JULY/AUGUST 2016 Why Your Retirement Plan The Power Of … · 2018-06-02 · iShares S&P/TSX Cdn. Div Aristocrats CDZ CDN. DIVIDEND $24.83 886 $21,999.38 19.0% iShares S&P/TSX Global

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JULY/AUGUST 2016, Volume 35, Number 9

REGULAR FEATURES Shareclubs 4

Sharing With You 4

Dividend & Company News 5

Model ETF Portfolio 5

Point Of View 27

Coming Events 34

Money Digest 36

Canadian DRIPs with SPPs 39

Ask The Experts 38

Top Funds 40

Canadian ETFs 42

SPECIAL FEATURES

Let My Experiences Be Your Teacher - Get Wealthy Eventually Principles Mark Seed 6

Beware Of Conflicts Of Interest Andrew Hepburn 8

The Best Interests Advice Standard Ken Kivenko 10

At-A-Glance: Split Share Corporations - Part 2 Michael Southern 13

Travel Insurance: Beware of Policy Gremlins a.k.a. The Fine Print - Part 2 Bruce Cappon 17

Investing In Real Estate: Tap Into The Institutional Advantage G. Derek Henderson 19

Feels Like The 1980s And 1990s Again Donald W. Dony 22

Fallen Angels Keith Richards 24

Volatility: Often The Spark To Investor Fear Allan Small 28

Why Your Retirement Plan Requires Flexibility Ross McShane 30

The Power Of Reinvested Dividends - Use Your Dividends To Buy More Shares And Ignore Market Fluctuations Richard Morrison 32

A Different Perspective On Spousal RRSPs Dean Neald 35

Figuring Out Where Your Business Will Thrive, Not Just Survive

Jeff Grandfield and Dale Willerton–The Lease Coach 37

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I wouldn’t want to be an investment advisor this month.

Under new regulations, full disclosure of all investment fees will be now be released to clients. IPO sales fees, mutual fund trailer fees, and advisory fees—they will all be shown to clients under new CRM2 guidelines.

The industry fought these regulations for years—and why not? Fees are outrageous in most of the industry. I should know. I once worked at a company that had 2.5% fund management fees AND performance fees. When I had a good year at my mutual fund, our MER could rise to more than 5%.

My friends in the business will not like me saying this, but everyone in the industry is overpaid. Investment bankers are the worst, but fund managers and traders do very well indeed as well. Considering that mutual funds hardly ever actually beat the market, the fee structure is ridiculous. These professionals are saving no lives, yet most will make more than brain surgeons.

But the times are a’ changing: Clients will now see the full extent of the egregious fees the industry charges. With low rates of returns these days, there is a good chance that your advisor and their company has made more money off of your money than you have this year.

Hopefully, though, MoneySavers won’t be too shocked. If you have paid any attention at all over the past few years, you’ll know all about the negative investment performance drag from high fees.

So, our apologies to all brokers and advisors out there. We don’t envy you this month. But you have all had it too easy for decades, burying high fees into net asset values of funds, or simply not disclosing them.

We think good advice is still worth paying for. For good advisors, new regulations should not really impact you that much. For ‘bad’ advisors, though, we suggest looking for another job, now that your clients will find out just how much money you are making off of them.

Sharing With You ShareClubs

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You may join any of the listed ShareClubs by contacting your local volunteer. Like-minded members get together to share financial information. No cost. No obligation. Just an inquiring mind.

The agenda for each group is shared by all group members, i.e. it is not just the responsibility of the contact person. ShareClubs are unlike investment clubs because they are meant to share investing information only.

Contact MoneySaver and volunteer to start a ShareClub in your area. When ShareClubs are filled, they are delisted.

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William Wood Calgary SE, AB [email protected] Tremblay Fort McMurray, AB [email protected] V. Kelowna/Okanagan, BC [email protected] Hicks New Westminster, BC 778-875-2615Brian Pearson Prince George, BC [email protected] Karefoe Queen Charlotte Is., BC [email protected] Lines Salmon Arm, BC [email protected] & Vic Parks Salt Spring Island, BC [email protected] Groom Sidney, BC [email protected] Beaton South Delta, BC www.tlshareclub.comBob Lee Ctrl. Vancouver , BC [email protected] Gibb Victoria, BC [email protected] Page Victoria/Sanich, BC [email protected]

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MoneySaver DIVIDEND& COMPANY NEWSIn this column we list recent news, events, dividend income news and any other relevant information for

MoneySavers. News items are those received after our last publication date.

• Andrew Peller (ADW.A) raises dividend by 9%.

• National Bank (NA) raises dividend by 1.8%

• Colliers (CIG) raises dividend by 25%

• CIBC (CM) boosts dividend by 2.5%

• Bank of Montreal (BMO) raises dividend 2.4%

• Cineplex (CGX) raises dividend by 4%

Canadian MoneySaver MODEL ETF PORTFOLIOETF SYMBOL CATEGORY PRICE # OF

UNITSTOTAL % OF

PORTFOLIO

iShares 1-5 Year Laddered Corporate Bond CBO FIXED INCOME $19.13 506 $9,679.78 8.3%

iShares DEX Universe Bond XBB FIXED INCOME $31.82 166 $5,282.12 4.6%

iShares S&P/TSX Canadian Preferreds CPD FIXED INCOME $12.49 460 $5,745.40 5.0%

iShares S&P/TSX Capped Composite XIC CDN. EQUITY $22.36 980 $21,912.80 18.9%

iShares S&P/TSX Cdn. Div Aristocrats CDZ CDN. DIVIDEND $24.83 886 $21,999.38 19.0%

iShares S&P/TSX Global Gold XGD CDN. EQUITY $13.03 471 $6,137.13 5.3%

Vanguard FTSE Emerging Markets Index VEE EMERGING MARKET $26.70 194 $5,179.80 4.5%

