FS Q411 G&I 6968 SKG · Annual Financial Statements as at December 31, 2011 1 MANAGEMENT’S...

Skylon Growth & Income Trust

2011AnnualFinancial Statements for the year ended December 31, 2011

Table of Contents

Management’s Responsibility for

Financial Reporting . . . . . . . . . . . . . . . . . . . . 1

Independent Auditor’s Report . . . . . . . . . . . . . . 2

SKYLON GROWTH & INCOME TRUST

Financial Statements

Statement of Investment Portfolio . . . . . . . . . . . 3

Statements of Net Assets . . . . . . . . . . . . . . . . . . 14

Statements of Operations and

Retained Earnings (Deficit) . . . . . . . . . . . . . . 15

Statements of Changes in Net Assets . . . . . . . . . 16

Statements of Cash Flows . . . . . . . . . . . . . . . . 16

Trust Specific Financial

Instruments Risks . . . . . . . . . . . . . . . . . . . . . 17

Notes to the Financial Statements . . . . . . . . . . . 22

Trust Information . . . . . . . . . . . . . . . . . . . . . . . 29

1Annual Financial Statements as at December 31, 2011

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying financial statements have been prepared by CI Investments Inc., the Manager of the Skylon Growth & Income Trust (the “Trust”), and approved by the Board of Directors of the Manager. The Trust’s Manager is responsible for the informationand representations contained in these financial statements and other sections of this report. CI Investments Inc. maintainsappropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have beenprepared in accordance with Canadian generally accepted accounting principles and include certain amounts that are based onestimates and judgments. The significant accounting policies which management believes are appropriate for the Trust aredescribed in Note 2 to the financial statements.

PricewaterhouseCoopers LLP is the external auditor of the Trust. They have audited the financial statements in accordance withCanadian generally accepted auditing standards to enable them to express to the unitholders their opinion on the financialstatements. Their report is set out on the following page.

Derek J. Green Douglas J. JamiesonToronto, Ontario President and Chief Executive Officer Chief Financial OfficerMarch 22, 2012 CI Investments Inc. CI Investments Inc.


INDEPENDENT AUDITOR’S REPORT

To the Unitholders of Skylon Growth & Income Trust (the Trust)

We have audited the accompanying financial statements of the Trust, which comprise the statement of investment portfolio as at December 31, 2011, the statements of net assets as at December 31, 2011 and December 31, 2010 and the statements ofoperations and retained earnings (deficit), changes in net assets and cash flows for the years then ended, and the related notes,which comprise a summary of significant accounting policies, and other explanatory information.

Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of the financial statements in accordance with Canadiangenerally accepted accounting principles, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance withCanadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and performan audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as at December31, 2011 and December 31, 2010, and the results of its operations, the changes in its net assets and its cash flows for the yearsthen ended in accordance with Canadian generally accepted accounting principles.

Toronto, Ontario Chartered Accountants,March 22, 2012 Licensed Public Accountants


LONG POSITIONS (113.3%)

COMMON EQUITIES (60.0%)

10,475 Abertis Infraestructuras SA 206,730 170,446

2,130 Agrium Inc. 123,948 145,479

2,000 Aisin Seiki Co., Ltd. 71,509 57,894

6,190 Algonquin Power & Utilities Corp. 34,402 39,616

7,370 Alimentation Couche-Tard Inc., Class B 166,437 233,260

1,616 AltaGas Ltd. 32,150 51,453

9,081 Amgen Inc. 528,727 593,997

28,800 AMP Ltd. 132,440 122,125

2,700 Apache Corp. 281,928 249,140

600 Apple Computer Inc. 181,930 247,539

7,170 ARC Resources Ltd. 134,310 179,250

8,180 AT&T Inc. 230,183 251,740

4,209 Atlantia SpA 94,440 67,933

16,350 Banco Santander Brasil SA 214,342 133,733

600 Banco Santander Chile SA, ADR 40,530 46,270

30,850 Bangkok Bank PCL 154,652 151,905

12,270 Barrick Gold Corp. 541,121 566,015

3,200 Baxter International Inc. 177,321 161,200

11,800 Bayer AG 745,137 765,148

7,190 BCE Inc. 205,140 305,287

2,850 Bell Aliant Inc. 76,930 81,282

7,070 BHP Billiton PLC 196,646 209,336

17,120 Bombardier Inc., Class B, Sub-Voting Shares 80,326 69,336

4,030 Bonavista Energy Corp. 94,870 104,982

5,828 British American Tobacco PLC 216,024 281,732

13,790 Brookfield Asset Management Inc., Class A 344,801 385,982

13,077 Brookfield Infrastructure Partners LP 250,944 368,608

2,998 Brookfield Properties Corp. (USD) 31,537 47,766

5,260 Brookfield Renewable Energy Partners LP 134,288 142,809

3,140 Bunge Ltd. 218,763 182,839

12,450 Calpine Corp 170,431 206,984

7,462 Cameco Corp. 240,878 137,226

14,590 Canadian Imperial Bank of Commerce 1,084,993 1,076,012

4,900 Canadian National Railway Co. 296,409 392,343

27,810 Canadian Natural Resources Ltd. 960,403 1,058,449

2,200 Canadian Pacific Railway Ltd. 141,332 151,712

19,310 Cenovus Energy Inc. 596,447 653,257

2,400 Chevron Corp. 227,992 259,989

8,250 Cisco Systems Inc. 139,216 151,950

7,200 Citigroup Inc. 239,454 192,828

3,033 CML Healthcare Inc. 38,615 29,299

15,300 Comcast Corp., Class A 366,187 369,548

710 Cominar REIT 15,478 15,627

3,500 Compagnie Financiere Richemont SA 192,291 180,333

900 Continental AG 59,675 56,905

4,870 Crescent Point Energy Corp. 157,215 218,322

Statement of Investment Portfolio (as at December 31, 2011)

Percentages shown in brackets relate investments at fair value to net assets of the Trust.The accompanying notes are an integral part of these financial statements.


Financial Statements

Number of Shares/ Average FairPar Value Description Cost ($) Value ($)


LONG POSITIONS (113.3%) (cont’d)

COMMON EQUITIES (60.0%) (cont’d)

5,100 CSL Ltd. 140,267 169,026

5,724 CVS Corp. 198,560 237,791

3,760 Davis & Henderson Income Corp. 71,483 63,356

2,200 Denso Corp. 68,525 61,762

12,649 Diageo PLC 234,356 281,469

21,150 Eli Lilly and Co. 752,003 895,219

15,250 EMC Corp. 348,595 334,318

2,800 Emera Inc. 88,169 92,428

2,860 Enbridge Income Fund Holdings Inc. 53,334 57,486

23,000 Enel SpA 101,687 94,017

2,800 Exxon Mobil Corp. 220,514 241,539

4,960 Finning International Inc. 87,790 109,814

17,350 First Capital Realty Inc. 259,532 300,155

5,782 Freeport-McMoRan Copper & Gold Inc., Class B (USD) 226,808 216,698

8,436 Genworth MI Canada Inc. 191,825 172,854

3,620 Gibson Energy Inc. 59,440 68,852

8,357 Gluskin Sheff & Associates Inc. 169,421 123,349

13,660 Goldcorp Inc. 561,773 616,203

679,500 GOME Electrical Appliances Holdings Ltd. 231,875 159,536

29,450 Great-West Lifeco Inc. 663,455 599,308

17,050 Groupe Aeroplan Inc. 191,995 203,406

262,500 Hengdeli Holdings Ltd. 133,949 87,110

2,790 Honda Motor Co., Ltd. 91,819 86,486

29,650 HSBC Holdings PLC 308,489 230,348

6,800 Ingersoll-Rand PLC 213,980 210,933

6,396 Intel Corp. 138,174 158,004

16,722 Inter Pipeline Fund LP 147,552 311,196

29,350 International Power PLC 179,216 156,578

7,050 Itau Unibanco Banco Multiplo SA, ADR 126,185 133,152

2,700 JPMorgan Chase & Co. 89,863 91,427

38,900 Kasikornbank PCL 149,371 152,607

2,500 KLA-Tencor Corp. 118,935 122,856

600 Labrador Iron Ore Royalty Corp. 5,447 22,416

6,600 Lazard Ltd. 181,930 175,146

1,800 Magna International Inc., Class A 78,056 61,056

2,648 Manitoba Telecom Services Inc. 90,916 78,460

22,500 Manulife Financial Corp. 286,375 243,675

3,600 MEG Energy Corp. 126,000 148,428

12,640 Microsoft Corp. 339,747 334,272

6,150 National Oilwell Varco Inc. 444,480 425,834

7,210 Nestle SA, Registered Shares 330,672 421,841

1,900 Network Appliance Inc. 92,640 70,202

4,000 Nexon Co., Ltd. 68,047 58,609

3,850 Norfolk Southern Corp. 267,475 285,758

6,131 Northland Inc. 74,122 109,377

13,600 Novartis AG, Registered Shares 779,786 792,018


Statement of Investment Portfolio (as at December 31, 2011) (cont’d)


