Briefly:

(August 12, 2005) The Ontario Securities Commission is seeking comment on its latest proposal to reduce fees. The regulator wants to cut fees by 11% in an effort to pare down a $35.9 million budget surplus over a three-year period.

“Like many other organizations in the financial services industry, our costs have risen, but as we were conservative in our forecasts in earlier years, we are able to apply an accumulated surplus to actually reduce fees overall in the next cycle,” said executive director Charlie Macfarlane. “The adjustments we propose are designed to reduce or eliminate any surplus generated as we prepare for our second three-year cycle under the new fee model.”

The OSC says fee reductions are targeted to benefit smaller participants the most. Participation fees for 81% of registrants — those with annual revenues below $3 million — will decrease between 10% and 38%.

The OSC introduced a new fee structure in 2003 in an attempt to abolish its surplus, a long-standing issue for critics who do not believe the agency should be generating a profit.

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IPC Securities fined $100,000

(August 12, 2005) The IDA has fined IPC Securities $100,000 for three violations of the association’s bylaws.

In a settlement agreement, IPC admitted that it failed to maintain adequate supervisory records for a five-month period in 2002, failed to establish or enforce written policies and procedures to supervise principal trading between June 2003 and January 30, 2004 (resulting in a loss to the firm of nearly $64,000) and failed to maintain its risk-adjusted capital between January 30, 2004 and February 13, 2004.

In issuing reasons for the sanctions, the IDA emphasized the “importance of there being an ongoing understanding of the weight of the responsibility of a member of the IDA to fully and completely conform to IDA by-laws, regulations and policies.”

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Sun Life exits Chile

(August 12, 2005) Sun Life Financial has sold off its stake in a Chilean investment firm for about $120 million US.

“This sale reflects our continued focus on building a sustainable presence in markets in which we choose to compete, and exiting those markets where we do not have a meaningful presence,” said Donald A. Stewart, CEO, Sun Life Financial. “Our ownership position in Cuprum was not a core strategic asset and this sale will allow us to redeploy the capital more effectively within Sun Life Financial.”

The sale is expected to result in a charge to earnings of approximately $45 million in the third quarter of 2005, due to the depreciation of the Chilean peso.

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Franklin Templeton’s BRIC fund gets green light from unitholders

(August 12, 2005) Unitholders of Templeton China Tax Class fund have approved the proposed merger of the fund into Franklin Templeton’s new Templeton BRIC Tax Class fund, which will offer investors exposure to Brazil, Russia, India and China. The merger will take effect August 15.

Franklin Templeton has also proposed the merger of Franklin U.S. Large Cap Growth Fund, Franklin U.S. Large Cap Growth Tax Class and Franklin Flex Cap Growth Fund into Franklin Flex Cap Growth Tax Class.

The firm is also seeking approval for the merger of Franklin World Telecom Fund, Franklin World Telecom Tax Class and Franklin Technology Fund with Franklin Technology Tax Class; and plans to fold Franklin World Growth Fund into Franklin World Growth Tax Class.

Franklin Templeton is also seeking to alter its investment mandates for Franklin Flex Cap Growth Tax Class, Franklin Technology Tax Class and Franklin World Growth Tax Class.

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Skylon to sell VentureLink

(August 12, 2005) Skylon Advisors has announced it will sell the VentureLink group of labour-sponsored investment funds to the funds’ portfolio managers.

“The purchase of the VentureLink funds by their portfolio managers, a highly experienced group of venture capitalists, will provide continuity and stability for the funds and their investors,” said David McBain, Skylon president and CEO. “We look forward to continuing our excellent working relationship with this group.”

The deal will see Skylon will spin off its management contracts for the six VentureLink funds and related Community Small Business Investment Funds to a new entity that subsequently will be acquired by Geoff Horton, John Varghese and Jim Whitaker.

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State Street launches Canadian index

(August 12, 2005) State Street Global Advisors has announced the launch of Canadian Index Plus, aimed at institutional investors seeking exposure to the Canadian equities market. State Street anticipates the index will beat the benchmark S&P/TSX Composite Index by 75 to 125 basis points.

