News of Interest to TRIVEST Clients

Trivest Annual Report

Would you like to understand your annual portfolio report better? Read all about it in our Foresight Library.
Would you like to understand your TD Waterhouse monthly statement better? Read all about it in our Foresight Library.

Re: TD Waterhouse Internet “WebBroker”

Waterhouse now has available web-based access to your own portfolio for all Trivest clients through Web Broker.

If you wish to view your account balances and holdings over the internet, please inform us and we will request an ID number and password from TD Waterhouse. The web site that will provide you access is http://www.tdwaterhouse.ca/ At the top right-hand corner of the home page at this site, you will see “Login to: WebBroker”. Click the “Now” button on the right of “WebBroker” and then type in the ID and the password that we will provide you with. You should then change your password to another one. Don’t forget to make note of your password in case you forget it. Once you are logged on, you will be able to access your account by clicking on the button beside “Account Inquiry” on the upper left of the page.


2009

04-Dec-09

EnCana

Effective November 30, 2009, EnCana will be split into two independent companies – EnCana (GasCo) and Cenovus Energy Inc. (Integrated OilCo). Each “old” Encana” common share will be exchanged for one share of the “new” EnCana and one share of Cenovus Energy Inc. The Cenovus and “new” EnCana shares will begin trading on Dec. 3, 2009 on the TSX and on Dec. 9, 2009 on the NYSE.

09-Oct-09

Suncor/Petro-Canada

Suncor and Petro-Canada have merged in August, 2009. Holders of Petro-Canada received 1.28 shares of the “new Suncor” for every share of the “old Petro-Canada” held.

Any fractional shares will be paid out in cash for the amount of $35.95 per share. Generally speaking, “old Petro-Canada and Suncor” shareholders will not realize a capital gain or loss on the disposition of their shares for the new company’s shares.

iShares Takeover

The iShares family of exchange-traded funds (ETFs), created and owned by Barclays Global Investors (BGI) has been sold to BlackRock, a large money management firm that has over $2 trillion under management. After the deal closes, BlackRock will become the world’s largest manager of investment assets. The press release describing the acquisition read as follows:

“The combination of BlackRock and BGI would result in two market leaders in active and index strategies, forming one fully-integrated and independent asset management firm that will operate under the name BlackRock Global Investors (“BlackRock”). The transaction is expected to be completed in the fourth quarter of 2009, subject to necessary shareholder and regulatory approvals and other customary closing conditions, with the initial integration of both firms’ operations shortly thereafter.”

2008

15-Dec-08

BCE Reinstates Dividends

The private takeover of BCE was not completed by its deadline date of December 11th. BCE announced the following day that their quarterly dividend of $0.365/share ($1.46 annually) will be reinstated and the Company plans to buy back up to 5% of its outstanding stock.

23-Sep-08

CHC HELICOPTER CORP.

CHC Helicopter Corp. Class A Shares have been bought out for $32.68 effective September 19, 2008.

Foreign iShares’ Splits

The following foreign iShares have been split:
Euro 350 iShares (IEV) 2-for-1
Latin America iShares (ILF) 5-for-1

8-Aug-08

Canadian TSX iShares splits – August 13, 2008

The following iShares will be split four-for-one:
TSX 60 iShares (XIU)
TSX Capped iShares (XIC)
TSX Completion iShares (XMD)
TSX Energy iShares (XEG)
TSX Gold iShares (XGD)

The following iShares will be split two-for-one:
TSX Material iShares (XMA)
TSX Financial iShares (XFN)

Since August 6th, the above iShares are currently being traded on the TSX at their ‘split’ prices although TD Waterhouse is not expected to adjust the number of shares you hold until August 13th. If you are looking at the value of your holdings on TD’s internet WebBroker, you may not see an accurate value for your iShare holdings until the number of shares are adjusted for the splits.

BCE

BCE is expected to be privatized by a group of investors that include Ontario Teachers’ Pension Plan by the end of the second quarter of 2008. Industry Canada has approved the buyout, given the majority of Directors will be Canadian. The offer price is $42.75 per BCE common share although the stock has been trading below this price. The market is still not convinced that this highly-leveraged deal will complete at this price due to tight global credit conditions.

9-Jan-08

Brookfield Asset Management

Brookfield Asset Management is spinning off its ‘infrastructure’ assets into Brookfield Infrastructure Partners LP. These assets are comprised of their electricity transmission and timber operations in North America, Chile and Brazil. As of record date January 14, 2008, this will be by way of a special dividend and shareholders of Brookfield shares will receive one unit of the Partnership for each 25 Brookfield shares held. The Partnership’s initial quarterly distribution has been set at $0.265 per unit, payable March 31, 2008.

2007

November 6, 2007

US Dollar and Foreign Exchange

As of Nov. 6th, 2007, the US Dollar is at a 150-year low against the Canadian dollar. So far this year, the Canadian dollar is up around 25% against the US dollar, the Australian dollar up 17%, the Euro up 10% and the British pound up 7%. In contrast, the US dollar is up 4% against the Japanese yen.

August 20, 2007

Alcan Takeover by Rio Tinto PLC

Rio Tinto has made an offer to purchase all the common shares of Alcan Inc. at a price of $101 US per share payable in cash. Rio Tinto has agreed to meet Alcan’s existing business and social commitments to Quebec and Canada. In light of the current credit turmoil, the companies are not concerned for the raising of the $38.1 billion required for the takeover. Rio Tinto has stated that the debt used to finance the deal is committed bank financing.

July 18, 2007

Shaw Communications Inc.

Effective August 2, 2007, Class B shareholders of Shaw Communications Inc. will receive one additional share for every share held in a 2-for-1 stock split.

June 23, 2007

Sobeys Inc.

Effective June 19, 2007, shareholders of Sobeys will receive $58.00 per common share. Empire Company Limited, a publicly trading company on the TSX, has taken it over.

June 4, 2007

Finning International Inc.

Finning has declared a 2-for-1 stock split for shareholders of record date May 30th.

Shell Canada

Royal Dutch Shell PLC has acquired all the outstanding shares of Shell Canada at $45 per share. Shell Canada’s common shares were delisted from the Toronto Stock Exchange on April 25th.

Nexen Inc. and Teck Cominco Class B

The above companies have declared 2-for-1 stock splits effective May 7th, 2007.

March 20, 2007

Please have a look at the latest editions of our Insight and Foresight newsletters for tax and investment tips, stories of interest and more…

TRIVEST Student Scholarship Program

Trivest awards annual bursaries to students enrolled in Trivest-managed Registered Educational Savings Plans

The award recognizes young people who combine academic success with contribution to the service of others and extra-curricular activities. There are two categories: A Junior Bursary of $250 to a student in grades 8 to 11 and a Senior Bursary of $500 to a student pursuing any level of post secondary education.

To apply, students are required to supply the most recent transcript of their grades together with a summary of their non-academic accomplishments, not to exceed five hundred words. Any extra-curricular activities such as sports, yearbook team, stage productions, choir, band, etc that show effort and discipline should be included.

Annual applications should be mailed by April 30th to AFT Trivest Management, attention: Scholarship Committee, 2227 Folkestone Way, West Vancouver BC V7S 2Y6.

Applicants will be judged by a committee of three independent persons appointed by AFT Trivest Management Inc. Relatives of committee members are not eligible to apply for bursaries. Winners will be announced in early June. The committee’s decision is final. Winners are not eligible to re-apply for the year immediately following their award.

