CI Global High Dividend

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CI Global High Dividend Advantage Fund
Epoch Investment Partners, Inc.
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Highlights A Case for Global Shareholder
Yield Portfolio Characteristics
Table of Contents
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Actively Managed Portfolio
Highlights

• Exposure to Global Portfolio focused on
  Shareholder Yield comprised of
• High Dividend Paying Securities
• MLPs / REITs
• Equities
• Diversified by company, geography and industry
• Proven investment strategy Epoch Investment
  Partners

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Attractive, tax efficient monthly distributions
Highlights

• 6 annual initial target distribution
• Approx. 8.5 pre-tax interest equivalent
• Forward structure recharacterizes income into
  tax-efficient capital gains, return of capital
• Benefits of traditional Closed End funds without
  their drawbacks

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Details

• Price 10 per unit
• Minimum investment 500
• Target Yield 6 (8.5 pre-tax equivalent)

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Epoch Investment Partners, Inc.
A Case for Global Shareholder Yield
William W. Priest, CFA, CPAChief Executive
Officer/Chief Investment Officer Michael A.
Welhoelter, CFAManaging Director, Portfolio
Manager
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Backdrop

• Financial Economy Real Economy Are Linked
  Role of Inflation and Interest Rates
• Changing Order Within Sources of Return Leads to
  Rising Importance of Yield
• Globalization Turbo-Charges Global Real Growth
  and Enhances Free Cash Flow Growth Rates
• Importance of Free Cash Flow Metric for Capital
  Allocation Options
• Dividends and Shareholder Yield
• Summary Case for Shareholder Yield

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Financial Economy and Real Economy are Linked -
Role of Inflation and Interest Rates
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Real and Financial Economy Directly Connected
Real Economy
Financial Economy
Real GDP
P/E Ratio
Inflation

Nominal GDP
EPS
x

StockMarket Level
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3.11- A Rate, Not A Date Bill Priest

• Following almost 20 years of expanding P/E
  ratios, interest rates are poised to rise,
  thereby eliminating P/E ratios as the major
  driver of total equity returns as was the case
  over the 1980-2000 period.

See Bill Priests Paper 3.11- A Rate, Not a
Date
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P/Es Are Inversely Related to Interest Rates
Sources of Equity Returns P/Es, Earnings,
Dividends
50.0
15.0
Trailing P/E Ratio
45.0
13.5
40.0
12.0
Long Term Government
35.0
10.5
Bond Interest Rate
30.0
9.0
P/E ratios at year end
Interest Rates () on 10-year Govt Securities
25.0
7.5
20.0
6.0
15.0
4.5
10.0
3.0
5.0
1.5
0.0
0.0
2002
1926
1930
1934
1938
1942
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
Source Epoch Investment Partners/Standard Poors
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Nominal GDP and Earnings Long-term History
Sources of Equity Returns P/Es, Earnings,
Dividends
Source Epoch Investment Partners/Standard Poors
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Changing Order Within the Sources of Return Leads
to Rising Importance of Yield
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Sources of Equity Returns

• P/Es
• Earnings
• Dividends

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Sources of Equity Returns P/Es, Earnings,
Dividends
Components of Compound Annual Total Returns for
Trailing 10-year Periods(SP 500 Composite
1926-2004)
20
15
10
5
0
Combined Effects
P/E Expansion
-5
Earnings Growth
Dividends Reinvestment
Total Return
-10
1992
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Ending Date of 10-year Period
Source Epoch Investment Partners/Standard Poors
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Globalization Turbo-Charges Real Growth and
Enhances Free Cash Flow Growth
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Turbo-Charging Real Economic Growth Through

• Globalization and its Instrument
• The Law of Comparative Advantage
• Volume of tradable goods has doubled
  in the past five years
• Emergence of new trading paradigms has led to

- Stephen Roach Economist, Morgan Stanley
Productivity
Inflation
Profitability
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Importance of Free Cash Flow Metric for Capital
Allocation Options
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Importance of Free Cash Flow Analysis for Capital
Application Options

• From an investors perspective, Free cash flow
  is the cash available for distribution to
  investors after all planned capital investment
  and taxes.
• But, accountants define the cash flow of a
  company as the sum of net income plus
  depreciation and other non-cash items that are
  subtracted in computing net income. - too
  inadequate for financial decisions
• Free cash flow is emerging as dominant capital
  allocation driver and hence, that of equity
  returns as well
• Rise in Private Capital Firms emphasizing
  role of free cash flow exclusively

The New Kings of Capitalism Economist
Valuations for Mergers, Buyouts, and
Restructuring , Enrique R. Arzac
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Free Cash Flow Options
Acquisitions Reinvestment in Business
Firm Growth
Dividends Share repurchase Debt reduction
Shareholder Yield
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Dividends and Shareholder Yield
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Dividends and Shareholder Yield

• Shareholder Yield is a better measure of a firms
  ability to deliver income to investors
• Application of free cash flow model clarifies
  components
• Traditional dividend measures fail to capture
  all shareholder yield contributions
• Buybacks and debt reduction are now viewed
  as important use of cash