Vanguard FTSE Developed Europe All Cap VE INTERN. EQUITY $25.40 252 $6,400.80 5.5%

SPDR S&P 500 SPY US EQUITY $209.84 33 $6,924.72 7.8%

Vanguard Div. Appreciation Index VIG US DIVIDEND $81.75 83 $6,785.25 7.7%

iShares Russell 2000 Growth IWO US GROWTH $137.78 69 $9,506.82 10.7%

Exchange rate 1.31

US Prices converted to C$ $112,751.20 Total Cash $3,249.89

Starting Value October 18, 2013 $100,000 Gain(Loss) $16,001.10 Gain(Loss)% 16.00%

Prices are at market close on May 31, 2016

*Individual prices and distributions are not converted to CAD

**Total portfolio value, total distributions, '$ Gain' and '% Gain' reflect USD values converted to CAD

CURRENT NOTES: FEZ will be sold for VE effective June 01, 2016. VE trades in CAD$ but is unhedged so the investor will still receive currency exposure. FEZ is a USD$ holding.

OTHER NOTES: Keep in mind all investors are different. This portfolio is designed as a guide in setting up your own personal portfolio. Unique considerations and adjustments need to be made to reflect your personal situation. Please perform your own due diligence before making investment decisions.

Returns are before transaction costs.

Please direct portfolio questions to [email protected]

• Noranda Income Fund (NIF.UN) cuts distribution by 40%

• Algonquin Power (AQN) raises dividend by 10%

• New Flyer (NFI) boosts dividend by 36%

• Enercare (ECI) raises dividend by 10%

• Power Corp (POW) boosts dividend by 7.6%

• Aimia (AIM) boosts dividend by 5%




Retirement Planning

Let My Experiences Be Your Teacher Get Wealthy Eventually PrinciplesMark Seed

I wasn’t always an investor. As a young Canadian kid fresh out of university having secured my first full-time (real) job at a major pharmaceutical company in Toronto, I didn’t think very much

about my financial future. Sure, I knew enough to “pay myself first” (and I did) to the tune of about $50 per month in my Registered Retirement Savings Plan (RRSP) but I was focused on living for today instead of saving what I could towards a retirement that might happen in 40 years. And who wouldn’t be focused on the present—in their early 20s, living in downtown Toronto, with a decent full-time job, and some disposable cash? You only live once, right?

As you get older in life, you realize more and more that you don’t know what you don’t know. You also learn that experiences can be your greatest teacher. I made some mistakes in my 20s—with relationships, friendships, in the workplace and with finances. Some of them weren’t very pretty, however, I’ve learned from all of them: those experiences have formed who I am today and they shape how I think, act and behave…for the better. When it comes to money management, I believe there is no substitute for experience. That includes lessons learned from your successes but more importantly your failures. Let my experiences be your teacher today: you can get wealthy eventually by following a few of these money management lessons.

Lesson #1

Find The Money You’ll Never See Again

Like The X-Files, the truth is out there (and it costs you money). Over the years I’ve learned when it comes to some investing products, like pricey mutual funds, the money you pay in money management fees for owning

investment products is money you’ll never see again. Money paid in front-end charges, back-end sales charges, and expense fees is money you’ll never see again—great for the investment firm, but bad for you. Worse still, for most pricey mutual funds owned, those products have virtually no chance over time to outperform their benchmark. So, it’s a massive double-whammy for the investor: you’re forking over money to own costly products that will underperform the market long-term. Get wealthy eventually by keeping your money management fees as low as possible, as soon as possible, for as long as possible. This could be exercised by buying and owning indexed mutual funds, indexed exchange traded funds (ETFs), dividend-paying stocks that have no ongoing fees or a combination of all three. In my case, I’m largely a dividend-growth investor although I do own a few low-cost, broad market ETFs in my registered accounts for worldwide diversification. By keeping your money management fees low, the money you save and invest stays with you instead of someone else. The first lesson I share with you: stop giving money to other people to manage your costly investment products so you can save more of that money for your future self.

Lesson #2

Stop Sweating The Small Stuff (And Focus On Big-Ticket Items Instead)

No doubt we’ve all heard of “The Latte Factor”—the idea that we look at the small things we spend our money on and see how we could redirect those small expenses to something more valuable, like paying yourself more? Sure, putting aside a few dollars per day for your financial future (rather than spending it) is a good way to save more, to invest more, and to accumulate more wealth over time. But what if you actually like specialty coffees?



What if you enjoy the odd meal out? What if you enjoy a nice bottle of wine now and then? Most of us don’t realize how much we’re actually spending on many of life’s smallest treasures but I believe there is a better way to get wealthy eventually: focus on the big stuff and don’t sweat the small stuff. What I mean is: how much house do you own and maintain? How much are those cars costing you in the yard? What are you paying in heat, hydro, insurance and other bills? I believe it makes little sense to cut out your favourite coffee, your favourite magazine or your favourite growler of craft beer (I wouldn’t…) before you look at how much debt you’re servicing for major expenses such as mortgage payments or car payments. My second lesson is to understand how much debt you’re servicing to pay off life’s big ticket items and focus on managing those expenses appropriately first. You can do this by ensuring you never own too much home, too much car or you overpay for home- or car-related expenses.

Lesson #3

Be Sloth-Like When It Comes To Investing

Ever seen a sloth? I saw a few of them on a trip to Costa Rica a few years ago. They are actually kinda cute. These small mammals are named after the capital sin of sloth because they appear to be very slow and downright lazy—and they are for the most part. However, their general idleness is actually a very efficient metabolic adaption, designed to conserve energy. By using and only storing the energy they need, they are able to flee predators usually on demand—pretty good traits in the wild for longevity. The same could be said for your investment portfolio: to be successful it should be very sloth-like. This means you should learn to train your investing brain to avoid market noise, tune out predictions, and, like sloths who move only when necessary, trade as infrequently as possible.

