Report Card Quarter Ending December 31, 2013 Date: <Date> Compliments of: Prepared for: <Advisor Name> <Client Name(s)> <Address> <City>, <Prov> <Postal Code> IPC Investment Corporation or IPC Securities Corporation <Street Address> <City>, <Prov>, <Postal Code> Phone: <Telephone Number> Email: <Email address> Website: www.ipcc.ca The Report Card provides a comprehensive review of past, current and potential factors that may impact your investments. Our goal is to continuously monitor your investments to help you meet your financial objectives. About This Report • Comments in Report Card refer to last three and 12 months. • Market discussions related to indices and do not analyze or reflect personal investments. • We review performance, risk management and overall effectiveness of each subadvisor and underlying fund manager. • Counsel investment solutions adopt a long-term approach to investing. Each portfolio solution diversified to reflect appropriate: – Asset mix – Geographic allocation – Investment style • Benchmarks for each Counsel investment solution can be found at end of presentation. Agenda 1. Market and economic overview 2. What our investment specialists say 3. Review of Counsel investment solutions 4. Benchmarks and Disclaimers 1. Market and Economic Overview Global Stock Markets: Index Movements • Quantitative easing (QE) continues to influence • Leaders: U.S. and Japan, United Kingdom and Germany – (QE’ing frenzy) • Mediocre: rest of Europe (sense of recovery) • Laggards: China, Brazil (no QE in place – makes commodities weaker; this impacts on commodity based countries like Canada and Australia) • Biggest risk is “recency bias” Performance is calculated using local currency. Data as at: December 31, 2013 Source: Morningstar Direct, Counsel Portfolio Services 1 Year A bi-polar world – those that QE and those that don’t Source: Morningstar • QE + low rates: helped equities (Risk ON) • Fears of reduction in QE: hurt Fixed Income (Risk OFF) 3 Months 12.00 10.00 8.00 6.00 4.00 2.00 0.00 October-13 S&P/TSX Composite TR November-13 S&P 500 TR CAD December-13 MSCI EAFE GR CAD DEX Universe Source: Morningstar • The fear of large tapering is off the table – equities breathed a large sigh of relief. • The concern is that much of the rise in the equity markets is based on low volumes and large margin debt. Canadian Dollar Performance CAD vs. U.S. Dollar CAD vs. Euro 1.04 0.8 1.02 0.78 0.76 1 0.74 0.98 0.72 0.96 0.7 0.94 0.68 0.92 0.66 0.9 0.64 Source: Bank of Canada • China slowing and the Iran/U.S. accord meant oil and geographic risks were lower – this impacted commodity based countries like Canada. • U.S. prospects seemingly looking better helped the U.S. dollar vs. Canadian dollar. • Stability in Europe (no more scares from the weaker nations) helped the euro vs. the Canadian dollar. • Bank of Canada governor has stated that a lower Canadian dollar will support exports – can expect Canadian dollar to go lower. 12/31/2013 11/30/2013 10/31/2013 9/30/2013 8/31/2013 7/31/2013 6/30/2013 5/31/2013 4/30/2013 3/31/2013 2/28/2013 1/31/2013 0.62 12/31/2012 12/31/2013 11/30/2013 10/31/2013 9/30/2013 8/31/2013 7/31/2013 6/30/2013 5/31/2013 4/30/2013 3/31/2013 2/28/2013 1/31/2013 12/31/2012 0.88 Canada: Equities Vs. Bonds Short-term: Equities vs. Bonds Long-term: Equities vs. Bonds 16.00 14.00 14.00 12.00 12.00 10.00 10.00 8.00 8.00 6.00 6.00 4.00 4.00 2.00 2.00 0.00 1 Month 3 Month 6 Month -2.00 DEX Universe S&P/TSX Composite TR 1 Year 0.00 3 Year 5 Year 10 Year DEX Universe S&P/TSX Composite TR 15 Year 20 Year Source: Globe and Mail • The fear of tapering hurt bonds – it’s the uncertainty of what might happen. • Yields in equities are greater than fixed income, hence the move to higher yielding equities. • Canadian equities also moved up with the momentum of U.S. equities. • Fixed income is not only a yielding component of a portfolio but is also an important diversification tool. There is almost always a place for fixed income. Canadian Market Overview Market Cap Investment Style S&P TSX 60 Total Return MSCI Canada Growth Index S&P TSX Completion Total Return MSCI Canada Value Index. S&P TSX Small Cap Total Return Source: Morningstar Direct Source: Morningstar Direct • Materials - Commodities, especially gold was hurt by the increasing U.S. Dollar. • Utilities were hurt because