“We have seen a strong interest in enhanced indexation strategies from our clients and developed this dedicated strategy to meet the unique needs of our institutional clients in Canada,” said Gregory Chrispin, State Street’s chief investment officer in Canada. “We believe that enhanced indexation should be considered as a core part of an institutional investors’ portfolio as a potential means of providing an efficient and low-risk method of capturing consistent returns.”

An enhanced investment strategy seeks to provide a consistent amount of excess return while closely tracking the characteristics of the benchmark. It focuses on controlling risk while adding value, using elements of both passive and active management.

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Indices beat most active managers in Q2

(August 11, 2005) Actively managed mutual funds largely underperformed their benchmarks in the second quarter, according to Standard & Poor’s. The S&P Indices Versus Active Funds Scorecard (SPIVA) says the S&P/TSX Composite Index outperformed 80% of actively managed Canadian equity funds for the three month period ending June 30.

Active managers fared a little better in U.S. equity funds, but the index still beat 68% of fund returns. Small cap managers, demonstrated their value, with 68% of funds beating the S&P/TSX SmallCap Index over the first six months of 2005.

“By controlling for survivorship bias, SPIVA offers investors a clearer picture of how mutual funds are doing in Canada,” said S&P’s Steve Rive. “For example, this allows us to measure ‘active risk’ — the risk that the fund you choose today will not beat the index over the period that you plan to hold it. SPIVA shows that active risk in Canadian mutual funds is a very real issue that investors need to be aware of.”

The SPIVA report says that correcting for survivorship is essential to accurately reflect such statistics, as roughly one in four Canadian equity funds will be discontinued or merged with another fund within a five year time frame. Earlier this month, the Russell Canadian Active Manager Report said 43% of active Canadian equity managers beat the index.

S&P says only 5.9% of actively managed Canadian Equity funds have outperformed the S&P/TSX Composite Index over the past three years.

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AIC hires ADP for investor communications

(August 11, 2005) AIC has contracted ADP Investor Communications to print and deliver its personalized investor communications and prospectuses, as required by new regulatory guidelines.

“AIC was a pioneer among the mutual fund industry in terms of undertaking personalized annual and semi-annual reports with ADP years before NI 81-106 came into being,” said AIC’s Mickey Falcone. “We were ahead of the curve in this regard and ADP was instrumental in making that possible.”

ADP’s Smart Prospectus allows dealers to meet statutory delivery requirements and to replace current manual fulfillment practices. Smart Financials allows fund companies to deliver customized annual reports to investors.

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BMO see no real estate bubble

(August 11, 2005) Rising housing costs do not constitute a “bubble” but are merely a reflection of a strong economy, according to economists at BMO Financial.

“Prices have been showing large increases nationally and in some major urban markets in recent years,” says Paul Ferley, assistant chief economist, BMO Financial Group. “However, this seems more a reflection of low mortgage rates and still attractive affordability rather than speculative activity.”

He points out mortgage payments, as a percentage of household income, remain low and that the mortgage market would need to experience a 200 point rate increase to seriously affect home affordability.

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OpenSky launches new series of commodity notes

(August 10, 2005) OpenSky Capital today released the fourth series of a principal-protected note linked to a basket of commodities. The notes, which have a six-year term, are guaranteed by Société Générale.

Open Sky says the notes offer investors exposure to 170% of the upside return, if any, of a weighted portfolio of five commodities: crude oil (25%), natural gas (25%), copper (25%), aluminum (15%) and nickel (10%).

The six-year term notes are available to investors until the end of August, with a minimum investment of $1,000.

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Loonie included in China’s currency basket

(August 10, 2005) The Canadian dollar will be a part of the basket of currencies against which the Chinese yuan trades. However, the loonie is expected to be a second-tier component, with the U.S. dollar, the euro, the Japanese yen and the South Korean won as the main constituents.

The weighting of each currency was not disclosed. Last month, the Chinese government announced it would revalue the juan by removing the U.S. dollar peg and instead using a basket of currencies to set exchange rates.

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Henck to retire from Sun Life Financial Asia

(August 10, 2005) Douglas Heck is stepping down as head of Sun Life Financial’s Asia division. Company president James Prieur will re-locate to Hong Kong for one year to find and prepare for Henck’s successor.

Henck, who has been with Sun Life’s Asia group for more than five years, will also be involved in the transition.

“Asia represents an important market in Sun Life Financial’s sustained, strategic program of international expansion,” said Sun Life CEO Donald Stewart. “We thank Doug for his significant contributions to the business. Moving forward, Jim’s experience and leadership will build on our success in Asia, positioning us for long-term growth and profitability in these important markets.”

Between 1999 and 2004, Sun Life Financial’s sales volume in Asia increased from $49 million to $240 million. About one-third of the company’s worldwide individual life insurance sales are now generated in Asia.

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Hedge fund index up 2% in July

(August 10, 2005) The Barclay/GHS Hedge Fund Index rose 2.24% in July, with more than 1,000 funds reporting. The fund of funds index was up 1.5% while the managed futures index declined 0.5%.

“Year to date, hedge funds have gained 4.3% and fund of funds are up 2.3%,” says Sol Waksman, president of The Barclay Group. “Even though these returns are lower than some investors’ expectations, let’s not forget that they’re nearly double what we saw last year at this time, and 2004 was a decent year both on an absolute and a relative basis.”

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AGF launches two funds, completes ING mergers

(August 9, 2005) AGF Funds has announced the launch of two new funds, including the AGF Dividend Income Fund, formerly known as the ING Canadian Dividend Income Fund, and AGF U.S. Risk-Managed Class. The latter fund is sub-advised by INTECH.

“It’s not often that a new fund is launched with such an impressive track record,” said Randy Ambrosie, executive vice president, sales and marketing, AGF Funds. “The AGF Dividend Income Fund provides investors with long-term capital appreciation and monthly income potential. It will play a crucial role in rounding out our income offering with a unique dividend play.”

AGF also announced today the successful integration of the Dutch-based bank’s mutual fund assets, by merging 13 ING funds into existing AGF funds with similar mandates. The deal was approved June 8, 2005 and brings $276 million in assets to AGF.

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Fed raises rates again

(August 9, 2005) The U.S. Federal Reserve has raised its key trend-setting interest rate by 25 basis points, matching expectations of almost everyone on the Street. Short-term rates now stand at 3.5%.

There is no sign that the Fed will stop, however. The policy setting Federal Open Markets Committee says the new rate is still “accommodative.” Today’s rate hike marked the tenth consecutive meeting that resulted in the Fed tightening credit.

The Fed pointed to strengthening consumer spending as evidence that the rate hike was needed to maintain a balance between inflationary pressures and continued economic growth.

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Feds open tax ‘centres of expertise’

(August 9, 2005) Canada Revenue Agency has announced the creation of 11 “centres of expertise” across the country to address what it calls “aggressive” tax planning.

“I am committed to ensuring a level playing field for all Canadians, and that is why I take the issue of tax havens seriously,” said John McCallum, Minister of National Revenue. “The CRA is continually challenging aggressive international tax planning structures and the new Centres of Expertise will equip the CRA with even more tools to ensure that everyone is paying their required share of taxes.”

The new tax centres will bring together audit professionals from the areas of international tax, special audits and tax avoidance to create teams of experts to combat the abusive use of tax havens.

The centres of expertise will be located in Saint John, Halifax, Laval, Montreal, Ottawa, Toronto, London, Winnipeg, Calgary, Vancouver and Burnaby.

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Mackenzie hires fixed income managers

(August 9, 2005) Mackenzie Financial has named Connor Clark & Lunn Investment Management and Goodman & Company Investment Counsel as sub-advisors to the Symmetry Registered Fixed Income Pool and Mackenzie Fixed Income Fund, effective October 1, 2005.

“Both CC&L and Goodman & Company have strong fixed income performance and their distinct investment styles make them an ideal fit within Symmetry,” said David Feather, president, Mackenzie Financial.

The two firms will manage a portion of each pool alongside existing managers from Mackenzie and Waddell & Reed.

