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Skylon Growth & Income Trust

2008AnnualFinancial Statementsfor the year ended December 31, 2008

Table of ContentsManagement and Auditors’ Reports . . . . . . . . . 1

SKYLON GROWTH & INCOME TRUST

Financial StatementsStatement of Investment Portfolio . . . . . . . . . . . 2Statements of Net Assets . . . . . . . . . . . . . . . . . . 10

Statements of Operations and Retained Earnings (Deficit) . . . . . . . . . . . . . . 11

Statements of Changes in Net Assets . . . . . . . . . 12

Statements of Cash Flows . . . . . . . . . . . . . . . . 12Trust Specific Financial

Instruments Risks . . . . . . . . . . . . . . . . . . . . . 13

Notes to the Financial Statements . . . . . . . . . . . 15Trust Information . . . . . . . . . . . . . . . . . . . . . . . 22

1Annual Financial Statements as at December 31, 2008

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL R E P O RT I N G

The accompanying financial statements have been prepared by CI Investments Inc., the Manager of the Skylon Growth & Income Tr u s t ,and approved by the Board of Directors of the Manager. The Tr u s t ’s Manager is responsible for the information and representationscontained in these financial statements and other sections of this report. CI Investments Inc. maintains appropriate processes to ensurethat relevant and reliable financial information is produced. The financial statements have been prepared in accordance with Canadiangenerally accepted accounting principles and include certain amounts that are based on estimates and judgments. The significantaccounting policies which management believes are appropriate for the Trust are described in Note 2 to the financial statements.

PricewaterhouseCoopers LLP are the external auditors of the Trust. 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 financial statements.Their report is set out below.

Peter W. Anderson Douglas J. JamiesonToronto, Ontario Chief Executive Officer Chief Financial OfficerM a rch 4, 2009 CI Investments Inc. CI Investments Inc.

A U D I TO R S ’ R E P O RT

To the unitholders of Skylon Growth & Income Trust (the “Trust”):

We have audited the Statement of Investment Portfolio of the Trust as at December 31, 2008, the Statements of Net Assets as at December 31, 2008 and 2007 and the Statements of Operations and Retained Earnings (Deficit), Changes in Net Assets and Cash Flows for the years ended December 31, 2008 and 2007. These financial statements are the responsibility of the Trust’smanagement. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Trust as at December 31, 2008 and 2007, and 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 A c c o u n t a n t s ,M a rch 4, 2009 Licensed Public A c c o u n t a n t s

Management and Auditors’ Reports

2 Annual Financial Statements as at December 31, 2008

Number of Shares/ Average FairFace Amount Description Cost ($) Value ($)

Financials (20.1%) 173,500 Aberdeen Asset Management PLC 490,321 366,612

USD 90,000 Ace Cash Express Inc. 10.25% 10/01/2014 102,280 30,663 18,200 Allied Properties REIT 283,411 225,862

19,140 Altus Group Income Fund 348,589 145,081

18,238 Artis REIT 286,595 133,320

104,854 AXA Asia Pacific Holdings Ltd. 471,270 446,531

11,700 Banco Bilbao Vizcaya Argentaria SA 203,097 172,223

12,800 Bank of Montreal 384,000 399,616 10,000 Bank of New York Mellon Corp. 324,499 344,718

11,400 Bank of Nova Scotia (The)†† 486,344 377,910

2,276 Boston Pizza Royalties Income Fund 30,111 17,093

19,615 Calloway REIT 381,595 222,042

400,000 Canada Housing Trust No. 1, FRN Series 12 1.71429% 09/15/2010 402,028 398,472

22,330 Canadian Apartment Properties REIT 305,636 350,804 62,300 Canadian Imperial Bank of Commerce 4,191,780 3,175,431

3,102 Canadian REIT 67,583 70,012

14,800 CI Financial Corp.† 427,418 214,304

24,270 Cominar REIT 366,093 388,563

USD 497,000 Couche-Tard Finance Corp., Callable 7.5% 12/15/2013 639,601 477,751

166,000 Countrywide Financial Corp. 4.69% 06/01/2009 153,205 164,220 7,100 Davis & Henderson Income Fund 128,714 118,499

19,348 European Capital Ltd. 286,667 26,309

329,000 First Capital Realty Inc. 5.5% 09/30/2017 336,503 240,203

17,400 H&R REIT 332,857 129,630

21,900 Hartford Financial Services Group Inc. 645,113 436,758

31,100 Hosted Data Transaction Solutions Inc. 79,700 6,376 24,700 ING Groep NV 873,718 307,742

84,100 Intesa Sanpaolo SpA 500,484 354,157

144,300 iShares MSCI Japan Index Fund 1,902,761 1,668,046

USD 903,000 iStar Financial Inc., FRN 2.33625% 09/15/2009 775,070 626,297

15,300 KKR Private Equity Investors LP 423,809 64,229

USD 34,000 Lender Processing Services Inc. 8.125% 07/01/2016 34,612 36,872 45,700 Lincoln National Corp. 1,860,844 1,047,647

9,686 Manulife Financial Corp., Restricted Shares (Apr09) 184,034 201,081

215,000 Morgan Stanley FRN 2.575% 02/23/2012 165,180 178,482

23,550 National Australia Bank Ltd. 513,888 424,602

13,100 National Bank of Canada 652,838 409,899

26,300 Nomura TOPIX Exchange-Traded Fund 350,240 311,111USD 363,000 Nuveen Investments Inc. 10.5% 11/15/2015 350,063 97,726

USD 253,000 Nuveen Investments Inc., Senior Notes 5% 09/15/2010 227,205 167,008

19,500 Power Corp. of Canada 533,803 433,095

4,800 Primaris Retail REIT 35,942 50,400

19,300 Principal Financial Group Inc. 480,673 530,038

10,300 RioCan REIT 206,546 140,698

Statement of Investment Portfolio (as at December 31, 2008)

††CI Investments Inc., the manager, is a corporation controlled by CI Financial Corp. The Bank of Nova Scotia owns a significant interest in CI Financial Corp. andis therefore, considered a related party to CI Investments Inc.

