Annual Financial Statements - CI Investments · relevant to the entity’s preparation and fair...

Signature Diversified Value Trust

Signature Ongoing Business 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

SIGNATURE DIVERSIFIED VALUE TRUST

Financial Statements

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

Statements of Net Assets . . . . . . . . . . . . . . . . . . 5

Statements of Operations and

Retained Earnings (Deficit) . . . . . . . . . . . . . . 6

Statements of Changes in Net Assets . . . . . . . . 7

Statements of Cash Flows . . . . . . . . . . . . . . . . 7

Trust Specific Financial

Instruments Risks . . . . . . . . . . . . . . . . . . . . . 8

SIGNATURE ONGOING BUSINESS TRUST


Statement of Investment Portfolio . . . . . . . . . . . 10

Statements of Net Assets . . . . . . . . . . . . . . . . . . 11

Statements of Operations and

Retained Earnings (Deficit) . . . . . . . . . . . . . . 12

Statements of Changes in Net Assets . . . . . . . . 13

Statements of Cash Flows . . . . . . . . . . . . . . . . 13

Trust Specific Financial

Instruments Risks . . . . . . . . . . . . . . . . . . . . . 14

Notes to the Financial Statements . . . . . . . . . . . 16

Trusts Information . . . . . . . . . . . . . . . . . . . . . . . 25

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 Signature DiversifiedValue Trust and the Signature Ongoing Business Trust (collectively the “Trusts”), and approved by the Board of Directors of theManager. The Trusts’ Manager is responsible for the information and representations contained in these financial statements andother sections of this report. CI Investments Inc. maintains appropriate processes to ensure that relevant and reliable financialinformation is produced. The financial statements have been prepared in accordance with Canadian generally acceptedaccounting principles and include certain amounts that are based on estimates and judgments. The significant accountingpolicies which management believes are appropriate for the Trusts are described in Note 2 to the financial statements.

PricewaterhouseCoopers LLP is the external auditor of the Trusts. 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 Signature Diversified Value TrustSignature Ongoing Business Trust (the Trusts)

We have audited the accompanying financial statements of each of the Trusts, which comprise the statement of investmentportfolio as at December 31, 2011, the statements of net assets as at December 31, 2011 and December 31, 2010 and thestatements of operations 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 each of our audits. We conducted our audits inaccordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirementsand plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from materialmisstatement.

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 each of our audits is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements of each of the Trusts present fairly, in all material respects, the financial position of each of the Trusts as at December 31, 2011 and December 31, 2010, and the results of each of their operations, the changes in each of their net assets, and each of their cash flows for the years then ended in accordance with Canadian generally acceptedaccounting principles.

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


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

Equities Subject to Forward Contract (39.1%) 25,329 Canfor Corp.* 246,198 268,741 28,063 Celestica Inc.* 177,919 210,192 22,646 CGI Group Inc.* 435,483 434,577 2,235 Crew Energy Inc.* 23,914 25,121 2,283 Research In Motion Ltd.* 56,641 33,697

940,155 972,328

FINANCIALS (46.1%) 6,570 Allied Properties REIT 105,796 165,892 2,734 Brookfield Asset Management Inc., Class A 84,205 76,525 7,030 Canadian REIT 161,271 248,862 9,089 Cominar REIT 132,198 200,049

909 Davis & Henderson Income Corp. 18,778 15,317 1,818 First Capital Realty Inc. 29,009 31,451 8,080 H&R REIT 129,404 187,779 2,420 Northern Property Real Investment Trust 69,970 71,922 8,400 PlazaCorp Retail Properties Ltd. 35,609 37,296 5,460 Primaris Retail REIT 93,590 112,531

859,830 1,147,624

ENERGY (16.2%) 416 AltaGas Ltd. 10,468 13,245

3,550 ARC Resources Ltd. 72,488 88,750 2,450 Bonavista Energy Trust 51,206 63,823 1,050 Crescent Point Energy Corp. 27,299 47,072