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BMO sells U.S. online brokerage

(August 8, 2005) BMO Financial Group has struck a deal to sell its U.S. online brokerage, Harrisdirect, to E*Trade Financial for C$910 million in cash. The deal is expected to close by the end of the year, pending regulatory approval.

“This transaction is a win; it will benefit both our clients and our shareholders,” said Tony Comper, president and CEO, BMO Financial Group. “BMO remains fully committed to continuing to expand its operations in the United States. This transaction increases value to our shareholders and will allow us to redeploy capital to higher-return businesses and to concentrate our attention on our goal of becoming the leading personal and commercial bank in the U.S. Midwest.”

The deal removes a redundancy in the overall company, which will continue to offer Canadian investors online brokerage services through its BMO InvestorLine division, which is not affected by the E*Trade transaction. BMO may be considering expanding InvestorLine into its U.S. market, but for now will focus on private banking and wealth management in the U.S.

Harrisdirect has approximately 430,000 active accounts and US$32 billion in assets under administration. Comper said further expansion of the line would have been too costly, given the highly competitive nature of the U.S. discount brokerage market.

While the federal government has again shelved plans to introduce rules on bank mergers, consolidation is widely regarded as inevitable. With an extra billion in cash, BMO takes a rather favourable position in the event of mergers being allowed, as several of BMO’s Canadian rivals — CIBC, RBC and TD Bank — are facing huge settlements and litigation over their role in the Enron collapse.

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Abria launches XL Trust

(August 8, 2005) Abria Alternative Investments has launched a new fund, the Abria XL Trust, an enhanced version of the Abria Diversified Arbitrage Trust.

“We’ve introduced leverage to the fund, in order to provide equity-like returns in the 7-11% range, while maintaining a level of risk consistent with that of long-term bonds or roughly one-half that of equities,” says Henry Kneis, CEO and Chief Investment Officer, Abria. “With most analysts and forecasters predicting very modest returns from the equities markets over the next ten years, it makes a lot of sense for investors to have an alternative strategy available to them.”

The trust uses a market neutral investment strategy, maintaining low correlation to equity and bond markets offers. It offers no distribution, holding onto excess capital until the position is liquidated, which leaves returns taxable as capital gains.

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TD offers farmers special loan rate

(August 8, 2005) TD Canada Trust is offering its prime lending rate to farmers eligible for the Farm Improvement Loans program, a federal government program designed to help farmers and farmer cooperatives with financing. TD’s Prime Rate is currently 4.25%.

“Any individual, partnership or corporation engaged in Canadian farming is eligible and farmers can enjoy a rate of TD Prime for the entire term of the loan,” said Matt Holden, manager, agriculture credit products, TD Canada Trust.

Loans can be used to purchase farm real estate, livestock and farm equipment, or help construct farm buildings. The guaranteed loan program can cover up to 80% of the farmer’s purchase, to a maximum of $250,000 per farmer, or $3,000,000 per cooperative.

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Manulife offers new group retirement income products

(August 8, 2005) Manulife Financial has launched a new group retirement income plan product series through its Canadian pension operations (CPO) division. The new plan is available only to former members of group pension and savings plans sponsored by Manulife customer firms.

“Our advisors and our plan sponsors want their plan members to move into retirement with investments and services they’ve grown comfortable using,” says Bill Sipes, marketing director, CPO. “Most sponsors ask about retirement income options when they establish a group retirement savings plan and they’re looking for the same sort of solutions we offer their members when they are saving for retirement.”

The product series includes a Registered Retirement Income Fund (RRIF), a Life Income Fund (LIF), a Locked-In Retirement Fund (LRIF) and a Prescribed Retirement Income Fund (PRIF).

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Cannaccord announces new board members

(August 8, 2005) Canaccord Capital has announced the election of three new directors at the firm’s annual general meeting on August 5, 2005.

Arpad A. Busson, Timothy J.D. Hoare and Paul D. Reynolds will join the board of re-elected directors, Peter Brown, Michael Greenwood, William Eeuwes, Michael Harris, Brian Harwood, Terrence Lyons, James Pattison and John Zaozirny.

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