Briefly:

(December 19, 2003) Eighty-nine per cent of Canadians plan to contribute at least as much to their RRSP for 2003 as they did for the 2002 tax-year, according to a survey by Manulife Investments.

The same survey found that 43% of respondents work with a financial advisor or planner. Households with income over $70,000 were more likely to have an advisor, at 58%, while 49% of those with incomes between 40,000 and $70,000 used an advisor. Those with household incomes between $20,000 and $40,000 had help 31% of the time.

“Advisors play an important role helping Canadians make better financial decisions and, at the same time, they also need to be sure to meet their clients’ needs and goals,” added Eric Grove, vice-president of investment funds for Manulife Financial.

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CSA releases new disclosure rule

(December 19, 2003) Securities regulators have introduced a new rule governing continuous disclosure obligations for corporate Canada. National Instrument 51-102 coming into force on March 30, 2004, will “eliminate the problem of companies having to meet different disclosure requirements in multiple jurisdictions in which they report.”

“It will enhance the consistency of disclosure available to primary and secondary market investors, and assist in establishing a common approach to regulatory review of continuous disclosure filings,” said Stephen Sibold, chair of the Canadian Securities Administrators and the Alberta Securities Commission.

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DC plan sponsors willing to test employees

(December 19, 2003) Sponsors of defined contribution plans are willing to test the investment knowledge of employees before allowing them to participate in the plan, according to a survey by Morneau Sobeco.

Seventy-one per cent of respondents said they believed less than 60% of their employee group were qualified to make the choices offered under their defined contribution plan.

Currently, the question of poor investment knowledge is being tackled through educational initiatives, but with the apparent lack of success, testing could become widespread.

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Options to be expensed

(December 18, 2003) Canadian corporations will have to expense stock options starting January 1, as the Canadian Accounting Standards Board (AcSB) will adopt the practice in the new year.

“From the AcSB’s perspective, there is no doubt that stock-based payments are a form of compensation and should be expensed,” said Paul Cherry, chair of the AcSB. “Once these amendments to our existing standard come into effect, investors, analysts and regulators will have financial statements that better reflect the reality of stock-based payment transactions.”

Canada will be the first major jurisdiction to adopt the new practice, which is one of the key aspects of the proposed international harmonization of corporate accounting practices.

“To have a harmonized standard, it may be necessary at a later date for the Canadian board to remove ‘nuisance’ differences if they exist between our standard and [Financial Accounting Standards Board]’s planned standard, but this should be a relatively simple matter,” said Cherry.

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Nearly half plan for RRSP contribution

(December 18, 2003) Nearly half of Canada’s taxpayers plan on making an RRSP contribution this year, according to an annual survey conducted by RBC. The poll found 49% of respondents were planning to do so — a 53% increase from the first poll taken in 1991.

“Investing in a RRSP may not have been the first choice for investors in 1991, but fast-forward to 2003 and RRSPs have become a major part of Canadians’ financial portfolios,” said Matt Varey, senior vice-president of RBC Investments, financial planning division. “Simply put, investing in an RRSP is the best way to grow your retirement nest egg year over year.”

The average planned contribution has risen to $4,964 per person this year, up from $3,411 per person in 1991.

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Seniors’ benefit to rise in January

(December 18, 2003) The federal government is raising the payout for CPP and OAS benefits to reflect cost of living increases. The new rates will come into effect January 1.

OAS benefits will rise by 0.2% to a basic rate of $462.47 per month, while CPP benefits will rise 3.2%.

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CPP announces new partners

(December 17, 2003) The CPP Investment Board (CPPIB) has announced three new investment partners, including its first investment into an infrastructure fund. Macquarie Essential Assets Partnership will invest $100 million in CPPIB funds in various infrastructure projects primarily in Canada.

CPPIB will also invest more in private equity funds, including $150 million US with Onex Partners LP and $100 million US in TPG Partners IV, a fund managed by Texas Pacific Group. The CPPIB will now have $5.5 billion in private equity commitments.

“Private market investments remain an important part of our long-term investment strategy and these new commitments continue our program of diversifying the total CPP portfolio,” says John MacNaughton, president and CEO of CPPIB.

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Insurers see regulations as biggest threat

(December 17, 2003) Just over half of Canadian insurance firms believe the current regulatory environment poses the biggest risk to the industry, at 52%, while in the U.S. just 29% feel the same way, according to an industry survey by KPMG.

