Capital growth with downside protection

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Capital growth with downside protection

• Cambridge Advisors

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Cambridge team
Brandon Snow Principal Portfolio Manager
Alan Radlo Chief Investment Officer Portfolio
Manager
Robert Swanson Principal Portfolio Manager
Emi Winterer Analyst
Stephen Groff Analyst
Greg Dean Analyst
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Importance of downside protection
Big losses make growing capital much more
difficult
STARTING DECLINE RETURN REQUIRED TO GET BACK TO EVEN
100 -1 1.1
100 -15 18
100 -25 33
100 -50 100
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Importance of downside protection
Protecting capital should lead to better compound
returns
STARTING DECLINE YEAR 2 RETURN TOTAL
100 -1 10 8.9
100 -15 20 2
100 -25 33 0
100 -50 100 0
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Philosophy

• Long-term holdings
• Management aligned with shareholders
• Strong capital allocation
• Competitive advantage
• Examples
• CN Rail
• Enghouse
• Couche-Tard

• Short-term investments
• Information edge
• An industry where we have experience
• Path to value recognition
• Examples
• F5 Networks
• Petroleum Geo-Services ASA
• Eagle Materials

Attractive risk/reward
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Our sell discipline

• Short-term investments
• Reaches fair value
• Thesis was wrong

Long-term holdings Valuation becomes
excessive Thesis changes
We find better opportunities
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Long-term holding example Couche Tard
Need 20 yr chart for ATD/B CN Equity
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Short-term investment Eagle Materials
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Downside protection in a difficult year
  YTD 2011 3 Year Inception
Cambridge Canadian Asset Allocation 3.7 -0.7 11.9 3.3
Quartile 2 1 1 n/a
Cambridge Canadian Equity 7.8 -1.3 13.3 2.9
Quartile 1 1 1 n/a
Cambridge Global Equity 14.4 -12.0 10.4 2.0
Quartile 1 4 1 n/a
Castlerock Canadian Growth A 16.8 n/a n/a 17.9
Quartile 1 n/a n/a n/a
Castlerock Pure Canadian Equity 11.9 n/a n/a 10.5
Quartile 1 n/a n/a n/a
Source Paltrak As of April 30, 2012
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Why invest with Cambridge? Results
Source CI Investment Consulting
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Market outlook
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Todays issues

• The negatives
• European debt resolution and austerity measures
• Slowing growth in China and developing markets
• U.S. headwinds from deleveraging and fiscal
  restraint
• Canada personal debt levels and home prices

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Todays issues

• The positives
• Current European policymakers more market
  friendly than predecessors
• U.S. economic indicators improving housing
  bottoming unemployment topping

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Key takeaways

• Global growth slowing, but still positive
• Increasingly confident of European resolution
• Low interest rates and improving earnings make
  North American equities attractive
• Systematic risk still warrants a conservative
  approach
• Large, stable dividend paying stocks
• Short to intermediate investment non-investment
  grade bonds
• Diverse set of income instruments
• Preferreds
• Convertible Bonds
• Infrastructure
• Selected REITs

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The case for equities
Source Stifel Nicolaus
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Dividends on high-quality companies exceed yields
on high-quality bonds
Source Deutsche Bank, Bloomberg
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Why invest with Cambridge?
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Why invest with Cambridge?

• Flexibility we arent the index
• Nimble asset base
• Open mandates
• Conviction in what we own
• We talk to management often
• Site tours
• Aligned with fundholders
• Focus on absolute returns

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The importance of flexibility
SP/TSX - Current
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As at March 30, 2012
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The importance of flexibility
SP/TSX Dec 31, 1999
SP/TSX - Current
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Cambridge doesnt replicate the benchmark
Sector Cambridge Canadian Equity CC SP/TSX Difference Cambridge Canadian Asset Allocation CC 60 SPTSX/ 40 DEX Universe Difference
Cash 14   14 5   5
Bonds -   - 16 40 -24
Financials 16 31 -15 23 19 4
Energy 14 26 -12 16 16 -
Materials 3 20 -17 6 12 -6
Consumer Discretionary 6 4 2 4 3 1
Consumer Staples 12 3 9 7 2 5
Information Technology 13 1 12 9 1 8
Telecomm Services - 5 -5 1 3 -2
Industrials 14 6 8 6 2 4
Health Care 5 2 3 3 1 2
Utilities 3 2 1 4 1 3
Source Paltrak, March 30, 2012
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Cambridge doesnt replicate the benchmark
Castlerock Growth Companies Top holdings as at April 30, 2012 Castlerock Growth Companies Top holdings as at April 30, 2012
Alimentation Couche-Tard 4.8
Trilogy Energy Corp 4.1
Brick Brewing Co. 3.9
Bauer Performance Sports 3.3
Shoppers Drug Mart 3.2
Brookfield Asset Management 3.1
Enghouse Systems Ltd 2.6
Stewart Info Svcs 2.5
ATS Automation Tooling System 2.5
Boyd Group Income Fund 2.2
Total 32.2
Cambridge Canadian Equity Top holdings as at April 30, 2012 Cambridge Canadian Equity Top holdings as at April 30, 2012
Alimentation Couche-Tard 6.7
Shoppers Drug Mart 4.5
Tourmaline Oil Corp. 4.5
Metro Inc 3.7
Brookfield Infrastructure LP 3.2
Keyera Corp. 3.0
Progressive Waste Solutions 3.0
Trilogy Energy Corp. 2.9
Brookfield Asset Management 2.8
MI Development 2.6
Total 36.9
Source CI Investments
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New fund