†CI Investments Inc., the manager, is a corporation controlled by CI Financial Corp. Percentages shown in brackets relate investments at fair value to total net assets of the Trust.The accompanying notes are an integral part of these financial statements.

SKYLON GROWTH & INCOME TRUSTFinancial Statements


Financials (20.1%) cont’d 1,000,000 RioCan REIT 4.7% 06/15/2012 997,700 916,270

71,600 Royal Bank of Canada 3,030,675 2,577,600

715,000 Royal Bank of Canada FRN 2.01% 09/27/2010 715,000 692,549

USD 1,050,000 Royal Bank of Scotland Group PLC 6.99% 10/04/2049 1,024,140 597,346

USD 100,000 SLM Corp. 4% 01/15/2009 120,104 121,124

130,000 SLM Corp. 4.625% 06/15/2011 111,588 101,179

USD 97,000 SLM Corp. 5.125% 08/27/2012 74,731 88,328 1,400 TMX Group Inc. 38,964 35,238

74,100 Toronto-Dominion Bank 3,941,638 3,217,422

976 Unibail 224,279 176,265

32,505,539 24,651,454

Materials (11.3%) 7,000 Ball Corp. 339,453 354,246

46,400 Barrick Gold Corp. 1,541,606 2,073,152

USD 100,000 Berry Plastics Co. 9.5025% 02/15/2015 94,382 83,959

62,000 Bowater Inc. 10.85% 11/30/2014 67,038 37,140

36,580 Cameco Corp. 1,416,104 766,351

USD 444,000 Cascades Inc. 7.25% 02/15/2013 478,162 275,531 USD 272,000 Clondalkin FRN 3.99625% 12/15/2013 276,732 167,139

7,323 Consolidated Thompson Iron Mines Ltd. 57,119 6,884

USD 55,000 Domtar Inc. 7.875% 10/15/2011 62,954 56,885

USD 416,000 FMG Finance Pty. Ltd. 10.625% 09/01/2016 529,956 293,589

USD 492,000 FMG Finance Pty. Ltd. 10% 09/01/2013 624,134 353,212

USD 164,000 FMG Finance Pty. Ltd. 6.2025% 09/01/2011 182,988 121,728 USD 809,000 Freeport-McMoRan Copper & Gold Inc. 8.25% 04/01/2015 897,650 836,730

USD 1,256,000 Gerdau Ameristeel Corp. 10.375% 07/15/2011 1,808,916 1,543,580

USD 364,000 Hexion US/NOVA 9.75% 11/15/2014 452,531 126,230

USD 430,000 Huntsman International LLC 7.875% 11/15/2014 483,180 279,924

37,775 ICL-Israel Chemicals Ltd. 268,522 319,441

USD 157,000 Innophos Inc. 8.875% 08/15/2014 178,146 133,726 USD 268,000 James River Coal Co. 9.375% 06/01/2012 272,883 239,685

2,700 Labrador Iron Ore Royalty Income Fund 49,022 57,456

USD 321,000 Metals USA Holdings Corp., FRN 10.8825% 07/01/2012 312,605 109,366

175,300 Paladin Resources Ltd. 878,036 380,401

4,500 Potash Corp. of Saskatchewan 525,067 402,840

USD 376,000 Rathgibson Inc. 11.25% 02/15/2014 441,907 101,797 21,310 Seaspan Corp. 573,881 229,480

45,000 Sherritt International Corp. 7.875% 11/26/2012 47,362 39,998

37,700 SPDR Gold Trust 3,584,325 3,969,870

USD 240,000 Steel Dynamics Inc., Senior Notes 6.75% 04/01/2015 181,895 201,502

AUD 480,000 Western Areas 8% 07/02/2012 402,237 221,896

17,028,793 13,783,738

Statement of Investment Portfolio (as at December 31, 2008) cont’d

Percentages shown in brackets relate investments at fair value to total net assets of the Trust.The accompanying notes are an integral part of these financial statements.




Energy (10.9%) 505,000 Advantage Energy Income Fund, Convertible 7.5% 10/01/2009 505,000 449,551

3,673 AltaGas Income Trust 70,450 63,212

11,000 Amerada Hess Corp. 642,090 717,959

15,100 ARC Energy Trust 279,525 302,755

887,000 Athabasca Oil Sands Corp. 13% 07/30/2011 892,986 745,080

4,800 Baytex Energy Trust 127,949 69,504

10,600 Bonavista Energy Trust 254,392 178,822 10,900 Canadian Natural Resources Ltd. 712,460 531,375

12,300 Canadian Oil Sands Trust 410,462 258,669

3,300 Chevron Corp. 326,277 296,017

USD 522,000 Connacher Oil and Gas Ltd. 10.25% 12/15/2015 508,237 254,067

USD 829,136 Corral Finans AB 6.2525% 04/15/2010 940,519 544,801

7,500 Crescent Point Energy Trust 111,529 180,000 1,445 Enbridge Energy Partners LP 58,494 44,713

5,200 Energy Savings Income Fund, (Entitlement Units) - 185

7,200 Enerplus Resources Fund 291,993 171,792

25,300 Fort Chicago Energy Partners LP 290,062 180,136

18,200 Imperial Oil Ltd. 632,749 745,654

54,300 Inter Pipeline Fund LP 490,762 382,815 1,700 Keyera Facilities Income Fund 27,621 30,192

29,140 Nexen Inc. 748,706 621,265

7,700 Occidental Petroleum Corp., Preferred Rights 533,114 561,785

USD 1,122,000 OPTI Canada Inc., Callable 8.25% 12/15/2014 1,257,945 737,233

13,700 Pembina Pipeline Income Fund 239,573 206,596

3,600 Penn West Energy Trust 101,497 48,852 10,500 Petro-Canada 324,202 279,405

USD 100,000 PetroQuest Energy Inc. 10.375% 05/15/2012 112,005 83,959

279 Primary Energy Recycling Corp. 2,832 647

10,900 Progress Energy Trust 143,060 96,574

USD 896,000 Sabine Pass LNG LP 7.5% 11/30/2016 884,292 784,980

15,400 Spectra Energy Corp. 359,879 294,947 44,913 Suncor Energy Inc. 1,871,042 1,065,336

85,900 Talisman Energy Inc. 1,279,556 1,046,262

USD 573,000 Targa Resources Inc. 8.5% 11/01/2013 658,709 376,501

USD 316,000 Transmeridian Exploration Inc. 12% 12/15/2010 307,627 96,127

10,100 TriStar Oil and Gas Ltd. 126,686 114,130

14,868 Vermilion Energy Trust 324,702 372,146 9,000 XTO Energy Inc. 395,098 386,138

17,244,082 13,320,182

Industrials (8.2%) 6,000 Alliant Techsystems Inc. 609,062 624,874

USD 248,000 American Railcar Industries Inc. 7.5% 03/01/2014 293,119 199,165 2,800 Ametek Inc. 123,038 102,586

4,400 Atlantia SpA 139,765 98,049

55,173 BAE Systems PLC 459,565 366,403

7,320 BFI Canada Ltd. 171,793 75,835






Industrials (8.2%) cont’d200 CAE Inc. 2,479 1,612

5,695 Contrans Income Fund 78,966 33,316

20,176 Finmeccanica SpA 454,968 370,378

26,600 Finning International Inc. 473,835 378,784

USD 335,000 Flextronics International Ltd. 6.5% 05/15/2013 363,366 322,025

1,600 FTI Consulting Inc. 106,718 86,519

USD 195,000 Hovnanian Enterprise Inc. 11.5% 05/01/2013 206,071 180,329 876,000 Iron Mountain Inc. 7.5% 03/15/2017 865,989 692,040

USD 423,000 Jabil Circuit Inc. 8.25% 03/15/2018 432,548 326,838

USD 25,000 Kansas City Southern de Mexico 8% 06/01/2015 24,832 24,032

USD 345,000 Kansas City Southern de Mexico 9.375% 05/01/2012 358,146 384,112

6,600 Koninklijke Vopak NV 265,177 301,775

9,100 Livingston International Income Fund 171,376 74,529 352,870 Macquarie Airports 965,817 717,768

29,460 Macquarie Infrastructure Co. LLC 1,027,059 134,067

176,100 Macquarie Infrastructure Group 386,406 253,028

USD 721,000 NXP BV/NXP Funding LLC 7.875% 10/15/2014 852,758 342,151

5,200 Pacer International Inc. 78,864 65,931

15,200 Raytheon Co. 895,145 944,001 9,293 Resolve Business Outsourcing Income Fund 85,492 13,010

986,000 Sherritt International Corp. 8.25% 10/24/2014 986,000 834,048

USD 140,000 Sotheby's Holdings Inc. 7.75% 06/15/2015 141,365 88,583

46,341 Tesco PLC 343,963 295,407

USD 97,000 Texam Competitive Electric Holdings Co. LLC 10.5% 11/01/2015 96,190 83,801

853 TransForce Inc. 13,059 3,523 USD 609,000 United Rentals North America Inc. 6.5% 02/15/2012 681,006 585,413

USD 794,222 US Oncology Holdings Inc. 8.33438% 03/15/2012 849,683 608,836

3,900 WW Grainger Inc. 317,157 373,282

13,320,777 9,986,050

Consumer Staples (6.9%) 11,800 Alimentation Couche-Tard Inc., Class B 266,709 165,554

USD 226,000 Alliance One International Inc. 11% 05/15/2012 235,643 228,247

6,576 British American Tobacco PLC 227,734 209,598

USD 48,000 Constellation Brands Inc. 7.25% 05/15/2017 49,136 55,194

USD 217,000 Constellation Brands Inc. 8.125% 01/15/2012 214,792 249,522

USD 82,000 Constellation Brands Inc., Senior Notes 7.25% 09/01/2016 84,011 94,290 21,771 CVS Corp. 755,895 761,083

20,521 Diageo PLC 392,978 347,986

7,878 Fomento Economico Mexicano SA de CV, ADR 243,939 288,440

4,327 Groupe Danone 399,438 317,582

17,300 Nestle SA, Registered Shares 686,863 820,410

10,632 Phillip Morris International Inc. 544,157 562,888 9,776 Procter & Gamble Co. 702,261 735,136

16,996 Saputo Inc. 364,113 374,932

10,497 Shoppers Drug Mart Corp. 475,994 504,171






Consumer Staples (6.9%) cont’dUSD 427,000 The Mosaic Co. 7.375% 12/01/2014 499,880 426,049

18,100 Unilever NV 572,315 533,475

920,000 Viterra Inc. 8% 04/08/2013 920,000 953,092

641,000 Viterra Inc. 8.5% 08/01/2017 640,470 660,512

37,000 Wal-Mart de Mexico SA de CV 129,054 119,762

8,405,382 8,407,923

Consumer Discretionary (6.0%) USD 115,125 Allison Transmission Inc. 11% 11/01/2015 115,320 68,641

USD 482,000 Baker & Taylor Inc. 11.5% 07/01/2013 573,966 247,061

USD 70,000 CanWest MediaWorks Inc. 8% 09/15/2012 78,013 37,477

USD 708,000 Charter Communications Holdings LLC 8% 04/30/2012 673,859 706,423

USD 99,000 CSC Holdings Inc. 8.125% 08/15/2009 97,313 119,861 USD 50,000 DIRECTV Group Inc. 7.625% 05/15/2016 50,342 59,015

USD 341,000 Dollarama Group LP 8.875% 08/15/2012 380,154 311,196

USD 292,000 Dollarama Group LP FRN 8.0725% 08/15/2012 334,552 225,618

USD 332,000 Foot Locker Inc. 8.5% 01/15/2022 376,407 307,022

20,200 Gildan Activewear Inc. 637,267 286,234

USD 576,000 Great Canadian Gaming Corp. 7.25% 02/15/2015 658,397 476,595 USD 340,000 H&E Equipment Services Inc. 8.375% 07/15/2016 422,981 219,267

