Briefly:

(February 13, 2004) The Canadian Securities Administrators (CSA) are calling on the income trust sector to clean up its disclosure practices, following a study of 40 trusts last year.

While some of the trusts, which were not named, were in compliance in each category, the CSA found deficiencies in disclosure of distributable cash, comparative figures, unitholders’ equity, future-oriented financial information, non-GAAP financial measures, and goodwill and intangibles.

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Pension funds see sluggish 2004

(February 12, 2004) After a stellar performance in 2003, pension fund managers are taking a more realistic outlook on market returns for 2004, according to a survey released by human resource consulting firm Morneau Sobeco.

The median return in 2003 was 13.9%, but managers are expecting a return of 8% from the TSX and 7.1% and 8.8% from S&P 500 and MSCI EAFE respectively, in Canadian dollars for the upcoming year. These percentages are below-average returns, as the TSX has a 25-year average of 10.8%, while the S&P 500 has averaged 14.2%.

Morneau Sobeco says most pension funds need returns similar to 2003 to make up their actuarial deficits. Instead, they are more likely to earn 6%, based on the average weighting of 55% equities and 45% bonds.

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Equities boosted fund performance in January

(February 12, 2004) January was a month of “tremendous” performance for Canada’s mutual fund industry, with 94% of funds reporting positive results, says Morningstar Canada in its monthly report. Thirty of the 32 Morningstar fund indexes gained last month, fuelled by a broad-based rally in global equity markets.

“The month’s solid returns continue the general upward trend enjoyed by funds since last April,” says Morningstar analyst David O’Leary. “Gains across most fund indexes reflect what appears to be the emergence of a synchronous global economic recovery as most major stock markets around the world enjoyed healthy gains again in January.”

Healthcare funds paced the January leaders, as the index rose 7.7%. “Biotech stocks benefited from a positive earnings season and growing optimism on the drug candidate front,” O’Leary says.

Asian funds rose 7.4% and science and technology funds added 7.1%, thanks mostly to Nortel Networks.

Canadian and U.S. equity fund posted low single-digit returns in January, reflecting a 1.7% gain in the S&P 500 index, Morningstar says. U.S. equity funds were up 3.7% in January, largely due to the loonie’s 2.7% decline against the greenback. Canadian equity funds returned 2.4% in January.

The worst performing sector in January was precious metals, which fell 8.5%. The sector appears to be cooling off, Morningstar explains, after posting 2003’s best overall performance. “A combination of profit taking and a declining gold price contributed to the loss in January.”

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Greenspan sees little inflation risk

(February 11, 2004) Despite robust American economic growth, there is still little risk of inflation, according to Federal Reserve chair Alan Greenspan. While he says the Fed will remain patient toward raising interest rates, he warns they are not “compatible indefinitely with price stability and sustainable growth.”

“The federal funds rate will eventually need to rise toward a more neutral level,” he told Congress. “However, with inflation very low and substantial slack in the economy, the Federal Reserve can be patient in removing its current policy accommodation.”

Greenspan said considerable improvements in productivity have helped keep inflation at bay, but warned productivity could not maintain its 5% rate of improvement. He also said the dividend tax cut given by the government did little to fuel the economic recovery.

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Dodge warns on debt, productivity

(February 11, 2004) Bank of Canada governor David Dodge declined comment on the near-term challenges to the Canadian economy today, opting instead to outline the long-term risks.

Dodge warned that Canada must achieve greater productivity growth. He said the high-flying dollar should not be seen as an impediment, as it allows Canadian firms to retool more affordably, allowing for better productivity growth.

He also warned that all levels of government must strive for balanced or surplus budgets to reduce the ratio of debt to GDP, or the economy would not support the aging population. Total indebtedness has dropped to 80% of GDP, from a high of 100%.

Dodge reiterated the Bank of Canada’s policy of keeping inflation at 2% and will make monetary policy decisions accordingly.

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Mackenzie rolls out new Tactical fund

(February 11, 2004) Mackenzie Financial has announced the launch of Mackenzie Universal Canadian Tactical Fund, an actively managed fund of funds which aims to deliver equity-like performance at a balanced-fund risk level.

“At some point the bull is going to get tired and there will be a benefit to follow a more defensive strategy,” said fund manager Karen Bleasby, senior vice-president at Mackenzie. “The model we’ve devised for the Mackenzie Universal Canadian Tactical Fund includes a number of indicators that recognize risk which helps us to move the portfolio to a more defensive position in advance of declines.”

Investors in this fund will be exposed to Canadian as well as foreign equity markets, Canadian fixed income and cash equivalent securities. Mackenzie says the fund “may be suitable for investors with a medium tolerance for risk who seek long-term capital growth.”

