND EXPENSE

Other assets consists mainly of an investment in a limited partnership, long-term accounts receivable, deferred charges

and loans advanced to employees, shareholders and investment advisors.

CI has an employee share purchase loan program for key employees. These loans are renewable yearly and bear interest

at prescribed rates. As at December 31, 2012, the carrying amount of employee share purchase loans is $9,162 [December

31, 2011 - $10,450] and is included in other assets. These loans become due immediately upon termination of employment

or sale of the shares that are held as collateral. As at December 31, 2012, the shares held as collateral have a market value

of approximately $16,651 [December 31, 2011 - $16,941].

Other assets include shareholder loans in the amount of $3,054 as at December 31, 2012 [December 31, 2011 - $3,185] issued

primarily to investment advisors. These amounts are secured primarily by common shares of CI that are held as collateral.

These loans become due immediately either on termination of the advisor relationship or upon the sale of CI shares that

are held as collateral. As at December 31, 2012, the shares held as collateral have a market value of approximately $3,769

[December 31, 2011 - $3,190].

CI has a hiring and retention incentive program whereby loans are extended to current investment advisors. These

loans are initially recorded at their fair value, may bear interest at prescribed rates and are contractually forgiven on a

straight-line basis over the applicable contractual period, which varies in length from three to seven years. CI utilizes the

effective interest rate method to amortize the forgiven amount. The forgiven amount is included in selling, general and

administrative expenses. As at December 31, 2012, loans to investment advisors of $3,670 [December 31, 2011 - $1,576] are

included in other assets. These loans become due on demand upon termination or breach in the terms of the agreements.

Other income consists mainly of fees received for the administration of third party mutual funds, custody fees, equity

income, foreign exchange gains (losses) and interest income. Other expenses consist mainly of distribution fees to limited

partnerships, legal settlements, amortization of debenture transaction costs and capital taxes.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

5. LONG-TERM DEBT

Long-term debt consists of the following:

Credit facility

Bankers’ acceptances

Prime rate loan

Debentures

$250 million, 3.30%, due December 17, 2012

$200 million, 4.19%, due December 16, 2014

$300 million, 3.94% until December 13, 2015 and

ﬂ oating rate until December 14, 2016

Long-term debt

Current portion of long-term debt

As at

December 31, 2012

December 31, 2011

88,000

8,000

96,000

—

199,536

298,832

498,368

594,368

24,000

26,000

7,000

33,000

249,514

199,258

298,583

747,355

780,355

257,763

Credit facility

Effective March 1, 2012, CI renewed its revolving credit facility with two chartered banks and on May 11, 2012 increased the

amount that may be borrowed under the credit facility to $250 million. Amounts may be borrowed under the facility in

Canadian dollars through prime rate loans, which bear interest at the greater of the bank’s prime rate and the Canadian

Deposit Offering Rate plus 1.00%, or bankers’ acceptances, which bear interest at bankers’ acceptance rates plus 0.75%.

Amounts may also be borrowed in U.S. dollars through base rate loans, which bear interest at the greater of the bank’s

reference rate for loans made by it in Canada in U.S. funds and the federal funds effective rate plus 1.00%, or LIBOR loans

which bear interest at LIBOR plus 0.75%.

CI may also borrow under this facility in the form of letters of credit, which bear a fee of 0.75% on any undrawn portion.

As at December 31, 2012 and 2011, CI had not accessed the facility by way of letters of credit.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Loans are made by the bank under a 364-day revolving credit facility, the term of which may be extended annually at the

bank’s option. If the bank elects not to extend the term, 50% of the outstanding principal amount shall be repaid in equal

quarterly instalments over the following two years, with the remaining 50% of the outstanding principal balance due two

years following the ﬁ rst quarter-end payment.

The credit facility is fully and unconditionally guaranteed by CI Investments, a wholly owned subsidiary of CI, and may be

guaranteed by certain other subsidiaries of CI. The credit facility contains a number of ﬁ nancial covenants that require CI

to meet certain ﬁ nancial ratios and ﬁ nancial condition tests. CI is within its ﬁ nancial covenants with respect to its credit

facility, which require that the funded debt to annualized earnings before interest, taxes, depreciation and amortization

ratio remain below 2.5:1 and that CI’s assets under management not fall below $40 billion, calculated based on a rolling

30-day average. There can be no assurance that future borrowings or equity ﬁ nancing will be available to CI or available

on acceptable terms.

Debentures

On December 17, 2012, CI repaid $250 million of debentures [the “2012 Debentures”] and on December 16, 2011, CI repaid

$100 million of ﬂ oating rate debentures [the “Floating Rate Debentures”].

On December 16, 2009, CI entered into interest rate swap agreements with a Canadian chartered bank to swap the semi-

annual ﬁ xed rate payments on the $250 million 2012 Debentures and the $200 million debentures due December 16, 2014

[the “2014 Debentures”] for ﬂ oating rate payments. Based on the terms of the agreements, CI pays a rate equivalent to the

three-month Canadian bankers’ acceptance rate plus a spread of 142.4 basis points on the 2012 Debentures and a spread of

157.6 basis points on the 2014 Debentures. The rates are reset quarterly and paid semi-annually to match the ﬁ xed payment

obligations of the Debentures. The swap agreements terminate on the maturity date of the respective Debentures unless

terminated by CI at an earlier date. The swap agreement on the 2012 Debentures terminated on the maturity date of

December 17, 2012. As at December 31, 2012, the fair value of the interest rate swap agreements was an unrealized gain of

$4,787 [December 31, 2011 - unrealized gain of $9,899] and is included in long-term debt in the consolidated statements of

ﬁ nancial position.

For the year ended December 31, 2012, interest expense attributable to the 2012 Debentures, the 2014 Debentures and the

2016 Debentures was $6,553, $5,722 and $11,820, respectively [2011 - $6,799, $5,740 and $11,885, respectively]. Interest on

the Floating Rate Debentures was paid at the average three-month bankers’ acceptance rate plus 1.20%. Interest expense

attributable to the Floating Rate Debentures was $2,385 for the year ended December 31, 2011.

Issuance costs and the issuance discount are amortized over the term of the Debentures using the effective interest rate

method. The amortization expense related to the discount and transaction costs for CI’s issued Debentures for the year

ended December 31, 2012 were $1,013 [2011 - $998] which is included in other expenses.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

CI may, at its option, redeem the 2014 Debentures, and CI Investments may, at its option, redeem the 2016 Debentures, in

whole or in part, from time to time, on not less than 30 nor more than 60 days’ prior notice to the registered holder, at a

redemption price which is equal to the greater of par or the Government of Canada Yield, plus 41 basis points in the case

of the 2014 Debentures and 37.5 basis points in the case of the 2016 Debentures. CI considers this embedded prepayment

option to be closely related to the Debentures and, as such, does not account for it separately as a derivative.

In the event that both a change of control occurs and the rating of the Debentures is lowered to below investment grade,

deﬁ ned as below BBB- by Standard and Poors and BBB (low) by DBRS Limited, CI will be required to make an offer to

repurchase all or, at the option of each holder, any part of each holder’s Debentures at a purchase price payable in cash

equivalent to 101% of the outstanding principal amount of the Debentures together with accrued and unpaid interest, to

the date of purchase.

The 2014 Debentures are fully and unconditionally guaranteed by CI Investments and may be guaranteed by certain other

subsidiaries of CI. The 2016 Debentures are fully and unconditionally guaranteed by CI.

6. PROVISION FOR OTHER LIABILITIES AND CONTINGENCIES

CI is a party to a number of claims, proceedings and investigations, including legal, regulatory and tax, in the ordinary

course of its business. Due to the inherent uncertainty involved in these matters, it is difﬁ cult to predict the ﬁ nal outcome

or the amount and timing of any outﬂ ow related to such matters. Based on current information and consultations with

advisors, CI does not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect

on its ﬁ nancial position or on its ability to continue normal business operations.

CI has made provisions based on current information and the probable resolution of any such claims, proceedings and

investigations. The movement in amounts provided for contingent liabilities and related expenses during the years ended

December 31, are as follows:

Provision for other liabilities, beginning of year

Additions

Amounts used

Unused amounts reversed

Provision for other liabilities, end of year

Current portion of provision for other liabilities

2012

8,947

1,659

(2,319)

(579)

7,708

1,097

2011

11,428

1,417

(1,597)

(2,301)

8,947

2,417

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

CI maintains insurance policies that may provide coverage against certain claims. Amounts receivable under these policies

are not accrued for unless the realization of income is virtually certain. During the year ended December 31, 2011, CI

received insurance proceeds of $16,004 related to the settlement of legal claims for 2011 and prior years [2012 – nil]. At

December 31, 2012, CI has accrued $475 for amounts to be received under insurance policies [2011 - $40], which is included

in accounts receivable.

Litigation

CI is a defendant to two class action lawsuits related to events and transactions that gave rise to a settlement agreement

with the Ontario Securities Commission in 2004. Although CI continues to believe that this settlement fully compensated

investors affected by frequent trading activity, a provision has been made based on the probable resolution of these

claims and related expenses.

Taxation

CI is subject to various uncertainties concerning the interpretation and application of Canadian tax laws. If tax authorities

disagree with CI’s application of such tax laws, CI’s proﬁ tability and cash ﬂ ows could be adversely affected. CI Investments

is considered a large case ﬁ le by the Canada Revenue Agency, and as such, is subject to audit each year. There is a

signiﬁ cant lag between the end of a ﬁ scal year and when such audits are completed. Therefore, at any given time, several

years may be open for audit and/or adjustment.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

7. SHARE CAPITAL

A summary of the changes to CI’s share capital is as follows:

[A] AUTHORIZED AND ISSUED

Common Shares

Authorized

An unlimited number of common shares of CI

Issued

Number of shares

Stated value

[in thousands]

Common shares, balance, December 31, 2010

287,434

1,984,488

Issuance of share capital on vesting of deferred equity units

and exercise of share options

Share repurchase

Common shares, balance, December 31, 2011

Issuance of share capital on exercise of share options

Share repurchase

Common shares, balance, December 31, 2012

863

(4,730)

283,567

722

(1,374)

282,915

12,575

(32,729)

1,964,334

9,633

(9,534)

1,964,433

During the year ended December 31, 2012, 1,374,300 shares [2011 - 4,729,800 shares] were repurchased under a normal

course issuer bid at an average cost of $22.22 per share [2011 - $20.13 per share] for total consideration of $30,534

[2011 - $95,194]. Deﬁ cit was increased by $21,000 [2011 - $62,465] for the cost of the shares repurchased in excess of their

stated value.

[B] EMPLOYEE INCENTIVE SHARE OPTION PLAN

CI has an employee incentive share option plan [the “Share Option Plan”], as amended and restated, for the executives

and key employees of CI.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

During the year, CI granted 2,232,412 options [2011 - 1,577,170 options] to employees. The fair value method of accounting is

used for the valuation of the 2012 and 2011 share option grants. Compensation expense is recognized over the three-year

vesting period, assuming an estimated forfeiture rate of 0% to 1.4%, [options issued 2011 – 0% to 1%], with an offset to

contributed surplus. When exercised, amounts originally recorded against contributed surplus as well as any consideration

paid by the option holder is credited to share capital. The fair value of the 2012 and 2011 option grants was estimated using

the Black-Scholes option-pricing model with the following weighted-average assumptions:

Year of grant

# of options grants [in thousands]

2012

243

2012

1,989

2011

370

2011

1,207

Dividend yield

4.892% – 5.257%

4.837% – 5.197%

4.514% – 4.833%

4.702% – 5.035%

Expected volatility (*)

18%

20%

Risk-free interest rate

1.335% – 1.439%

1.374% – 1.528%

2.276% – 2.637%

2.202% – 2.592%

Expected life [years]

Forfeiture rate

2.7 – 4.0

1.4%

3.0 – 4.2

Fair value per stock option

$1.81 – $2.01

$1.84 – $2.06

$2.40 – $2.71

$2.26 – $2.54

Exercise price

$21.73

$21.98

$22.45

$21.55

(*) Based on the historical volatility of CI’s share price

The maximum number of shares that may be issued under the Share Option Plan is 14,000,000 shares. As at December 31,

2012, there are 6,363,963 shares [2011 - 6,018,092 shares] reserved for issuance on exercise of share options. These options

vest over periods of up to ﬁ ve years, may be exercised at prices ranging from $11.60 to $22.45 per share and expire at dates

up to 2017.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

A summary of the changes in the Share Option Plan is as follows:

Options outstanding, December 31, 2010

Options exercisable, December 31, 2010

Options granted

Options exercised (*)

Options cancelled

Options outstanding, December 31, 2011

Options exercisable, December 31, 2011

Options granted

Options exercised (*)

Options cancelled

Options outstanding, December 31, 2012

Options exercisable, December 31, 2012

Number of options

exercise price

Weighted average

[in thousands]

6,270

727

1,577

(1,665)

(164)

6,018

1,585

2,232

(1,777)

(109)

6,364

2,418

15.50

13.52

21.76

12.90

18.02

17.80

15.96

21.95

13.32

21.05

20.45

18.34

(*) Weighted-average share price of options exercised was $22.15 during the year 2012 [2011 – $21.68]

The equity-based compensation expense under the Share Option Plan for the year ended December 31, 2012 of $3,886

[2011 - $7,000] has been included in selling, general and administrative expenses.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Options outstanding and exercisable as at December 31, 2012 are as follows:

Exercise price

options outstanding

remaining contractual life

options exercisable

Number of

Weighted average

Number of

11.60

12.57

15.59

18.20

19.48

21.27

21.55

21.73

21.98

22.45

11.60 to 22.45

[in thousands]

[years]

[in thousands]

503

153

120

135

1,714

1,081

243

1,956

370

6,364

1.2

0.9

1.3

1.4

2.4

2.2

3.1

4.4

4.1

3.2

2.9

503

153

120

135

1,029

331

––

123

2,418

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

[C] BASIC AND DILUTED EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per common share for the years ended

December 31:

[in thousands]

Numerator:

2012

2011

Net income – basic and diluted

$352,163

$376,899

Denominator:

Weighted average number of common shares – basic

Weighted average effect of dilutive stock options (*)

Weighted average number of common shares – diluted

Net earnings per common share

Basic

Diluted

283,390

640

284,030

$1.24

286,998

1,202

288,200

$1.31

(*) The determination of the weighted average number of common shares – diluted excludes nil shares related to stock options that

were anti-dilutive for the year ended December 31, 2012 [and 3,393 thousand shares for the year ended December 31, 2011].