Junior Bursary proceeds will be contributed to the winners’ Trivest-managed Registered Educational Savings Plan. Senior Bursary proceeds will be paid to the winner upon proof of post secondary enrollment.

Students who have won a Junior Bursary but do not use the proceeds in accordance with the regulations outlined by the Registered Educational Savings Plan forfeit the principal. In such a situation the rules outlined by the Registered Educational Savings Plan will apply.

Students who win the Senior Bursary must utilize the funds within two years otherwise the award is forfeited.

These sums are taxable as bursary income under the Income Tax Act and will be T4A’d. They will qualify for the scholarship exemption.

2006

December 4, 2006

Nortel – Share Consolidation

Effective December 1st, shares of Nortel will be consolidated whereby 10 shares of Nortel will become 1 share. Shareholders of less than 10 shares of Nortel before the consolidation will receive cash at a later date.

November 24, 2006

Dividend Exchange-Traded Fund

Canadian Dividend Fund iShares is an exchange-traded fund that trades under the symbol “XDV” on the Toronto Stock Exchange. It is comprised of 30 of the highest yielding, dividend-paying companies in the Dow Jones Canada Total Market Index and has a relatively low annual Management Expense Ratio of 0.50%.

November 3, 2006

Proposed Legislation for Income Trusts

The taxation of trust units became high profile in the Fall of 2005, when the out-going Liberal government decided that something had to be done. They left their mark, before losing power, with legislative changes in November 2005. While their approach did address the “problem”, it did not completely fix it. Each of the provinces had to buy into the problem and the solution, which, today, most of them have not. Also, there remained a more complex problem with foreign ownership of Canadian trust units.

A year later, the Canadian financial market finds itself mired in the same mess. It took the recent statements by Telus and BCE to force the Ottawa mandarins to accelerate their deliberations.

The Conservative Government’s version of a solution took a different tack and proposed to tax income trusts directly (with the exception of Real Estate Investment Trusts) and this tax would commence in 4 years time. For investors that hold the Income Trusts in their non-registered accounts, the after-tax distributions from these income trusts would be taxed as dividend income, resulting in a similar taxation situation as if the income trust were a corporation.

Since October 31st, a significant amount of “paper wealth” has been shaved from the falling unit values of Canadians’ trust holdings.

There is a tremendous amount of misinformation and vested interest posturing appearing in the Press. Our firm wrote on the subject and made a submission to the Finance Minister a year ago. That article can be found in our investoru.ca website in the trust unit section. In there we wrote about the premium attached to trust unit holdings, which is directly correlated with the tax preference enjoyed by trusts over regular share holdings:

Trust mania is the current era’s investment flavour of the month. Do you remember the last one: it was called the tech bubble. The trust premium is no more nor no less than a tax shelter, like all of the tax shelters that we have had over the decades, including thoroughbreds and feature films, etc. Recall that most of those were bludgeoned out of existence many years ago. Nature abhors the proverbial vacuum and seeks rebalancing. It was entirely obvious that the trust premium could not continue forever. It is lunacy to have and keep a business environment in which every company is forced to draw into this trust phenomenon to preserve shareholder value. To do nothing merely promises that, with the passing of enough time, there will be no shares on the TSX anymore, only trust units.”

In conclusion, while we sympathize with mourning investors right now, we support the current government for “facing the music” and making an unpopular decision.

September 12, 2006

New Global iShares

Barclay’s has issued five new Global iShares this September, 2006 – Global Materials (MXI), Global Consumer Discretionary (RXI), Global Consumer Staples (KXI), Global Industrials (EXI) and Global Utilities (JXI).

August 22 , 2006

Softwood Lumber Deal

On Aug. 22, 2006, Harper announced that his government would introduce a bill in the House of Commons in September to implement the agreement, saying the main softwood producing provinces and a “clear majority” of Canadian forestry companies had given it their support. The terms of the deal include the following terms:

  • Canadian lumber firms would be held to a 34 per cent share of softwood lumber in the U.S. market, which is roughly Canada’s current share. That share would be broken down regionally, based on 2004-05 exports.
  • The U.S. would return about 78 per cent of the $5 billion

August 18, 2006

BCE and Aliant

As of record date July 10, 2006, Aliant and BCE Inc. created Bell Aliant Regional Communications Income Fund (TSX: BA.UN) by combining Aliant’s wireline telecommunications operations in Atlantic Canada, information technology operation and other operations with Bell Canada’s wireline telecommunications operations in its regional territories in Ontario and Quebec and its indirect 63.4 per cent interest in NorthernTel, Limited Partnership and Telebec, Limited Partnership.

Owners of BCE shares will receive 0.915 BCE shares and 0.0725 BA.UN units for 1 BCE share held. For holder of 149 or fewer shares of BCE, the BA.UN units will be sold automatically.

June 2, 2006

Manulife Financial

Manulife Financial has declared a 2-for-1 stock split anticipated June 2, 2006.

May 23, 2006

Imperial Oil Limited

Imperial Oil has declared a 3-for-1 stock split anticipated May 23, 2006.

May 15, 2006

Fairmont Hotels

As a result of a corporate takeover, shares of Fairmont Hotels were redeemed May 15, 2006 for $45 US per share (or approximately $49.69 Canadian).

March 24, 2006

Hudson’s Bay Company

Hudson’s Bay shareholders will receive $15.25 for each share held as a result of the takeover by Maple Leaf Heritage Investments.

March 21, 2006

SNC LAVALIN

SNC-Lavalin has declared a 3-for-l stock split anticipated March 16, 2006.

Royal Bank of Canada

The Royal Bank has declared a 2-for-1 stock split anticipated March 23, 2006.

Talisman Energy

Talisman Energy has declared a 3-for-1 stock split anticipated May 23, 2006.

February 17, 2006

Canadian National Railway Stock Split

CNR has declared a 2-for-1 stock split anticipated on March 1st, 2006.

January 18, 2006

Terasen Sold to Kinder Morgan

As of November 30, 2005, Terasen has been acquired by Kinder Morgan (symbol: KMI) and Terasen shareholders will receive a mixture of cash and common shares of KMI as proceeds.


2005

October 28, 2005

CP Ships takeover

On October 19th, it was confirmed that Ship Acquisition Inc., an indirect wholly-owned subsidiary of TUI, will acquire all of the CP Ships shares and pay U.S.$21.50 per share on October 25, 2005.

October 27, 2005

Fortis Inc. Stock Split

Fortis Inc. has just announced a 4-for-1 stock split anticipated on October 21st.

October 25, 2005

Cheques from Mutual Fund Companies

We are receiving cheques from mutual fund companies representing settlement payments relating to “frequent trading market timing” that had been investigated by the Ontario Securities Commission. Five mutual fund companies are involved – Franklin Templeton, CI Investments, AGF Funds, AIC Funds and Investor’s Group.

The cheques are for relatively small amounts. We completed the processing of these cheques this week. Most cheques have been deposited back into clients’ accounts but a few were mailed directly to them.

August 30th, 2005

….. and another!

Two large utilities have announced stock splits, as follows –
Canadian Utilities Limited Class A: 2-for-1 stock split
Atco Ltd. Class I and II: 2-for-1 stock split

August 8th, 2005

…and another split

Petro-Canada has just announced a stock split: 2-for-1 stock split on September 14, 2005.

August 7th, 2005

Noranda will be renamed to Falconbridge Limited – shareholders of Noranda will receive one common share of Falconbridge for each common share of Noranda.