My third and final lesson for getting wealthy eventually is to be lazy when it comes to investing. This means you should favour buying and holding assets with the long-term view and avoid near-term speculation. It has been said the stock market is a voting machine in the short term

and a weighting machine in the long run. This means the performance of any one company or the performance of a collection of companies years or decades from now has next to nothing to do with the public’s fickle opinion today. Part of my portfolio is comprised of 30+ Canadian and U.S. dividend-paying stocks, companies I’ve owned for many years. These holdings are very sloth-like for me: I don’t trade them and the dividends paid by these companies flow in with predictable fashion every month and quarter (although some dividends are growing every year, something I won’t complain about). The other part of my portfolio is rooted with the lowest cost,

highly diversified ETFs available to retail investors like you and I. This means I earn what the market returns every year (less the aforementioned minuscule money management fees). Over time, my “hybrid” but sloth-like combination of owning dividend stocks and passive assets has grown my portfolio value to well over $250,000. I have full confidence that if I keep my lazy attitude, along with my solid saving and investing rates, that portfolio value will only climb higher, just like our sloth friends who can rest high amongst the Costa Rican trees.

Experiences in life can be a formidable teacher if you allow yourself some time to reflect, understand what went wrong and think about what could have been better. If and when financial mistakes happen to you, give yourself some time to accept your reality and then go dust yourself off and move on. Your money management lessons can help you get wealthy eventually.

Mark Seed is passionate about personal finance and investing and is the blogger behind My Own Advisor. Mark is currently investing in dividend-paying stocks and some low cost ETFs on his journey to financial freedom. He is almost halfway to his goal of earning $30,000 per year in tax-free and tax-efficient dividend income for an early retirement. You can follow Mark on his path to financial freedom here. You can follow him on Twitter @myownadvisor.

I have full confidence

that if I keep my lazy

attitude, along with

my solid saving and

investing rates, [my]

portfolio value will

only climb higher...



Investment Strategies

Beware Of Conflicts Of Interest

Andrew Hepburn

I f you read a newspaper, watch television or read research reports from brokerage firms, you will find investment advice. Of course, that’s just for starters. Nowadays, the Internet is full of people

and outfits telling you how to make money and which stocks to buy.

Some of these recommendations are well-meaning. Some may turn out to be profitable. But investors need to be aware that a huge chunk of the financial landscape is littered with advice that is woefully conflicted. As a result, you may not be hearing the unvarnished truth.

Conflicted advice comes in all shapes and sizes, so let’s take a look at how it manifests itself.

Perhaps you read in the paper one day that a brokerage firm has rated a stock a buy, and put a juicy target price on it for the next twelve months. All this seems very enticing. But what you may not realize is that the same brokerage house has benefited from providing investment banking services to the company they are now recommending. They may have participated in a stock or bond offering for the company, or maybe they advised it on a merger or acquisition. Regardless, they have a vested interest in promoting the stock so as to be considered for future business. Brokerage firms don’t tend to bite the hands that feed them.

Conflicts extend to recommendations on big picture things like the outlook for currencies or commodities. For example, if a large investment bank publicly says you should bet against the gold price, you might be inclined to take them at their word. Yet there’s always the chance they have not disclosed that they have a vested interest in which way the market moves.

The investment bank’s conflict could come about in a couple ways. On one hand, they might already be short

the market for their own account, hoping the price will fall. In this case, it’s possible they are trying to entice other investors to join in on the bearish side, thus helping make their position more profitable. On the other hand, if they think the price is likely to rise, the bank might be looking for investors to take the other side of the trade. If this is the case, the bank which is publicly bearish might actually be building up a bullish position for itself.

Conflicts of interest happen with even the tiniest of stocks. In fact, that’s often where they happen. Many (though not all) newsletter writers who cover junior mining stocks are compensated in some way by the companies they recommend. This can take the form of either a monthly retainer for promotional services, the granting of stock options or the ability to participate in private placements. All of these conflicts provide a clear incentive for a supposedly independent analyst to be biased.

It’s important to note that conflicts of interest extend beyond the investing world. When it comes to the outlook for real estate, for example, it’s near impossible to find a realtor who will admit prices for houses are in a bubble. And it’s easy to understand why this is: real estate agents are in the business of selling properties. They benefit from higher prices. It’s completely against their interests to tell you the market is dangerously overvalued. Again, this is not to paint all realtors with the same brush, but as a general rule, they won’t tell you the sky is about to fall.

Many of the conflicts we’ve looked at are disclosed. Brokerage firms, for instance, are required to tell you if they’ve done work for a company whose stock they cover. Problem is, it’s in the fine print so most people won’t recognize it. And it may not be mentioned if all you’re reading is a newspaper article. The same goes for newsletter writers who are paid by the firms they



recommend. Unless you look, you may not spot the glaring potential for bias.

So what should investors do, given all of these conflicts of interest?

One approach is to adopt a healthy level of skepticism. That doesn’t mean you completely ignore what someone says about a stock, currency or commodity, but you shouldn’t buy or sell something just based on their opinion if you have reason to believe they are conflicted. It also helps to do some research on your own. Particularly if you’re an active investor, you’ll benefit from formulating your own opinions rather than making decisions based on someone else’s.

There are many good people in the investment world. And many who are just trying to give you the best advice. But there are also many conflicts of interest out there. Some are hidden, while others are in plain sight. At the very least, being aware of them empowers an individual so they can invest in their own interest, rather than for the benefit of someone else.