the yields are lower. • The rest of the market was strong, mainly on the back of buoyancy in the U.S. market. Year-on- Year-toYear date Energy 13.32 13.32 Materials -29.11 -29.11 Industrials 37.55 37.55 Consumer Discretionary 43.04 43.04 Consumer Staples 23.57 23.57 Healthcare 44.20 44.20 Financials 26.78 26.78 Info. Technology 36.12 36.12 Telecom Services 11.38 11.38 Utilities -4.44 -4.44 Market Sector Q4 2013 4.19 -1.98 16.28 7.96 4.08 9.29 10.69 8.78 5.97 3.06 U.S. Market Overview Investment Style Market Cap S&P 500 Total Return Russell 1000 Value Index S&P Mid Cap 400 Total Return Russell 1000 Growth Index S&P Small Cap 600 Total Return Source: Morningstar Direct Source: Morningstar Direct • Obamacare helped boost Healthcare stocks, especially the insurers. • Liquidity has been the wind behind the sails of the U.S. economy. • Utilities and telecom services performed the weakest because of their lower yields. Year-on- Year-to- Q4 Year date 2013 Energy 22.27 22.27 7.74 Materials 22.73 22.73 10.05 Industrials 37.63 37.63 12.92 Consumer Discretionary 40.96 40.96 10.37 Consumer Staples 22.68 22.68 7.89 Healthcare 38.74 38.74 9.60 Financials 33.21 33.21 9.82 Info. Technology 26.23 26.23 12.75 Telecom Services 6.49 6.49 4.17 Utilities 8.75 8.75 1.78 Market Sector Returns measured in U.S. dollar terms International Market Overview Investment Style • Japan was boosted by their own version of QE, in fact they are ‘QE on steroids’, putting approximately $225 billion instead of the U.S.’s $85 billion into monthly purchases. • China had a marked slowdown that impacted other countries, especially the commodity producing countries like Brazil. • The QE tapering discussion hurt emerging market bonds. • Gold was affected by slowing global growth and a rising perception of U.S. growth. MSCI EAFE Value MSCI EAFE Growth Source: Morningstar Direct Year-on- Year-toQ4 Year date 2013 Energy 18.84 18.84 6.99 Materials 3.91 3.91 4.44 Industrials 32.80 32.80 9.32 Consumer Discretionary 39.80 39.80 8.33 Consumer Staples 22.03 22.03 6.12 Healthcare 37.06 37.06 9.02 Financials 27.95 27.95 7.81 Info. Technology 29.30 29.30 11.97 Telecom Services 32.37 32.37 9.90 Utilities 13.73 13.73 2.15 Market Sector Returns measured in Canadian dollar terms Recency Bias • Definition: the tendency of people to place too much weight on the most recent events. • What just happened will keep happening. • Events from the past might be less important. Example: an Earthquake occurs. People change their buying habits based on the fact that they recently experienced an earthquake; they might buy too many earthquake supplies even though strong earthquakes are quite rare. This market was brought to you by the letters Q & E It was all about Q & E QE Despite all the things thrown at it – S&P 500 moved up as if made from Teflon Source: MYRA Capital Range-Bound Markets are Typical U.S. Stock Market 13 Years • Markets have been range-bound in 109 of the last 144 years • Secular bull runs are a rarity; not the norm • After major bull markets, markets trend sideways for a minimum of 15 years SOURCE: Sionna Investments 13 years into this consolidation market – best one before this was 15 years – so have about 4 years left in this range bound market 18 Inflation Adjusted Market Is Not At New Highs Markets have not broken a record when inflation is taken into account 19 Source: Gary Shilling’s Insight January 2014 Margin Debt is getting to concerned levels Chart to Jan 9. 2014 Source: STAWEALTH.COM Trading volumes have been trending lower, suggesting new buyers may be scarce. Only the Tech era had higher P/E’s (NTM – Next Twelve Months) Bear Arguments 1. Fed quantitative easing is over 2. Interest rate rise will kill rally 3. Growth is too weak 4. Corporate profit margins are peaking 5. Business cycle/bull market is getting old 6. Dysfunction remains in Washington 7. A hard landing in China may occur 8. Stocks are in a bubble (valuations too high) Benign, if Not Bullish for Stock Prices • Monetary Ease (Dovish Fed) • Fiscal Restraint (Falling Deficit) Big Themes for 2014 • Economic Recovery • Obamacare • Further Fiscal Restraint • Loss of Global Prestige • Mid-Term Elections 2. What our Investment Specialists say Canadian Dividend Equities As we look ahead to 2014, we expect another solid year for the Canadian equity market, but are