• Cambridge Income Fund

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Cambridge Income Fund
Cambridge Income Fund provides investors with
what they are looking for a stable source of
tax-efficient income that will keep them ahead of
inflation. Similar to all Cambridge funds, it has
low volatility and downside protection built in.
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Cambridge Income Fund

• Combination of global fixed income and
  high-yielding equities
• Diversified across regions, sectors and capital
  structure
• Focus on income stability, with potential for
  capital appreciation and inflation protection

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Bonds are guaranteeing capital losses for clients
Company DividendYield Bond Price at Dividend Yield Required Capital Loss
Bristol-Myers 4.1 110.2 -9.3
Unilever 3.7 110.4 -9.4
Pfizer 3.8 113.0 -11.5
JNJ 3.8 110.9 -9.8
Merck 4.3 114.1 -12.4
  (as at April 27th) (4 to 6 year bond) Compound annual return
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Stocks vs. bonds the Metro story
Scenario 1 The bond story 2.4 annual gross
return
Scenario 2 The stock story 11.9 annual gross
return
Total value ()
1,000 investment a five-year BBB Metro bond
trading at 112 above par Initial coupon payment
5.0 Annual capital appreciation -2.2
Assumes a constant P/E multiple and dividend
payout ratio 4.0 organic growth 4.0 share
buyback 2.5 dividend yield on principal
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Representative portfolio structure
Fund target yield 4.0
Yields
Investment grade 5.0 Converts 6.0 High-yield
bonds 7.5 REITS 5.0 Preferred 6.6 High-yield
equity 4.9 Infrastructure 4.5 Utilities 5.0
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Cambridge Income Fund
Manager Robert Swanson Available in Class A,
E, F and O Corporate Class, T-Class, E, O and
US Management fees Class A 1.90 Class F
0.90 Trailer 1.00 FE 0.50 DSC Tax-effective
monthly distribution 0.03 (annual targeted
yield 4.0) Mutual Fund FEL CIG 635
Corporate Class FEL CIG 2261
DSC CIG 885
DSC CIG 3261 Low Load
CIG 1235 Low Load CIG 1261
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Right team, right philosophy, right experience

• Experienced investment team
• Focused on capital growth with downside
  protection
• With the flexibility to deliver in volatile
  markets
• If everything is coming your way, youre
  probably in the wrong lane.
• Warren Buffett

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Cambridge multi-asset class, multi-manager
Fund Fund Code Assets (million) Foreign Content
Cambridge Canadian Equity Corporate Class CIG2321 867.5 maximum 49
Cambridge Canadian Asset Allocation Corporate Class CIG2322 831.9 maximum 49
Cambridge Global Equity Corporate Class CIG2323 638.7 no restrictions
Cambridge Income Corporate Class CIG2261 26.4 no restrictions
Cambridge Income Fund CIG635 42.0 no restrictions
Cambridge American Equity Corporate Class CIG294 220.0 no restrictions
Cambridge American Equity Fund CIG 212 51.7 no restrictions
Castlerock Canadian Growth Companies Fund HIC191 13.3 maximum 49
Castlerock Pure Canadian Fund HIC192 2.0 maximum 10
Effective June 5, 2011 Cambridge assumed
management of the funds and they were renamed
from CI American Equity Corporate Class and CI
American Equity Fund.
Source RBC Dexia at April 30, 2012
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Thank You

• All charts and illustrations in this guide are
  for illustrative purposes only. They are not
  intended to predict or project investment
  results.
• CI Investments, CI Investments design and
  Cambridge are registered trademarks of CI
  Investments Inc. Cambridge Advisors is the
  business name of CI Global Holdings Inc.
  Commissions, trailing commissions, management
  fees and expenses all may be associated with
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  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.