JARISLOWSKY FRASER LIMITED
                                                           U.S. EQUITY FUND REPORT
                                                                 4th QUARTER 2009
                         Details of the Fund                                                                                         U.S. Equity Fund Industry Weightings
  Inception Date                            November 1, 1998                                                                                   December 31, 2009
                                                                                                               Petroleum        Utilities &
  Net Asset Value per Unit                  $ 6.6158                                                             15%            Pipelines                        Materials
  Income Distribution                       $ 0.0387                                                       Financial                1%                             2%                   Consumer
  Fund Size ($ Million)                     $ 118.7                                                        Services
Over the past year, the global economy has gone from recession to
a mild recovery. Despite continued government funding, growth
prospects for 2010 remain muted across developed economies.
Much of any enduring strength and staying power of the current                                              Cash
recovery still rests on the shoulders of North American consumers                                            1%                                                                         Industrials
                                                                                                                                                         Drugs /                           7%
who must spend in order to compensate for lower government                                                             Technology                       Healthcare
stimulus expected in the latter part of 2010. This will be a difficult                                                    11%                             19%

task given high household indebtedness and stubborn levels of                                              Integrated Oil company Exxon Mobil Corporation was the
unemployment.                                                                                              worst performing holding in the portfolio, declining by 25.8%
                                                                                                           during the year. After years of strong refining margins, the
In the coming year, policymakers will be torn between
                                                                                                           downstream business was weaker in 2009. Moreover, investor
maintaining some economic growth versus raising both taxes to
                                                                                                           scepticism about the proposed US$41 billion all stock acquisition
replenish coffers and interest rates in the face of monetary
                                                                                                           of XTO, a natural gas producer with attractive assets has also
inflation. In that environment, 2010 promises to be a challenging
                                                                                                           pushed down the stock price.
year for both bond and stock markets. Convincing earnings
growth will be required to maintain positive returns in 2010, as                                           Early in the quarter, we opportunistically trimmed Apple Inc. on
equities rallied well ahead of the current recovery. Investors,                                            valuation. The proceeds were used to add to agricultural seed and
egged on by a low interest rate environment, continued their                                               chemical manufacturer Monsanto Company and to life insurer
search for yield during the final quarter. U.S. equity returns                                             MetLife Inc. We also exited medical device company,
continue to be held back by the rising value of the Canadian                                               Medtronic Inc., due to the company’s maturing growth profile.
dollar.                                                                                                    We reinvested the proceeds into two existing holdings:
                            Performance Review                                                             seasonings producer McCormick & Company, Incorporated
                               3 mths 1 Year 3 Years 5 Years 10 Years
                                                                                                           and medical device company Becton Dickinson, and Company.
To Dec. 31, 2009                                                                                           In late December, Time Warner Inc. spun out its slow growing
                                (%)    (%)     (%)     (%)     (%)
JF US Equity
                                                                                                           and volatile AOL Inc. division to existing shareholders. The
                                   2.7           7.2          -7.2            -1.2             -1.3        small position was sold and proceeds were redeployed into Time
Fund (C$)
                                                                                                           Warner Cable Inc. We also initiated a position in payroll
S&P 500 (C$)                       3.6           7.4          -8.9            -2.2             -4.1
Canadian dollar index returns and NAV values have been calculated using the London 4PM closing FX rates.   processing company Automatic Data Processing, Inc.
The S&P 500 index appreciated by 7.4% in Canadian dollar terms                                                                                Strategy
and 26.5% in U.S. dollars for 2009, led by cyclical sectors. The                                           While the economy has stabilized, we do not anticipate a
portfolio performance was close to its benchmark, advancing by                                             meaningful rebound in the short term. We anticipate more market
7.2%. Strong performance from our holdings in Consumer Staples,                                            volatility as well as short lived, commodity-based equity rallies
Health Care and Industrials was offset by poor sector mix. The last                                        in this middling environment. Furthermore, the proliferation of
quarter mirrored the year in terms of direction and relative                                               government debt is inflationary and the rate of inflation, while
performance, as the index appreciated by 3.6% while the portfolio                                          still low, is expected to increase next year. Our portfolio is well
increased by 2.7%.                                                                                         suited to this environment. Our investments are chosen to build a
                                                                                                           diversified portfolio able to navigate steadily between the peaks
Our holding in hospital management company Community
                                                                                                           and valleys of the market, always participating, but with much
Health Systems Inc. was our top performing stock this past year,
                                                                                                           reduced volatility. Over the long term, we still favour equities
appreciating by 107.4%. The company delivered strong earnings
                                                                                                           over cash. Stocks are reasonably valued and offer protection
during the year and the successful integration of the Triad
                                                                                                           against rising inflation. The value of the U.S. dollar is also
Hospitals, Inc. acquisition helped boost the stock. Investors in
                                                                                                           expected to stabilize as the Euro and Yen weaken.
specialty cable and online shopping provider Scripps Networks
Interactive, Inc. saw their investment increase by 61.9% in 2009,                                                            Representative Holdings
lifted by prospects of higher advertising revenues and of a
favourable resolution to year end fee negotiations with cable and                                          Holdings                                           Industry
                                                                                                           Bank of New York                                   Financials
satellite distributors. Higher oil prices and reaffirmed
                                                                                                           Chevron Corporation                                Energy
commitments for deepwater exploration rig rentals lifted the stock                                         CVS Corporation                                    Consumer
price of oilfield services company Transocean Ltd. by 48.8%.                                               Johnson & Johnson                                  Health Care
                                                                                                           Emerson Electric                                   Industrials

This document is provided for information purposes only to clients of Jarislowsky, Fraser Limited (JFL). All opinions and estimates contained in this report constitute JFLʹs judgement as of the time 
of writing and are provided in good faith. All data, facts and opinions presented in this document may change without notification. This is not a solicitation for business.  Past performance is not a 
guide to future performance. Future returns are not guaranteed. No use of the Jarislowsky, Fraser Limited name or any information contained in this report may be copied or redistributed without 
the prior written approval of JFL. Sources: Jarislowsky, Fraser Limited, MSCI Inc., S&P Financial Services LLC., TSX Inc., PC Bond Analytics, Wilshire Atlas Analytics, Bloomberg. 

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