more cautious on the U.S. market given the rapid price appreciation of the last two years. We believe the U.S. economy is poised to accelerate as the private sector is finally strong enough to withstand stimulus withdrawal and still post 3%+ GDP growth. Canadian Quantitative Growth Equities Commodities have been a drag on the resource laden Canadian equity market this past year. With the expected improvement in global growth, the free fall in commodity prices should moderate. This assumes no adverse change to China’s current level of GDP growth. Gold remains a concern as investors appear to no longer need the safety gold typically offers due to the improved growth outlook and lack of geopolitical/financial turmoil. North American economies will continue to show signs of improvement. In the U.S., recent gains in housing, consumer confidence and manufacturing will sustain growth going forward. Canada will be a net benefactor from the strengthening U.S. economy. A weaker Canadian dollar will also contribute to Canada’s growth through improved exports. Global Fixed Income Despite the relatively strong fundamental outlook in many emergingmarket countries, we believe the emerging-market asset class is likely to see broad-based bouts of elevated volatility surrounding the issue of Fed tapering. We believe that selecting countries with relatively good fundamentals, avoiding countries with poor fundamentals, and actively managing risk within emerging markets may prove more successful than a passive allocation to emerging markets as an asset class. Global Dividend For Europe, the challenges of divergent economic profiles being managed under a singular monetary authority remain at the forefront. Although many euro zone nations, especially the weaker southern European countries, appear to be on more solid economic footing, having returned to modest growth, the frailty of those recoveries and weakness in France's large economy are likely to keep European GDP only modestly positive. Global Real Estate From a real estate perspective the supply side remains limited. Even though the availability of real estate financing was relaxed during 2013 and is more readily available than a year before, particularly in Europe which is still undergoing the deleveraging process, we expect development capacity to be very specific and de-risked, and we do not expect that targeted development activity would bring supply out of balance. U.S. Small Cap Equity markets have risen consistently over the past year, with a number of market indices approaching record highs. Investors have bid up equity valuations on signs that the global economy was strengthening and on relief that the U.S. Federal Reserve Board would use a measured approach in tapering its quantitative-easing program. The portfolio management team believes rising equity markets have led to an increase in valuation of many businesses, which may not be warranted. Canadian Small Cap Our outlook for the Canadian small cap sector remains positive. With global economies on a firmer footing, we would expect many companies to benefit from improved demand for their products and services, leading to growth in earnings and cash flows. Should the economy be in a self propelling recovery, this should give the U.S. Fed the leeway to engage in further tapering of Quantitative Easing without alarming investors too much. U.S. Growth Equities We expect a slightly better backdrop for the U.S. In addition, we expect to see continued economic improvement in Europe and China which should have a positive effect on the global economy. With a more constructive macro outlook, an investment posture that increases the portfolio’s exposure to companies that are leveraged to global growth may be appropriate. We continue to focus on companies with dependable solid top-line growth and visible earnings streams. 