Monthly. Politicians at the heart of economic uncertainty. China - CPI y/y Variation (%)

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1 Monthly Update July 31, 2012 SAVINGS AND RETIREMENT Politicians at the heart of economic uncertainty By Jonathan Girard, M. Sc. Analyst, Fund Management Investment Management Inc. T he more things change, the more they stay the same! Concerns over European debt have sparked fears that the euro zone could break up. Attention is simply wavering from one European country to another. It began with Ireland, and then Greece. After the implementation of austerity measures, concerns emerged for Portugal, and then for two countries with economies of much greater size, Italy and Spain (third and fourth respectively in the European zone). No sooner is an agreement reached for helping one country than another country is in trouble. Instead of reacting to the difficulties of each troubled European country as they arise, ideally what is needed is a more proactive and coordinated approach. A ray of hope to this effect appeared on June 29, when European leaders reached an agreement in principle to create the European Stability Mechanism (ESM). This mechanism would be used to recapitalize troubled European banks directly. But hope quickly gave way to doubts in light of the obstacles to its implementation. In order for the ESM to be established, it must be accepted by all member countries. One only has to look to Germany to realize that this unanimity is far from being achieved. Faced with the possi-bility of having to write a blank cheque, German constitutional judges are currently examining the constitutionality of the ESM s rescue measures. Unfortunately, their verdict will not be known until September, which does nothing to alleviate the persisting climate of uncertainty. Yet this political uncertainty cannot last many more years because it allows market moods to influence the economic conditions of not just the countries in precarious situations, but also, through their reverberations, those of the more financially sound countries as well. % Yet this political uncertainty cannot last many more years because it allows market moods to influence the economic conditions of not just the countries in precarious situations, but also, through their reverberations, those of the more financially sound countries as well. One only has to look at the rates at which Spanish ten-year bonds are currently trading (6.69% today compared to 3.75% in the second quarter of 2010) to be convinced that European leaders are playing with fire. Even the highest rated countries such as Germany, the Netherlands and Luxembourg risk seeing their credit ratings downgraded following the lowering of their credit outlook to negative by Moody s on July 23. Although, at the moment, attention is centred primarily on Europe, it will gradually shift to U.S. politicians as the end of the year draws near. Even though U.S. economic growth has been slowed by the European debt crisis, several major political issues could, potentially, plunge the country back into recession. At this same time last year, the interminable debate on raising the debt ceiling led to fears of a historic U.S. government default on its creditors. Before the end of this year, the U.S. Congress will have to pass its budget for 2013, and it is easy to picture that negotiations surrounding a new increase in the debt ceiling could become long and arduous. Despite the fact that it was very difficult, at that time, to imagine a U.S. default, it still caused a great amount of uncertainty on the markets. Check the Group Products and Services section for daily unit values. Evolution of China s Consumer Price Index and its Prime Lending Rate China - CPI y/y Variation (%) China - Prime Lending