700 Enel SpA 3,095 2,861 3,180 Gibson Energy Inc. 58,244 60,484

550 Pengrowth Energy Corp. 6,018 5,890 593 Progress Energy Resources Corp. 8,536 7,851

3,011 Veresen Inc. 41,712 46,038 1,450 Vermilion Energy Inc. 42,860 65,526

321,926 401,540

Commissions and other portfolio transaction costs (696)

Total Equities (101.4%) 2,121,215 2,521,492

DERIVATIVE INSTRUMENTS

Forward Contract (-0.8%)(see Schedule A) (20,981)

Total Investments (100.6%) 2,121,215 2,500,511

Other Assets (net) (-0.6%) (13,289)

Net Assets (100.0%) 2,487,222

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

*Securities sold forward as part of the Forward Contract Agreement.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.




Schedule AForward Contract (-0.8%)

Investments sold forward Fair Value ($)Canfor Corp. (269,754)Celestica Inc. (210,192)CGI Group Inc. (434,803)Crew Energy Inc. (25,144)Research In Motion Ltd. (33,788)

(973,681)

Notional Units Underlying Trust Fair Value ($)142,697 Skylon Ongoing Business Trust 952,700

Total Forward Contract Value (20,981)

Settlement Date 31-Dec.-12Credit Rating of Counterparty‡ A-1+

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

‡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.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 (cont’d)


ASSETSInvestments at fair value* Cash Unrealized gain on forward contractReceivable for securities soldDividends and accrued interest receivable

LIABILITIESPayable for securities purchasedPayable for unit redemptionsManagement fees payableUnrealized loss on forward contractService fees payableDistributions payableSpread fee payableBorrowing fee payableAccrued expenses

Net assets and unitholders’ equity

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

*Investments at cost

Net assets per unit (Note 9)

Number of units outstanding (Note 3)

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

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

2,521 3,410 56 47

– –– –5 5

2,582 3,462

– –36 200 2 2

21 579 6 6

28 30 1 1 – 1 1 1

95 820

2,487 2,642

1,380 1,727 58 69

1,049 846 2,487 2,642

2,121 2,350

6.04 6.33

411,519 417,519

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




INVESTMENT INCOMEDividendsInterestManagement fee rebateLess: Foreign withholding taxes

EXPENSESManagement fees (Note 4) Administrative expenses (Note 4)Service 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 costsForward fees (Note 4)Change 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

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

For the years ended December 31 2011 2010

30 11 34 44

– –– –

64 55

23 23 8 7

10 11 – 1 – 2 1 –5 4

47 48

17 7

309 1,023 – –

(1) (1)(10) (13)

(102) (516)196 493

213 500

0.52 1.11

846 356 213 500

– –(10) (10)

– –1,049 846

69 113(11) (44)58 69





Net assets, beginning of year

CAPITAL TRANSACTIONSCost of units redeemed and repurchased(Excess) deficiency on amounts paid on units redeemed

DISTRIBUTIONS TO UNITHOLDERSFrom net incomeFrom realized gainsFrom return of capital


Net assets, end of year


2,642 2,701

(23) (156)(11) (44)(34) (200)

(10) (10)– –

(324) (349)(334) (359)

213 500

2,487 2,642

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




Statements of Cash Flows (in $000’s)

CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES

Net investment income (loss) Proceeds from sale of investmentsPurchase of investmentsNet 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


17 7 1,536 2,501 (1,010) (1,777)

– 2 543 733

(336) (363)(198) (370)(534) (733)

9 –

47 47

56 47




Trust Specific Financial Instruments Risks (Note 13)

The Signature Diversified Value Trust (the “Trust”) is exposed to the financial instrument risks of the Signature Ongoing Business Trust. The Trust was

created to obtain exposure to a diversified portfolio consisting primarily of securities of Canadian publicly traded ongoing business trusts by virtue of

the Forward Agreement. By entering into the Forward Agreement, the Trust assumed the risk exposure of the Signature Ongoing Business Trust, as well

as credit risk to the Counterparty of the Forward Agreement in respect of any positive amount of the value of the Forward Contract. The Trust also

provides unitholders with exposure to the returns of an actively managed portfolio consisting primarily of securities of Canadian publicly traded real

estate investment trusts, oil and gas trusts and energy infrastructure funds (the “Resource and Real Estate Portfolio”). Details of the Signature Ongoing

Business Trust’s financial instruments risk exposure can be found in the Trust Specific Financial Instruments Risk in the Signature Ongoing Business Trust

financial statements. As at December 31, 2011, the credit rating of the Counterparty to the Forward Agreement was A-1+ (2010 - A-1+).