“In Canada, the regulatory environment in the insurance industry is far more complex,” says Neil Parkinson, KPMG lead partner of insurance. “Canadian insurers must comply with many more layers of regulation, including provincial, [Personal Information Protection and Electronic Documents Act] (PIPEDA) and [Office of the Superintendent of Financial Institutions] (OSFI) — all of which impact the Canadian industry.”

But it could be that the regulatory environment is just the lesser of evils in the U.S., as the Sarbanes-Oxley Act is seen as the biggest threat by American insurance firms, with 58% concerned about the impact that legislation will have. In Canada, only 37% believed Sarbanes-Oxley posed the biggest threat.

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Small business confidence rises

(December 17, 2003) The Canadian Federation of Independent Business (CFIB) has reported its quarterly survey of business confidence shows strengthening optimism among small- and medium-sized businesses.

The index stands at 109.9, the highest level since mid-2002 and up 2.2 points from the last survey in September. The report also says that retail sales are improving in the fourth quarter, compared to the same period in 2002.

“Clearly, the small- and medium-sized community has managed to pick itself up after the multiple economic shocks of the past year,” said CFIB chief economist Ted Mallett. “The increased optimism among Canada’s chief job creators bodes well for the year ahead.”

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RBC buys regional U.S. brokerage

(December 16, 2003) RBC Dain Rauscher has announced an agreement to purchase William R. Hough & Co., a privately held full-service investment firm based in St. Petersburg, Florida. The firm specializes in fixed income sales, trading and underwriting primarily in the Southeastern U.S.

“The combined company will be a strong national player in municipal bonds, tax-exempt housing, student loans and education,” said Brian Peters, president and CEO of RBC Dain Rauscher.

The deal is expected to close in the spring of 2004, pending regulatory approval. Terms of the agreement were not released.

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Life insurance applications drop

(December 16, 2003) The number of life insurance applications across the continent dropped in November, with the steepest decline found in Canada, according to MIB Life Index.

Canadian applications dropped by 11%, compared to November 2002 levels, while U.S. applications declined 3.6% over the same period. This marks the ninth monthly decline for life insurance applications in 2003.

Even activity in the “over 60” demographic declined by 2.6% in Canada. This age bracket has been the strongest performer so far this year.

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Goodale says no to tax cut cancellation

(December 15, 2003) Canada’s new federal finance minister has rejected a suggestion that he cancel plans to roll back the corporate tax rate on January 1, 2004. Ralph Goodale, who was sworn in as finance minister last Friday, says Ottawa’s tax reduction measures have produced significant economic and social benefits for Canadians.

The corporate tax rate will fall to 21% from 23%, a move that will cost Ottawa $1.1 billion next year. However, Goodale says that will likely be offset by increased economic growth in 2004, expected to boost federal corporate tax revenues by more than $1 billion.

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CI parts company with fund manager Sartz

(December 15, 2003) CI Mutual Funds has announced a pair of portfolio management changes, including the replacement of John Sartz, who was managing CI’s Explorer Fund.

Peter Hodson, the manager of CI’s Signature Fund family, takes over as manager of the Explorer Fund and the Explorer Fund Insight Units, effective February 26, 2004. Hodson joined Signature Funds following CI’s acquisition of Synergy Mutual Funds this summer.

“With the addition of Peter Hodson, a highly regarded Canadian small-cap manager, it only made sense to move this fund in-house,” said CI president Peter Anderson.

In the other change, John Hock of Altrinsic Advisors takes over management of CI’s World Equity Fund. Hock manages several other CI products, including the Global Value Fund. Altrinsic replaces MFS Institutional Advisors.

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Ethical unitholders approve fund mergers

(December 15, 2003) Vancouver’s Ethical Funds announced today it has received unitholder approval to terminate six funds, and merge them into other funds with similar mandates.

The terminated funds are Ethical Global Bond, Ethical Canadian Equity, Ethical Pacific Rim, Credential Balanced Portfolio, Credential Growth Portfolio and Credential Equity Portfolio.

Ethical Funds also announced today the appointment of Central Financial Corporation as the new portfolio manager for Ethical’s Money Market Fund, effective April 1, 2004.

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(12/15/03)