14
CI Pacific Sector Fund 2002 Annual Report as at December 31
CI Pacific Sector Fund
2002 Annual Report as at December 31
The past three years have been the most challenging on global
markets in 50 years. What makes this more unsettling is that these
conditions follow a decade of unprecedented market growth.
So, for many investors, these markets may be a new experience.
In times like these, it is tough to stay focused on the long term.
However, history tells us that the markets will turn around and
resume their long-term upward trend, reflecting the ongoing
growth of companies and the overall economy.
In spite of the current market conditions, CI has taken steps to
ensure we continue to provide you with the investment options
you need. Here is what CI offers:
• Experience – CI has been providing investment products and
services since 1965. We manage over $30 billion on behalf of
more than 1.4 million Canadians.
• Choice – Whether you’re looking for Canadian or global equity
funds, fixed-income or balanced funds, they are all available
from CI. Our varied investment options include mutual funds,
segregated funds, tax-advantaged funds, RSP-eligible foreign
funds and the CI Portfolio Series.
• Expertise – Our wide range of investment funds is combined
with world-class portfolio managers like Gerry Coleman (named
Fund Manager of the Year at the 2001 Canadian Mutual Fund
Awards and manager of Harbour Fund, named Best Canadian
Equity Fund in 2002), Eric Bushell (manager of Signature
Dividend Fund, which was selected Best Dividend Fund in
2001 and 2002, and of Signature Select Canadian Fund, named
Best Canadian Equity Fund in 2001), and Bill Miller (named
Fund Manager of the Decade for the 1990s by Morningstar).
• Service – CI’s Client Services team can be reached toll-free at
1-800-563-5181 or by e-mail at [email protected]. You can
also access your account through CI’s state-of-the-art website at
www.cifunds.com by clicking on My Account. In addition, our
site has a great deal of information about our funds and about
investing in general.
We know the markets are challenging, but our goals have never
changed – to provide you, through your adviser, with the products
and services you need to meet your financial goals.
Thank you for investing with CI Funds. We realize that it is a
privilege to manage your money. If you have any questions, please
contact your adviser or our Client Services Department.
Yours truly,
Peter W. Anderson
President,
CI Mutual Funds Inc.
February 1, 2003
A Message from the President
Most global equity markets ended 2002 down significantly: the
S&P 500 Index declined 23% (its worst loss since 1974), the DAX
in Germany fell a staggering 44% and Japan’s Nikkei closed at a
20-year low.
At face value, economic fundamentals do not justify the market
action of 2002. Overall global economic growth has been robust
and monetary policy has been relatively loose. We feel that the
turbulence indicates that a structural shift in the equity investment
climate is taking place with new longer-term trends about to be
established. This year may well be a watershed year in which
exciting opportunities abound.
The 1990s were a period of U.S. economic and political
domination, with its stocks trading at significant premiums. When
we look at the situation the country faces today, the U.S. premium
is baffling. The government’s fiscal situation, which looked
strong even in early 2002, has weakened further and faster than
anyone thought possible. The productivity gains that justified
continued investment by foreigners appear increasingly to be a
statistical myth.
Despite our bleak overall outlook, we continue to find a host
of exciting opportunities in the United States. The defence, energy
and health-care areas in particular offer compelling value. When
seeking short-sale positions for our hedge fund, we continue
to see considerable overvaluation in technology, finance and
consumer products.
Paradoxically, conditions in the rest of the world are hardly as grim
as the global equity markets would suggest. The Japanese market is
at 20-year lows despite new policies from the Bank of Japan. While
the country continues to have significant macroeconomic problems,
the clamour for action is growing. Compelling opportunities exist
in several of the larger, financially strong Japanese companies.
Remarkably, many of these stocks trade at multi-year lows with
lower valuations than distressed U.S. companies.
Europe is equally interesting. Continental Europe is challenged
by slowing growth, but has a trade surplus rather than a deficit. We
expect domestic growth to become a policy priority for the region
in 2003 and there is ample room for interest rate cuts. The region
presents excellent opportunities in domestic-oriented companies
such as banks and consumer goods.
With regard to the emerging markets, conditions are especially
attractive in Asia, where countries have worked through their
problems of the 1997 financial crisis and accumulated significant
trade surpluses. Here, too, domestic growth will be a policy priority
with the best opportunities in domestic-oriented companies.
Latin America, especially Brazil, continues to face significant
challenges. However, President Lula’s proposed steps for Brazil
give us some reason for optimism.
We believe 2003 will provide excellent opportunities for profitable
investments. It is likely that the European and Japanese equity
markets will decouple from the U.S., signalling a definitive end to
the reign of the global bear.
TRIDENT INVESTMENT MANAGEMENT, LLC
Nandu Narayanan
February 1, 2003
A Message from Trident Investment Management, LLC
P E R F O R M A N C EFund Objective:To obtain maximum long-term capital growth.
Lead Manager:Nandu Narayanan
Adviser:Trident Investment Management, LLC†
Management Style:Top-down analysis of global macro-economic trends; bottom-up selectionof companies with the greatest growth potential.
