March - CI Investments

COMMENTARYHarbour AdvisorsHarbour Fund and Harbour Growth & Income FundLeading worldwide economies continued to displayeconomic growth and recovery during the first quarter of2010 and we believe this positive trend will continue to bethe case for the foreseeable future. Against this backdrop,the past quarter saw stock markets here at home and in theU.S., our two principal areas of investment, sell off duringthe month of January. However, since early February, bothmarkets have marched steadily upward, erasing the declinesexperienced during January. Both Harbour portfolios ekedout small gains during the quarter.At the end of March, Harbour Fund was 82.9% investedin common stocks (Canadian stocks 52.4%, foreign stocks30.5%), while the fund’s cash and equivalent position stoodat 17.1%. Harbour Growth & Income Fund, in contrast, was71.5% invested in common stocks (Canadian stocks 49.8%,foreign stocks 21.7%) and held a bond position of 6.7% anda cash reserve position of 21.8%. Our ongoing low levelof commitment to the bond market remained essentiallyunchanged during the quarter, as we believe the risk/rewardratio for investors in bonds is unattractive against an expectedbackdrop of rising interest rates over the next couple of years.While the past quarter was relatively uneventful for thestock markets overall, nonetheless, further upward progresscontinued. We at Harbour were quite active in bothportfolios, with our efforts strongly biased to the buy side.Specific examples where we added to existing holdingsinclude Cisco Systems, General Electric, Intact Financial,Manulife Financial, Martin Marietta Materials, PennWest Energy, Taiwan Semiconductor, TD Bank, and TimHortons. On the sell side of the ledger, we eliminated oursmall holding of PetroBras from both portfolios.Notably, we are pleased to report the initiation of four newholdings in both portfolios over the past quarter, which whencoupled with two new names that we added in the latterpart of 2009, brings the number of recent new positionsto six. Since we are still in the early stages of doing ourfundamental analysis on certain of these companies, andgetting comfortable with the underlying businesses, weare not in a position yet to reveal their names. However,to provide a little colour, we can report that two of thenew names are U.S. banks, which we believe to have largeappreciation potential over the next two to three years andwe hope that our research efforts here will permit us toboost each of these names to more meaningful levels. Wehave also started small positions in a leading multinationaltechnology company with a strong growth profile, as wellas a leading telecommunications company based in China.Lastly, we are now well on our way towards establishing a fullposition in a leading North American company involved infood processing and distribution.While everyone knows that stock market indices haveadvanced considerably since the spring of 2009, we havenonetheless, as outlined above, been able to identify anumber of new high-quality names without compromisingour strong growth and value disciplines. The main outgrowthof these new initiatives has been to reduce the cash positionin Harbour Fund from a year-end level of 22.5% to a March31 level of 17.1%. In Harbour Growth & Income Fund, wehave moved the cash reserve down from 27.0% to 21.8% atMarch 31, 2010.Harbour Foreign Equity Corporate Class andHarbour Foreign Growth & Income Corporate ClassThe first quarter saw a continuation of the positive returnsearned in 2009 for the funds. Looking out over the comingPAGE 37 • SPRING 2010 PERSPECTIVE AS AT MARCH 31, 2010