[D] MAXIMUM SHARE DILUTION

The following table presents the maximum number of shares that would be outstanding if all the outstanding options as

at January 31, 2013 were exercised and outstanding:

[in thousands]

Shares outstanding at January 31, 2013

Options to purchase shares

283,193

5,029

288,222

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

8. DIVIDENDS

The following dividends were paid by CI during the year ended December 31, 2012:

Record date

Payment date

December 31, 2011

January 31, 2012

February 29, 2012

March 31, 2012

April 30, 2012

May 31, 2012

June 30, 2012

July 31, 2012

August 31, 2012

September 30, 2012

October 31, 2012

November 30, 2012

Paid during the year ended December 31, 2012

January 13, 2012

February 15, 2012

March 15, 2012

April 13, 2012

May 15, 2012

June 15, 2012

July 13, 2012

August 15, 2012

September 14, 2012

October 15, 2012

November 15, 2012

December 14, 2012

Cash dividend

Total dividend

per share

0.075

0.08

amount

21,220

21,274

22,703

22,698

22,705

22,666

22,667

22,668

22,647

22,648

22,646

22,642

269,184

The following dividends were declared but not paid by CI during the year ended December 31, 2012:

Record date

December 31, 2012

January 31, 2013

Declared and accrued as at December 31, 2012

Cash dividend

Total dividend

Payment date

January 15, 2013

February 15, 2013

per share

0.08

amount

22,627

45,254

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

The following dividends were paid by CI during the year ended December 31, 2011:

Cash dividend

Total dividend

Record date

Payment date

December 31, 2010

January 31, 2011

February 28, 2011

March 31, 2011

April 30, 2011

May 31, 2011

June 30, 2011

July 31, 2011

August 31, 2012

September 30, 2012

October 31, 2012

November 30, 2012

January 14, 2011

February 15, 2011

March 15, 2011

April 15, 2011

May 13, 2011

June 15, 2011

July 15, 2011

August 15, 2011

September 15, 2012

October 14, 2012

November 15, 2012

December 15, 2012

per share

0.07

0.075

Paid during the year ended December 31, 2011

The following dividends were declared but not paid by CI during the year ended December 31, 2011:

amount

20,146

20,179

20,183

21,615

21,620

21,632

21,634

21,501

21,569

21,500

21,324

21,298

254,201

Record date

Payment date

per share $

dividend amount $

Cash dividend

Total

December 31, 2011

January 31, 2012

Declared and accrued as at December 31, 2011

January 13, 2012

February 15, 2012

0.075

21,263

42,526

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

9. INCOME TAXES

[a] The following are the major components of income tax expense for the years ended December 31:

Statement of Income

Current income tax expense

Based on taxable income of the current year

Adjustments in respect of prior years

Deferred income tax expense

Origination and reversal of temporary differences

Other

Income tax expense reported in the statement of income

Statement of Other Comprehensive Income (Loss)

Deferred income taxes

Unrealized gain (loss) on available-for-sale ﬁ nancial assets

Reversal of losses to net income on available-for-sale ﬁ nancial assets

Income tax expense (recovery) reported in other comprehensive income (loss)

2012

136,653

(2,561)

134,092

17,417

105

17,522

151,614

287

306

2011

132,387

(967)

131,420

12,203

548

12,751

144,171

(449)

125

(324)

[b] The following is a reconciliation between CI’s statutory and effective income tax rates for the years ended December 31:

Combined Canadian federal and provincial income tax rate

Increase (decrease) in income taxes resulting from

Impact of rate changes on deferred income taxes

Recovery of prior years’ provisions for settled tax items

Other, net

2012

26.5

3.6

(0.5)

0.5

30.1

2011

28.2

(1.0)

0.4

0.1

27.7

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

[c] Deferred income taxes reﬂ ect the net tax effects of temporary differences between the carrying amounts of assets and

liabilities for ﬁ nancial reporting purposes and the amounts used for income tax purposes. Signiﬁ cant components of CI’s

deferred income tax liabilities and assets are as follows at December 31, 2012:

Recognized

in other

As at

Recognized in

comprehensive

As at

December 31, 2011

net income

income (loss) December 31, 2012

261,732

122,854

384,586

6,104

8,140

2,174

6,966

23,384

361,202

12,885

(5,135)

7,750

(5,070)

(3,222)

(305)

(1,175)

(9,772)

17,522

—

(306)

306

274,617

117,719

392,336

1,034

4,918

1,869

5,485

13,306

379,030

Deferred income tax liabilities

Fund contracts

Deferred sales commissions

Total deferred income tax liabilities

Deferred income tax assets

Equity-based compensation

Non-capital loss carryforwards

Provisions for other liabilities

Other

Total deferred income tax assets

Net deferred income tax liabilities

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Signiﬁ cant components of CI’s deferred income tax liabilities and assets are as follows at December 31, 2011:

Recognized

in other

As at

Recognized in

comprehensive

As at

December 31, 2010

net income

income (loss) December 31, 2011

264,831

132,874

397,705

6,576

32,652

2,609

7,093

48,930

348,775

(3,099)

(10,020)

(13,119)

(472)

(24,512)

(435)

(451)

(25,870)

12,751

—

324

(324)

261,732

122,854

384,586

6,104

8,140

2,174

6,966

23,384

361,202

Deferred income tax liabilities

Fund contracts

Deferred sales commissions

Total deferred income tax liabilities

Deferred income tax assets

Equity-based compensation

Non-capital loss carryforwards

Provisions for other liabilities

Other

Total deferred income tax assets

Net deferred income tax liabilities

The ultimate realization of deferred tax assets is dependent upon future taxable proﬁ ts during the periods in which

those temporary differences become deductible. Management considers the expected reversal of deferred tax liabilities

and projected future taxable income in making this assessment. Based upon the level of historical taxable income and

projections for future taxable income over the periods in which the deferred tax assets are deductible, management

believes it is probable that CI will realize the beneﬁ ts of these deductible differences.

