Investment Edge Quarter 1 2011

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Investment Edge Quarter 1 2011

  1. 1. Investment EdgeVolume 4 Quarter 1 2011
  2. 2. Canada Life is a leading provider of life, pensions and investments with over 100 years’experience serving the financial planning needs of our customers in the Irish market.We receive consistently high financial ratings from the independent rating agenciesincluding a AA* rating from Standard & Poor’s.We only partner with the best investment managers to offer a broad range of choice toIrish investors. And we are backed by strength. Our parent is Great-West Life, one of theworld’s leading life assurance companies, making us one of the largest and strongest lifeand pension companies operating in the Irish market today.* The financial rating shown for the Canada Life Assurance Company is provided by Standard & Poor’s.Standard & Poor’s is a rating agency which provides ratings on the financial strength of companies.This information is correct at the time of going to print.
  3. 3. Introduction Welcome to the second quarter edition of Investment Edge. The second quarter was a mixed bag for markets and overall the MSCI World Index fell by 0.9% in Euro terms during the period. Equity markets initially started 2011 where they had left off last year by extending the rally that began last summer on the back of strong corporate earnings and positive economic momentum. By late February, equities began what many commentators believed was an overdue correction prompted by increasing political unrest in the Middle East and rising inflation concerns. The pullback intensified following the massive earthquake and tsunami in Japan in mid-March. Markets regained some ground in thesecond half of March as the economic impact of the earthquake in Japan was not expected to have asignificant effect on global growth and there was some further positive US economic data.Developed equity markets broadly outperformed emerging equity markets; however, that trend began toreverse late in the quarter. Sector performance varied throughout the quarter and finished with energy beingthe only sector to produce a gain during the quarter benefiting from robust demand and tensions in theMiddle East.At home another round of stress tests of Irish banks commissioned by the Central Bank of Ireland revealednew capital requirements of €24 billion, and led to the new government following up with plans to restructurethe industry including plans to merge AIB with EBS and to have 2 main banking pillars. The government alsochanged their pre election stance on their intention to impose losses on bank senior bondholders, providingsome respite for financial institutions and investors that hold the debt. The total cost of the bank bailout todate is estimated to be €70 billion.European markets performed well during the quarter and despite the recent downgrades of debt in Ireland,Portugal and Spain, equity markets in peripheral Europe out-performed the broader European index. Out-performance was driven by the unexpected progress made by eurozone leaders in addressing the structureof bailout mechanisms and repayment conditions of existing loans. Robust fourth-quarter earnings reports,accommodative monetary policy and improving economic momentum drove strong performance by US equitymarkets as well. Equity markets in Russia and Canada, whose economies are leveraged to higher energyprices, also out-performed.Japanese equities, which had been outperforming since early November on a weaker yen and an improvingeconomy, dropped dramatically in the days following the earthquake and tsunami. They finished the quarterwell behind the global benchmark.As we moved into April the European Central Bank increased interest rates for the first time since July 2008in response to an increase in eurozone inflation. The quarter percentage point interest rate hike was entirelyexpected, and the focus has now shifted to discerning what the bank’s next move will be.While some form of correction has been expected as markets have now increased by over 70% since thetrough of March 2009 conditions still seem relatively positive for equity markets. However, there are somerisks to this favourable environment including an escalation of Middle East tensions that forces oil priceshigher, a policy error by central banks in increasing interest rates too quickly, the end of quantitative easingin June and its impact on the US economy and a hard economic landing in emerging economies.In the Spotlight section of this issue we focus on the importance of dividends as a major component of stockreturns to long term investors. We highlight our successful Canada Life/ Setanta Dividend Fund which followsa value investing philosophy and looks for companies paying above average dividends. The case for dividendbased investing is a strong one and dividend payouts are expected to increase this year as many companiesdistribute more of their surplus cash from improving earnings.Michael HayesInvestment Development Manager Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. Canada Life Assurance (Ireland) Limited and The Canada Life Assurance Company are regulated by the Central Bank of Ireland. This quarterly publication is intended for Financial Advisors only.
  4. 4. IndexMarket Commentary 4Spotlight - The importance of dividends 6Fund Fact Sheets 9Life Investment Funds 9Pension Funds 35Fund Performance 62Our Investment Partners 64
  5. 5. Market Commentary Q1 2011Financial markets in the first quarter were buffeted by a couple of the destabilising ‘known unknowns’: the tragic naturaldisaster in Japan and the wave of political unrest/change sweeping across the Arab world. These macro uncertaintiesproved enough to all but stifle, but not significantly reverse, the strong flow into ‘risk’ assets such as equities which hascharacterised investor behaviour for much of the last two years. The MSCI Developed World index returned -0.9% for thequarter.Fuelled by the exceptionally easy stance of official monetary policy, the surge in global stock markets since the trough ofMarch 2009 has now extended to 71% (in Euro terms).While there has certainly been a strong economic and consequent earnings recovery over this period, some pause to reflecton what this substantial rally in stock prices means for current valuation levels seems timely. After all, for value investorssuch as us owning/buying the stock of a company with, for example, the MSCI World Equity Index at a price 1334.9 todayis a very different value proposition from owning/buying that stock at the trough price level of 697.5 in March 2009.In broad terms, valuation is now somewhat above long-term ‘fair value’ – though still well below the extreme levels scaledat the height of the technology boom in 2000 or prior to the great crash in 1929.As stock prices rally, it is becoming more difficult to buy stocks at prices below our estimation of their intrinsic worth. Ihasten to add, that this should in no way be taken as suggesting that we are making any forecast on the direction of stockprices more generally. We are merely highlighting that as we analyse our stock opportunities on a case by case basis toarrive at a sensible appraisal of their value, the sharp appreciation of stock prices over the last two years is now makingvalue more difficult to find.European Government bonds lagged most assets over the quarter. The BofA ML Sovereign 5Yr+ index returned-1.4% during the quarter. Despite political upheaval in the Middle East & North Africa and the natural disasters inJapan, investors continued to allocate to riskier assets. Consensus points to global growth remaining strong overthe year, with liquidity deemed ample and offering some comfort to investors. Within Europe, the sovereign debtcrisis continues. However, there are signs of some containment as Spanish and Italian bond spreads narrowedto core Europe. Portugal is expected to enter a bailout scenario, with many hopeful this is the line in the sand.Ireland continues to try and get a handle on the socialisation of the banking crisis, with some signs of foreignsentiment changing towards our pariah status (S&P rating lowered, but now stable outlook).The Euro strengthened by approx. 6% against the USD during the quarter, from 1.34 to 1.42.The best performing region over the period (in euro terms) was MSCI Europe ex UK (+1.9%). Japanese equities fellby approx. 15% when the Earthquake and Tsunami hit in mid March, and although stocks did recover, the return forthe quarter was still negative (-10.1%).The best performing global industrial sector was clearly energy, unsurprising given the rising oil price. The weakestsector over the quarter was consumer staples.Brent Oil continued to rise during the quarter reaching $118/bbl by end March – the highest level since October2008. Growth in manufacturing together with the cold weather in Europe and the US helped to increase demandin 2010. However, political upheaval in North Africa and the Middle East drove the price above $100/bbl in 2011.The DJ UBS Spot Commodity index rose by 5.1% during the last quarter, bringing the gains for the year to 17.0%MSCI World Q1. 2011Source: MSCI Net Total Returns (in €) 01.01.11 – 31.03.11 4
  6. 6. Asset Class Returns Q1. 2011 Global Equities Euro Bonds Property Euro Cash % 3 2 1 0.3% 0 -1 -0.7% -0.9% -2 -1.4% -3Source: MSCI World, Merrill Lynch (EMU +5yrs), Average Property Fund MercerSurvey, 3 Month Interbank Deposit (all in €) 01.01.11 – 31.03.11Regional Returns Q1. 2011 % 15 10 5 1.9% 0.0% 0.6% 0 -5 -1.9% -0.9% -2.9% -10 -10.1% -15 MSCI World UK Europe ex UK USA Japan Pacific ex Ireland Index JapanSource: MSCI Regional Indices Total Return, ISEQ, (in €), 01.01.11 – 31.03.11Sector Returns Q1. 2011 % 9 7.6% 6 3 0 -1.2% -1.1% -0.7% -3 -1.6% -3.3% -3.2% -6 -4.0% -9 Financials Consumer Healthcare Consumer Information Industrials & Energy Telecoms / Discretionary Staple Technology Materials UtilitiesSource: MSCI Global Sector Performances Total Return (in €), 01.01.11 – 31.03.11 5