3. Review Of Counsel Investment Solutions Counsel Balanced Portfolio Mandate Canadian short term fixed income Fixed income Canadian value equities Canadian growth equities U.S. value equities U.S. growth equities International value equities International growth equities Global small cap Global real estate Target Allocation (Oct 2009)* n/a 40.00% 8.00% 8.00% 7.50% 7.50% 7.50% 7.50% 8.00% 6.00% Current Target Allocation* 7.00% 33.00% 7.75% 7.75% 7.00% 7.00% 7.00% 7.00% 10.50% 6.00% * Target asset allocation weights adjusted following annual review of Counsel portfolios and with the renewal of the Simplified Prospectus. This Portfolio is managed using a multi-manager process. The current sub-advisor or underlying mutual fund manager for each mandate is listed beside the mandate for which it provides portfolio management / sub-advisory services. This Portfolio invests in underlying mutual funds (which may be managed by Counsel) currently sub-advised by the sub-advisors listed beside each investment mandate. For information on the underlying funds, please refer to the Simplified Prospectus, which is available on our website at www.counselservices.com or on the SEDAR website at www.sedar.com. Counsel Balanced Portfolio Effective Asset Class Mix Effective Geographic Mix Effective Top 10 Sector Allocation Counsel Balanced Portfolio Performance (%) Compound Returns vs. Benchmark Period Series 'A' Net Benchmark* Incept. Incept. 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Return Date 0.92 1.22 5.63 6.76 8.95 9.97 14.56 18.38 6.12 8.98 9.01 7.98 4.43 4.10 4.30 3.11 1/15/02 U.S. growth Int'l value equities equities + + Int'l growth equities + Positive and negative attribution for Q4 2013 Mandate Attribution Canadian short term fixed income + Fixed income + Cdn value equities - Cdn growth equities + U.S. value equities + Global small cap - Global Portfolio real Design & estate Construction + - Positive and negative attribution for the 12 months ended December 31, 2013 Mandate Attribution Canadian short term fixed income + Fixed income + Cdn value equities + Cdn growth equities + U.S. value equities + U.S. growth Int'l value equities equities + + Int'l growth equities - Global small cap + Global Portfolio real Design & estate Construction - + Positive attribution to overall Portfolio, reflecting that the mandate outperformed its relative benchmark on a gross returns basis. - Negative attribution to overall Portfolio, reflecting that the mandate underperformed its relative benchmark on a gross returns basis. Counsel Short Term Bond Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* -0.17 -0.15 0.49 0.57 0.74 1.07 0.44 0.99 1.64 2.04 n/a n/a n/a n/a Effective Investment Mix Incept. Incept. Return Date 1.61 2.29 1/25/10 Effective Bond Maturity Counsel Short Term Bond Contributors Q4 • Security selection in the Financial sector • Incremental yield associated with the overweight exposure to corporate credit Past 12 months • Incremental yield associated with the overweight exposure to corporate credit • Security selection, particularly in financial and communication sectors Detractors • Negative impact from yield curve positioning, as the shortest sections of the yield curve moved down and the 4-6 year section moved up NA Counsel Fixed Income Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* -0.26 -0.50 0.64 0.18 1.07 0.10 -0.78 -1.99 2.75 3.13 4.50 3.98 4.15 4.36 Effective Investment Mix Incept. Incept. Return Date 5.36 5.08 5/31/01 Effective Bond Maturity Canadian Core Fixed Income Contributors Q4 • • • Overweight in corporate bonds Overweight in BBB-rated corporate bonds Shorter-than-index duration Detractors • • Tactically reducing provincial bond exposure into a rallying provincial bond market hurt performance Overweight position in mid-term bonds High Yield Fixed Income Contributors Q4 • • • Past 12 months • Rite Aid Corp. • First Data Corp. • Intelsat Investments SA First Data Corp. Sprint Communications Valeant Pharmaceutical International Detractors • • • Bombardier Inc. Quebecor Inc. Lone Pine Resources Inc. • • Bombardier Inc. First Quantum Minerals Ltd. Lone Pine Resources Inc • Strategic Shifts • Increased Technology and Transportation • Reduced Paper & Packaging Global Fixed Income Contributors Q4 • In Q4 2013, the portfolio’s currency positions led positive absolute performance, followed by sovereign credit exposures and interest-rate strategies • The portfolio’s currency positions in Asia ex-Japan added to results. The portfolio’s positions in peripheral European currencies against the euro also benefited absolute results • Select duration exposures in Europe added to results Detractors In Q4 2013, there were no significant detractors from absolute performance Counsel Canadian Value Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr Series 'A' Net Benchmark* 1.38 1.89 5.80 6.98 10.51 12.54 13.38 11.74 3 yr 5 yr 10 yr 3.71 2.15 n/a n/a n/a n/a Contributors Incept. Incept. Return Date 10.49 11.51 01/14/09 Detractors Strategic Shifts Q4 • Methanex Corporation • Thomson Reuters Corporation • Silver Wheaton Corp. • Empire Co. Ltd. Class A • Central Fund of Canada Limited Class A • Canadian Pacific Railway Overweight sectors • Financials • Energy • Consumer Discretionary • Consumer Staples Past 12 months • Methanex Corporation • Thomson Reuters Corporation • Canadian Tire Corporation, Limited Class A • Central Fund of Canada Limited Class A • Valeant Pharmaceuticals International, Inc. • Barrick Gold Corporation Underweight sectors • Materials • Industrials • Telecommunication Services • Information Technology • Health Care Counsel Canadian Value Effective Asset Class Mix Effective Top 10 Sector Allocation Counsel Canadian Growth Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr Series 'A' Net Benchmark* 1.50 1.89 7.35 6.98 12.98 15.41 13.38 11.74 3 yr 5 yr 10 yr 2.72 2.15 n/a n/a n/a n/a Effective Asset Class Mix Incept. Incept. Return Date 11.10 11.51 01/14/09 Effective Top 10 Sector Allocation Canadian Growth Equities Contributors Q4 • • • Past 12 months • • • Detractors Strategic Shifts Positioning in the Consumer Discretionary Positioning in the Materials sector Canadian Tire Corp was the top individual relative contributor • Positioning in the Financials Sector • Positioning in the Consumer Staples Sector • Potash Corp of Saskatchewan was the largest individual relative detractor We reduced our underweight position in materials and energy during the quarter. We also reduced our cash position. Positioning in the Consumer Discretionary sector Positioning in the Materials Sector Top individual contributors were Barrick Gold Corp., Magna International and Canadian Tire Corp. • • • Positioning in the Financials Sector Positioning in the Telecom Sector Positioning in Bank of Montreal, New Gold and Silver Wheaton were the largest individual detractors from relative performance Overweight sectors We are positioned for continued cyclical growth led by the U.S. economy by being overweight cyclical sectors (particularly nonresource cyclical). Underweight sectors We are underweight in interest rate sensitive groups as we expect interest rates to continue to rise gradually as global growth improves and Monetary Policy becomes less accommodative. Canadian Quantitative Growth Equities Q4 Past 12 months Contributors Detractors • Constellation Software Inc. • Methanex Corporation • Enerplus Corporation • CGI Group Inc. • Stantec Inc. • Canadian Pacific Railway • Methanex Corporation • Valeant Pharmaceuticals International Inc. • Magna International Inc. • Agnico-Eagle Mines Limited • Franco-Nevada Corporation • Canadian Pacific Railway Strategic Shifts The strategy is based purely bottom up stock selection, sector changes are a residual of stock selection. Sector exposure moved from six to seven with the addition of industrials and consumer staples and the elimination of financials. Sector exposure until the February 28th rebalancing will consist of Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, and Information Technology. Counsel U.S. Value Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 2.08 2.80 18.22 13.41 22.10 14.56 47.76 40.22 14.73 17.48 n/a n/a n/a n/a Contributors Q4 Past 12 months Incept. Incept. Return Date 16.71 13.91 01/14/09 Detractors • Valero Energy Corporation • Marathon Petroleum Corporation • Tesoro Corporation • Safeway Inc. • Murphy USA, Inc. • Berkshire Hathaway Inc. • Safeway Inc. • Seagate Technology PLC • Western Digital Corporation • D.R. Horton, Inc. • L-3 Communications Holdings, Inc. • McCormick & Company, Incorporated Strategic Shifts There were no sector allocation shifts during the fourth quarter. Counsel U.S. Value Effective Asset Class Mix Effective Top 10 Sector Allocation Counsel U.S. Growth Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 2.66 3.13 14.07 13.85 18.07 19.65 41.61 41.24 15.02 17.88 n/a n/a n/a n/a Contributors Q4 Past 12 months Incept. Incept. Return Date 15.12 16.73 01/14/09 Detractors Strategic Shifts • Pharmaceuticals Biotechnology & Life Sciences Industry – Gilead Sciences and Biogen Idec • Software & Services Industry – Google and Visa • Consumer