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• Overview
• Manager
• Performance
• Holdings
• Commentary

January 2012

Market Overview

• Global investors are glad to see the end of 2011. Most major markets declined, with Japan and many European indices suffering double-digit setbacks. The U.S. market bucked the trend and posted a modest gain.
• The Canadian dollar fell slightly against the U.S. dollar (-2%) and dropped 7% against the yen. It was largely unchanged against the euro and pound.

Portfolio Specifics (2011)

• 2011 was all about Europe. Negative sentiment in the region spilled into capital markets worldwide. The manager, Edinburgh Partners (EPL), feels that many stocks in the region are cheap and there is plenty of potential upside behind the political and debt clouds. European stocks (excluding the U.K.) comprise 21% of the portfolio. The focus is on companies with a global footprint which have growing revenues in the emerging markets.
  
• The fund’s poor performance was also due in part to its relatively light weighting in U.S. stocks, which fared well. American companies make up 20% of the portfolio, as compared to roughly half of the World market.
  
• Another big issue that impacted the portfolio was the setback in Japan. The post-earthquake recovery is happening, but is being hampered by the strength of the yen, which makes it difficult for companies to compete.
  
• Financial stocks were a burden on the fund, although they are not a large weighting in the portfolio. Banks had a challenging year as interest rates remain low and sovereign debt concerns overhang the financial markets.
  
• Positive performance came primarily from consumer-related and health care holdings. Unilever, Bridgestone, Sanofi, and GlaxoSmithKline were among the top performers. Intel and Shell were also key contributors.
  
• A number of positions were sold based on valuation (Yara, GE, Symantec, Kajima) or a deteriorating outlook (Mizuho, Bank of America, UBS). The manager also did some buying in Europe (including Unilever, Heineken, SAP) and Asia (Dongfeng Motor, Swire Pacific, DBS Group).

Notable Transactions (Fourth Quarter)

• Three Asian companies were purchased: Softbank (Japanese telecom), Swire Pacific (Hong-Kong conglomerate) and DBS Group (Singapore bank).
  
• Two stocks were sold: UBS (wrestling with restructuring its investment bank operations) and SK Telecom (acquisition of unrelated business).

Positioning

• The manager’s bias toward value-oriented stocks (low price-to-earnings multiples, high dividend yields) remains largely in place.
• As a result of the ongoing violence in share price moves, EPL is seeing opportunities in areas where they have not had significant investments and continue to increase exposure to the emerging markets.