Short-Term Income Class

Short-Term Income Class Commentary

Portfolio Advisor: Industrial Alliance Investment Management Inc.

Fund Commentary - March 31, 2013

The Bank of Canada renewed its key rate twice during the quarter, specifying in its March 6 statement, in a very dovish tone, that "the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required." Inflation remains below the Bank's projections and the output gap is currently between 1.5% and 2%, reducing the chances of an inflationary trend in the medium term.

The Fund has a focus on capital preservation. It invests primarily in money market instruments that mature in less than 365 days. At quarter end, the fund was solely invested in short-term fixed income securities. The weighted interest rate of the fund was 0.95% and the weighted maturity was 56 days. The Portfolio Advisor continues to focus on high-quality issuers and maintaining a high degree of liquidity in the Fund. The Portfolio Advisor is not taking any unnecessary credit risk in the selection of securities as the main investment objective of the Fund is capital preservation and liquidity.

The manager is currently waiving a portion of the management fees and absorbing expenses of the Fund in order to ensure that the fees and expenses of the Fund do not exceed the yield on the portfolio.  The manager may change the level of absorption as well as the waiver of fees and expenses from time to time in response to changing market conditions.