Canadian Council of Christian Charities Performance Measurement Reporting to September 30, 2004

Transcription

1 Canadian Council of Christian Charities Performance Measurement Reporting to September 30, 2004 Proteus Performance Management Inc. 250 Ferrand Drive, Suite 303 Toronto, Ont. M3C 3G8 Phone: (416) Fax: (416) website:

2 Canadian Council of Christian Charities Performance Measurement Reporting to September 30, 2004 Executive Summary Most major global equity markets posted negative returns in the third quarter, weighed down by concerns about soaring oil prices, weaker economic data, and disappointing corporate profit announcements. The continued rise in oil prices dominated equity markets over the quarter, as the price of crude rose above US$50 per barrel. In Canada, the S&P/TSX Index led most major markets with a 1.9% return, due mainly to the Energy sector. The top contributors to the TSX were Suncor Energy, Canadian Natural Resources and Petro-Canada. Another source of strength was Materials (Alcan, Potash Corp, Placer Dome) which benefited from higher commodity prices. Another focus for the market was weaker-than-expected economic data. In the US, employment numbers for June and July showed positive growth but were well below expectations. The S&P 500 suffered a broad-based decline. The only two sectors to show positive returns for the quarter were Energy and Utilities. Overseas, the weakest market was Japan, dragged down by exportoriented stocks such as Canon, Kyocera and Fuji. In Europe, technology shares declined sharply, thanks to a downgraded outlook for the industry and a disappointing profit announcement by Nokia. North American 10-year government bond yields declined, as weaker economic data caused speculation that both the US Federal Reserve and Bank of Canada could afford to be cautious about raising interest rates. Year to date in order of performance. Canadian Equities 6.8%, Bonds 3.8%, International Equities 2.5%,, Cash 1.6%, Global Equities 0.7%,, US Equities -0.7%.

3 Canadian Council of Christian Charities Quarterly Investment Performance Monitoring For The Period Ending September 30, year 3 year 4 year Fixed Income SIP&P objective 8.1% McLean Budden Fixed Income Fund's rate of return 5.1% 6.9% 7.7% Differential -0.4% Median performance 4.9% 7.2% 7.6% Quartile SCMU Bond Index 4.8% 7.1% 7.6% Balanced SIP&P objective 2.7% Jarislowsky Fraser Balanced Fund Fund's rate of return 10.3% 6.6% 5.6% Differential 2.9% Median performance 11.2% 6.8% 3.2% Quartile Index - Composite * 10.4% 6.9% 1.7% Canadian Equity SIP&P objective -1.7% Jarislowsky Fraser Canadian Equity Fund's rate of return 25.4% 14.3% 10.7% Differential 12.4% Median performance 19.2% 10.9% 2.3% Quartile S&P/TSX Compostite 18.9% 10.2% -2.7% SIP&P Benchmarks (4 Yr.): Balanced- Composite + 1.0% Fixed Income - SC Bond Index + 0.5% Canadian Equity - S&P/TSX Comp % * Index Composite 15% Global Equity, 35% Canadian Equity, 45% Canadian Bond, 5% Cash

4 Jarislowsky Fraser Balanced Fund Asset Allocation Canadian Council of Christian Charities June 30 '02 Sept 30 '02 Dec 31 '02 Mar 31 '03 Jun 30 '03 Sept 30 '03 Dec 31 '03 Mar 31 '04 June 30 '04 Sept 30 '04 Cash 10.1% 12.9% 12.5% 14.2% 9.8% 8.7% 9.0% 10.0% 10.0% 9.0% Bond 39.5% 42.0% 42.4% 42.5% 45.1% 44.9% 42.0% 41.0% 40.0% 40.0% Cdn Equity 28.6% 25.7% 25.3% 25.2% 26.5% 27.1% 28.0% 28.0% 28.0% 29.0% U.S. 11.9% 10.9% 11.2% 10.0% 10.4% 11.2% 12.0% 12.0% 13.0% 12.0% Non-U.S. 9.9% 8.5% 8.6% 8.1% 8.2% 8.1% 9.0% 9.0% 9.0% 10.0% Total Equity 50.4% 45.1% 45.1% 43.3% 45.1% 46.4% 49.0% 49.0% 50.0% 51.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Median Cash 8.0% 7.7% 6.8% 6.3% 5.8% 5.8% 6.1% Bond 35.0% 36.2% 34.0% 32.5% 35.5% 32.2% 34.7% Cdn Equity 36.3% 34.5% 35.4% 36.3% 36.4% 35.5% 37.7% U.S. 11.9% 12.9% 14.3% 14.7% 11.8% 12.3% 12.2% Non-U.S. 8.8% 8.7% 9.5% 10.2% 10.5% 14.2% 9.3% Total Equity 57.0% 56.1% 59.2% 61.2% 58.7% 62.0% 59.2% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% September 30, 2004 U.S. 12.0% Non-U.S. 10.0% Cash 9.0% Cdn Equity 29.0% Bond 40.0%

