annual financial statements · annual financial statements as at december 31, 2013 – 3 –...

Annual Financial Statements – as at December 31 , 2013

Skylon All Asset Trust

Table of Contents

Management’s Responsibility for

Financial Reporting ........................................................ 1

Independent Auditor’s Report ............................................ 2

SKYLON ALL ASSET TRUSTFinancial Statements

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

Statements of Net Assets ................................................. 6

Statements of Operations and

Retained Earnings (Deficit) ............................................ 7

Statements of Changes in Net Assets .............................. 8

Statements of Cash Flows ................................................ 8

Trust Specific Financial

Instruments Risks .......................................................... 9

Notes to the Financial Statements .................................... 11

Trust Information ............................................................... 18

– 1 –Annual Financial Statements as at December 31, 2013

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying financial statements have been prepared by CI Investments Inc., the Manager of the Skylon All Asset Trust (the “Trust”), and approved by the Board of Directors of the Manager. The Trust’s Manager is responsible for the information and representations contained in these financial statements and other sections of this report. CI Investments Inc. maintains appropriate processes to ensure that relevant and reliable financial information is produced. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include certain amounts that are based on estimates and judgments. The significant accounting policies which management believes are appropriate for the Trust are described in Note 2 to the financial statements.

Derek J. Green Douglas J. JamiesonToronto, Ontario President and Chief Executive Officer Chief Financial OfficerMarch 21, 2014 CI Investments Inc. CI Investments Inc.


INDEPENDENT AUDITOR’S REPORT

To the Unitholders of Skylon All Asset Trust (the Trust)

We have audited the accompanying financial statements of the Trust, which comprise the statement of investment portfolio as at December 31, 2013, the statements of net assets as at December 31, 2013 and December 31, 2012, the statements 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 Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation 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 our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assur-ance about whether the financial statements are free from material misstatement.

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 the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as at December 31, 2013 and December 31, 2012, the results of its operations, the changes in its net assets and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Toronto, Ontario Chartered Professional Accountants,March 21, 2014 Licensed Public Accountants


Average Fair Number of Shares Description Cost ($) Value ($) EQUITIES SUBJECT TO FORWARD AGREEMENT (106.2%) 58,768 Argonaut Gold Inc.*^ 581,803 312,058 18,369 Canfor Corp.*^ 267,273 488,799 54,902 CGI Group Inc.*^ 407,402 1,950,119 16,367 Detour Gold Corp.*^ 510,159 66,941 57,635 Dream Unlimited Corp.*^ 252,012 971,150 57,635 Dundee Corp., Class A*^ 426,351 1,077,198 30,420 First Majestic Silver Corp.*^ 580,414 316,976 53,162 New Gold Inc.*^ 534,807 295,581 36,710 Osisko Mining Corp.*^ 527,890 172,537 34,889 Blackberry Ltd.*^ 602,146 275,274 28,266 Silver Standard Resources Inc.*^ 489,850 208,320 11,112 Tourmaline Oil Corp.*^ 464,704 496,706 6,287 Valeant Pharmaceuticals International Inc.*^ 487,982 783,486 19,880 Westport Innovations Inc.*^ 406,145 412,510 W

Commissions and other portfolio transaction costs –

Total Equities Subject to Forward Agreement (106.2%) 6,538,938 7,827,655

DERIVATIVE INSTRUMENTS Forward Agreement (-8.5%) (see Schedule A) (626,363) Foreign Currency Forward Contracts (-0.1%) (see Schedule B) (4,914) Total Investments (97.6%) 6,538,938 7,196,378 Other Net Assets (Liabilities) (2.4%) 175,530 Net Assets (100.0%) 7,371,908

^Denotes all or part securities on loan.* Securities sold forward as part of the Forward 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.

Skylon All Asset TrustFinancial Statements

Statement of Investment Portfolio as at December 31, 2013


‡Credit ratings 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.* Further PIMCO funds information is available at www.pimco.com.