Rate (%) % Sources: CNBS, CSIC/Haver There is also all the uncertainty surrounding the end of the temporary income tax reductions set up during the Bush era. At the moment, they are expected to stop at the end of the year. Will they be extended, modified or simply terminated? Given that U.S. economic growth has been below its potential for more than a year, there is reason to be concerned about the impact that an increase in taxation would have on the country s economic growth. Add to this the November presidential elections which are creating a climate where neither the Democrats nor the Republicans really have a political interest in finding a middle ground on these issues before elections are held. In light of all this economic and political uncertainty, we have to admit that the markets could remain quite volatile in the short term. According to initial estimates, U.S. GDP expanded 1.5% on an annualized basis in the second quarter of Although the economy has been growing at a slower rate than its potential for five out of the last six quarters, it is still growing enough for the Fed to remain reticent to intervene once again. We can presume that it is waiting for a clearer signal that the economic recovery is threatened. Despite the opposing winds it faces, China is no longer a major source of anxiety for markets. Its Continued on last page Monthly Update

2 Gross returns as at July 31, 2012 Reference Net assets 1 Simple returns 2 Compound annual returns Investment Index in millions 1 month 3 months YTD 1 year 3 years 5 years 10 years advisor $ % % % % % % % ASSET ALLOCATION FUNDS FU506 Asset Allocation - Conservative INDC506 FU507 Asset Allocation - Moderate INDC507 FU508 Asset Allocation - Balanced INDC508 FU509 Asset Allocation - Growth INDC509 FU510 Asset Allocation - Aggressive Growth INDC510 INCOME FUNDS FU070 Money Market IN018 FU170 Short Term Bonds IN019 FU020 Bonds IN021 FU750 Bonds (Beutel Goodman) IN021 FU860 Bonds (PIMCO) IN021 FU472 Bonds (Fiera Capital) IN021 FU521 Bonds (PH&N) IN021 FU489 Emerald Canadian Bond Index (TD) IN021 FU504 Long Term Bonds IN056 FU861 Long Term Bonds (PIMCO) IN056 DIVERSIFIED FUNDS FU240 Diversified Security INDC240 FU040 Diversified INDC040 FU463 Diversified () INDC463 FU380 Diversified (MFS McLean) INDC380 FU522 Balanced (PH&N) INDC522 FU751 Diversified (Beutel Goodman) INDC751 FU250 Diversified Opportunity INDC250 FU462 Fidelity Canadian Asset Allocation INDC462 CANADIAN EQUITY FUNDS FU160 Dividends IN026 FU753 Canadian Equity Index (TD) IN024 FU010 Canadian Equity Value INDC010 FU % Canadian Equity Value IN024 FU488 Canadian Equity () IN024 FU543 Canadian Equity (Scheer Rowlett) IN024 FU835 Canadian Equity (Highstreet) IN024 FU487 Canadian Equity (Invesco) IN024 FU871 Canadian Focused Equity (Pyramis) IN031 FU862 Canadian Equity (Pyramis) IN031 FU752 Canadian Equity (Beutel Goodman) IN024 FU464 Canadian Equity Growth IN024 FU360 Canadian Equity (MFS McLean) IN031 FU473 Canadian Equity (Fiera Capital) IN024 FU270 Fidelity True North IN031 FU511 Canadian Equity (Small Cap.) (Montrusco) IN037 FU541 Canadian Equity (Small Cap.) (QV) IN037 FU514 Canadian Equity Responsible (MFS McLean) IN024 FOREIGN EQUITY FUNDS FU707 Global Equity IN008 FU465 Global Equity (Templeton) IN008 FU754 Global Equity (Sprucegrove) IN008 FU837 Global Equity (Artio) IN008 FU500 Global Equity (Hexavest) IN008 FU865 Global Equity (C$-Hedged) (Hexavest) IN104 FU534 Global Dividends (BNP Paribas) IN089 FU390 Global Equity (MFS McLean) IN008 FU863 Global Equity (Pyramis) IN008 FU531 Global Equity (Small Cap.) (DB Advisors) 3 IN079 FU300 International Equity Index (BlackRock) IN046 FU706 International Equity IN002 FU080 International Equity (Templeton) IN002 FU755 International Equity (Sprucegrove) IN002 FU483 International