CAMBRIDGE PORTFOLIO MANAGER REVIEW AND OUTLOOK JANUARY 2020

Brandon Snow

Principal and Chief Investment Officer Happy 2020! As we embark on a new decade, I recently wrote a blog on my review of 2019 and outlook for this year. Below are key highlights from my letter:

A look back over the year 2019 has been a successful year for investors by all accounts. As of the end of November, the STP/TSX Composite Index is up 22%, S&P 500 Index up 28% and FTSE Canada Universe Overall Bond Index is up 8%. This is an arbitrary end point, as there was tremendous trepidation at the end of 2018, where we saw markets correct by more than 15% in December 2018. This gave Cambridge a great opportunity to put capital to work for clients. For Cambridge, 2019 represented a year of growth and evolution towards our goal of adding value to clients through investment excellence and improved client service.1

Team milestones Our team accomplished important milestones during 2019:

• We celebrated the five-year anniversary of Cambridge Global Smaller Companies Corporate Class and the three-year anniversary of Paul Marcogliese managing Cambridge Bond Fund; both funds outperformed their respective peer groups as of the date of their anniversary.

Below is trailing performance for fund, category and index, as at anniversary date (July 31 for Global Smaller Companies and June 30 for Cambridge Bond Fund):

1 15% correction is for SPX, TSX corrected approximately 9.75%

Trailing Return 1 Year 3 Year 5 Year Since Inception

30-Jun-19 30-Nov-19 30-Jun-19 30-Nov-19 30-Jun-19 30-Nov-19 30-Jun-19 30-Nov-19

Cambridge Bond Fund Class I

7.13% 11.83% 4.17% 4.93% N/A N/A 2.91% 3.31%

Category: Canadian Fixed Income

6.20% 8.35% 2.29% 3.05% 2.90% 2.71% 2.02% 2.10%

FTSE Canada Universe Bond Index

7.37% 9.62% 2.66% 3.81% 3.88% 3.54% 2.68% 2.77%

# of funds in the category

650 647 564 588 434 474 486 485

*Inception date: March 27, 2015 Source: Morningstar

Trailing Return 1 Year 3 Year 5 Year Since Inception

31-Jul-19 30-Nov-19 31-Jul-19 30-Nov-19 31-Jul-19 30-Nov-19 31-Jul-19 30-Nov-19

Cambridge Global Smaller Companies* Corporate Class F

-0.22% -0.48% 9.04% 3.92% 10.19% 8.28% 10.19% 8.77%

Category: Global Small/Mid Cap Equity

-6.07% 5.56% 4.77% 4.77% 5.50% 5.79% 5.50% 5.87%

MSCI World Small Cap GR CAD

-2.07% 11.13% 9.51% 9.72% 11.28% 11.65% 11.28% 11.74%

# of funds in the category

461 466 382 400 208 215 208 208

* Formerly Cambridge Growth Companies Corporate Class Inception date: July 31, 2014 Source: Morningstar

• Several of Cambridge’s funds continue to be ranked top quartile and rated as four or five-star according to the Morningstar rankings (Morningstar Research 2019, https://ci.com/en/morningstar-ratings).

• Cambridge team members won Lipper Awards 2019 (Stephen Groff for Cambridge Canadian Dividend Fund (five-year); Bob Swanson and Paul Marcogliese for Cambridge Global High-Income Fund (10-year). Full details can be found on the ci.com website.

• Dan Rohinton was promoted to Portfolio Manager after years of hard work and dedication as an analyst on the team. We are the co-managers of Cambridge Global Equity Fund.

• Grant Connor (our fixed-income analyst) has taken on increased responsibilities and has played an important role within the Cambridge Asset Allocation Committee.

• We launched new products, including CI Canadian Dividend Private Pool.