Other Price RiskThe Trust has no significant direct exposure to currency risk, credit risk or interest rate risk as both the Trust and the Signature Ongoing Business

Trust invest primarily in Canadian equities. The Trust is exposed to indirect currency risk through its exposure to Signature Ongoing Business Trust.

The Trust is exposed to both direct and indirect other price risk as a result of its direct equity holdings and indirect exposure to Signature Ongoing

Business Trust through the Forward Agreement.

As at December 31, 2011, had the Canadian 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 $250,000 (December 31, 2010 - $283,000).

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 subject to forward contract 70.3Financials 39.5Energy 19.3Other assets (net) -7.2Forward contract -21.9



Trust Specific Financial Instruments Risks (Note 13) (cont’d)

Fair Value HierarchyThe 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 2,521 – – 2,521 Forward contract – (21) – (21) Total 2,521 (21) – 2,500




Equities 3,410 – – 3,410 Forward contract – (579) – (579)Total 3,410 (579) – 2,831


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

CANADA (77.5%) 6,500 Algonquin Power & Utilities Corp. 36,166 41,600

484 BCE Inc. 17,259 20,551 3,200 Bell Aliant Inc. 79,765 91,264

117 Canadian National Railway Co. 8,381 9,368 140 Capital Power Corp. 3,602 3,517

3,400 CML Healthcare Inc. 43,436 32,844 2,510 Enbridge Income Fund Holdings Inc. 46,808 50,451

784 Groupe Aeroplan Inc. 9,992 9,353 14,690 Inter Pipeline Fund LP 131,700 273,381

950 Labrador Iron Ore Royalty Corp. 15,713 35,492 423 Manitoba Telecom Services Inc. 12,477 12,533

5,690 Northland Inc. 67,961 101,510 240 Rogers Communications Inc., Class B 8,356 9,418 342 TELUS Corp., Non-Voting Shares 15,847 18,660 600 TransCanada Corp. 25,371 26,700

4,820 Yellow Media Inc. 28,807 892

551,641 737,534

BERMUDA (11.1%) 3,900 Brookfield Renewable Energy Partners LP 99,567 105,885

ITALY (0.2%) 400 Enel SpA 1,768 1,635

Commissions and other Portfolio Transaction Costs (1,472)

Total Investments (88.8%) 651,504 845,054

Other Assets (net) (11.2%) 106,206

Net Assets (100.0%) 951,260

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.




ASSETSInvestments at fair value* Cash Receivable for securities soldDividends and accrued interest receivable

LIABILITIESManagement fees payableDistributions payableAccrued expenses

Net assets and unitholders’ equity

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

*Investments at cost

Net assets per unit (Note 9)

Number of units outstanding (Note 3)

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

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

845 1,13599 1312 7 5 8

951 1,281

– 1 – 27 – –– 28

951 1,253

1,190 1,407 1,142 1,125 (1,381) (1,279)

951 1,253

652 873

6.67 7.42

142,697 168,717





INVESTMENT INCOMEDividendsInterest Income distribution from investmentsManagement fee rebateLess: Foreign withholding taxes

EXPENSES Management fees (Note 4)Administrative expenses (Note 4)Audit feesLegal 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 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

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


39 7 15 83

– –– –– –

54 90

5 7 2 3 – 1 – – 1 –1 1 9 12

45 78

106 59 – –

(1) (1)(69) 139 36 197

81 275

0.57 1.57

(1,279) (1,470)81 275

– –(183) (84)

– –(1,381) (1,279)