10. FINANCIAL INSTRUMENTS

Financial assets are classiﬁ ed into three categories, FVPL, loans and receivables and available-for sale. As at December 31, 2012,

FVPL assets include cash and cash equivalents carried at fair value and classiﬁ ed as Level 1 fair value hierarchy of $24,137

[December 31, 2011 - $122,550,]. The carrying amount of loans and receivables include client and trust funds on deposit

of $127,712 [December 31, 2011 - $124,978 ], accounts receivable of $62,585 [December 31, 2011 - $63,300] and other assets

of $18,252 [December 31, 2011 - $18,184]. AFS assets as at December 31, 2012 include CI’s marketable securities of $66,155

carried at fair value of which $26,875 have been classiﬁ ed in the Level 1 fair value hierarchy and $39,280 in the Level 2 fair

value hierarchy, respectively [December 31, 2011 - $42,099 and $25,798 in the Level 1 fair value hierarchy and $16,301 in the

Level 2 fair value hierarchy, respectively].

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Financial liabilities are classiﬁ ed into two categories, FVPL and other liabilities. Included in accounts payable and accrued

liabilities as at December 31, 2012 is $2,940 classiﬁ ed as Level 1 fair value hierarchy [December 31, 2011 – $460]. Other

liabilities include accounts payable and accrued liabilities of $115,250 [December 31, 2011 - $118,745], dividends payable of

$45,254 [December 31, 2011 - $42,526] and long-term debt of $594,368 [December 31, 2011 - $780,355].

For all other ﬁ nancial assets and ﬁ nancial liabilities, the carrying value approximates fair value due to the short-term nature

of these instruments.

11. RISK MANAGEMENT

Risk management is an integrated process with independent oversight. CI’s management and compliance group has

established a control environment that ensures risks are reviewed regularly and that risk controls throughout CI are

operating in accordance with regulatory requirements. CI’s senior management takes an active role in the risk management

process by reviewing policies and procedures within each business segment and assessing and mitigating the various

ﬁ nancial risks that could impact CI’s ﬁ nancial position and results of operations.

CI’s ﬁ nancial instruments bear the following ﬁ nancial risks:

[A] MARKET RISK

Market risk is the risk of a ﬁ nancial loss resulting from adverse changes in underlying market factors, such as interest

rates, foreign exchange rates, and equity prices. Management of CI’s market risk is the responsibility of the Chief Financial

Ofﬁ cer. The corporate ﬁ nance group reviews the exposure to interest rate risk, foreign currency risk and equity risk

by identifying, monitoring and reporting potential market risks to the Chief Financial Ofﬁ cer. A description of each

component of market risk is described below:

Interest rate risk is the risk of gain or loss due to the volatility of interest rates.
Foreign exchange risk is the risk of gain or loss due to volatility of foreign exchange rates.
 Equity risk is the risk of gain or loss due to the changes in the prices and the volatility of individual equity instruments

and equity indexes.

CI’s ﬁ nancial performance is indirectly exposed to market risk. Any decline in ﬁ nancial markets or lack of sustained growth

in such markets may result in a corresponding decline in the performance and may adversely affect CI’s assets under

management and ﬁ nancial results.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

[i] Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect the value of ﬁ nancial instruments.

Fluctuations in interest rates have a direct impact on the interest payments CI makes on its long-term debt.

Debt outstanding on CI’s credit facility of $96,000 [2011 - $33,000] is borrowed at a ﬂ oating interest rate. The existing

credit facility provides CI with the option of ﬁ xing interest rates, should CI change its view on its exposure to rising interest

rates. As at December 31, 2012, CI also has $500,000 ﬁ xed interest rate Debentures [2011 - $750,000]. In 2009 CI entered

into interest rate swap agreements with a Canadian chartered bank to convert the ﬁ xed interest rates on $250,000 of the

2012 Debentures and $200,000 of the 2014 Debentures to ﬂ oating interest rates.

Based on the amount borrowed under the credit facility and Debentures outstanding as at December 31, 2012, each 0.50%

increase or decrease in interest rates would result in annual interest expense increasing or decreasing by $1.5 million [2011

- $2.4 million], respectively.

[ii] Foreign exchange risk

As at December 31, 2012, net ﬁ nancial assets of $8 million [2011 - $7 million] were denominated in U.S. currency. A 10%

increase or decrease in U.S. exchange rates would result in a foreign exchange gain or loss of $0.8 million [2011 - $0.7

million], respectively. CI may enter into forward contracts to manage its foreign exchange exposure.

[iii] Equity risk

CI’s marketable securities as at December 31, 2012 of $66,155 [2011 - $42,099] are exposed to equity risk. Based on the

carrying amount of these assets, an increase or decrease in equity market prices by 10% would result in estimated gains

or losses of $6.6 million [2011 - $4.2 million], respectively.