• We are excited to have our first client in Australia through the partnership between CI Investments and Grant Samuel Funds Management, a firm substantially owned indirectly by CI Financial Corp

Investment process The evolution of the asset management industry continues as passive investments take share from active managers. I now believe this is positive for clients, since all investment firms will need to improve their value proposition in order to compete against index funds that are “free.” To ensure that we remain competitive in this environment, we initiated several important improvements in 2019:

• Over the last 18 months, the team has spent considerable time automating and outsourcing commoditized areas to free our time for critical thinking and leverage our expertise and talent. To this end, we have introduced new tools to reduce email clutter and share insights and ideas with the team.

• We are also using a new data visualization tool to analyze and discuss our investment opportunities.

• To uncover our biases to drive better investment outcomes, we engaged a third party to analyze portfolio management decisions using data analytics and behavioural science, providing feedback and coaching to our team members. This involves capturing historic trading data, monitoring personal behavioural surveys and other insights and using advanced analytics/artificial intelligence to determine patterns in behaviour. We are excited to roll this out to the analysts in 2020.

Team update From an organizational perspective, we have undergone tremendous growth in 2019:

• Over the last 18 months, we have made changes to enhance the team structure. We’ve restructured the team for greater focus in specific areas (Canada, Global Large-Cap, Global Small-Cap and Fixed-Income) compared to a centralized pool of analysts.

• To support this change, we’ve grown the team to support this initiative. In March, Oliver Shao relocated to Toronto from Calgary to join us. Lucas Michael (October 2019), Arthur Phillips (November 2019) and Leon Xu (November 2019) all recently joined our team as equity analysts.

• The Cambridge fixed-income team is also growing and Paul Marcogliese is in the process of interviewing for a credit analyst who will join in early 2020.

• To better serve and support our clients, we hired Sonia Mahadeo as our Director, Investment Communications in February. Sonia brings a tremendous amount of experience in strategic marketing, communications and stakeholder engagement within the investment industry.

• With our growing team, we’ve kept our Office Manager, Diane Burke busy! She’s been the glue that holds Cambridge together and has taken on a lot to enable our growth plan. In August, Amanda Ho joined Cambridge as an Administrative Assistant to support the team.

Our ongoing success is only possible thanks to the commitment and enthusiasm of the Cambridge team. Their efforts are reflected in the strong growth we deliver to clients and the momentum we are seeing in our transformation. To this end, I wish to express my appreciation to the entire Cambridge team; thank you for so readily and expertly carrying out your responsibilities, while simultaneously supporting the corporate initiatives and for continuously adapting to Cambridge’s evolution.

Thank you Of course, none of this would be possible without you, our valued clients and stakeholders. Thank you for your continued support and the trust you put in Cambridge. Your confidence has enabled us to build a remarkable company. I am confident that with the changes we’ve made in 2019, we have never been in a better place to have a positive impact in the lives of our clients, deliver against the plan that we have set out for ourselves and unlock significant long-term value for our stakeholders.

------------------------- Sources: http://blogs.ci.com/cambridge/brandon-snow/letter-cio

Bob Swanson

Principal and Portfolio Manager Area of Focus: Asset Allocation

A look back over the year 2019 started the year on a cautious note, following the market correction in the fourth quarter of 2018. The year began against the backdrop of a contracting global economy, and corporate earnings that turned negative in the Eurozone while decelerating dramatically in the U.S. from levels the previous year. Corporate and consumer confidence came under pressure as a result of continued tightening by the U.S. Federal Reserve (the Fed), uncertain trade policies and ongoing social and political discord around the globe. In response to deteriorating economic, monetary, social and political conditions, we felt it was prudent to be conservative in our equity exposure across our asset allocation portfolios. As the year progressed and markets rallied, we gradually rebalanced the portfolio away from equities while increasing our exposure to fixed income. In the summer of 2019, the Fed, recognizing the weakening conditions, reversed course, resumed their purchases of bonds and started to cut short term rates once again. This pivot in policy towards easing provided support for both equity and bond markets, as both asset classes turned in strong performances on the year. There was also active rebalancing taking place in each of the equity and fixed-income portions of the portfolio. Within the equity portfolio we took advantage of various securities becoming overbought and oversold with changing sentiment regarding both monetary and trade policy. As rate expectations changed, interest sensitive sectors such as utilities and communication services became expensive, while financials become oversold. We took the opportunity to reduce exposures to utility holdings, such as Emera and Hydro One, and purchased Fairfax Financial and the Power Corporation. We also trimmed exposure to technology and industrial stocks and purchased out of favour companies within U.S. health care and Canadian energy companies. Sentiment toward Canadian energy companies is about as low as we have seen, which is being reflected in their valuations. Despite