1,125 977 17 148

1,142 1,125





Statements of Cash Flows (in $000’s)

CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES

Net investment income (loss) Proceeds from sale of investmentsPurchase of investmentsCommissions and other portfolio transaction costsNet change in non-cash balances related to operations

FINANCING ACTIVITIESDistributions paidCost of units redeemed

Increase (decrease) in cash during the year

Cash (Bank overdraft), beginning of year

Cash (Bank overdraft), end of year


45 78 749 560 (418) (159)

– –2 2

378 481

(210) (108)(200) (569)(410) (677)

(32) (196)

131 327

99 131

Net assets, beginning of year

CAPITAL TRANSACTIONSCost of units redeemed(Excess) deficiency on amounts paid on units redeemed

DISTRIBUTIONS TO UNITHOLDERSFrom net incomeFrom realized gainsFrom return of capital


Net assets, end of year


1,253 1,682

(217) (717)17 148

(200) (569)

(183) (84)– –– (51)

(183) (135)

81 275

951 1,253

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







Trust Specific Financial Instruments Risks (Note 13)

Other Price Risk

As at December 31, 2011 and 2010, the Trust was exposed to other price risk as it was invested in a diversified portfolio of Canadian publicly traded

business income trusts and other types of Canadian publicly traded income trusts, such as oil and gas trusts, real estate investment trusts (“REITs”)

or energy infrastructure funds. Overall, the Trust was invested in Canadian income trusts and equities, thus an expansion in the Canadian economy

could have increased the value of the Trust's holdings.

As at December 31, 2011, had the Canadian 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 $85,000 (December 31, 2010 - $114,000). In

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

Interest Rate Risk

As at December 31, 2011 and 2010, the Trust did not have a significant exposure to interest rate risk as substantially all of its assets were invested

in equities and income trusts.

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

Category Net Assets (%)

Canada 90.6Other Assets (net) 9.4

Credit Risk

As at December 31, 2011 and 2010, the Trust did not have a significant exposure to credit risk as substantially all of the Trust's investments were

equities and income trusts.



Trust Specific Financial Instruments Risks (Note 13) (cont’d)


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



Equities 845 – – 845 Total 845 – – 845



Equities 1,135 – – 1,135 Total 1,135 – – 1,135

Currency Risk

As at December 31, 2011 and 2010, the Trust did not have a significant exposure to currency risk as substantially all of the Trust’s assets were

invested in equities and income trusts denominated in Canadian dollars, the functional currency of the Trust.

The table below summarizes the Trust’s exposure to currency risk.

as at December 31, 2011

Financial Instruments Derivatives Total Currency NetExposure Exposure Exposure Assets

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

US Dollar 22 – 22 2.3 Euro 2 – 2 0.2 Total 24 – 24 2.5

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


1. THE TRUSTSSignature Diversified Value Trust (the “Trust”) is a closed-end investment trust established under the laws of the Province of Ontario pursuant to a trust agreement dated October 30, 2002. On November 15, 2002, the Trust completed an initialpublic offering of 2,500,000 units at $10 per unit. The Trust’s units are listed on the Toronto Stock Exchange, under thesymbol SDF.UN. On December 4, 2002, an over-allotment option granted to agents was exercised for 230,000 units at $10 per unit. The Trust will terminate operations on December 31, 2012 (the “Termination Date”), and the net assets will be distributed pro rata to unitholders unless an alternative later termination date is approved by the unitholders.

