Canadian Equities

Investors in the Canadian equity market enjoyed double-digit returns for the fifth consecutive year in 2006-07. Almost all industry groups rose, with only the health care sector declining over the year. The technology sector led the market, largely due to the rise of Research in Motion, which continues to benefit from the growth in the global market for mobile email devices. The strength in telecom stocks reflected both improving fundamentals in the wireless business as well as the unprecedented takeover bid for BCE by a private equity consortium. Railroad stocks were the primary drivers of return in the industrial sector, reflecting the strength of the North American economy and its increased transportation demand. Materials stocks continued to outperform the market, as concerns over the global supply/demand balance drove prices higher for base metals, fertilizer and chemicals. Despite record high oil prices, returns on Canadian energy stocks were marginal, due in part to rising costs and weak natural gas prices. Income trusts struggled to deliver good returns in the year, in the wake of the federal government’s October 31, 2006 announcement that the tax structure would be phased out over a four-year period. Foreign and private equity takeovers were again a theme in the Canadian market, as several familiar names disappeared from the Canadian equity landscape.

Canadian equities are managed using a diversified structure involving four different portfolios. Three of these portfolios are managed by external investment management firms, while the fourth is managed by ATRF’s own investment staff. While all four portfolios delivered very strong absolute returns, two portfolios generated returns in excess of the benchmark, with the other two underperforming slightly. On a combined basis, ATRF’s Canadian equity portfolios returned 16.5% for the year, exceeding the 16.0% return of the benchmark S&P/TSX Composite Index.