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 Agreement (-8.5%) Investments sold forward Fair Value ($) Bankers Petroleum Ltd. (234,468) Argonaut Gold Inc. (312,646) Canfor Corp. (489,718) CGI Group Inc. (1,951,217) Detour Gold Corp. (67,105) Dream Unlimited Corp. (974,032) Dundee Corp., Class A (1,077,198) First Majestic Silver Corp. (317,281) New Gold Inc. (295,581) Osisko Mining Corp. (172,904) Research In Motion Ltd. (275,623) Silver Standard Resources Inc. (208,320) Tourmaline Oil Corp. (496,706) Valeant Pharmaceuticals International Inc. (783,486) Westport Innovations Inc. (413,305) (7,835,122)

Notional Units Underlying Fund Fair Value ($)563,758 PIMCO All Asset Fund* 7,208,759 Total Forward Agreement Value (626,363)

Settlement Date 31-Dec.-14 Credit Rating of Counterparty‡ A-1+

*PIMCO All Asset Fund’s allocations:

As at September 30, 2013

Income Fund 10.5EM Fundamental IndexPLUS® AR Strategy Fund 10.0Emerging Local Bond Fund 7.4Emerging Markets Currency Fund 7.2International Fundamental IndesPLUS® AR Strategy Fund 6.3High Yield Fund 5.5Unconstrained Bond Fund 5.4High Yield Spectrum Fund 4.2Worldwide Fundamental Advantage AR Strategy Fund 3.9Long Term Credit Fund 3.8Diversified Income Fund 3.6Emerging Markets Bond Fund 3.5Floating Income Fund 3.3Senior Floating Rate Fund 2.5EqS Pathfinder Fund 2.3Long Duration Total Return Fund 2.2CommoditiesPLUSTM Strategy Fund 2.1Credit Absolute Return Fund 2.0Global Advantage Strategy Bond Fund 1.8RealEstateRealReturn Strategy Fund 1.6Fundamental Advantage Absolute Return Strategy Fund 1.5

Emerging Markets Corporate Bond Fund 1.0 Investment Grade Corporate Bond Fund 0.9Total Return Fund 0.9CommodityRealReturn Strategy Fund® 0.8Low Duration Fund 0.8Foreign Bond Fund (Unhedged) 0.7Small Company Fundamental IndexPLUS® AR Strategy Fund 0.7International StocksPLUS® AR Strategy Fund (Unhedged) 0.6Long-Term US Government Fund 0.5Mortgage Opportunities Fund 0.5EqS Long/Short Fund 0.4Real Return Asset Fund 0.4Real Return Fund 0.3EqS Emerging Markets Fund 0.2International StocksPLUS® AR Strategy Fund (U.S Dollar Hedged) 0.2Small Cap StocksPLUS® AR Strategy Fund 0.2EqS Dividend Fund 0.1Fundamental IndexPLUS® AR Strategy Fund 0.1Global Advantage® Inflation-Linked Bond Exchange-Traded Fund 0.1StocksPLUS® Absolute Return Fund 0.1

Skylon All Asset TrustFinancial Statements (cont’d)

Statement of Investment Portfolio as at December 31, 2013 (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 or Canadian Bond Rating Services. †† CI Investments Inc., the Manager, is a corporation controlled by CI Financial Corp. The Bank of Nova Scotia has a significant interest in CI Financial Corp. Transactions with The Bank of Nova Scotia are

identified above.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 BForeign Currency Forward Contracts (-0.1%) Credit Rating of Settlement Contract UnrealizedContracts Counterparty the Counterparty‡ Date Rate ($) Pay Receive Gain (Loss) ($)

1 Royal Bank of Canada A-1+ 5-Mar-14 1.07 (968,000) US $ 1,034,405 Canadian $ 4,651 1 Royal Bank of Canada A-1+ 22-Jan-14 0.96 (1,455,000) US $ 1,513,695 Canadian $ (32,556) 1 The Bank of Nova Scotia†† A-1 5-Mar-14 1.07 (4,733,265) US $ 5,058,218 Canadian $ 22,991 Total Foreign Currency Forward Contracts Value (4,914)


Statement of Investment Portfolio as at December 31, 2013 (cont’d)


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

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

ASSETSInvestments at fair value* Cash Unrealized gain on forward agreementUnrealized gain on futures and foreign currency forward contractsDividends and accrued interest receivableReceivable for securities sold

LIABILITIESBank loan payable (Note 6)Payable for unit redemptionsManagement fees payableUnrealized loss on forward agreementUnrealized loss on futures and foreign currency forward contractsService 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)


