David Knight

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David Knight Executive Chairman
Co-Founder Growth Here and Now

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KBSH CAPITAL MANAGEMENT

• Founded in 1980.
• Privately owned, by employees.
• Manager of 6.6 billion in client assets for
  pension plans, foundations, private clients and
  managed accounts.
• Leading separately managed accounts manager.
• Investing in growing companies at reasonable
  valuations.
• All asset classes managed internally.
• Global capabilities.

CAPITAL MANAGEMENT
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GLOBAL CAPABILITIES

CAPITAL MANAGEMENT
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KBSH - MANAGED CLARINGTON FUNDS

• CANADIAN GROWTH FUND
• RRSP-eligible Canadian equity fund
• Up to 30 foreign (U.S., International)
• U.S. GROWTH FUND
• KBSH management since November 1, 2002
• Core U.S. equity fund
• DIVERSIFIED INCOME FUND
• Conservative, RRSP-eligible income fund monthly
  distribution 6 target yield
• Mix of corporate and high yield bonds, income
  trusts and dividend-paying equities
• INCOME TRUST FUND
• RRSP-eligible income trust fund, monthly
  distribution 8 target yield
• Emphasis on most conservative income trusts

CAPITAL MANAGEMENT
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CRITICAL SUCCESS FACTOR ASSESSING BUSINESS

• STEP 1
• IDENTIFY GLOBAL GROWTH COMPANIES
• High growth in revenues, cash flow, earnings
• STEP 2
• ANALYZE FINANCIAL CRITERIA/VALUATIONS
• Reasonable valuations P/E, P/CF
• Balance sheet strength
• STEP 3
• QUALITATIVE ASSESSMENT
• Sustainable competitive advantage
• Management strength
• Accounting philosophy

2000 Companies

400 Companies Closely followed
150 Companies Buy List
25-45 Companies
CAPITAL MANAGEMENT
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CRITICAL SUCCESS FACTOR ASSESSING BUSINESS
Solvency Score (Corp. Bonds)
Sustainable Distribution
(Income Trusts)
Cash Flow
Strong Balance Sheet
ATTRACTIVE INVESTMENTS

Strong and Stable Management
Attractive Industry Profile
Sustainable Competitive Advantage
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STRONG LONG TERM RESULTS
Sample Canadian Equity
The KBSH Canadian Equity WRAP portfolio has
doubled over the past 5 years.

The TSX is up 30 over the past 5 years.
The growth style index is down 25 over the past
5 years.
All returns are in Canadian Dollars as of April
30th, 2004. The indicated return history is based
on average annual compound total returns and does
not take into account any management or
administration fees payable by individual
investors which would have reduced returns in
their individual portfolios. Investment returns
will fluctuate. Prior to December 31st, 2002 the
Canadian Growth and Value Indices are represented
by the Russell 300 Growth and Value Indices. As
of January 1, 2003 they are represented by the
MSCI Canada Growth Index and the MSCI Canada
Value Index. Sources Bloomberg, KBSH
CAPITAL MANAGEMENT
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PORTFOLIO CHARACTERISTICS
(as of April 30th, 2004)
Our objective is to construct portfolios with
above average earnings growth characteristics at
reasonable, if not discounted, valuations.

KBSH U.S. data from a stand-alone U.S. Equity
wrap portfolio and may not be identical for the
U.S. Equity component of a broader, global
mandate.
CAPITAL MANAGEMENT
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Economic Commentary
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INFLATION IS COMING
US ECRI Future Inflation Gauge vs Core CPI

The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source DB Global Markets
Research, Bloomberg. The ECRI FIG is a composite
of commodity prices, labour market conditions,
yield spreads, growth in debt, imports prices and
ISM supplier deliveries.
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BY HOW MUCH? IS THE QUESTION

The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source NFIB, BLS/Haver
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THERE IS AN INFLATION SWEET SPOT

P/E ratios are sensitive to inflation. Below 3
inflation, pricing power diminishes rapidly.
Above 3, earnings quality decreases.
The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source Cross Border
Capital. Data for the SP 500 trailing earnings.
CAPITAL MANAGEMENT
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LEADING INDICATORS REMAIN STRONG

