Give me a higher return The Signature Income & Growth story Finding income in a low yield world Relative value in a traditional balanced asset mix Forward earnings yield based on IBES 12-month forward S&P 500 earnings Income opportunities – high-yield bonds “Yield is a head start on outperformance” High yield: 90% of the monthly return of stocks with 45% of the volatility = 2x higher risk-adjusted returns –– High yield cumulative return –– S&P 500 cumulative return Offset equity volatility Offset interest rate risk High-yield bonds More to credit analysis than credit ratings: High-yield bonds More to credit analysis than credit ratings: Sears overview More to credit analysis than credit ratings: • Retailing icon founded in 1893 • 4,000 Retail Locations, #4 Broadline retailer in the U.S. • Hedge fund ownership • Sears and Kmart combined in March 2005 • Strategy remains adrift, financial results deteriorating Neiman Marcus overview More to credit analysis than credit ratings: • Women’s luxury apparel retailer • 44 stores in the U.S. including Bergdorf Goodman in New York • 2005 private equity leveraged buyout • Luxury consumer is back • InCircle customer focus sets them apart • Store growth has resumed Income opportunities: High-yield bonds Bond comparison Call schedule Structure Credit ratings at time of issue Credit ratings now Sears Holding <SHLF> Neiman Marcus <NMG> 6.625% due 10/15/2018 10.375% due 10/15/2015 Non-callable With 30 days notice at 103.458 or at 101.729 beginning 10/15/12 Senior secured Senior subordinated Ba1 / BB+ (September 2010) B3 / B(September 2005) B2 / B (Negative outlook both) Caa1 / B(both Stable) Four C’s of credit analysis: Capacity to repay Sears Neiman Marcus • 90% decline in EBITDA since ~2006 • 18 quarters of negative same-store sales growth • $40 billion in sales, ~$400mm in capital expenditures • Canada no longer an ATM • Answer = asset sales • EBITDA approaching prerecession highs • Positive same-store sale growth trend since 2010 • Sponsor dividend funded by cash on hand • Capital markets receptive to this company Advantage: NMG Four C’s of credit analysis: Character Sears Neiman Marcus • Revolving door • New CEO, promoted from management – new CEO within has no previous retail • Depth and longevity to experience management team • Asset stripping and • Best-in-class private self-dealing company disclosure • Weak reporting standards • Reasonable shareholder and high executive activity turnover • Unreasonable shareholder activity Advantage: NMG Four C’s of credit analysis: Collateral Sears Neiman Marcus • Significant inventories • Material owned real estate assets • Valuable brands: Kenmore, Craftsman, DieHard • Land’s End • Sears Canada • Small proportion of owned real estate • Merchandise inventory subject to fashion risk • Business model generates consistent cash flow • International markets remain untapped Advantage: Tie Four C’s of credit analysis: Covenants Sears Neiman Marcus • 2nd lien on inventory and accounts receivable with put right • Yard sale of real estate and brands continues • Introduction of additional secured debt probable • Unlimited restricted payments • Most junior debt in capital structure • No security • Significant layering possible • ‘Covenant-lite’ capital structure • Restricted payments largely exhausted Advantage: Tie Income opportunities: High-yield bonds Price difference: bad business = volatility 110 105 100 95 90 85 80 75 –– Nieman Marcus Bond –– Sears bond 70 Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 Source: Bank of America Income opportunities: High-yield bonds Performance difference: aiming for ‘boring’ Value of $10,000 invested SHLD NMG $12,000 $11,000 $10,000 $9,000 Cumulative performance since September 2010 Source: Bank of America Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10 $8,000 SHLD6.625% NMG10.375% -1.4% 17.5% What happens when interest rates rise? High yield and U.S. investment grade bond return correlations to 5-year U.S. Treasuries (52 week trailing) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 2000 2002 2004 2006 U.S. Investment Grade (Total Returns) Source: Bank of America 2008 2010 U.S. High Yield (Total Returns) 2012 What happens when interest rates rise? High-yield bond returns during past federal funds rate tightening episodes (total returns/not annualized) Source: UBS (Federal Reserve Board and Bureau of Economic Analysis) Index data is Bank of America Merrill High Yield Master II Index in USD Ways to gain exposure to Signature’s high-yield bond portfolio Fund name Exposure to high-yield bond portfolio (%) Signature High Yield Bond Fund 100% Signature Corporate Bond Fund 59% Signature Diversified Yield Fund 47% Signature High Income Fund 35% Select Income Advantage Managed CC 22% Signature Income & Growth Fund 17% Source: CI Investments, March 2012 CI Signature Diversified Yield Fund Signature Diversified Yield Fund Quartile *Inception November 2009 Source: Globefund YTD 1 Year 2 Year Since inception* 5.1% 1.9% 6.2% 6.1% 1 2 1 n/a CI Signature High Income Fund Signature High Income Fund Quartile *Inception December 1996 Source: Globefund 1 Year 3 Year 5 Year 10 Year Since inception* 3.7% 18.1% 4.5% 9.2% 9.7% 1 1 1 1 N/A CI Signature Corporate Bond Fund Signature Corporate Bond Fund Quartile *Inception December 2001 Source: Globefund 1 Year 3 Year 5 Year 10 Year Since inception* 5.3% 11.6% 5.1% 4.7% 4.5% 2 3 2 3 N/A The Hype was Real – Just The Timing was Wrong Source: Gartner, Bloomberg More Devices than People Source: Intel Facebook – the largest country in the world Facebook users (in millions) Source: Facebook; Graph by Ben Foster Facebook – we know where you live & who you know Source: Facebook More data than the world has ever seen Source: Passive Pundits Powered by Virtual Cities of Infrastructure What is 10PB; Source: Backblaze Yes, they do make money … Source: Google … And the possibilities are unthinkable Source: IBM Malcolm White – Portfolio Manager Malcolm White, CFA Vice-President, Portfolio Management and Portfolio Manager with Signature Global Advisors of CI Investments Inc., has over 16 years of investment experience in a career that included analytic roles at Merrill Lynch Canada and First Marathon Securities (now National Bank Financial). Malcolm specializes in the technology, media and telecommunications sectors. He was selected as one of Canada’s Top 50 Portfolio Managers and global industry expert in recent Brendan Wood International surveys. Disclaimer Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc.