Managing Risk Now: A Global Perspective Special Roadshow Roundtable by renaissancemag

The Renaissance QUARTERLY FUND PROFILES / PRACTICE MANAGEMENT / OUTLOOK / OPINION

Q2 – JUN. 30, 2013

Managing Risk Now: A Global Perspective Special Roadshow Roundtable ALSO INSIDE:

Create a Winning Advisor Website Experience Canada’s Top Film Festivals

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TO ENSURE FREEDOM,THEY TORE DOWN A PORTION OF THE WALL.

GREAT LEADERS PUSH HARDER TO COMPREHEND THE CHANGES THAT WILL IMPACT OUR WORLD. ECONOMIC

Every day you and your clients face new economic realities. When you partner with Renaissance, you can count on insights from Canada’s leading economic minds – economists like Benjamin Tal, described by the International Monetary Fund as one of Canada’s leading experts on the real estate market, and Avery Shenfeld, recently recognized as the top forecaster of the Canadian and U.S. economies*.

INSIGHT

You need economic insight formed from the belief that success doesn’t depend on keeping pace – it demands going further.

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1989 After 28 years, the Berlin Wall falls.

*In December 2012, Bloomberg named Avery Shenfeld top forecaster of the Canadian economy over the past two years. Avery Shenfeld and his colleague Andrew Grantham also won the MarketWatch award for the most accurate forecasts on U.S. economic data released in November 2012. ®Renaissance Investments is offered by and is a registered trademark of CIBC Asset Management Inc.

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In this issue

Tax and Estate Taxing Trusts and Estates

Economic Outlook History Shows That Bond Sell-offs Can Yield Equity Sweet Spots

Back of the Napkin Create a Winning Advisor Website

Managing Risk Now: A Global Perspective Solution Highlight Leverage the High-Yield Opportunity

Thanks to Our Supporters Making a Positive Difference

The Screeners: Top Canadian Film Festival Experiences

Brain Calisthenics

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PLUS CIBC Global Asset Management Market Outlook Perspectives

Letter from the National Sales Manager

Now is the Time to Articulate Your Value to Clients While the summer has come and gone, and hopefully given each of us an opportunity to recharge our batteries, the issue of fee transparency continues to be top of mind for the advisor community. Whether it be CSA and the separation of mutual fund fees, or the CRM initiative that requires fee transparency to our clients, the level of anxiety is clearly high. What will the statements look like? What will the client see? How will they react? How do I discuss these changes with my client? These are all fair questions and facts that must be addressed – some by the industry to advisors and some by advisors to clients. To some advisors, this may be a non-event. Fee-based advice clients will notice no difference, except perhaps in how the fee is communicated to them. Other clients who have had fully-disclosed fee discussions will not be surprised or deterred by the fees that are now being illustrated. Unfortunately, there will be those clients that don’t recall the discussions that they have had, or have never really seen it described in exact amounts, and those conversations may be more difficult. Many advisors are looking to their dealers or partners for speaking points and/or advice on how to conduct those discussions. Perhaps a better solution is to revisit the value proposition that each of you offer to your clients. If you cannot clearly articulate that to yourself, then it will be truly difficult to concisely convey to your clients who may be questioning their fees. Clearly, all of you add value to your clients, but how do you describe it to them – similarly to the way your fees are going to be soon articulated? Renaissance Investments has a couple of support materials that can help you with those discussions. Entitled “Justifying Your Fee”and “The Five Explicit Needs,” these pieces outline client concerns and the way that advisors can assist with those concerns. Both of these resources can help you with ultimately articulating your value proposition to your clients. I hope that these suggestions help you in strengthening your relationships and solidifying your clients in your practice. Be confident in your abilities and remember that the one time that you help your client stay invested in a time of panic, earns every bit of your fee for many years to come. Your client will thank you in the end. Please remember that we want to earn your business and become your most trusted business relationship. As always, I hope to hear your comments and concerns and welcome your feedback.

Sincerely,

Dave Wahl National Sales Manager Renaissance Investments 416-943-6959

Taxing Trusts and Estates Government proposals could lead to higher tax for clients

TAX AND ESTATE

In June 2013, the government formally launched a consultation paper that may lead to the elimination of the graduated tax rate system for testamentary trusts and estates. The proposed measures, if adopted, would come into play starting in 2016 and would effectively abolish a common estate-planning technique used by wealthy clients to reduce tax on the investment income earned from their assets, by their beneficiaries, for years after their death. A testamentary trust is a type of legal arrangement in which one person, typically known as the estate trustee, holds and manages the deceased’s property for the benefit of someone else, known as the beneficiary. A testamentary trust also includes an estate, which arises upon death and generally lasts until the executor distributes the assets to the beneficiaries who are inheriting under the will of the deceased.

“For tax purposes, both trusts and estates are considered to be individuals and must file returns...” For tax purposes, both trusts and estates are considered to be individuals and must file returns that require them to pay tax on any taxable income that is not paid to the trust’s beneficiaries. In 2013, testamentary trusts and estates pay tax at graduated tax rates starting at 15% federally for income under $43,561 and ultimately rising to 29% once income reaches about $135,000. Each province other than Alberta, which has a 10% flat provincial tax, also applies its own set of graduated tax rates to the testamentary trust’s income. The government specifically cited the use of multiple testamentary trusts, tax-motivated delays in completing the administration of estates, and avoidance of the Old Age Security clawback as offensive testamentary trust planning, which “raise questions of fairness, and negatively affect government tax revenues.” As a result, the government proposes to change the tax law to apply flat top-rate taxation to testamentary trusts created by will as well as to estates “after a reasonable period of administration” of 36 months.

For example, suppose your client has a will that leaves all funds to a spouse who pays tax at the highest marginal rate. While no tax will be payable at the time of your client’s death if assets are transferred on a rollover basis to a surviving spouse or qualifying testamentary trust, after your client’s death taxes will be payable on income earned from the inherited assets. If the spouse were to invest the inherited funds in a non-registered account that earned $100,000 of ordinary income, the spouse would pay tax of almost $50,000 (assuming the top marginal tax rate in Ontario for 2013). If instead your client’s will directed that the funds be put into a testamentary trust for the benefit of the spouse, the trust would pay about $30,000 of tax on $100,000 of ordinary income (assuming Ontario graduated tax rates for 2013). The testamentary trust could, therefore, yield tax savings of approximately $20,000 annually. If the measures proposed in the government’s consultation paper are implemented, the tax savings would be eliminated. The government is inviting written comments on the proposed changes until December 2, 2013.

Jamie Golombek is Managing Director, Tax and Estate Planning with CIBC Private Wealth Management. He works closely with advisors to help them provide integrated financial planning solutions for their high-net-worth clients. Jamie is frequently quoted in the media as an expert on taxation. Follow @JamieGolombek www.advisor.ca/togo Podcast > RRSP, 2013 Budget: TFSA or Mortgage? Not Much Good Tax News www.renaissanceinvestments.ca/en/jamie_golombek/

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History Shows That Bond Sell-offs Can Yield Equity Sweet Spots Co-authored by CIBC Economists Benjamin Tal and Peter Buchanan

ECONOMIC OUTLOOK

Rise in TSX Composite Index in Following Six Months 30

At the end of June, the U.S. Federal Reserve (the Fed) provided the market with additional insight on its plan to eventually taper the asset purchases in place to stimulate the labour market and the economy. What followed was an “end of the world” reaction by some investors and a sell-off in the bond market. However, what seems to have been largely ignored in all the commotion is the fact that the early stages of past retightening cycles / bond sell-offs have, more often than not, been sweet spots in the cycle for equities. Economic momentum at that stage of the cycle has traditionally been firm enough to support improvements in current and future earnings expectations. At the same time, rates have not been high enough to do the damage on both fronts that typically occurs, later in the cycle.

25 20 Median = 13.8% 15 10 5 0 Mar-87

Oct-93

Oct-98

Jun-03

Dec-08

Date of 10-Year Treasury Trough Source: Bloomberg, CIBC

Canadian Equity Markets Have Reacted Strongly in the Past The historical connection between Canadian equity market performance and U.S. bond sell-offs provides interesting viewing. In the vast majority of instances (about 80% of the time) the Toronto Stock Exchange (TSX) has actually gained ground appreciably in the six months after the trough in 10-year yields. The TSX’s median advance of 13.8% is treble the longer-term trend, and is significantly stronger than the S&P 500’s 8.7% gain, in that interlude. The only recent case in which Canadian stocks failed to advance measurably was in 1993-1994. The Bank of Canada’s harsh, “no captives” approach to wiping out inflation helped to make that instance something of an exception. In other cases, patience has brought rewards for the stock investor who is willing and able to sit tight, and bear some near-term valuation risk.

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Drilling down to look at the underlying drivers of index moves shows consensus estimates for forward earnings rose by about 6% in the half-year after the trough, in line with constructive economic developments and also broadly similar to the pattern for U.S. stocks. Somewhat surprisingly, the forward multiple, which is simply the inverse of the earnings yield, also increased by about 1-2 points on average, despite competition from higher bond yields. That presumably reflects investors’ greater tolerance for uncertainty, as the cycle turns. It also suggests that the decline in the risk premium typically offsets any pressure on stock valuations from rising bond yields, during the recovery’s early stages.

Sectors to Watch: Financials, Autos, Rails and Base Metals When it comes to weathering the ups and downs of rates and the business cycle, not all sectors are created equal. Investors will be interested to note

that certain market segments stand out as strong performers around these turning points historically. The TSX IT group was the best performer in the six-month period after the last four troughs in U.S. 10-year Treasury yields. However, the median return in that sector masks a high degree of variability. In one case, that sector posted a 90% increase, in another an 8.5% decline.

“Certain market segments stand out as strong performers around these turning points historically.”

Among other segments, auto-related stocks, capital goods, insurers and retailers all posted gains of 10% or more. Their lower variability may appeal to many investors. Auto parts producers should benefit from an expected 5-6% rise in U.S. light vehicle sales next year, this time around. The rails have been another strong performer, with a typical increase of nearly 12%. The materials group’s strength has been due principally to the base metals group. China’s troubles imply some risk in moving into that sector immediately, but our expectation that global growth will top 4% next year, and reasonable valuations, could see good buying opportunities emerge in a quarter or two.

“Despite some conventional wisdom, Canadian bank stocks have actually done well in the past around bond market turning points.”

Despite some conventional wisdom, Canadian bank stocks have actually done well in the past around bond market turning points. The impact of rates on the sector is complex, but one normal positive is the effect of an improving economy on loan demand. Not surprisingly, given the bearing of a high capital intensity on financing costs, utilities valuations have fared the worst historically, when bond yields start to rise. That sector has consistently underperformed the market after rate troughs. Defensive plays like food retailers and health issues have also ordinarily lagged, as have gold producers. That asset pays no interest while serious inflation pressures only typically arise much later in the cycle.

Use the Past to Help Navigate Volatility While equity market volatility may rise around yield troughs, the historical record and other considerations argue against a hasty tap on the sell button. Investors may also be able to draw conclusions about optimal sectoral positioning by examining past performance.

Benjamin Tal is Deputy Chief Economist for CIBC. Described as one of Canada’s leading experts on the real estate market by the International Monetary Fund, he is responsible for analyzing economic developments and their implications for North American fixed income, equity, foreign exchange and commodities markets. www.advisor.ca/togo Podcast > U.S. Economy in the Lead www.renaissanceinvestments.ca/en/economy/

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Create a Winning Advisor Website BACK OF THE NAPKIN

In recent years, the Internet has risen to become the most dominant force behind the marketing of products and services. As such, the world has changed for all those engaged in the business of building relationships, gathering assets, spreading a message, or simply trying to become more visible. At the same time, the modern-day investor is seeking ready access to useful information and simple solutions to complex problems. As technology continues to redefine how consumers approach their financial decisions, an advisor’s professional website will increasingly become an important filter in the search and selection process. For that reason, the advisor of today needs a website that will set them apart and provide each visitor with rich, compelling content.

Once you’ve completed this all-important exercise, and gained massive clarity around your personal brand, you can custom design your content, and drive your focused message directly to the heart of your intended audience. Develop a powerful, attention-grabbing value proposition that will leave your visitors intrigued and wanting more. Display your value proposition front and centre using a bold font, and then prepare to “prove” your propositional claim with the information to follow. Focus Only on the Investor:

Most advisors will openly acknowledge that their website needs improving, but many simply don’t know where to begin. Fortunately, there are several steps they can implement immediately, that will greatly enhance their Internet identity, while leveraging their basic website framework.

As advisors, we often make the mistake of focusing too much on ourselves. We include long paragraphs of biographical information – highlighting our credentials, years of experience, corporate history, investment platforms and departmental resources. In the meantime, a visitor simply wants to know what’s in it for them. Your home page should immediately begin to answer that implied question by articulating exactly how they will benefit by becoming your client.

Showcase Your Crystal Clear Advisory Brand:

For example:

The first step to developing a strong website presence is to carefully define your unique advisory identity. Avoid the temptation to appeal to everyone. Contemplate your primary target markets and clarify your niche opportunities. Your future top clients are looking for a selective advisor, not a jack-of-alltrades. Ask yourself the question: what is my unique advisory identity? What are my primary target markets? •The affluent investor •The business owner •The female executive

• The young professional • Accountants and dentists • Other

What are my core areas of specialization? • Estate planning • Retirement planning • Wealth preservation

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• Institutional-style investing • Holistic wealth management • Other

• How will their life improve? • What fears will you address? • How will they become more secure? • What expectations will you fulfill? • How will you get to know them? • Who else have you done this for? • What will their service experience look like? • How is your wealth approach different?

Showcase your deep understanding of the emotional needs of the investor. You will have plenty of time and space on your website to provide your credentials and to explain the logical “science” behind your approach…once they care enough to ask.

Go Heavy on Graphics and Light on Text: You and your website are competing for attention in the sensational and dynamic world of the Internet. Text-heavy web pages are simply unattractive and they consistently fail to draw and hold a viewer’s attention. In contrast, a strategic set of compelling visuals will keep your reader interested and will motivate them to navigate further. Post a graphical representation of your wealth management process – rather than describing it with text alone. Include slides, photos, tables, borders, frames and other visually stimulating elements. Ensure to include a photograph of yourself and your team members, so that your visitor can put a human face to the name and begin the process of getting to know you on a more personal level. Include User-Friendly Tools and Resources: The more interactive you can make your website, the greater the impact. Step into the shoes of your prospective client and get behind their searching eyes. Ask yourself what you would want to explore on an advisor’s website. What would you find interesting, educational, intriguing or even fun? Work with your marketing departments, and other external partners, to incorporate hands-on tools like net-worth calculators, budget spreadsheets, investor profiling questionnaires, retirement planners, and a comprehensive FAQ page. Consider adding a link to your favourite websites, your recommended reading list, or to an investment trivia game. Provide a way for your clients to submit referrals, ask questions, and share ideas.