As at As at December 31, 2013 December 31, 2012

7,828 301

–28–

1,0029,159

–947

4626

336

162423

1,787

7,372

2,581–

4,7917,372

6,539

19.28

382,341

10,439

270 – 8

– 2,000

12,717

– 1,900

51,636

108

196534

3,767

8,950

3,640 –

5,3108,950

8,349

20.75

431,231



INVESTMENT INCOMEInterest Securities lending (Note 7)Fees rebate

EXPENSES Management fees (Note 4)Administrative expenses (Note 4)Commitment fees (Note 6)Loan interest expenseService fees (Note 4)Legal feesAudit feesIndependent review committee feesHarmonized sales tax

Net investment income (loss) for the year

Realized and unrealized gain (loss) on investments and commissions and other portfolio transaction costsRealized 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

For the years ended December 31

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


2013

1 26

– 27

44 31

––

22 – 2 1

13 113

(86)

(46) 13

– (71) 205 101

15

0.03

5,310 15

(534)––

4,791

–––

2012

1 32 –33

5439161527–31

13168

(135)

811– –

(88)829

1,552

1,417

2.71

4,861 1,417 (968)

––

5,310

– – –


Net assets, beginning of year

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

DISTRIBUTIONS TO UNITHOLDERS From net incomeFrom realized gainsFrom return of capital

Increase (decrease) in net assets from operations

Net assets, end of year

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


Statements of Cash Flows (in $000’s)

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIESNet investment income (loss) Proceeds from sale of investmentsPurchase of investmentsNet change in non-cash balances related to operations

FINANCING ACTIVITIESProceeds from bank loanRepayment of bank loanDistributions 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



8,950

(412) (534) (946)

––

(647) (647)

15

7,372

2012

10,225

(940) (968)

(1,908)

– –

(784) (784)

1,417

8,950


(86) 6,782

(4,080) (4)

2,612

––

(681) (1,900) (2,581)

31

270

301

2012

(135) 5,101

(2,525)–

2,441

– (600) (800) (826)

(2,226)

215

55

270



Skylon All Asset Trust (“Trust”) was exposed to the financial instrument risks of the PIMCO All Asset Fund (the “Fund”). By entering into the Forward Agreement, the Trust eliminated the direct risk exposure to its common share portfolio and assumed the risk exposure of the Fund, as well as credit risk to the Counterparty of the Forward Agreement in respect of any positive amount of the value of the Forward Agreement. The Fund invested substantially all of its assets in Institutional Class shares of other funds (“Underlying Funds”) managed by PIMCO . The Fund did not invest directly in stocks or bonds of other issuers. The Fund allocates its assets broadly among the Underlying Funds. The Trust is exposed to indirect credit risk to the extent the underlying fund holds fixed income and derivative instruments. As at December 31, 2013, the credit rating of the Counterparty to the Forward Agreement was A-1+ (2012 - A-1+).

Other Price Risk The Trust bears the other price risk exposure of the Fund. As at December 31, 2013 and 2012, the Fund was invested in other funds that were invested primarily in fixed income securities.

As at December 31, 2013, had the global markets increased or decreased by 10% (December 31, 2012 - 10%), with all other variables held constant, net assets of the Trust would have increased or decreased, respectively, by approximately $192,000 (December 31, 2012 - $158,000). In practice, actual results may differ from this analysis and the difference may be material.

Credit RiskThe Trust bears the credit risk exposure of the Fund and of the counterparty of the Forward Agreement. As at December 31, 2013 and 2012, the Fund was invested in other funds that were invested primarily in fixed income securities.

As at December 31, 2013 and 2012, the counterparties to the foreign currency forward contracts had a credit rating of A-1+ and A-1 (2012 A-1+ and A-1).

The PIMCO All Asset Fund’s investments were concentrated in the following PIMCO Funds:

as at September 30, 2012

EM Fundamental IndexPLUS IM TR Strategy Fund 10.1 Income Fund 8.8 High Yield Fund 8.1 Emerging Markets Currency 8.0 Emerging Local Bond Fund 7.9 Floating Income Fund 6.7 CommoditiesPLUSTM Strategy Fund 5.4 International Fundamental IndesPLUS® TR Strategy Fund 5.4 Diversified Income Fund 4.4 Emerging Markets Bond Fund 4.0 Global Advantage Strategy Bond Fund 3.3 Foreign Bond Fund (Unhedged) 2.9 Fundamental Advantage Total Return Strategy Fund 2.8 Long Term Credit Fund 2.8 High Yield Spectrum Fund 2.6 Convertible Fund 2.1 Senior Floating Rate Fund 2.1 Unconstrained Bond Fund 2.0 CommodityRealReturn Strategy Fund® 1.8 EqS Pathfinder Fund 1.8