  7. 7. Spotlight - The importance of dividendsBy Michael Hayes, Investment Development Manager, Canada Life2010 was another good year for investors with many major markets recording significant gains toAlbert Einstein once said of compound interest that ‘It is the greatest mathematical discovery of alltime’. While the veracity of this statement has long been questioned there can be no doubt aboutthe importance of dividends as a percentage of overall equity returns. The same logic attributed tocompound interest also applies to the reinvestment of dividends.In a recent research study ‘The quest for yield’ (2011) by Elroy Dimson, Paul Marsh and Roy Stauntonof the London Business School, the role of dividends is examined in some detail. In the study, $1invested in 1900 in US equities grew in capital value to $217 by the end of 2010 for an annualisedgain of 5%. However, according to the study if dividends had been reinvested in US equities, $1 wouldhave been worth $21,766 or an annualised return of 9.4%. Thus, reinvesting income can lead to areturn 100 times larger than the return from capital gains alone. This is not specific just to the US butis true for all equity markets researched in the study. The study also demonstrates that the longer theinvestment horizon, the more important is dividend income as ‘for the seriously long term investor, thevalue of a portfolio corresponds closely to the present value of dividends’.As well as the importance of dividends as a percentage of overall return the study found that highyielding stocks also out-performed lower yielding stocks. The study broke down data in respect ofUS returns from 1927 into US stocks that rank each year in the highest or lowest yielding 30% ofdividend paying-companies, the middle 40% and stocks that pay no dividends at all. Non-dividendpaying stocks gave the lowest total return of 8.4% per year, while low-yield stocks returned 9.1% andhigh yielders gave the best return at 11.2%.The longest data timeline provided in the study of the yield effect was done in the UK and goes backto 1900. In the study, the 100 largest UK stocks are ranked by their dividend yield and divided 50:50into higher and lower yielding stocks. The capitalisation weighted returns on those two portfoliosare calculated over the following year and that process is repeated every year. The results show thatan investment of £1 in 1900 would have grown to £5,122 in the lower yielding strategy by the endof 2010, an annualised return of 8%. However, the same initial investment allocated to high yieldstocks would have grown to £100,160 which is almost 20 times greater and equivalent to an annualreturn of 10.9% per year. As before, the study found that same effect has been evident in every othercountry reviewed except New Zealand which is a small market.According to the study the same results applied when different countries were compared to eachother based on dividend yield. At the start of each year 19 countries were ranked by their dividendyield at the old year end. The countries were assigned to quintiles each one made of four countrieswith the middle quintile containing three markets. Each portfolio had an equal amount invested ineach country and all income was reinvested. Portfolios were held for one year and the 19 countrieswere then re-ranked and the portfolios were rebalanced and this was repeated each year. The resultsfound that over the full 111 years from 1900 an investment of $1 in the lowest yielding countrieswould have grown to $370 by the end of 2010, a return of 5.5%. But the same initial investmentallocated to the highest yielding countries vastly out-performed as it would have grown to an end 2010value of more than $1 million, some 2700 times as much or a return of 13.4% per annum.The study also looked at four sub-periods of 25 years each and the first 10 years of the 21stcentury with high yielding stocks out-performing every time. While this strategy would have requireda disciplined rebalancing regime, it does highlight the yield effect. The study also found that higheryielding strategies not only had higher returns but also at lower levels of risk. 6