you! I’m referring to the explosive phenomenon of social media. The compliance policies around social media for Canadian advisors are still fairly restrictive, so it might be some time before you’re able to fully capitalize on its potential within your business. But Those Compliance Rules Don’t Apply to Your Clients! A growing number of your clients and prospects are highly active on the social media scene, and they are more than happy to spread the word about you. But, in order for that to happen, you need to make it easy for them to do so, and to give them something to work with. If you don’t currently maintain a LinkedIn profile, a Facebook page, or a presence on Twitter, then you certainly need a top-notch website. As you openly share the address of your newly enhanced website, your satisfied clients and greatest advocates will find it easy to include your link within their personal message postings, tweets, and other social media transmissions. Remember, a single click of a button can reach hundreds or even thousands of users in the blink of an eye. Until fairly recently, we may have been somewhat justified in downplaying the importance of an advisor website, but those days are over. We are now operating in a world intimately connected to the Internet, social media, and online commerce…and the opportunities abound.

Offer your qualified visitors something for free – a monthly newsletter, a series of educational pieces, or a personal portfolio review. In other words, give them tangible reasons to connect with you and to provide you with their contact information. If you are in the enviable position of being able to install multimedia functionality on your website, take full advantage of the opportunity! Incorporate podcasts, audio files, videos, webinars and other animated illustrations. Solicit your clients for additional suggestions on how to improve your website. Once your project is complete, you will be able to direct your clients to your online resources, where they will find solutions to the most common questions and other administrative issues. Although some of these recommendations may seem overwhelming, they are routine functions for a trained web designer – a professional service well worth considering as a small investment in your business. Putting it All Together… The development of a high-quality website won’t generate a wild stampede of business to your door overnight, but it will give you a powerful tool to leverage in your proactive marketing efforts. There are countless ways to share your website with clients and prospects, but thanks to the latest technological paradigm shift, you can also count on others to do some of that sharing for

Grant Shorten is Director of Strategic Insights at Renaissance Investments. He offers insights and approaches that will work with your clients and have an immediate impact on your practice. www.advisor.ca/togo Podcast > Connect to prospects online www.renaissanceinvestments.ca/en/practicemanagement/

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MANAGING

RISK N W A

G L O B A L

P E R S P E C T I V E

Step into our think tank and learn how our experts are managing risk in todayâ&#x20AC;&#x2122;s challenging global market environment. 8 Renaissance Investments

Special Roadshow Roundtable The Renaissance Advisor Live & Interactive Roadshow is coming to a venue near you this fall – 22 centres across Canada in total! Before they hit the stage, we spoke to Renaissance portfolio managers from Canada and around the world to find out how they are looking to stabilize returns and manage risk in today’s challenging global market environment.

The Renaissance Experts

Michael Orndorff Vice-President, Portfolio Manager, American Century Investments, Kansas City, United States Renaissance U.S. Equity Growth Fund, Renaissance Global Focus Fund

Special Considerations for Canadian Investors PO: Canadian investors have to be more globally focused. Canada is a trading nation and our interest rates, commodities and stocks move on what’s happening not just inside our borders, but largely what’s going on outside our borders. While you may stay invested in mainly Canadian assets, you should have a view on how the developed and developing economies are going to impact our domestic economy. GD: For over 10 years Canadian equities, and the Canadian dollar, have been supported by the expansion of the Chinese economy and China’s insatiable demand for resources. With a sole focus on a “bottom-up” investment approach, Walter Scott makes no claim of particular economic foresight but there are many question marks over the strength of future demand. That is not to say that demand will evaporate but the rate of growth must necessarily slow at some stage. Another area that warrants close attention is the growth in shale gas and oil within the U.S. This growth and the expectations for future growth may have profound implications for many energy markets around the world including Canada. NL: With interest rates at historically low levels, investors seeking additional income and steady growth should consider broadening their portfolio outside Canada. This might include listed infrastructure as it offers global exposure but with less volatility than the broader global equities markets. It provides better capital protection in falling markets and a reasonable share of upside in rising markets. MO: The Canadian market is heavily tilted toward natural resources, which includes energy and materials companies. These stocks can be especially volatile during periods when the global supply/ demand outlook is changing. Consequently, we believe this makes diversification into non-energy and materials stocks all the more important. Owning U.S. equities offers access to an expanded universe of stocks with secular (company-specific) growth characteristics, as well as participation in a broader North American recovery.

Current Drivers of Investment Decisions SC: There are four key issues. First, interest rates and the direction they are headed – this will have a significant influence on investment portfolios and will likely necessitate asset allocation decisions for Canadian investors – especially those with income needs. Second, we continue to monitor the debt levels of the Canadian consumer and are mindful of the efforts by policy makers to slow the activity levels in the housing sector. While we do not believe that there should be any big negative consequences, we are watching those trends closely to ensure that there are no surprises. Third, we are monitoring employment growth trends in Canada as this is an important benchmark for growth sustainability for the Canadian economy. Finally, we are watching the emerging markets (more specifically China) for growth trends there as they continue to have an influence on the demand for products produced from Canada’s natural resource sector.

