Management of CI has the specialized skills and knowledge to focus on several key objectives. These include: meeting the needs of its clients, developing new products, enhancing investor awareness and increasing market share by marketing to investment dealers, mutual fund dealers and life insurance agents. 

## KEY PERFORMANCE DRIVERS 

CI’s results are driven primarily by the level of its assets under management, which are in turn driven by the returns earned by its funds and the net sales of its funds. The margin earned on these assets under management determines, to a large extent, CI’s profi tability. 

The returns of each fund reflect the returns of equities and bonds or other securities held by the fund. These returns will reflect the returns of equity and bond indexes plus the over or under performance of the investment manager of each fund. In years when markets decline (such as 2008) CI’s assets will decline. Conversely, CI’s assets will appreciate in years when markets perform well. For a particular period, the average assets under management will drive CI’s results as CI receives the majority of its fees on a daily basis. 

Fund sales and acquisitions also affect CI’s assets under management. While sales results help increase assets under management, they are also an indicator of the level of demand for CI’s products and our success in delivering attractive products. 

CI uses several performance indicators to assess its results. These are described throughout the results of operations and the discussion of the two operating segments and include the following: net income, earnings per share, pre-tax operating earnings, EBITDA, EBITDA margin, and dealer gross margin. 

## 2012 OVERVIEW 

CI’s average assets under management for 2012 increased 1% from 2011 as a result of the strong performance of CI’s funds and $973 million in net sales. However, a greater factor in CI’s performance this year was the continued trend of investor preference for fixed income products, which generally carry a lower management fee. As well, a larger proportion of CI’s assets under management are now institutional mandates, which carry a lower management fee. The resulting change in asset mix reduced management fee revenues by 2% notwithstanding the increase in average assets under management. 

This was mitigated by a similar impact on trailer fee expense, which fell 1% year over year, and management’s efforts to control spending in which selling, general and administrative (“SG&A”) expenses dropped 2% during the year. However, pre-tax operating earnings, as set out in Table 6, still declined 2% in 2012 versus 2011. 

While markets in 2012 faced challenges, including lingering concerns over the European debt crisis, the slowing Chinese economy, and the U.S. “fiscal cliff,” volatility eventually subsided and investors responded. Industry gross sales of funds picked up in 2012 and CI’s gross sales increased 16% year over year and net sales increased 201% year over year. 