Equity () IN002 FU838 International Equity (Artio) IN002 FU852 International Equity (Hexavest) IN002 FU467 International Equity (MFS McLean) IN002 FU760 U.S. Equity Index (BlackRock) IN098 FU705 U.S. Equity IN014 FU839 U.S. Equity (Batterymarch) IN014 FU756 U.S. Equity (Sprucegrove) IN014 FU512 U.S. Equity () IN014 FU513 U.S. Equity (MFS McLean) IN014 FU540 Global Real Estate (BNP Paribas) IN * * (0.7) * (1.7) 1.8 (1.2) * (2.6) 1.5 (3.3) * , * 6.5* 7.8* 6.9* * 7.8* * * * * 11.3* , (1.3) (0.1) (1.6) 3.6 (1.7) (0.1) (0.9) * (1.4) * 6.6* 3.4* 6.9* (2.6) 0.4 (3.0) (1.8) 0.1 (2.5) (2.8) (4.4) (1.0) (7.4)* 5.5* (0.5)* 8.5* (0.3) (4.6) (0.7) (7.5) 2.9 (2.0) (5.3) (3.2) (9.9) 2.6 (0.4) (2.4) 2.1 (1.6) (4.8) 1.3 (6.1) 5.1 (1.8)* 8.6* (4.5) (2.0) (7.8) 3.8 (2.4)* 8.7* (4.0) 2.7 (4.8) * (4.5) 0.3* (6.2)* 6.6* 1.9* (3.7) 0.8 (5.7) 7.5* 1.3* (3.5) 2.5 (1.1)* 6.7* 2.1* 9.3* (4.3) 0.1 (7.1) (0.4) (5.4) 1.4 (13.1) 0.2 (3.8) (2.5) 3.2 (4.2) (2.1) 2.9 (1.5) (5.6) (0.3) (7.5) * * (3.6) 4.1 (8.3) 3.4 (2.2) 7.4* 77.2 (1.0) (2.1) 7.2 (0.3) (0.3) (2.9) 2.5 (6.2) 2.0 (5.7) (0.4) (1.2) * 7.0* (3.4)* 2.5* 1.8 (2.0) (5.1) 2.9 (7.6) 2.8 (5.2)* 1.5* * (2.9) (0.3) (2.2) (3.2) (0.4) (1.0) * (3.4)* (1.3) (6.3) 2.0 (4.8) 7.9 (2.4) (0.6) (2.6) 2.8 (6.6) 1.0 (6.1) (1.2) (3.7) 4.7 (9.3) (1.0) (4.0) (0.4) (10.2) (0.7) (7.2) (0.6) (3.2) 3.6 (3.5)* 5.4* (3.8)* 3.8* 4.7 (0.1) (2.5) (1.0) (4.5) 2.1 (13.1) (2.3) (8.7)* (0.9) 0.9 (2.4) 4.1* 6.0 (1.7) (4.0) 2.5 (5.9) 1.3 (4.3) (0.3) * 11.2* (0.2)* (0.6) (0.4) (0.5) (0.4) (1.6)* 1.5* 0.8 (0.4) * 10.0* (0.6)* * (1.4) 2.2* (2.8) 6.0* Beutel Goodman PIMCO Fiera Capital Phillips, Hager & North TD PIMCO Phillips, Hager & North Beutel Goodman Fidelity TD Scheer Rowlett Highstreet Invesco Pyramis Pyramis Beutel Goodman Selexia Fidelity Montrusco Bolton QV Investors Inc. Templeton Sprucegrove Artio Hexavest Hexavest BNP Paribas Inv Partners Pyramis DB Advisors BlackRock Templeton Sprucegrove Artio Hexavest BlackRock Batterymarch Sprucegrove BNP Paribas Inv Partners The above returns are gross returns and do not take into account management and administration fees. Past performance is not a guarantee of future returns. Monthly Update

3 Gross returns as at July 31, 2012 Reference Net assets 1 Simple returns 2 Compound annual returns Investment Index in millions 1 month 3 months YTD 1 year 3 years 5 years 10 years advisor $ % % % % % % % SPECIALTY FUNDS (offered only for certain types of contracts) FU759 Canadian Equity Q 120/20 (CC&L) IN024 FU757 Global Infrastructure (Lazard) IN111 FU758 Emerging Markets (Templeton) IN (3.3) 1.0 (3.6)* 8.4* 1.0* * 11.2* (0.3)* (0.1) (4.5) 4.1 (10.8)* 5.1* (0.8)* 10.9* CC&L Lazard Templeton Simple returns 2 Compound annual returns 1 month 3 months YTD 1 year 3 years 5 years 10 years % % % % % % % BENCHMARK INDEXES Money market index IN018 DEX 91 day Tbill Index Bond indexes IN019 DEX Short Term Bond Index IN056 DEX Long Term Bond Index IN021 DEX Universe Bond Index Equity indexes IN026 S&P/TSX 60 IN024 S&P/TSX Composite Index IN031 S&P/TSX Capped Composite Index IN037 S&P/TSX SmallCap Index IN008 MSCI - World (Can. $) IN104 MSCI - World (Local $) IN089 S&P Citigroup High Income Equity Index (Can. $) IN079 MSCI - World Small Cap. (Can. $) IN046 MSCI - EAFE (Can. $) (Reuters) IN002 MSCI - EAFE (Can. $) IN098 S&P 500 (Can. $) (Reuters) IN014 S&P 500 (Can. $) IN080 FTSE EPRA/NAREIT Global Index Net TRI (Can. $) 4 IN006 MSCI - Emerging Markets Index (Can. $) IN111 UBS Global 50/50 Infrastructure and Utilities Index (Local $) Composite indexes (funds) INDC010 IN024 (90%), IN008 (10%) INDC040 IN021 (50%), IN024 (35%), IN008 (10%), IN018 (5%) INDC240 IN021 (65%), IN024 (20%), IN008 (5%), IN018 (10%) INDC250 IN021 (30%), IN024 (50%), IN008 (15%), IN018 (5%) INDC380 IN021 (35%), IN024 (30%), IN008 (30%), IN018 (5%) 