The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source Canada Statistics
Canada US Bureau of Labor Statistics.
CAPITAL MANAGEMENT
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SHIPPING RATES HAVE SURGED
Baltic Freight Index

The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source NBF Economic
Research, Datastream, IMF
CAPITAL MANAGEMENT
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CHINAS COMMODITY DEMAND CONTINUES
Chinas Consumption of World Commodities

Cement consumption implies strong infrastructure
demand
The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source WBMS, IISI, World
Cement, UNCTAD
CAPITAL MANAGEMENT
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EARNINGS LOOK GOOD

Trailing P/E multiples may be high, but trailing
earnings per share (EPS) is back on trend.
The opinions expressed herein are those of KBSH
Capital Management Inc. and are subject to change
without notice. Chart source DB Global Markets
Research, Bloomberg.
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Outlook and Strategies

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OUTLOOK AND STRATEGIES

• MACRO ECONOMIC
• Full throttle for monetary and fiscal policies
• Global economic momentum to continue
• Modest inflation

• MARKETS
• A pause following last years strong rebound
• Corporate profits growing for 8 straight quarters
• Equities appreciation to be driven by profit
  growth
• Bond yields heading higher

• PORTFOLIO STRATEGIES
• Equity emphasis in balanced portfolios
• Foreign equities becoming more attractive
• Economic sensitive sectors favoured

CAPITAL MANAGEMENT
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IN SUMMARY

• KBSH MANAGED CLARINGTON PORTFOLIOS ARE
• WORKING
• and
• THEYRE POSITIONED FOR FURTHER GROWTH
• Leverage to global expansion
• Strong growth characteristics at reasonable
  prices

CAPITAL MANAGEMENT
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CANADIAN GROWTH FUND
Canada U.S. International
Materials 10 Aber Diamond Alcan Domtar
Energy 15 Encana Precision Drilling Suncor Energy Apache Norsk Energy
Health Care 4 QLT Pfizer
Information Technology 19 ATI Technologies Celestica Cognos Solectron Analog Devices Intel Canon Taiwan Semiconductor
Industrials 10 CP Railway CP Ships Quebecor World Danaher
Consumer Discretionary 6 Shaw Communications DirecTV Lowes Companies (received for GM.H) News Corp. ADR (received for GM.H)
Consumer Staples 5 Loblaw Shoppers Drug Mart Whole Foods Market
Financials 29 CIBC Manulilfe Power Financial Royal Bank TD Bank AIG Citigroup HSBC Holdings
Telecom. Services 2 Nextel Communications China Mobile
Utilities 0

Always well diversified currently invested with
significant economically sensitive exposure some
defensive holdings retained
Holdings are as of May 21st, 2004 and are based
on a model portfolio. The securities held should
not be considered a recommendation to buy, sell
or hold. There is no guarantee your portfolio
would hold these securities. The securities
mentioned herein were chosen as examples and may
not represent the complete portfolio.
CAPITAL MANAGEMENT
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U.S. GROWTH FUND
U.S.
Materials 3 International Paper
Energy 9 Apache Schlumberger
Health Care 13 Boston Scientific Cooper Pfizer United Healthcare
Information Technology 23 Analog Devices Avocent Corp. Dell Computer Intel Symantec Taiwan Semiconductor
Industrials 4 Danaher Corp.
Consumer Discretionary 11 Coach Lowes Companies Wendys International DirecTV News Corp. ADR (received for GM.H)
Consumer Staples 10 Whole Foods Market Procter Gamble
Financials 21 AIG Citigroup JP Morgan Chase Morgan Stanley
Telecom. Services 6 Nextel
Utilities 0

