Editors: Carl Spiess, CFP, CIM, FMA, FCSI,
MBA, Director, Wealth Management
Allan McGlade, CFP, CLU, Senior Wealth Advisor
Featured Articles
The cheque is in the mail
Fund settlements proceeding ahead of time
Many Canadian investors will be receiving cheques in the mail in the
next few weeks. The payments for the fund settlements that were announced
last December have now all been calculated and are being processed.
Clients who held AIC, AGF, CI, Investors Group or Templeton GLOBAL funds
sometime in the 1998-2003 period, are sharing in the reimbursements.
The initial timeline was to have the process complete by Dec. 31, 2005,
but it now looks like most cheques will be mailed by Sept. 30th. Cheque
amounts start at $2, and may be more depending on the particular fund
and the amount invested. Complete tax reporting information is also
included with the cheques. Please contact us
or the fund companies directly if you have questions.
More on fund settlements
Markets making new highs
 TSX at highest level in 5 years
By Carl Spiess
As the TSX closed over 11,000 for the first time in 5 years earlier
this week, it is worth looking back at what has made investors
successful over the last decade. What seems to be the right answer
through good times and bad, is remaining invested for the long term.
It is interesting recalling how bad the investment marketplace looked
10 years ago for Canada, with separatists, GST, uncertainty about free trade, and the
failure of Meech Lake and Charlettown – and how dire the investment
outlook was in 2001 after 9/11 – and again in 2003 with war looming in
Iraq. Back then, markets went down due to poor investor sentiment,
in spite of rising corporate profits and low interest rates.
 Today,
markets are high again and as Canadians, we have been blessed with
significant portions of our funds and indices being exposed to resource
companies. So much so, that when disaster struck in New Orleans,
markets in Canada actually rose.
Markets in the US seemed unfazed by the destruction resulting
from Katrina, which I personally found to be a reality "disconnect"
since, as discussed above, previous catastrophic events have negatively
affected market performance, in spite of good underlying
fundamentals. It is truly strange when we see a
tragedy in New Orleans, and yet there is a marked increase in the markets over the
subsequent weeks. It almost denies day-to-day analysis and compels
us to turn off the 24 hour news channel due to the improbability of
predicting short term market moves resulting from such
events.
In fact, it finds us repeating even more our
mantra of buying and holding good funds with professional money
managers, where we focus from the top down on your asset allocation (bonds
vs. stocks) to balance your risk and return profile. If it has been a while since we sat down to look
at your asset
allocation, please contact us.
We would be more than happy to review your accounts to ensure your
portfolio is still tracking to your long term goals.
Recommended reading
Is there an income trust bubble?
The Russell Investor has one of the best pieces on income trust
investing that we have seen. There is no doubt that income trusts are here to
stay, and many companies are seeing increases in their stock price when
they consider or complete a conversion to the trust format. But it is
important to know what you are buying. This article outlines how
trust valuations differ from common stock valuations.
Interestingly, the last time we featured an article by Russell was 3
years ago, and it was entitled "battling
a bear". It turned out to be quite a prescient article.
CI investors approve fixed operating expenses
Effective Sept. 1, CI Investments Inc. is charging its mutual funds a
fixed amount for operating expenses. CI said investors voted
overwhelmingly in favour of the new lower pricing schedule at special
meetings held on Aug. 30.
The new system will result in cost savings and greater transparency
to investors. The management expense ratios (MERs) of CI funds will
consist of three components. The first component, which makes up by far
the largest portion of the MER, is the management fee. The second
component will be the fixed administration fee, which will cover
operating expenses. The third component is taxes, over which CI has no
control. Excluding any possible tax changes, CI says its new system
effectively creates a cap on MERs, since CI will absorb any operating
costs that exceed the published administration fee.
Another plus for investors is that the new administration fees are,
on average, 36% lower than the funds' actual operating expenses for
2004. The administration fees are set at 0.20% of assets for domestic
equity funds, 0.21% for U.S. equity funds, and 0.22% for other foreign
equity funds and specialty equity funds. For balanced and fixed income
funds, the administration fee will range between 0.17% and 0.22%.
We continue to favour funds and fund companies where management fees are
lower than their peer group while still providing good returns and the
many services investors expect.
Please contact us
to know more about the benefit to you if you hold CI mutual funds..
Ontario revising LSIF tax credits
Full 15% grant still available until 2008 tax year
The Ontario government made an updated
announcement in September that the 15% tax break will be phased out
starting in 2009 and will be eliminated after the 2010 tax year (incorrect
information appeared here earlier). The tax
break along with the federal 15% grant, was one of the primary reasons
why Canadians made Labour
Sponsored Investment Funds so popular in the 1990s. Not all
provinces offered the 15% grant for LSIF investors but Ontario did and
thus was one of the provinces with the most LSIF funds available to
residents. The labour fund industry did succeed in providing
financing to many small companies, creating jobs which was its mandate
when established in 1991. Approximately 40% of venture capital
financing in Ontario came from LSIFs annually.
Personally, I purchased an LSIF every year for the last decade, and for the past few
years have been "flipping" my fund from 8 years ago (i.e. once
the tax penalty period is over), into the same fund to recapture the
credits. 2005 will likely be the last year I take advantage of
this, however there will still be a number of funds worth examining for
the 15% federal credit, and even more importantly, several funds stand
on their own merits, due to the emerging companies they hold in their
portfolios. Unfortunately, many funds in the sector have had disappointing
performance and will have a difficult time retaining assets in the
future.
We will keep you updated on any other changes to the LSIF rules
before RRSP season, but in the interim, please contact us
if you would like to review the dates at which you could sell your LSIF
funds without incurring a tax penalty.
More on labour fund rule changes
Canada News Wire is an excellent site for researching public company
information.
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