  8. 8. The Canada Life/ Setanta Dividend FundThe Canada Life/Setanta Dividend Fund is an actively managed equity portfolio which invests instocks that have paid above average dividends since 2003.Setanta Asset Management Limited (‘Setanta’), Canada Life’s primary investment manager followsa value investing philosophy. The Canada Life/ Setanta Dividend Fund (the ‘Fund’) distils thisphilosophy, placing particular emphasis on the significant proportion of cumulative total return thatdividends typically represent.High yield investment fits neatly with Setanta’s value philosophy for a number of reasons. A highdividend yield is generally considered to be a classical indicator of value and typically correspondsto other respected value metrics. That said, a high dividend yield alone is not enough for a stock tomerit consideration for investment. In addition the stock must trade below Setanta’s assessment ofintrinsic value and the company will ideally exhibit strong competitive advantages. Setanta believesthat a strong balance sheet, a central tenet of value investing, is important for a company that aspiresto pay a sustainable and upwardly-trending dividend. Cash flow should closely reflect accountingearnings, indicating that profits are real and not reflective of an accountant’s vivid imagination. Robustcash flows typically ensure that a dividend is well covered and a company’s payout viable. Thesefactors help to protect an investment during the difficult times a company inevitably encounters,through an economic cycle. They also ensure that the Fund, in accordance with value investingprinciples, emphasises a high probability of long-term capital preservation.Setanta takes a common sense approach to risk so that investment decisions are based on thecharacteristics of each stock. By design, the Fund is well diversified, holding 45 stocks acrossnineteen countries and five continents. Stocks are currently drawn from ten broad economic sectors,while no stock has a greater weight than 5% of the fund.Sector concentration is a function of the value opportunities available, subject to reasonablediversification. Although subject to change, the largest sector is telecoms which currently represents15% of the fund. Upon investment the fund managers typically expect to hold a stock for 4-5 years,but are not bound to a maximum holding period. Setanta pays no heed to classical ‘risk’ metrics andagree with Warren Buffett, who said: “The risk that matters is not beta or volatility, but the possibilityof loss or injury from an investment.”The rationale for dividend based investing is clear and dividend payouts are expected to increase thisyear as many companies distribute more of their surplus cash from improved earnings.Dividends have historically contributed the majority of overall returns and to date there is no historicalevidence that this will change in the future. Dividends are the foundations on which long term equityreturns are built.For more information on Canada Life’s fund performance, please visit www.canadalife.ie Warning: The value of your investment may go down as well as up. Past performance is not a reliable guide to future performance.The Canada Life Assurance Company and Canada Life Assurance (Ireland) Limited are regulated by the Central Bank of Ireland.This article does not constitute advice or an advertisement and does not form part of any contract. 7
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  10. 10. Life Funds9
  11. 11. Canada Life / Setanta Equity Dividend Fund Quarter 1, 2011Fund DescriptionThe Equity Dividend Fund is an actively managed equity company debt must be ‘investment grade‘ (if rated)portfolio which aims to hold c. 40 stocks that pay above company gearing below 100%.average dividends. The fund does not target high dividendpayers indiscriminately; a set of desired criteria is applied The ratio of debt to equity should be not more than 100%,when filtering potential candidates for the fund. The desired except for utility companies (water, electricity etc.) wherecriteria are: we use a hurdle of 200%, and for financial stocks, where no maximum is applied. dividend yield 20% in excess of the MSCI World Index no cut in dividend in the last five years The maximum exposure to currencies other than the euro is market capitalisation of at least 500m (excluding Irish capped at 10% of the value of the fund. The Equity Dividend stocks) Fund is managed by Setanta Asset Management Limited dividend must be less than 80% of earnings (“Setanta“) .Top 10 Holdings Fund Performance* Q1 2011 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % 15 CRH Industrials / Materials 3.6 12 Sanofi-Aventis Healthcare 3.5 Fortum Telecoms / Utilities 3.1 9 Lockheed Martin Industrials / Materials 2.8 6 Solvay Industrials / Materials 2.6 3 DCC Industrials / Materials 2.5 Wincor Nixdorf Information Technology 2.5 0 Svenska Handbkn Financials 2.5 -3 Sasol Energy 2.4 CL/Setanta Equity Dividend -6 Thai Beverage Public Consumer Staples 2.4 Average of High Yield Funds Peer GroupPortfolio Financials Q1 2011 *Source: Moneymate. Peer Group Average (High Yield Equity Funds from Bloxhams, AIB, Eagle Dividend Yield 3.8% Star, Aviva and Friends First. P/E Ratio 11.8xSource: Bloomberg & individual company reports. These figures are based on last years dividend in some cases.The gross yield is before any withholding taxes on the individual shares. It is also before taking account of any exit tax that may apply.