5 Investment Manager Commentary Mclean Budden Portfolio duration was increased from 0.7 of a year to almost 1.2 years longer than the Scotia Capital Universe Bond Index as evidence of slower growth in the U.S. economy mounted. Some profits were taken late in the quarter. The mid-term bond weight remained close to 55%, however, its relative weight rose to 5% above the Index, from 1% at last quarter-end, as a large amount of bonds rolled out of the mid-term sector into short-term. Provincials were lowered through the sale of some Ontario bonds which were replaced with a new Bank of Montreal Tier 1 Capital issue and Government of Canada bonds. In an effort to maintain portfolio duration and increase yield, some 3 to 4-year corporate bonds were switched into 5-year bonds from the same issuers including Household Finance and Wells Fargo Financial Canada. Finally, an initial 1% position was established in U.S.-pay bonds given the strong rally in the Canadian dollar. The Fund rebounded sharply during the quarter posting strong absolute and relative performance. A prime contributor was the move to a longer duration, which coincided with a significant reversal in interest rates. Jarislowsky Fraser Balanced Fund While bonds and Canadian equities performed reasonably well during the third quarter, overall performance was held back by the poor performance of foreign equity markets and the strong Canadian dollar. With 22% of the portfolio s assets invested outside of Canada, the 6% rise in the value of the Canadian dollar against its U.S. counterpart reduced the total portfolio return by 1.3%. The best performers in the Canadian section of the portfolio were Cameco (+28.6%), Nova Chemicals (+26.5%) and Potash (+26.2%). The best performing companies in the U.S. section were Chevron Texaco (+14.0%), Exxon (+8.8%) and Wachovia (+5.5%). The best individual performers in the EAFE portfolio were Ericsson (10.8%) and Sanofi-Aventis (8.1%). During the quarter the Fund added to a number of equity holdings in the portfolio, increasing the portfolio s equity weighting. In addition, a small percentage of the cash and short-term position were redirected into the JF International Equity Fund. Asset mix remained relatively constant, as the relatively poor performance of foreign stock markets cancelled out any manager-induced increases in equity exposure. While foreign diversification appears to have held back returns, the manager believes it would be short sighted not to have funds invested outside Canada. The Canadian equity market s superior performance has largely been based on the rise in commodity prices, and oil in particular. Given the manager s view, and expectation for a slowing economy, they would expect a reversal of performance in the future. Equities remain the preferred asset class as interest rates are expected to rise, thereby dampening the outlook for bonds.

6 Canadian Equity In Canada, where the S&P/TSX carries a much higher weight in resource companies and other cyclicals than the U.S. markets, it was the Energy sector that led the way. With the price of oil rising to almost US$50 per barrel by the end of September, the holdings in oil & gas companies performed very well. The Energy sector was up by 11.2% in the quarter, although the manager would argue that share prices in the sector have probably not risen to levels that fully reflect a sustained period of oil prices above US$35. Another factor that aided the relative performance of the portfolio was its absence of Information Technology holdings. This sector was down by 21.4% during the quarter, once again led by Nortel Networks, which was off 36.0% due to continued problems with their accounting statements. In terms of the best performers in the Canadian portfolio, the third quarter was almost a carbon copy of the second quarter. Although the manager s philosophy will always lead to the portfolio carrying a below market weight in cyclical stocks, their bottom-up approach allows them to own a number of the best players in these industries. As a result, it was the cyclical stocks in the portfolio that performed best with Cameco (+28.6%), Nova Chemicals (+26.5%) and Potash (+26.2%) leading the way. A new position was added in Canadian National Railway in July. CN is a leader in the North American rail transportation business, and has made some sensible acquisitions over the past few years. They also added to the positions in MDS, George Weston, Shaw Communications and Thomson, and directed some more cash into the JF Special Equity Fund. On the sale side, they continued to trim the existing positions in Cameco and Jean Coutu, and sold a small portion of the holding in Talisman Energy.

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