Fund Assets: $23.7 million
NAV per Share:A Shares Cdn $5.44 US $3.46F Shares Cdn $5.22 US $3.32
Inception: July 1987
RSP/RIF Eligible: 30%
Distribution: Paid annually
Management Expense Ratio:A Shares 2.63%F Shares 1.56%
Fund Code: CIGFront End DSC
A Shares Cdn 657 Cdn 664US 357 US 464
F Shares Cdn 256 Cdn –US 456 US –
C I P a c i f i c S e c t o r F u n d 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
$30,000
$20,000
$10,000$11,537
July '87 '90 '93 Dec. '02'99'96
Hong Kong 1.3, Taiwan 0.7 Utilities 2.4, Funds 1.4
Top 10 Equity Holdings [%]Ranbaxy Laboratories Ltd. . . . . . . . . . . . . . . . . . . . . [India, Health Care] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9Shiseido Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . [Japan, Consumer Staples] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0Posco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [South Korea, Materials] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3State Bank Of India . . . . . . . . . . . . . . . . . . . . . . . . . . [India, Financials] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2Ito-Yokado Company Ltd. . . . . . . . . . . . . . . . . . . . . . [Japan, Consumer Discretionary] . . . . . . . . . . . . . . . . . . . . . . . . . 2.9Toyota Industries Corp. . . . . . . . . . . . . . . . . . . . . . . . [Japan, Consumer Discretionary] . . . . . . . . . . . . . . . . . . . . . . . . . 2.9Sony Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Japan, Consumer Discretionary] . . . . . . . . . . . . . . . . . . . . . . . . . 2.8United Overseas Bank Ltd. . . . . . . . . . . . . . . . . . . . . [Singapore, Financials] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2DBS Group Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . [Singapore, Financials] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1Toshiba Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Japan, Information Technology] . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.6India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7Republic of China . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8Cash & Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.0
Consumer Discretionary . . . . . . . . . . . . . . . . . . . . . 21.6Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.7Telecommunication Services . . . . . . . . . . . . . . . . . 8.5Industrials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1Health Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1Information Technology . . . . . . . . . . . . . . . . . . . . . . 5.2Consumer Staples . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1Cash & Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9
Country Allocation [%] Sector Allocation [%]
Current Value of $10,000 Investment in A Shares
A Shares F Shares1 year -18.6 -17.53 years -27.2 N/A5 years -9.0 N/ASince Inception 0.9 -23.8
A Shares F Shares2002 $ - $ -
C$ NAV at December 31 each year:
A Shares F Shares2002 $ x.xx $ x.xx
AT
A G
LAN
CE
H O L D I N G S & A L L O C AT I O N
Total Annual Dividends:Compound Annual Returns [%]
CI Pacific Sector Fund
† Nothing herein should be read to constitute an offeror solicitation by Trident or its principal to provideinvestment advisory services to any person or entity.
Net asset value per special share,
beginning of year
Dividends per special share:
From net income
From net realized gain
Net income (loss) per special share
Net realized and unrealized appreciation
(depreciation) of investments per special share
Surplus (deficiency) of capital transactions
over original cost per special share
Net asset value per special share,
end of year
Ratios & Supplemental Data
Total return (%) (a)
Average net assets ($000’s) (b)
Management expense information (c)
Management and operating expenses (%)
Capital tax expenses (%)
Goods and services tax expenses (%)
Total management expense ratio (%)
Portfolio turnover rate (d)
Shares Issued and Outstanding
Balance beginning of year
Shares issued for cash including re-invested dividends
Shares redeemed
Shares issued (redeemed) on conversion (net)
Balance end of year
Additional Fund Notes (in 000’s)
Brokerage Commissions
(a) Total return is the historical rate of return of an investment for the year, assuming reinvestment of all dividends at net asset value.(b) Average net assets are calculated based on the daily net assets outstanding.(c) Management expense information is calculated based on the total amount of respective expenses of the fund, plus, if applicable, the management expense information of its underlying fund, expressed as
an annualized percentage of average net assets during the year. (d) Portfolio turnover rate equals the lesser of purchases or sales divided by the average value of the portfolio securities of the fund, excluding short-term securities.
Inception dates for all classes, please refer to note 1 in the Notes to the Financial Statements.
A Shares F Shares
2002 $ 2001 $ 2000 $ 1999 $ 1998 $ 2002 $ 2001 $ 2000 $
6.68 8.64 14.11 7.34 8.99 6.33 8.09 10.00
- - - - - - - -
- - - (0.40) - - - -
- - - (0.40) - - - -
(0.07) (0.08) (0.08) (0.05) (0.03) - (0.08) (0.06)
(1.11) (1.65) (4.77) 7.58 (1.75) (1.04) (1.48) (1.76)
(1.18) (1.73) (4.85) 7.53 (1.78) (1.04) (1.56) (1.82)
(0.06) (0.23) (0.62) (0.36) 0.13 (0.07) (0.20) (0.09)
5.44 6.68 8.64 14.11 7.34 5.22 6.33 8.09
(18.56) (22.7) (38.8) 98.1 (18.4) (17.54) (21.8) (19.1)
27,540 40,802 76,167 61,500 66,758 2,761 117 2
2.44 2.52 2.47 2.55 2.61 1.44 1.52 1.47
0.03 - 0.36 0.51 0.23 0.03 - 0.36
0.16 0.17 0.17 0.18 0.18 0.09 0.10 0.10
2.63 2.69 3.00 3.24 3.02 1.56 1.62 1.93
2.95 2.24 3.40 1.15 0.36 2.95 2.24 3.40
4,721,311 5,772,645 8,320 213
3,410,122 2,198,077 602,237 554,274
(4,206,240) (3,035,353) (402) (17,200)
(162,334) (214,058) 18,823 (528,967)
3,762,859 4,721,311 628,977 8,320
3 -
CI Pacific Sector FundStatements of Financial Highlights (for the years ended December 31)
C I P a c i f i c S e c t o r F u n d 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
The accompanying notes are an integral part of these financial statements.