stabilizing prices for oil and normalizing spreads for Western Canadian select crude, the prices of Canadian energy companies continued to fall throughout the year. The magnitude of this valuation disparity has encouraged us to add meaningfully to our energy holdings, particularly Enbridge, Keyera and Canadian Natural Resources. Outlook for 2020 Looking forward to 2020, we will continue to monitor economic, corporate, and political developments as they, along with our fundamental company-specific views, will shape our portfolio construction decisions. We will be looking for further stabilization or deterioration in both the industrial and consumer segments of the economy. These will have to be evaluated in the context of future central bank policy measures, as this has been the focal point of both equity and fixed-income markets. -------------------- Mr. Robert Swanson is associated with CI Global Investments Inc., a firm registered with the U.S. Securities and Exchange Commission and an affiliate of CI Investments Inc

Stephen Groff

Principal and Portfolio Manager Area of Focus: Canadian Equity

A look back over the year 2019 turned into a very interesting year, particularly when one considers how 2018 ended. As of December 1, 2019, the S&P/TSX Composite Index has returned an impressive 22%; when measuring the return from the peak in 2018, the return is a far more modest 3%. What a difference a few months can make! The robust return from the December 2018 lows were driven by a number of sectors; however, the strongest areas included interest rate sensitive industries or businesses with attractive growth algorithms. Cambridge holdings with such attributes have benefitted strongly include Emera (+32%), Brookfield Asset Management (+47%) and Dollarama (+47%). Driven by declining interest rates, investors’ desire for “certainty” in an uncertain world resulted in high demand for consistent growers. While investors remain willing to pay full (or even inflated) prices for consistent growth, there is often no price for businesses facing elements of uncertainty. We spend considerable time and effort working to distinguish the difference between a good business and a good investment, with the price being paid being an important factor. This phenomenon is pronounced when looking at the energy sector. It’s no doubt that the challenges that businesses in the sector faced in 2018 continued into 2019. While select holdings positively contribute to performance (such as Enbridge and Keyera), many of our lowest-performing holdings have been in this sector (Vermillion and Tourmaline). Despite short-term headwinds, we remain disciplined to our bottom-up fundamental process as the way to drive strong long-term value for our clients. In Canada, it’s quite common to see investing fads come and go. In 2018 it was cryptocurrency; 2019 was the year of cannabis. In just a few months, a number of high-profile cannabis companies saw their market value increase by several billion dollars, despite questions surrounding governance, profitability potential and industry structure.