Andrew Hepburn is a freelance writer based in Toronto. He specializes in economic and financial issues. From 2006 to 2009 Andrew was a Research Associate with Sprott Asset Management in Toronto focusing on commodity markets. He is a graduate of Queen's University. Reach him at [email protected].

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Under prevailing rules and regulations, investment “advisors” need only provide you recommendations that are suitable. Imagine this for a moment: You would

never ask a lawyer, an accountant or a doctor if the advice they were giving you was in your best interest or merely suitable. You rightfully assume it. But sadly, investors are being asked to make this distinction today with their financial advisors. And sadly, most retail investors don’t have the tools to evaluate the differences between suitable and best interest. Many wrongly believe the Best Interests duty is in place.

A report, Lack Of Truth In Advertising Deceives Investors from Small Investor Protection Association, deftly illustrates the divergence of the advisory services promoted by industry versus the actual services delivered.http://www.sipa.ca/library/SIPAsubmissions/720_SIPA_Report_Deception_20150505.pdf

Under a suitability standard, certain products like mutual funds can and do compete by offering generous remuneration to the sellers, and that’s the problem. Investors end up paying high costs, suffering substandard performance, being exposed to unnecessary risks and subjected to exploitive behaviours as a direct result. Suitability does not require advice to be in the best interest of a client or to be the lowest priced or least risky option available; it simply requires advice to be suitable, which is, of course, a very broad definition that benefits the advisor and the dealer at the expense of the consumer. That has a huge impact on the ability of Canadians to afford a decent standard of living in retirement or fund other long-term financial goals. Retail investors need and deserve advice which is competent, objective, transparent, and understandable.

In a 2011 Financial Post comment piece, former OSC Chairman Ed Waitzer noted that, as one commentator

Investor Protection

The Best Interests Advice Standard

Ken Kivenko

to a published SEC staff study noted: “If the product sold is that of advice, then that advice should be in the best interest of the client. Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying.” Read the full article Make Advisors Work For Investors http://business.financialpost.com/fp-comment/make-advisors-work-for-investors.

If you visit the website of the Canadian Securities Administrators you can check the registration status of individuals offering advice. What you will find is that the vast majority of “advisors” are in fact registered as salespersons or dealing representatives. Most of the titles used on business cards are just marketing ploys. They do not provide advice under a Best Interests regime. There is a small number of registrants identified as Portfolio Managers; these do have a fiduciary duty to clients but their clients typically are high net worth individuals. Also, investment fund managers (IFM) are subject to a statutory best interest standard or fiduciary duty. Every IFM must (i) exercise the powers and discharge the duties of their office honestly, in good faith and in the best interests of the investment fund, and (ii) exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.

With the decline of Defined Benefit Pension plans, more volatile markets, technological change, an aging population and complex investment products, investor risks and vulnerabilities are much greater than ever before. Canadian investors are highly vulnerable due to low financial literacy, information asymmetry versus dealers/dealing Reps (“advisors”), overconfidence in their investing skills, blind trust in advice givers incented by commissions and a desperate search for yield in a low interest environment. Whatever savings they have must be protected with trusted financial advice. The industry

http://www.sipa.ca/library/SIPAsubmissions/720_SIPA_Report_Deception_20150505.pdf

http://business.financialpost.com/fp-comment/make-advisors-work-for-investors



has evolved from a transaction industry to wealth management—it's time for regulations and standards to catch up.

Holding financial advisors to a fiduciary standard would require them to act solely in the best interests of their clients, and avoid or disclose all conflicts of interest/self-dealing that arise in the advisor-client relationship. Currently, financial advisors in Canada are held to a “suitability” standard that does not require them to act in the best interests of their clients, instead, they must simply ensure that any investment recommendations are suitable given a client’s personal profile and objectives. The implementation of a fiduciary standard would have widespread implications for the financial industry, as advisors would be required to ensure that all recommendations were in the best interest of their clients, including the optimization of all fees and expenses, which is typically at odds with the dealer representative’s goal of maximizing revenue from a client account.

The key change needed is to raise the standard of care that financial advisors owe their clients to a fiduciary standard (referred to as “Best Interests”). There has simply been too much investor exploitation under the lowly suitability standard. This change has already occurred in the UK, Australia and elsewhere. Under a separate initiative, the U.S. Department of Labor recently released a finalized fiduciary rule defining who is a "fiduciary" of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA). A change to Best Interests is disruptive and the road has been bumpy loaded with vigorous industry opposition along the way wherever it has been introduced. However, it is a journey that Canada must take to better protect the life savings of investors who more than ever, are responsible for their own retirement income security.

In a 2013 Consultation Paper, the Canadian Securities Administrators (CSA) proposed for comment the standard that every advisor and dealer (and each of their representatives) that provides advice to a retail client with respect to investing in, buying or selling securities or derivatives shall, when providing such advice,

a. act in the best interests of the retail client, and

b. exercise the degree of care, diligence and skill that a reasonably prudent person or company would exercise in the circumstances.

In the latest consultation , the CSA state it is not their intention for the Standard of Care to automatically result in firms and representatives owing a common law fiduciary duty to their clients.

Two critical elements of a fiduciary duty are:

• A duty of loyalty—fiduciaries should act in good faith, in the best interests of their client or beneficiaries. They should avoid conflicts

of interest, and should not act for the benefit of themselves or another third party

• A duty of prudence—fiduciaries should act with due care, skill, and diligence, investing as a “prudent man” would do.

Best interests means no conflicts-of-interest or at a minimum mitigating conflicts of interest. It implies that appropriate professional tools such as an investment policy statement will be routinely used. Best interests implies no game playing—unduly expensive products, unnecessary leveraging, misleading ads, with-holding of important decision

making information, misrepresentation, made up titles and designations, no account churning etc. It means working to a publicly available Code of Ethics and Code of Conduct. A Best Interests duty implies the obligation to provide full disclosure on portfolio fees / expenses and account performance .