JAPAN (50.6%)10,100 Aeon Co., Ltd. 373,521 375,714
8,000 Dai Nippon Printing Company Ltd. 133,703 139,054
23,000 Daiwa Securities Group Inc. 152,633 160,460
40 Dentsu Inc. 175,247 191,689
2,700 Hitachi Software Engineering Company Ltd. 93,242 96,507
7,000 Hokuetsu Paper Mills 52,767 54,488
15,000 Ito-Yokado Company Ltd. 666,841 695,006
2,000 Jafco Co., Ltd. 131,435 135,824
6,600 Japan Medical Dynamic Marketing Inc. 159,037 166,444
8,000 Kao Corp. 253,593 275,884
12,000 Mitsubishi Estate Co. Ltd. 130,198 143,608
40 Mitsubishi Tokyo Financial Group Inc. 336,578 341,546
19,000 Mitsui Fudosan Company Ltd. 181,419 193,675
95 Mizuho Holdings Inc. 134,657 139,597
23,000 Nikko Cordial Corp. 115,882 121,792
10,000 Nippon Broadcasting System 429,098 469,956
69,000 Nippon Express Co. Ltd. 385,879 424,748
1,200 Nippon System Development Company Ltd. 20,102 22,081
79 Nippon Telegraph & Telephone Corp. 446,893 450,748
600 Nippon Television Network Corp. 135,378 140,590
38 Nippon Unipac Holding 247,768 259,072
46,000 Nisshinbo Industries Inc. 232,357 250,891
15,000 Nomura Holdings Inc. 257,459 264,897
3,400 NS Solutions Corp. 250,165 265,558
59 NTT Data Corp. 249,366 256,186
141 NTT DoCoMo Inc. 396,084 408,783
35,000 Oji Paper Company Ltd. 225,953 236,302
4,000 Secom Company Ltd. 205,658 215,518
5,000 Sharp Corp. 72,161 74,597
46,000 Shiseido Company Ltd. 865,412 939,622
10,100 Sony Corp. 649,432 663,181
28,000 Sumitomo Corp. 175,350 189,042
25 Sumitomo Mitsui Financial Group Inc. 118,550 122,784
18,000 Sumitomo Realty & Development Corporation Ltd. 104,607 115,093
4,000 Takeda Chemical Industries Ltd. 248,954 262,646
40,000 Teikoku Oil Corporation Ltd. 227,821 250,996
24,000 Toho Co. Ltd./Tokyo 330,908 361,880
6,000 Tokyo Broadcasting System Inc. 108,396 118,508
19,000 TonenGeneral Sekiyu 193,171 196,190
101,000 Toshiba Corp. 469,830 497,386
29,000 Toyota Industries Corp. 660,308 685,276
3,400 Toyota Motor Co. Ltd. 134,502 143,582
60 UFJ Holdings Inc. 88,912 95,315
20,000 Yamato Transport Company Ltd. 407,192 410,385
11,428,419 12,023,101
No. of Shares/ Average MarketFace Amount Cost ($) Value ($)
INDIA (11.8%)12,000 Gas Authority of India Ltd., GDR 161,088 164,148
10,000 Hindustan Petro Corp. 91,021 93,598
9,700 Larsen & Toubro Ltd Part. Notes 59,316 64,257
68,000 Mahanager Telephone Nigam Ltd., ADR 461,164 422,320
58,000 Ranbaxy Laboratories Ltd., GDR 1,150,333 1,171,837
35,000 State Bank Of India, GDR 733,274 756,670
19,000 Videsh Sanchar Nigam Ltd., ADR 125,906 122,482
2,782,102 2,795,312SINGAPORE (8.4%)
51,000 City Developments Ltd. 190,081 192,310
50,000 DBS Group Holdings Ltd. 490,402 498,541
26,000 Singapore Press Holdings Ltd. 428,878 428,926
242,000 Singapore Technologies Engineering Ltd. 368,978 361,940
49,000 United Overseas Bank Ltd. 502,439 524,102
1,980,778 2,005,819AUSTRALIA (5.5%)
40,000 BHP Billiton Ltd. 343,727 358,214
30,000 News Corporation Ltd., Pfd. 261,982 252,779
26,000 Publishing & Broadcasting Ltd. 198,472 198,430
70,000 Telstra Corporation Ltd. 272,975 272,366
20,000 Woodside Petroleum Ltd. 210,772 218,458
1,287,928 1,300,247SOUTH KOREA (3.6%)
710 Cheil Communications Inc. 96,564 87,628
20,000 Posco 850,443 777,661
947,007 865,289U.S.A. (2.7%)
3,600 India Fund 58,885 59,942
30,000 iShares MSCI Japan Index Fund 315,657 327,825
26,000 Japan OTC Eqty Fund Com 246,939 249,367
621,481 637,134CHINA (2.6%)
8,100 Huaneng Power Int'l Inc., ADR 415,704 410,470
655,000 PetroChina Company Ltd. 203,338 204,691
619,042 615,161THAILAND (2.0%)
91,000 PTT Expolration and Production Co. 449,682 471,071
NEW ZEALAND (1.8%)137,000 Rubicon Ltd. 72,323 77,911
93,000 Telecom Corporation Of New Zealand Ltd. 340,689 347,227
413,012 425,138HONG KONG (1.3%)
151,000 CNOOC Ltd. 314,012 309,007
No. of Shares/ Average MarketFace Amount Cost ($) Value ($)
C I P a c i f i c S e c t o r F u n d 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
CI Pacific Sector FundInvestment Portfolio as at December 31, 2002
The accompanying notes are an integral part of these financial statements. All common shares unless otherwise noted. Percentages shown in brackets relate investmentsat market value to total net assets of the fund.