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Consumer Cash Japan Ireland Discretionary Telecoms/Utilities 6.6% 6.8% Pacific & Emerging 4.4% 6.5% Consumer 18.4% Markets Staples 11.5% UK 10.9% 19.1% Equity Information 94.3% Energy Technology 11.1% 6.3% Industrials USA & Materials Financials Europe 20.0% 18.6% 14.2% 38.5% Healthcare 13.8% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 10
  12. 12. Canada Life / Setanta Balanced Fund Quarter 1, 2011Fund DescriptionThe investment objective of the Balanced Fund is to secure picked within a global sector framework, with an emphasislong-term capital growth. The fund seeks to achieve its on the following key characteristics:objective by investing primarily in a range of Irish andinternational equities and bonds. The asset distribution of superior financial track recordthis fund is more conservative than a managed fund, having competitive advantage and a sustainable business modela lower proportion of its assets invested in equities; the within their industrytarget equity content is less than 50%. focused on profitability and can demonstrate an ability to earn cash flow returns in excess of their cost of capitalThe fund is managed by Setanta Asset Management Limited over the business cycle(“Setanta“). Setanta is a value investor in quality companies do not carry excessive debt levels.and builds the portfolio from the bottom up. Stocks areTop 10 Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % % Exxon Mobil Energy 2.4 6 5 Pfizer Healthcare 2.0 4 General Dynamics Industrials & Materials 2.0 3 CRH Industrials & Materials 2.0 2 Total Energy 1.9 1 Johnson & Johnson Healthcare 1.7 0 ENI Energy 1.7 -1 Owens Illinois New Industrials & Materials 1.7 -2 BP Energy 1.7 -3 DCC Industrials & Materials 1.7 -4 Canada Life/Setanta Balanced Category Average Managed Balanced Source: Moneymate. Performance is net of management fees.Asset Distribution Equity Geographic Distribution Equity Sectoral Asset Distribution Telecoms/Utilities Consumer Cash Japan Ireland 7.9% Discretionary 0.6% Property Pacific & Emerging 6.1% 5.8% UK 9.9% 7.4% 10.2% Information Markets Consumer 7.6% Technology Staples 12.4% 10.9%Equity47.2% Europe 21.0% Industrials Energy & Materials 15.5% Fixed Interest 16.6% 44.7% USA 49.4% Healthcare Financials 12.8% 14.1% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 11
  13. 13. Canada Life / Setanta Balanced Dividend Fund Quarter 1, 2011Fund DescriptionThe Balanced Dividend Fund is an actively managed balanced dividend must be less than 80% of earningsfund investing 66% in equities and 34% in fixed interest company debt must be ‘investment grade‘ (if rated)securities. The equity portion of the fund aims to hold c. 40 company gearing below 100%.stocks that pay above average dividends. The fixed interestportion of the fund invests in EU government bonds. The ratio of debt to equity should be not more than 100%, except for utility companies (water, electricity etc.) whereThe fund does not target high dividend payers indiscriminately we use a hurdle of 200%, and for financials stock, where nofor the equity securities; a set of desired criteria is applied maximum is applied.when filtering potential candidates for the fund. The desiredcriteria are: The maximum exposure to currencies other than the euro is capped at 10% of the value of the fund. The Balanced dividend yield 20% in excess of the MSCI World Index Dividend Fund is managed by Setanta Asset Management no cut in dividend in the last 5 years Limited (“Setanta“) . market capitalisation of at least 500m (excluding Irish stocks)Top 10 Holdings Fund Performance* Q1 2011 % Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % 10 CRH Industrials / Materials 3.6 Sanofi-Aventis Healthcare 3.5 8 Fortum Telecoms / Utilities 3.1 6 Lockheed Martin Industrials / Materials 2.8 4 Solvay Industrials / Materials 2.6 2 DCC Industrials / Materials 2.5 Wincor Nixdorf Information Technology 2.5 0 Svenska Handbkn Financials 2.5 -2 Sasol Energy 2.4 -4 Thai Beverage Public Consumer Staples 2.4 CL/Setanta Bal Dividend Category Average Managed BalancedPortfolio Financials Q1 2011 *Source: Moneymate. Peer Group Average (High Yield Equity Funds from Bloxhams, AIB, Eagle Dividend Yield 3.8% Star, Aviva and Friends First. Source: Bloomberg & individual company reports. These figures are based on last years dividend P/E Ratio 11.8x in some cases. The gross yield is before any withholding taxes on the individual shares. It is also before taking account of any exit tax that may apply.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Consumer Japan Ireland Discretionary Pacific & Emerging 4.4% Telecoms/Utilities 6.6% 6.5% Markets 18.4% Consumer 11.5% Staples UK 10.9% 19.1% Information Energy Technology 11.1% 6.3% Industrials Europe USA & Materials Financials 38.5% 20.0% 18.6% 14.2% Healthcare 13.8% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 12