[B] LIQUIDITY RISK

Liquidity risk arises from the possibility that CI will encounter difﬁ culties in meeting its ﬁ nancial obligations as they fall

due. CI manages its liquidity risk through a combination of cash received from operations as well as borrowings under its

revolving credit facility. Liquidity is monitored through a daily cash management process that includes the projection of

cash ﬂ ows to ensure CI meets its funding obligations.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

CI’s liabilities have contractual maturities, excluding interest payments, as follows:

Total

Accounts payable and accrued liabilities

119,721

Dividends payable

Client and trust funds payable

Long-term debt

Total

45,254

125,773

596,000

886,748

2013

119,721

45,254

125,773

24,000

314,748

2014

—

224,000

2015

—

48,000

2016

—

300,000

[C] CREDIT RISK

Credit risk arises from the potential that investors, clients or counterparties fail to satisfy their obligations.

As at December 31, 2012, ﬁ nancial assets of $208,549 [2011 - $206,462], represented by client and trust funds on deposit of

$127,712 [2011 - $124,978], accounts receivable of $62,585 [2011 - $63,300] and other assets of $18,252 [2011 - $18,184], were

exposed to credit risk. CI does not have a signiﬁ cant exposure to any individual counterparty. Credit risk is mitigated by

regularly monitoring the credit performance of each individual counterparty and holding collateral, where appropriate.

Client and trust funds on deposit consist mainly of cash deposits or unsettled trade receivables. CI may also extend

amounts to clients on a margin basis for security purchases. Collateral is provided in margin accounts by each client in

the form of securities purchased and/or other securities and cash balances. The credit extended is limited by regulatory

requirements and by CI’s internal credit policy. Credit risk is managed by dealing with counterparties CI believes to be

creditworthy and by actively monitoring credit and margin exposure and the ﬁ nancial health of the counterparties.

Credit risk associated with accounts receivable is limited as the balance primarily consists of trade receivables that are

outstanding for less than 90 days.

Other assets primarily represent loans granted under CI’s employee share purchase plan and loans extended to investment

advisors under CI’s hiring and incentive program. Employee loans are collateralized by CI shares and become due

immediately upon termination of the employee or upon the sale of the shares held as collateral. Commissions may be

used to offset loan amounts made to investment advisors in the event of default. Credit risk associated with other assets

is limited given the nature of the relationship with the counterparties.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

12. CAPITAL MANAGEMENT

CI’s objectives in managing capital are to maintain a capital structure that allows CI to meet its growth strategies and build

long-term shareholder value, while satisfying its ﬁ nancial obligations and meeting its long-term debt covenants.

CI’s capital is comprised of shareholders’ equity and long-term debt [including current portion of long-term debt]. CI’s

senior management is responsible for the management of capital. CI’s Board of Directors is responsible for reviewing and

approving CI’s capital policy and management.

CI and its subsidiaries are subject to minimum regulatory capital requirements whereby sufﬁ cient cash and other liquid

assets must be on hand to maintain capital requirements rather than using them in connection with its business. Failure

to maintain required regulatory capital by CI may result in ﬁ nes, suspension or revocation of registration by the relevant

securities regulator. As at December 31, 2012 and 2011, CI met its capital requirements.

CI’s capital consists of the following:

As at

December 31, 2012

December 31, 2011

1,675,988

594,368

2,270,356

1,620,185

780,355

2,400,540

Shareholders’ equity

Long-term debt

Total capital

13. COMMITMENTS

Lease commitments

CI has entered into leases relating to the rental of ofﬁ ce premises and computer equipment. CI has the option to renew

certain leases. The approximate future minimum annual rental payments under such leases are as follows:

2013

2014

2015

2016

2017

2018 and thereafter

11,030

9,621

9,054

8,989

8,574

57,604

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Advisor services agreements

CI is a party to certain advisor services agreements, which provide that the advisor has the option to require CI to

purchase a practice that cannot otherwise be transitioned to a qualiﬁ ed buyer. The purchase price would be in accordance

with a pre-determined formula contained in the advisor services agreements.

Indemnities

CI has agreed to indemnify its directors and ofﬁ cers, and certain of its employees in accordance with its by-laws.

CI maintains insurance policies that may provide coverage against certain claims.

14. RELATED PARTY TRANSACTIONS

The Bank of Nova Scotia [“Scotiabank”] owns approximately 37% of the common shares of CI, and is therefore considered a

related party. CI has entered into transactions related to the advisory and distribution of its mutual funds with Scotiabank

and its related parties. These transactions are in the normal course of operations and are recorded at the agreed upon

exchange amounts. During the year ended December 31, 2012, CI incurred charges for deferred sales commissions of

$4,926 and trailer fees of $20,278, respectively [2011 - $4,896 and $19,978, respectively] which were paid or payable to

Scotiabank and its related parties. The balance payable to Scotiabank and its related parties as at December 31, 2012 of

$1,745 [December 31, 2011 - $1,681] is included in accounts payable and accrued liabilities.

Scotiabank was the provider of and administrative agent for CI’s revolving credit facility during the period January 1, 2011

to March 17, 2011. During the period January 1, 2011 to March 17, 2011, interest and stamping fees of $389 were recorded as

interest expense.