Specifically, for Kenmar, Best Interests means a process including these elements:

• Distilling the objectives, financial situation and needs of the client that were identified through forms, tests and discussion;

• Identifying the subject matter of the advice sought by the client (whether explicitly or implicitly);

• Clearly identifying the objective(s), financial

The key change needed

is to raise the standard

of care that financial

advisors owe their

clients to a fiduciary

standard—referred to

as “Best Interests”



situation and needs of the client that would reasonably be considered relevant to the advice sought on that subject matter;

• If it is reasonably apparent that information relating to the client’s relevant circumstances is incomplete or inaccurate, make reasonable inquiries to obtain complete and accurate information;

• The Representative must assess whether he/she has the expertise to provide the advice sought and, if not, decline to give the advice or refer to a subject matter professional;

• If it would be reasonable to consider recommending a financial product (or investment strategy like leveraging), conduct a reasonable investigation into the financial products that might achieve the objectives and meet the needs of the client that would reasonably be considered relevant advice on the subject matter and assess the information gathered in the investigation ( choose the lowest cost product that meets minimum requirements);

• Disclosing why proprietary products are more appropriate to the client’s objectives, constraints, risk profile than products from third parties available from the advisor;

• Base all judgments on the client’s prevailing relevant circumstances and solely on their best interests;

• Take any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances at the time. This could include for example not to make an investment if high credit card interest is being incurred or insurance coverage is inadequate.

Being a fiduciary is not about the types of service offered, it’s about the quality of service. The big issue here is the definition of Best Interests in the context of investing. Some regulators have hinted that the Best Interests " standard is an objective standard for assessing the processes used when delivering investment advice and accordingly will not examine investment performance retrospectively. Dealers must ensure that they have the infrastructure to support the provision of trusted advice. This includes but is not limited to information systems, personnel selection and training programs, administrative

processes, policies, procedures and rules, product research, supervisory oversight, compliance monitoring and timely and fair client complaint handling.

A Best Interest standard does not impose a “perfect advice” standard. In certain situations, advice that the client “do nothing” will satisfy the best interests duty, if a reasonable advice provider would believe that the client is likely to be in a better position if the client follows the advice.

Ultimately, we anticipate regulators will expect advisors to exercise judgment in acting in the best interests of the client. They will likely regard a “one-size-fits-all” advice model to be insufficient.

After many consultations and much research, Ontario and the Canadian Securities Administrators (CSA) seem ready to introduce some sort of Best Interests standard for personalized advice to better protect retail investors.

On April 28th the CSA released a consultation paper that includes proposed targeted reforms to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, as well as potential guidance in a number of areas that would work together to better align the interests of registrants to the interests of their clients, better define the client-registrant relationship for clients and enhance various specific obligations that registrants owe to their clients. Several provincial regulators have significantly different approaches. At the far end of the spectrum, the British Columbia Securities Commission (BCSC) has ruled out the proposed standard. It is not even prepared to consult on the idea. It remains to be seen how all this shakes out.

We are probably years away from seeing any real reforms put in place. Even when introduced, a lot will depend on the definition of “Best Interests” and the applicable rules. The success of a Best Interests standard will also depend on regulatory enforcement, enhanced KYC/risk profiling processes, how dual licensed advisors are treated, the type of fee structures put in place and how complaints are handled.

Until a meaningful Best Interests standard is invoked, it's CAVEAT EMPTOR.

Ken Kivenko, PEng, President , Kenmar Associates, Etobicoke, ON (416) 244-5803, [email protected], www.canadianfundwatch.com


http://www.canadianfundwatch.com



Investment Insight

At-A-Glance: Split Share Corporations (Part 2 of 2)Michael Southern

W hat makes investing in today’s markets so interesting is that, regardless of your strategy or outlook, there is likely an investment product that fits

your need. Here, the split share fills a niche. However, as with many engineered products, the devil is in the details and investors need to perform a heightened level of due diligence to understand the unique set of risks present in split shares.

This is the second and final article on split shares, designed to examine the performance of the products. The first article in this series was a primer on split shares, discussing the structure and for whom they are appropriate.

TSX Universe Of Split Shares:The TMX Group, which oversees the Toronto

Stock Exchange, makes available through the TMX Money website a list of all the split shares currently trading. As of April 30, 2016, there are 30 split shares corporations trading on the TSX. Quadravest is easily the largest issuer with nine split shares listed. For the reader’s reference, the TMX site can be found here: http://www.tmxmoney.com/en/research/closed-end_funds.html

We wil l look at the performance of five listings. The majority of split share corporations are similar in terms of the portfolio of holdings. Most are entirely invested in the financial and telecommunication sector, or are at least heavily weighted there. With that, we decided to look at the top three split shares by market-cap, but also

to highlight two funds that are focused in sectors other than the financial and communication sectors. We also tried to look for a diversity of issuers.

Below is the list of names for which we will examine performance.

Note that while these are the tickers for the capital share component of the split share, the market-cap is for the corporation as a whole, which includes the preferred share component. The top three split shares by market-cap on the TSX are DFN, FTN and DGS. The portfolio is dominated by financial and communication names. For example, as of December 31, 2015, DGS had 80.0% of its portfolio in these two sectors. BBO and UST were two of the few names in our universe of 30 that were not tilted to financial and communications. Although the size of BBO and UST is much smaller, these split share corporations are focused on the energy and utility sector, respectively, which will provide a more diverse view of performance compared to the top three names.

Performance Characteristics:

Select characteristics of each issue are presented on the next page.