USD 458,000 Host Hotels & Resorts Inc. 2.625% 04/15/2027 441,643 360,151

97,400 Li & Fung Ltd. 332,562 203,074

USD 674,000 MGM Mirage Inc. 5.875% 02/27/2014 616,676 524,877

USD 255,000 MGM Mirage Inc. 7.5% 06/01/2016 281,075 196,642

USD 359,000 MGM Mirage Inc. 8.5% 09/15/2010 434,821 366,937 USD 336,000 Mohegan Tribal Gaming Authority 6.125% 02/15/2013 304,994 257,572

USD 587,000 Neiman Marcus Group Inc. 10.375% 10/15/2015 687,583 307,132

12,400 Rogers Communications Inc., Class B 263,991 453,592

16,669 RONA Inc. 351,894 199,861

USD 84,000 Scientific Games Corp. 6.25% 12/15/2012 79,655 82,280

USD 240,000 Scientific Games Corp. 7.875% 06/15/2016 243,052 235,085 679,000 Shaw Communications Inc. 7.5% 11/20/2013 720,525 695,853

7,400 Universo Online SA 66,851 28,089

USD 400,000 Wynn Las Vegas LLC 6.625% 12/01/2014 371,579 367,473

9,595,472 7,343,028

Telecommunication Services (5.6%) 20,700 AT&T Inc. 578,312 717,849

25,500 BCE Inc. 923,910 638,775

11,800 Bell Aliant Regional Communications Income Fund 320,399 276,946

USD 875,000 Intelsat Bermuda Ltd. 11.25% 06/15/2016 1,096,005 968,874

25,164 Manitoba Telecom Services Inc. 1,019,296 892,567

USD 195,000 MetroPCS Wireless Inc. 9.25% 11/01/2014 216,653 212,361 USD 490,000 Qwest Capital Funding Inc. 7.25% 02/15/2011 494,460 500,834






Telecommunication Services (5.6%) cont’d1,120,000 Rogers Wireless Inc. 7.625% 12/15/2011 1,127,500 1,163,893

USD 68,000 Rogers Wireless Inc. 8% 12/15/2012 80,468 79,226

39,100 TELUS Corp., Non-Voting Shares 1,567,740 1,348,950

7,424,743 6,800,275

Information Technology (4.3%) USD 102,000 Agilent Technologies Inc. 6.5% 11/01/2017 98,432 85,315 USD 517,000 CEVA Group PLC 10% 09/01/2014 529,877 466,308

28,700 Cisco Systems Inc. 885,976 568,531

USD 316,000 First Data Corp. 9.875% 09/24/2015 290,796 232,627

USD 459,000 Hughes Network Systems LLC 9.5% 04/15/2014 520,046 453,789

41,062 Intel Corp. 882,276 732,973

8,000 MEMC Electronic Materials Inc. 427,238 138,812 28,700 Nokia OYJ, Class A, ADR 775,935 544,784

USD 497,000 Nortel Networks Corp. 10.75% 07/15/2016 487,614 160,258

6,800 Research In Motion Ltd. (USD) 483,901 335,520

24,200 Tandberg ASA 486,902 318,320

46,400 Thomson Reuters PLC 1,302,543 1,239,981

7,171,536 5,277,218

Utilities (2.9%) USD 820,094 AES Corp. 8.75% 05/15/2013 852,776 957,972

54,700 Canadian Hydro Developers Inc. 295,987 162,459

7,482 Constellation Energy Group Inc. 662,638 228,330

8,600 FPL Group Inc. 584,212 526,676 USD 672,000 Intergen NV 9% 06/30/2017 727,267 670,504

8,400 Northland Power Income Fund 119,693 96,852

4,400 Sempra Energy 300,455 228,076

27,600 TransAlta Corp. 945,539 670,680

4,488,567 3,541,549

Health Care (2.7%) USD 225,000 Axcan Intermediate Holdings Inc. 9.25% 03/01/2015 221,481 229,975

USD 585,000 Biomet Inc. 10% 10/15/2017 586,504 683,353

USD 194,000 Boston Scientific Corp. 6.25% 11/15/2015 180,139 193,568

USD 531,000 Boston Scientific Corp., Senior Notes 6.4% 06/15/2016 503,385 552,432

6,100 CML Healthcare Income Fund 72,557 78,324 USD 102,000 HCA Inc. 9.125% 11/15/2014 100,056 114,805

54,700 Patheon Inc. 516,336 120,887

USD 750,000 Province Healthcare Co. 7.5% 06/01/2013 1,109,241 877,006

USD 246,683 Skilled Healthcare Group Inc. 11% 01/15/2014 303,582 282,153

USD 270,000 United Surgical Partners International Inc. 8.875% 05/01/2017 285,768 225,047

3,879,049 3,357,550






Private Placements (2.6%) USD 761,460 Aramark Ltd., Term Loan, Private Placement 7.47% 01/27/2014^ 900,454 759,764

641,875 Bragg Loan, Private Placement 7.53% 08/31/2014^ 641,875 542,384

USD 200,000 CCS Inc., Private Placement 11% 11/15/2015^ 181,528 138,715

USD 1,027,000 Clarketerm, Private Placement 7.84% 06/30/2014^ 1,172,120 624,825

USD 621,000 Dow Jones CDX HY , Private Placement 6.75% 06/29/2012^ 656,534 688,568

USD 230,546 Great Canadian Gaming Corp., Private Placement 4.30375% 02/12/2014^ 245,077 206,889

USD 249,635 HealthSouth Corp., Private Placement 8.15% 03/10/2013^ 323,631 233,891 4,121,219 3,195,036

Government Bonds (1.1%) 1,265,000 Canadian Government Bond 6% 06/01/2011 1,379,925 1,408,236

Warrants (0.1%) 10,500 Hosted Data Transaction Solutions Inc., Purchase Warrants (03Aug09) - 1,967

Commissions and other Portfolio Transaction Costs (72,312)

Total Bonds & Equities (82.7%) 126,492,772 101,074,206

Short Term Notes (15.5%) 19,000,000 19,000,000

DERIVATIVE INSTRUMENTS

Foreign Currency Forward Contracts (1.4%)(see Schedule A) 1,738,870

Total Investments (99.6%) 145,492,772 121,813,076

Other Assets (net) (0.4%) 698,684

Total Net Assets (100.0%) 122,511,760

Currency CodesAUD – Australian Dollar

USD – U.S. Dollar




^Denotes illiquid securities.Percentages shown in brackets relate investments at fair value to total net assets of the Trust.The accompanying notes are an integral part of these financial statements.


