Target Click 2015 Fund

Target Click 2015 Fund Commentary

Portfolio Advisor: Fortis Investment Management Canada Limited (now called BNP Paribas Investment Partners Canada Ltd.)

Fund Commentary - December 31, 2011

The Fund was rebalanced in February 2011, resulting in less exposure to the BNP Paribas Global Equity Exposure Fund ("BNP GEEF") and an increase of the cash/T-bill liquidity provision. The reduction of the BNP GEEF was due to its positive performance over the 12 months preceding the end of February 2011. This rebalancing was consistent with the Fund's investment strategy of annually rebalancing the investment in the BNP GEEF and the liquidity provision to approximately equal amounts.

The Fund underperformed its blended benchmark as the investments of the fixed income component have a shorter duration than the DEX Universe Bond Index.  Additionally, the Fund's equity component was a detractor to overall performance.

The Fund outperformed its broad-based benchmark mostly due to its high allocation to strip bonds. During 2011, fixed income assets benefited from a flight to safety as economic uncertainty rattled global equity markets, mostly in the second half of the year. Amongst the fixed income assets, longer dated maturities benefited most when compared to shorter and mid term maturities. The Fund can invest only in Canadian federal and provincial strip bonds. The Fund's allocation to fixed income assets was a significant positive contributor to performance as, in Canada, prices for government strip bonds maturing in 2015 increased as yields fell.

The Fund's equity exposure has less currency risk exposure than the equity portion of the benchmark, and is equally weighted across the Americas, Europe, and Asia, while the equity portion of the benchmark is weighted by market capitalization. This results in the Fund's equity exposure having a lower allocation to the Americas and a higher allocation to Asia. The Fund can invest only in Canadian Federal and Provincial strip bonds, while the bond portion of the benchmark incorporates corporate and municipal bonds along with government bonds. Overall, the allocation to bond and equity exposure can differ as the Fund does not use a fixed ratio similar to the benchmark.

The international equity markets that the Fund is exposed to had difficult returns in 2011. In local currency terms, Asia and continental Europe suffered the most with the Hang Seng dropping by 17.0%; and the Nikkei 225, the ASX 200 and the Dow Jones Euro Stoxx 50 trailing respectively. The S&P/TSX 60 Index, the Canadian index which was added in February 2011, declined by 8.9% The U.K. fared better, but the FTSE 100 was still down by 1.5%. The U.S. showed resilience with the S&P 500 Index returning 2.1%.

The optimism at the beginning of 2011, which enabled U.S. equity indices to reach their highest levels since August 2008, quickly subsided when global geopolitical risks and natural disasters triggered an increase in the volatility of most financial assets. The persistent concerns over the sovereign debt of southern European countries, the prospect of a slowdown in macroeconomic activity in the U.S. and China, and the contraction of Japanese output as a result of the earthquake all had a large, negative impact on equities. Only the revival of optimism in late June, after the adoption of the austerity plan in Greece, helped lift markets.