Through a forward agreement with TD Global Finance (the “Forward Agreement”), the Trust provides unitholders with exposure to the performance of the Signature Ongoing Business Trust, a diversified portfolio consisting primarily of securities of Canadianpublicly traded ongoing business trusts. The Trust also provides unitholders with exposure to the returns of an actively managedportfolio consisting primarily of securities of Canadian publicly traded real estate investment trusts, oil and gas trusts and energyinfrastructure funds (the “Resource and Real Estate Portfolio”). The Investment Advisor (described below) may, on behalf of theTrust, settle all or part of the Forward Agreement prior to the Termination Date and invest the net proceeds (after any distributionsto unitholders necessary to ensure that the Trust is not liable for income tax) in additional investments for the Resource and RealEstate Portfolio. Similarly, the Investment Advisor may, on behalf of the Trust, dispose of securities in the Resource and Real EstatePortfolio, invest the net proceeds (after any distributions to unitholders necessary to ensure that the Trust is not liable for incometax) in the Common Share Portfolio and adjust the Forward Agreement or enter into new Forward Agreements to provideadditional exposure to the Ongoing Business Trust Portfolio. In addition, the Trust may settle all or part of the Forward Agreementprior to the Termination Date to the extent necessary to fund monthly distributions, redemptions of units, payment for purchasesof units in the market and expenses of the Trust.

Signature Ongoing Business Trust is an investment trust established under the laws of the Province of Ontario on October 30, 2002.On November 15, 2002, the Signature Ongoing Business Trust completed its initial exempt offering of 2,000,000 units at $10 perunit. The Signature Ongoing Business Trust will terminate operations on December 31, 2012 (the “Termination Date”), and the netassets will be distributed pro rata to the unitholder unless an alternative later termination date is approved by the unitholder.

The manager of Signature Diversified Value Trust and Signature Ongoing Business Trust (the “Trusts”) is CI Investments Inc.(the “Manager” and the “Trustee”).

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 Trusts:

(a) Valuation of InvestmentsCanadian GAAP requires the fair value of financial instruments traded in an active market to be measured based on aninvestment’s bid/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 ofinvestments(referred to as “Net Asset Value”), while for financial statement purposes net assets are calculated based on bid/ask price of investments (referred to as “Net Assets”).

In accordance with National Instrument 81-106, a comparison between the Net Asset Value per unit and the Net Assets per unit is disclosed in Note 9.

Notes to the Financial Statements


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 funds’ 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 excludingcommissions and 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 gains and 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.

Distributions received from investment fund holdings are recognized by the Trusts 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 Trusts, 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 respective dates 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) 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.

(g) Forward ContractsThe Trusts may enter into forward contracts. Forward foreign currency contracts are valued on each valuation day based on thedifference 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 unrealizedappreciation (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, atwhich time the gains (losses) are realized and reported as “Realized gain (loss) on investments” in the Statements of Operations.

Notes to the Financial Statements (cont’d)


The value of the forward contract as part of the Forward Agreement on the valuation date is equal to the gain or loss thatwould be realized if the contract was closed out or expired. Investments sold forward as part of the Forward Agreement are valued at the market close price, and the Underlying Fund is valued at its net asset value as reported by the UnderlyingFund’s manager on the valuation date for purposes of determining the value of the forward contract. All gains (losses)arising from the forward agreement are recorded as part of “Change in unrealized appreciation (depreciation) of investmentsand derivatives” in the Statements of Operations and “Unrealized gain (loss) on forward contract” in the Statements of NetAssets until the contract is 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.

(h) 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.

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

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

The Signature Ongoing Business Trust is a unit trust and deemed a financial institution for purposes of the ‘specific debt obligation’and ‘mark-to-market’ rules contained in the Income Tax Act (Canada) at any time if more than 50% of the fair market value of allinterest in the Trust are held at that time by one or more such financial institutions. The Trust will be subject to tax in each taxationyear under Part 1of the Income Tax Act (Canada) on the amount of its income for the year, including net realized and unrealizedgains, if any, less the portion thereof that it deducts in respect of the amount paid or payable to unitholders in the year. The Trustintends to distribute all of its net income and net realized and capital gains so that the Trust will not generally be liable for incometax thereon.

To comply with the mark-to-market rules, during the year, the Trust declared a distribution which was automatically reinvestedwithout charge, into the Trust. These units were immediately consolidated so that the number of units outstanding equalled the number of units outstanding immediately prior to the distribution.

(k) Use of Estimates The 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 year. Actual results could differ from those estimates.