Schedule AForeign Currency Forward Contracts (1.4%)

Contracts Pay Receive Due Date Credit Rating Fair Value ($)1 (1,229,000) Australian $ 986,703 Canadian $ 16-Apr-09 A-1 (66,866)

1 (1,354,000) British Pound 2,697,371 Canadian $ 16-Apr-09 A-1 299,012

4 (456,807) Canadian $ 246,000 British Pound 16-Apr-09 A-1 (21,064)

1 (1,528,000) Euro 2,355,579 Canadian $ 16-Jan-09 A-1 (240,006)

2 (6,750,000) US $ 8,624,450 Canadian $ 16-Jan-09 A-1+ 409,955 2 (13,410,000) US $ 16,889,078 Canadian $ 16-Jan-09 A-1 569,615

2 (7,620,000) US $ 9,706,038 Canadian $ 16-Jan-09 A-1+ 432,786

1 (5,000,000) US $ 6,440,250 Canadian $ 16-Jan-09 A-1 355,439

Total Foreign Currency Forward Contracts Value 1,738,870





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 Short term investmentsDaily variation margin on derivative investmentsUnrealized gain on derivative investmentsPremium paid for option contractsReceivable for securities soldManagement fee rebate receivableDividends and accrued interest receivable

LIABILITIESPayable for unit redemptionsService fees payableDistributions payableManagement fees payableAccrued expenses Premium received from options contractPayable for securities purchased

Net assets and unitholders’ equity

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

*Investments at cost

Net assets per unit (Note 2 and Note 10)

Number of units outstanding (Note 3)

As at December 31, As at December 31,2008 2007

101,074 166,850676 835

19,000 9,380– –

1,739 8– –

141 64– –

1,237 1,334123,867 178,471

– 49132 196965 9,405124 17528 58

– 9106 145

1,355 10,037

122,512 168,434

145,314 159,717652 –

(23,454) 8,717122,512 168,434

126,493 167,130

7.41 9.82

16,542,328 17,146,595




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

INVESTMENT INCOMEDividendsInterest Derivative income (loss)Management fee rebateLess: Foreign withholding taxes

EXPENSES Management fees (Note 4)Administrative expenses (Note 4)Commitment fees Interest expenseDividend expense on securities sold shortService fees (Note 4)LegalAuditGoods and services tax

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

Increase (decrease) in net assets from operations per unit

STATEMENTS OF RETAINED EARNINGS (DEFICIT)Retained earnings (deficit), beginning of yearSection 3855 transitional adjustmentAdjusted Retained earnings (deficit), beginning of the year

(Excess) deficiency on amounts paid on units redeemedIncrease (decrease) in net assets from operationsDistribution from net incomeDistribution from realized gainsRetained earnings (deficit), end of year

For the years ended December 312008 2007

2,351 2,4615,812 5,918

72 5– –

(182) (116)8,053 8,268

1,675 2,119263 266

– 524 221 –

609 77117 5091 71

133 1962,793 3,547

5,260 4,721

(10,372) 18,289(280) (197)(259) (360)

(23,447) (24,114)(34,358) (6,382)

(29,098) (1,661)

(1.73) (0.10)

8,717 31,809– (327)

8,717 31,482

– (736)(29,098) (1,661)(3,073) (2,509)

– (17,859)(23,454) 8,717



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 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

For the years ended December 31 2008 2007

5,260 4,721 155,218 159,524(135,276) (134,016)

(48) (11)25,154 30,218

(19,601) (21,561)(5,712) (7,922)

(25,313) (29,483)

(159) 735

835 100

676 835

Net assets, beginning of yearSection 3855 transitional adjustmentAdjusted net assets, beginning of the year

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

DISTRIBUTIONS TO UNITHOLDERSFrom 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)

For the years ended December 31 2008 2007

168,434 198,222– (327)

168,434 197,895

649 714 (6,315) (7,136)

652 (736) (5,014) (7,158)

(3,073) (2,509)– (17,859)

(8,737) (274)(11,810) (20,642)

(29,098) (1,661)

122,512 168,434





SKYLON GROWTH & INCOME TRUSTTrust Specific Financial Instruments Risks (Note 14)

Other Price Risk

The Trust is exposed to other price risk as most of its holdings are sensitive to changes in general economic conditions across the world. The Trust’s

portfolio consists of international stocks and fixed income securities, thus an overall downturn in economic conditions across the world may lead

to a widening in credit spreads and a decrease in equity prices which may then lead to a decrease in the value of the Trust's holdings.

As at December 31, 2008, had the global markets increased or decreased by 10%, with all other variables held constant, net assets would have

increased or decreased, respectively, by approximately $6,136,000. In practice, the actual trading results may differ from this sensitivity analysis

and the difference may be material.

Interest Rate Risk

ASSETSFinancial assets held for tradingLoans and receivablesDerivative assetsTotal Assets

LIABILITIESFinancial liabilities held for tradingFinancial liabilities at amortized costDerivative liabilitiesTotal Liabilities

*Total assets and liabilities presented in table above are not intended to match total assets and liabilities disclosed in Statements of Net Assets, due to differences inpresentation of derivative instruments held at the end of the reporting period, if applicable.

As at December 31, 2008, had the prevailing interest rates increased or decreased by 0.25%, assuming a parallel shift in the yield curve, with

all other variables held constant, net assets would have decreased or increased, respectively, by approximately $548,000. In practice, the actual

results may differ from this sensitivity analysis and the difference may be material.