  14. 14. Canada Life / Setanta European Equity Fund Quarter 1, 2011Fund DescriptionThe investment objective of the European Equity Fund is to superior financial track recordsecure long-term capital growth. competitive advantage and a sustainable business model within their industryThe fund seeks to achieve its objective by investing in a focused on profitability and can demonstrate an ability torange of European equities. earn cash flow returns in excess of their cost of capital over the business cycleIt is an actively managed equity portfolio which holds c. 30- do not carry excessive debt levels.50 European stocks. The fund is managed by Setanta AssetManagement Limited (“Setanta“). Setanta is a value investorin quality companies and builds the portfolio from the bottomup. Stocks are picked within a global sector framework, withan emphasis on the following key characteristics:Top 10 Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % % DCC Industrials/Materials 4.9 20 BP Energy 4.4 15 C&C Group Consumer Staples 4.4 CRH Industrials/Materials 4.2 10 Solvay Industrials/Materials 4.0 Axel Springer Consumer Discretionary 3.9 5 Vodafone Telecoms / Utilities 3.9 Wincor Nixdorf Information/Technology 3.8 0 Diageo Consumer Staples 3.8 Total Energy 3.8 -5 Canada Life/Setanta European Equity Category Average Advanced Europe Equity Source: Moneymate. Performance is net of management fees.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Cash Consumer Cash Telecoms/ 1.7% Greece 2.0% Belgium Utilities Discretionary 3.0% 7.0% Czech Republic 10.0% 15.9% Consumer 3.0% Staples Finland Information 8.3% UK 9.0% Technology 27.0% 6.0% France 8.0% Energy 13.4% Germany Norway Industrials 8.0% 3.0% & Materials Switzerland 16.8% 6.0% Italy Ireland Financials Equity 6.0% 18.0% Healthcare 18.9% 98.3% 10.6% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 13
  15. 15. Canada Life / Setanta Unitised With Profits Fund Quarter 1, 2011Fund DescriptionThe Unitised With Profits Fund (UWP) operates like a At maturity a terminal bonus may be applied if the underlyingunit-linked fund, except that investment return to assets have outperformed the declared bonuses.policyholders is smoothed and guaranteed not to fall.Returns are distributed in the form of a bonus rate declaredby Canada Life based on various factors including theperformance of the underlying assets.Returns are smoothed to the investor in that the bonusrate will endeavour to reflect the performance of the assetsover the long term, allowing the investor to avoid short-termvolatility in the markets.Top 10 Holdings Annual Bonus History Company Sector % Year Life Gross Version Net Version Exxon Mobil Energy 2.4 95 – 96 - - Pfizer Healthcare 2.1 96 – 97 - - General Dynamics Industrials & Materials 2.0 97 – 98 - - CRH Industrials & Materials 1.9 98 – 99 - 6.5% Total Energy 1.9 99 – 00 - 6.0% 00 – 01 6.0% 5.0% ENI Energy 1.8 01 – 02 6.0% 4.5% Johnson & Johnson Healthcare 1.8 02 – 03 5.0% 3.5% BP Energy 1.8 03 – 04 2.0% 0.0% Owens Illinois New Industrials & Materials 1.7 04 – 05 1.0% 0.0% DCC Industrials & Materials 1.7 05 – 06 1.0% 0.0% 06 – 07 1.0% 0.0% 07 - 08 1.0% 0.0% 08 - 09 0.5% 0.0% 09 - 10 0.0% 0.0% 10 - 11 0.0% 0.0% Bonus rates are declared net of management chargesAsset Distribution Equity Geographic Distribution Equity Sectoral Distribution Japan Telecoms/Utilities Consumer Property Ireland Discretionary Cash 6.0% 7.9% 2.0% Pacific & Emerging 5.8% 9.9% 6.2% UK Markets 10.3% Information Consumer 8.6% Technology Staples 12.1% 11.0% Equity Europe 36.9% Fixed Interest 20.4% Industrials 54.9% Energy & Materials 15.8% 16.4% USA Healthcare 48.9% Financials 12.6% 14.3% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 14