Total Return Fund 1.7 Investment Grade Corporate Bond Fund 1.2 RealEstateRealReturn Strategy Fund 0.8 Small Company Fundamental IndexPLUS® TR Strategy Fund 0.6 Int’l StocksPLUS® TR Strategy Fund (Unhedged) 0.5 Emerging Markets Corporate Bond Fund 0.4 EqS Long/Short Fund 0.4 Credit Absolute Return Fund 0.2 EqS Emerging Markets Fund 0.2 Int’l StocksPLUS® TR Strategy Fund (U.S Dollar Hedged) 0.2 Low Duration Fund 0.2 EqS Dividend Fund 0.1 Fundamental IndexPLUS IM TR 0.1 Long Duration Total Return Fund 0.1 Short Term Fund 0.1 Small Cap StocksPLUS® Total Return Fund 0.1 StocksPLUS® Total Return Fund 0.1 Long-Term US Government Fund - Real Return Asset Fund - Real Return Fund -

Skylon All Asset TrustTrust Specific Financial Instruments Risks (Note 13)


Currency RiskAs at December 31, 2013 and 2012, the Trust was exposed to currency risk as its investments were denominated in currencies other than Canadian dollars, the functional currency of the Trust. As a result, the Trust could have been affected by fluctuations in the value of such currencies relative to the Canadian dollar. The Trust was also exposed to indirect currency risk through its exposure to the Fund.

The tables below summarize the Trust’s exposure to currency risk.

as at December 31, 2013

Financial Instruments Derivatives Total Currency Net Exposure Exposure Exposure AssetsCurrency (in $000’s) (in $000’s) (in $000’s) (%)US Dollar 8,229 (7,601) 628 8.5Total 8,229 (7,601) 628 8.5

as at December 31, 2012

Financial Instruments Derivatives Total Currency Net Exposure Exposure Exposure AssetsCurrency (in $000’s) (in $000’s) (in $000’s) (%) US Dollar 11,106 (9,704) 1,402 15.7 Total 11,106 (9,704) 1,402 15.7

As at December 31, 2013, had the Canadian dollar strengthened or weakened by 10% (December 31, 2012 - 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 $63,000 (December 31, 2012 - $140,000). In practice, the actual results may differ from this analysis and the difference may be material.

Interest Rate RiskThe Trust bears the interest rate risk exposure of the Fund. As at December 31, 2013 and 2012, the Fund was invested in other funds that were invested directly in debt instruments.

Fair Value Hierarchy

The 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, 2013

Level 1 Level 2 Level 3 Total (in $000’s) (in $000’s) (in $000’s) (in $000’s)Equities 7,828 – – 7,828 Foreign currency forward contracts, net – (5) – (5)Forward agreement – (626) – (626)Total 7,828 (631) – 7,197

Long Positions at fair value as at December 31, 2012 Level 1 Level 2 Level 3 Total (in $000’s) (in $000’s) (in $000’s) (in $000’s) Equities 10,439 – – 10,439 Foreign currency forward contracts, net – (2) – (2) Forward agreement – (1,636) – (1,636)Total 10,439 (1,638) – 8,801

There were no transfers between Level 1, 2 and 3 during the years ended December 31, 2013 and 2012.


Skylon All Asset TrustTrust Specific Financial Instruments Risks (Note 13) (cont’d)


1. THE TRUSTSkylon All Asset Trust (the “Trust”) is a closed-end investment trust established under the laws of the Province of Ontario pursuant to a Declaration of the Trust dated as of September 30, 2004. On October 15, 2004, the Trust completed its initial public offering of 4,800,000 units at $25 per unit. The Trust is listed on the Toronto Stock Exchange, under the symbol SKA.UN. On November 5, 2004, an over-allotment option granted to agents was exercised for further issuance of 210,000 units at $25 per unit. The Trust is managed by CI Investments Inc. (the “Manager” and the “Trustee”).

The Trust will terminate operations on or about December 31, 2014 (the “Termination Date”) and the net assets will be distributed pro rata to unitholders unless an alternative earlier or later termination date is approved by the unitholders.