Financial Statements (cont’d)





3,490 Occidental Petroleum Corp. 277,088 333,165

48,550 Patheon Inc. 116,652 62,144

4,980 PepsiCo Inc. 317,061 336,552

26,800 Pfizer Inc. 589,597 590,799

4,200 PlazaCorp Retail Properties Ltd. 17,640 18,648

12,070 Posera-HDX Ltd. 23,639 3,862

4,760 Potash Corp. of Saskatchewan Inc. 196,948 200,348

78,447 Prime AET & D Holdings - -

3,838 Procter & Gamble Co. 261,185 260,626

1,620 Progress Energy Resources Corp. 25,106 21,449

11,200 Quanta Services Inc. 198,683 245,646

5,700 Rhoen Klinikum AG 108,550 110,149

4,850 Rio Tinto PLC 294,282 239,788

10,220 Rogers Communications Inc., Class B 317,279 401,033

7,300 Rolls-Royce Group PLC 69,326 86,158

662,400 Rolls-Royce Holdings PLC 1,077 1,048

7,672 RONA Inc. 124,674 74,725

5,496 Saputo Inc. 126,702 214,179

2,800 Schlumberger Ltd. 212,600 194,817

3,907 Schneider Electric SA 206,573 209,500

23,800 Seagate Technology 350,554 397,378

2,690 Sempra Energy 163,260 150,580

8,377 Shoppers Drug Mart Corp. 340,414 344,043

18,000 Siam Commercial Bank PCL 66,179 67,418

3,410 SNC-Lavalin Group Inc. 155,505 173,740

9,380 Spectra Energy Corp. 232,332 293,639

12,300 Sun Life Financial Inc. 274,208 232,224

31,891 Suncor Energy Inc. 1,041,737 936,958

99,908 Syndey Airport 185,922 275,845

37,380 Talisman Energy Inc. 634,784 485,192

5,650 Teck Resources Ltd., Class B 272,116 202,552

250,100 Telstra Corp., Ltd. 705,441 867,715

5,050 TELUS Corp., Non-Voting Shares 190,603 275,528

870 The Bank of Nova Scotia†† 42,292 44,170

1,650 Tiffany & Co. 74,782 111,307

25,610 Toronto-Dominion Bank 1,749,125 1,952,762

6,500 TransCanada Corp. 219,767 289,250

1,585 Triumph Group Inc. 77,238 94,279

12,560 Veresen Inc. 125,602 192,042

3,641 Vermilion Energy Inc. 80,041 164,537

3,318 Vinci SA 181,328 147,684


††CI Investments Inc., the Manager, is a corporation controlled by CI Financial Corp. The Bank of Nova Scotia has a significant interest in CI Financial Corp. Investmentsin The Bank of Nova Scotia are identified above.Percentages shown in brackets relate investments at fair value to net assets of the Trust.The accompanying notes are an integral part of these financial statements.







21,920 Viterra Inc. 218,227 235,202

1,250 Volkswagen AG, Private Placement 117,153 190,046

82,731 Wal-Mart de Mexico SA de CV 190,313 230,344

3,500 Walt Disney Co. 142,768 133,634

4,010 Weir Group PLC 42,602 128,915

18,390 Wells Fargo & Co. 493,597 516,308

2,600 WESCO International Inc. 126,577 140,430

24,395 Westfield Group 217,731 198,251

4,566 Whistler Blackcomb Holdings Inc. 51,873 47,030

730 WW Grainger Inc. 63,943 139,204

8,800 Xstrata PLC 161,009 135,884

12,400 Yahoo! Inc. 204,857 203,627

5,200 Zynga Inc. 53,854 49,847

33,386,551 35,283,462

CORPORATE BONDS (46.1%)

USD 120,000 Abengoa Finance SAU 8.875% 11/01/2017 121,137 122,244

USD 320,000 ABN Amro North American Holding Preferred Capital Repackage Trust I

6.523% 11/08/2012 299,941 222,077

USD 82,000 Academy Ltd., 9.25% 08/01/2019 78,177 82,490

USD 98,000 ACE Cash Express Inc., 11% 02/01/2019 97,010 91,597

USD 10,000 AES Corp., 7.375% 07/01/2021 9,756 10,977

USD 25,000 Ainsworth Lumber Co., Ltd., 11% 07/29/2015 16,623 16,554

169,000 Air Canada 10.125% 08/01/2015 167,907 153,790

USD 79,000 Air Canada 9.25% 08/01/2015 81,062 70,418

USD 44,000 Aircastle Ltd., 9.75% 08/01/2018 44,850 46,952

USD 15,000 Aircastle Ltd., 9.75% 08/01/2018 15,698 15,930

USD 16,000 Aktore International Inc., 9.875% 01/01/2018 16,318 15,607

USD 40,000 Alere Inc., 9% 05/15/2016 44,422 41,156

USD 38,000 Allbritton Communications Co., 8% 05/15/2018 38,369 38,420

USD 79,000 Alliance One International Inc., 10% 07/15/2016 85,168 72,430

USD 175,000 AMERIGROUP Corp., 7.5% 11/15/2019 178,081 183,621

USD 25,000 Ameristar Casinos Inc., 7.5% 04/15/2021 24,148 26,232

USD 106,000 Apria Healthcare Group Inc., 11.25% 11/01/2014 117,095 111,492

USD 158,000 Apria Healthcare Group Inc., 12.375% 11/01/2014 170,477 147,676

USD 158,870 Aramark Corp., Term Loan, Private Placement 7.47% 01/27/2014 188,123 159,389

USD 40,000 Arch Coal Inc., 7% 06/15/2019 38,942 41,563

USD 125,000 Atlantic Power Corp., 9% 11/15/2018 122,424 127,656

USD 99,250 Axcan Intermediate Holdings Inc., Private Placement 5.5% 02/11/2017 98,230 97,568

USD 165,000 Baker & Taylor Inc., 11.5% 07/01/2013 191,351 131,107

USD 750,000 Bank of America Corp., Callable 8% 01/30/2049 755,651 684,141

USD 125,000 Baytex Energy Corp., 6.75% 02/17/2021 123,364 127,975

USD 16,000 Belo Corp., 8% 11/15/2016 16,471 17,685

USD 150,000 Biomet Inc., 11.625% 10/15/2017 164,589 165,794








CORPORATE BONDS (46.1%) (cont’d)

USD 50,000 Boart Longyear Management Pty., Ltd., 7% 04/01/2021 49,436 51,699

622,375 Bragg Communication Inc., Loan, Private Placement 7.53% 08/31/2014 622,375 617,707

USD 118,000 Brightstar Corp., 9.5% 12/01/2016 120,726 122,611

USD 25,000 Cablevision Systems Corp., 8.625% 09/15/2017 26,746 28,205

USD 196,000 Calfrac Holdings LP 7.5% 12/01/2020 198,403 194,674

USD 159,000 Calpine Corp., 7.5% 02/15/2021 161,359 173,312

USD 39,000 Calpine Corp., 7.875% 07/31/2020 39,002 42,808

85,000 Canadian Satellite Radio Holdings Inc., 9.75% 06/21/2018 83,565 87,054

118,000 Cara Operations Ltd., 9.125% 12/01/2015 115,737 117,803

55,000 Cascades Inc., 7.75% 12/15/2016 54,268 54,908

USD 82,000 Cascades Inc., 7.75% 12/15/2017 84,385 82,698

USD 185,000 Case New Holland Inc., 7.875% 12/01/2017 189,251 212,960

USD 144,000 CB Richard Ellis Services Inc., 11.625% 06/15/2017 163,665 169,064

USD 57,000 CB Richard Ellis Services Inc., 6.625% 10/15/2020 57,989 59,518

USD 5,000 CDW LLC 8.5% 04/01/2019 4,766 5,132

USD 15,000 Celanese US Holdings LLC 5.875% 06/15/2021 14,290 15,777

USD 47,000 Celanese US Holdings LLC 6.625% 10/15/2018 48,253 50,872

USD 19,000 CF Industries Inc., 6.875% 05/01/2018 18,976 22,162

USD 100,000 CHC Helicopter 9.25% 10/15/2020 101,321 91,683

USD 15,000 Chesapeake Oilfield Operating LLC 6.625% 11/15/2019 15,240 15,892

USD 334,000 Chiron Merger Sub Inc., 10.5% 11/01/2018 333,230 333,442

USD 140,000 Chrysler Group LLC 8% 06/15/2019 118,250 130,496

USD 55,946 CityCenter Holdings LLC 10.75% 01/15/2017 56,264 58,773

USD 508,523 Clarketerm, Private Placement 7.84% 06/30/2014 580,700 439,958

USD 145,000 Clubcorp Club Operations Inc., 10% 12/01/2018 139,824 141,804

USD 36,000 Compagnie Générale de Géophysique 9.5% 05/15/2016 37,725 39,607

USD 25,000 Comstock Resources Inc., 7.75% 04/01/2019 24,285 24,194

USD 16,000 Comstock Resources Inc., 8.375% 10/15/2017 16,712 15,770

USD 150,000 Connacher Oil and Gas Ltd., 8.5% 08/01/2019 145,957 138,289

131,000 Connacher Oil and Gas Ltd., 8.75% 08/01/2018 131,000 118,228

USD 51,000 Consol Energy Inc., 8% 04/01/2017 52,807 56,889

USD 20,000 Continental Resources Inc., 7.125% 04/01/2021 20,549 22,106



25,637 Data & Audio Visual Enterprises Holdings Inc., 15% 09/25/2018^ 25,000 26,745

75,000 Data & Audio Visual Enterprises Wireless Inc., 9.5% 04/29/2018 75,000 67,641

USD 15,000 DaVita Inc., 6.375% 11/01/2018 15,260 15,643

USD 15,000 DaVita Inc., 6.625% 11/01/2020 15,260 15,701

USD 249,538 Denbury Resources Inc., Callable 8.25% 02/15/2020 270,759 284,074

USD 32,000 Digicel Group Ltd., 10.5% 04/15/2018 32,446 32,762

USD 79,000 Digicel Group Ltd., 12% 04/01/2014 93,048 90,135





^Denotes illiquid securities.Percentages shown in brackets relate investments at fair value to net assets of the Trust.The accompanying notes are an integral part of these financial statements.