July 4, 2005

More recent share splits

Enbridge Inc: 2-for-1 stock split on May 27, 2005
Precision Drilling: 2-for-1 stock split on May 31, 2005
Russell 2000 iShares: 2-for-1 stock split on June 16, 2005
S&P MidCap 400 iShares: 2-for-1 stock split on June 16, 2005
MSCI Emerging Market iShares: 3-for-1 stock split on June 16, 2005
S&P SmallCap 600 iShares: 3-for-1 stock split on June 16, 2005
MSCI EAFE iShares: 3-for-1 stock split on June 16, 2005
Shell Canada: 3-for-1 stock split on June 30, 2005
Best Buy Inc. – 3-for-2 stock split on August 11, 2005

May 12, 2005

Share splits
Encana Corp.

Encana has declared a 2-for-1 stock split. Shareholders as of record date May 12, 2005 will receive an additional common share for every common share held and the anticipated date is May 20th.

CHC Helicopter Stock Split

A 2-for-1 stock split has been announced for shareholders of CHC Helicopter Class A shares as of record date April 14, 2005.

March 24, 2005

Changes to iUnits MSCI International Equity Index (XIN) and iUnits S&P 500 Index (XSP)

Barclays Canada has proposed that the XIN and XSP iUnits will no longer need the use of purchasing futures contracts if the federal budget legislation eliminates the foreign content limit in RRSPs. XIN and XSP can then track the major indices by investing in iShares, US-based exchange traded funds. These iShares directly hold shares in companies that make up the index they are tracking. Barclays will then reduce their annual management fees for the XIN and XSP iUnits to 0.15% (from 0.30%).
In addition, XIN and XSP will also be hedged to the Canadian dollar, whereby changes to the exchange rate will not affect the performance of the tracked index.

Removal of 30% RRSP Foreign Content Limit

Canadian regulators have finally recognized that our registered savings plans and pension plans can no longer be restricted to a limited amount of global investment opportunities in order to achieve our retirement goals. Trivest has long recognized the need to invest outside our country to take part in the growth of non-resource industrial sectors, such as health care and technology. We are prepared for this new wave of global investment management and the framework for our clients’ portfolios is already based on ‘global’ sector weightings

Onex Corp.

Onex, headed by financier Gerald Schwartz, has announced this February that it will buy Boeing Co.’s commercial airplane manufacturing operations based in Kansas and Oklahoma, a C$1.5 billion transaction. Senior management of the business will be investors along with Onex and the new business will enter into a long-term supply agreement with Boeing. Onex has a history of taking stakes in a wide variety of businesses and, after improving their operations, has profitably sold them off.

March 1, 2005

 

 

THE SECTOR STORY IN 2004

The broad world market, as measured by the S&P 1200 Index* (in US dollars), was up 9.3% year-to-date to November 30th, with one month remaining in 2004 to bring in the year’s final performance. Below, a review of the Index’s individual sector returns year-to-date shows that the Energy sector was the outstanding winner, followed by Utilities. The Information Technology sector, that led all sectors last year, returned essentially zero since the beginning of 2004. Health Care retreated and, so far, has had a negative return for 2004.

*The S&P Global 1200 is a composite index, comprised of seven regional and country headline indices, many of which are the accepted leaders in their local markets – S&P 500, S&P Europe 350, S&P/TOPIX 150 (Japan), S&P/TSX 60 (Canada), S&P/ASX 50 (Australia), S&P Asia 50 and S&P Latin America 40.

Canada’s TSX Composite Index is up 9.6% year-to-date. Our Energy Sector, with a significant 18.7% weight in the TSX Composite Index, echoed the global sector’s performance with a year-to-date change of 28.0%. Financials were next with a 11.8% gain, and this sector represents a grand 32.5% of the Index. Continuing positive returns for these two sectors in 2005 should bode well for our overall market as these two sectors represent just over half of the TSX Composite Index.

iSHARES FTSE/XINHUA CHINA 25 INDEX FUND

The much anticipated iShares FTS/Xinhua China 25 Index Fund (symbol: FXI) has finally been launched. This ‘exchange-traded fund’ (ETF) holds shares in 25 of the largest and most-liquid Chinese companies and is denominated in US dollars. It is the first mainland China ETF available to us. Its expense ratio is 0.74% as compared to mutual fund vehicles that have significantly higher fees.

Investing in China is appealing not only for its continuing high growth prospects but also for a potential increase in the value of its currency. It is believed that the Chinese currency, the ‘renminbi’, is undervalued by at least 20%. Chinese Premier Wen Jiabao recently announced that the move toward a more flexible exchange rate for the renminbi would be a long-term project. Despite international pressure, China is not going to be rushed into a currency change as it recognizes it needs time to develop its banking and financial systems.

THE CURRENCY STORY IN 2004

From a ‘global’ investing perspective, the volatile currency markets since the beginning of 2004 have led to differing returns depending on which country’s soil you live on. Assuming that you wish to convert to your own country’s currency, the following ‘total returns’ are what you would have obtained if you invested in the major indexes from January 1 to November 30, 2004:

*Bold returns represent the home country

From a Canadian perspective, given that our Canadian dollar has appreciated against the US dollar, Euro and Yen year-to-date, our foreign returns converted back into Canadian dollars were lowered respectively. Foreign investors made ample returns by investing in Canada, augmented by currency gains. Conversely, foreign investors had disappointing results from their US currency holdings.

February 5, 2005

Trivest is pleased to announce its new website to promote investor education … InvestorU.ca will provide Canadian investors with a large and unbiased collection of articles. The new site also has search capabilities to allow fine-tuning of your enquiries and efficient use of web-browsing time.

February 4, 2005

Our staff will be contributing various advice to the online RRSP Clinic at the National Post.

January 12, 2005

Alcan Stock Distribution – Novelis

Alcan common shareholders will receive 1 common share of Novelis Inc. for each five common shares of Alcan held. Alcan will trade on a ex-split basis on the TSX on January 7, 2005 and on the NYSE on January 19th.

Novelis was Alcan’s aluminum rolled-products business that was created in part to address antitrust concerns after Alcan acquired Pechiney SA last year. Novelis represented almost half of Alcan’s total revenue and will continue to supply sheeting to Alcan divisions.


2004

November 18, 2004

The Canadian Dollar versus the Euro

The value of the Canadian dollar in Euros is at the same amount as it was a year ago; 1 Canadian dollar buys 0.65 Euro. It has been a roller coaster of a ride, though, as the Euro appreciated 6% against the Canadian dollar from November of last year to the spring of 2004 and then reversed course, depreciating 6% against the Canadian dollar to this November.

November 17, 2004

Book Value for Non-Registered Accounts

“Book Value” for individual investment holdings will be showing soon on TD Waterhouse monthly account statements for non-registered accounts. If the system works properly, this will tell you your “cost base” for tax purposes when you sell the particular investment. The system can break down if, for instance, you own the same stock at two different financial institutions. When you sell one lot of them, tax law requires your cost base to be based upon the average of both holdings, not the cost base unique to the shares sold at the one institution.

In fact, at TRIVEST / Nilson&Company we have always kept track of your cost bases.

To-date, book value has only been shown for registered accounts for the main purpose of calculating the foreign content percentage (you were allowed to hold a maximum of 30% of the book value of your registered account in ‘foreign’ securities).

October 22, 2004

CI Canadian Equity Merged

On September 3rd, CI Canadian Equity Fund had been merged with CI Canadian Investment Fund and the resulting fund is called CI Canadian Investment managed by Kim Shannon.

