Scott White, CFA Quarterly Investment Update Second Quarter 2010

Market Update: A Quarter in Review June 30, 2010 Data is in Canadian dollars. Market segment (index representation) as follows: Canadian stocks: Large Cap (TSX 60), Small Cap (MSCI/Barra Canadian Small), Growth (MSCI/Barra Canadian Growth), Value (MSCI/Barra Canadian Value); US stocks: Large Cap (S&P 500), Small Cap (Russell 2000), Growth (Russell 3000 Growth), Value (Russell 3000 Value); International stocks: Large Cap (MSCI EAFE [net div]), Small Cap (MSCI EAFE Small (net div)), Growth (MSCI EAFE Growth [net div]), Value (MSCI EAFE Value [net div]), Emerging Markets (MSCI Emerging (net div)); Real Estate: Global REITs (S&P Global REIT [net div]); Fixed Income: Canadian (Canadian 1-month T-bills), Short Term Bonds (DEX Short Term Bond), Canadian Bonds (DEX Universe Bond), Global Bonds-Hedged (Citigroup World Government Bond Index 1-5 Years [hedged to CAD]). Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance does not guarantee future returns. S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group , all rights reserved. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup bond indexes copyright 2010 by Citigroup. CANADIAN STOCKS US STOCKSREAL ESTATE AND FIXED INCOME INTERNATIONAL STOCKS Large CapSmall CapGrowthValueLarge CapSmall CapGrowthValueEmerging -5.69%-5.05%-4.57%-7.27%-9.82%-7.04%-8.21%-11.45%-3.94% Large CapSmall CapGrowthValue Global REITs 1-Month T-Bills Short Term Bonds Intermediate Bonds Global Bonds (hedged) -7.15%-5.58%-7.28%-6.79%-2.14%+0.08%+1.72%+2.93%+0.97%

Survey of Long-Term Performance June 30, 2010 Annualized (%) Asset ClassIndex1 Year3 Years5 Years10 Years20 Years Since Inception Inception date CANADIAN STOCKS Large Cap TSX Feb 1987 Small Cap MSCI/Barra Canadian Small Jul 1990 Growth MSCI/Barra Canadian Growth Jan 1982 Value MSCI/Barra Canadian Value Jan 1982 US STOCKS Large Cap S&P Feb 1951 Small Cap Russell Jan 1979 Growth Russell 3000 Growth Jan 1979 Value Russell 3000 Value Jan 1979 INTERNATIONAL STOCKS Large Cap MSCI EAFE (net div.) Jan 1970 Small Cap MSCI EAFE Small (net div.) N/A4.08 Jan 1993 Growth MSCI EAFE Growth (net div.) Jan 1975 Value MSCI EAFE Value (net div.) Jan 1975 Emerging Markets MSCI Emerging (net div.) Jan 1988 REAL ESTATE Global REITs S&P Global REIT (net div.) Jul 1989 FIXED INCOME Canadian BillsCanadian 1-Month T-Bills Jun 1973 Canadian Short Term BondsDEX Short Term Bond Jan 1980 Canadian BondsDEX Universe Bond Jan 1980 Global Bonds (hedged)Citigroup World Government Bond Index 1-5 Years N/A5.52 Oct 1992 Data is in Canadian dollars. MSCI EAFE Small index return is price only prior to January 1999 data inception. MSCI Emerging index return is gross dividends prior to January 1999 data inception. S&P Global REIT index return is gross dividends prior to January 2001 data inception. S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group , all rights reserved. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup bond indexes copyright 2010 by Citigroup. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

Weights Number of Countries Number of StocksTotal ValueJune 30, 2010 Change from Previous Year 01/90-06/10 Average Canada Trillion4.63%0.41%3.00% United States12, Trillion41.03%0.46%44.53% Developed Markets223, Trillion 39.33%-2.65%47.65% Emerging Markets212, Trillion15.00%1.77%4.82% Total458, Trillion100.00% Value of Stock Markets around the World January 1990-June 2010 Data is in US dollars and values are beginning of month. The proxies for the Canadian and US equity markets are based on the respective country markets from the MSCI All Country World IMI Index. The international developed market proxy is the MSCI All Country World IMI ex USA ex Canada Index. The proxy for emerging markets is the MSCI All Country World IMI Index (Emerging Markets). MSCI data copyright MSCI 2010, all rights reserved. Global market capitalization weights are not static; they change across time. Emerging Markets Maximum 15.00% June 2010 CAN Stock Market Maximum 4.77% May 2010 Intl. Developed Markets Maximum 65.26% January 1990 US Stock Market Minimum 31.55% January 1990 Emerging Markets Minimum 0.76% January 1990 US Stock Market Maximum 54.85% January 2002 Intl. Developed Markets Minimum 39.71% January 2002 CAN Stock Market Minimum 2.21% August 1998

Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ? ? ? ? ? ? ? ? The Randomness of Quarterly Returns June 30, 2010 Data is in Canadian dollars. Indexes represented as follows: Canadian stocks (S&P/TSX Composite Index), US stocks (Russell 3000 Index), International Developed Markets (MSCI EAFE Index), Emerging Markets (MSCI Emerging Markets Index), Global REIT (S&P Global REIT Index), Canadian 1-Month T-Bills, Canadian Bonds (DEX Universe Bond), Global Bonds (Citigroup World Government Bond Index Canada 1-5 Years). Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. S&P/TSX data provided by S&P/TSX. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group , all rights reserved. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Citigroup bond indexes copyright 2010 by Citigroup. Highest Return Lowest Return This table shows from top to bottom the highest returning asset classes each quarter over the last 14 quarters. Each asset class is color coded based on the legend below. The lack of a pattern indicates that picking which asset classes will be the best or worst performers is virtually impossible. Portfolios combining these various investments will avoid extreme returns. Canadian Stocks US Stocks International Developing Markets Emerging Markets Global REITs 1-Month CAN Treasury Bills CAN Bonds Global Bonds

Currency June 30, 2010 CHANGE IN FOREIGN EXCHANGE RATES (%) FX/$CAD CurrencyQ1 2010One YearThree Years $ US Dollars -3.71%9.62%0.46% € Euro 5.68%26.26%11.56% £ Pounds -2.37%21.13%34.93% ¥ Yen -8.96%1.36%-27.19% Data is in Canadian dollars. The market for the United States, International Developed Markets, and Emerging Markets is defined as: Russell 3000 Index, MSCI EAFE Index, and MSCI Emerging Markets Index, respectively. The S&P data are provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group , all rights reserved. MSCI data copyright MSCI 2010, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. FX Rates courtesy of Federal Reserve of New York. IMPACT OF CURRENCY FLUCTUATIONS Annual Returns in CAD and Local CurrencyThree-Year Annualized Returns in CAD and Local Currency CADLocal Currency

MSCI Country Returns in Canadian Dollars and Local Currency June 30, 2010 ONE YEAR RETURNS IN CAD AND LOCAL CURRENCY Return in CAD Return in Local Currency Impact of Currency 1. Indonesia 48.54%44.17%4.37% 2. Colombia 42.10%38.62%3.48% Canada12.27% – United States 5.96%15.81%-9.85% Spain %-1.08%-19.88% 45. Greece %-37.66%-12.52% SECOND QUARTER 2010 RETURNS Return in CAD Return in Local Currency Impact of Currency 1.Philippines 9.14%6.89% 2.25% 2.Indonesia 8.89%3.56% 5.33% Canada-5.92% –. 24. United States -7.11%-11.32% 4.21% Hungary %-17.01% -9.64% 45.Greece %-32.02% -3.53% MSCI data copyright MSCI 2010, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

MSCI Country Returns June 30, 2010 Data in Canadian dollars gross of fees. MSCI data copyright MSCI 2010, all rights reserved. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. COUNTRY RANKINGS–TEN-YEAR ANNUALIZED RETURNS Canada United States Percent Return How to edit this page: 1.Copy new data from source 2.Right click on chart and select “edit data” 3.Paste new source data “as values” over old data 4.The Canadian and USA rankings will changes, so you will have to delete the “Canada” and “USA” names from the data names 5.On the powerpoint page, reposition the Canadian flag and name label to its new ranking location 6.Same for USA flag and label 7.Recolor the Canada and USA data points to their new position

Bond Returns June 30, 2010 Data is in Canadian dollars. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. Data provided by Citibank. Treasury yield data provided by Bank Of Canada; copyright © , Bank of Canada. Return (%) IndexQ One Year Three Years Annualized Canadian 1-Month T-Bills 0.08%0.21%1.72% DEX Short-Term Bond Index 1.72%4.31%6.26% DEX Mid-Term Bond Index 3.30%8.39%8.01% DEX Long-Term Bond Index 5.05%10.85%7.43% DEX Universe Bond Index 2.93%6.88%6.90% Citigroup World Government Bond Index 0.97%3.01%5.10% (1-5 years hedged) CAN Treasury Yield Curve

- $1.13 $1.24 $1.00 $0.97 $1.05 $1.07 $1.12 ONE YEAR Growth of Wealth June 30, 2010 $1.07 In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills, 30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