Stephen Carlin Vice President, Senior Portfolio Manager, Canadian Equities, CIBC Global Asset Management, Toronto, Canada Renaissance Diversified Income Fund, Renaissance Canadian Dividend Fund

Nick Langley Director, Senior Portfolio Manager, RARE Infrastructure, Sydney, Australia Renaissance Global Infrastructure Fund, Renaissance Optimal Income Portfolio

George Dent Investment Manager, Walter Scott & Partners, Edinburgh, Scotland Renaissance Global Growth Fund, Renaissance International Equity Fund

Patrick O’Toole Vice-President, Global Fixed Income, CIBC Global Asset Management, Toronto, Canada Renaissance Optimal Income Portfolio, Renaissance Canadian Bond Fund

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GD: Back in the depths of the global financial crisis it was noticeable, and to some extent unusual, that a large number of investment ideas came from the U.S. market. This did not reflect a particular view on the U.S. economy and instead reflected the fact that there are many fantastic companies in the U.S. Many of these the team had been monitoring for years but had always struggled to reconcile valuation and growth. As panic swept financial markets through the GFC, many of these companies saw very significant falls in their share prices despite the strength of their underlying businesses. This gave us an opportunity to buy in at historically low valuations. MO: Because we look for companies exhibiting fundamental improvement, this can occur within pockets of a specific industry, but it can also occur across multiple sectors. For example, our analysis has identified a number of companies benefiting from the U.S. housing recovery. These companies are actually spread across several different sectors: consumer discretionary, financials, materials and industrials. Exposure to U.S. housing looks attractive because we are fairly early in its growth cycle, and the cycles tend to last multiple years.

Dividends and Potential Rising Interest Rates SC: Our portfolios offer an above-average dividend yield versus the overall market; we are diversified across a variety of different industry sectors; and, the companies we have invested in have some growth prospects over the next few years, which we believe can offer some capital appreciation potential on top of the yield that they are providing. We focus on companies that generate good free cash flows and over time have the potential to increase the dividend payment to shareholders. We believe that this can offer an investor a more attractive total return potential in a rising interest rate scenario. MO: Rising rates are clearly on our radar as a potential risk factor. Our investments tied to the housing recovery are probably the most sensitive to rate fluctuation. Factors such as historically low mortgage rates and the pent-up demand for housing likely help offset a gradual rise in rates. We also own financial companies that would directly benefit from a higher rate environment. Our financial holdings are asset sensitive, and when rates rise, their earnings will increase. NL: RARE considers the interest rate exposure in terms of real rates plus inflation. The portions of the portfolio protected from real rates are generally the utilities. They are protected in that their return targets are â&#x20AC;&#x153;resetâ&#x20AC;? on regular bases (between four- and eight-year cycles for U.K., Australia and Brazil) or on an ad-hoc basis (for U.S. utilities).

Canadian Equities SC: We continue to see attractive opportunity in a variety of sectors that have either unique domestic growth prospects or are growing their business outside of Canada. Specifically, we continue to see attractive opportunity within the Canadian energy sector. Whether its building infrastructure, like pipelines, to transport Canadian oil and gas to other markets; extracting liquids out of

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the natural gas stream to improve the profitability for companies producing natural gas; and, looking a little farther out, the potential for LNG (liquefied natural gas) to export Canadian natural gas to higher growth and more profitable regions like Asia. There are many initiatives underway that will ultimately create opportunity for growth in this sector in Canada.

U.S. and Global Growth Outlook GD: Investing globally offers access to companies in a broad range of sectors such as consumer, health care and technology where there are in some cases tremendous corporate growth prospects. Companies positioned to benefit from secular tailwinds that offer a high degree of immunity to the ebb and flow of broader economic growth trends. For example, Google and the shift of advertising online; Novo Nordisk and the rise in obesity.

Video > Global Investment Update with Walter Scott & Partners. www.renaissanceinvestments.ca

MO: We believe there are several threats (to the U.S.) including weak economic conditions in China, a continued European recession and the potential for rising U.S. interest rates, particularly if rates experience a rapid, sustained increase. We believe that if U.S. companies worry about those threats and defer investments, it might become a self-fulfilling prophecy. However, if rising rates combined with continued economic recovery, this could certainly mitigate these threats.

Fixed Income in Portfolios PO: Bonds have always been, and will continue to be, the place where investors seek safety and income. While yields are unlikely to revisit the lows seen in 2012, the lack of any increase in short-term rates (for perhaps years in the U.S., and for the next year in Canada) act as an anchor on how high long-term yields can move. The market has changed, and we understand the angst that investors have about the potential for yields to rise, but recommend that investors focus on the reasons for holding fixed income: it is less volatile than stocks, pays steady income, diversifies portfolios, and is a hedge against the problems that still exist in many parts of the world.

Global Infrastructure NL: Although global listed infrastructure is now very much a mainstream asset class, the ability to access large infrastructure assets via the listed market is still a relatively new phenomenon. Generally speaking, the revenues of listed infrastructure companies tend to be resilient across economic cycles because consumers tend to use water, electricity and gas for heating, cooling and lighting, drive their cars on toll roads and use other essential infrastructure. In addition, the revenues of these companies are usually underpinned by regulation or long-term contracts, which limits their upside on one hand, but also limits their downside.