Also, on December 16, 2009, CI entered into an interest rate swap agreement with Scotiabank as described in Note 5.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

15. SEGMENTED INFORMATION

CI has two reportable segments: Asset Management and Asset Administration. These segments reﬂ ect CI’s internal

ﬁ nancial reporting and performance measurement.

The Asset Management segment includes the operating results and ﬁ nancial position of CI Investments and CI Private

Counsel LP, which derive their revenues principally from the fees earned on the management of several families of mutual

and segregated funds.

The Asset Administration segment includes the operating results and ﬁ nancial position of AWM and its subsidiaries,

including Assante Capital Management Ltd. and Assante Financial Management Ltd. These companies derive their

revenues principally from commissions and fees earned on the sale of mutual funds and other ﬁ nancial products, and

ongoing service to clients.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Segmented information as at and for the year ended December 31, 2012 is as follows:

Asset

Intersegment

management

administration

eliminations

Total

1,277,698

—

39,051

1,316,749

233,285

389,066

—

220,722

15,008

235,730

52,724

—

174,464

—

1,277,698

(94,737)

—

125,985

54,059

(94,737)

1,457,742

—

(15,112)

(76,201)

286,009

373,954

98,263

168,110

2,029

1,562

3,236

(4,135)

165,537

—

5,265

792,490

231,986

(95,448)

929,028

524,259

3,744

711

528,714

(24,937)

(151,614)

352,163

599,957

264,359

(11,709)

852,607

927,344

192,582

—

1,119,926

999,082

456,941

(11,709)

2,971,615

999,082

2,526,383

Management fees

Administration fees

Other revenue

Total revenue

Selling, general and administrative

Trailer fees

Investment dealer fees

Amortization of deferred sales

commissions and intangibles

Other expenses

Total expenses

Income before income taxes

and non-segmented items

Interest expense

Provision for income taxes

Net income for the year

Identiﬁ able assets

Indeﬁ nite life intangibles

Goodwill

Fund contracts

Total assets

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

Segmented information as at and for the year ended December 31, 2011 is as follows:

Management fees

Administration fees

Other revenue

Total revenue

Selling, general and administrative

Trailer fees

Investment dealer fees

Amortization of deferred sales

commissions and intangibles

Other expenses

Total expenses

Income before income taxes

and non-segmented items

Interest expense

Provision for income taxes

Net income for the year

Identiﬁ able assets

Indeﬁ nite life intangibles

Goodwill

Fund contracts

Total assets

Asset

Intersegment

management

administration

eliminations

Total

1,302,773

—

45,558

1,348,331

235,938

394,059

—

226,179

15,690

241,869

54,838

—

179,529

—

1,302,773

(93,907)

—

132,272

61,248

(93,907)

1,496,293

—

(14,605)

(75,776)

290,776

379,454

103,753

169,665

4,178

1,504

2,749

(4,352)

166,817

—

6,927

803,840

238,620

(94,733)

947,727

544,491

3,249

826

548,566

(27,496)

(144,171)

376,899

731,810

246,536

(12,372)

965,974

927,344

192,582

—

1,119,926

999,082

2,658,236

439,118

(12,372)

3,084,982

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

16. COMPENSATION OF KEY MANAGEMENT

The remuneration of directors and other key management personnel of CI during the years ended December 31, is as follows:

Salaries

Equity-based compensation

Total

17. FUTURE ACCOUNTING CHANGES

2012

10,746

878

11,624

2011

9,887

1,365

11,252

CI is currently evaluating the impact the following new standards issued by the IASB will have on its ﬁ nancial statements.

CI will has not yet determined whether to early adopt IFRS 9 – Financial Instruments.

International Accounting Standard

IFRS 10 – Consolidated Financial Statements

IFRS 12 – Disclosures of Interests in Other Entities

IFRS 13 – Fair Value Measurement

IFRS 9 – Financial Instruments

Issue Date

May 12, 2011

November 12, 2009

Effective Date

January 1, 2013

January 1, 2015

IFRS 10 Consolidated Financial Statements (“IFRS 10”) replaces the consolidation requirements in SIC-12, Consolidation – Special

Purpose Entities and IAS 27, Consolidated and Separate Financial Statements. IFRS 10 builds on existing principles by identifying

the concept of control as the determining factor in whether an entity should be included within the consolidated ﬁ nancial

statements of the parent company.

IFRS 12 Disclosures of Interests in Other Entities establishes disclosure requirements for interests in other entities, including

subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing

disclosures and also introduces signiﬁ cant additional disclosure requirements that address the nature of, and risks associated

with, an entity’s interest in other entities.

Notes to Consolidated Financial Statements
[in thousands of Canadian dollars, except per share amounts]

December 31, 2012 and 2011

IFRS 13 Fair Value Measurement establishes the deﬁ nition of fair value and sets out a single IFRS framework for measuring fair

value and the required disclosures.

IFRS 9 Financial Instruments (“IFRS 9”) will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9

uses a single approach to determine whether a ﬁ nancial asset is measured at amortized cost or fair value, replacing the multiple

rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its ﬁ nancial instruments in the context of its business

model and the contractual cash ﬂ ow characteristics of the ﬁ nancial assets. The new standard also requires a single impairment

method to be used, replacing the multiple impairment methods in IAS 39.