USD 8,000 DJO Finance LLC / DJO Finance Corp., 7.75% 04/15/2018 7,756 6,255

USD 404,444 Dow Jones CDX HY, 144A, Private Placement 6.75% 06/29/2012 445,824 412,009

USD 46,000 DuPont Fabros Technology LP 8.5% 12/15/2017 49,313 50,141

USD 76,000 Eagle Parent Canada Inc., 8.625% 05/01/2019 74,276 73,937

USD 23,000 EH Holding Corp., 6.5% 06/15/2019 22,372 24,426

USD 166,000 EH Holding Corp., 7.625% 06/15/2021 161,470 177,560

USD 500,000 Eksportfinans ASA 3% 11/17/2014 457,290 453,511

USD 61,000 Emergency Medical Services Corp., 8.125% 06/01/2019 58,844 61,986

USD 165,000 EV Energy Partners LP 8% 04/15/2019 163,761 171,028

USD 8,000 Fidelity National Information Services Inc., 7.625% 07/15/2017 8,350 8,822

USD 7,000 Fidelity National Information Services Inc., 7.875% 07/15/2020 7,306 7,701

USD 129,000 Florida East Coast Railway Corp., 8.125% 02/01/2017 132,070 129,770

USD 175,000 FMG Resources August 2006 Pty. Ltd., 8.25% 11/01/2019 178,048 181,393

USD 238,000 FMG Resources Pty. Ltd., 7% 11/01/2015 248,276 244,876

USD 101,000 Foot Locker Inc., 8.5% 01/15/2022 114,093 106,233

USD 232,000 Frac Tech Services LLC 7.125% 11/15/2018 233,922 247,565

82,000 Gateway Casinos & Entertainment Inc., 8.875% 11/15/2017 83,344 82,831

USD 149,250 Gibson Energy ULC 5.75% 06/15/2018 143,813 152,022

USD 63,000 GOL Finance LLP 9.25% 07/20/2020 65,219 59,204

USD 35,000 Goldcorp Inc., 2% 08/01/2014 37,948 43,649

USD 11,000 Goodyear Tire & Rubber Co., 10.5% 05/15/2016 11,865 12,354

USD 53,000 Great Canadian Gaming Corp., 7.25% 02/15/2015 57,842 54,531

USD 70,000 Green Field Energy Services Inc., 13% 11/15/2016 70,821 69,170

USD 350,000 Griffon Corp., 7.125% 04/01/2018 343,245 352,981

USD 14,000 Grupo Posadas SAB de CV 9.25% 01/15/2015 14,567 11,837

USD 129,000 H&E Equipment Services Inc., 8.375% 07/15/2016 160,484 134,370

USD 20,000 Hapag-Lloyd AG 9.75% 10/15/2017 20,280 14,975

USD 302,000 Harvest Operations Corp., 6.875% 10/01/2017 313,876 318,416

USD 432,000 HCA Holdings Inc., 7.75% 05/15/2021 434,960 447,781

USD 43,000 HCA Inc., 6.5% 02/15/2020 40,543 45,447

USD 43,000 HCA Inc., 7.5% 02/15/2022 40,543 44,790

USD 141,000 HCA Inc., 7.875% 02/15/2020 151,664 155,128

USD 55,000 HCA Inc., 8.5% 04/15/2019 64,783 61,351

USD 60,000 Headwaters Inc., 7.625% 04/01/2019 54,180 54,093

USD 93,000 Huntington Ingalls Industries Inc., 6.875% 03/15/2018 92,570 92,845

USD 29,000 Huntington Ingalls Industries Inc., 7.125% 03/15/2021 28,517 28,952

USD 13,000 Huntsman International LLC 8.625% 03/15/2021 13,352 14,038

USD 132,000 IGATE Corp., 9% 05/01/2016 126,474 138,839

USD 127,000 Ingles Markets Inc., 8.875% 05/15/2017 137,881 140,049

USD 123,000 Intelsat Bermuda Ltd., 11.5% 02/04/2017 127,511 120,915

USD 25,000 Intelsat Jackson Holdings SA 7.25% 04/01/2019 24,494 25,850












USD 360,000 Intelsat Luxembourg SA 11.25% 02/04/2017 359,475 354,814

USD 47,000 Interactive Data Corp., 10.25% 08/01/2018 50,406 51,769

USD 15,000 Interface Inc., 7.625% 12/01/2018 15,323 16,159

USD 36,000 Intergen NV 9% 06/30/2017 39,189 38,599

USD 10,000 International Lease Finance Corp., 6.625% 11/15/2013 9,912 10,136



95,000 Iron Mountain Inc., 7.5% 03/15/2017 93,914 96,916

USD 233,000 Jabil Circuit Inc., 8.25% 03/15/2018 239,659 273,555

USD 79,000 JBS Finance II Ltd., 8.25% 01/29/2018 80,987 73,033

USD 23,000 JBS USA LLC/JBS USA Finance Inc., 11.625% 05/01/2014 26,851 26,564

USD 750,000 JPMorgan Chase & Co., FRN, Callable 7.9% 04/30/2049 793,137 813,452

USD 16,000 Kansas City Southern de Mexico SA de CV 6.125% 06/15/2021 15,470 16,747

USD 60,000 Kansas City Southern de Mexico SA de CV 6.625% 12/15/2020 60,396 64,790

USD 79,000 Kansas City Southern de Mexico SA de CV 8% 02/01/2018 80,560 88,123

USD 9,000 Kansas City Southern Railway 8% 06/01/2015 9,578 9,730

USD 27,000 Land O'Lakes Capital Trust I 7.45% 03/15/2028 24,148 26,336

USD 31,000 Lender Processing Services Inc., 8.125% 07/01/2016 31,856 31,027

USD 46,000 Limited Brands Inc., 6.625% 04/01/2021 45,068 49,672

USD 404,000 Lincoln National Corp., Callable 7% 05/17/2066 320,149 371,429

USD 5,000 Lincoln National Corp., Preferred 6.05% 04/20/2067 4,719 4,240

USD 51,000 Linn Energy LLC 8.625% 04/15/2020 51,100 56,370

136,000 Livingston International Inc., 10.125% 11/09/2015 136,522 137,927

USD 81,000 Longview Fibre Paper & Packaging Inc., 8% 06/01/2016 78,931 82,515

USD 40,000 MCE Finance Ltd., 10.25% 05/15/2018 40,246 43,906

USD 139,000 MEG Energy Corp., 6.5% 03/15/2021 135,171 144,786

USD 26,000 Mercer International Inc., 9.5% 12/01/2017 26,003 27,082

USD 237,000 MGM Mirage Inc., Senior Notes 6.625% 07/15/2015 226,004 229,361

USD 124,000 MGM Resorts International 10.375% 05/15/2015 140,037 144,320

USD 39,000 MGM Resorts International 11.125% 11/15/2017 45,388 45,292

USD 64,000 Michaels Stores Inc., 11.375% 11/01/2016 66,984 69,102

USD 43,000 MU Finance PLC 8.375% 02/01/2017 42,080 46,104

USD 59,000 Multiplan Inc., 9.875% 09/01/2018 62,148 62,508

USD 213,000 National Money Mart Co., 10.375% 12/15/2016 222,442 231,630

USD 30,000 Navios Maritime Acquisition Corp., 8.625% 11/01/2017 30,328 22,157

USD 158,000 Navios Maritime Holdings Inc., 8.875% 11/01/2017 164,829 153,310

USD 296,000 Neiman Marcus Group Inc., 10.375% 10/15/2015 344,417 313,224

USD 95,000 NII Capital Corp., 7.625% 04/01/2021 94,512 96,051

USD 32,000 NII Capital Corp., 8.875% 12/15/2019 33,638 34,310

41,250 Noranda Operating Trust 6.875% 12/28/2016 41,250 41,456

USD 105,000 Nortel Networks Corp., 10.75% 07/15/2016 103,017 117,660

26,000 North American Energy Partners Inc., 9.125% 04/07/2017 26,000 24,960

USD 10,000 NOVA Chemicals Corp., 7.875% 09/15/2025 9,855 10,187

USD 73,000 NOVA Chemicals Corp., 8.625% 11/01/2019 75,604 81,988

USD 39,000 NOVA Chemicals Ltd., 6.5% 01/15/2012 40,423 39,779









USD 202,000 OGX Petroleo e Gas Participacoes SA 8.5% 06/01/2018 197,111 201,663

USD 34,000 Overseas Shipholding Group Inc., 8.125% 03/30/2018 34,347 21,258

USD 32,000 Pacific Rubiales Energy Corp., 7.25% 12/12/2021 32,539 32,762

USD 70,000 Pacific Rubiales Energy Corp., Restricted 8.75% 11/10/2016 73,747 80,579

