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PERFORMANCE SUMMARY • • • For Q1 2012, Mackenzie Canadian Balanced All Cap Value1 returned 5.7%. This compares with the blended index2 return of 2.6% The relative outperformance was driven primarily by the equity portion of the mandate benefitting from strong returns from the energy, materials, and consumer discretionary sectors The mandate also benefitted from its asset mix which over-weighted equities compared to the blended benchmark CONTRIBUTORS TO PERFORMANCE • • • The largest contributor to performance was the individual stock performance within the energy sector Other contributors were strong stock performance in the materials sector and both an overweight position and good stock performance in the consumer discretionary sector The biggest single contributor to the mandate was the holding in Flint Energy. In the quarter Flint was the target of a takeover offer at a significant premium to its trading price. Additionally, holdings in auto suppliers Linamar and Magna were strong performers as the outlook for auto production improved DETRACTORS FROM PERFORMANCE • • The biggest detractors from portfolio return were the mandate’s precious metals holdings. Within the group, Iamgold had the largest negative impact The consumer discretionary sector was also a negative contributor to the mandate, as investors looked more favourably on economically sensitive companies. Loblaw’s was the largest negative contributor to the mandate in this sector. As well, within that sector there was takeover speculation pushing up the price of Viterra which was not held in the mandate PORTFOLIO ACTIVITY • • The portfolio managers added to the mandate’s positions in: o Bank of Nova Scotia (BNS) is Canada’s third largest bank and has a unique international strategy. In the quarter the company’s valuation declined relative to the other banks and provided a good buying opportunity o SNC-Lavalin Group was added despite short-term issues regarding payments to contractors, the portfolio managers believe the company has a strong asset base and significant value will be realized over time The portfolio managers added to the mandate’s positions in: o Potash Corp as it had lagged other fertilizer producers and represented good value • The portfolio managers sold or reduced the mandate’s position in: o Thomson Reuters - even though the company has appointed a new CEO and embarked on another corporate restructuring, after numerous years of poor execution in its markets division, the portfolio managers believe the restructuring will be a long, difficult process and sees better risk reward opportunities elsewhere in the market o CP Rail – the portfolio managers felt it was prudent to reduce the position in CP rail as the stock climbed ever higher due to activist shareholder Pershing Squares Capital Management’s involvement with the company o Within the fixed income portion of the portfolio the portfolio managers reduced long provincial positions as spreads narrowed and have been selectively adding to BBB corporate holdings in the 5-10 year range, which offer very attractive spreads over Canadian government bonds OUTLOOK • • • • The first quarter of 2012 reflected a further reduction in the uncertainty that consumed the market in the second half of 2011. Investors appear to be somewhat more optimistic about the prospects for world growth following increased cooperation in Europe and generally positive economic news from the US Global economic conditions have improved but remain vulnerable. China, which has been the key driver of much of global growth in the last five years, appears to be slowing economically. Consequently global interest rates remain at historically low levels and are not expected to rise in the near term Though the year-over-year Consumer Price Index (CPI) increased slightly in the first quarter, the portfolio managers do not see inflation as being problematic as there is very little ability to pass through higher commodity prices to consumers. Corporate bonds generally offer investors a significant yield increment over government bonds in this low yield environment. The portfolio managers believe that, over time, this should translate into additional return in the fixed income portion of the mandate as the carrying yield advantage is realized Yield on the Canadian stock market is above even the 30-year Canadian government bond. The portfolio managers see this as relatively positive for equities and are maintaining their strategy of a 70% equity/30% fixed income asset mix PORTFOLIO MANAGEMENT TEAM: EQUITY Hovig Moushian, MBA, CFA Portfolio Manager; Industry experience: 15 years; Firm experience: 10 years Gordon Winter, MBA, CFA Portfolio Manager; Industry experience: 18 years; Firm experience: 6 years Alan Pasnik, CA Portfolio Manager; Industry experience: 17 years; Firm experience: 8 years William Aldridge, MBA, CFA Portfolio Manager; Industry experience: 16 years; Firm experience: 6 years Michael Morden, MBA, CFA Associate Portfolio Manager; Industry experience: 18 years; Firm experience: 6 years Wincy Wong Associate Portfolio Manager; Industry experience: 14 years; Firm experience: 6 years Adelaide Kim, CFA Senior Investment Analyst; Industry experience: 11 years; Firm experience: <1 year 2 | Q 1 - 2 0 1 2 FIXED INCOME Steve Locke, MBA, CFA Portfolio Manager; Industry experience: 17 years; Firm experience: 8 years Felix Wong, MBA, CFA Associate Portfolio Manager; Industry experience: 23 years; Firm experience: 12 years Mandate and Benchmark Performance as at: March 31, 2012 1 Mackenzie 2 Blended Canadian Balanced All Cap Value Index (comprised of 60% TSX Composite TR Index + 40% DEX Universe Bond TR Index) 1 year 2 years 3 years 4 years 5 years 10 years -4.5% 5.2% 16.0% 4.2% 3.5% 7.4% -2.1% 5.7% 12.3% 3.6% 3.8% 7.3% The performance of the Mackenzie Canadian Balanced All Cap Value mandate is represented by the gross returns of the Series A units of Mackenzie Saxon Balanced Fund for the period. The performance of the blended index reflects the gross returns of the index for the period indicated. © Mackenzie Financial Corporation 2012. All rights reserved. “Mackenzie Institutional” is a trademark of Mackenzie Financial Corporation (“Mackenzie”) and is used to identify Mackenzie’s institutional investment management and institutional client relationship activities. The contents of this document do not constitute specific advice regarding your investment situation or provide specific advice about investment, insurance, financial, legal, accounting, tax or similar matters. Certain information contained in this document is obtained from third parties. Mackenzie believes such information to be accurate and reliable as at the date hereof, however, we cannot guarantee that it is accurate or complete or current at all times. No portion of this communication may be reproduced or distributed to anyone without the express permission of Mackenzie. 3 | Q 1 - 2 0 1 2