Less than 1 - 3 3 - 5 Greater Non-interest 1 Year Years Years than 5 Years bearing Total

(in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s) (in $000’s)

21,157 7,907 12,440 19,626 59,620 120,750 – – – – 1,378 1,378 – – – – 2,067 2,067

21,157 7,907 12,440 19,626 63,065 124,195

– – – – – –– – – – (1,355) (1,355)– – – – (328) (328)– – – – (1,683) (1,683)

The Trust’s assets are mainly invested in bonds that mature in one or more years. Generally, debt securities will increase in value when interest

rates decline and decrease in value when interest rates rise. How sensitive the Trust is to changes in prevailing interest rates depends also on other

factors like the credit rating of the issuers and the term to maturity of the Trust's investments. The higher the credit rating of the issuers and the

longer the term to maturity, the more sensitive the Trust is to changes in prevailing interest rates.

The table below summarizes the Trust’s exposure to interest rate risk. It includes the Trust’s assets and liabilities at fair values, categorized by thecontractual maturity date.

as at December 31, 2008*

Credit Risk

The Trust is exposed to credit risk as it invests in fixed income securities that may bear a below investment grade rating.

The Trust was invested in debt securities and derivative instruments if any, with the following credit ratings, as per table below.

as at December 31, 2008*



SKYLON GROWTH & INCOME TRUSTTrust Specific Financial Instruments Risks (Note 14)

Currency Risk

CURRENCY

US Dollar 11,403 9.3 Australian Dollar 1,066 0.9 British Pound 887 0.7 Swiss Franc 820 0.7 Israeli Shekel 319 0.3 Norwegian Krone 318 0.3 Japanese Yen 311 0.3 Hong Kong Dollar 203 0.2 Mexican Peso 120 0.1 Euro 74 0.1 Brazilian Real 28 0.1 Total 15,549 13.0

As at December 31, 2008, had the Canadian dollar strengthened or weakened by 10% in relation to all other foreign currencies held in the Tr u s t ,

with all other variables held constant, net assets would have decreased or increased, respectively, by approximately $1,593,000. In practice, the actual

trading results may differ from the sensitivity analysis and the difference can be material.

Total Net Assets(in $000’s) (%)

The Trust is exposed to currency risk as its investments are denominated in currencies other than Canadian dollars, the functional currency of the

Trust. As a result, the Trust may be affected by fluctuations in the value of such currencies relative to the Canadian dollar.

The table below summarizes the Trust’s exposure to currency risk, net of derivative instruments.

as at December 31, 2008

DEBT SECURITIES AND DERIVATIVE INSTRUMENTS BY CREDIT RATING

AAA/Aaa/A++ 2.4AA/Aa/A+ 1.4A 0.3BBB/Baa/B++ 6.2BB/Ba/B+ 10.0B 8.3CCC/Caa/C++ 2.7Not Rated 19.9Total 51.2

*Credit ratings are obtained from Standard & Poor’s, otherwise ratings are obtained from: Moody’s Investors Service, Dominion Bond Rating Services and Canadian BondRating Services, respectively.

Net Assets(%)


1. THE TRUSTSkylon Growth & Income Trust (the “Trust”) is a closed-end investment trust established under the laws of the Province ofOntario pursuant to a Declaration of Trust dated as of January 30, 2004. On February 18, 2004, the Trust completed an initialpublic offering of 19,500,000 units at $10 per unit. The Trust is listed on The Toronto Stock Exchange, under the symbolSKG.UN. On March 3, 2004 an over-allotment option granted to agents was exercised for further issuance of 1,030,000 unitsat $10 per unit. The Trust is managed by CI Investments Inc. (the “Manager” and the “Trustee”). CI Investments Inc. is also theinvestment advisor (the “Investment Advisor”) to the Tr u s t .

The Trust will terminate operations on June 30, 2009 (the “Termination Date”), and the net assets will be distributed pro rata tounitholders unless an alternative later termination date is approved by the unitholders.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”).

(a) Adoption of New Accounting StandardsThe Canadian Institute of Chartered Accountants (“CICA”) issued Section 3862 “Financial Instruments – Disclosures” and Section3863 “Financial Instruments – Presentation” in place of Section 3861 “Financial Instruments – Disclosure and Presentation”.Section 3862 and 3863 became effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically January 1, 2008 for the Trust. These sections establish standards for disclosure of financialinstruments including the nature and extent of risks arising from financial instruments to which the Trust is exposed during thereporting period. The adoption of the new accounting standards has no impact on valuation policies, nor the way the Tr u s t ’s Net Assets are calculated.

Section 1535 “Capital Disclosures” establishes standards for disclosing information about an entity’s capital and how it ismanaged. This new standard became effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, specifically January 1, 2008 for the Trust. The adoption of this new accounting standard has noimpact on the Tr u s t ’s Net Assets.

(b) Valuation of InvestmentsInvestments are categorized as held for trading in accordance with Section 3855, “Financial Instruments – Recognition andMeasurement” and are recorded at their fair value for financial reporting purposes. Listed securities are valued based on the bid price for securities held long and the ask price for securities held short on the financial reporting date. Unlisted securities are valuedbased on price quotations from recognized investment dealers, or failing that, their fair value is determined by the Manager on thebasis of the latest reported information available. Fixed income securities, debentures, money market investments and other debtinstruments are valued at the bid quotation from recognized investment dealers.

The Canadian Securities Administrators (“CSA”) amended section 14.2 of National Instrument 81-106 on September 5, 2008. The amended section 14.2 requires the net asset value of an investment fund to be calculated using the fair value of the fund'sassets and liabilities. The adoption of Section 3855 results in a different valuation method for calculating daily net asset value.For the purpose of processing unitholder transactions, net asset value is calculated based on the closing market price (referred to as “Net Asset Value”), while for financial statement purposes net asset value is calculated based on bid/ask price (referred to as“Net A s s e t s ” ) .

In accordance with NI 81-106, a reconciliation between the Net Asset Value per unit and the Net Assets per unit is disclosed in Note 10.

(c) 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 Statement of Operations.

Notes to the Financial Statements


(d) Cost of InvestmentsCost of investments represents the amount paid for each security and is determined on an average cost basis excludingcommissions and transactions costs.

(e) Investment Transactions and Income RecognitionInvestment transactions are accounted for on the trade date for financial reporting purposes and any 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 Trust in the same form in which they were receivedfrom the underlying funds.