  16. 16. Canada Life / Setanta Focus 15 Fund Quarter 1, 2011Fund DescriptionThe Focus 15 Fund is an actively managed, concentrated focused on profitability and can demonstrate an ability toequity portfolio, which holds c. 15 international (ex Ireland) earn cash flow returns in excess of their cost of capitalstocks. The Focus 15 Fund is managed by Setanta Asset over the business cycleManagement Limited (“Setanta“). Setanta is a value do not carry excessive debt levels.investor in quality companies. Setanta builds the portfoliofrom the bottom up, using the stocks researched by the Clearly, Focus 15 is likely to be more volatile than moresector specialists, with an emphasis on the following key broadly-based funds; it is therefore only suitable for thosecharacteristics: investors with experience of the stock market. superior financial track record competitive advantage and a sustainable business model within their industryFund Holdings Fund Performance to 31/03/11 Company Sector % % Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Pfizer Healthcare 9.0 15 Sysco Consumer Staples 8.2 12 Everest Re Group Financials 7.7 Tidewater Energy 7.0 9 Steris Healthcare 7.0 6 Johnson & Johnson Healthcare 6.9 Total Energy 6.8 3 MI Developments Financials 6.8 0 Astellas Pharmaceutical Healthcare 6.7 Wincor Nixdorf Information Technology 6.6 -3 NTT Docomo Telecoms / Utilities 6.1 -6 Motor Consumer Discretionary 5.9 Belgacom Telecoms / Utilities 4.0 Nokia Information Technology 3.1 Canada Life/Setanta Focus 15 OPAP Consumer Discretionary 2.1 Category Average Flexible Equity Komori Industrials & materials 1.8 Source: Moneymate. Performance is net of management fees. Cash 4.3Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Cash Consumer 4.3% Telecoms/Utilities Discretionary Japan 10.7% 8.5% 21.5% Consumer Information Staples Technology 8.6% 10.1% Pacific Industrials USA & Emerging & Materials Energy 46.7% Markets 1.9% 14.4% 8.0% Europe Healthcare 23.7% 30.8% Financials Equity 15.1% 95.7% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 15
  17. 17. Canada Life / Setanta Irish Equity Fund Quarter 1, 2011Fund DescriptionThe Irish Equity Fund is an actively managed equity focused on profitability and can demonstrate an ability toportfolio which aims to hold stocks quoted on the Irish earn cash flow returns in excess of their cost of capitalstock exchange. The fund is managed by Setanta Asset over the business cycleManagement Limited (“Setanta“). Setanta is a value investor do not carry excessive debt levels.in quality companies. Setanta builds the portfolio from thebottom up, picking stocks within a sector framework, with an The Irish Equity Fund is a relatively concentrated equity fundemphasis on the following key characteristics: with exposure to stocks from only one country and is likely to be more volatile than more broadly-based funds. superior financial track record competitive advantage and a sustainable business model within their industryTop 10 Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % % DCC Industrials & Materials 9.3 20 Total Produce Consumer Staples 8.8 15 Irish Continental Industrials & Materials 8.3 10 Kingspan Industrials & Materials 7.8 5 CRH Industrials & Materials 7.4 0 Abbey Industrials & Materials 7.3 -5 Dragon Oil Energy 6.3 -10 Grafton Group Industrials & Materials 6.2 -15 -20 Kerry Group Consumer Staples 6.2 -25 Ryanair Holdings Industrials & Materials 6.2 Canada Life/Setanta Irish Equity Category Average Irish Equity Source: Moneymate. Performance is net of management fees.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Consumer Cash Discretionary 0.1% 5.8% Consumer Staples 25.3% Industrials & Materials 57.5% Energy 6.3% Financials 1.1% Healthcare Equity 4.0% 99.9% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 16
  18. 18. Canada Life / Setanta Property Fund Quarter 1, 2011Fund DescriptionThis fund invests in commercial properties - office, retail and The Property Fund is suitable for investors who wish to gainwarehousing. The fund is characterised by the quality of the investment exposure to the commercial property sector.property that makes up the portfolio and the tenants that Investors should understand that property investment is byoccupy these properties. its nature less liquid than other asset classes.Currently, all of the properties are located in Ireland.Sample Property Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a OFFICE % Block C, Earlsfort Centre 15 Tenant - Office of Public Works 10 Fund Weighting - 13.2% 5 RETAIL 0 45/46 Patrick Street, Cork -5 Tenant - C&J Clarke International -10 Fund Weighting - 3.8% -15 INDUSTRIAL/WAREHOUSE -20 Swords Business Campus -25 Tenants - Air France, Client Logic, Eastern Health Board Fund Weighting - 10.2% Canada Life/Setanta Property Category Average Property Source: Moneymate. Performance is net of management fees.Asset Distribution Geographic Distribution Sectoral Distribution Cash 9.5% Rest of Ireland 16.5% Office 27.7% Retail Dublin city centre 41.7% Cork 44.4% 10.3% Cash & Bonds 9.5% Property Suburban Dublin Industrial 90.5% 28.8% 21.1% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 17