Within the listed infrastructure space, assets such as electricity, gas and water utilities tend to be the most defensive in tough economic times as they are not tied to the economic cycle and they generally offer strong dividend yields. User pays assets such as airports, seaport, rail and toll roads tend to be more linked to economic growth and offer superior returns in periods of economic recovery or high growth. By balancing the portfolio’s exposure to these two broad groups of assets, we are able to ensure that investors achieve a consistent return across all phases of the economic cycle.

ADVISOR ToGo Access to the experts when you need them

Listen to short podcasts from these experts and others

www.advisor.ca/togo

Michael Orndorff American Century Investments

Podcast > Travel Stocks are Going Places

Nick Langley RARE Infrastructure

Podcast > Actively Manage Infrastructure Investments

George Dent Walter Scott & Partners

Podcast > A Look at the Tech Sector

Patrick O’Toole CIBC Global Asset Management

Podcast > U.S. Can’t Depend on QE

Corporate and High-Yield Bonds PO: We pay close attention to the economic outlook and the impact it will have on corporate profitability and stability. We then look at the strength of each individual company before adding its bonds to our clients’ portfolios. It’s similar to the work done by equity analysts, with the focus on different metrics that focus on leverage, earnings stability, and the bond covenants specific to each bond issue. High-yield bonds offer a source of diversification to conventional, investmentgrade bond portfolios. They also generally outperform government and investment-grade corporate bonds in periods of rising interest rates, which usually occur as the economy improves. But you have to manage that risk by rigorous analysis of each company and by broad diversification of individual holdings. One of the advantages that we have in managing the risk of high-yield bonds is the analysis done by our in-house corporate bond credit research team. With oversight by our Credit Committee, the CGAM credit research team has helped to keep the rate of defaults to less than half the industry average over the past three years.

Best and Worst Investment Moves SC: When I look back, I think my best investment move is simply applying the wisdom I’ve learned from past mistakes. The experience you learn over the many years of investing in the North American marketplace is what I believe makes you a better overall investor. In terms of my worst investment move…I have to go back to the tech bubble years in the early 2000s. I hung on to Nortel for way too long…I learned from my mistake the hard way, I won’t do that again!

the company capturing share in the U.S. market. Continued growth was driven by replicating the business model in Europe and more recently in Asia. Less-than-desirable investment decisions typically result from an abrupt change in a company’s growth trajectory or a steady decline in fundamentals that we mistakenly view as temporary. In either situation, our issue results from misjudging the duration of the improvement. PO: The best move was increasing our weighting in corporate bonds after the credit crisis had peaked. Corporate spreads were still at very cheap levels versus government bonds and have added significant value to our clients’ portfolios these past few years. We think that continues as the recovery gains traction. The worst personal investing move I’ve made was buying a small-cap tech stock during that boom. Thankfully it was my smallest holding…and still is! I should have just bought Jennifer Law’s fund.

NL: Worst: stocks with poor corporate governance, particularly in times of economic disasters. Best: It’s nice to have other long-term investors support your decisions; we have had entities announce acquisitions of our stocks twice in the last five years. MO: Our best investments are those where we identify a change in company fundamentals, for example, accelerating revenue growth, and the improvement is sustained for multiple quarters. An example of this is our position in priceline.com, which we bought in May 2006. Our analysis revealed a company with strong growth drivers that were largely independent of the business cycle. The shift from travel agents to online travel booking drove an acceleration in the company’s revenues. The initial growth was driven by

Success demands going further.

Renaissance Advisor Live & Interactive Roadshow 2013 22 venues across Canada this fall

1969

Man reaches the moon.

Find out more and reserve your seat today: 1-888-888-FUND (3863) or renaissanceroadshow.ca

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Leverage the High-Yield Opportunity SOLUTION HIGHLIGHT

Equity-like Growth of $10,000 Investment $100,000

STEP 1 Choose equity-like growth with more downside protection with an allocation to high-yield bonds

$80,000

More Downside Protection during Global Financial Crisis1

U.S. Equity* Canadian Equity* High-Yield Bonds*

0% -6%

-10%

$60,000

-20%

$40,000

-30%

High-yield bonds offered better downside protection during the global financial crisis

-32% -40%

$20,000

-43%

-50% $0 06/88

06/93

06/98

06/03

U.S. Equity*

06/13

06/08

Canadian Equity*

High-Yield Bonds*

Source: Morningstar Direct as at June 30, 2013. For illustration purposes only.

STEP 2 Select from two strategic solutions

1 yr

2 yr

3 yr

5 yr

10 yr

Since Inception2

Pure Play Access: Renaissance High-Yield Bond Fund See page 60

7.4%

5.8%

6.5%

5.5%

5.0%

5.8%

Diversified Access: Renaissance Optimal Income Portfolio See page 66

5.3%

4.3%

6.9%

4.1%

n/a

3.7%

Performance as at June 30, 2013. Source: Morningstar Direct.3

STEP 3 Rely on the experts

• One of Canada’s largest asset management firms. • Highly-experienced Global Fixed Income group, including High-Yield Credit Committee for final decision in this specialized space. • Comprehensive, fundamental value process includes industry and bottom-up credit analysis for evaluation of each company. • Lead manager Nicholas Leach takes an active role in the high-yield portfolio strategy in terms of country, industry, company and rating allocations.