The Trust provides unitholders with exposure to the performance of the PIMCO All Asset Fund (the “Fund”) which is a separate open-end investment fund. However, neither the Trust nor the unitholders have any ownership interest in the Fund.

The return to the unitholders and the Trust is dependent upon the return on the Institutional Class shares (“Fund Shares”) of the Fund by virtue of a forward agreement (the “Forward Agreement”) with TD Global Finance. The Fund seeks to achieve its investment objective by investing under normal circumstances substantially all of its assets in Institutional Class shares of other funds (“Underlying Funds”) within the PIMCO family of funds. The Trust may partially settle the Forward Agreement prior to the Termination Date in order to fund monthly distributions, redemptions of units, payment for purchases of units in the market and expenses of the Trust.

Neither the Fund nor the Underlying Funds are regulated under Canadian securities laws as “mutual funds”. The Fund and the Underlying Funds are regulated under United States law including the United States Investment Company Act of 1940.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”).

The following is a summary of the significant accounting policies of the Trust:

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

At the financial reporting date, listed securities are valued based on the bid price for securities held long and the ask price for securities sold 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 evaluated bid quotation from recognized investment dealers. Underlying funds are valued on each business day at their net asset value as reported by the Underlying Fund’s manager.

(b) Commissions and Other Portfolio Transaction CostsTransaction costs, such as brokerage commissions, incurred in the purchase and sale of securities, are included in “Commissions and other portfolio transaction costs” in the Statements of Operations.

Notes to the Financial Statements


(c) Cost of InvestmentsCost of investments represents the amount paid for each security and is determined on an average cost basis excluding commissions 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 income is accounted for on the accrual basis.

(e) Foreign ExchangeForeign currency amounts are translated into Canadian dollars, the functional currency of the Trust, as follows: fair value of investments, 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 Trust may enter into forward contracts. Forward foreign currency contracts are valued on each valuation day based on the difference 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 unrealized appreciation (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, at which time the gains (losses) are realized and reported as “Realized gain (loss) on investments” in the Statements of Operations.

The value of the forward contract as part of the Forward Agreement on the valuation date is equal to the gain or loss that would 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 Underlying Fund’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 investments and derivatives” in the Statements of Operations and “Unrealized gain (loss) on forward contract” in the Statements of Net Assets 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) CashCash is comprised of cash on deposit.

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

Notes to the Financial Statements (cont’d)


(j) Income TaxesThe Trust complies with the Income Tax Act (Canada) to qualify as a mutual fund trust. A mutual fund trust is subject to tax in each taxation year under Part 1 of the Income Tax Act (Canada) on the amount of its income for the year, including net realized taxable capital gains, less the portion thereof that it claims in respect of the amounts paid or payable to the unitholders for the year. Income tax paid by the Trust on any net realized capital gains not paid or payable to unitholders is recoverable by virtue of refunding provisions contained in Income Tax Act (Canada) and provincial legislation, as redemption occur. The Trust intends to 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 Trust’s investment strategy utilizes a forward sale agreement “forward agreement” in order to gain exposure to the returns of an underlying fund. The government refers to these as character conversion transactions. On March 21, 2013, the Minister of Finance announced proposals in a federal budget that would treat the gain realized by a mutual fund under such forward agreements as ordinary income rather than a capital gain, if the forward agreement was entered into or extended on or after March 21, 2013. On July 11, 2013, the Department of Finance announced proposed technical changes to the transitional rules related to character conversion transactions announced in the federal budget. One of the announced changes includes the extension of the transition period for short-term agreements. The extended grandfathered period allows investment funds, whose forward agreements were entered into prior to March 21, 2013 and the terms of which provide for settlement or are a part of series of agreements that provide for settlement prior to 2015, to extend their forward agreements until end of 2014. For longer-dated forward agreements, the grandfathering transitional period will not extend beyond March 21, 2018. Grandfathering is subject to certain growth rules with which the Trust intend to comply. The federal budget, part of Bill C-4, was enacted into law on December 12, 2013.

The Manager is currently assessing the impact and implications of these changes to the Trust.

(k) Use of Estimates The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

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

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

The Trust is authorized to issue an unlimited number of redeemable, transferable units of one class, each of which represents an equal, undivided interest in the net assets of the Trust. Commencing in December 2007, unitholders are entitled to redeem their units outstanding at the end of each year (the “Annual Redemption”). Annual redemption price per unit is equal to net asset value per unit determined on the annual valuation date.