Stock Symbols and Voting Rights

The Toronto Stock Exchange has changed the stock symbols for securities that have a non-conventional voting structure. The revised symbols will give investors a better sense of the voting rights associated with these shares. The voting structure indicators are as follow:

  • NV, non-voting shares
  • MV, multiple-voting shares
  • SV, subordinate-voting shares
  • LV, limited-voting shares
  • RV, restricted-voting shares.

Examples of symbol changes are Onex to OCX.sv and Power Corp.to POW.

October 13, 2004

Launch of China ETF

China is one of the largest global emerging markets. On Oct. 8th, Barclays Global Investors launched the first ETF tracking 25 of the largest and most liquid Chinese companies that trade on the Hong Kong Stock Exchange. The iShares FTSE/Xinhua China 25 Index Fund trades under the symbol “FXI” over the NYSE and has an MER of 0.74%. The three top holdings in the Index were the Bank of China Hong Kong (Holdings) Ltd., Petrochina Co. Ltd. and China Mobile. The Index’s top three industrial sectors were resources, non-cyclical services and financials.

ETFs for Emerging Markets Exposure

Morgan Stanley recently issued a report (August 23/04) on this topic. The report stated that emerging markets currently have a “better risk/reward trade-off than any equities alternative”. This “value” case for investing in emerging markets was based on three dimensions: “absolute, relative to history and relative to other regions”. Morgan Stanley indicated that Exchange traded funds (ETFs) provided a simple way to gain access to emerging market equities, providing diversified exposure and lower expense ratios than traditional funds.

August 17, 2004

Oil prices are reaching record highs of $47 a barrel and are up over 26% so far this year. Robust global demand and little spare output capacity around the globe have contributed towards the rise in prices. Higher prices will no doubt curb some of that demand and it is hoped that this will not slow down the growth in the US economy.

Despite the surge in energy prices, inflation in the United States is up a more moderate 2.4% for the whole year. Last week, the US Federal Reserve boosted its key short-term interest rate for a second time this year and continued to signal that future rate increases would take place at a gradual pace unless inflation threatens to become more of a problem.

July 23, 2004

Power Corp. has had a 2-for-1 stock split for shareholders as of record date July 23rd, 2004, payable July 28th.

June 18, 2004

CI American Growth Fund had been merged into CI Value Trust Fund, after approval by the Fund’s security holders on May 19, 2004. CI Value Trust Fund has a similar mandate to CI American Growth Fund.

June 15, 2004

Re; The May 31st TD Waterhouse Statement

Canadian Natural Resources has had a 2-for-1 stock split in May and for those investors who hold this stock, you will see the number of shares you held doubled on the May statement. TD Waterhouse, though, did not divide the share price by half and so the value of your Canadian Natural share holdings is twice the value it should be on your statement. TD subsequently has mailed out revised May statements with the correct value.

June 10, 2004

Stock Split

Terasen Inc. has declared a 2-for-1 stock split for shareholders of record date June 7th, 2004, payable June 10th.

June 1st, 2004

Graham Lyons of iUNITS-Barclays Global Investors will be the guest speaker at our June 15th informational seminar on investing in exchange-traded funds, the low-cost and effective alternative to conventional mutual funds.

May 19, 2004

We thank all of our clients and friends who joined us to celebrate TRIVEST’s 10th Anniversary. 125 people attended over the course of the afternoon.You can re-live the event pictorially.The winner of the draw for a weekend in Victoria was Douglas Alder of Vancouver.

May 18, 2004

Stock Split

Canadian Natural Resources has declared a 2-for-1 stock split for shareholders of record date May 21st , 2004, payable May 31st.

May 17, 2004

Stock Splits

WestJet Airlines Limited has declared a 3-for-2 stock split for shareholders of record date May 7th, 2004, payable May 14th.

Talisman Energy has declared a 3-for-1 stock split for shareholders of record date May 19th, payable May 25th.

March 28, 2004

Stock Splits

Countrywide Financial Corporation has declared a 3-for-2 stock split for shareholders of record date March 26th, payable April 20th. Bank of Nova Scotia has declared a 2-for-1 stock split for shareholders of record date April 6th, payable April 28th, 2004.

March 27, 2004

Taxation of Distributions from Exchange-Traded Funds

Canadian-based exchange-traded funds (iUnits) distribute their dividends quarterly and capital gains annually in December and you are required to pay tax on these forms of distributions. When iUnits pass on capital gains, your ‘adjusted cost base’ increases by the amount of the distribution, so you will not have to pay tax again on this capital gain when you sell the iUnits.

US-based exchange traded funds’ distributions are treated as income and do not retain their tax character as dividends or capital gains.

January 22, 2004

RRSP loans

RRSP loans can be arranged directly with any TD Canada Trust branch. You must take your AFT Trivest TD Waterhouse account number with you so the loan proceeds can be deposited directly into your account.

TD allows loans from a minimum of $1,000 to a maximum of $14,500 and the loan must be repaid within one year, i.e. a one year term and a one year amortization period. Payments can be deferred for up to 120 days, but the loan continues to accrue interest during this period.

Many financial institutions, including TD Bank, now offer “carry forward RRSP loans“. These are intended for situations where people are catching up their RRSP contributions in a large lump. These loans are subject to different terms and conditions:

  • Overall maximum is $50,000
  • The loan can be amortized over up to 10 years
  • The term of the interest rate can be 1-5 years
  • For loans with an amortization period less than 2 years the minimum amount is $2,000
  • For loans with an amortization period greater than 2 years the minimum amount is $5,000

For current interest rates, call 1-866-567-8888.


2003

December 24, 2003

Income Trusts’ Non-Taxable Distributions

Investors that hold income trusts in non-registered accounts normally receive a non-taxable portion of distributions (also known as return of capital) along with a taxable portion. Generally speaking, the longer the trust has been around, the smaller the non-taxable proportion of distributions. For example, Rio Can REIT (REI.UN-TSX) had a distribution in 1995 that was 100% non-taxable and that declined to 38.5% in 2002. So, beware of the initial lure of a new income trust that states that all or a high-proportion of the distributions will be non-taxable initially – eventually, there will be taxable income.

On another note, legislation proposed by the Ontario government providing for “limited liability” protection for Ontario-based income trusts should be forthcoming when legislators meet again in early spring.

October 17, 2003

Canadian Dollar

The Bank of Canada should be reluctant to raise its key Bank lending rate, currently at 2.75%, any time soon. To do so would add further fuel to the Loonie’s fire, as higher interest rates in Canada would attract more foreign investors and lead to further appreciation of our dollar. As of today’s date (Oct. 16th), the Loonie has risen 16.8% against the US dollar over the past 12 months, a rare event for such a short time period. This is great if you are planning to catch some southern winter rays, but not so great for your Canadian portfolios that hold US investments. The US’s S&P 500 price index is up sharply as well over the last 12 months. From a Canadian perspective, though, its 22.1% gain has been tempered by the Loonie’s rise, and the net result is a 5.3% gain in this index.

The new “Time Warner”

AOL Time Warner has officially changed its name to Time Warner, and its ticker symbol has changed from AOL to TWX. Current shareholders don’t need to take any action. A Reuters press release suggested that, “The new name will help the company move past the disastrous merger of new and traditional media, which has failed to improve either business….”.

October 7, 2003

Fees, Fees, Fees

Portfolio performance is a lot about the cost of investment management. This should be true always. However, the reality is that this subject gets little attention in heady markets and lots of attention in down-markets. Now that we have had almost three years of down-markets, investors and the financial media indeed have turned lots of attention to this subject.