TAIWAN (0.7%)65,000 Chinatrust Financial Holding Company Ltd. 80,188 83,470
35,000 Quanta Computer Inc. 97,776 90,526
177,964 173,996
Total Bonds & Equities (91.0%) 21,021,427 21,621,275
DERIVATIVE INSTRUMENTS (Capital)
Foreign Currency Forward Contracts
(Capital) (-0.6%) (see Schedule 1) (145,593)
Total Investments (90.4%) 21,021,427 21,475,682
Other Assets (net) (9.6%) 2,269,116
Total Net Assets (100.0%) 23,744,798
Schedule 1Foreign Currency Forward Contracts (Capital) (-0.6%)
Due Credit MarketContracts Pay Receive Date Rating Value $
1 (405,770,000) Japanese Yen 3,370,183 US$ 8-Jan-03 A-1+ (74,421)*1 (386,950,000) Japanese Yen 3,213,870 US$ 9-Jan-03 A-1+ (71,172)*
Total Foreign Currency Forward Contracts Value (145,593)
No. of Shares/ Average MarketFace Amount Cost ($) Value ($)
C I P a c i f i c S e c t o r F u n d 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
CI Pacific Sector FundInvestment Portfolio as at December 31, 2002
The accompanying notes are an integral part of these financial statements. All common shares unless otherwise noted. Percentages shown in brackets relate investmentsat market value to total net assets of the fund. *Hedge
C I P a c i f i c S e c t o r F u n d 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
CI Pacific Sector FundFinancial Statements
The accompanying notes are an integral part of these financial statements.
Income
Dividends
Interest
Less foreign withholding taxes
Expenses
Management fees (Note 4)
Administrative (Note 4)
Custody
Legal
Audit
Capital taxes
Goods and services tax
Income (loss) before taxes
Provision for income taxes
Net income (loss) for the year
Realized and unrealized
gain (loss) on investments
Realized gain (loss) on investments (a)
Change in unrealized appreciation
(depreciation) of investments
Net gain (loss) on investments
Increase (decrease) in net assets
from operations
(a) Realized gain (loss) on investments
Proceeds from sale of investments including
foreign exchange gain (loss) (b) (c)
Investments at cost, beginning of year
Investments purchased
Change in cost of short-term notes held
Investments at cost, end of year
Cost of investments sold
Realized gain (loss) on investments
(b) Proceeds on sales of short-term
notes sold during the year
not included above
(c) Foreign exchange gain (loss)
included above
Statements of Operations for the years ended December 31 (000’s)
Assets
Investments at market value (Note 2)
Cash
Income taxes recoverable
Receivable for special shares subscriptions
Receivable for securities sold
Income taxes payable
Liabilities
Payable for securities purchased
Payable for special shares redemption
Net assets and shareholders’ equity
Net asset value per share:
A Shares
F Shares
Number of shares outstanding
A Shares
F Shares
Approved on behalf of the Board of Directors:
G. Raymond ChangDirector
William T. HollandDirector
2002 $ 2001 $
21,476 31,437
862 707
57 57
38 64
1,421 -
16 -
23,870 32,408
22 419
103 390
125 809
23,745 31,599
5.44 6.68
5.22 6.33
3,762,859 4,721,311
628,977 8,320
Statements of Net Assets as at December 31 (in 000’s except forper share amounts and shares outstanding)
Net assets, beginning of year
Capital Transactions
Proceeds from special shares issued
Amounts paid for special shares redeemed
Conversion of special shares (net)
Dividends paid to shareholders
Dividends from net income
Dividends from realized gain
Increase (decrease) in net assets
from operations
Net assets, end of year
2002 $ 2001 $
31,599 49,871
25,015 21,284
(26,259) (24,027)
(1,091) (6,629)
(2,335) (9,372)
- -
- -
- -
(5,519) (8,900)
23,745 31,599
Statements of Changes in Net Assets for the years ended December 31 (000’s)
2002 $ 2001 $
20 -
13 30
(3) -
30 30
276 411
15 12
4 5
1 1
1 1
9 -
20 31
326 461
(296) (431)
- -
(296) (431)
(11,332) (11,908)
6,109 3,439
(5,223) (8,469)
(5,519) (8,900)
93,563 101,960
37,092 59,419
88,824 91,541
- -
125,916 150,960
21,021 37,092
104,895 113,868
(11,332) (11,908)
- -
17 -
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
Notes to the Financial Statements
1. THE FUNDSCI Sector Fund Limited (the “Corporation”) was incorporated on July 8, 1987under the laws of the Province of Ontario.