Services Industry – Wynn Resorts, Starwood Hotels & Resorts Worldwide, and Chipotle Mexican Grill. • Cash - 5% of average net assets dampened performance as the benchmark index returned +10.5% • Consumer Durables & Apparel Industry – Lululemon Athletica • Food Beverage & Tobacco Industry – Green Mountain Coffee Roasters. The portfolio reduced its allocation to Financials from 14% to 9% due primarily to the sale of Wells Fargo and paring of our AIG position. • Pharmaceuticals Biotechnology & Life Sciences Industry – Gilead Sciences and Biogen Idec • Consumer Services - Wynn Resorts, Chipotle Mexican Grill and Starbucks Corp. • Information Technology – Google, Facebook Inc. and Visa Inc. • Cash - 5% of average net assets dampened performance as the benchmark index returned +32% • Industrials – In aggregate, the portfolio’s holdings in the sector returned +32% but underperformed the +41% sector return in the benchmark index; in particular, Precision Castparts Corp. and Cummins Inc. lagged. • Food Beverage & Tobacco Industry – Green Mountain Coffee Roasters Additionally, Industrials were reduced from 11% to 9% due primarily to the sale of Union Pacific. The portfolio increased sector allocations modestly in Consumer Discretionary Health Care and Energy. Counsel U.S. Growth Effective Asset Class Mix Effective Top 10 Sector Allocation Counsel International Value Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 0.50 1.17 8.08 6.53 18.73 15.36 31.25 26.29 7.27 8.70 n/a n/a n/a n/a Contributors Q4 Past 12 months • ING Groep NV • PostNL NV • Aryzta AG Net Euro exposure via securities and cash balance net of hedge helped portfolio performance • Nokia OyJ • Renault SA • ING Groep NV On an annual basis net of the currency hedge appreciation of the Euro vs. Canadian dollar was beneficial. Incept. Incept. Return Date 9.25 01/14/09 11.48 Detractors • Henderson Land Development Canadian dollar weakness against most currencies, particularly the Euro, hurt the portfolio via currency hedge. Hedge levels were scaled back for all currencies except the Yen, mitigating the loss potential • Canon Inc • Henderson Land Development The currency hedge program hurt the portfolio as a whole in 2013, the only exception being the Japanese Yen as the Yen weakened in 2013, in this case the hedge helped. Strategic Shifts Industrials Financials Cons. Discretionary Cons. Staples Energy Materials Information Technology Telecom. Services 0.42% -1.93% -4.96% 1.64% 2.01% -0.13% -1.69% 0.22% Changes are stock specific and not done to specifically over or underweight sectors. Counsel International Value Effective Asset Class Mix Effective Top 10 Sector Allocation Counsel International Growth Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 2.05 1.89 8.13 8.36 14.82 16.38 21.55 29.79 9.70 9.38 n/a n/a n/a n/a Effective Asset Class Mix Incept. Incept. Return Date 13.21 9.76 01/14/09 Effective Top 10 Sector Allocation Counsel Global Real Estate Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 0.41 0.43 2.18 2.46 1.55 1.87 6.17 9.79 6.70 8.99 n/a n/a n/a n/a Contributors Incept. Incept. Return Date 11.47 13.58 01/14/09 Detractors Q4 • Stock selection in the U.S. and Canada • Allocation and stock selection in Japan • Stock selection in Western Europe • Stock selection in Hong Kong and China • Allocation to the United Kingdom Past 12 months • Stock selection and allocation in the U.S. • Allocation and stock selection in Singapore • Stock selection in Australia • Cash • Stock selection in Japan • Allocation to Latin America Strategic Shifts The biggest shift that occurred during the quarter was an increase in weighting towards specialty (data centers) as the portfolio bought into a small cap data center company QTS in the U.S. This shift was funded via a reduction in weighting towards the industrial sector (via an exit from Segro in the U. K.). Counsel Global Real Estate Effective Asset Class Mix Effective Geographic Mix Counsel Global Small Cap Performance (%) Compound Returns vs. Benchmark Period 1 mth 3 mth 6 mth 1 yr 3 yr 5 yr 10 yr Series 'A' Net Benchmark* 2.65 2.65 9.33 10.79 17.59 20.26 34.16 40.46 9.65 13.93 17.18 16.34 n/a n/a Incept. Incept. Return Date 6.15 5.79 6/6/05 Positive and negative attribution for Q4 2013 Mandate Attribution U.S. Cdn Small small Cap cap + - Int'l small cap - Portfolio Design & Construction + Positive and negative attribution for the past 12 months ended December 31, 2013 Mandate Attribution U.S. Cdn Small small Cap cap + - Int'l small cap + Portfolio Design & Construction + + Positive attribution to overall Portfolio, reflecting that the mandate outperformed its relative benchmark on a gross returns basis. - Negative attribution to overall Portfolio, reflecting that the mandate underperformed its relative benchmark on a gross returns basis. Counsel Global Small Cap Effective Asset Class Mix Effective Top 10 Sector Allocation Canadian Small Cap Contributors Detractors Strategic Shifts Q4 • Low weight in mining and metals - a weak performing sector during the quarter. • An overweight allocation to alternative lenders and asset managers. • Auto related stocks were up significantly in the quarter. • Paladin Labs was acquired by Endo Health and was sold at a 54% premium after the announcement. • Dundee Precious Metals • Interest sensitive stocks, such as Boralex Power, Agellan Commerical REIT and Dundee Industrial REIT came under pressure due to fears over rising interest rates. • Martinrea International lost 20% of its value after the company disclosed misreported financials in the past. The position was sold out of the portfolio prior to the announcement mostly due to concerns over ongoing legal battles and the potential impact on its operations. There were no major sector shifts, but we were actively reducing the portfolio’s exposure to metals and mining companies. Past 12 months • Low weight in mining and metals - a very weak performing sector during the past 12 months. • Paladin Labs • CCL Industries • Winpak • Western Forest products • Material stocks such as Dundee Precious Metals and Major Drilling • Surge Energy and Angle Energy U.S. Small Cap Contributors Q4 Past 12 months Detractors • Alliance Data Systems Corp. (ADS) • Alere Inc. •Global Payments Inc. • Cash • ION Geophysical Corp • Energy sector • Alliance Data Systems Corp. • International Rectifier Corp. • Alere Inc. • Cash • ION Geophysical Corp. • Energy sector Strategic Shifts There were no significant changes to the sector allocation within the portfolio during the period International Small Cap Q4 Past 12 months Contributors Detractors Strategic Shifts The Information Technology sector was the largest contributor for the period. The companies in the portfolio returned, on average, 5.6% while those in the benchmark returned, on average, 3.5%. The portfolio’s top two contributors were in this sector. • Oxford Instruments Plc. was up 19% in the period. • Infomart Corporation was up over 25% in the period. The portfolio is structurally overweight in the Consumer Discretionary sector at 25.5% versus the benchmark at 18.7%. The securities in the portfolio were up, on average, 1% while those in the benchmark were up 1.7%. The portfolio’s three largest detractors were in this sector. • REA Group was down -9.1% during the period. • Merida Industry, a Taiwanese bicycle manufacturer, was down 7.7% during the period. • United Arrows Ltd. was down 11.2% during the period. Not applicable as Wasatch assumed the investment management of this mandate on November 30, 2013. Not applicable. Wasatch assumed the investment management of this mandate on November 30, 2013. 4. Benchmarks and Disclaimers Net Benchmarks Net benchmark return is calculated using the actual management expense ratio(s) of the equivalent exchange traded fund(s) and weighing that/those MER(s) by the benchmark/hybrid benchmark weight(s). The weighted MER(s) is/are then added to a typical retail management fee of 1%. In February 2009, the typical retail management fee for Counsel Fixed Income was revised from 1% to 0.5%. Investment Solution Index Counsel Conservative Portfolio 60% DEX Universe Bond, 40% MSCI World Total Return Counsel Regular Pay Portfolio 50% DEX Universe Bond, 20% MSCI World Total Return, 30% S&P/TSX Composite Dividend Total Return Counsel Balanced Portfolio 40% DEX Universe Bond, 60% MSCI World Total Return Counsel Growth Portfolio 20% DEX Universe Bond, 80% MSCI World Total Return Counsel All Equity Portfolio 100% MSCI World Total Return Counsel Managed Yield Portfolio 55% DEX Universe Bond Index, 25% JP Morgan Global Government Bond Index, 20% S&P/TSX Composite Dividend Total Return Counsel Managed High Yield