5 INDC462 IN031 (65%), IN021 (30%), IN018 (5%) INDC463 IN021 (39%), IN024 (30%), IN002 (12.5%), IN018 (6%), IN014 (12.5%) INDC506 IN021 (80%), IN024 (10%), IN008 (10%) INDC507 IN021 (65%), IN024 (20%), IN008 (15%) INDC508 IN021 (50%), IN024 (30%), IN008 (20%) INDC509 IN021 (35%), IN024 (40%), IN008 (25%) INDC510 IN021 (20%), IN024 (50%), IN008 (30%) INDC522 IN021 (35%), IN031 (35%), IN008 (25%), IN018 (5%) INDC751 IN021 (40%), IN024 (30%), IN002 (13%), IN014 (12%), IN018 (5%) (4.1) (0.6) (6.5) 3.3 (0.9) (4.3) (0.7) (7.2) 5.5 (0.6) (4.3) (0.7) (7.2) 5.5 (0.6) (7.4) (5.6) (18.0) 12.1 (3.0) 5.1 (0.5) (1.5) (3.5) (1.5) (2.9) (3.8) - (1.9) (4.4) 4.8 (1.3) 9.7 (1.6) 5.4 (0.6) (2.8) 2.5 (7.0) 0.7 (6.8) 1.6 (0.6) (2.9) 2.5 (7.0) 0.8 (6.8) 1.6 (0.3) (0.1) 1.6 (0.4) (0.1) (2.3) (4.6) 4.6 (9.3) 4.3 (1.7) (1.5) (4.1) (0.1) (6.2) 5.6 (0.8) (0.2) (1.5) 1.4 (0.7) (0.7) (2.0) 0.4 (2.2) (0.5) (0.4) (1.4) (2.4) 1.7 (1.7) (0.9) (0.4) Total net assets of the fund including individual and group contracts. 2 The rates of return for the period are non-annualized. 3 Fund managed by DB Advisors since March 31, The returns presented are those of the FTSE EPRA/NAREIT Global Index Net TRI (Can. $) since January 1, For periods to this date, the returns presented are those of GPR The current composition of this index has been in effect since July 1, * Simulation of past returns as if the fund had been in effect for these periods. Index funds: Simulation of past returns from the return of the index that the fund aims to reproduce. Asset allocation funds: Simulation of past returns based on the return of the funds included in the asset allocation fund and on an asset allocation decision. Returns as at July 31, 2012 (%) Special 1-day 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years GUARANTEED INVESTMENTS Published rates The rates applicable to your guaranteed investments may differ from those presented above. To find out the applicable adjustment, please call Client Service at the following number: Monthly Update

4 ATTITUDE Portfolios Gross Returns as at July 31, 2012 SAVINGS AND RETIREMENT Conservative Conservative Portfolio 1996 to 2000 Conservative Portfolio 2001 to 2005 Conservative Portfolio 2006 to 2010 Conservative Portfolio 2011 to 2015 Conservative Portfolio 2016 to 2020 Conservative Portfolio 2021 to 2025 Conservative Portfolio 2026 to 2030 Conservative Portfolio 2031 to 2035 Conservative Portfolio 2036 to 2040 Conservative Portfolio 2041 to 2045 Conservative Portfolio 2046 to 2050 Conservative Portfolio 2051 to 2055 Conservative Portfolio 2056 to 2060 PORTFOLIOS INDEXES Simple Compound Simple Compound Benchmark returns 1 (in %) annual returns (in %) returns 1 (in %) annual returns (in %) indexes 1 month 3 months YTD 1 year 3 years 5 years 1 month 3 months YTD 1 year 3 years 5 years INP9544 INP9545 INP9000 INP9546 INP9001 INP9547 INP9002 INP9548 INP9003 INP9549 INP9004 INP9550 INP (0.2) (0.3) (0.3) Moderate Moderate Portfolio 1996 to 2000 Moderate Portfolio 2001 to 2005 Moderate Portfolio 2006 to 2010 Moderate Portfolio 2011 to 2015 Moderate Portfolio 2016 to 2020 Moderate Portfolio 2021 to 2025 Moderate Portfolio 2026 to 2030 Moderate Portfolio 2031 to 2035 Moderate Portfolio 2036 to 2040 Moderate Portfolio 2041 to 2045 Moderate Portfolio 2046 to 2050 Moderate Portfolio 2051 to 2055 Moderate Portfolio 2056 to 2060 Balanced Balanced Portfolio 1996 to 2000 Balanced Portfolio 2001 to 2005 Balanced Portfolio 2006 to 2010 Balanced Portfolio 2011 to 2015 Balanced Portfolio 2016 to 2020 Balanced Portfolio 2021 to 2025 Balanced Portfolio 2026 to 2030 Balanced Portfolio 2031 to 2035 Balanced Portfolio 2036 to 2040 Balanced Portfolio 2041 to 2045 Balanced Portfolio 2046 to 2050 Balanced Portfolio 2051 to 2055 Balanced Portfolio 2056 to 2060 Growth Growth