Holdings are as of May 21st, 2004 and are based
on a model portfolio. The securities held should
not be considered a recommendation to buy, sell
or hold. There is no guarantee your portfolio
would hold these securities. The securities
mentioned herein were chosen as examples and may
not represent the complete portfolio.
CAPITAL MANAGEMENT
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DIVERSIFIED INCOME FUND
Cash Cash Equivalents 25 Royal Bank TDR 1.95 May 28/04 CIBC TDR 1.95 May 31/04 Royal Bank TDR 1.95 Jun/04 Royal Bank TDR 1.95 May 28/04 Financials 13 Bank of Montreal Bank of Nova Scotia Royal Bank of Canada Calloway Real Estate Investment Units HR REITs Canadian Real Estate Trust Riocan Real Estate Trust Banco Popular Espagnol
Corporate Bonds 22 Nextel Communications 6.875/13 Call-Net 10.625 Dec 31/08 Cogeco Cable 6.75 Jun 04/09 Cogeco Cable 6.75 Jul 31/07 Compton Petroleum 9.90/09 Grtr Toronto Air Auth 6.25/12 John Hancock 6.496 Nov 30/1 Ipsco 7.80 Dec 01/06 Ipsco 8.75 Jun 01/13 Intrawest 7.50 Oct 15/13 Precision Drilling 7.65 Oct 2 Rogers Cantel 10.50 Jun 01/06 Rogers Wireless 6.375 Mar/14 Royal Bank 3.96 Jan 27/09 Shaw Communications 7.50/13 TD Capital 6.792 Dec 31/12 Telesat Canada 8.20 Nov/08 Telus 7.50 Jun 01/06 Tembec 8.50 Feb 01/11 Timberwest Forest 7.00 Oct/07 Videon Cable 8.15 Apr 26/10 Westcoast Energy 7.15/31 Health Care 2 Medical Facilities
Federal Bonds 3 Canada Govt 4.25 Sep 01/08 Canada Govt 5.75 Jun 01/29 Industrials 1 Livingston International
Energy 8 Arc Energy Trust Calpine Pwr. Income Fund Bonavista Energy Trust Enbridge Income Fund Pembina Pipeline Income Fund Vermillion Energy Telecom. 3 BCE Bell Nordiq Income Fund
Consumer Discretionary 6 Davis Henderson Income Fund Yellow Pages Income Fund Thomson Utilities 8 Consumer Waterheater Transalta Corp. Transcanada Power Partners Transcanada Corp. UE Waterheater Income Fund
Consumer Staples 7 Connors Brother Income Fund Loblaw North West Company Fund Coca-Cola Technology 1 Microsoft

Holdings are as of May 21, 2004 and are based on
a model portfolio. The securities held should
not be considered a recommendation to buy, sell
or hold. There is no guarantee your portfolio
would hold these securities. The securities
mentioned herein were chosen as examples and may
not represent the complete portfolio.
CAPITAL MANAGEMENT
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INCOME TRUST FUND
Cash Equivalents 8 Canada T-Bill Jun 17/04 Canada T-Bill Jun 30/04 Canada T-Bill Aug 12/04 Canada T-Bill Aug 26/04
Corporate Bonds 3 Timberwest Forest 7.00 Oct/07 Videon Cable 8.15 Apr 26/10 Shaw Communications 7.50/13
Energy 23 Arc Energy Trust Bonavista Energy Trust Enbridge Income Fund Pembina Pipeline Income Fund Calpine Power Income Fund Vermillion Energy
Consumer Discretionary 11 Davis Henderson Income Fund Osprey Media Income Fund Yellow Pages Income Fund
Financials 17 Canadian Real Estate Trust Riocan Real Estate Calloway Real Estate Investments HR Real Estate Investments
Consumer Staples 9 Connors Brother Income Fund North West Company Fund Hot House Growers Income Fund
Industrials 3 Livingston International Units
Utilities 16 Consumers Waterheater Transcanada Power Partners UE Waterheater Income Fund Macquaire Power Income Fund
Health Care 4 Medical Facilities
Telecommunications 6 Bell Nordiq Income Fund

Holdings are as of May 21st, 2004 and are based
on a model portfolio. The securities held should
not be considered a recommendation to buy, sell
or hold. There is no guarantee your portfolio
would hold these securities. The securities
mentioned herein were chosen as examples and may
not represent the complete portfolio.
CAPITAL MANAGEMENT