The Trust initially targeted a quarterly distribution of $0.375 per unit ($1.50 per annum to yield 6.00% on the subscription price of $25.00 per unit). Distributions commenced December 31, 2004, and are expected to continue until termination of the Trust.

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

Unit Transactions 2013 2012Balance, beginning of year 431,231 523,001 Units redeemed (48,890) (91,370)Units purchased for cancellation (Note 5) – (400)Balance, end of year 382,341 431,231



When units of the Trust are redeemed at a price per unit which is lower than the average cost per unit of capital, the difference is included 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 FeesThe Trust pays to the Manager an annual fee equal to 0.50% of the Net Asset Value of the Trust calculated and paid monthly in arrears, plus an amount equal to the service fees payable by the Manager to registered dealers.

(b) Administrative ExpensesThe Trust is also responsible for all its expenses incurred in connection with its 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 FeesThe Manager pays to registered dealers an annual service fee equal to 0.25% of the Net Asset Value per Trust unit for units held by clients of the sales representatives of the registered dealers, calculated and payable quarterly in arrears.

(d) Advisory FeesPacific Investment Management Company (PIMCO) investment advisory fees are indirectly paid by the Trust.

(e) Forward Agreement FeesThe Trust will pay to the counterparty under the Forward Agreement a fee of approximately 0.50% per annum of the fair value of notional exposure to the Fund 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.

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 closing price of the units (the “Reference Closing Price”) is less than 95% of the net asset value per unit determined on that date, the Trust will offer to purchase for cancellation any units offered in the market at or below the Reference Closing Price on the following business day. 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 year ended December 31, 2013, the Trust purchased no units for cancellation (400 units at a cost of $7,802 for 2012). All units purchased by the Trust were subsequently cancelled.

6. LOAN FACILITY Skylon All Asset Trust had entered in prior years into a revolving term credit facility with The Bank of Nova Scotia, a related party (see Note 10), up to a maximum principal amount of $600,000. Under the terms of the credit agreement, the Skylon All Asset Trust was allowed to borrow up to 25% of its net asset value, determined at the time of borrowing, in the form of Bankers’ Acceptances or Prime Rate Loans. Amounts borrowed were secured by a general security interest in all the personal property, assets and undertakings of the Skylon All Asset Trust that were not otherwise pledged. The loan facility bore interest at a rate equal to LIBOR plus 1.00%, The Bank of Nova Scotia’s prime rate or the Alternate Base Rate Canada, depending on the form of the loan. In addition, Skylon All Asset Trust was required to pay a commitment fee of 0.25% per annum on the maximum principal amount less any amounts drawn. The term credit facility expired on October 10, 2012. As at December 31, 2012, the amount of the loan facility outstanding was nil.



7. SECURITIES LENDINGThe Trust may lend the Common Share Portfolio pursuant to the terms of a securities lending agreement with TD Global Finance. Under a Securities Lending Agreement: (i) the borrower will pay to the Trust a negotiated securities lending fee and will make compensation payments to the Trust equal to any distributions received by the borrower on the securities borrowed; (ii) the securities loans must qualify as “securities lending arrangements” for the purposes of the Tax Act; and (iii) the Trust will receive 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 securities will be 102%. The securities lending income received for the years ended December 31, 2013 and 2012 appears in the Statements of Operations.

The value of securities lent and collateral received at December 31, 2013 and 2012 were as follows: 2013 2012 (in $000’s) (in $000’s)Loaned 7,824 10,458Collateral (non cash) 9,543 13,450

8. INCOME TAX LOSSES CARRY FORWARDNet capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non-capital losses arising in taxation years 2004 and 2005 may be carried forward ten years. Non capital losses arising in taxation years after 2005 may be carried forward twenty years. Non-capital losses and net capital losses are reported in the table below. Non-capital losses carried forward may reduce future taxable income.

Losses carry forwards (in $000’s) 2013Net capital losses carry forward 1,972

Year of expiry 2015 2026 2027 2028 2029 2030 2031 2032 2033 TotalNon-capital losses carry forward – – – – – – – – 89 89

9. NET ASSETS COMPARISONIn accordance with National Instrument 81-106, a comparison of net assets per unit and net asset value per unit as at December 31, is as follows:

2013 (in $) 2012 (in $)Net assets per unit 19.28 20.75Net asset value per unit 19.35 20.95

10. RELATED PARTY TRANSACTIONSThe Bank of Nova Scotia has a significant interest in CI Financial Corp., the parent company of the Manager. The Trust 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 Trust, if applicable.

