Portfolio Advisory Group

Month-in-Review: September 2010

What Moved the Markets

The S&P/TSX Composite advanced 3.8% in September to consensus, citing software licensing strength, while FedEx finish at 12,368.65, the highest point since August 2008, (FDX) missed by a penny and guided lower on concerns of supported by a broad-based appreciation in materials economic weakness in the near term affecting sales. prices. In the U.S., stock markets produced the biggest Germany showed some weakness in September as its monthly gains in over a year as economic data was forward-looking Purchasing Manager’s Index (PMI) generally positive and fears of a double-dip recession came in below expectations. Spain and Ireland remained eased. The S&P 500 and Dow gained 8.8% and 7.7% the focus of intense investor scrutiny. Positive mid- respectively. Crude oil gained 11.0% as market sentiment month Irish bond auctions and Moody’s decision to cut improved and inventories declined in the last week of the Spanish debt by one notch versus two eased concerns. month, while natural gas gained 1.5%. Gold gained 4.9% Canada’s employment figures resumed advancing after and reached a record high during the month, while silver July’s negative data, while in the U.S., existing home sales gained 12.4% and reached a 30-year peak. rose, non-farm payrolls exceeded expectations, and the Toronto Dominion Bank (TD) rounded out a mixed trade deficit narrowed unexpectedly, all fostering positive earnings season for the big six banks coming in two cents market sentiment. In Asia, China’s August PMI exceeded shy of consensus. Retailers Reitmans (RET.A), Dollarama expectations, establishing the tone for the month and Inc. (DOL) and Lululemon Athletica (LLL) all came in easing fears of a global deceleration in growth. The well above consensus as did Research in Motion (RIM), Chinese central bank also allowed the yuan to appreciate which demonstrated improved margins and guided well to the highest level since it began trading. The Bank of above expectations for next quarter. In the U.S., retailers Japan intervened in currency markets after more than a Nike (NKE) and Best Buy (BBY) both beat consensus month of speculation and sold over 2 trillion yen trying to estimates on stronger revenues. Oracle (ORCL) beat halt its appreciation.

Professional Wealth Management Since 1901 In Canadian Mergers & Acquisition news, Goldcorp U.S. economic outlook and suggested that the Bank may Inc (G) bought Andean Resources Ltd (AND) for $3.6B now pause and gauge the outlook for growth outside its besting Eldorado Gold (ELD). BCE Inc (BCE) bought the borders before any further rate hikes. The U.S. Federal remaining interest in CTV for $3.2B from its consortium Reserve announced that it plans to keep the fed funds rate of owners in order to increase access to content. Anatolia unchanged and highlighted that inflation figures were Minerals (ANO) agreed to combine with Australian miner “somewhat below” those it “judges most consistent, over Avoca Resources and will create a new 50/50 owned the long term, with its mandate.” Analysts and investors intermediate global gold producer, Alacer Gold. interpreted this statement as an indication that the Federal Reserve is preparing for another round of Large Fixed Income Scale Asset Purchases (also referred to as Quantitative Easing, which involves printing money to purchase bonds The Bank of Canada raised the overnight rate by 25bps with the aim of pushing down long-term interest rates). to 1.0% during September. The Bank’s accompanying Two-year Treasury yields hit a record low of 0.416% statement highlighted uncertainties surrounding the following the Fed’s September meeting and closed at 0.422% for the month.

Number Crunching

Equity Indices Index Level Month YTD* Currencies (in Canadian Exchange Month YTD* S&P/TSX Composite Index 12,368.65 3.8% 5.3% Dollars) Dow Jones Industrial Average 10,788.05 7.7% 3.5% US Dollar 1.0292 -3.4% -2.3% S&P 500 Index 1,141.20 8.8% 2.3% Euro 1.4034 3.9% -7.0% NASDAQ Composite Index 2,368.62 12.0% 4.4% British Pound 1.6177 -1.1% -5.0% MSCI World 1,179.19 9.1% 0.9% Japanese Yen (100) 1.2324 -2.6% 8.9% MSCI EAFE 1,561.01 9.5% -1.3% MSCI World TR 3,933.68 9.4% 3.0% Commodities (US$) Spot Price Month YTD* Crude Oil (WTI per barrel) $79.97 11.2% 0.8% S&P/TSX Sector Index Level Month YTD* Natural Gas (per million btu) $3.87 1.5% -30.5% Performance Gold (per ounce) $1,308.35 4.9% 19.3% S&P/TSX Financials 1,602.27 4.7% 2.2% Silver (per ounce) $21.75 12.4% 28.9% S&P/TSX Energy 2,784.74 4.3% -2.5% Copper (per pound) $3.63 7.8% 9.0% S&P/TSX Materials 3,595.46 2.3% 19.0% Nickel (per pound) $10.62 13.4% 26.8% S&P/TSX Industrials 1,242.99 4.2% 9.6% Aluminum (per pound) $1.05 13.7% 5.7% S&P/TSX Consumer 1,031.40 3.3% 14.7% Zinc (per pound) $1.00 6.3% -14.3% Discretionary S&P/TSX Telecom Services 850.25 2.3% 17.1% S&P/TSX Information 203.64 7.8% -21.8% S&P/TSX Index - Target Overnight Rate, LTM Technology 1.2 % 13,000

S&P/TSX Index S&P/TSX Consumer Staples 1,602.61 2.1% 3.7% Target Overnight Rate 1.0 % 12,500 S&P/TSX Utilities 1,849.64 6.3% 8.7% 0.8 % 12,000 S&P/TSX Healthcare 448.52 0.1% 38.2%

0.6 % 11,500 *YTD return data is simple price return. All indices are in local currency unless otherwise noted.

