Clarica Mutual Funds
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Clarica Mutual Funds 2003 Annual Report as at December 31, 2003 A look inside A Message From The President............................................................................................1 A Message From AIM Funds Management Inc.................................................................................................2 Altrinsic Advisors, LLC ..........................................................................................................3 Harbour Funds Group ............................................................................................................4 J. Zechner Associates Inc.....................................................................................................5 MFC Global Investment Management (Canada) ..................................................................6 Signature Funds Group..........................................................................................................7 Sionna Investment Managers Inc.........................................................................................8 Steinberg Priest & Sloane Capital Management, LLC ........................................................9 Trilogy Advisors, LLC ...........................................................................................................10 UBS Global Asset Management (Canada) Co. ..................................................................11 Equity Funds Clarica Alpine Canadian Resources Fund....................................................................................12 Clarica Alpine Growth Equity Fund..............................................................................................16 Clarica Canadian Blue Chip Fund ................................................................................................20 Clarica Canadian Equity Fund......................................................................................................24 Clarica Canadian Large Cap Value Fund .....................................................................................27 Clarica Canadian Small/Mid Cap Fund .......................................................................................30 Clarica Global Large Cap Value Fund ..........................................................................................34 Clarica Premier International Fund..............................................................................................37 Clarica Summit Canadian Equity Fund ........................................................................................41 Clarica Summit Dividend Growth Fund .......................................................................................44 Clarica Summit Foreign Equity Fund............................................................................................47 Clarica US Small Cap Fund..........................................................................................................50 Balanced Funds Clarica Balanced Fund..................................................................................................................53 Clarica Canadian Diversified Fund...............................................................................................57 Clarica Summit Growth and Income Fund...................................................................................61 Income Funds Clarica Global Bond Fund.............................................................................................................64 Clarica Premier Bond Fund...........................................................................................................67 Clarica Premier Mortgage Fund...................................................................................................70 Notes to the Financial Statements (Clarica Mutual Funds)............................................73 Management and Audit Reports (Clarica Mutual Funds)................................................76 Trustee’s Letter and Legal Notice.......................................................................................77 CI Place, 151 Yonge Street, Eleventh Floor Telephone: 416-364-1145 Toronto, Ontario M5C 2W7 Toll Free: 1-800-268-9374 www.cifunds.com Facsimile: 416-364-6299 A Message from the President Dear Client, Investors saw a dramatic turnaround in 2003. The year started with a difficult first three months, marked by the beginning of the U.S.-led invasion of Iraq. However, global stock markets then rallied, as world economies began to improve and interest rates remained low. While the Canadian stock market did well in 2003, the sharp rise in our dollar also affected investors by dampening the returns on global investments when reported in Canadian dollars. For example, the S&P 500 Index was up 29% in U.S. dollars for the year, but gained only 5% in Canadian dollars. Despite these currency changes, the overall outlook for global markets at the start of 2004 was much more positive than it had been for some time. At CI Funds, we continued to build on our product lineup and our portfolio management expertise in 2003 by acquiring Synergy Asset Management Inc. and Skylon Capital Corp., manager of the VentureLink Group of Labour-Sponsored Funds and a series of structured products. The acquisitions were a result of our goal of offering investors a wide choice of funds and portfolio managers, whether you are investing in mutual funds, segregated funds or another product. Another important part of our business is providing an industry-leading level of service to our clients. One example is CI e-Service Centre, which allows you to view online the most up-to-date information about your CI account. You can also elect to receive statements, trade confirmations and tax receipts electronically. You can register for this convenient service at www.cifunds.com. Over the past 30 years, this emphasis on innovation and choice has helped CI to grow into one of the largest investment fund companies in Canada. As one of two million Canadians who invest with CI Funds, you benefit from our strength, experience and diversity. If you have any questions about your account or this annual report, please contact your advisor or CI Client Services at 1-800-563-5181 or [email protected]. Thank you for investing with CI Funds. Sincerely, Peter W. Anderson President and Chief Executive Officer CI Mutual Funds Inc. January 30, 2004 2003 Annual Report as at December 31, 2003 – 1 – A Message from AIM Funds Management Inc. Virtually every major equity index registered sharply positive With the impressive gains in virtually all equity markets in 2003, it returns in 2003. should not be surprising that the abundance of investment opportunities is not as plentiful. In 2004 and beyond, astute stock picking will reward In the U.S., the Nasdaq Composite Index, the S&P 500 Index and investors – great investment ideas are not as obvious as in the past. We the Dow Jones Industrial Average snapped three-year losing streaks believe our portfolios remain attractive and equity returns over the next with near-record returns. The 50% return for the Nasdaq was the few years will compare favourably to government bonds or cash. third best ever result, the 26% return for the S&P 500 was the fifth However, it is our expectation that returns will not be as strong as those best return since 1980 and the Dow had its strongest return since witnessed in 2003. 1996, posting a positive 25.3% (all returns in U.S. dollars). AIM FUNDS MANAGEMENT INC. The story was much the same in Canada with the S&P/TSX Composite Index returning 26.7%, the seventh best return in the January 30, 2004 past 35 years, and breaking a two-year losing streak. These returns are certainly quite impressive, and highlights just how resilient the equity markets can be and how important equities are for growth in a portfolio. At the beginning of 2003, many people were thinking that cash was the best place to park their money until there were some clear signs that the bear market was over. It is never that simple. Not only did Canadian equities outperform a T-bill invest- ment by over eight times in 2003, but the past two years show that Canadian equities have also outperformed cash by almost twice as much, despite posting a negative return in 2002. Investment success is measured over long periods of time, and we truly believe that an equity investment offers investors the opportunity for long-term growth in their portfolios. The backdrop for these impressive gains included continued expansion in the North American economies, led by consumer spending, low inflation, low interest rates and evidence that the “growth torch” was being passed from the consumer to the corporate sector late in the year. It is our view that these broad trends will continue in North America and even begin to gain momentum around the globe, offering investors a reasonably optimistic backdrop for investing over the next few years. 2003 Annual Report as at December 31, 2003 – 2 – A Message from Altrinsic Advisors, LLC A year that began burdened by concerns about war in Iraq, SARS Accordingly, we added to our holdings in several European industrials and weak global economic conditions proved rewarding for investors in 2003, such as BASF Group, a German chemical company that in global equities. Narrowing credit spreads and increased appetite trades at 40% discount to Dow Chemical while providing a 3.4% for risk, coupled with prospects for a synchronized global economic dividend yield. Additionally,