Mutual funds

In today’s world, mutual fund managers are the scallywags, charging an average 2.62% in fees. The issue is not just the size of the fees but also the value delivered. At any point in time, the returns for the majority of funds is below the relevant market index for that fund category. Many investors are oblivious to the subject of MERs. Many others may understand in general terms but not in stark reality.

As an example, we recently conducted an analysis of this matter for a new Trivest client. He came to us with a collection of mutual funds, many of which we sold. The MERs on those funds varied from .85% to 2.95%. Our analysis showed that his average MER on these funds was 1.85% and this was costing $4,200 a year in fees. The proceeds from selling these funds were invested in direct stocks and bonds, which bear only the original purchase commission, plus some exchange-traded funds which have a typical MER of approx .17 to .30 of 1%. Our management fees on this sum were $1,600 and fee costs were driven down at least $2,000.

Income trusts

The financial industry always needs something to attract investors. With low fixed-income returns and dismal stock market returns, the darling-of-the-day has been income trusts. These are a different beast (see our Summer 2002 Foresight article) . The industry flaunts the cash “yield”, leading investors to view trusts as fixed income, not equity. The very word “trust” itself logically inspires confidence. But it would be more accurate to give trusts the unwieldy moniker of “income-and-equity-risk” units.

“Total return” is the relevant statistic. For stocks, this means dividends plus/minus change in share price. For trusts, this means cash yield plus/minus change in unit price. Corporate Directors are very leery to drop dividend rates, because they know from experience how the market punishes the stock price. However, trust managers already have been dropping cash yields when the underlying business falls in the toilet. The result? Trust prices are being hit, and “total return” drops.

MERs in the trust industry are finally drawing attention, too. Unfortunately, full disclosure is less than perfect, and thus the true MER is sometimes unknowable. Fees are often multi-tiered, including, for instance, a royalty percentage on gross revenues, an advisory fee based on assets held, a fee based on new assets acquired or a percentage of net operating profit or distributable cash flow. Over time, more of these stories will be exposed in the Press.

Common Stock

As one delves deeper into the subject of fees borne by investors, one eventually faces the level of corporate executive compensation. After all, money that goes into executive pockets is no longer there for shareholders. The median total direct CEO compensation for 2002 was US $6.1 million, based on a recent survey of 350 large US companies. The bulk of the CEO pay-mix was “Long Term Incentives” such as stock options and stocks. Management experts tell us that CEO compensation is all about “incentives” and “efficiency.” A simpler rationale may be good old-fashioned greed. The individual investor has little power to influence this issue, but the huge pension funds that have large holdings of corporate stocks could demand more accountability. “Corporate governance” is the hot topic in this post-Enron era.

Another dilemma in Canada is that many of our largest publicly-traded stocks have grown from old family businesses whose founders maintain tight control by creating a dual-share structure. The Stronach family of Magna International fame, for instance, owns 66.2% of the voting stock but only 0.8% of the non-voting stock. Obviously, non-family shareholders have little power in this case to have a say in executive pay decisions.

October 7, 2003

SURVEY RESULTS

Trivest periodically undertakes a survey of our clients in order to determine how well we are serving you and what we can do to improve. Here is a summary of what you recently told us. We were graded “good” or “excellent” in the following categories by the following proportions of the respondents:

August 27, 2003

Housing Market

Canadian housing starts were at record levels for July. All regions of Canada have experienced an increase in residential home building – ultra-low mortgage rates along with consumer confidence are contributing to the red-hot construction activity.

Canadian building permits issued for July are also at record levels and this will fuel the housing market for several months to come. The increase in housing demand has led to home price increases: British Columbia’s housing prices remain the least affordable in Canada and Atlantic Canada the most affordable. Economists expect that demand will remain strong on the West Coast and stabilize in the Eastern provinces.

May 24, 2003

Canada Pension Plan’s Performance

The poor performance of the global equity markets eroded Canadian’s retirement savings in the Government’s Canada Pension Plan (CPP). The CPP’s Investment Board reported a loss of $4.1-billion or 21.1% on stocks and real estate in its last fiscal year. Gains of $3 billion or 8.4% in the CPP’s large bond portfolio helped to mitigate stock market losses and the overall loss amounted to 1.5 % or a slide of $1.1 billion. The Board’s aim is to produce an annual real rate of return of at least 4%. The current asset mix of the CPP is about 69 % in federal, provincial bonds and cash, and the remaining 31% is in equities (primarily publicly traded stock) and a relatively small amount of real estate. Annual CPP contributions by Canadians are expected to exceed annual benefit payments until 2021, providing an 18-year stretch before a portion of the investment income generated by the CPP Investment Board is needed to help pay pensions.

May 12, 2003

BC Gas changes its name to Terasen

Shareholders approved the new name change of BC Gas to Terasen. The name Terasen was created by combining the Latin word for earth, “Terra” and the word “send.” Together they represent “sent from the earth,” an accurate description that connects the natural gas, water and petroleum transportation businesses of Terasen Inc. The Company reported that the reason for the name change was that, “Some people found the BC Gas name confusing and many people believed we were a Crown Corporation or tied to the provincial government”.

April 23, 2003

International Bond Outlook

Amidst the carnage, you may note the significant positive returns shown for International Bonds on the Trendline Graph. The weakening of the Canadian dollar against major currencies contributed at least half of the returns of international bonds over the last year. Aggressive monetary easing on a global basis had also increased bond returns in local currency terms. It is unlikely that international bond returns in 2003 will be as strong as in the past year. Global economic activity will probably return to more normal levels and inflationary pressures will prevent local interest rate decreases. As to foreign exchange rates, it is debatable as to whether or not the Canadian and US dollars will continue to depreciate against other international major currencies, at least as much as they did over the past year.

Legal Notice from TD Waterhouse Re: Currency Conversions

Some clients may receive a notice from TD Waterhouse this April describing a Legal Notice of a settlement of a class-action suit regarding foreign exchange conversions. The settlement amount that TD Waterhouse will pay a client is in the form of a trade voucher as along as the client agrees to the settlement in written legal form. The value of the trade voucher depends on the amount of funds you had converted. If the amount is less than or equal to $30,000, the trade voucher is for $29 (i.e. one free trade). Further details are at the web site www.tdwaterhouse.ca/settlement.

April 17, 2003

April in Paris?

Bad news for Canadian travelers visiting Europe this spring – the Canadian dollar has depreciated approximately 14% over the last twelve months against the Euro. The decline has leveled off over the past month. The good news for Canadians that have European investments is that the Euro’s appreciation mitigated the decline in European stock markets (overall 31% decline in the MSCI European stock index in Canadian dollars versus a 45% decline in the MSCI European Stock index in Euros).

However, the Canadian dollar has appreciated approximately 7% over the US greenback, amplifying the decline of the S&P over the last twelve months to about 30% in Canadian dollars.

The 0.25% increase in April of the Bank of Canada’s key lending rate to 3.25%, will continue to support the rising trend of our dollar as the spread between US and Canadian interest rates widen.

April 5, 2003

Our Joan McCance visits the Wall Street Bull

March 18, 2003

The Direction of Interest Rates

Today, March 18th, the US Federal Reserve left its interest rates unchanged, at 1961 lows. Unlike Canada, the US economy is running below capacity and rate hikes are not expected until its economic recovery gathers strength in the latter part of 2003.