The Corporation is authorized to issue an unlimited number of non-cumulative,redeemable, restricted voting, convertible special shares of various designatedclasses and an unlimited number of common shares. Each designated class ofspecial shares holds a separate proprietary right in the investments and net assetsacquired specifically for that class of special shares. Each class of special shareshas a right of conversion to any other class of special shares of the Corporation.
The following Funds are a class of special shares of the Corporation.
Fund Names Dated BPI American Equity Sector Fund February 24, 2000BPI Global Equity Sector Fund February 24, 2000BPI International Equity Sector Fund February 24, 2000CI American Managers Sector Fund July 17, 2000CI American Small Companies Sector Fund February 24, 2000CI American Value Sector Fund July 31, 2001CI Canadian Bond Sector Fund August 28, 2002CI Emerging Markets Sector Fund September 21, 1992CI European Sector Fund September 21, 1992CI Explorer Sector Fund December 8, 1997CI Global Biotechnology Sector Fund August 5, 1999CI Global Bond Sector Fund August 28, 2002CI Global Boomernomics® Sector Fund June 11, 1998CI Global Consumer Products Sector Fund April 11, 1997CI Global Energy Sector Fund June 11, 1998CI Global Financial Services Sector Fund July 23, 1996CI Global Health Sciences Sector Fund July 23, 1996CI Global Managers Sector Fund February 24, 2000CI Global Small Companies Sector Fund February 24, 2000CI Global Technology Sector Fund July 23, 1996CI Global Telecommunications Sector Fund July 23, 1996CI Global Value Sector Fund July 23, 1996CI International Balanced Sector Fund July 31, 2001CI International Sector Fund July 31, 2001CI International Value Sector Fund July 23, 1996CI Japanese Sector Fund December 23, 1998CI Pacific Sector Fund July 8, 1987CI Short-Term Sector Fund July 8, 1987CI Short-Term US$ Sector Fund July 31, 2001CI Value Trust Sector Fund December 31, 2001Harbour Foreign Equity Sector Fund December 31, 2001Harbour Sector Fund June 27, 1997Landmark American Sector Fund September 21, 1992
(cont’d)Fund Names Dated Landmark Canadian Sector Fund July 31, 2001Landmark Global Sector Fund July 17, 2000Signature Canadian Resource Sector Fund July 31, 2001Signature Dividend Sector Fund August 28, 2002Signature High Income Sector Fund August 28, 2002Signature Select Canadian Sector Fund July 31, 2001
Sometimes referred to herein individually as “Fund “ and collectively as the“Funds”.
A Shares were offered to investors on the date of the formation of the special shares.
F Shares were offered to investors commencing on July 17, 2000, except for CI Short-Term US$ Sector Fund which does not offer F shares. The followingFunds offered F shares after July 17, 2000:
Fund Names Inception Date of F SharesCI American Value Sector Fund July 31, 2001CI European Sector Fund July 31, 2001CI Global Energy Sector Fund July 31, 2001CI International Balanced Sector Fund July 31, 2001CI International Sector Fund July 31, 2001CI International Value Sector Fund July 31, 2001Landmark Canadian Sector Fund July 31, 2001Signature Canadian Resource Sector Fund July 31, 2001Signature Select Canadian Sector Fund July 31, 2001CI Value Trust Sector Fund December 31, 2001Harbour Foreign Equity Sector Fund December 31, 2001
Funds established after August 27, 2002 were established with F Shares.
I Shares were offered to investors for the following Funds:
Fund Names Inception Date of I SharesCI Global Biotechnology Sector Fund July 31, 2001CI Global Boomernomics® Sector Fund July 31, 2001CI Global Consumer Products Sector Fund July 31, 2001CI Global Financial Services Sector Fund July 31, 2001CI Global Health Sciences Sector Fund July 31, 2001CI Global Managers Sector Fund July 31, 2001CI Global Technology Sector Fund July 31, 2001CI Global Telecommunications Sector Fund July 31, 2001CI American Managers Sector Fund August 31, 2001CI American Value Sector Fund August 28, 2002CI Value Trust Sector Fund December 31, 2001
N o t e s t o t h e F i n a n c i a l S t a t e m e n t s 2 0 0 2 A n n u a l R e p o r t a s a t D e c e m b e r 3 1 , 2 0 0 2
Notes to the Financial Statements
On August 28, 2002, the Harbour Sector Fund, Signature Select CanadianSector Fund, Signature High Income Sector Fund and the CI InternationalBalanced Sector Fund commenced the offering of a new class of special shareswhich are referred to as T Shares, of which, there are currently no shares issued.
A Shares are available to all investors.F Shares are available to certain investors including those who participate in fee-based programs through their financial advisers or who are members of cer-tain groups.I Shares are available to institutional clients and investors who have entered intoa Class I Account Agreement with CI Mutual Funds Inc.T Shares are available to all investors.
Effective as of the close of business on October 11, 2002 the following funds were merged.