11. INTERNATIONAL FINANCIAL REPORTING STANDARDSOn December 12, 2011 the Canadian Accounting Standards Board (“AcSB”) allowed investment funds to defer mandatory adoption of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting standards Board (“IASB”) until the fiscal year beginning on or after January 1, 2014. Accordingly, the Trust will adopt IFRS for its fiscal year beginning January 1, 2014, and will issue financial statements in accordance with IFRS, including comparative information, for the semi-annual period ending June 30, 2014. The June 30, 2014 semi-annual and December 31, 2014 annual financial statements will include an opening Statement of Net Assets as at January 1, 2013 and comparative financial information prepared in accordance with IFRS.



The Manager has evaluated the differences between Canadian GAAP and IFRS and implemented a transition plan to meet the AcSB implementation timeline. Based on the Manager’s analysis to date, the adoption of IFRS may impact the Trust’s Net Assets with the potential elimination of the difference between the Net Assets per Unit and the Net Asset Value per Unit at the financial statement reporting date, as disclosed in Note 9 – Net Assets Comparison. The changeover to IFRS will also result in additional note disclosures and may result in the presentation of Net Assets representing unitholders’ equity as a liability instead of the current presentation as equity depending on Trust meeting certain criteria. The Manager’s current evaluation may be subject to changes due to issuance of new standards or new interpretations of existing standards.

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. Dividends and accrued interest receivable and receivable for securities sold 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, service fees payable, management fees payable, accrued expenses, 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. Bank loan payable is designated as financial liability and is carried at amortized cost. Financial liabilities are generally settled within three months.

13. FINANCIAL INSTRUMENTS RISK Risk ManagementThe Trust is exposed to a variety of financial instruments risks: credit risk, liquidity risk and market risk (including interest rate risk, currency risk and other price risk). The level of risk to which the Trust is exposed to depends on the investment objective and the type of investments held by the Trust.

Other Price RiskOther 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 RiskInterest 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. 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.

Currency RiskCurrency risk arises from financial instruments that are denominated in a currency other than the Canadian dollar, the functional currency of the Trust. As a result, the Trust 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 Trust’s functional currency to determine their fair value.

Credit RiskCredit 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 a debt instruments includes consideration of the credit worthiness of the debt issuer. The credit risk exposure of the Trust’s 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 schedulesAAA/Aaa/A++ A-1+AA/Aa/A+ A-1, A-2, A-3A B, B-1BBB/Baa/B++ B-2BB/Ba/B+ B-3B CCCC/Caa/C++ -CC/Ca/C+ -C and Lower DNot Rated WR

Significant cash balances as disclosed in the Statements of Net Assets are maintained by the Custodian, RBC Investor Services Trust. The Manager monitors the credit worthiness of the custodian on a regular basis.

All transactions executed by the Trust 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 RiskLiquidity risk is the risk that the Trust may not be able to settle or meet its obligations, on time or at a reasonable price. The Trust is exposed to annual cash redemptions of redeemable units, and also repayment of its bank loan, if applicable, which are financed by the partial settlements of the Forward Agreement.

Fair Value HierarchyThe Trust is required to classify financial instruments measured at fair value using a fair value hierarchy. Investments whose values are based on quoted market prices in active markets are classified as Level 1. This level may include publicly traded equities, exchange traded and retail mutual funds, exchange traded warrants, futures contracts, traded options, American depositary 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 fixed income 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, private term loans, private equity funds and certain derivatives. As observable prices are not available for these securities, the Trust may use a variety of valuation techniques to derive the fair value.

Details of the Trust’s exposure to financial instruments risks including the fair value hierarchy classification are available in the “Trust Specific Financial Instruments Risks” section of the financial statements.



Manager and TrusteeCI Investments Inc.2 Queen Street East, 20th FloorToronto, OntarioM5C 3G7Phone: (416) 364-1145Fax: (416) 364-6299Toll Free: [email protected]

Custodian RBC 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 SymbolSKA.UN

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

Trust Information

SKYLON_6972_AR_03/14E

2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I www.ci.comHead Office / Toronto416-364-1145 1-800-268-9374

Client ServicesEnglish: 1-800-563-5181 French: 1-800-668-3528

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