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

The relevant changes pertaining to subscription and redemption of the Signature Diversified Value Trust units are disclosed in theStatements of Changes in Net Assets. In accordance with the objectives and risk management polices outlined in Note 13, theSignature Diversified Value Trust endeavors to invest subscriptions received in appropriate investments while maintaining sufficientliquidity to meet redemptions through utilizing a short-term borrowing facility or partial settlement of the Forward Agreement.



Signature Diversified Value Trust is authorized to issue an unlimited number of transferable, redeemable trust units of one class,each of which represents an equal, undivided interest in the net assets of Signature Diversified Value Trust. Unitholders areentitled to redeem their units outstanding monthly (the “Monthly Redemption”) or at the end of each year (the “AnnualRedemption”). Monthly redemption price per unit is equal to the lesser of: (a) 90% of the 10 day average trading price on theapplicable monthly valuation date; and (b) the “closing market price” per unit on the applicable monthly valuation date. Annualredemption price per unit is equal to Net Asset Value per unit determined on the annual valuation date.

Unless the transfer agent and registrar is directed that units are being surrendered for redemption pursuant to the MonthlyRedemption, units surrendered for redemption within the period commencing 45 days and ending ten business days prior to the second last day of December in any year will be deemed to have been surrendered for the Annual Redemption.

Signature Diversified Value Trust endeavours to provide the unitholder with monthly distributions of $0.0666 per unit ($0.80 perannum to yield 8.00% on the subscription price of $10.00 per unit). Distributions commenced on December 31, 2002, and areexpected to continue until the termination of Signature Diversified Value Trust.

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

Unit Transactions 2011 2010

Balance, beginning of year 417,519 448,919 Units purchased for cancellation (Note 5) – –Units redeemed (6,000) (31,400)Balance, end of year 411,519 417,519

Units issued and outstanding represent the capital of the Signature Ongoing Business Trust.

The relevant changes pertaining to subscription and redemption of the Signature Ongoing Business Trust units are disclosed in theStatements of Changes in Net Assets. In accordance with the objectives and risk management polices outlined in Note 13, theSignature Ongoing Business Trust endeavors to invest subscriptions received in appropriate investments while maintaining sufficientliquidity to meet redemptions through utilizing a short-term borrowing facility or disposal of investments when necessary.

Signature Ongoing Business Trust is authorized to issue an unlimited number of transferable, redeemable trust units of one class,each of which represents an equal, undivided interest in the net assets of Signature Ongoing Business Trust. The counterparty isentitled to redeem their units daily. Units will be redeemed at the net asset value per unit on such date.

The Signature Ongoing Business Trust endeavours to provide the unitholder with monthly distributions per unit.

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

Unit Transactions 2011 2010

Balance, beginning of year 168,717 251,795 Units redeemed (26,020) (83,078)Balance, end of year 142,697 168,717

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



4. FEES AND OTHER EXPENSES(a) Management Fees

As compensation for management services rendered to Signature Diversified Value Trust, the Manager is entitled to receive

an annual management fee in an amount equal to 1.10% of the Net Asset Value of the Resource and Real Estate Portfolio,

payable monthly in arrears. The Manager is also entitled to an annual management fee of 0.55% of its Net Asset Value of

the Trust’s assets, other than the Resource and Real Estate Portfolio, payable monthly in arrears, and an amount equal to the

service fee payable to dealers which is equal to 0.40% annually of the Net Asset Value of units held by clients of the sales

representatives of such dealers, payable semi-annually in arrears.

Signature Ongoing Business Trust pays to the Manager an annual management fee equal to 0.55% of its Net Asset Value

calculated and paid monthly.

(b) Administrative Expenses

The Trusts are also responsible for all their expenses incurred in connection with their operations and administration

(fees shown as administration fees include: trustee fees, transfer agency, custody and accounting fees). Audit fees, legal fees

and independent review committee fees are disclosed separately.

(c) Service Fees

The Manager will pay to registered dealers of the Trust an annual fee of 0.40% of the Net Asset Value per unit for units held

by clients of the sales representatives of the registered dealers calculated and payable semi-annually in arrears.