- THREE YEARS Growth of Wealth June 30, 2010 $0.63 $0.89 $1.05 $0.94 $1.22 $0.93 $0.73 $0.65 Jun-10

- $0.84 $0.91 $1.27 $1.30 $1.58 $1.16 $0.77 $1.13 FIVE YEARS Growth of Wealth June 30, 2010 Jun-10 In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills, 30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

$1.32 $1.33 $0.61 $1.89 $1.38 $1.87 $1.57 $0.73 TEN YEARS Growth of Wealth June 30, 2010 Jun-10 In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills, 30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

- $2.00 $4.43 $4.04 $5.59 $5.04 $2.34 $4.01 $5.22 TWENTY YEARS Growth of Wealth June 30, 2010 In Canadian dollars. T-Bills is Canadian 1-Month T-Bills, Canadian Bonds is DEX Universe Bond Index, International Stocks is MSCI EAFE Index (net div.), Emerging Markets Stocks is MSCI Emerging Markets Index (gross div.) from 01/1988 to 12/1998 and MSCI Emerging Markets Index (net div.) from 01/1999, US Stocks is S&P 500 Index, Global Real Estate is S&P Global REIT Index (gross div.) from 07/1989 to 12/2000 and S&P Global REIT (net div.) from 01/2001 and Canadian Stocks is S&P/TSX Composite Index. Balanced Portfolio is 10% T-Bills, 30% Canadian Bonds, 20% Canadian Stocks, 15% US Stocks, 15% International Stocks, 5% Emerging Markets Stocks and 5% Global Real Estate. Canadian fixed income data provided by PC-Bond, a business unit of TSX Inc.; copyright © TSX Inc., all rights reserved. MSCI data copyright MSCI 2010, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

Quarterly Topic Great Gains Come in Spurts Capital market returns are there for the taking, but short-term discipline and a long-term perspective are required to capture them because market gains often come in short and unpredictable spurts. 98% of the growth of wealth from investing in Canadian and US stocks over the last 43 years came from the best month each year. Growth of $ Data is in Canadian dollars. The S&P data are provided by Standard & Poor's Index Services Group. S&P/TSX data provided by S&P/TSX. Indexes are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results

Quarterly Topic Forecasting Interest Rates It seemed so obvious. With the economy slowly recovering last year from the worst recession in decades and the federal government spending tens of billions to stimulate job growth, both laymen and experts alike seemed to agree that interest rates had nowhere to go but up. The yield on the ten-year U.S. Treasury note as of June 30, 2009 was 3.52%, down from 5.25% in June 2007 but well above the 2.09% level registered amidst the worst of the credit crisis the previous December. With retail sales and housing activity showing signs of gradual improvement, the only question appeared to be how much higher interest rates would go. Among fifty economic forecasters surveyed by the Wall Street Journal in 2009, forty-three expected the ten-year U.S. Treasury note yield to move higher over the year ahead, with an average estimate of 4.13%. Seven expected a rate of 5.00% or higher while only two predicted rates to fall below 3.00%. The result? The ten-year Treasury yield slumped to 2.95% on June 30, 2010, and rates on thirty-year mortgages fell to their lowest level since Fannie Mae began tracking them in Some observers may be tempted to poke fun at these hapless “experts,” implying they are incompetent or poorly informed. This interpretation is flawed since it suggests that a team of better experts would achieve a more accurate result. A more useful explanation is that even the most talented analysts are unlikely to make reliable predictions, and the poor showing by this particular group is simply what we would expect to see, just as often as not, if markets are working freely and fairly. Today’s bond prices already reflect expectations for tomorrow’s business conditions and inflation, and these expectations can change quickly in response to new information. However tempting it may be to believe that we can predict the future better than other market participants through careful study, the results of the Wall Street Journal survey as well as numerous other efforts suggest this confidence is misplaced. What is the message for investors? Predicting interest rates and bond prices is no easier than predicting stock prices, and making decisions based on what appear to be certain outcomes at the time can often prove costly. Many investors reconfigured their portfolios in anticipation of higher interest rates and have penalized their results while they are waiting. Instead of seeking to predict the unpredictable, investors are much more likely to enhance their results by focusing on the elements they can control—risk exposure, diversification, and minimizing costs and taxes. Yahoo! Finance accessed July 7, Wall Street Journal Forecasting Survey, accessed July 7, Prabha Natarajan and Matt Phillips, “Stocks Drop; So Do Mortgage Rates” Wall Street Journal, June 25, Mark Gongloff, “Two Treasury Forecasts: a Grand Canyon-Sized Gap,” Wall Street Journal, April 10, 2010.

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