Please find in the following chart the industry weights of the portfolio relative to the benchmark index.

Although there are concerns and some confusion on the horizon, reflation appears to be alive and well.  Even though monetary easing in developed markets is coming to an end, emerging markets continue to stimulate and grow their economies (as evidenced by Morgan Stanley Emerging Markets stock index being up over 10% in the quarter).  Our expectation for narrowing monetary policy between the Fed and other G7 central banks should keep the US dollar in check, providing a positive environment for late cyclical stocks. These stocks had a significant correction (energy and metal stocks) in the first quarter of 2017 in favour of investors moving to defensive stocks (which look very expensive relative to a historical metrics).  Even though we see short-term risks, we believe inflation should continue to rise as global economies continue to accelerate.  The fund continues to hold a significant overweight in gold stocks to capitalize on this reflation.  The portfolio is primarily invested in gold growth/exploration companies versus current producers to help offset the short-term risks to the price of gold.

The portfolio continues to hold a sizeable weight in base metal stocks on weak supply fundamentals and has a market weight in oil stocks where there is abundant supply above $55.  We are also cautious on Canadian gas companies due to transportation constraints.  It is our intention to reduce the portfolio’s energy weight, if the oil price should approach $55 or the seasonal draw down of gas inventories expires.  We continue to try and balance the fund with non-resource growth names, and have recently added Lite Access Technologies, Grand West Transportation and Centric Health.

This quarter was surprisingly uninspiring, as investors jockey back and forth with every press release or Presidential tweet. While the market struggles to find a direction, we continue to invest in exciting, high-growth Canadian companies that offer superior long term investment returns.

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