Terminated Funds Continuing FundsCI Canadian Sector Fund Signature Select Canadian
Sector FundSignature Canadian Sector Fund Signature Select Canadian
Sector FundCI Latin American Sector Fund CI Emerging Markets Sector FundCI Global Business-to-Business
(B2B) Sector Fund CI Global Technology Sector FundCI Global Focus Value Sector Fund CI Global Value Sector FundSpectrum World Growth Managers Fund CI Global Managers Sector FundSpectrum Global Financial Services Fund CI Global Financial Services
Sector FundSpectrum Global Health Sciences Fund CI Global Health Sciences
Sector FundSpectrum Global Telecommunications Fund CI Global Telecommunications
Sector Fund
The mergers were effected by transferring the net assets of the terminated fundsin exchange for shares of the continuing funds. The value of the shares of the continuing funds issued in connection with these mergers was equal to themarket value of the net assets transferred from the terminated funds.
These financial statements do not include the operating results of theterminated funds prior to the merger date.
During the month of December 2002, the BPI American Equity Sector Fund,BPI Global Equity Sector Fund, BPI International Equity Sector Fund, CI American Small Companies Sector Fund, CI Emerging Markets SectorFund, CI European Sector Fund, CI Global Sector Fund, CI Global SmallCompanies Sector Fund, CI Global Value Sector Fund, CI InternationalBalanced Sector Fund, CI International Value Sector Fund, CI Pacific SectorFund, Harbour Sector Fund, Landmark American Sector Fund, SignatureCanadian Resource Sector Fund and Signature Select Canadian Sector Fund
exchanged their investment in the underlying fund units for their proportionalinterest in the securities held by the underlying fund. The value of the directsecurities acquired was equal to the market value of the units that wereexchanged. This amount has been included in the proceeds from sale ofinvestments and investments purchased balances in the financial statements.Both the Funds and the underlying funds have the same investments advisorand fund manager.
The Investment Portfolios for each of the Funds are as at December 31, 2002and the Statements of Net Assets are as at December 31, 2002 and 2001, if theFund was in existence at that time. The Statements of Operations and Changesin Net Assets for each Fund are for the years ended December 31, 2002 and2001, except for Funds established during either period, in which case theinformation provided is for the period from inception to December 31. TheStatements of Financial Highlights for each Fund are for each of the mostrecent five years ended December 31, except where the inception date of aFund, or date of first sale of a Class of a Fund, was after January 1, 1998, inwhich case the information is provided for the period from inception or date offirst sale, as applicable, to December 31 of that period, if applicable, and foreach year ended December 31 thereafter. The date of inception of each Fundis shown above.
2. SIGNIFICANT ACCOUNTING POLICIESThe following is a summary of significant accounting policies of the Funds:
(a) Valuation of InvestmentsListed securities are valued on each business day at their latest available sale price. In the absence of recorded sales on that day, they are valued at theaverage of the last recorded bid and ask prices where appropriate. Unlistedsecurities are valued on each business day based on price quotations fromrecognized investment dealers, or failing that, management’s best estimate.Short-term investments are valued at cost which, together with accrued interest, approximates market value. Mutual Funds are valued on eachbusiness day at their closing net asset value.
(b) Foreign ExchangeForeign currency amounts are translated into Canadian dollars as follows:market value of investments, forward currency contracts, other assets andliabilities at the closing rate of exchange on each business day; income,expenses and, purchases, sales and settlements of investments at the rateof exchange prevailing on the respective dates of such transactions.
(c) Investment Transactions and Income RecognitionInvestment transactions are accounted for on the trade date and any realized gains and losses from such transactions are calculated on an average cost basis. Dividend income is recognized on the ex-dividenddate and interest income on the accrual basis. Stock dividends are recorded as dividend income determined by reference to market value.
(d) Net Asset Value Per Special ShareNet asset value per special share is calculated daily as of the close of business of The Toronto Stock Exchange when open for trading by dividing the net assets of each class of special shares of the Fund by thenumber of special shares of that class outstanding. The net asset value of each class of special shares is computed by calculatingthe value of that class’s proportionate share of the Fund’s assets less that class’s proportionate share of the Fund’s common liabilities and less class specific liabilities. Expenses directly attributable to a class are charged to thatclass. Other income and expenses are allocated to each class proportionatelybased upon the relative net asset value of each class of special shares.
(e) Futures, Forward and Option ContractsFutures, forward and option contracts are valued on each business dayaccording to the gain or loss that would be realized if the contracts wereclosed out, unless daily limits are in effect in which case they are valuedbased on the current market value of the underlying interest. Any payments made to satisfy initial and variation margin are reflected as areceivable balance in daily variation margin on the Statement of NetAssets. Margin consisting of assets other than cash is noted in theStatement of Investment Portfolio. Gains or losses arising from futures,forward and option contracts which are held as hedges for capital investments are recorded as unrealized gains (losses) on investments untilthe contracts are closed or expire. Gains or losses arising from futures,forward and option contracts not held as hedges for capital investmentsare recorded as income (loss) on a daily basis.