Name Root Ticker Fund Family Market-Cap

Dividend 15 Split Corp. DFN Quadravest 321,000,000

Financial 15 Split Corp. FTN Quadravest 164,000,000

Dividend Growth Split Corp. DGS Brompton 148,000,000

Big Bank Big Oil Split Corp. BBO Claymore 19,000,000

Utility Split Trust UST First Asset 13,000,000


http://www.tmxmoney.com/en/research/closed-end_funds.html


For each class of split share, the tables above show the distribution and frequency as per the original prospectus. Preferred distributions are fixed and cumulative. Distributions on the capital share however, are targets and are not guaranteed. As per the UST prospectus: “The amount of capital share monthly distributions may fluctuate from month to month and there can be no assurance that the Trust will make any distributions in any particular month or months.” Indeed, UST initially offered a $0.0906 monthly dividend; since 2009, it has paid a $0.05 monthly dividend.

The table also shows the share’s NAV and price. This is important as split shares, which are generally thinly traded, can trade at significant discounts/premiums to the NAV. Investors only transact at the NAV before the fund starts trading; otherwise, they do so at the prevailing market price. The market price of the capital shares is determined by, among other things, the relative demand for and supply of the units in the market; the performance of the underlying stocks; and investor perception of the fund’s overall attractiveness as an investment as compared with other investment alternatives. One will notice the initial and most recent NAV of the preferred split matches; this is because shareholders receive back their initial

capital investment at liquidation. In reality, the preferred split share NAV may fluctuate slightly, but it is generally not material. NAV is far more important for the capital split shareholder as they only receive back principal once the preferred shareholders are paid.

This issue is further addressed in the “Performance” section.

The final piece to the table above is the “Minimum Fund NAV for Distribution” column. Capital share distributions can be cancelled altogether. Most split shares quote a net asset value (NAV) threshold that, if breached, will cause all capital share distributions to cease. In the case of BBO, the NAV fell below 15.0 in late 2015 and the capital share distribution was cancelled. As per a BBO December 17, 2015 press release: “No distributions will be paid on the Class A Capital Shares if, in respect of a cash distribution, after payment of the distribution by the Corporation, the NAV per Unit (a “Unit” consisting of one Class A Capital Share and one Class A Preferred Share of the Corporation) would be less than $15.00 (the “NAV Restriction”). As the NAV per unit on December 17, 2015 was $14.57, no distribution will be declared or paid on the Class A Capital Shares for December. Unless the NAV Restriction is satisfied, no future monthly distributions will be paid on the Class A Capital Shares.” The NAV on BBO has since recovered and payments have resumed on the capital share; however, three months’ worth of payments were missed. This has contributed to BBO’s poor performance, discussed in the next section.

Capital Split Share

Root Ticker Distribution ($/share)

NAV (initial)

NAV Price (as of last NAV date)

Minimum Fund NAV for Distribution

DFN 0.10 (monthly) 15.00 8.22 10.64 15.00

FTN 0.10 (monthly) 15.00 5.16 8.36 15.00

DGS 0.10 (monthly) 9.00 6.36 6.64 15.00

BBO 0.05 (monthly) 9.95 6.31 6.05 15.00

UST.UN 0.10 (monthly) 15.00 17.45 16.00 Other

Preferred Split Share

Root Ticker Distribution ($/share)

NAV (initial)

NAV Price (as of last NAV date)

DFN.PR.A 0.04 (monthly) 10.00 10.00 10.16

FTN.PR.A 0.04 (monthly) 10.00 10.00 10.16

DGS.PR.A 0.13 (monthly) 10.00 10.12 9.91

BBO.PR.A 0.13 (monthly) 10.20 10.00 10.02

UST.PR.B 0.13 (monthly) 10.00 10.00 10.40



When examining annualized performance of the capital split shares, results are mixed. In two cases (DFN, DGS, UST), the capital split share outperformed the TSX; in two cases (FTN, BBO) the capital split share underperformed. The same “mixed” picture holds true when one looks at the total return, although the variance is to a larger degree.

The performance of the capital share becomes more clear when we break down total return into its two components: price and dividend. With the exception of UST, the return from the dividend accounts almost entirely for any positive performance from the capital share. In fact, the price return on DFN, FTN, DGS and BBO is negative. Keep in mind that the dividend on the capital share is only a target and can be cut all together if the share violates the NAV threshold. Again, this total return assumes no reinvestment of dividends.

Compare these results to our benchmark, XIU. Here, price return plays a larger part in the total return picture and investors would not be completely reliant on the dividend. Only in the time period covered since DGS’ inception date did XIU show a negative price return.

From a price perspective, one may wonder why the capital shares are taking it so hard on the chin versus

Performance:In calculating the performance for our sample of split

shares, we used a methodology different than what you would see if an investor examined performance reports from a split-share corporation. To calculate annualized performance, most corporations assume distributions are immediately reinvested at the current NAV of the fund. Our methodology differs in two ways. First, we assume dividends were collected but only reinvested at the end of each quarter. (March, June, September and December). Second, we assume this reinvestment took place at the prevailing market price and not the NAV of the fund. As investors transact at the price level and not the NAV, we felt this was more realistic as the two can vary significantly.

We also provided a simple total return calculation, which assumes dividends are not reinvested, but simply collected. We then broke the total return down into its price component and dividend component.

The performance of the capital shares is shown below using our methodology. We have compared results to the iShares S&P/TSX 60 Index ETF (XIU) and adjusted performance to the inception date of the split-share corporation.

The performance of the preferred shares is shown below.