All income, dividends, net realized and unrealized gains (losses) are attributable to investments and derivatives which are deemedheld for trading.

(f) Foreign ExchangeForeign currency amounts are translated into Canadian dollars 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 andsettlements 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 Statement of Operations.

(g) Forward ContractsThe Fund may enter into forward contracts. Forward foreign currency contracts are valued using a bid price on the related publicexchange, on each valuation day according to the gain (loss) that would be realized if the contracts were closed out.

All gains (losses) arising from forward foreign currency contracts are recorded as part of “Change in unrealized appreciation(depreciation) of investments and derivatives” in the Statement of Operations and “Unrealized gain (loss) on derivativeinstruments” in the Statement of Net Assets until the contracts are closed out or expire, at which time the gains (losses) arerealized and reported as “Realized gain (loss) on investments” in the Statement of Operations.

(h) Increase (Decrease) in Net Assets from Operations per UnitIncrease (decrease) in net assets from operations per unit in the Statement 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.

(i) Private Placement LoansThe fair value of private placement loans are determined using indicative bid values obtained from third-party broker- d e a l e r s .The broker-dealers determine the fair value using valuation models that are based, in part, on assumptions that are not supportedby observable market inputs. The indicative bid values are independently assessed internally to ensure that they are reasonable.The fair values of private placements are affected by the perceived credit risk of the issuers, predictability of cash flows and thelength of time to maturity.

(j) Cash and Short-Term InvestmentsCash is comprised of cash on deposit. Short-term investments are comprised of short-term debt instruments with terms to maturity of less than one year at acquisition.

Notes to the Financial Statements (cont’d)


(k) 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 forbusiness by dividing the total net asset value of the Trust by outstanding units.

(l) 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 ineach taxation year under Part I of the Act on the amount of its income for the year, including net realized taxable 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 the Trust. The Trust intends todistribute all of its net income and net realized capital gains so that the Trust will not generally be liable for income tax thereon.

(m) Use of EstimatesThe preparation of financial statements in accordance with Canadian Generally Accepted Accounting Principles requiresmanagement 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 Statement of Changes inNet Assets. In accordance with the objectives and risk management polices outlined in Note 14, the Trust endeavor to investsubscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions through utilizing ashort-term borrowing facility or disposal of investments when necessary.

The Trust is authorized to issue an unlimited number of redeemable, transferable units of one class, each of which represents anequal, undivided interest in the net assets of the Trust. Commencing April 30, 2008 unitholders are entitled to redeem their unitsoutstanding monthly (“Monthly Redemption”). Monthly redemption price per unit is equal to the lesser of: (a) 94% of the 10 dayaverage trading price on the applicable monthly valuation date; and (b) the “closing market price” per unit on the applicablemonthly valuation date.

The Trust endeavours to provide unitholders with monthly distributions which were initially targeted to total $0.70 per unit perannum representing a yield of 7.0% based on the $10.00 per unit issue price. Distributions commenced on March 31, 2004, and are expected to continue until termination of the Tr u s t .

For the years ended December 31, net capital transactions of Skylon Growth & Income Trust consisted of the following:

Unit Transactions 2008 2007

Balance, beginning of year 17,146,595 17,842,136Units issued for cash – –

Units issued on reinvested distributions 73,733 68,759

Units redeemed – –

Units purchased for cancellation (Note 5) (678,000) (764,300)

Balance, end of year 16,542,328 17,146,595

The Trust filed a notice of intention to make a normal course issuer bid on June 20, 2006. The issuer bid commenced on June 20, 2007 and will terminate on the earliest of the date on which the maximum number of units have been purchased, the date the Trust provides notice of termination, or June 19, 2008. At December 31, 2008, no units were purchased under thecurrent normal course issuer bid.



4. FEES AND OTHER EXPENSES(a) Management FeesThe Trust pays to the Manager an annual fee equal to 1.10% of the net asset value of the Trust calculated and payablemonthly plus any applicable taxes and an amount equal to the service fees payable by the Manager to registered dealers.

(b) Administrative ExpensesThe Trust is also responsible for all of its expenses incurred in connection with its operations and administration, includingtrustee fees, audit and legal fees, transfer agency, custody and accounting fees.

(c) Service FeesThe Manager will pay to registered dealers of the Trust an annual service fee of 0.40% of the net asset value for units held by clients of the sales representatives of the registered dealers, calculated and payable quarterly in arrears.

5. MARKET REPURCHASE PROGRAMIn accordance with the Tr u s t ’s prospectus, and to enhance liquidity and to provide support to the units, the Trust has a mandatorymarket purchase program under which the Trust, subject to exceptions contained in the Trust Agreement and in compliance withany regulatory requirements, is obligated to purchase its own units for cancellation. If, on any business day, the closing marketprice of the Tr u s t ’s 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 thefollowing 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, 2008 the Trust purc h a s e d678,000 units for cancellation at a cost of $5,668,000 (764,300 units at a cost of $7,872,000 for 2007).

6. REINVESTMENT OF DISTRIBUTIONSThe Trust has adopted a Distribution Reinvestment Plan (“DRIP”) therefore at the election of each unitholder distributions areautomatically reinvested in additional units of the Trust, without charge, at a price equal to the average trading price of the Unitson the TSX for the five trading days immediately preceding the relevant Distribution Date. The Manager may terminate the DRIPin its sole discretion, upon not less than thirty days’ written notice to the DRIP participants.

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

(in $000’s) 2008 2007

Brokerage CommissionsSkylon Growth & Income Trust 253 220

Soft Dollar Commissions†

Skylon Growth & Income Trust 23 20

†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.

8. 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 bythe borrower on the securities borrowed; (ii) the securities loan must qualify as “securities lending arrangements” for thepurposes of the Tax Act; and (iii) the securities loan must be fully collateralized. The minimum level of collateralization will be 102%. As at December 31, 2008 and 2007 the Trust was not engaged in securities lending.



9. INCOME TAX LOSSES CARRIED FORWARDNet capital losses may be carried forward indefinitely to reduce future net realized capital gains. Non-capital losses arising intaxation years up to 2003 may be carried forward seven years. Non-capital losses arising in taxation years 2004 and 2005 maybe carried forward ten years. Non-capital losses arising in taxation years after 2005 may be carried forward twenty years.