(d) Forward Agreement Fees

Signature Diversified Value Trust will pay to the counterparties under the Forward Agreement a fee of approximately

0.65% per annum of the market value of notional exposure to Signature Ongoing Business Trust under the Forward

Agreement (“spread fee”), plus an ongoing fee (“borrowing fee”) which may vary based upon hedging costs associated

with the Forward Agreement, calculated and paid monthly in arrears.

(e) Harmonized Sales Tax

As 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

mandatory market purchase program under which the Trust, subject to exceptions contained in the Trust Agreement and in

compliance with any regulatory requirements, is obligated to purchase its own units for cancellation. If, on any business day,

the price at which units are offered for sale is less than 90% of the Net Asset Value per unit determined as of the most recent

valuation date, the Trust will offer to purchase for cancellation any units offered in the market at the then prevailing market

price. 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 years ended December 31, 2011 and 2010, the Trust

purchased no units for cancellation.

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

(in $000’s) 2011 2010

Brokerage CommissionsSignature Diversified Value Trust 1 1Signature Ongoing Business Trust 1 1



(in $000’s) 2011 2010

Soft Dollar Commissions†

Signature Diversified Value Trust – –Signature Ongoing Business Trust – –

†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.

7. 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 by theborrower on the securities borrowed; (ii) the securities loans must qualify as “securities lending arrangements” for the purposes of the Income Tax Act (Canada); and (iii) the Trust will receive prescribed collateral security which it may pledge as security under the Forward Agreement. The minimum level of collateralization in respect of a loan of Common Share Portfolio securitieswill be 105%. As at December 31, 2011 and 2010, the Trust was not engaged in securities lending.

8. 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.

Skylon Diversified Value Trust

Losses carry forwards (in $000’s)

2011

Net capital losses carry forward 580

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

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

Skylon Ongoing Business Trust had no net capital losses carry forward or non-capital losses carry forward as at December 31, 2011.

9. 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:

Signature Diversified Value Trust 2011 ($) 2010 ($)Net assets per unit 6.04 6.33 Net asset value per unit 6.06 6.33

Skylon Ongoing Business Trust 2011 ($) 2010 ($)Net assets per unit 6.67 7.42Net asset value per unit 6.68 7.59

10. RELATED PARTY TRANSACTIONS The Bank of Nova Scotia has a significant interest in CI Financial Corp., the parent company of the Manager. The Trusts

may have direct or indirect holdings in The Bank of Nova Scotia and/or CI Financial Corp. as identified in the Statement of

Investment Portfolio of the Trusts, if applicable.



11. INTERNATIONAL FINANCIAL REPORTING STANDARDS On February 13, 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the use of International Financial

Reporting Standards (“IFRS”) will be required for all publicly accountable profit-oriented enterprises for interim and annual

financial statements relating to fiscal years beginning on or after January 1, 2011. On December 12, 2011, the AcSB confirmed

deferral of the IFRS changeover date for investment funds. Based on the AcSB decision, IFRS will become effective for interim

and annual financial statements 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 not expect 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 that the 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 provided during the implementation period leading up to the transition date.

12. 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 and dividends and accrued interest receivable are designated as loans and receivables.

They are recorded at amortized cost which approximates their fair value due to their short-term nature. Similarly, payable for unit

redemptions, payable for securities purchased, management fees payable, accrued expenses, service fees payable, distributions

payable, spread fee payable and borrowing fee 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 are generally settled within three months.

13. FINANCIAL INSTRUMENTS RISK Risk Management

The Trusts are exposed to a variety of financial instrument risk: credit risk, liquidity risk and market risk (including interest rate risk,

currency risk and other price risk). The level of risk to which each Trust is exposed to depends on the investment objective and the

type of investments the Trust holds. The value of the investments within the portfolio can fluctuate daily as a result of changes in

prevailing interest rates, economic and market conditions and company specific news related to investments held by the Trusts. The

Manager of the Trusts may minimize potential adverse effects of these risks on each Trusts’ performance by, but not limited to,

regular monitoring of the investment 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 Risk

Other price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices

(other than those 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 financial instruments 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 Risk

Interest rate risk is the risk that the fair value of interest-bearing investments and interest rate derivative instruments will fluctuate due

to changes in prevailing levels of market interest rates. As a result, the value of the Trusts will be affected by changes in applicable

interest rates as they invest in debt securities and income trusts. If interest rates fall, the fair value of existing debt securities may

increase due to the increase in yield. Alternatively, if interest rates rise, the yield of existing debt securities decrease which may then

lead to a decrease in their fair value. The magnitude of the decline will generally be greater for long-term debt securities than for

short-term debt securities.