The Bank of Canada’s decision to hike rates by 25 basis points on March 4 was no surprise to the markets. Inflation has been trending upwards, above the Bank of Canada’s upper target. This rate hike had sent the loonie to its highest exchange rate since September 2000 as our short-term interest rates attracted international money flows. Further rate hikes in the near term are almost a certainty as our economy continues to grow and inflationary pressures build. Bank of Canada Governor David Dodge in a recent speech in London, England, boasted of Canada’s growth. “Since 1997, our economy has consistently exceeded the average growth rates of the world’s most industrialized countries. And we are expected to do so again this year.” With respect to the outlook for the Canadian economy, Mr. Dodge said that growth should accelerate in the second half as global uncertainties diminish. The Bank expects the level of economic output to remain close to capacity during 2003 and into 2004. And so the outlook for Canadian interest rates is for a series of increases in an attempt to keep inflation under control. Expect bond prices to decline accordingly.

March 10, 2003

Announcement

We are pleased to announce that the BC Securities Commission upgraded the registration of AFT TRIVEST Management, Stephanie Venn and Don Nilson to the category of “Portfolio Manager“, effective March 3, 2003.

February 11, 2003

Re: RRSP loans

RRSP loans can be obtained through application at any TD Canada Trust branch and the proceeds placed directly in your TD Waterhouse account with Trivest. Be sure to bring your TD Waterhouse account number with you when applying. A loan term can be 1-5 years and the loan can be amortized for up to 10 years. A minimum loan of $1,000 is required for a one year term, a $2,000 minimum for up to 2 years term, and $5,000 minimum for over 2 years term. Payments can be bi-weekly or monthly and payments are a blend of interest and principal. The loan can be at a variable interest rate or fixed interest rate. For a 1-2 year term, the variable interest rate is at prime (currently 4.5%) and the fixed interest rate is currently 6%.

January 17, 2003

Re: State of the markets- Chin up!

When I listen to the 7 am early stock report every morning, I cannot remember the last time the markets opened UP….. every morning… its DOWN! This is obviously reflected in our Trendline graphs.

However, it is unquestionably a time to seek shelter, solace and wisdom in the benefits of a balanced portfolio. The vast majority of portfolios that we manage are balanced to a large degree, ie have a fairly significant allocation dedicated to “fixed income”, not equity. While this strategy creates a “drag” in fabulous stock markets, it also creates a “buoy” in awful markets.

The table below shows our mean returns each month for the past 14 months for the portfolios that have a reporting date for any given month-end. In total, this reflects approximately 200 reports.You will see that, while equity markets have been ravaged with -10% to -25% returns over the past year or so, our portfolios over the 14 months very consistently have pretty much broken even.

Annual returns (%) for twelve months periods ending over the past fourteen months:

 Oct  Nov  Dec  Jan  Feb  Mar  Apr  May  June  July  Aug  Sept  Oct  Nov
 -3.8  -1.9  -1.9  -3.2  -0.2  5.2  2.5  0.0  1.0  2.2  -2.0  -1.6  -2.5  -4.7

So, what’s good about this? Well, a full equity portfolio of $100,000 two years ago is probably worth approximately $70,000 today. It will require a cumulative return of approximately 40% to get that portfolio back to the water-line of $100,000 before it starts to make money again. That translates into approximately 7.5% per year for the next five years. In other words, it will take five years to get back to where you were!

Our balanced portfolios that have lost 1-4% will be making money within the first year that the equity markets turn around.

For those who have borne the full brunt of a 30% loss in the past two years, you must face the decision of how to position yourself to get back on track. Do you stay with a full equity portfolio or do you learn your lesson and migrate to a balanced portfolio? Properly answered, that’s a fairly complicated question that needs to look at your overall financial situation. One of the spin-offs of formal financial planning is some strong insight into what your fixed income/equity mix should be. For my money, I would start “getting it right” by migrating to balance. If you continue to take your chances on a 100% equity portfolio, there’s no guarantee you’ll be back to “ground zero” in five years, and in the meantime, five more years of your life has gone by with a misbegotten portfolio strategy. Back to you!

January 16, 2003

Re 2002 T slips

Over the next eight weeks, we will receive over a thousand T slips of various sorts (T3s, T5s, RRSP slips)from TD Waterhouse.

For Trivest clients that have their taxes done by Nilson & Company, we will process these slips into your personal tax files, ready for tax season in March / April.

For Trivest clients who do their own tax returns, we will batch the slips as they trickle in through January-March and mail them out in early March. We do not mail them out one-by-one as they arrive. Also, we cannot easily know how many slips to expect for each of you (because of, for instance, mutual fund distributions); therefore, we prefer to wait until everything has been processed by the outside world.

If you know how many slips you are expecting and you are anxious to file your tax return early, contact us to “jump the queue”!

January 9, 2003

US Dividends’ Tax Elimination – What are the Implications?

If Congress passes Bush’s stimulus package announced on January 7th and eliminates tax on US dividends, dividend-paying stocks could be strong competitors for other forms of investments for US investors. Money could shift from lower-yielding (on an after-tax basis) bonds and income trusts into US dividend-paying stocks. This would then put competitive pressure on US bond prices, forcing them to drop which would result in higher market yields. Keep in mind, though, that bonds are a different asset class from stocks and that investors will continue to want to have a balanced mix in their portfolios to reduce risk. As well, bond interest is a “contractual” obligation and dividends are not as dependable an income stream. A company may decide not to make dividend payments if its cash flows are inadequate.

US investors could also pull out of higher-yielding Canadian stocks, such as Canadian utilities, since these companies’ dividend payments are subject to Canadian withholding tax and US federal income tax, (unless foreign dividend income also becomes non-taxable for US investors).

It is not clear yet whether Canadian investors would be subject to US withholding taxes on dividend income from their US stocks. Canadians would still have Canadian tax on US dividend income and there would basically be no “tax-incentive” for Canadians to invest in US stocks. There would be more of a “capital-appreciation” incentive if US investors push up the value of these dividend-paying US stocks.

What the Experts are Forecasting for Market Returns in 2003

Mercer Investment Consulting polled 89 institutional money managers who collectively manage around $10 trillion. Over the next five years, these money managers forecast a median annual return of 8% for Canadian and US equities and 9% for international equities.

January 6, 2003

Stephanie hits the airwaves on CBC Radio One’s Almanac program, answering listeners questions about finance.

January 5, 2003

A new book review of an investing book

“I would say that it is from time to time the duty of the serious investor to accept the depreciation of his holdings with equanimity and without reproaching himself.” JM Keynes


2002

December 29, 2002

Dividends

Investing in companies that pay dividends are back in vogue. A dividend allows an investor to get cash distributions along with the promise of a capital gain if the stock price does rise. In Canada, tax laws treat dividends favorably with a “dividend tax credit“.

U.S. investors do not receive the same favourable treatment. Dividend income effectively is taxed twice there: once inside the company as business profits and a second time to the shareholder as dividends. However, the United States currently is debating a change in its tax law to alleviate this double taxation on dividends, which could encourage companies down south to pay out more profits in that form.

We could see higher dividend payouts from US companies if this change comes about.

November 26, 2002

Chauncy’s “Being There”

We’ve been rained on by a deluge of plunging stock prices over the last couple of years. Fortunately, most of us survived the downpour by having our wealth spread out in other assets such as fixed income investments and real estate. It was recently reported that the average Canadian house price has increased 13% from a year ago, thanks to low interest rates and pent-up demand.