3. INCOME TAXESThe Corporation complies with the requirements of the Income Tax Act (Canada) to qualify as a mutual fund corporation. A mutual fund corporation is subject to a special 33 1/3% tax on taxable dividends receivedfrom corporations resident in Canada and to tax at normal corporate rates onother income and net taxable realized capital gains for the year. The special33 1/3% tax is refundable on payments of taxable dividends to shareholders atthe rate of $1 for each $3 of such dividend paid. All the tax on net taxablerealized capital gains is refundable when the gains are distributed toshareholders as capital gains dividend or through redemption of shares at therequest of shareholders, while the Corporation qualifies as a mutual fundcorporation. Income and capital taxes (if any) are allocated to the funds on areasonable basis.
4. MANAGEMENT FEES AND OTHER EXPENSESCI Mutual Funds Inc. is the manager of the Corporation. The manager is entitled to receive a fee calculated on the net assets, excluding mutual fundinvestments of each class, at the end of each business day. The Corporation isresponsible for its own administrative expenses including audit and legal fees,directors’ fees, registry and transfer agency fees, custody fees, all other costs andfees imposed by statute or regulation and expenses incurred by providing services in relation to reporting and making distributions to shareholders, suchexpenses to be reasonably allocated to each fund.
To encourage large purchases in the Funds, the manager may reduce the management fee that it would otherwise be entitled to receive from a fund with respect to an investment in a Fund provided that the amount of the management fee reduction is distributed to the investor for whose benefit thefees were reduced.
5. SECURITIES LENDINGCertain Funds have entered into a securities lending program with theircustodian, Royal Trust Company of Canada ("Royal Trust"). The aggregatemarket value of all securities loaned by a Fund cannot exceed 50% of the assetsof the Fund. A Fund will receive collateral of at least 102% of the value ofsecurities on loan. Collateral will generally be comprised of cash and obligationsof or guaranteed by the Government of Canada or a province thereof, or by theUnited States government or its agencies, but may include obligations of othergovernments with appropriate credit ratings. Royal Trust has indemnified theFunds against the credit risk of the borrowers. For those Funds participating inthe program, amounts for securities loaned, the collateral received, and theincome collected appear on the Statement of Net Assets and income from secu-rities lending is included in "Interest Income" in the Statement of Operations.
6 . RELATED PARTY TRANSACTIONSSun Life Financial Services of Canada Inc. (“Sun Life”) owns a significantinterest in CI Mutual Funds Inc. and is therefore considered a related party tothe Funds. The following is a summary of the investments by Sun Life in theFunds at December 31, 2002.
Fund Names Net Asset Value (ooo’s)CI Global Financial Services Sector Fund (A Shares) 1,066CI Global Health Sciences Sector Fund (A Shares) 962CI Global Financial Services Sector Fund (F Shares) 424CI Global Health Sciences Sector Fund (F Shares) 372
7 . REMUNERATIONThe Corporation paid no remuneration to its directors and officers for the yearsended December 31, 2002 and 2001.
8. FINANCIAL STATEMENTS AND PORTFOLIO TRANSACTIONSCopies of the audited financial statements for any class of special shares of the Corporation, or for the Corporation itself, or copies of unauditedStatements of Portfolio Transactions for the Funds or for any other class of specialshares of the Corporation for the year ended December 31, 2002 are available without charge upon written request to the manager, CI Mutual Funds Inc., CI Place, 151 Yonge Street, Eleventh Floor, Toronto, Ontario M5C 2W7.
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Notes to the Financial Statements
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements have been prepared by CI Mutual Funds Inc., the manager of CI Sector Fund Limited (the “Corporation”), and approved by the Board of Directors of theCorporation. The manager is responsible for the information andrepresentations contained in these financial statements and other sectionsof the Annual Report.
CI Mutual Funds Inc. maintains appropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have been prepared in accordance with accounting principlesgenerally accepted in Canada and include certain amounts that are basedon estimates and judgments. The significant accounting policies whichmanagement believes are appropriate for the Shares of the Corporation aredescribed in Note 2 to the financial statements.
PricewaterhouseCoopers LLP are the external auditors of the Corporation,appointed by the shareholders. They have audited the financial statementsin accordance with Canadian generally accepted auditing standards toenable them to express to the shareholders their opinion on the financialstatements. Their report is set out at the right.
President Chief Financial OfficerCI MUTUAL FUNDS INC. CI MUTUAL FUNDS INC.
AUDITORS’ REPORT
To the shareholders of the Funds listed in note 1 to the financial statements(the "Funds") of CI Sector Fund Limited (the"Corporation")
We have audited the Investment Portfolios of each of the Funds as atDecember 31, 2002 and the Statements of Net Assets, Operations, Changesin Net Assets and Financial Highlights as at and for the periods indicated innote 1. These financial statements are the responsibility of the managementof the Corporation. Our responsibility is to express an opinion on thesefinancial statements based on our audits.
We conducted our audits in accordance with Canadian generally acceptedauditing standards. Those standards require that we plan and perform anaudit to obtain reasonable assurance whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.
In our opinion, these financial statements present fairly, in all materialrespects, the financial position of each of the Funds, the results of each oftheir operations, the changes in each of their net assets and each of theirfinancial highlights as at and for the periods indicated in note 1 inaccordance with generally accepted accounting principles.
We have also reported on the financial statements of the Corporation for theyears ended December 31, 2002 and 2001 and the financial statements ofeach of the other classes of special shares of the Corporation for the yearsthen ended, as applicable, without reservation.