Preferred Split Share

Root Ticker

Annualized Return

Total Return Total Return - Price

Total Return - Dividend

DFN.PR.A 5.2% 53.7% -5.0% 58.7%

FTN.PR.A 4.9% 50.4% -9.3% 59.7%

DGS.PR.A 5.7% 39.2% -3.0% 42.2%

BBO.PR.A 5.1% 43.2% -5.1% 48.3%

UST.PR.B 5.5% 18.6% -1.8% 20.5%

Capital Split Share S&P/TSX 60

Root Ticker

Annualized Return



Annualized Return



DFN 11.8% 130.0% -14.2% 144.1% 7.7% 113.8% 68.9% 44.9%

FTN 5.5% 31.9% -54.6% 86.6% 7.9% 121.6% 74.8% 46.9%

DGS 4.9% 11.4% -53.6% 65.0% 3.0% 20.6% -0.8% 21.3%

BBO -2.3% -4.1% -63.9% 59.8% 5.3% 51.4% 22.2% 29.2%

UST 8.0% 53.0% 8.0% 45.0% 3.9% 33.0% 8.0% 25.0%

XIU when they hold similar large-cap, dividend portfolios. While the price of the capital share is affected by multiple factors, the answer likely has to do with the “VIP” status of the preferred split share and a subsequent lower demand for the capital share. In a falling market, the NAV of the entire portfolio is affected but the preferred holder has a put option on the portfolio in that they are promised back their initial capital. Thus, the preferred does not participate on the downside, assuming the NAV of the fund is sufficient to cover the initial NAV on the preferred share. The leveraged capital split share



bears the entirety of the loss and this is certainly not an attractive feature. This, however, does work both ways.

Moving on to the preferred split shares, results are more encouraging than for their capital counterparts. Overall the shares achieve their objective of providing holders with fixed, cumulative income and the shares have maintained the stated payout. Annualized returns are consistent across the sample and closely reflect the advertised yields. Again, the total return is largely reliant on the distribution, but this makes sense as the preferred split share is tasked primarily with generating income. One can see that the price component of total return is more palatable. In fact, the price return should be closer to zero. This is because investors in preferred split shares are receiving their invested principal back at fund termination. With that, the price should closely track the original NAV at inception. This helps to show why these products may be most attractive to individuals who are sensitive to their particular tax situation.

As an investor, we would far prefer to invest for total return and not have to choose between dividends and capital gains. It is easy enough to create your own portfolio of quality dividend names, save on the MER, and not have to read through the more complicated split share prospectus to ensure you have understood the unique risks of these products. However, we do think the preferred split share is a reasonable investment for the investor who is looking to generate some additional yield from the portfolio versus a traditional bond at a similar credit quality. Capital split shares, however, is the difficult half to sell to investors. Here, risk is heightened and investors need to understand the various clauses found in the prospectus that have the potential to affect overall performance. We would tend to avoid these shares unless your goal is leveraged exposure to the financial or telecom sectors.

Michael Southern is an Analyst with 5i Research in Kitchener, Ontario.

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Travel Insurance Advice

Travel Insurance: Beware of Policy Gremlins a.k.a. The Fine Print - Part 2

Bruce Cappon

In the previous article, I referenced how inadvertent and inaccurate responses by the applicant to a murky Gremlin-loaded medical questionnaire could readily lead to the invalidation of the

policy contract.

This follow-up article will provide solutions and advice on the process of purchasing travel insurance to minimizing the risk of exposure to your own assets from retroactive rescission of the coverage.

At this point you may have concluded that the best solution is simply to avoid insurers that demand a medical questionnaire. Well, no. For most applicants over 55 and/or for trips of longer durations, the questionnaire is part of the mandatory application process. Moreover policies with no medical questionnaire may also have many adverse clauses such as:

1. Insurers may merely state rather than ask the medical conditions. This still leaves room for ambiguity;

2. The “flying standby” clause a.k.a. change of health clause. How can you plan ahead when there is no certainty that your insurance coverage will be continued? This adverse provision states that you must report changes in health on the single-trip plan between the purchase date and departure or in the case of a multi-trip (annual plan) prior to every departure. Under this clause the insurer is free to cancel your policy, raise the premium and/or not cover you for specific medical conditions.

3. Adverse stability clause.

Here Is One Such Example:The Imitation Stability Clause

These policies could be relatively cheap but unbeknownst to the consumer would not cover any pre-existing condition for which treatment was ever received. They could include back to birth or refer to a specified timeframe. It’s very difficult for the consumer to differentiate between this clause and a more generous one that does cover pre-existing conditions, providing they have been stable over a certain timeframe prior to departure.

Imitation Stability Clause Example

“Benefits are not payable for costs incurred due to: any sickness, injury or medical condition, that exhibited symptoms for which a diagnosis need not have been made or required any or all of, medical consultations, prescription medication, medical treatment or hospitalization, within the of 180 days immediately prior to the effective date.

➥ Tip: The foregoing would exclude coverage for any treated medical condition within the specified time frame whether stable or not.

What’s The Solution?So what’s the solution? Should we all just throw up

to our hands in despair and not purchase any travel insurance or not travel at all? Absolutely not. There are policies on the market that provide fair coverage at a reasonable price. Consumers would have to do their part in becoming knowledgeable shoppers. To minimize the risk of exposure of your own assets to arbitrary rescission of insurance coverage, insist on a concise and precise (gremlin-free) medical questionnaire. Even more



importantly it’s a non-starter if the policy has a financial penalty cap due to an inaccurate response.

Shop for a policy that allows you to pay a medical health questionnaire (MHQ) deductible if you’re faced with a huge medical bill but would traditionally be denied coverage because of an unintentional mistake. What this means is that the insurer shows some understanding and compassion when it comes to an oversight on your MHQ. Rather than deny your claim entirely based on an error, they would apply a deductible if the claim was otherwise payable. Consequently, the largest financial loss will be that deductible.

