SECTOR – GENERAL INVESTING

TWST: If one of you could just introduce Cumberland Private Wealth Management and what your respective responsibilities are there?

Mr. Wilson: Cumberland Private Wealth Management was founded in 1998, but our clients have actually been with us as long as 30 years. We’ve been managing wealth for high net worth individuals for decades and we have always approached it with the same two goals, which are first, protecting our clients’ capital; and second, growing their wealth over time. That’s at the very core of how we think about investing. I’m John Wilson, our Chief Investment Officer and I’m joined today by Peter Jackson, head of our Canadian investment team, and Peter Mann, head of our U.S. investment team.

TWST: What is the firm’s investment philosophy?

Mr. Wilson: I’ll go back to the two goals I mentioned earlier, protecting capital and growing wealth over time. Our philosophy is really driven by three things; number one, we’ve always had a value-orientation. We believe a focus on value provides the best opportunity for long-term returns and gives us a margin of safety in protecting capital. Number two, we very strongly believe we can best achieve our goals if we’re process driven. By that I mean we have a defined investment process that we follow very closely, because we fundamentally believe it improves the timeliness of our investment decisions, increases the frequency of successful decisions, gives us confidence that those successful decisions are repeatable and it allows us to implement a very active risk management process to help us protect our clients’ capital.

Finally, I would say that our philosophy is to be disciplined. We don’t wander off into ideas and themes that we don’t feel we know a lot about. We keep a high degree of focus on areas where we feel we have the most expertise and we stay disciplined to our process and value orientation. Those are the three keys to our philosophy and we drive them down through the entire organization.

TWST: You have a macro top-down approach which I suppose is necessary for both the U.S. and Canada. Would you give us a brief description of how the economy and the markets in Canada are functioning and how they are different in some ways from the U.S.?

Mr. Wilson: We do obviously have a very well defined topdown process of looking at the economic landscape and how that translates into opportunities and risks in financial markets. Obviously Canada and the U.S. are important elements of that, but I would say that particularly in the current environment, it’s a much more global discussion than would have been the case 15 or 20 years ago. Number one, the opportunities are more global; but two, as we saw in 2007 and 2008, the global community is much more connected and risks are much more transferable from one geography to another. A top-down discussion today is much more global than we would have had in the past.

In order to strengthen our global investment capability, we were aggressively hiring investment talent through a difficult period for most investment management firms and we were able to add considerable depth to the global expertise within our investment management team. As for Canada specifically, there was no way to avoid being affected by what transpired in 2008. The U.S. has always been Canada’s largest trading partner and a big part of the Canadian economy. So as the U.S. went into a very steep and protracted recession, that clearly had a significant negative impact on the Canadian economy as well.

That being said, in the context of how different economies around the world have been impacted, Canada has come through this more quickly than most and with less damage than most. This is partly because its financial system was in much better shape and didn’t suffer through some of the difficulties seen in Europe and in the U.S. with their banking systems; partially because Canada has a heavy commodity bias and as we saw, Chinese demand for commodities came back very, very quickly as their economy went on to grow in 2009 by well over 8%. That demand for commodities has really helped Canada come back to positive growth relatively quickly following a twoquarter decline. When we look at Canada specifically today, unemployment is still lagging although it has never deteriorated to the levels seen in the U.S. The Canadian housing market never went into the kind of decline we saw in the U.S. and has recently hit new highs in prices and sales. So generally, the consumer is in better shape and Canada enjoys the strong growth driver of emerging market demand for commodities, in particular from China.

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