18. COMPARATIVE FIGURES

Certain comparative ﬁ gures have been reclassiﬁ ed to conform to the consolidated ﬁ nancial statement presentation in the

current year.

Corporate Directory

CI Financial

DIRECTORS

Ronald D. Besse
President,
Besseco Holdings Inc.;
Lead Director
Toronto, Ontario

Stephen A. MacPhail
President and
Chief Executive Ofﬁ cer,
CI Financial;
Director
Toronto, Ontario

OFFICERS

G. Raymond Chang
President,
G. Raymond Chang Ltd.;
Director
Toronto, Ontario

Stephen T. Moore
Managing Director,
Newhaven Asset
Management Inc.;
Director
Toronto, Ontario

Paul W. Derksen
Corporate Director;
Director
Clarksburg, Ontario

Tom P. Muir
Co-Managing Director,
Muir Detlefsen & Associates
Limited;
Director
Toronto, Ontario

William T. Holland
Chairman;
Director
Toronto, Ontario

A. Winn Oughtred
Corporate Director;
Director
Toronto, Ontario

Clay Horner
Partner,
Osler, Hoskin & Harcourt LLP;
Director
Toronto, Ontario

David J. Riddle
President,
C-Max Capital Inc.;
Director
Vancouver, B.C.

Stephen A. MacPhail
President and
Chief Executive Ofﬁ cer

Sheila A. Murray
Executive Vice-President,
General Counsel and Secretary

Douglas J. Jamieson
Senior Vice-President and
Chief Financial Ofﬁ cer

David C. Pauli
Executive Vice-President and
Chief Operating Ofﬁ cer

CI Investments

EXECUTIVES

Derek J. Green
President

Douglas J. Jamieson
Senior Vice-President and
Chief Financial Ofﬁ cer

David C. Pauli
Executive Vice-President and
Chief Operating Ofﬁ cer

Chris von Boetticher
Vice-President,
General Counsel and Secretary

Assante Wealth Management

EXECUTIVES

Steven J. Donald
President

James E. Ross
Senior Vice-President,
Wealth & Estate Planning

Robert J. Dorrell
Senior Vice-President,
Distribution Services

Corporate Information

Head Office

2 Queen Street East
Twentieth Floor
Toronto, Ontario M5C 3G7
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
www.ciﬁ nancial.com

Administration Office

15 York Street
Second Floor
Toronto, Ontario M5J 0A3

Investor Relations

Contact: Douglas J. Jamieson, Senior Vice-President and Chief Financial Ofﬁ cer
Telephone: 416-364-1145
Toll Free: 1 800 268-9374
E-mail: investorrelations@ci.com

Trading Symbol

CI Financial trades on the Toronto Stock Exchange under the symbol “CIX”.

Auditors

Ernst & Young LLP
Chartered Accountants
Toronto-Dominion Centre
P.O. Box 251
Toronto, Ontario M5K 1J7

Registrar and Transfer Agent

Computershare Investor Services Inc.
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1 800 564-6253
E-mail: caregistry@computershare.com

Normal Course Issuer Bid

Effective May 29, 2012, the Toronto Stock Exchange accepted CI’s notice of
intention to commence a normal course issuer bid (the “Notice”) through the
facilities of the Toronto Stock Exchange. Under the bid, CI may purchase up
to 6,000,000 Shares at the prevailing market price. Purchases under the bid
will terminate no later than May 28, 2013. As of March 31, 2013, CI has acquired
an aggregate of 528,100 Shares under the normal course issuer bid at an average
price of $22.80 per Share. Shareholders may obtain a copy of the Notice, without
charge, by contacting the Corporate Secretary of CI. The Corporation intends to
renew its Normal Course Issuer Bid effective May 29, 2013, subject to receipt of
approval from the Toronto Stock Exchange.

Shareholder rights plan

The Corporation entered into an agreement (the “Rights Plan Agreement”) dated
as of January 1, 2009 with Computershare Investor Services Inc., as rights agent,
in connection with the adoption of a shareholder rights plan (the “Rights Plan”).
The Corporation obtained the approval to amend and continue the Rights Plan
for a further term of three years, at the annual and special meeting of shareholders
held on June 1, 2011. Accordingly, the Rights Plan will terminate at the close of the
annual meeting of shareholders in 2014. The Notice of Meeting and Management
Information Circular of the Corporation dated May 2, 2011 includes a summary
of the Amended and Restated Rights Plan approved by the shareholders. The
complete text may be found on SEDAR at www.sedar.com.

Digital Report

This Annual Report can be downloaded from CI’s website at www.ciﬁ nancial.com
under “Reports”.

2012

This Report contains forward-looking statements with respect to CI, including its business operations and strategy and ﬁ nancial

performance and condition. Although management believes that the expectations reﬂ ected in such forward-looking statements are

reasonable, such statements involve risks and uncertainties. Actual results may differ materially from those expressed or implied by

such forward-looking statements. Factors that could cause results to differ materially include, among other things, general economic

and market factors, including interest rates, business competition, changes in government regulations or in tax laws, and other factors

discussed in materials ﬁ led with applicable securities regulatory authorities from time to time.

1302-0221_E (04/13)