Interest rate risk also applies to the Trusts if they invest in convertible securities. The fair value of these securities varies

inversely with interest rates, similar to other debt securities. However, since they may be converted into common shares,

convertible securities are generally less affected by interest rate fluctuations than other debt securities.

Currency Risk

Currency risk arises from financial instruments that are denominated in a currency other than the Canadian dollar, the functional

currency of the Trusts. As a result, the Trusts may be exposed to the risk that the value of securities denominated in other currencies

will fluctuate due to changes in exchange rates. Equities traded in foreign markets are exposed to currency risk as the prices

denominated in foreign currencies are converted to the Trusts’ functional currency to determine their fair value.

Credit Risk

Credit risk is the risk that a security issuer or counterparty to a financial instrument will fail to meet its financial obligations.

The fair value of debt instruments includes consideration of the credit worthiness of the debt issuer. Credit risk exposure for

derivative instruments, if applicable, is based on each Trust’s unrealized gain of the contractual obligations with the counterparty

as at the reporting date. The credit risk exposure of the Trusts’ other assets are represented by their carrying amount as disclosed

in the Statements 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 or Canadian

Bond Rating Services.

Credit ratings can be either long-term or short-term. Short-term credit ratings are generally assigned to those obligations and

derivative instruments considered short-term in nature. The table below provides a cross-reference between the long-term

credit ratings disclosed in the Credit Rating table inclusive of the short-term credit ratings disclosed in the derivatives

schedules in the Statement of Investment Portfolio.

Credit Rating as per Credit Risk table Credit Rating as per derivatives schedules

AAA/Aaa/A++ A-1+

AA/Aa/A+ A-1, A-2, A-3

A B, B-1

BBB/Baa/B++ B-2

BB/Ba/B+ B-3

B C

CCC/Caa/C++ -

CC/Ca/C+ -

C and Lower D

Not Rated WR



Significant cash balances as disclosed in the Statements of Net Assets are, maintained by the Custodian, RBC Dexia.

The Manager monitors the credit worthiness of the custodian on a regular basis.

All transactions executed by the Trusts 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 Risk

Liquidity risk is the risk that the Trusts may not be able to settle or meet their obligations, on time or at a reasonable price.

The Signature Ongoing Business Trust is exposed to daily cash redemptions of redeemable units. Therefore, the Signature

Ongoing Business Trusts aims to invest the majority of its assets in investments that are traded in active markets and can be

readily disposed of. In addition, the Signature Ongoing Business Trust aims to retain sufficient cash and cash equivalent

positions to maintain liquidity. From time to time, the Signature Ongoing Business Trust may enter into derivative contracts

or invests in unlisted securities that may not trade in an organized market and may be illiquid. Illiquid securities are

identified in the Statement of Investment Portfolio of the Signature Ongoing Business Trust, if applicable. The Trust is

exposed to monthly and annual cash redemptions that will be financed by partial settlements of the Forward Agreement.

Fair Value HierarchyThe Trusts are required to classify financial instruments measured at fair value using a fair value hierarchy. Investments whosevalues 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 Trusts mayuse a variety of valuation techniques to derive the fair value.

Details of individual Trusts’ exposure to financial instruments risks including the fair value hierarchy classifications are

available in the “Trust Specific Financial Instruments Risks” section of the financial statements of each Trust.



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 SymbolSDF.UN

For more information on the Trusts, visit us online at www.ci.com.

Trusts Information

SKYDVT-AR-03/12

Annual Financial Statements - CI Investments · relevant to the entity’s preparation and fair...

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