USD 28,000 Patheon Inc., 8.625% 04/15/2017 28,107 22,676

USD 75,000 Peabody Energy Corp., 6% 11/15/2018 75,949 77,931

USD 75,000 Peabody Energy Corp., 6.25% 11/15/2021 75,949 79,077

USD 154,000 Pilgrim's Pride Corp., 7.875% 12/15/2018 150,468 147,468

70,000 Precision Drilling Corp., 6.5% 03/15/2019 70,000 70,817

USD 110,000 Precision Drilling Corp., 6.625% 11/15/2020 112,293 114,579

USD 50,000 Production Resource Group Inc., 8.875% 05/01/2019 47,852 46,606

USD 79,000 ProQuest LLC/ProQuest Notes Co., 9% 10/15/2018 82,883 65,187

USD 7,333 QHP Royalty Sub LLC 10.25% 03/15/2015 7,789 7,551

USD 127,000 Quadra FNX Mining Ltd., 7.75% 06/15/2019 124,217 146,356

USD 8,000 QVC Inc., 7.125% 04/15/2017 8,162 8,639

USD 134,000 Rathgibson Inc. 11.25% 02/15/2014 153,875 -

USD 39,000 Regal Cinemas Corp., 8.625% 07/15/2019 41,499 42,908

USD 260,000 Regal Entertainment Group 9.125% 08/15/2018 273,317 284,065

USD 40,000 Reliance Intermediate Holdings LP, 144A, Private Placement 9.5% 12/15/2019 43,494 43,193

USD 44,000 Reynolds Group Issuer Inc., 8.25% 02/15/2021 43,991 39,668


USD 24,000 Reynolds Group Issuer Inc., 9% 04/15/2019 24,263 23,226


1,000,000 RioCan REIT 4.7% 06/15/2012 997,700 1,012,053

USD 269,000 Sabine Pass LNG LP 7.5% 11/30/2016 265,485 275,401

USD 20,000 Salem Communications Corp., 9.625% 12/15/2016 20,983 21,495

66,000 Savanna Energy Services Corp., 7% 05/25/2018 65,925 64,130

USD 128,000 Scientific Games Corp., 7.875% 06/15/2016 126,385 132,024

USD 25,000 Scientific Games International Inc., 9.25% 06/15/2019 26,659 26,996

USD 33,000 Severstal Columbus LLC 10.25% 02/15/2018 34,653 35,214

700,000 Shaw Communications Inc., 6.5% 06/02/2014 767,270 764,348

USD 135,000 Shea Homes LP 8.625% 05/15/2019 130,579 128,586

500,000 Sherritt International Corp., 8% 11/15/2018 500,000 507,500

523,000 Sherritt International Corp., 8.25% 10/24/2014 523,000 548,169

USD 44,000 Skilled Healthcare Group Inc., 11% 01/15/2014 54,149 44,823

USD 40,000 SLM Corp., 8% 03/25/2020 37,525 41,156

USD 181,000 SLM Corp., 8.45% 06/15/2018 187,611 189,917

USD 20,000 SM Energy Co., 6.5% 11/15/2021 20,163 20,985

USD 123,750 Southern Pacific Resource Corp., 10.5% 01/07/2016 121,931 126,821

USD 60,000 Starwood Hotels & Resorts Worldwide Inc., 7.15% 12/01/2019 62,390 69,909

USD 20,000 Steel Dynamics Inc., 7.625% 03/15/2020 20,485 21,495

USD 167,000 Steel Dynamics Inc., Senior Notes 6.75% 04/01/2015 130,070 173,951

USD 105,000 STHI Holding Corp., 8% 03/15/2018 104,145 109,905









USD 292,000 SunGard Data Systems Inc., Callable 10.25% 08/15/2015 302,550 308,244

USD 15,000 Taseko Mines Ltd., 7.75% 04/15/2019 14,445 13,791

USD 159,000 Teck Resources Ltd., 10.75% 05/15/2019 184,953 197,608

USD 28,000 Teekay Corp., 8.5% 01/15/2020 28,586 27,454

USD 77,000 Tembec Industries Inc., 11.25% 12/15/2018 78,248 80,793

USD 50,000 Thompson Creek Metals Co., Inc., 7.375% 06/01/2018 48,711 45,332

USD 57,000 Tomkins LLC 9% 10/01/2018 59,399 64,381

USD 31,000 Trans Union LLC 11.375% 06/15/2018 35,167 36,080

USD 66,000 Trinidad Drilling Ltd., 7.875% 01/15/2019 66,522 69,251

USD 103,000 United States Steel Corp., 7.375% 04/01/2020 103,523 102,303

USD 143,000 United Surgical Partners International Inc., 8.875% 05/01/2017 151,351 145,310

USD 87,000 UPC Germany GmbH 8.125% 12/01/2017 90,837 93,612

USD 160,000 UPCB Finance III Ltd., 6.625% 07/01/2020 158,384 160,548

USD 58,000 US Foods Inc., 8.5% 06/30/2019 56,254 57,165

58,000 Vermilion Energy Inc., 6.5% 02/10/2016 58,000 59,396

USD 38,000 Virgin Media Finance PLC 9.5% 08/15/2016 40,665 43,453

USD 39,000 Visant Corp., 10% 10/01/2017 41,456 36,352

312,000 Viterra Inc., 8.5% 08/01/2017 311,742 331,890

USD 750,000 Wells Fargo & Co., 7.98% 03/15/2049 785,245 818,465

AUD 117,299 Western Areas Ltd., 8% 07/02/2012 98,296 122,118

AUD 148,923 Western Areas NL 6.375% 07/02/2014 116,637 150,437

USD 167,000 Wind Acquisition Finance SA 11.75% 07/15/2017 195,624 152,260

USD 135,000 Wind Acquisition Finance SA 7.25% 02/15/2018 136,703 125,148

USD 86,000 WM Finance Corp., 11.5% 10/01/2018 80,615 86,951

USD 5,000 WM Finance Corp., 9.5% 06/15/2016 5,033 5,526

USD 212,000 Wynn Las Vegas LLC 7.875% 05/01/2020 196,937 237,832

USD 35,000 Xinergy Corp., 9.25% 05/15/2019 33,351 30,128

152,942 Xplornet Communications Inc., 9% 05/15/2017^ 152,942 152,942

27,200,348 27,087,177

REITS (1.9%)

7,850 Allied Properties REIT 128,366 198,212

6,792 Canadian REIT 140,171 240,437

36,630 CapitaCommercial Trust 40,606 30,205

10,656 Cominar REIT 140,100 234,539

7,560 H&R REIT 124,739 175,694

2,390 Northern Property Real Investment Trust 69,105 71,031

5,300 Primaris Retail Real Estate Investment Trust 81,629 109,233

25 Soverign REIT 31,207 28,333

2,432 Starwood Property Trust Inc. 52,312 45,834

808,235 1,133,518

CANADIAN GOVERNMENT BONDS (3.7%)

1,000,000 Government of Canada 2.75% 09/01/2016 1,061,845 1,066,275

1,000,000 Government of Canada 3.25% 06/01/2021 1,098,430 1,111,603

2,160,275 2,177,878








WARRANTS (1.0%)

67,223 Bank of America Corp., Warrants (16Jan19) 487,669 137,645

550 Data & Audio Visual Enterprises Wireless Inc., Warrants (25Sep18)^ – –

70 Green Field Energy Services Inc., Warrants (01Jan49)^ – –

54,525 JPMorgan Chase & Co., Warrants (28Oct18) 747,988 469,909

4,200 Posera-HDX Ltd., Warrants (27Apr12) – –

150 Xplornet Communications Inc., Warrants (15May17)^ – –

1,235,657 607,554

PREFERRED SHARES (0.6%)

3,600 Cia Brasileira de Distribuicao Grupo Pao de Acucar., Preferred 154,901 129,120

5,500 Cia Energetica de Minas Gerais, Preferred 100,043 99,536

3,000 GMAC Capital Trust I, Preferred 64,157 59,166

200 Volkswagen AG, Preferred 34,701 30,407

353,802 318,229

Total Long Positions 65,144,868 66,607,818

SHORT POSITIONS (-0.3%)