But investing just doesn’t seem right without equities boosting our net worth. After all, we expect to be rewarded for buying stakes in big businesses, especially those that we personally buy products and services from. History has shown a long-term, after-inflation return of around 7% on equities, outperforming real returns on bonds and real estate. Even so, some investors are now questioning whether to stay invested in blue-chips. An even more difficult decision being faced is whether to commit new money towards equities. Perhaps the following chart can help investors make up their minds. As you can see, not “being there” during the “best months”, in the past 25 years, can make quite a difference in your wealth.

October 24, 2002

Re: Ericsson Telephone (ERICD)

As a result of a reverse stock-split, Ericsson shareholders will receive 1 share for every 10 shares held, effective Oct. 23, 2002.

Fording Coal (FDG)

On Oct. 21, 2002, Fording announced it plans to reorganize into an income trust, a move intended, “to unlock the value of the significant cash flow the company generates”. Sherritt Coal Partnership II made a bid of $29 for each Fording share and Fording replied that this bid was “opportunistic, completely inadequate and fails to reflect the underlying value of Fording”. Teck-Cominco is also viewed as a possible rival bidder for Fording, although the company has not made any formal announcement.

October 15, 2002

Re: iREIT ETFs will be available late October

Exchange-traded funds, or “ETFs”, are baskets of stocks traded on exchanges. Each ETF represents either a sector of an index, or an index itself. ETFs have all the benefits of a mutual fund, but with fewer costs. Their popularity has largely been driven by their low management fees. For example, Barclay’s RRSP iUnits S&P 500 has an annual management expense fee capped at 0.30%. Many new ETFs are being introduced and in Canada, we will shortly have iREITs, a fund which will invest in several Real Estate Investment Trusts that make up the newly-formed TSX/S&P Canadian REIT Index. Its management fee will be capped at 0.55%. REITs can provide income and long-term capital appreciation for investors, and are a way of obtaining a diversified mix of holdings in the Canadian real estate sector.

July 16, 2002

Where’s the Money??

Where have the investment funds gone that were pulled out of equity markets, and, in particular, the massive US equity market? They don’t appear to have settled in any one particular regional equity market.

It would be suspected that part of this huge flow had ended up in European equities, given that the US dollar has declined 10.8% year-to-date against the Euro. As of July 15, 2002, Morgan Stanley’s Euro Index is down 27.7% year-to-date (in Euro currency). Germany is -25.1% and Ireland – 31.5%. The World Index is down 19.9%. Other national indices, (with the exception of Singapore and Austria), are showing losses, the majority being large losses. The declines, valued in local currencies, for example, are the following: Japan -4.3%, Pacific (ex Japan) – 5.8%, Australia -7.2%, Canada -14.4%, the United States – 20.7%, and the United Kingdom -24.3%.

So, where’s the money gone from the equity markets? And, more importantly, when are these trillions of currencies going to pour back into the equity markets?

June 12, 2002

re: Proctor and Gamble

As of record date May 29, 2002, shareholders of Procter & Gamble will receive one common share of J.M. Smucker for every 50 common shares of Procter & Gamble they hold.

re: Mutual fund merger:

In May, 2002, C.I. Fund Management Inc. announced its acquisiton of Spectrum Investments and the integration should be completed by the end of 2002. Sun Life Financial shortly thereafter announced that it had acquired 30% of C.I. Fund Management.

May 15, 2002

Tricon Global Restaurants (YUM) has announced a 2-for-1 stock split to shareholders as of record date June 6, 2002. Shareholders will receive one additional share for each share held.

May 14, 2002

Canadian Natural Resources (CNQ) announced on May 13th that it plans to acquire Rio Alto (RAX) at $18.10 per share or 0.3468 of a common share of Canadian Natural. In addition, Rio Alto’s South American assets will be transferred to a new company, Rio Alto International, and each Rio Alto shareholder will also receive one share of Rio Alto International for each Rio Alto share held.

Suncor Energy Inc. has announced a 2-for-1 stock split, to be issued to shareholders as of record date May 15, 2002. One additional share will be issued for each share held

May 7, 2002

Re: Compaq, Barclays, Westjet and the TSE 300

Compaq Computer and Hewlett Packard Merger – As of May 6, 2002, the merger between Compaq and Hewlett Packard is in effect. Compaq shareholders will receive 0.6325 common share of Hewlett Packard for each common share of Compaq Computer held.

WestJet Airlines Ltd. has announced a 3-for-2 stock split, to be issued to shareholders as of record date May 3, 2002. One additional share will be issued for every two shares held.

As of May 1, 2002, the TSE 300 Composite Index has changed to the S&P/TSX Composite. The number of companies in the new index will most likely be less than 300. The new acronym for the Toronto Stock Exchange has been changed from TSE to TSX.

Barclay’s PLC has announced a 4-for-1 stock split which will give shareholders as of record date, April 26,2002, 3 additional ADR shares for each one held.

April 23, 2002

Re: Best Buy Inc

Best Buy Inc. has declared a 3-for-2 stock split which will give shareholders as of record date, April 26, 2002, one additional share for every 2 shares held.

April 11, 2002

April 8, 2002 marks the birth of EnCana, created by the merger of PanCanadian Energy and Alberta Energy. EnCana is now North America’s largest independent oil & gas company and trades on the Toronto and New York Stock Exchanges under the symbol “ECA”. Holders of PanCanadian Energy shares will receive one common share of EnCana for each PCE share. Holders of Alberta Energy will receive 1.472 common shares of EnCana for each AEC share.

February 13, 2002

Re: Wealth management survey Taddingstone Consulting Group, a Toronto consulting firm, recently conducted a survey of Canada’s wealthy. 63% of respondents who have money with investment counsellors indicated they were satisfied, a higher rating than that attributed to banks, full-service brokerages or financial planners. 43% suggested there were no drawbacks in dealing with investment counsellors.

February 7, 2002

Re: A GLOBAL SECTOR APPROACH TO BUYING STOCKS

Now that you have managed to make an RRSP contribution with your hard-earned after-tax dollars, the next challenging task is to decide which stocks to buy for the planned equity portion of your portfolio.

Picking stocks is both an art and a science. The art part comes with experience and the synthesis of a ton of information that only the human mind can intuitively put together. The science part is more approachable and one can begin with “sector” analysis. You start by dividing the stocks that are currently in your portfolio into the various industrial global sectors. The sectors that you can use are those that form the Global Industry Classification Standard, the GICS. The GICS was developed by Standard & Poor’s and Morgan Stanley Capital International to provide for a consistent set of industry classes that can be used by investors worldwide. You simply total the market value of your stocks in each of the sectors and see what percentage each sector represents of your total equity portfolio. Let’s say you have found that your stocks are weighted as follows: 10% Energy, 5% Materials, 8% Industrials, 0% Consumer Discretionary, 6% Consumer Staples, 0% Health Care, 40% Financials, 4% Information Technology, 15% Telecommunication Services and 12% Utilities. Right away, you can see that you hold no investments in the Consumer Discretionary and Health Care sectors and you should consider investing in these sectors to provide for more diversification in your stock mix. The next step would be to see which companies fall within these sectors, and then narrow your search using company fundamentals such as price/earnings ratios, price/earnings to growth ratios, return on equity and debt to equity ratios.

Various internet sites can provide all of these fundamental ratios and returns. Sometimes individual investors lose sight of just how much they have invested in any one sector. This can be seen in the example portfolio in that the Financial sector is over-weighted (40%), calling for the sale of a portion of financial stocks. The sector approach can provide for a disciplined approach to selling off stocks when a sector becomes over-weighted. For example, a sell signal in the Information Technology sector would have been set off when those technology stocks were at their dizzy highs.