Portfolio 1996 to 2000 Growth Portfolio 2001 to 2005 Growth Portfolio 2006 to 2010 Growth Portfolio 2011 to 2015 Growth Portfolio 2016 to 2020 Growth Portfolio 2021 to 2025 Growth Portfolio 2026 to 2030 Growth Portfolio 2031 to 2035 Growth Portfolio 2036 to 2040 Growth Portfolio 2041 to 2045 Growth Portfolio 2046 to 2050 Growth Portfolio 2051 to 2055 Growth Portfolio 2056 to 2060 INP9551 INP9552 INP9005 INP9553 INP9006 INP9554 INP9007 INP9555 INP9008 INP9556 INP9009 INP9557 INP9340 INP9558 INP9559 INP9010 INP9560 INP9011 INP9561 INP9012 INP9562 INP9013 INP9563 INP9014 INP9564 INP9341 INP9565 INP9566 INP9015 INP9567 INP9016 INP9568 INP9017 INP9569 INP9018 INP9570 INP9019 INP9571 INP (0.1) (0.2) (0.4) (0.2) (0.5) (0.5) (0.8) (0.5) (0.9) (0.5) (0.9) (0.1) (0.4) (0.4) (0.7) (0.5) (0.8) (0.7) (1.0) (0.8) (1.1) (1.1) (1.4) (1.2) (1.5) (1.2) (1.5) (0.1) (0.1) (0.5) (0.7) (1.0) (1.0) (1.3) (1.1) (1.4) (1.3) (1.6) (1.4) (1.7) (1.7) 3.7 (0.4) (2.0) 2.4 (0.2) (1.8) 3.7 (0.2) (2.1) 2.3 (0.3) (1.8) 3.7 (0.9) (2.1) 2.3 (0.6) Continued on other side Monthly Update

5 ATTITUDE Portfolios Gross Returns as at July 31, 2012 SAVINGS AND RETIREMENT Aggressive Aggressive Portfolio 1996 to 2000 Aggressive Portfolio 2001 to 2005 Aggressive Portfolio 2006 to 2010 Aggressive Portfolio 2011 to 2015 Aggressive Portfolio 2016 to 2020 Aggressive Portfolio 2021 to 2025 Aggressive Portfolio 2026 to 2030 Aggressive Portfolio 2031 to 2035 Aggressive Portfolio 2036 to 2040 Aggressive Portfolio 2041 to 2045 Aggressive Portfolio 2046 to 2050 Aggressive Portfolio 2051 to 2055 Aggressive Portfolio 2056 to 2060 PORTFOLIOS INDEXES Simple Compound Simple Compound Benchmark returns 1 (in %) annual returns (in %) returns 1 (in %) annual returns (in %) indexes 1 month 3 months YTD 1 year 3 years 5 years 1 month 3 months YTD 1 year 3 years 5 years INP9572 INP9573 INP9020 INP9574 INP9021 INP9575 INP9022 INP9576 INP9023 INP9577 INP9024 INP9578 INP (0.1) (0.4) (0.2) (0.6) (0.7) (1.0) (1.3) (1.6) (1.6) (1.9) (1.7) (2.0) (1.9) 3.7 (0.8) (2.2) 2.3 (0.6) (2.0) 3.7 (0.8) (2.4) 2.3 (0.7) (2.3) 3.7 (1.6) 6.1 (0.4) 0.1 (2.6) 2.3 (1.4) 6.7 (0.5) 0.3 (2.4) 3.6 (1.5) 6.2 (0.3) 0.1 (2.7) 2.3 (1.4) 6.7 (0.5) 0.3 (2.4) 3.6 (2.1) 5.9 (0.5) 0.1 (2.7) 2.3 (1.7) 6.5 (0.6) Simple Compound returns 1 (in %) annual returns (in %) 1 month 3 months YTD 1 year 3 years 5 years Bond indexes IN019 DEX short-term bond index IN021 DEX Universe Bond Index Equity indexes IN026 S&P/TSX (4.1) (0.6) (6.5) 3.3 (0.9) IN024 S&P/TSX Composite Index 0.8 (4.3) (0.7) (7.2) 5.5 (0.6) IN031 S&P/TSX Capped Composite Index 0.8 (4.3) (0.7) (7.2) 5.5 (0.6) IN037 S&P/TSX SmallCap Index 2.5 (7.4) (5.6) (18.0) 12.1 (3.0) IN008 MSCI - World (Can. $) (0.5) (1.5) (3.5) IN104 MSCI - World (Local $) 1.3 (1.5) (2.9) IN079 MSCI - World Small Cap. (Can. $) (1.9) (4.4) 4.8 (1.3) 9.7 (1.6) Composite indexes (portfolios) Benchmark Indexes Gross Returns as at July 31, 2012 Each portfolio index is composed of a set of benchmark sub-indexes, listed above. These sub-indexes are linked to the portfolios underlying funds. The weighting used is equal to the asset allocation of the portfolios underlying funds. The asset allocation varies periodically. The current allocation appears on the Composition of the ATTITUDE portfolios (in %) page of the Quarterly Update publication. 1 Rates of return for the period are non-annualized. Some portfolio returns are simulated as if they were in effect during the periods shown above. The above returns are gross returns and do not take into account management and administration fees. Past performance is not a guarantee of future returns. Monthly Update