Source: Bloomberg 0.4 % 11,000

0.2 % 10,500

0.0 % 10,000 4/9/10 5/7/10 6/7/10 7/6/10 8/4/10 9/1/10 1/13/10 2/10/10 3/11/10 9/30/10 10/16/09 11/13/09 12/11/09 North American Equity Performance – September 2010

12,700 1180 Sept 12: BASEL III rules Sept 21: FOMC Sept 30: State owned Sept 22: detailed with nine year leaves rates Anlgo Irish Bank will Sept 2: ECB leaves unchanged but bias Microsoft (MSFT) need $34B in capital Sept 7: Oracle buffer period rates unchanged seems to shift raises dividend by in a worst case 1160 12,600 (ORCL) names towards additional 23% scenario Mark Hurd, Sept 13: Cisco Systems Sept 7: BP PLC easing. former HP (CSCO) announces first (BP) releases 1140 (HPQ) CEO, as ever dividend Sept 30: HP names former 12,500 internal oil spill co-president SAP exec. Leo Apotheker as report, blames sparking a legal new CEO other contractors battle Sept 20: US National 1120 as well as itself for Sept 30: Chicago Bureau of Economic Sept 23: Ireland 12,400 the accident PMI beats Sept 13: Chinese Research declares posts -1.2% GDP expectations industrial production US recession ended for Q2., much lower 1100 comes in above in June 2009 than expected expectations 12,300 Sept 15: Bank of Japan Sept 10: Canada intervenes in currency Sept 27: Research In S&P 500 S&P/TSX Sept 2: Sept 7: creates 35,800 jobs Motion (RIM) unveils 1080 Burger King market for the first time Sept 28: Spot acquired by Goldcorp (G) in August reversing new Playbook tablet (BKC) in six years Gold closes 12,200 private equity group buys Andean July's negative Resources above 3G for $24/sh. growth 1060 (AND) for US$1,300/oz $3.6B for the first time 12,100 Sept 16: Research Sept 16: Kinross 1040 In Motion (RIM) Gold (K) Sept 21: Sept 28: Sept 2: Toronto reports revenues shareholders AbitibiBowater Inc. Biovail/Valeant Dominion Bank and earnings 12,000 Sept 10: Enbridge approve Red receives approval merger completed, (TD) posts above expectations 1020 (ENB) reports leak in Back Mining from creditors to shares begin earnings marginally and raises partially owned (RBI) acquisition emerge from trading under new below expectations guidance pipeline in Illinois bankruptcy VRX ticker 11,900 1000 9/1/2010 9/2/2010 9/3/2010 9/7/2010 9/8/2010 9/9/2010 9/10/2010 9/13/2010 9/14/2010 9/15/2010 9/16/2010 9/17/2010 9/20/2010 9/21/2010 9/22/2010 9/23/2010 9/24/2010 9/27/2010 9/28/2010 9/29/2010 9/30/2010

S&P/TSX S&P 500

World Markets – September 2010

MSCI World Index: Global USD CAD M/M: 9.1% MTD: 5.3% YTD: 0.9% YTD: -1.7% U.K.: FTSE 100 Canada: S&P/TSX M/M: 6.2% M/M: 3.8% China: YTD: 2.5% YTD: 5.3% Shanghai Index M/M: 0.6% Japan: Nikkei Germany: DAX YTD: -19.0% M/M: 6.2% U.S.: S&P 500 M/M: 5.1% YTD: -11.2% M/M: 8.8% YTD: 4.6% Hong Kong: YTD: 2.3% Hang Seng Brazil: Bovespa India: Sensex M/M: 8.9% Australia: M/M: 6.6% M/M: 11.7% YTD: 2.2% S&P/ASX 200 YTD: 1.2% YTD: 14.9% M/M: 4.1% YTD: -5.9%

World equity markets gained momentum in September as U.S. economic data was generally positive, easing fears of a double-dip recession. In Europe, news that Basel III rules will be phased in over nine years lifted financials, while months of positive German economic data paused as the August PMI came in below expectations. The Bank of Canada raised the overnight rate by 0.25% to 1.0% and employment growth resumed after July’s negative data. In the U.S. the Fed left rates unchanged and began to signal the potential for additional Quantitative Easing at its November meeting. In Asia, the bank of Japan intervened in currency markets in an attempt to halt the appreciation of the yen, while China’s central bank allowed the yuan to appreciate to the highest level recorded since it began trading.

