Managed Money Reporter Newsletter — Issue 219, July/August 2005

Editors: Carl Spiess & Allan McGlade

Featured Articles

Summer Reading

As is our summertime tradition, the July and August edition of the Mutual Fund Reporter is a combined one.  If you have been, or are heading on summer vacation, we hope you have a well deserved break.

Here is some recommended summertime reading...

Perhaps the most interesting part, is that in the Economic and Market Outlook 2005/2006 table on page 8, the forecasted level for the S&P TSX 60 Index is 9600.  We are 10%  higher than that at present, which may call for some more conservative investment posture for accounts with high Canadian equity exposure. If you would like a review of your asset allocation to see if you are overweight in any sector, please contact us.

RRSP Clone Funds Quickly being Eliminated

Most of the major fund companies have quickly taken steps to eliminate their redundant RRSP clone funds now that the formal legislation eliminating the 30% foreign content limit was passed in early July.  This is good news for investors. The elimination of both the 30% foreign content limit and the RRSP Clone funds will give investors more flexibility and make RRSP investing simpler and less costly. For many years, RRSP clone funds were a popular way to get past the government's arbitrarily imposed 30% foreign content limit for registered plans but they were more expensive than their non-RRSP counterparts.

Fund companies have already begun rolling RRSP clone fund investments into the underlying foreign funds. Securities legislators have waived the normal 60 day requirement for notice, as these changes are purely in the interests of investors.  If you have a clone fund, you will see that being switched automatically into the regular foreign fund that the clone was based on.  The termination of the RRSP clones will be considered a deemed disposition for tax purposes but there will be no adverse tax consequences for investors in registered plans, which is where virtually all RRSP clones are held.

Fidelity was the first fund company in Canada to complete their clone fund windup, and most consolidations have now been completed.  There were over 200 clone funds 2 months ago, and we do not expect to see any of them after September.  

In the future, it will be possible that any "Canadian" fund will be able to invest up to 100% international, not just 30%.  It will become increasingly important to watch the fund category that your fund is in.

In a related move, ScotiaMcLeod's registered account statements will show maximum foreign content allowed at 100%, while continuing to show the actual percentage exposed to foreign investments.

Anything that makes life simpler is a welcome change.  Please contact us for more information on any of the topics raised.

More on foreign content

CDIC Insurance Increased to $100,000

Along with and included in the formal passing of the budget, Canadian Deposit Insurance Corporation (CDIC) has increased the maximum coverage per institution to $100,000 from $60,000.  As ScotiaMcLeod offers 8 different GIC issuers, we can therefore offer over $800,000 of deposit insurance in a single account.

More on CDIC insurance

AIC, AGF, CI, Templeton, Investors Group Settlements expected this Fall

The details of the process for resolving the fund timing settlements we reported on last fall are now becoming available.  It appears that in most cases, investors in affected funds will be receiving cheques directly for their settlements.  Earlier, it had been suggested that the settlements would be paid out as additional shares to existing shareholders, but it appears that was unworkable.  In any case, the settlements only affect international funds held around 5 years ago, and many settlements may be for relatively small amounts. Please contact us if you have any questions about settlements and your funds. 

Summer Fund Investments at Record Levels

June and July were some more good months in the markets, and mutual fund sales continue to grow.  Driven by energy prices, the natural resources sector continues to be the the driving force behind the Canadian market.  According to the Investment Funds Institute of Canada, (IFIC), Canadians have over $540 Billion invested in funds, which represents another record level of confidence in mutual fund investment management.

Growthworks Merging Funds

GrowthWorks is proposing to merge the 3 smaller Canadian Science and Technology Growth, Capital Alliance Ventures and GrowthWorks Opportunity funds into the original GrowthWorks WV Canadian fund.  We continue to feel that there are too many small LSIF funds, and applaud this initiative.

Mutual Fund Reporter Recommended Website of the Month

During the summer "driving months" and with gas prices remaining high, many people will be wondering how much oil we have left, and what our sources of alternative energy will be.  Most sources of information tend to be very biased one way or the other, but this site, (although run by an oil company) seems to present a balanced view and seeks public input.



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F.  416.863.7479

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