COMMON EQUITIES (-0.3%)

(3,300) Valeant Pharmaceuticals International Inc. (154,890) (157,278)

Total Short Positions (154,890) (157,278)

Commissions and other Portfolio Transaction Costs (49,450)

Total Bonds & Equities (113.0%) 64,940,528 66,450,540

Short-Term Investments (3.4%) 2,000,000 2,000,000

DERIVATIVE INSTRUMENTS

Foreign Currency Forward Contracts (-0.1%)

(see Schedule A) (63,109)

Total Investments (116.3%) 66,940,528 68,387,431

Other Assets (net) (-16.3%) (9,594,798)

Net Assets (100.0%) 58,792,633

Principal amounts stated in:

AUD - Australian Dollar

USD - U.S. Dollar







Schedule A

Foreign Currency Forward Contracts (-0.1%)

Credit Rating of Settlement Contract Unrealized

Contracts Counterparty the Counterparty‡ Date Rate ($) Pay Receive Gain (Loss) ($)

1 Credit Suisse Group AG A-1 13-Mar-12 0.98 (6,093,000) US $ 6,191,615 Canadian $ (25,152)1 Morgan Stanley A-2 11-Apr-12 1.36 (747,000) Euro 1,017,513 Canadian $ 29,305 1 Morgan Stanley A-2 13-Mar-12 0.99 (1,496,000) US $ 1,518,709 Canadian $ (7,675)1 Royal Bank of Canada A-1+ 13-Mar-12 0.99 (3,079,000) US $ 3,125,770 Canadian $ (15,765)1 State Street Corp. A-1 13-Mar-12 0.99 (1,660,033) Canadian $ 1,636,000 US $ 9,192 1 State Street Corp. A-1 13-Mar-12 0.99 (44,546) Canadian $ 44,000 US $ 348 1 The Bank of Nova Scotia†† A-1+ 13-Mar-12 1.03 (170,000) US $ 175,260 Canadian $ 1,799 1 The Bank of Nova Scotia†† A-1+ 13-Mar-12 0.98 (4,713,000) US $ 4,788,314 Canadian $ (20,418)1 UBS AG A-1 11-Apr-12 0.98 (1,002,000) Australian $ 1,025,752 Canadian $ (8,623)1 UBS AG A-1 11-Apr-12 1.61 (914,000) British Pound 1,467,349 Canadian $ 19,684 1 UBS AG A-1 11-Apr-12 1.10 (283,000) Swiss Franc 312,324 Canadian $ 3,983 1 UBS AG A-1 13-Mar-12 0.99 (8,492,000) US $ 8,614,667 Canadian $ (49,787)

Total Foreign Currency Forward Contracts Value (63,109)


‡Credit ratings are obtained from Standard & Poor’s, where available, otherwise ratings are obtained from: Moody's Investors Service, Dominion Bond Rating Services orCanadian Bond Rating Services.

††CI Investments Inc., the Manager, is a corporation controlled by CI Financial Corp. The Bank of Nova Scotia has a significant interest in CI Financial Corp. Transactionswith The Bank of Nova Scotia are identified above.Percentages shown in brackets relate investments at fair value to net assets of the Trust.The accompanying notes are an integral part of these financial statements.




Statements of Net Assets (in $000’s except for per unit amounts and number of units outstanding)

The accompanying notes are an integral part of these financial statements.

ASSETSInvestments at fair value* Cash Short-term investmentsUnrealized gain on futures and foreign currency forward contractsMargin for short salesReceivable for securities soldDividends and accrued interest receivable

LIABILITIESPayable for securities purchasedPayable for unit redemptionsManagement fees payableUnrealized loss on futures and foreign currency forward contractsService fees payableInvestments sold short at fair value**Distributions payableAccrued expenses

Net assets and unitholders’ equity

UNITHOLDERS’ EQUITYUnit capitalContributed surplusRetained earnings (deficit)Net assets and unitholders’ equity

*Investments at cost **Investment sold short at cost

Net assets per unit (Note 10)

Number of units outstanding (Note 3)

As at As at December 31, 2011 December 31, 2010

66,608 91,522 1,163 1,051 2,000 –

64 848 189 –125 46 559 636

70,708 94,103

– 356 11,043 15,276

2 3 127 98 76 100

157 –509 608

1 1 11,915 16,442

58,793 77,661

51,708 66,037 4,112 4,677 2,973 6,947

58,793 77,661

65,095 84,130 (155) –

8.01 8.91

7,336,952 8,712,569





Statements of Operations and Retained Earnings (Deficit) (in $000’s except for per unit amounts)

INVESTMENT INCOMEDividendsInterest Derivative income (loss)Management fee rebateLess: Foreign withholding taxes

EXPENSES Management fees (Note 4)Administrative expenses (Note 4)Interest expenseService fees (Note 4)Legal feesAudit feesIndependent review committee feesHarmonized sales tax/Goods and services tax (Note 4)

Net investment income (loss) for the year

Realized and unrealized gain (loss) on investmentsand commissions and other portfolio transaction costs

Realized gain (loss) on investmentsForeign exchange gain (loss)Commissions and other portfolio transaction costsChange in unrealized appreciation (depreciation) of investments and derivativesNet gain (loss) on investments

Increase (decrease) in net assets from operations

Increase (decrease) in net assets from operations per unit

STATEMENTS OF RETAINED EARNINGS (DEFICIT)Retained earnings (deficit), beginning of yearIncrease (decrease) in net assets from operations(Excess) deficiency on amounts paid on units redeemedDistribution from net incomeDistribution from realized gainsRetained earnings (deficit), end of year

Contributed surplus, beginning of year(Excess) deficiency on amounts paid on units redeemedContributed surplus, end of year

For the years ended December 312011 2010

1,386 1,403 2,058 2,532

12 –– –

(165) (92)3,291 3,843

820 984 185 152

2 1 298 358

– 5 1 66 1 –

118 110 1,425 1,676

1,866 2,167

3,143 2,480 – (53)

(96) (146)(6,694) 5,451 (3,647) 7,732

(1,781) 9,899

(0.20) 0.95

6,947 (663)(1,781) 9,899

– –(2,193) (2,289)

– –2,973 6,947

4,677 5,985 (565) (1,308)

4,112 4,677




Statements of Cash Flows (in $000’s)

CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES

Net investment income (loss) Proceeds from sale of investmentsProceeds from short sale of investmentsPurchase of investmentsShort cover of investmentsMargin for short salesNet change in non-cash balances related to operations

FINANCING ACTIVITIESDistributions paidCost of units redeemed and repurchased

Increase (decrease) in cash during the year

Cash (Bank overdraft), beginning of year

Cash (Bank overdraft), end of year

For the years ended December 31 2011 2010

1,866 2,16770,841 74,723

155 –(51,044) (67,819)

(150) –(189) –

52 (101)21,531 8,970

(6,060) (7,186)(15,359) (1,014)(21,419) (8,200)

112 770

1,051 281

1,163 1,051

Net assets, beginning of year

CAPITAL TRANSACTIONSReinvested distributions (Note 6)Cost of units redeemed and repurchased(Excess) deficiency on amounts paid on units redeemed

DISTRIBUTIONS TO UNITHOLDERSFrom net incomeFrom realized gainsFrom return of capital

Increase (decrease) in net assets from operations

Net assets, end of year

Statements of Changes in Net Assets (in $000’s)

For the years ended December 31 2011 2010

77,661 91,180

142 138(10,561) (14,930)

(565) (1,308)(10,984) (16,100)

(2,193) (2,289)– –

(3,910) (5,029)(6,103) (7,318)

(1,781) 9,899

58,793 77,661







Trust Specific Financial Instruments Risks (Note 14)

Other Price Risk

As at December 31, 2011 and 2010, the Trust was exposed to other price risk as most of its holdings were sensitive to changes in general economic

conditions across the world. The Trust’s portfolio consisted of international stocks and fixed income securities, thus an overall downturn in economic

conditions across the world could have led to a widening in credit spreads and a decrease in equity prices which could have then led to a decrease

in the value of the Trust's holdings.

As at December 31, 2011, had the global markets increased or decreased by 10% (December 31, 2010 - 10%), with all other variables held constant,

net assets of the Trust would have increased or decreased, respectively, by approximately $3,734,000 (December 31, 2010 - $6,202,000). In practice,

actual results may differ from this analysis and the difference may be material.

The Trust’s investments were concentrated in the following segments as at December 31, 2010

Category Net Assets (%)

Equities 79.9Bonds 37.9Cash & Equivalents 1.4Foreign Currency Forward Contracts 1.0Other Assets (net) -20.2

Interest Rate Risk

As at December 31, 2011 and 2010, some of the Trust’s assets were invested in bonds. Generally, debt securities will increase in value when

interest rates decline and decrease in value when interest rates rise. How sensitive the Trust was to changes in prevailing interest rates depends

also on other factors, like the credit rating of the issuers and the term to maturity of the Trust's investments. The higher the credit rating of the

issuers and the longer the term to maturity, the more sensitive the Trust was to changes in prevailing interest rates.