*** All returns calculated in local currency. Source: Bloomberg Canadian and U.S. Economic Data – September 2010

Better Than Expected Event Period Consensus Actual Prior 8-Sep CA Ivey Purchasing Managers Index AUG 55.5 65.9 54 10-Sep CA Net Change in Employment AUG 30.0K 35.8K -9.3K 14-Sep CA New Motor Vehicle Sales MoM JUL 1.0% 2.4% 3.3% 1-Sep US ISM Manufacturing AUG 52.8 56.3 55.5 14-Sep US Retail Sales Less Autos AUG 0.3% 0.6% 0.1% 14-Sep US Business Inventories JUL 0.7% 1.0% 0.5% 16-Sep US Producer Price Index (MoM) AUG 0.3% 0.4% 0.2% 21-Sep US Housing Starts AUG 550K 598K 541K 21-Sep US Building Permits MOM% AUG 0.2% 1.8% -4.1% 23-Sep US Existing Home Sales AUG 4.10M 4.13M 3.84M 23-Sep US Leading Indicators AUG 0.1% 0.3% 0.1% 30-Sep US GDP QoQ (Annualized) 2Q T 1.6% 1.7% 1.6% 30-Sep US Personal Consumption 2Q T 2.0% 2.2% 2.0% 30-Sep US Chicago Purchasing Manager SEP 55.5 60.4 56.7 3-Sep US Change in Nonfarm Payrolls AUG -105K -54K -54K 28-Sep US S&P/CaseShiller Home Price Ind JUL - - 148.9 148.0 9-Sep US Trade Balance JUL -$47.0B -$42.8B -$49.8B 8-Sep CA Building Permits MoM JUL -4.9% -3.3% 6.9% 30-Sep US Initial Jobless Claims 25-Sep 460K 453K 469K As Expected 3-Sep US Unemployment Rate AUG 9.6% 9.6% 9.5% 17-Sep US Consumer Price Index (MoM) AUG 0.3% 0.3% 0.3% 8-Sep CA Bank of Canada Rate SEP 1.0% 1.0% 0.8% Weaker Than Expected 9-Sep CA Housing Starts AUG 185.0K 183.3K 188.9K 10-Sep CA Unemployment Rate AUG 8.0% 8.1% 8.0% 22-Sep CA Retail Sales MoM JUL 0.6% -0.1% 0.0% 1-Sep US Construction Spending MoM JUL -0.5% -1.0% 0.1% 1-Sep US Domestic Vehicle Sales AUG 8.85M 8.66M 9.11M 3-Sep US Change in Manufact. Payrolls AUG 10K -27K 34K 3-Sep US ISM Non-Manf. Composite AUG 53.2 51.5 54.3 15-Sep US Empire Manufacturing SEP 8 4.1 7.1 15-Sep US Capacity Utilization AUG 75.0% 74.7% 74.6% 17-Sep US CPI Ex Food & Energy (MoM) AUG 0.1% 0.0% 0.1% 17-Sep US U. of Michigan Confidence SEP P 70 66.6 68.9 24-Sep US Durable Goods Orders AUG -1.0% -1.3% 0.7% 24-Sep US New Home Sales AUG 295K 288K 288K 27-Sep US Dallas Fed Manf. Activity SEP -6 -17.7 -13.5 28-Sep US Consumer Confidence SEP 52.1 48.5 53.2 21-Sep CA Consumer Price Index MoM AUG 0.0% -0.1% 0.5% 22-Sep US House Price Index MoM JUL -0.2% -0.5% -0.12% Canadian Equities – September 2010

S&P/TSX Composite Sector Movement Top 10 S&P/TSX Contributors/Decliners by Index Points

-10% -6% -2% 2% 6% 10% -40 -20 0 20 40

Bank of Nova Scotia INFORMATION TECHNOLOGY Royal Bank of Canada

UTILITIES Teck Resources Ltd Research In Motion Ltd FINANCIALS Toronto-Dominion Bank/The Manulife Financial Corp ENERGY Suncor Energy Inc

INDUSTRIALS Canadian Natural Resources Ltd First Quantum Minerals Ltd CONSUMER DISCRETIONARY Encana Corp Detour Gold Corp TELECOM Niko Resources Ltd MATERIALS SXC Health Solutions Corp Loblaw Cos Ltd CONSUMER STAPLES Sino-Forest Corp IAMGOLD Corp HEALTHCARE Eldorado Gold Corp Goldcorp Inc Barrick Gold Corp Potash Corp of Saskatchewan Inc

U.S. Equities – September 2010

S&P 500 Sector Movement Top 10 S&P 500 Contributors/Decliners by Index Points

-4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Apple Inc

TELECOM Oracle Corp General Electric Co HEALTHCARE Google Inc International Business Machines Corp CONSUMER DISCRETIONARY Chevron Corp MATERIALS Johnson & Johnson Exxon Mobil Corp INFORMATION TECHNOLOGY Schlumberger Ltd

ENERGY Amazon.com Inc Weyerhaeuser Co CONSUMER STAPLES Tyco International Ltd Campbell Soup Co UTILITIES Dr Pepper Snapple Group Inc INDUSTRIALS M&T Bank Corp Entergy Corp FINANCIALS PG&E Corp Sara Lee Corp Adobe Systems Inc Monsanto Co

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