Loss carry forwards (in $000’s)2008

Net capital loss carried forward 8,638

Year of expiry 2009 2010 2014 2015 2026 2027 2028 TotalNon-capital loss carried forward – – – – – – – –

10. NET ASSETS RECONCILIATIONIn accordance with NI 81-106, a reconciliation of net assets per unit and net asset value per unit, as at December 31, 2008and 2007, is as follows:

2008 2007Net assets per unit 7 . 4 1 9 . 8 2

Section 3855 adjustment per unit 0.01 0 . 0 1

Net asset value per unit 7 . 4 2 9 . 8 3

11. RELATED PARTY TRANSACTIONSOn October 6, 2008 Sun Life Financial Inc. sold its significant interest in CI Financial Corp. (formerly CI Financial Income Fund)to The Bank of Nova Scotia. As CI Financial Corp. is the parent company of the Manager, The Bank of Nova Scotia therefore isconsidered a related party to the Trust. The Bank of Nova Scotia did not hold investments in the Trust as at December 31, 2008.

Blackmont Capital Inc. is a subsidiary of CI Financial Corp. As CI Financial Corp., is the parent company of the Manager of theTrust, Blackmont Capital Inc. is thus considered a related party to the Tr u s t .

The Trust paid the following brokerage commissions to Blackmont Capital Inc., an affiliated company of CI Investments Inc.during the years ended December 31, 2008 and 2007:

2008 2007Skylon Growth & Income Tr u s t 2 –

12. FUTURE ACCOUNTING STANDARDSOn February 13, 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the use of International Financial Reporting Standards (“IFRS”) will be required in 2011 for all publicly accountable profit-oriented enterprises. IFRS will replace Canadian Generally Accepted Accounting Principles (“GAAP”). IFRS becomes effective for interim andannual financial statements relating to fiscal years beginning on or after January 1, 2011.

At December 31, 2008, the Manager is taking the following steps to transition to IFRS: • Identification of areas where changes in disclosure will be required under IFRS standards.• Identification of operational areas impacted by the adoption of IFRS.• Assessment of current reporting systems and their readiness for IFRS implementation.• Implementation of an IFRS transition plan.



13. FINANCIAL INSTRUMENTS The categorization of financial instruments in accordance with CICA 3855, Financial Instruments – Recognition and Measurement( “ C I C A 3855”) are as follows: financial assets and financial liabilities held for trading are stated at fair value. Due from brokers,interest and dividends receivable, subscriptions receivable and other receivables are designated as loans and receivables and shownas other assets. They are recorded at cost and amortized cost which approximates their fair value due to their short term nature.S i m i l a r l y, redemptions payable, due to brokers, accrued management fees, accrued expenses and other payables are designated asfinancial liabilities and are carried at their amortized cost which approximates their fair value, due to their short term nature.

14. 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 depends on the investment objective and the typeof investments held by the Trust. The value of the investments within the portfolio can fluctuate daily as a result of changes inprevailing interest rates, economic and market conditions and company specific news related to investments held by the Trust. TheManager of the Trust may minimize potential adverse effects of these risks on the Tr u s t ’s performance by, but not limited to, regularmonitoring of the Tr u s t ’s 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.

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

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 thanthose 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 financialinstruments 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 otherprice risk.

Interest Rate RiskInterest rate risk is the risk that the fair value of interest-bearing investments will fluctuate due to changes in prevailing levels ofmarket interest rates. As a result, the value of the Trust will be affected by changes in applicable interest rates as it invests in debtsecurities and income trusts. If interest rates fall, the fair value of existing debt securities may increase due to the increase in yield.On the other hand, if interest rates rise, the yield of existing debt securities decrease which may then lead to a decrease in their fairvalue. The magnitude of the decline will generally be greater for long-term debt securities than short-term debt securities.

Interest rate risk also applies if the Trust invests in convertible securities. The fair value of these securities varies inverselywith interest rates, similar to other debt securities. However, since they may be converted into common shares, convertiblesecurities are generally less affected by interest rate fluctuations than other debt securities.

Currency RiskCurrency risk arises from financial instruments that are denominated in a currency other than 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 tochanges in exchange rates. The Statement of Investment Portfolio identifies all bonds and derivative instruments denominated inforeign currencies. Equities traded in foreign markets are also exposed to currency risk as the prices denominated in foreigncurrencies are converted to the Tr u s t ’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 fairvalue of debt instruments includes consideration of the credit worthiness of the debt issuer. Credit risk exposure for derivativeinstruments, if applicable, is based on the Tr u s t ’s unrealized gain (loss) of the contractual obligations with the counterparty as at thereporting date. The credit risk exposure of the Tr u s t ’s other assets is represented by their carrying amount as disclosed in theStatement of Net A s s e t s .

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 monthly cash redemptions of redeemable units. Therefore, the Trust invests the majority of its assetsin investments that are traded in active markets and can be readily disposed of. In addition, the Trust retains sufficient cashand cash equivalents positions to maintain liquidity. From time to time, the Trust may enter into derivative contracts or investin unlisted securities that may not trade in an organized market and may be illiquid. Illiquid securities are identified in theStatement of Investment Portfolio of the Trust.

15. SUBSEQUENT EVENTS A special meeting of Unitholders will be held on March 31 to seek unitholder approval to extend the Trust to June 30, 2019 and toadd an annual right of unitholders to redeem their units at the net asset value.



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

Custodian RBC Dexia Investor Services Trust77 King Street West, 10th FloorToronto, OntarioM5W 1P9

A u d i t o r sPricewaterhouseCoopers LLPSuite 3000, Box 82Royal Trust Tower, TD CentreToronto, OntarioM5K 1G8

Registrar & Transfer A g e n tComputershare Investor Services Inc.100 University Avenue8th FloorToronto, OntarioM5J 2Y1

L i s t e dThe Toronto Stock Exchange

Ticker SymbolSKG.UN

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

Trust Information

SKYGIT-AR-03/09

fs ar08 skylong&i skg

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