Tetrem Capital Management - CI Investments

Tetrem Capital Management is an investment management firmfounded in 2004 by Daniel Bubis. Tetrem is based in Winnipeg and has an office in Boston.The firm uses a disciplined investment approach to seek out and invest in undervaluedCanadian and U.S. companies. Tetrem manages over $5 billion in assets.

The Tetrem teamDaniel Bubis is President and Chief Investment Officerof Tetrem Capital Management. Previously, he was ChiefInvestment Officer of United Financial Corporation, where hewas responsible for United’s asset management operations.Mr. Bubis has served as Lead Portfolio Manager of UnitedCanadian Equity Value Pool since its inception in 1993. In2006, he became Lead Portfolio Manager of CI CanadianInvestment Fund, Canada’s oldest equity mutual fund. Mr.Bubis holds the Chartered Financial Analyst designation and anHonours Business Administration degree from the University ofWestern Ontario.Daniel BubisAaron Clark joined Tetrem in 2008. Based in Boston,Mr. Clark brings more than 15 years of investment experienceto the firm, including four years with Pioneer Investments, mostrecently as Vice President and Lead Portfolio Manager of the$4.5 billion Pioneer Value Fund. Prior experience includesseven years with Morgan Stanley Investment Management inNew York, where he held the position of Portfolio Managerand Executive Director and co-managed the firm’s flagship$8.5 billion Dividend Growth Fund. Mr. Clark started his careerwith the Pioneer Group before moving to Prudential Securitiesas a Research Analyst and then to Gerard Klauer Mattison as aSenior Equity Analyst. Mr. Clark holds the Chartered FinancialAnalyst designation and received a BA in Economics fromTrinity College.Aaron clarkInvestment Analysts:Alec MacIsaac, CFASteve Maksymyk, CFABen Boult, CFAResearch Associates:Russel GerbrandtBen Ellis

Investment philosophy and approachTetrem adheres to a contrarian, value-based philosophy. The firm believes that controversy creates investmentopportunities and by staying focused on the long-term value of a company, it can capitalize on irrational investorbehaviour to produce exceptional, risk-adjusted returns.Tetrem identifies investment candidates from a combination of quantitative screens, thematic views and general research.Its managers then perform fundamental, bottom-up analysis in order to gain a deeper understanding of investmentcontroversies, determine an estimate of fair value, and develop an investment thesis. They set price levels at which theywould be willing to buy and then monitor for developments that confirm or challenge the thesis.Investment processReview of key investment criteriaEach time Tetrem analyzes a company,these are its questions:MEANREVERSIONValuationIs the stock undervalued?Are valuation spreads narrow or wide?Mean reversionIs profitability temporarily or permanently impaired?Is valuation temporarily low or is it a value trap?VALUATIONREVIEWOF KEYINVESTMENTCRITERIAECONOMICMOATEconomic moatIs the competitive position sustainable?Is the balance sheet strong?RISKRiskDoes the stock help to diversify the portfolio?Is there a sufficient margin of safety?

Development of an investment thesisThe investment thesis is a clear statement of why the stock is an attractive investment opportunity. It covers importantaspects of the investment case, including the nature of the investment controversy, valuation and risk-reward, potentialcatalysts and thematic fit.Determination of fair valueTetrem’s research efforts focus on determining a company’s fair value by developing a view of its normalized earnings.To achieve this, analysts model the company five years into the future and then apply a normalized multiple to theseearnings. They develop three potential scenarios of fair value: Base Case, Bull Case and Bear Case (see chart for example).The portfolio managers assign a probability to each scenario, which leads to an estimate of the stock’s fair value. Theythen compare the upside potential with the downside risk and require a sufficient margin of safety before investing.Base case: Tetrem’s estimate, using conservative assumptions, of the company’s earnings and target price undernormalized conditions.Bull case: Tetrem’s estimate, using optimistic assumptions, of the company’s earnings and target price if things gobetter than expected.Bear case: Tetrem’s estimate, using harsh assumptions, of the company’s earnings and target price if the controversyturns out to be permanent.$30$25$20$15$10$5$12Bull – $25 (30% Probability)Base – $20 (50% Probability)Probability-Weighted Average Price $19.50Bear – $10 (20% Probability)$0Sep-08Jun-09Mar-10Dec-10Sep-11Jun-12Mar-13Dec-13Sep-14

Portfolio constructionTetrem constructs its portfolios through individual stock selection, within the context of its guidelines. The most significantcomponents of its investment decision are valuation and margin of safety. The companies monitored by the Tetrem teamare classified into different buckets: actual holdings, watch list companies (close to a buy level), and long watch companies(which they would like to own, but at a lower price). Once price targets are established, holdings and watch list stocksare ranked to determine the ratio of upside potential versus downside risk. The typical hurdle rate for a new investmentis 3:1, which means that it offer $3 of upside potential for every $1 of downside risk.Tetrem portfolios are concentrated in a relatively small number of holdings based on the managers’ conviction, which inturn is influenced by the key investment criteria mentioned previously: valuation, mean-reversion, economic moat andrisk. The size of a holding is correlated with the number of these criteria that are met. The portfolio’s cash position is aresult of Tetrem’s equity process, and typically accounts for 2% to 5% of the portfolio.Tetrem’s expertise is available throughthe following Castlerock funds:Castlerock Canadian Dividend FundThe fund’s objective is to achieve a balance between high dividend income and capital growth by investing mainly in adiversified portfolio of Canadian common stocks that are paying a dividend or are expected to pay a dividend and, toa lesser extent, in high-yield preferred shares and interest-bearing securities.Castlerock Canadian Value FundThe fund seeks long-term capital appreciation by primarily investing in common shares of established Canadian issuersthat are undervalued relative to their intrinsic value.Castlerock Capital Appreciation FundThe fund seeks growth of capital by investing primarily in United States stocks selected on the basis of potential forcapital appreciation.

Formerly known as Hartford Investments Canada, Castlerock is a new name in the Canadianinvestment industry – but it represents a wealth of experience and expertise.[ Leading money managers ]The Castlerock mutual funds provide you with access to someof the best investment professionals available.[ Exceptional core investments ]Castlerock provides a focused lineup of core investment solutions.[ Strength and Stability ]Castlerock is part of the CI Financial group of companies and benefits fromits financial strength. CI Financial (TSX: CIX) is a diversified wealth management firmand Canada’s third-largest investment fund company.

Fund Codes(All fund codes begin with HIC) Series A Series B Series T Series F(DSC) (L1) (L3) (A) (B) (L1) (L3)FUNDSCastlerock Canadian Dividend Fund 145 140 408 409 142 406 401 403 146Castlerock Canadian Value Fund 165 160 608 609 162 606 601 603 166Castlerock Capital Appreciation Fund 515 500 528 529 522 526 521 523 516TORONTO | 2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 | 1-800-268-9374 or 416-364-1145 |CALGARY | 1-800-776-9027 or 403-205-4396 | MONTREAL | 1-800-268-1602 or 514-875-0090 | VANCOUVER | 1-800-665-6994 or 604-681-3346 |CLIENT SERVICES | 1-877-540-4828 or 416-306-6091 |www.castlerockinvestments.caCommissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read theprospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.1102-0187_E (02/11)