6 Monthly Update Continued from first page economic growth is slowing, but its growth potential is slowing too. Now that inflationary fears have been practically extinguished, the Chinese central bank has much more manoeuvring room to stimulate the economy if necessary. By lowering the bank s one-year benchmark rate in July, for the second time in one month, Chinese authorities provided reassurance as to their intention to control the economic slowdown. If we also consider the central bank s three cuts in six months (since November) of the reserve ratio required of Chinese banks, the increase in the number of loans granted, and the rise in automobile sales, the Chinese economic slowdown appears somewhat less severe. Financial market review After an excellent month of June, markets continued their ascent more moderately in July. While they moved without much conviction during the month, markets were seemingly encouraged by the statement of the President of the European Central Bank (ECB), Mario Draghi, on July 26. He stated that the ECB is ready to do whatever it takes to preserve the euro. These words stand out from the more moderate, implicit and reserved statements that public leaders usually make. At the time of writing these lines, markets are on standby as they wait for impending decisions on monetary policy by the Fed and the ECB. Without wanting to exaggerate their importance, these decisions will no doubt have an impact on markets in the short term. The U.S. market continued its remarkable momentum, with a total monthly return of 1.4% for the S&P 500 (-0.4% in Canadian dollars). This brings its performance since January to 11% (or 9.3% in Canadian dollar terms). Given July s return of 4.2% in the energy sector, all sectors are now in positive territory for the year to date. Both defensive and cyclical sectors contributed to this excellent performance, as can be seen by sector returns for consumer discretionary (12.6%), consumer staples (11.6%), health care (12.1%), financials (13.9%), information technology (14.5%) and tele-communications (24.1%). Like the other markets, world markets continued the climb begun in June, but at a slower pace. The MSCI - EAFE and MSCI - World indices grew 1.4% and 1.3% respectively, in local currencies, resulting in positive increases of 3.5% and 6.3% respectively since the start of the year. As for the Canadian market, although it had a positive month (0.8% for the S&P/TSX), it continues to underperform the other stock markets (total return of -0.7% since January). Because the stock market capitalization of the energy and materials sectors represents 45% of the S&P/TSX, this index is known for being relatively cyclical. Given the strength of the Canadian dollar and the economic slowdown in most of the countries that purchase Canadian exports, we should not be surprised at this under-performance. In the current environment, its more cyclical character means that it suffers the consequences of bad economic news when investors risk aversion increases. For the most part, the poor performance of the cyclical sectors continued throughout July, with total returns of -3.5%, -4.7% and 4.4% for the materials, information technology and energy sectors respectively. This brings their respective performances to -13.8%, -15.5% and -3.6% since the start of the year. Although these are the only sectors in negative territory for the year to date, their importance in the Canadian index offsets the strong performance of the other sectors such as consumer discretionary (13%), consumer staples (11.1%) and heath care (7.9%). As for the bond market, the DEX Universe Bond Index continued its momentum begun in May, generating a monthly return of 0.7%, up 2.7% since January. With the flattening of the yield curve (increase in short-term rates and drop in long-term rates), long-term bonds outperformed short-term bonds, both for the month and for the year to date. F95-21A(1)(12-08) Monthly Update