Billions of dollars in shareholder value evaporated as quickly as it materialized. We continue to shy away from businesses where we lack solid understanding of underlying fundamentals and choose to carefully invest in businesses instead of speculating. While many will no doubt win (and lose) in these type of speculative instruments, we prefer to avoid the excitement and focus on businesses that are consistently compounding. Outlook for 2020 As we head into 2020, we see a number of positives and negatives on the horizon. From an overall economic perspective, conditions in Canada are solid from a number of indicators, including employment, gross domestic product, etc. However, there are a number of concerns that we continue to monitor which brings the long-term sustainably of its strength into question. While the current low interest rate environment has fuelled consumer spending, the average Canadian consumer continues to live beyond their means. With elevated debt levels and a savings rate of less than 2% compared to over 10% in the U.S. and Germany, the ability to absorb economic shocks is reduced. We are witnessing consumer insolvencies rise by nearly 20% (again, this is in good times). Lastly, personal insolvencies in Canada are rising at a rate in the double digits and stand at the highest levels in decades; this is despite robust employment and interest rates which stand at low absolute levels. We are noting an increase in debt loads which are directed into areas which benefit shorter-term economic activity (such as housing and consumer spending) but are not drivers of lasting productivity improvement (such as non-residential capital investment). Improving productivity is the key to long-term prosperity. From an investment perspective, we are finding new opportunity both in traditional sectors (select industrials, consumer businesses, financials) as well as within the energy sector. Many of the businesses within the energy sector are exposed to end markets outside of Canada, and/or are well positioned for varying economic environments. With a combination of valuations not seen in decades, a number of businesses that generate strong free cash flow in reasonable scenarios, and far improved capital allocation by a number of management teams, this has resulted in several excellent risk/reward opportunities coming to fruition.

What am I most excited about going into 2020? I’m very excited by the additional investment we have made in attracting top notch talent to the team, further aiding Cambridge’s research process. It is an excellent environment in which to invest (when the industry overall is shrinking) and positions the firm well to drive investment excellence over the coming years. Our team remains highly focused, motivated and is continually working to get better each day. Our focus on driving value for our clients is the reason I am excited to come to work each day.

Greg Dean

Principal and Portfolio Manager Area of Focus: Global Equity – Small/Mid-Cap

A look back over the year Early in 2019, we made the decision to split our global research team into small-cap and large-cap focused analysts. I believe this was one of the most important decisions we made, as it enhances our research process by focusing our talented analysts on finding investment opportunities that are better aligned with our portfolios and clients. To that end, Jordan McNamee is now a dedicated analyst on the small-cap team. We also made two new additions from outside the firm, hiring Arty Philips and an individual who will be joining in 2020 (he spent this past summer as a co-op student on our team). We continue to find great ideas everywhere and believe the U.K. represents tremendous value; in 2019, many new ideas came from the U.S. and Europe. Stocks like Takeaway.com and Etsy entered the portfolio with a multi-year thesis and a very attractive internal rate of return that exceed our 10%+ hurdle rate. Outlook for 2020 At Cambridge, we’re building portfolios to endure any macro-economic environment by focusing on finding well-run businesses that generate strong cash flow growth at reasonable prices. Easing trade tensions will benefit holdings like Spin Master and Middleby which have had to increase prices to offset rising costs from higher tariffs (pricing power is important). BREXIT finally occurring (or not) in early 2020 will improve capital flows into the U.K., which should benefit the businesses we own there. By way of discussion, we own domestic retailers, investment management companies and technology distributors who have robust business models that we believe will sustain any macro shock – we would be more concerned of how the macro movements unfold if we owned real estate, banks or regulated assets.

The team is busy planning our research agenda and travel for 2020. As it stands today, we will be spending significant time in the U.S., Germany and the Nordic countries early in the year. Germany as an export-driven economy is suffering from the trade tensions, in addition to many wonderful U.S. companies, so we also plan to spend time looking at the industrial sector in both of those regions. After returning from a U.S. industrials conference in November 2019, I came away with several ideas we’d like to further explore.

Can you highlight a stock that we have found and added to the portfolio?

Takeaway is a food delivery/marketplace business in the Netherlands and Germany that we believe should grow orders over 30% for the next five years and take operating margins from negative to 5% of gross merchandise value by 2023. The current competitive landscape in these two markets is the most favourable globally which allows them to achieve high margins (7%+ earnings before interest, taxes and amortization percent of gross merchandise value) while still experiencing strong order growth runway. The chief executive officer has a strong track record of execution, acts like an owner (he is the biggest shareholder) and has great aspirations to build a profitable and large company over the next decade.