Less than 1 - 3 3 - 5 Greater1 Year Years Years than 5 Years Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Interest Rate Exposure 5,160 3,739 5,169 18,549 32,617

as at December 31, 2010

Less than 1 - 3 3 - 5 Greater1 Year Years Years than 5 Years Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Interest Rate Exposure 1,072 3,496 7,812 18,174 30,554

As at December 31, 2011, had the prevailing interest rates increased or decreased by 0.25% (December 31, 2010 - 0.25%), with all other variables held

constant, net assets of the Trust would have indirectly decreased or increased, respectively, by approximately $426,000 (December 31, 2010 - $588,000).

In practice, the actual results may differ from this analysis and the difference may be material.

The tables below summarize the Trust’s exposure to interest rate risk, categorized by the contractual maturity date.





Trust Specific Financial Instruments Risks (Note 14) (cont’d)

Currency Risk

As at December 31, 2011 and 2010, the Trust was exposed to currency risk as its investments were denominated in currencies other than

Canadian dollars, the functional currency of the Trust. As a result, the Trust could have been affected by fluctuations in the value of such currencies

relative to the Canadian dollar.

Financial Instruments Derivatives Total Currency NetExposure Exposure Exposure Assets

CURRENCY (in $000’s) (in $000’s) (in $000’s) (%)

US Dollar 43,047 (30,060) 12,987 16.7 British Pound 2,944 (1,097) 1,847 2.4 Euro 3,330 (1,845) 1,485 1.9 Australian Dollar 2,412 (1,042) 1,370 1.8 Swiss Franc 1,645 (353) 1,292 1.7 Brazilian Real 456 – 456 0.6 Singapore Dollar 413 – 413 0.5 Hong Kong Dollar 358 – 358 0.5 Japanese Yen 237 – 237 0.3 Mexican Peso 231 – 231 0.3 Thai Baht 160 – 160 0.2 Total 55,233 (34,397) 20,836 26.9

As at December 31, 2011, had the Canadian dollar strengthened or weakened by 10% (December 31, 2010 - 10%) in relation to all other foreign

currencies held in the Trust, with all other variables held constant, net assets of the Trust would have decreased or increased, respectively, by approximately

$1,663,000 (December 31, 2010 - $2,084,000). In practice, the actual results may differ from this analysis and the difference may be material.

The tables below summarize the Trust’s exposure to currency risk.



Financial Instruments Derivatives Total Currency NetExposure Exposure Exposure Assets

CURRENCY (in $000’s) (in $000’s) (in $000’s) (%)

US Dollar 34,712 (22,781) 11,931 20.3 Swiss Franc 1,394 (307) 1,087 1.8 Australian Dollar 1,923 (1,044) 879 1.5 Euro 1,842 (985) 857 1.5 Brazilian Real 423 – 423 0.7 Thai Baht 372 – 372 0.6 British Pound 1,754 (1,446) 308 0.5 Japanese Yen 266 – 266 0.5 Hong Kong Dollar 247 – 247 0.4 Mexican Peso 230 – 230 0.4 Singapore Dollar 30 – 30 0.1 Total 43,193 (26,563) 16,630 28.3




Credit Risk

As at December 31, 2011 and 2010, the Trust was exposed to credit risk as it was invested in fixed income securities and derivatives.

The Trust was invested in fixed income securities, preferred securities and derivative instruments, as applicable, with the following credit ratings:

as at December 31, 2011*

CREDIT RATING^ Net Assets (%)

AAA/Aaa/A++ 0.3 AA/Aa/A+ 0.7 A 1.3 BBB/Baa/B++ 6.4 BB/Ba/B+ 11.0 B 11.9 CCC/Caa/C++ 4.4 Not Rated 3.0 Total 39.0

as at December 31, 2010*

CREDIT RATING^ Net Assets (%)

AAA/Aaa/A++ 7.1 AA/Aa/A+ 0.1 BBB/Baa/B++ 10.5 BB/Ba/B+ 15.7 B 14.2 CCC/Caa/C++ 3.1 Not Rated 3.2Total 53.9

*Credit ratings are obtained from Standard & Poor’s, where available, otherwise ratings are obtained from: Moody’s Investors Service, Dominion BondRating Services or Canadian Bond Rating Services, respectively.

^Refer to Note 14 for Credit Rating cross reference.The accompanying notes are an integral part of these financial statements.




The tables below summarize the inputs used by the Trust in valuing the Trust’s investments and derivatives carried at fair value.

Long Positions at fair value as at December 31, 2011

Level 1 Level 2 Level 3 Total(in $000’s) (in $000’s) (in $000’s) (in $000’s)

Equities 36,734 1 – 36,735 Bonds – 29,085 180 29,265 Short-term investments – 2,000 – 2,000 Warrants 608 – – 608 Foreign currency forward contracts, net – (63) – (63)Total 37,342 31,023 180 68,545


Fair Value Hierarchy

Long Positions at fair value as at December 31, 2010


Equities 61,489 – – 61,489Bonds – 29,482 21 29,503 Warrants 530 – – 530 Foreign currency forward contracts, net – 750 – 750 Total 62,019 30,232 21 92,272

Short Positions at fair value as at December 31, 2011


Equities (157) – – (157) Total (157) – – (157)


The tables below summarize the movement in Level 3 financial instruments at fair value using unobservable inputs.

For the year ended December 31, 2011

Balance at Net transfers Realized gain Unrealized gain Balance atDec. 31, 2010 Purchases Sales in (out) (loss) (loss)**Dec. 31, 2011

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Long PositionsBonds 21 152 – 6 – 1 180 Total 21 152 – 6 – 1 180

**Change in unrealized gain (loss) related to investments held at December 31, 2011 was $1,745.

During 2011 fixed income securities with a net fair value of $6,000 were transferred into Level 3 from Level 2 as observable market inputs were no

longer available for these investments.




For the year ended December 31, 2010

Balance at Net transfers Realized gain Unrealized gain Balance atDec. 31, 2009 Purchases Sales in (out) (loss) (loss)* Dec. 31, 2010

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

Long PositionsBonds 589 – (1,225) 525 (433) 565 21 Total 589 – (1,225) 525 (433) 565 21

*Change in unrealized gain (loss) related to investments held at December 31, 2010 was $962.

During 2010 fixed income securities with a net fair value of $525,000 were transfered into Level 3 from Level 2 as observable market inputs were nolonger available for these investments.

Investments classified as Level 3 are valued at fair value based on unobservable inputs and assumptions, which may include credit spreads, industrymultipliers and discount rates. Management has assessed that the effect of changing these inputs to reasonably possible alternatives would not havea significant impact on the net assets of the Trust as at December 31, 2011 and December 31, 2010.


1. THE TRUSTSkylon Growth & Income Trust (the “Trust”) is a closed-end investment trust established under the laws of the Province ofOntario pursuant to a Declaration of Trust dated as of January 30, 2004. On February 18, 2004, the Trust completed an initialpublic offering of 19,500,000 units at $10 per unit. The Trust is listed on The Toronto Stock Exchange, under the symbolSKG.UN. On March 3, 2004, an over-allotment option granted to agents was exercised for further issuance of 1,030,000 unitsat $10 per unit. The Trust is managed by CI Investments Inc. (the “Manager” and the “Trustee”). CI Investments Inc. is also theinvestment advisor (the “Investment Advisor”) to the Trust.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles(“Canadian GAAP”). Certain prior period balances have been reclassified to conform with the current period presentation.

The following is a summary of the significant accounting policies of the Trust:

(a) Valuation of InvestmentsCanadian GAAP requires the fair value of financial instruments traded in an active market to be measured based on an investment’sbid/ask price depending on the investment position (long/short).

For the purpose of processing unitholder transactions, net asset value is calculated based on the closing market price of exchange-traded investments (referred to as “Net Asset Value”), while for financial statement purposes net assets arecalculated based on bid/ask price of such investments (referred to as “Net Assets”).

In accordance with National Instrument 81-106, a comparison Net Asset Value per unit and the Net Assets per unit is disclosed inNote 10.

At the financial reporting date, listed securities are valued based on the bid price for securities held long and the ask price forsecurities held short. Unlisted securities are valued based on price quotations from recognized investment dealers, or failing that,their fair value is determined by the Manager on the basis of the latest reported information available. Fixed income securities,debentures, money market investments and other debt instruments including short-term investments, are valued at the bid quotationfrom recognized investment dealers. Underlying funds are valued on each business day at their net asset value as reported by theUnderlying Fund’s manager.

(b) Commissions and Other Portfolio Transaction CostsTransaction costs, such as brokerage commissions, incurred in the purchase and sale of securities, are included in “Commissionsand other portfolio transaction costs” in the Statements of Operations.

(c) Cost of InvestmentsCost of investments represents the amount paid for each security and is determined on an average cost basis excluding commissionsand transaction costs.

(d) Investment Transactions and Income RecognitionInvestment transactions are accounted for on the trade date for financial reporting purposes and any unrealized and realized gainsand losses on such transactions are calculated on an average cost basis.