  19. 19. Canada Life / Setanta Strategic Growth Fund Quarter 1, 2011Fund DescriptionThe investment objective of the Strategic Growth Fund is to superior financial track recordsecure long-term capital growth. The fund seeks to achieve competitive advantage and a sustainable business modelits objective by investing primarily in a range of Irish and within their industryinternational equities and bonds. The fund will hold between focused on profitability and can demonstrate an ability to50-80% of its assets in equities with the balance consisting earn cash flow returns in excess of their cost of capitalof bonds, property and cash over the business cycle do not carry excessive debt levels.The fund is managed by Setanta Asset Management Limited(“Setanta“). Setanta is a value investor in quality companies.Setanta builds the portfolio from the bottom up, pickingstocks within a global sector framework, with an emphasison the following key characteristics:Top 10 Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % % Exxon Mobil Energy 1.6 6 CRH Industrials & Materials 1.5 5 DCC Industrials & Materials 1.4 4 Pfizer Healthcare 1.4 3 Total Energy 1.4 2 General Dynamics Industrials & Materials 1.3 1 ENI Energy 1.2 0 Johnson & Johnson Healthcare 1.2 -1 BP Energy 1.2 Owens Illinois Industrials & Materials 1.1 -2 -3 Canada Life/Setanta Strategic Growth G Category Average Managed Dynamic Source: Moneymate. Performance is net of management fees.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Japan Telecoms/Utilities Consumer Cash Property 6.0% Ireland 7.6% Discretionary Pacific & Emerging 6.4% 2.8% Markets 9.2% Information 9.7% Commodities Fixed Interest Consumer 7.9% UK Technology 2.4% 19.4% Staples 9.9% 11.6% 11.3% Europe 19.9% Industrials Energy & Materials 15.7% 18.3% Equity 69.0% Healthcare Financials USA 12.4% 13.5% 47.1% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 18
  20. 20. Canada Life / Setanta Global Opportunity Fund Quarter 1, 2011Fund DescriptionThe Global Opportunity Fund is an actively managed equity superior financial track recordportfolio, which holds c. 100-140 global stocks. The competitive advantage and a sustainable business modelinvestment objective of the Global Opportunity Fund is to within their industrysecure long-term capital growth by investing in a range of focused on profitability and can demonstrate an ability toIrish and international equities. earn cash flow returns in excess of their cost of capital over the business cycleThe fund is managed by Setanta Asset Management Limited do not carry excessive debt levels.(“Setanta“). The fund is the cornerstone of Setanta‘sinvestment process. Setanta is a value investor in qualitycompanies and builds the portfolio from the bottom up.Stocks are picked within a global sector framework, with anemphasis on the following key characteristics:Top 10 Holdings Fund Performance to 31/03/11 Q1 2011 1 yr p.a 3 yr p.a 5 yr p.a 10 yr p.a Company Sector % % Exxon Mobil Energy 2.4 10 Pfizer Healthcare 2.1 8 General Dynamics Industrials & Materials 2.0 6 CRH Industrials & Materials 1.9 4 Total Energy 1.9 Johnson & Johnson Healthcare 1.8 2 ENI Energy 1.7 0 Owens Illinois Industrials & Materials 1.7 -2 BP Energy 1.7 DCC Industrials & Materials 1.7 -4 Canada Life/Setanta Global Opportunity Category Average Flexible Equity Source: Moneymate. Performance is net of management fees.Asset Distribution Equity Geographic Distribution Equity Sectoral Distribution Cash Japan Ireland Telecoms/Utilities Consumer 1.3% 7.9% Discretionary Pacific & Emerging 6.1% 5.8% UK 9.9% Markets 10.2% Information Consumer 7.6% Technology Staples 12.4% 10.9% Europe 21.0% Energy Industrials & Materials 15.5% 16.6% USA 49.4% Equity Healthcare Financials 98.7% 12.8% 14.1% Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up.Important Information:This fact sheet does not form part of any contract. The information contained in this document is based on current legislation and is, therefore, subject to change.The contents are intended as a guideline only and should not be construed as an interpretation of the law. For full details of all our products, please refer to thespecific product policy conditions. You should always seek advice of an appropriately qualified professional. Setanta Asset Management Limited is regulated by theCentral Bank of Ireland. Canada Life Assurance (Ireland) Limited is regulated by the Central Bank of Ireland. 19

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