For more information on how to put these solutions to work for your clients, please speak to your Renaissance Investments representative.

*Canadian Equity = S&P/TSX Composite Index, U.S. Equity = S&P 500 Index (CAD) and High-Yield Bonds = Bank of America (BoA) Merrill Lynch U.S. High Yield Master II Index (CAD). 1 May 2008 – February 2009. 2 Renaissance High-Yield Bond Fund inception date September 23, 1994. Renaissance Optimal Income Portfolio inception date November 13, 2007. 3 Morningstar, for the period specified ending June 30, 2013 for Class A units of the Funds. ©2013 Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Renaissance Investments family of funds simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

12 Renaissance Investments

Making a Positive Difference THANKS TO OUR SUPPORTERS

Without the support of advisors like you, Renaissance Investments would not enjoy the privilege of helping so many Canadians realize their investment goals. Here is one of the outstanding professionals we are so very proud to work with.

Best tip for gaining new clients: First things first; take care of your clients and they will take care of you. One of the rewards of having a satisfied client base is the consistent stream of referrals they can provide you. Make sure to go the extra mile to make a positive difference in your clients’ lives. Your clients will appreciate this and you will be sure to be rewarded in the long run. It just makes good business sense. Favourite hobbies:

What do you love about the business? This business is dynamic. The ability to help people and make lasting relationships with others makes this profession like no other.

In the winter months I am a bit of a hockey nut. I love playing hockey here in my hometown of Oliver with other Oldtimers, and I love watching my Habs as they try to win a twenty-fifth Stanley Cup! In the summer I try to improve my golf game, and I always enjoy a good read.

What are you doing to combat low yields? One item I can’t be without: Today’s low-interest-rate environment poses a threat to people’s ability to generate the cash flow they require, especially during their retirement years. I rely on the Renaissance Optimal Income Portfolio to assure my clients receive the yield they need to meet their financial objectives. The diversification in this portfolio reduces volatility to a point where clients can feel comfortable.

My wife and kids. They always provide me with the inspiration and support in all that I do! They keep me going through thick and thin!

How do you tend to manage market volatility with clients? My clients are mostly retired individuals. As a result they have a relatively low-risk profile. Renaissance offers solutions that help meet my clients’ needs. Whether we choose the high-yield bond solution, Optimal Income Portfolio or the Global Infrastructure Fund, Renaissance offers solutions that meet my clients’ risk profile. Are there any asset classes or investment themes that are particularly attractive to you right now?

Luke Ellis Firm: First West Credit Union Location: Oliver, British Columbia Years in Business: 23

In today’s low-interest-rate environment, it can be a challenge to attain desirable returns. For my clients who can tolerate equity exposure I think U.S. and global equities offer excellent growth potential. These markets have been largely overlooked in favour of a Canadian bias for the past several years. It is time to consider equities outside of Canada to ensure clients maximize their portfolios’ returns.

Renaissance Investments 13

YOU’LL SEE THEM BY THE HUNDREDS

DON’T TRY AND AVOID THEM

ONCE YOU’RE IN THERE’S NO TURNING BACK

THEY’RE AFTER YOUR THOUGHTS

EVERY YEAR ACROSS CANADA, HUNDREDS OF UNIQUE FILM FESTIVALS UNITE AUDIENCES WITH INSPIRING FILMS AND THE FILMS’ CREATORS. WHATEVER YOUR TASTE - DOCUMENTARIES, SCI-FI OR ANIMATION, THERE’S A FILM FESTIVAL FOR YOU. READ ON TO FIND OUT MORE ABOUT CANADA’S TOP FILM FESTIVALS AND TIPS ON HOW TO MAKE YOUR EXPERIENCE AS ENJOYABLE AS POSSIBLE. COMING SOON...FOR YOU!

14 Renaissance Investments

Top Canadian film festival experiences

Not just about back-to-school and foliage, the fall is also prime film festival season. With over a decade of professional film festival experience, Eileen Arandiga, Director of Partnerships & Events at the Canadian Film Centre, shares her favourite festivals across Canada. Her advice for first-time festival goers, “Get a good night’s sleep before the festival, rest up, because if you really want to immerse yourself in a festival, you should be there early in the morning and not leave until late at night, so you can see as many films as possible.”

The Atlantic Film Festival (Halifax)

Cinéfest Sudbury International Film Festival

Ottawa International Animation Festival

The Victoria Film Festival

September 12-19, 2013

September 14-22, 2013

September 18-22, 2013

February 7-17, 2014

Based in Halifax, and screening over 150 films from across the world over an eight-day period in September, Arandiga likes this festival because of its great East Coast-friendly vibe with everyone wanting to have a great time. As an added bonus, this festival has grown to year-round exposure including a kids’ festival in April and summer outdoor screenings.