Dividend income and distributions from investments are recognized on the ex-dividend/ex-distribution date and interest incomeis accounted for on the accrual basis.

Distributions received from income trust holdings are recorded as income, capital gains or a return of capital, based on the bestinformation available to the Manager. Due to the nature of these investments, actual allocations could vary from this information.Distributions from income trusts that are treated as a return of capital for income tax purposes reduce the average cost of theunderlying investment trust.

Notes to the Financial Statements


Distributions received from investment fund holdings are recognized by the Trust in the same form in which they were receivedfrom the underlying funds.

(e) Foreign ExchangeForeign currency amounts are translated into Canadian dollars, the functional currency of the Trust, as follows: fair value ofinvestments, forward currency contracts, other assets and liabilities at the closing rate of exchange on each business day;income and expenses, purchases, sales and settlements of investments at the rate of exchange prevailing on the respectivedates of such transactions. Foreign exchange gains (losses) on completed transactions are included in “Foreign exchange gain (loss)” as reflected in the Statements of Operations.

(f) Forward Contracts

The Trust may enter into forward contracts. Forward foreign currency contracts are valued on each valuation day based on the

difference between the value of the contract on the date the contract originated and the value of the contract on the valuation day.

All unrealized gains (losses) arising from forward foreign currency contracts are recorded as part of “Change in unrealized appreciation

(depreciation) of investments and derivatives” in the Statements of Operations and “Unrealized gain (loss) on futures and foreign

currency forward contracts” in the Statements of Net Assets until the contracts are closed out or expire, at which time the gains (losses)

are realized and reported as “Realized gain (loss) on investments” in the Statements of Operations.

(g) Increase (Decrease) in Net Assets from Operations per UnitIncrease (decrease) in net assets from operations per unit in the Statements of Operations is calculated by dividing the increase(decrease) in net assets from operations by the weighted average number of units outstanding during the period.

(h) Private PlacementsThe fair value of private placements is determined using indicative bid values obtained from third-party broker-dealers. The broker-dealers determine the fair value using valuation models that may be based, in part, on assumptions that are not supported by observable market inputs. The indicative bid values are independently assessed by the Manager to ensurethat they are reasonable. The fair values of private placements are affected by the perceived credit risk of the issuers,predictability of cash flows and the length of time to maturity.

(i) Cash and Short-Term InvestmentsCash is comprised of cash on deposit. Short-term investments are comprised of short-term debt instruments with terms to maturityof less than one year at acquisition.

(j) Net Asset Value per UnitNet Asset Value per unit for the Trust is calculated at the end of each day on which the Toronto Stock Exchange is open forbusiness by dividing the total Net Asset Value of the Trust by outstanding units.

(k) Income TaxesThe Trust complies with the Income Tax Act (Canada) to qualify as a mutual fund trust. A mutual fund trust is subject to tax in each taxation year under Part 1 of the Income Tax Act (Canada) on the amount of its income for the year, including net realized taxable capital gains, less the portion thereof that it claims in respect of the amounts paid or payable to theunitholders for the year. Income tax paid by the Trust on any net realized capital gains not paid or payable to unitholders is recoverable by virtue of refunding provisions contained in the Income Tax Act (Canada) and provincial legislation, asredemption occur. The Trust intends to distribute all of its net income and net realized capital gains so that the Trust will not generally be liable for income tax thereon.

(l) Use of EstimatesThe preparation of financial statements in accordance with Canadian GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of incomeand expenses during the reporting period. Actual results could differ from those estimates.

Notes to the Financial Statements (cont’d)


3. UNITHOLDERS’ EQUITYUnits issued and outstanding represent the capital of the Trust.

The relevant changes pertaining to subscription and redemption of the Trust units are disclosed in the Statements of Changes inNet Assets. In accordance with the objectives and risk management polices outlined in Note 14, the Trust endeavors to investsubscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing ashort-term borrowing facility or disposal of investments when necessary.

The Trust is authorized to issue an unlimited number of redeemable, transferable units of one class, each of which represents anequal, undivided interest in the net assets of the Trust. Commencing April 30, 2008, unitholders are entitled to redeem their unitsoutstanding monthly (the “Monthly Redemption”). Monthly redemption price per unit is equal to the lesser of: (a) 94% of the 10day average trading price on the applicable monthly valuation date; and (b) the “closing market price” per unit on the applicablemonthly valuation date.

On April 14, 2009, the Trust received approval of the unitholders to add an annual right of unitholders to redeem their units. As a result of these changes, commencing December 31, 2010, the unitholders will have the right to redeem some or all of theirunits on December 31 each year (the “Annual Redemption”) at the net asset value.

The Trust endeavours to provide unitholders with monthly distributions which were initially targeted to total $0.70 per unit perannum representing a yield of 7.0% based on the $10.00 per unit issue price. Distributions commenced on March 31, 2004, and are expected to continue until termination of the Trust.

For the years ended December 31, net capital transactions of the Trust consisted of the following:

Unit Transactions 2011 2010

Balance, beginning of year 8,712,569 10,525,715

Units issued on reinvested distributions 17,367 16,846

Units redeemed (1,381,984) (1,710,642)

Units purchased for cancellation (Note 5) (11,000) (119,350)

Balance, end of year 7,336,952 8,712,569

The Trust did not file a notice of intention to make a normal course issuer bid for 2011.

When units of the Trust are redeemed at a price per unit which is lower than the average cost per unit of capital, the differenceis included in “Contributed surplus” on the Statements of Net Assets. If the redemption price is greater than the average cost ofcapital, the difference is first charged to “Contributed surplus” until the entire account is eliminated, and the remaining amountis charged to “Retained Earnings (Deficit)” in the Statements of Net Assets.

4. FEES AND OTHER EXPENSES(a) Management FeesThe Trust pays to the Manager an annual fee equal to 1.10% of the Net Asset Value for the Trust calculated and payablemonthly plus any applicable taxes and an amount equal to the service fees payable by the Manager to registered dealers.

(b) Administrative ExpensesThe Trust is also responsible for all of its expenses incurred in connection with its operations and administration (fees shownas administration fees include: trustee fees, transfer agency, custody and accounting fees). Audit fees, legal fees and independentreview committee fees are disclosed separately.

(c) Service FeesThe Manager will pay to registered dealers of the Trust an annual service fee of 0.40% of the Net Asset Value for units held by clients of the sales representatives of the registered dealers, calculated and payable quarterly in arrears.



(d) Harmonized Sales TaxAs of July 1, 2010, Ontario combined the federal goods and services tax (“GST” - 5%) with the provincial retail sales tax(“PST” - 8%). The combination resulted in a Harmonized sales tax (“HST”) rate of 13%.

5. MARKET REPURCHASE PROGRAMIn accordance with the Trust’s prospectus, and to enhance liquidity and to provide support to the units, the Trust has a mandatorymarket purchase program under which the Trust, subject to exceptions contained in the Trust Agreement and in compliance withany regulatory requirements, is obligated to purchase its own units for cancellation. If, on any business day, the closing marketprice of the Trust’s units (the “Reference Closing Price”) is less than 95% of the Net Asset Value per unit determined on that date,the Trust will offer to purchase for cancellation any units offered in the market at or below the Reference Closing Price on thefollowing business day. The maximum number of units to be purchased in any three month period will not be over 1.25% of the number of units outstanding at the beginning of such period. During the year ended December 31, 2011 the Trust purchased11,000 units for cancellation at a cost of $83,416 (119,350 units at a cost of $961,854 for 2010).

6. REINVESTMENT OF DISTRIBUTIONSThe Trust has adopted a Distribution Reinvestment Plan (“DRIP”) therefore at the election of each unitholder distributions areautomatically reinvested in additional units of the Trust, without charge, at a price equal to the average trading price of the unitson the TSX for the five trading days immediately preceding the relevant Distribution Date. The Manager may terminate the DRIPin its sole discretion, upon not less than thirty days’ written notice to the DRIP participants.

7. BROKERAGE AND OTHER COMMISSIONSCommissions paid for security transactions for the years ended December 31, were as follows:

(in $000’s) 2011 2010

Brokerage Commissions

Skylon Growth & Income Trust 90 141

Soft Dollar Commissions†

Skylon Growth & Income Trust 12 22

†A portion of brokerage commissions paid was used to cover research and market data services, termed soft dollar commissions. These

amounts have been estimated by the Manager.

8. SECURITIES LENDINGThe Trust may engage in securities lending. Under a Securities Lending Agreement: (i) the borrower will pay to the Trust anegotiated securities lending fee and will make compensation payments to the Trust equal to any distributions received bythe borrower on the securities borrowed; (ii) the securities loan must qualify as “securities lending arrangements” for thepurposes of the Tax Act; and (iii) the securities loan must be fully collateralized. The minimum level of collateralization willbe 102%. As at December 31, 2011 and 2010 the Trust was not engaged in securities lending.



