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Investment Objective The objective of this fund is to provide long-term investment returns through capital appreciation (growth), without compromising its regard for the preservation of capital. Fund Details • Fund Inception: December 1, 1996
†This fund is no longer offered by way of prospectus and is only available for accredited investors or members of an employer-sponsored pension or savings plan. Canadian Equities Highstreet Asset Management - Quantitative Core Manager Highstreet uses a multi-factor quantitative model which must meet their specific criteria for Growth, Value, Quality & Risk (GVQ+ R(tm)) when considering buy and sell decisions. Uncertainty regarding the health of the world’s financial institutions and the negative implications for economic growth, led to a sharp sell off in the markets. The S&P/TSX composite was not immune, shedding 18.2% during the quarter, effectively erasing any of the gains captured during the last two years. The fallout led to a significant decline in the price of Energy commodities as investors expected curtailed demand. The sector accounted for almost half of the index’s decline. Led by Fertilizers and Golds, the Materials sector witnessed a reversal of fortunes from prior periods, also contributing significantly to the index’s slide. Surprisingly, Financials north of the border added a modest amount of positive return for the TSX benchmark. Overall the rationality of the market was tested, as those companies with weaker growth and valuation profiles outperformed. The portfolio benefited from not holding Cameco or Yamana and holding Royal Bank. Fertilizer stocks Agrium and Potash detracted the most relative value. The markets remain fixated on the unfolding global credit crisis and its implications. While the ultimate impact of these events on the real economy remains uncertain, we continue to focus on companies that exhibit strong relative earnings growth and attractive valuations. In addition, we pay close attention to risk and the revision of analyst estimates. These short-term measures will help to ensure the sustainability of the earnings profile for the portfolio in a market that is in transition. Heightened volatility and a market that is driven by events, underscore the need to stay the course with a consistent and disciplined approach to stock selection. Lincluden Management - Value Manager Lincluden, using a “value-buyer” approach, favours companies that its analysis shows to be undervalued. Identifying trends that will enhance future value is important. Equity markets around the globe were strongly negative as markets were faced with the prospects of a slowdown in global growth combined with continued uncertainty in the financial system. The first part of the quarter was marked by rapidly declining commodity prices as signs of slowing global demand took the steam out of what we had believed were speculatively high commodity prices in general. Energy and Material sectors declined in excess of 30% in the quarter. With the failure of Lehman Brothers in mid September an already precarious banking sector suffered another series of shocks culminating in the most significant financial institution failures in U.S. history. While Canadian banks appear sound many of the gains this sector had made earlier in the quarter were erased as fear sideswiped the price of virtually all Financial stocks. With this backdrop 9 out of 10 sectors of the broad market declined in the quarter with the Financial sector posting an anemic gain. Our portfolio was well positioned for the commodity decline managing a positive result through August. However the declines in late September were broad based involving all sectors and our portfolio suffered marked declines in the period. Over the quarter we initiated a new position in West Jet Airlines and increased our holdings of Barrick Gold, CanWest Global Communications and Bombardier. J. Zechner Associates - Top-Down Growth Manager Zechner’s expertise is the identification of economic and business trends and the weighting of industry sectors. Stocks selected must have good growth characteristics and be liquid. The S&P/TSX posted its worst quarterly drop since the Asian economic crisis and pre-LTCM bailout in Q3/98. The index fell by 18.2% in the third quarter. In terms of relative performance for the Canadian market, the cyclical sectors of the market took the largest hits in both September and the third quarter overall as worries about global economic growth and substantial redemptions by levered investment funds sent prices sharply lower. The index fell by 14.0% in September alone, even though that month included the two strongest single daily point gains in the index since its inception and the single strongest daily percentage gain ever. Copper tumbled to its worst quarterly decline on record while the overall commodities index overall fell back to 2005 levels. We definitely see the current panic in the stock market as a long-term buying opportunity, not only from the point of view of the value of stocks relative to bonds, but also due to the valuations we are seeing in the stock market compared to historical levels for these companies. Even assuming a very negative economic outlook, stocks already seem to be discounting this weakness and pricing it in. Oil stocks have trades down to 2005 levels, when oil prices were near $60 per barrel versus the current price of $90 while copper stocks have given back most of this cycle’s gains and are trading back to where they were when copper was under $1 per pound versus the current price of $2.50. Technology stocks as well are priced for a recession which has yet to occur; and most of these companies have ample cash and are therefore not at all impacted in their operations by the credit crisis. U.S. Equities NWQ Investment Management - Value Manager NWQ invests in undervalued companies with perceived catalysts to improve profitability and unlock value. The U.S. stock market declined significantly during the third quarter of 2008. Conditions in the credit markets deteriorated significantly and liquidity for many companies virtually evaporated. The strains became so severe that several of the largest financial companies in the U.S. collapsed or were acquired. These changes in the financial landscape are the most dramatic since the Great Depression and occurred in about four weeks. The Treasury and the U.S. Federal Reserve have taken unprecedented actions to try and stabilize the credit markets. In the midst of the current turmoil the Treasury proposed a $700 billion financial bailout program, which was recently approved by the U.S. Congress. This program could help stabilize the financial markets and improve badly needed liquidity. While this aggressive response should avert a collapse in the U.S. financial system, it will not keep the U.S. economy from falling into recession. While the weakness in the economy will create further challenges for the markets, easing inflationary pressures, and greater clarity regarding the election, regulation and fiscal policy could create a favourable environment for financial assets in 2009. The Fund’s exposure to financials, oil and natural-gas exploration and production companies, as well as gold stocks were the main contributors to the underperformance. The Fund benefited from its exposure to defence companies, healthcare, and a less-than-benchmark weighting in utilities. International Equities Newton Capital Management - Global Thematic Core Newton’s approach recognizes that no economy, industrial sector or company should be seen in isolation when there is a global market for goods and services. The third quarter has been a very challenging period for global equity markets, with the ramifications of Fannie Mae, Freddie Mac, Lehmans, AIG, Merrill Lynch and Wachovia being worked through and felt around the globe. Europe has also had its fair share of problems with the Benelux countries rescuing Fortis and Dexia, and the UK Government attempting to force HBOS into the arms of Lloyds TSB. In addition, the news has continued to deteriorate from an economic standpoint, and it is clear that the world economy is going through a very difficult period. The uncertainty created has lead to a sell-off across markets, and in particular an aggressive sell-off in perceived risk assets, namely commodities and developing economies. Stock selection has suffered across most sectors. In particular the broadly positive stance towards the commodity and developing economy areas has been a negative. We focused on those economies which we believe to be well placed, and is invested on a stock by stock basis. The same can be said for the resources sectors, where we retain an allocation to the energy, mining and agricultural sectors, where we continue to believe that the longer term fundamentals are strong. A further disappointment has come from holdings in the more defensive sectors of the market; stock selection has been negative in healthcare and consumer staples, two of the better performing sectors, where we are overweight. However, of particular disappointment has been the very poor returns from the telecom sector, which has thus far proved not to be resilient in the market sell off. We expect there to be a reversal in this sector performance, and the outperformance of consumer staples and healthcare to continue, and within that the returns from our stocks to improve. All performance is presented in Canadian dollar terms, gross of investment management fees. Past performance is not indicative of future results. |
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