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InvestorEd launches new fund fee tool

(February 11, 2004) The Investor Education Fund has launched an enhanced version of its Mutual Fund Fee Impact Calculator on its Web site www.investored.ca.

“It is very important for investors to learn about the various types of fees they can pay for their investments and realize the impact these fees have over time,” says Terri Williams, president of the Investor Education Fund. “The calculator has always been a very popular online resource. Now it is even more useful for investors shopping for mutual funds this RRSP season.”

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Partners exam to be dropped by IDA

(February 10, 2004) The IDA is phasing out its acceptance of the Partners, Directors and Senior Officers (PDO) qualifying exam as a substitute for the Conduct and Practices Handbook (CPH) exam.

The Canadian Securities Institute is revising the PDO exam — which used to cover the contents of the CPH — to focus more on corporate governance issues. The revised PDO will no longer cover the CPH in its entirety, the IDA says.

After May 24, 2004, the PDO will not be accepted as a qualification for registration in a trading category. Registered reps will have to complete the CPH, the IDA says.

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Taxman rolls out new senior service

(February 10, 2004) The newly renamed Canada Revenue Agency has rolled out Service for Seniors, inviting 260,000 senior citizens to take advantage of the new electronic income tax filing option.

“The CRA is a client-focused organization. We are continually looking at new ways to better serve all Canadians,” said Minister of National Revenue Stan Keyes. “One example of this is our new Service for Seniors. This innovative electronic service allows seniors in all provinces and territories to file their income tax return in a simple and easy way.”

The service allows seniors to file their taxes over the telephone, using yes or no questions to complete and file their tax return.

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Tax agency extends help-line hours

(February 10, 2004) The Canada Revenue Agency will keep its business enquiries telephone service open in the three remaining Saturdays in February, from 9:00 a.m. to 4:00 p.m. The service offers assistance to employers preparing T4 slips for their staff. The business enquiry telephone number is 1-800-959-5525.

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Corporate directors expect scandal

(February 10, 2004) Canadian investors should brace themselves for corporate scandals in 2004, according to a survey of directors from the countries 75 largest firms.

The KPMG survey, titled Survey of the Risk of Manipulation of Financial Statements, found 84% of respondents found it likely there would be a scandal over financial misstatements. Perhaps more startling, 46% thought such manipulation could occur at their firm.

“It’s illuminating that our survey results show that this type of fraudulent behaviour carried out as a conspiracy by a group of senior people to deceive corporate directors, auditors, lenders and other stakeholders to line their own pockets, has come to be seen as commonplace,” says James Hunter, president of KPMG Forensic.

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CLU Institute begins challenge exam program

(February 9, 2004) The CLU Institute has started accepting applications for its challenge exam program, a one-time opportunity for experienced advisors to earn the CLU designation by writing a single test.

Candidates must complete an online questionnaire and submit two reference letters to qualify for the exam, to be held in major cities across the country on April 21, August 25 and December 15, 2004. Optional prep courses will also be offered, beginning in June.

The normal route to the CLU involves completion of the CFP program combined with three specialized courses.

“Many qualified senior financial advisors, while undesignated, have typically maintained successful long-term careers by gaining hands-on experience, knowledge and expertise through self-study and mentorship programs and participation in annual continuing education courses,” the CLU Institute says.

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Pension funds bounced back in 2003

(February 9, 2004) Canadian pension funds posted an average return of 14.3% in 2003, according to a survey released today by Russell/Mellon Canada. The firm studied the performance of 450 corporate defined benefit plans, foundations, endowments and public pension plans representing more than $156 billion in assets.

“Returns across all major asset classes were positive, with Canadian asset classes contributing the lion’s share of last year’s performance,” says Russell/Mellon Canada managing director Shawn Menard. “After the last three years, this was a nice reprieve and should help alleviate some of the pressures faced by the pension industry.”

However, Menard says it will take several more years of solid performance to help repair the damage caused by the recent bear market.

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One Financial launches equity-linked bond

(February 9, 2004) One Financial today introduced a new principal-guaranteed bank deposit product that also provides exposure to the equity markets.

The BNP Paribas “Step-Over” bond, which matures in 2011, pays up to 10% annual income and provides the opportunity to lock in stock market gains every six months.

The bond’s coupon payments are linked to the performance of 50 multinational firms selected from the Dow Jones Global Titans Index.

“One Financial’s new bonds are a smart option for fixed income investors seeking higher returns than they could normally get from principal-protected investments,” says company CEO Jeffrey O’Brien.

The bonds, which require a minimum investment of $2,000, are available through financial advisors until March 15.

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(02/09/04)