Celebrating its twenty-fifth year, Cinéfest “is one of the most fun film festivals you can go to,” says Arandiga. With about 140 films to pick from, fans of this festival often go to screenings all day until midnight. Held in September, Cinéfest goes the extra mile to connect the audience with the films’ creators via receptions and Q&As to give a real film festival experience.

As the largest event of its kind in North America, this September festival is not just for kids. Attracting attendees from around the world (about 30,000 in 2012), this festival features cutting-edge animation including work by Oscarwinning artists.

“It’s a very easy festival to navigate,” says Arandiga. This 10-day festival, held in February, has many events in the same place. “You get up in the morning, you pack your bags ull of snacks and bottles of water, and off you go to watch some great films.”

www.animationfestival.ca

www.victoriafilmfestival.com

www.atlanticfilm.com/festivals/ atlantic-film-festival

www.cinefest.com

Renaissance Investments 15

the big one TIFF (Toronto International Film Festival)

The imagineNATIVE Film + Media Arts Festival (Toronto)

Fantasia Film Festival (Montreal)

September 5-15, 2013

October 16-20, 2013

Mid-summer, 2014

Every September, more than 300 films from over 60 countries are screened at TIFF, recognized as the world’s most prolific film festival, after Cannes. Unlike Cannes though, TIFF is open to the public. TIFF’s screenings often have post-show Q&A sessions, giving you the chance to ask a question directly to a famous director, producer or movie star. The downside of a big festival like this is that tickets are mostly pricier than smaller festivals, and you may need binoculars to see the stars’ facial expressions as many popular screenings happen at large venues like Roy Thomson Hall. Plus, if you don’t want to stand in line for last minute seats for hours on end, you need to plan ahead. Book tickets for TIFF well in advance of the festival start date and pay attention to the key dates to give you a good shot at seeing your first picks.

Because of “the sheer exposure to programming that you really won’t find anywhere else,” this is Arandiga’s top pick. Held in October, this festival highlights indigenous films from around the world and offers other happenings such as digital media, radio, gallery installations and music. She feels this event epitomizes the film festival experience as it contextualizes the work, and connects the audience to the creators. This gives the audience a truly enriching experience, unlike watching a movie on TV.

Lauded by Oscar-winning film director Quentin Tarantino as “the most important genre film festival on this continent,” Fantasia is geared towards “people who might be interested in crazy, wacky content,” says Arandiga. Covering many nonPG genres including horror, fantasy and Hong Kong action, about half of the films are Asian at this popular mid-summer festival. www.fantasiafestival.com/2013/ en/pre-festival

www.imaginenative.org/home

www.tiff.net/thefestival

Film festival top tips Plan ahead. Most film festivals offer discounts for purchasing tickets and/or packages ahead of time. Do your research. With many film creators showcasing their latest film at many festivals, try to search online to find out the preliminary buzz on films you’re thinking of watching. Roll the dice. Utilize the film festival experience to its fullest by picking films that you may not be able to see anywhere else. This may be your chance to see the next big-time director. Bring the kids. Many film festivals have kid-friendly selections that may inspire the younger set, who may love hearing directly from the filmmakers themselves. Know thy neighbour. Don’t hesitate to chat with someone in line, or the stranger sitting beside you. Perhaps you will gain some great insight on films you are planning to view and discover the next festival ‘darling’. Exit early. If you’re not loving a film, don’t be afraid to get up and walk out. Go see a different unknown flick that’s about to start. Keep fed and watered. Many film festivals are more lenient than regular movie theatres when it comes to bringing in your own beverages and food.

16 Renaissance Investments

brain calisthenics Word scramble – Unscramble the following letters to spell words from the article on pages 8-11:

Sudoku – Complete the Sudoku puzzle so that each and every row, column and 3x3 box contains the numbers one through nine only once.

1. eevun 2. szeibltai

3. alloiviytt

2 9

4. hrcbnakme

2 8

5. srrcouee

7 8

6. oerevcyr

7. neisgrna 8. crysoiietandr 9. eeghd

5 7

6 2 9

10. erjyctotra

4 1

4 Source: 4puz.com

Spot the difference – Can you spot the five differences between the pictures below?

Check your answers at www.renaissanceinvestments.ca/magazine/answers/

Renaissance Investments 17

To learn more about how Renaissance Investments can help you and your clients,visit renaissanceinvestments.ca or call 1-888-888-FUND (3863).

FOR ADVISOR USE ONLY Renaissance Investments and the Axiom Portfolios are offered by CIBC Asset Management Inc. This material was prepared for investment professionals only and is not for public distribution. It is for informational purposes only and is not intended to convey investment, legal or tax advice. The material and/or its contents may not be reproduced or distributed without the express written consent of CIBC Asset Management Inc. 速 Axiom, Axiom Portfolios and Renaissance Investments are registered trademarks of CIBC Asset Management Inc.

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TO CREATE A MASTERPIECE, THEY MOVED A FEW STONES.

GREAT LEADERS KNOW BUILDING FOR THE FUTURE REQUIRES A STRONGER FOUNDATION. At Renaissance, we understand that building business takes time and dedication. We also believe that the boldest accomplishments begin one block at a time.

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Stonehenge is completed – over 1500 years after construction began.

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