Soon, the Toronto Stock Exchange will be using these various sectors for their newly revised index, allowing investors to compare relative performances of the sectors on a global basis.

Investing is now evolving to a global sector approach.

January 31, 2002

Re: Toronto Stock Exchange Announces Changes in Canadian Indices

The Toronto Stock Exchange will be renaming the TSE 300 to the S&P/TSE Composite Index, and there will no longer be a requirement for the Index to have exactly 300 companies make up the Index. The number of stocks that are to make up the Index will vary over time and a company’s inclusion in the Index will depend on its market price and capitalization. In addition, the Global Industry Classification Standard (GICS) for industrial sector indices will replace the current sector classification system. This will allow investors to compare Canadian sector performance with other indices around the world, and is expected to be introduced

January 30, 2002

Re: A Change in US Accounting Rules for Goodwill

A change in US accounting rules will require companies to take “goodwill” charges all at once instead of amortizing them over several years. For companies that have made acquisitions and have acquired a lot of goodwill, this could result in a large one-time write down. On the bright side, after this write down, earnings will no longer be affected by goodwill amortization charges. AOL Time Warner has announced a huge charge of between $40-$60 billion in goodwill primarily from its acquisition of Time Warner.

January 28, 2002

Re: Merger of Alberta Energy Co. and PanCanadian Energy

PanCanadian is buying Alberta Energy in a share swap and will create a new company called EnCana Corp., bringing together the, “highest oil and gas output and biggest reserves of all publicly traded independent energy firms”. Under the deal, Alberta Energy shareholders will get 1.472 PanCanadian shares for each of their own shares.

January 23, 2002

Re: 2001 RRSP contributions and loans

Please note that the maximum allowable RRSP contribution for 2001 is $13,500, subject to your income level and pension situation. Your own contribution limit is indicated on your 2000 T1 Assessment Notice. If you are uncertain of the amount available to you, we will be pleased to be of assistance.

Please feel free to contact us to discuss the wisdom and tax value of making a contribution, and also to consider whether your contributions should be spousal.

Also, remember to visit our website for everything you need to know about RRSPs and RRIFs.

You can forward your contribution cheque to us (post-dated to March 1st if you prefer), or you can make a deposit directly to your TD Waterhouse RRSP account through your local TD Bank branch. Please call us to notify us of the amount you are depositing at the bank.

Again this year, TD Bank will be offering competitive RSP loans to our clients. A typical one year RSP Loan is at the prime interest rate, currently at 3.75%, and is payable in blended interest and principal monthly payments. Loan amounts range from a minimum of $1,000 to the maximum government allowable contribution, with prepayment options. Please call us if you have any questions regarding this program.

We have arranged with TD’s main branch (700 West Georgia in Vancouver) to process your applications. The branch advises that it is best at this time of the year to call ahead for an appointment with a Financial Service Representative. The telephone number to call is 604-654-3665. The branch also advises it would assist the process if you had your RRSP account numbers available when you make your appointment.


2001

Sept 13, 2001

Re: Sector analysis for clients

We have been initiating more formalized sector analyses for Trivest clients who have direct holdings of stocks in their portfolios. Our sector groupings are similar to the new TSE groupings and are as follows: resource, utilities, industrial/transportation, consumer, communications, finance, health, and technology. We look at your current diversification by seeing what percentage of your portfolio is in the various sectors, establish a percentage target for each of the sectors, and then analyze what is necessary in terms of buys and sells of individual stock holdings in order to achieve the sector target. This is a disciplined approach and when a sector becomes over-weighted (ie, having too high a percentage in a particular sector), the strategy would highlight the need to sell part of your holdings of stocks in this sector, and redistribute the funds to different sectors…..

“selling high”!

January 24, 2001

Re: International markets in calender year 2000

Many major equity markets experienced negative returns for the calender year 2000, both in terms of local currency and in Canadian dollars (see accompanying table). In fact, the World Index was down approximately 11% over the year.

The first column shows performance in major markets around the world, ranked by % return and expressed in Canadian dollars.

The second column shows performance expressed in the foreign market’s domestic currency.

The third column shows the difference in return between the two columns. This difference represents the appreciation, or depreciation, of the Canadian dollar against each country’s currency over the year 2000.

A negative(-) difference indicates that the foreign currency depreciated against the Canadian dollar (ie, the Cdn. Dollar appreciated against the foreign currency).

A positive difference indicates that the foreign currency appreciated against the Canadian dollar (ie, the Cdn. Dollar depreciated against the foreign currency).

It can be seen that the Canadian dollar appreciated against most foreign currencies in 2000.

In summary, the value of foreign holdings generally declined in 2000, partly due to markets declining and partly due to foreign currency depreciating agsint our currency.

% RETURN for Year 2000

Difference in % Return
MAJOR MARKETS

In Cdn. $

In Local Currency

due to Currency*
Switzerland 8.5 6.2 2.3
Canada 8.1 8.1 0.0
Denmark 6.2 9.9 -3.7
Norway 1.0 7.1 -6.1
Italy 0.7 3.9 -3.2
France -1.7 1.4 -3.1
Netherlands -2.1 1.0 -3.1
Australia -8.9 3.7 -12.6
Portugal -9.1 -6.2 -2.9
Austria -10.4 -7.6 -2.8
Britain -10.5 -6.7 -3.8
United States -10.5 -13.6 3.1
Ireland -11.3 -8.5 -2.8
Finland -11.7 -8.9 -2.8
Germany -13.6 -10.8 -2.8
Spain -13.9 -11.2 -2.7
Hong Kong -14.1 -16.7 2.6
Belgium -15.8 -13.1 -2.7
Sweden -19.2 -13.8 -5.4
Japan -26.0 -20.3 -5.7
Singapore -26.2 -25.7 -0.5
New Zealand -34.1 -24.9 -9.2
WORLD INDEX -11.1 -10.8 -0.3
EUROPEAN MON. UNION -6.6 -3.6 -3.0
ASIAN PACIFIC -29.0 -18.4 -10.6

 


2000

October 15, 2000

Re: About RRSPs/RRIFs and foreign content

YOU GOTTA BE KIDDING?

Getting older is inevitable, and that means we all eventually reach age 69 and must convert our RRSPs into RRIFS. This is a fairly straight forward process. A new brokerage account must be set up and the assets are transferred from the old RRSP to the new RRIF on or before December 31st of your 69th year.

When the paper shuffle is complete, all the stocks, bonds and mutual funds you own in the RRSP now are in the RRIF. Time to head for the retirement beach….but hold on!

The foreign content restrictions (currently25% of book value and heading for 30% on January 1st) apply equally to RRSPs and RRIFS. On the day before you close down your RRSP, your foreign content may be onside at book values. However, depending on the relative movements of your Canadian and foreign holdings, the relative foreign proportion at market value may be greater or less than 25%. Under present rules, the assets move from your RRSP to your RRIF at market values, not book values. The result of this metamorphosis is that you may find yourself off-side the foreign content limit, literally “overnight”.

The government has introduced legislation this summer to “fix” this, so that transfers happen at book value, effective after 1999.

Well, that’s nice! It only took 83 years of income tax legislation to make something fair! But more to the point, in over twenty years in the business, we have never seen or heard of the old legislation actually being applied and causing the grief explained above. Power to the people!