Portfolio 40% DEX Universe Bond, MSCI AWCI High Dividend Yield, 25% Bank of America Merrill Lynch Global High Yield & Emerging Market Corporate Bond Total Return Counsel Income Managed Portfolio 40% DEX Universe Bond, 40% S&P/TSX Composite Dividend Total Return, 20% MSCI World Total Return Counsel Managed Portfolio 40% DEX Universe Bond, 15% MSCI World Total Return, 45% S&P/TSX Composite Total Return Counsel World Managed Portfolio 40% DEX Universe Bond, 60% MSCI World Total Return Net Benchmarks Net benchmark return is calculated using the actual management expense ratio(s) of the equivalent exchange traded fund(s) and weighing that/those MER(s) by the benchmark/hybrid benchmark weight(s). The weighted MER(s) is/are then added to a typical retail management fee of 1%. In February 2009, the typical retail management fee for Counsel Fixed Income was revised from 1% to 0.5%. Investment Solution Index Counsel Short Term Bond 100% DEX Short Term Bond Index Counsel Fixed Income 100% DEX Universe Bond Index Counsel High Yield Fixed Income 70% Bank of America Merrill Lynch U.S. High Yield Master II Total Return, 30% Bank of America Merrill Lynch Emerging Market Liquid Corporate Plus Total Return Counsel Canadian Dividend 100% S&P/TSX Dividend Composite Total Return Counsel Canadian Value 100% S&P/TSX Composite Index Counsel Canadian Growth 100% S&P/TSX Composite Index Counsel U.S. Value 100% Russell 1000 Value Index Counsel U.S. Growth 100% Russell 1000 Growth Index Counsel International Value 100% MSCI EAFE Value Index Counsel International Growth 100% MSCI EAFE Growth Index Counsel Global Dividend 100% MSCI ACWI High Dividend Yield Index Counsel Global Real Estate 100% FTSE EPRA/NAREIT Counsel Global Small Cap 100% MSCI World Small Cap Total Return General Disclaimers This report may contain forward-looking statements which reflect our current expectations or forecasts of future events. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as: “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, “preliminary”, “typical” and other similar expressions. In addition, these statements may relate to future corporate actions, future financial performance of a fund or a security and their future investment strategies and prospects. Forward-looking statements are inherently subject to, among other things, risks, uncertainties and assumptions which could cause actual events, results, performance or prospects to differ materiality from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, the volatility of global equity and capital markets, business competition, technological change, changes in government regulations, changes in tax law, unexpected judicial or regulatory proceedings, catastrophic events and the ability of Counsel Portfolio Services to attract or retain key employees. The foregoing list of important risks, uncertainties and assumptions is not exhaustive. Please consider these and other factors carefully and not place undue reliance on forward-looking statements. The forward-looking information contained in this report is current only as of the date of this report. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Simplified Prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The indices cited are widely accepted benchmarks for investment performance within their relevant regions, sectors or asset class, represent non-managed investment portfolios, exclude management fees and expenses related to investing in the indices, and are not necessarily indicative of future investment returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. To learn more about Counsel’s investment solutions, please speak to your Advisor. Review Checklist Your portfolio mix remains consistent with your risk tolerance. Your portfolio mix has been Insert Advisor name and details here rebalanced to your pre-determined mix (see Portfolio Review). Your portfolio’s long-term performance is acceptable given your investment strategy and financial objectives. We are committed to helping you achieve your financial goals through: • effective investments • accountability of all parties • operating with your objectives and goals as our guide Sub-advisors and underlying fund managers have been effective in their respective areas of expertise. Do you have any questions or concerns? Is an action plan required?