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Dividend Yield to become Shareholder Yield

• Dividend Yield will be re-defined as Shareholder
  Yield with ascendancy of free cash flow metric
• Shareholder Yield will rise sharply as
  corporations more efficiently use their capital

Dividends as a Share of Free Cash Flow 11974
Through November 2005
200
180
160
140
120
100
Current
80
60
40
20
0
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
Source Corporate Reports, Empirical Research
Partners Analysis. 1 Largest 1,500 stocks data
smoothed on a trailing one-year basis. Excluding
Microsoft's special dividend in 12/2004.
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Shareholder Yield positively affected by
emerging compensation policies
Shareholder Yield

• Restricted Stock Units

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Summary Case for Shareholder Yield
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Summary Case for Shareholder Yield

• Interest rates will stay flat or rise for the
  foreseeable future.
• P/E ratios will stay flat or fall.
• To the extent that equities deliver positive
  returns, such positive returns will, out of
  necessity, be driven by dividends and earnings
  (the other two contributing sources of total
  return).
• Both dividends and earnings are real phenomena
  as opposed to pricing multipliers.

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Summary Case for Shareholder Yield

• Assume overall economy (nominal terms) grows 6.
  Assume current dividend yield is 2. The return
  to equities will be 8.
• If interest rates rise, P/E ratios will fall.
  Under such a scenario, equity returns will be
  less than 8.
• To the extent that equities deliver positive
  returns, such positive returns will, out of
  necessity, be driven by dividends and earnings.
• A clear opportunity exists by focusing on the
  sources of real returns.

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Summary Case for Shareholder Yield

• Through the use of a financial metric (free cash
  flow) rather than an accounting metric (earnings)
  it is easier to discern those firms most likely
  to utilize their free cash flow intelligently for
  shareholder value creation.
• If the return on incremental capital to be
  deployed in the business is equal to or
  less than the present average return on
  capital, the capital should be returned to
  shareholders.
• By assembling a portfolio of companies that offer
  superior dividend levels (direct dividends, share
  repurchases, debt reductions) and operating
  earnings growth we will be able to deliver
  performance superior to that of the broad-based
  equity market.

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Portfolio Characteristics

• Core Portfolio Process
• Current Portfolio Allocation

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Core Portfolio Process Fund Competitive
Positioning

• Exceptional, robust, current yield 5
• Exceeds long bonds
• Roughly 300 bps greater than global equity
  indices
• Consistent dividend growth
• 3 compound annual growth last three years
• 85 of companies raised their dividend in the
  last 12 months
• Global participation and diversification
• Innovative Portfolio Construction
• Stock-specific performance and income risks
  reduced
• Simultaneously allocating portfolio weight,
  income, and dividend growth
• Special Dividend Capture Program

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Core Portfolio Process Epochs Proprietary
Income Screen

• Income Security and Growth
• Current yield 4
• 3 years of monotonically increasing dividends
• Cash from operations exceeds dividends (or cash
  returned)
• over trailing three years
• Want ample dividend coverage and to avoid
  liquidating income vehicles
• No dividend cancellations in available financial
  history up to 20 years Dividend is sacred
• Low incidence of dividend reduction in available
  history
• Company has increased dividend in more than 50
  of available history
• Positive growth in cash flow from operations over
  the last 5 years
• Liquidity
• Market Capitalization 250 million U.S.
• For lightly traded stocks, prospective position
  is less than one-day of trading volume

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Core Portfolio Process Portfolio Construction

• Take candidate stocks ( n 150)
• Use quadratic optimizer to maximize the
  probability of achieving the following portfolio
  goals
• Conventional Dividend Yield 5
• Recent Dividend Growth 10 (Expected
  Incremental Yield 0.50)
• R-squared of security dividend streams 0.9 for
  two-thirds of holdings
• Seek additional 1.5 of shareholder yield through
  expected share repurchases and debt reduction
• Position Constraints
• Maximum assets per security 2.5
• Maximum income contribution per security 3
• Maximum incremental income per security 5
• Minimum position 0.50

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Current Portfolio Allocation
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Current Portfolio Allocation
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Summary details
Minimum Purchase 500 / Each subsequent
investment minimum 50. RSP Eligibility 100
eligible for RRSPs, RRIFs, RESPs. Distributions
Paid monthly. Automatically reinvested with the
option to receive in cash. Selling Concession
5.00 upfront plus 0.50 per annum trailer.
Liquidity Daily liquidity.
Switches Clients can switch units of one class
of the fund to another class of the fund or to
another fund managed by CI subject to any
applicable fees. See the Prospectus for more
details.
DSC Withdrawal Privileges
Redemption Fees
Short-term trading fee may apply if units are
sold within 30 business of purchase.

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Disclaimer
Commissions, trailing commissions, management
fees and expenses all may be associated with
mutual fund investments. Please read the
prospectus before investing. Mutual funds are not
guaranteed, their values change frequently and
past performance may not be repeated. CI
Investments and CI Investments design are
trademarks of CI Investments Inc.
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