Briefly:

(June 25, 2004) The Ontario government has tabled long-awaited legislation that would limit liability for income trust investors. The Trust Beneficiaries’ Liability Act was reintroduced in Ontario’s spring budget after the previous government failed to pass the legislation.

Under the terms of the act, the beneficiaries of a trust would not be liable in the event of a default. The absence of such protection has been viewed as a roadblock for institutional investors interested in the income trust sector.

Alberta and Nova Scotia have introduced similar legislation. The income trust amendment was part of a larger budget measures act tabled by Ontario this week, which also included the province’s controversial new health premium.

The trust act will come into force when it receives royal assent.

• • •

Employer pension plans post record assets

(June 25, 2004) Trusteed pension fund assets have hit a record $624 billion as of the end of 2003, Statistics Canada says.

The fourth-quarter increase last year was the third consecutive quarterly rise, StatsCan added, reflecting growth in stock prices. Stocks accounted for 40% of pension funds in Q4.

Employer pension assets peaked at $614 billion in 2000, but fell steadily over the next few years before starting to rally in 2003. About 4.5 million Canadians are members of trusteed pension plans.

• • •

Investor confidence eases slightly

(June 24, 2004) Canadian investor confidence eased in June, but RRSPs gained on real estate as investment vehicles, according to Manulife Financial’s quarterly survey.

“Market volatility, interest rates, strong real estate markets and international events all are influencing Canadians’ perceptions of where it’s better to place their money these days,” said Bruce Gordon, Manulife Financial’s senior executive vice-president and general manager. “While some areas eased this month, our December and March surveys reflected strong confidence in most areas as Canadians generally continued to stay focused on their long-term goals.”

Sixty-five per cent of respondents said now was a good time to contribute to RRSPs, while 63% said their own home would be a good place to put their money. Thirty-eight per cent remained confident in balanced mutual funds, compared to 33% who felt it was a good time to invest in stocks.

• • •

SEC passes controversial new fund rule

(June 23, 2004) The U.S. Securities and Exchange Commission (SEC) has imposed new rules regarding the composition of mutual fund companies’ boards, despite heated opposition from the industry.

Under the new rules, fund companies must name independent chairs and the rest of the board must include 75% independent directors. Hundreds of firms will need to replace their current chair to comply with the new rules.

It was a split decision, however, with the rule changes being passed by a three to two vote. Dissenting opinion held that the costs would be too high and the benefit negligible. The new rule takes effect in 18 months.

• • •

Industrial Alliance offers online retirement planner

(June 23, 2004) Industrial Alliance Insurance and Financial Services has launched a new retirement planning feature on its Cyberclient Web site, available to members of its group savings plans.

“Retirement planning is complex and important,” said Lucie Lachance, director of actuarial and marketing services with the group pensions division. “This new tool guides our members so that they make the right decisions and obtain the desired results.”

• • •

No early close for bond market on June 30

(June 22, 2004) Anticipating a busy trading session in the U.S, the Canadian bond market will observe normal working hours the day before Canada Day. The fixed income markets were scheduled to close early — at 1 p.m. Eastern Time — on June 30.

The IDA notes that the U.S. markets will be open for a full day of trading on June 30 and that there is a scheduled U.S. interest rate announcement on that date. It’s also the day the U.S. is scheduled to hand over power in Iraq.

“Trading may be heavy on June 30 and firms and market participants have indicated a preference for normal working hours on that date,” the IDA said in a release today recommending a regular close for the Canadian bond market.

• • •

Interest rates predicted to rise as economy heats up

(June 22, 2004) Canadian interest rates could jump by as much as 1.5% in the next 18 months, says the chief economist at National Bank. Clement Gignac also expects U.S. interest rates to climb as much as 2.5%.

The economy will pick up steam in the coming year, Gignac predicts, forecasting GDP growth of at least 3%. “The western provinces will lead economic growth as a result of their industrial structure tied to natural resources,” he says.

Stock market returns will be in the 6% to 9% range, Gignac believes, not as strong as last year but in line with historical returns. “In the medium term, investors would be well served to adopt a strategy of portfolio diversification. This is especially true since current developments in the Middle East constitute an important risk factor hanging over oil prices and the world economic outlook.”

• • •

M&A activity improves, slowly

(June 21, 2004) Merger and acquisition activity in Canada has broken its recent downward trend, stabilizing in the first half of 2004, according to KPMG Corporate Finance. But growth has remained “elusive” despite one mega-deal.

“Even if we take away the sizable effect of the Manulife/John Hancock deal, Canadian deal volumes have reached a sustainable level and we’re now primed for a gradual upturn,” says Steve Smith, senior vice-president and director of KPMG Corporate Finance in Canada. “Right now, it’s encouraging to see a flattening-out in the market that has resulted from a more stable economic landscape, a rebound in the equity markets and therefore, less uncertainty.”

Transaction value rose from $20 billion US in the first half of 2003 to $37 billion US in the same period for this year, with most of the gain coming from the $14 billion US Manulife deal.

• • •

AIM Trimark opens Dialogue

(June 21, 2004) AIM Trimark Investments has launched a new wealth management program called Dialogue Wealth Management, which integrates financial planning with an appropriate portfolio of mutual funds.

“Until now, financial planning and portfolio management had to be done separately which was complex and time-consuming,” says Philip Taylor, president and CEO at AIM Trimark. “We’re proud to be leading this evolution that allows advisors to integrate these processes.”

The Dialogue program carries no additional fees and is available to investors with a minimum of $25,000 to invest. The portfolios are made up of both AIM and Trimark brands.

• • •

Smaller housing markets more profitable

(June 21, 2004) The booming real estate market has offered the best pay-off to homebuyers in small and secondary markets over the past five- and 10-year periods, according to Century 21 Canada.

A survey conducted by the real estate agency based the value of returns on the initial investment of the home buyer’s down payment, factoring in the cost of carrying 90% equity mortgage, rather than simply comparing resale values. For example, the survey found that a $20,000 investment in a home in Peterborough, Ontario, would have earned 357% over five years and a 10-year return of 431%. Profit margins in larger centres, like Toronto, were thinner, due to the higher purchase prices and larger mortgage debt.

“Big profits are still available in the big markets, especially if you can afford to invest without going too deeply in debt,” says Donald Lawby, president of Century 21 Canada. “But the bottom line is that buying your own home in virtually any community in Canada is still an excellent way to build equity.”

• • •

Fraser Institute declares tax freedom day

(June 21, 2004) The Fraser Institute has declared June 28 to be Canada’s “tax freedom day,” pointing out the date is one day later than last year. While it differs from province to province, the date marks the point in the year when the average Canadian’s earnings have passed the total of taxation from all levels of government.

“It is nearly impossible for an ordinary citizen to have a clear idea of how much tax they really pay,” said Niels Veldhuis, senior research economist at the institute. “Tax freedom day gives Canadians a true picture of their total tax burden.”

The think-tank says the average Canadian family saw an increase of $1,327 in overall taxation between 2003 and 2004, with 40% of the increase paying for higher social security, pension, medical and hospital costs.

• • •

(06/21/04)