9. INCOME TAX LOSSES CARRY FORWARDNet capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non-capital losses arising intaxation years 2004 and 2005 may be carried forward ten years. Non-capital losses arising in taxation years after 2005 may becarried forward twenty years. Non-capital losses carried forward may reduce future taxable income.

Losses carry forwards (in $000’s)

2011

Net capital losses carry forward 6,905

Year of expiry 2014 2015 2026 2027 2028 2029 2030 2031 Total

Non-capital losses carry forward – – – – – – – – –

10. NET ASSETS COMPARISONIn accordance with National Instrument 81-106, a comparison of Net Assets per unit and Net Asset Value per unit, as atDecember 31, is as follows:

2011 ($) 2010 ($)

Net assets per unit 8.01 8.91

Net asset value per unit 8.02 8.92

11. RELATED PARTY TRANSACTIONSThe Bank of Nova Scotia has a significant interest in CI Financial Corp., the parent company of the Manager. The Trust may havedirect or indirect holdings in The Bank of Nova Scotia and/or CI Financial Corp. as identified in the Statement of Investment Portfolioof the Trust, if applicable.

The Trust paid $2,353 in brokerage commissions to The Bank of Nova Scotia during the year ended December 31, 2011 (2010 - $3,131).

12. INTERNATIONAL FINANCIAL REPORTING STANDARDSOn February 13, 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the use of International FinancialReporting Standards (“IFRS”) will be required for all publicly accountable profit-oriented enterprises for interim and annual financialstatements relating to fiscal years beginning on or after January 1, 2011. On December 12, 2011, the AcSB confirmed deferral of theIFRS changeover date for investment funds. Based on the AcSB decision, IFRS will become effective for interim and annual financialstatements relating to fiscal years beginning on or after January 1, 2014.

Based on the Manager’s current evaluation of the differences between IFRS and Canadian GAAP, the Manager currently does notexpect any impact to net asset value or net asset value per unit, at this time, as a result of the transition to IFRS, and expects thatthe main impact will be on the financial statements, where additional disclosures or changes in presentation will be required.Further updates on the progress in the implementation of the IFRS transition plan and any changes to reporting will be providedduring the implementation period leading up to the transition date.

13. FINANCIAL INSTRUMENTS The categorization of financial instruments is as follows: investments and derivatives are classified as held for trading and are stated at fair value. Receivable for securities sold, margin for short sales, and dividends and accrued interest receivableare designated as loans and receivables. They are recorded at amortized cost which approximates their fair value due totheir short-term nature. Similarly, payable for unit redemptions, payable for securities purchased, management fees payable,accrued expenses, distributions payable and service fees payable are designated as financial liabilities and are carried at their amortized cost which approximates their fair value, due to their short-term nature. Financial liabilities other thaninvestments sold short are generally settled within three months.



14. FINANCIAL INSTRUMENTS RISK Risk ManagementThe Trust is exposed to a variety of financial instruments risks: credit risk, liquidity risk and market risk (including interest rate risk,currency risk and other price risk). The level of risk to which the Trust is exposed to depends on the investment objective and the type of investments held by the Trust. The value of the investments within the portfolio can fluctuate daily as a result of changes inprevailing interest rates, economic and market conditions and company specific news related to investments held by the Trust. TheManager of the Trust may minimize potential adverse effects of these risks on the Trust’s performance by, but not limited to, regularmonitoring of the Trust’s positions and market events, diversification of the investment portfolio by asset type, country, sector, term to maturity within the constraints of the stated objectives, and through the usage of derivatives to hedge certain risk exposures.

Other Price RiskOther price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other thanthose arising from interest rate risk or currency risk). The value of each investment is influenced by the outlook of the issuer and by general economic and political conditions, as well as industry and market trends. All securities present a risk of loss of capital.Except for options written, future contracts sold short and investments sold short, the maximum risk resulting from financialinstruments is equivalent to their fair value.

Other assets and liabilities are monetary items that are short-term in nature and therefore are not subject to significant other price risk.

Interest Rate RiskInterest rate risk is the risk that the fair value of interest-bearing investments and interest rate derivative instrument will fluctuate due to changes in prevailing levels of market interest rates. As a result, the value of the Trust will be affected by changes in applicableinterest rates as it invests in debt securities and income trusts. If interest rates fall, the fair value of existing debt securities mayincrease due to the increase in yield. Alternatively, if interest rates rise, the yield of existing debt securities decrease which may thenlead to a decrease in their fair value. The magnitude of the decline will generally be greater for long-term debt securities than forshort-term debt securities.

Interest rate risk also applies if the Trust invests in convertible securities. The fair value of these securities varies inversely with interestrates, similar to other debt securities. However, since they may be converted into common shares, convertible securities are generallyless affected by interest rate fluctuations than other debt securities.

Currency RiskCurrency risk arises from financial instruments that are denominated in a currency other than the Canadian dollar, the functionalcurrency of the Trust. As a result, the Trust may be exposed to the risk that the value of securities denominated in other currencieswill fluctuate due to changes in exchange rates. The Statement of Investment Portfolio identifies all bonds and derivative instrumentsdenominated in foreign currencies. Equities traded in foreign markets are exposed to currency risk as the prices denominated inforeign currencies are converted to the Trust’s functional currency to determine their fair value.

Credit RiskCredit risk is the risk that a security issuer or counterparty to a financial instrument will fail to meet its financial obligations. Thefair value of debt instruments includes consideration of the credit worthiness of the debt issuer. Credit risk exposure for derivativeinstruments, if applicable, is based on the Trust’s unrealized gain of the contractual obligations with the counterparty as at thereporting date. The credit risk exposure of the Trust’s other assets are represented by their carrying amount as disclosed in theStatements of Net Assets.

Credit ratings for fixed income securities, preferred securities and derivative instruments are obtained from Standard & Poor’s,where available, otherwise ratings are obtained from: Moody's Investors Service, Dominion Bond Rating Services orCanadian Bond Rating Services.

Credit ratings can be either long-term or short-term. Short-term credit ratings are generally assigned to those obligations andderivative instruments considered short-term in nature. The table below provides a cross-reference between the long-term creditratings disclosed in the Credit Rating table inclusive of the short-term credit ratings disclosed in the derivatives schedule in theStatement of Investment Portfolio.



Credit Rating as per Credit Risk table Credit Rating as per derivatives schedulesAAA/Aaa/A++ A-1+AA/Aa/A+ A-1, A-2, A-3A B, B-1BBB/Baa/B++ B-2BB/Ba/B+ B-3B CCCC/Caa/C++ -CC/Ca/C+ -C and Lower DNot Rated WR

Significant cash balances as disclosed in the Statements of Net Assets are maintained by the Custodian, RBC Dexia. The Managermonitors the credit worthiness of the custodian on a regular basis.

All transactions executed by the Trust in listed securities are settled / paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation.

Liquidity RiskLiquidity risk is the risk that the Trust may not be able to settle or meet its obligations, on time or at a reasonable price. The Trust isexposed to monthly and annual cash redemptions of redeemable units. Therefore, the Trust aims to invest the majority of its assets ininvestments that are traded in active markets and can be readily disposed of. In addition, the Trust aims to retain sufficient cash andcash equivalent positions to maintain liquidity. From time to time, the Trust may enter into derivative contracts or invest in unlistedsecurities that may not trade in an organized market and may be illiquid. Illiquid securities are identified in the Statement ofInvestment Portfolio of the Trust.

Fair Value HierarchyThe Trust is required to classify financial instruments measured at fair value using a fair value hierarchy. Investments whose values are based on quoted market prices in active markets are classified as Level 1. This level may include publicly tradedequities, exchange traded and retail mutual funds, exchange traded warrants, futures contracts, traded options, Americandepositary receipts (“ADRs”) and Global depositary receipts (“GDRs”).

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices,dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. These may include fixedincome securities, mortgage backed securities (“MBS”), short-term instruments, non-traded warrants, over-the-counter options,structured notes of indexed securities, foreign currency forward contracts and swap instruments.

Investments classified as Level 3 have significant unobservable inputs. Level 3 instruments may include private equities, privateterm loans, private equity funds and certain derivatives. As observable prices are not available for these securities, the Trust mayuse a variety of valuation techniques to derive the fair value.

Details of the Trust’s exposure to financial instruments risks including the fair value hierarchy classification are available in the “Trust Specific Financial Instruments Risks” section of the financial statements.



Manager and TrusteeCI Investments Inc.2 Queen Street East, 20th FloorToronto, OntarioM5C 3G7Phone: (416) 364-1145Fax: (416) 364-6299Toll Free: [email protected]

Custodian RBC Dexia Investor Services Trust155 Wellington Street West5th FloorToronto, OntarioM5V 3L3

AuditorPricewaterhouseCoopers LLP18 York StreetSuite 2600Toronto, OntarioM5J 0B2

Registrar & Transfer AgentComputershare Investor Services Inc.100 University Avenue8th FloorToronto, OntarioM5J 2Y1

ListedThe Toronto Stock Exchange

Ticker SymbolSKG.UN

For more information on the Trust, visit us onlineat www.ci.com.

Trust Information

SKYGIT-AR-03/11

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