Most memorable moment of 2019 On a personal note, becoming a father was by far the most memorable moment in 2019. I now have someone else at home to help me get through transcripts! A lot of bedtime reading (so far) has been on the topic of wage inflation in Japan.

Portfolio Manager: Dan Rohinton

Area of Focus: Global Equity – Large-Cap A look back over the year Animal spirits returned quickly to start the year after a turbulent end to 2018. Investors quickly responded to more constructive commentary from central banks and attractive valuations in equities to recover back near all-time highs. This is despite concerns around a widening trade war between the United States and China over issues ranging from trade balances to intellectual property rights. It was against this backdrop that we saw a growing divergence between two different types of stocks in the market; the safety and secular growth companies and everything else. If investors gained comfort around the durability of the business model and its cash flows, there was no price too high that investors weren’t willing to pay. It was in this environment that we took advantage of very bullish investor expectations to begin selectively reducing positions in some of the highest growth companies as their risk/reward became less attractive. Closing out the year, we have taken a more cautious position in the portfolio than we had entering 2019. This means entering 2020 with more cash and a greater emphasis on buying businesses where we see less absolute levels of downside in terms of equity returns. Outlook for 2020 As we look to 2020 and end one of the best decades in modern history, our team is focused on sticking to our knitting, finding great businesses that are trading at a discount to their fair value. We remain cautiously optimistic that, despite weaker economic growth around the world, there are still parts of the market that offer attractive investment opportunities. There are also other areas where we are befuddled about how an investor will ever earn a positive return.

With the market fixating on the risks of a global recession, some of the most stable and “anti-recession” stocks have been priced for perfection. As investors rush to pay ever higher prices for what they view as “safe”; they leave behind in their wake durable businesses with strong foundations at very attractive prices. It’s not uncommon for us to come across businesses from health care to technology that previously used to be market darlings but now sit in the penalty box, some of which deserve to be there and others that are diamonds in the rough. Can you highlight a stock that we have found and added to the portfolio? Over the last year, our position in Facebook grew to become one of the largest holdings in the portfolio. We took

advantage of the sell-off from broadly negative market sentiment, broadly and specific concerns around data privacy on their platform. As the leader in social media globally, the business benefits from being one of the few places where advertisers can engage with customers all around the world and with much better accuracy than other mediums like television and radio. Despite going through a challenging public scandal for nearly 12 months, the business fundamentals of Facebook have remained strong and we took advantage of this gap between perception and reality to the benefit of our clients.

What is the most important thing you want to tell clients? Last year, we welcomed Oliver Shao, Lucas Michael and Leon Xu to our team of bottom-up stock geeks. Soon after joining, each of them have already begun having a positive impact on finding great businesses we can invest in for the long term. Most important of all, I’m confident that they also wake up each day knowing that their hard work is critical in helping Canadians from coast to coast build their nest egg for the retirement they deserve.

Paul Marcogliese

Fixed Income Portfolio Manager Area of Focus: Fixed-Income

The economy remains uncertain going into 2020. Leading indictors continue to point to weaker economic growth, although the rate of deterioration has slowed. Any prolonged economic slowdown could be amplified by the high leverage levels in the economy. For this reason, we’ve positioned Cambridge Bond Fund to remain long duration. This sensitivity to interest rate movements is generated by holding long foreign government bonds. The portfolio holds long duration in German, U.K., U.S. and Japanese government bonds because we feel they are good relative value versus similar duration Canadian government bonds. Throughout 2019, the total corporate bond and high-yield bond allocation in the portfolio was reduced. We continue to hold credit in names that we believe offer superior return relative to their risk. Spread risk of the total portfolio is more defensive going into 2020 than it was going into 2019. An area in which we’re optimistic that could provide the portfolio with attractive absolute and relative returns in 2020 is the Canadian preferred share market. Canadian preferred shares had a challenging 2019 and we feel they are now priced attractively going into 2020. Preferred shares continue to become a more material position within the portfolio. ------------------------- Sources: Cambridge Global Asset Management

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