Toronto, Ontario PRICEWATERHOUSECOOPERS LLPJanuary 31, 2003 Chartered Accountants
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Management and Audit Reports
NOTICE: Should you require additional copies of this Annual Report or havereceived more than one copy, please contact CI Mutual Funds Inc. (the“Manager”) or your financial adviser.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus beforeinvesting. 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 perform-ance data assume reinvestment of all distributions or dividends and do not takeinto account sales, redemption, distribution or optional charges or income taxespayable by any securityholder that would have reduced returns. Mutual fundsare not guaranteed, their values change frequently and past performance maynot be repeated. Mutual fund securities are not covered by the Canada DepositInsurance Corporation or by any other government deposit insurer.
The commentaries contained herein are provided as a general source of information and should not be considered personal investment advice or anoffer or solicitation to buy or sell securities. Every effort has been made toensure that the material contained in these commentaries is accurate at thetime of publication. However, the Manager cannot guarantee its accuracy orcompleteness and accepts no responsibility for any loss arising from any use ofor reliance on the information contained herein.
SIMPLIFIED PROSPECTUS: The Simplified Prospectus and AnnualInformation Form of a Fund are renewed annually. The Manager would bepleased to provide, without charge, the most recent Simplified Prospectus uponrequest to its Toronto office.
DISTRIBUTION OR DIVIDEND REINVESTMENT: Distributions or dividends from the Funds are automatically reinvested, free of any sales commissions or charges, in additional securities of the relevant Fund, unlessyou otherwise direct. You may withdraw from participation in the reinvestmentplan at any time by delivering a written request to your financial adviser or tothe Manager.
REDEMPTION OF SECURITIES: Securities may be redeemed by security-holders on any business day by delivering to your financial adviser or the Managera redemption request in writing, or in such other form as permitted by yourfinancial adviser. If your redemption request is received by the Manager on anyValuation Date prior to 4:00 p.m. (Eastern time), then your securities beingredeemed will be priced at the next valuation time following receipt by theManager of the redemption request. If the proceeds of redemption exceed$10,000 or are to be paid to someone other than the registered owner, your signature must be guaranteed by a bank, trust company, investment dealer, orbroker. If certificates representing the securities to be redeemed have beenissued, the redemption request must be accompanied by the certificates, properly endorsed for redemption with the signature guaranteed in the mannerdescribed above. If the registered owner is a corporation, partnership, agent,fiduciary or surviving joint owner, additional documentation may be required.
®Boomernomics, Harbour Funds, CI Funds, the CI Funds logo design, BPIFunds, CI Sector Funds and Global Managers are registered trade marks of CI Mutual Funds Inc. ™Landmark Funds, Signature Funds and AmericanManagers are trademarks of CI Mutual Funds Inc.
Board of Governors’ Letter
Legal Notice
Your CI Funds’ Board of Governors is pleased to report on its activities inrespect of the year ended December 31, 2002. The Governors are appointedpursuant to the Declarations of Trust governing the Funds that are trusts, andconstitute the board of directors of CI Sector Fund Limited.
The Governors’ mandate is to consult with CI Mutual Funds Inc. (the “Manager”) and any investment advisers (referred to as “Subadvisers”) in matters pertaining to investment policy; receive and review periodic reports concerning the investment of the Funds’ assets, the issue and redemption of securities and distributions to securityholders; and to review and advise or consent, if appropriate, with respect to any other matter required by theDeclarations of Trust and by applicable securities laws, regulations and rules. The Governors met quarterly.
The Governors have reviewed, commented on and approved the CI Code ofEthics and Conduct, which establishes rules of conduct designed to ensure fairtreatment of the Funds’ securityholders and that, at all times, the interests of thethe Funds and their securityholders are placed above personal interests of employees, officers and directors of the Manager and each of its subsidiaries and affiliates, the Subadvisers, and the Governors, through the application ofthe highest standards of integrity and ethical business conduct. The objectiveis not only to remove any potential for real conflict of interest but to avoid any perception of conflict.
The independent Governors report that management has been open and cooperative, permitting the Governors to meet with Subadvisers, to meet withindividual department heads and personnel to review control mechanisms andcompliance procedures, including those relating to the personal securities
trading activity of employees, and to consider other matters that affect theFunds, such as customer complaints. The personal trading rules under the CI Code of Ethics and Conduct require prior clearance of personal trades andrestrict the ability of staff to trade any securities held by the Funds. The three independent Governors comprise the Audit Committee of the Boardof Governors. The Audit Committee independently reviewed, with the Fund’s auditors, the planning, scope and results of the audit of the financial statementsof the Funds for the year 2002, and reported to the Board of Governors. The Board of Governors has received and accepted the 2002 Annual Reports of the Funds.
The Manager's year 2002 report on compliance with the CI Code of Ethics andConduct has been provided to the Governors in a timely and satisfactory manner.
Stephen T. MooreCHAIR, CI FUNDS BOARD OF GOVERNORS
March 6, 2003
Members of the Board of GovernorsStephen T. Moore, ChairJasmine HerltThomas L. JarmaiPeter W. Anderson, President, CI Mutual Funds Inc. (commencing February 2003)
Head OfficeCI Place, 151 Yonge Street, Eleventh FloorToronto, Ontario M5C 2W7Tel: 416-364-1145Toll Free: 1-800-268-9374Client Services Team: 1-888-771-2999
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