Although the deductible isn’t cheap (it can be $15,000 in some cases), it would make it a huge difference if your medical bill were in the tens, or even hundreds, of thousands. You’d be surprised how quickly the bills add up if something happens abroad; a $100,000 bill isn’t uncommon.

Five Quick Tips1. Don’t buy blind. If the provider does not offer a

sample policy contract prior to purchase, move on.

2. Be reluctant to answer medical questions over the phone without advance written copies. Moreover, insist on the completed version of the hard copy prior to finalization—otherwise significant details may get left out.

3. Avoid gremlin policy and wording by answering questionnaires between 1 to 20 questions (including subsections of those questions). Recommended length should be under 20 questions.

4. As a safeguard, insist on a penalty cap for misanswered questions.

5. Be skeptical of policies where the contract bars their customers from seeking legal recourse in the courts. Certain policies insist on disputes being settled by an arbitrator with no right of appeal to the courts. At minimum know the stats of the particular arbitrator. How many complaints made versus those settled in favour of the consumer?

Final WordFor further advice on comparative shopping, you may

consult my website for a “Safety Checklist”. I am a strong advocate for travel insurance that provides greater safety and certainty for consumers. You can also read my report to the CCIR entitled “Travel Insurance: The Urgent Need For Improved Regulation Governing Contract Voidability”. This submission details the dynamics of policy structures combined with current insurance regulations which may fall far short of Canadians’ expected level of consumer protection.

CCIR UpdateThe CCIR made an examination of travel insurance

one of its key priorities in 2015 including a travel insurance survey asking insurers for their detailed stats on claim denials. As a result, they formed a working group that is currently undertaking research on travel insurance. We’ve been told to expect the Issue Paper to be released this spring.

Meanwhile, it’s buyer beware!

Bruce Cappon, Travel Insurance specialist, President, First Rate Insurance Inc., Ottawa, ON (800) 884-2126, [email protected], www.firstrateinsurance.com

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Investment Products

Investing In Real Estate: Tap Into The Institutional AdvantageG. Derek Henderson

W hen evaluating the effectiveness of your investment portfolio, whether you are working with an advisor or managing your own investments,

the following objectives are important considerations:

• Capital preservation

• Return enhancement

• Risk mitigation

• Inflation protection

• Income generation

• Low volatility

Given the current market environment of increased volatility, low rates and overall market uncertainty, you may be wondering if there are also unique investment options to consider. An alternative asset class like real estate can play a vital role in any multi-asset portfolio—to provide capital protection, consistent income and the opportunity for significant value creation and capital growth.

Real estate investment has not always been viewed advantageously; it wasn’t until a 1970 speech to the Treasurer’s Club in New York when George Russell suggested that pension funds should start to consider investing in foreign stocks and real estate to help diversify their portfolios1. Fast forward 40 years and real estate has become an integral part of the institutional investment portfolio as a diversifier, income generator and a way to enhance overall returns1.

In Canada, we only need to look to our 10 largest pension funds to see that they are heavily invested in alternative asset classes, such as real estate, infrastructure

and private equity—a strategy which has boded very well.

According to Morningstar3 there are three distinct categories of alternative investments:

1. Non-traditional asset classes, such as currencies and commodities

2. Non-traditional strategies, such as shorting and hedging

3. Illiquid assets, such as private equity or private debt and real estate

These pension funds have managed significant growth in the last 10 years. They have seen assets under management triple since 2003, generating $600 billion in net investment returns from 2003 to 2014. 80 percent of the increase in value was driven by investment returns in today’s low rate environment.

These 10 large pension funds have allocated an average of 32% of their investments in alternative asset classes, which includes a real estate allocation (we do not have the specific real estate percentage). In contrast, most other Canadian pension funds carry an 11% allocation in alternative asset classes while the average retail investors hold approximately 5% alternative investments in their portfolio2.

Using this top 10 is not a fair representation since the average retail investor has historically not had the size, the clout or the overall ability to invest in such direct assets. Even small pension funds do not have the ability to own 50 million square feet of Canada’s best office, retail, multi-res, industrial and hotel real estate. However, through investment product innovation, today we have a multitude of investment options including investing in publicly traded Real Estate Investment Trusts (REIT), Real Estate Mutual Funds and Exchange Traded Funds,



as well as opportunities to invest in private REITs and private funds focused on direct real estate ownership.

As we start to realize a greater ability to access ways to invest in real estate, it’s important to understand the advantages and disadvantages of the tools we utilize to access the asset class.

With this in mind, we wanted to share some interesting and exclusive insight into some of the options we have for investing in real estate and why it is important.

One of the advantages of spending a number of years on the institutional side of investment management is developing wonderful relationships with some of the country’s brightest minds in the Canadian financial community. I recently had an opportunity to sit down and chat with a number of them to share their perspective on real estate, the advantages of investing, and why they personally are firm believers in this alternative asset class.

In this article we will share some insight from the manager of a private real estate fund, Peter Cuthbert, Senior Vice President and Partner at Fiera Properties.

Peter Cuthbert has 30 years of experience within the commercial real estate investment industry in Canada. His multi-disciplinary background includes hands-on experience with capital fundraising, real estate portfolio and asset management, real estate finance, appraisal, leasing, acquisitions and dispositions.

Below are some highlights from our conversation.

Derek Henderson: Peter, why do you feel investors look to real estate as an important asset class within their investment portfolios?

❝ Peter Cuthbert: Most investors come to invest in commercial real estate because it has investment characteristics that are unique. It has a low correlation with equity and bonds, lower volatility than equity and has proved to be a good hedge against inflation. In essence, real estate has both bond-like and equity-like qualities and serves to further diversify an investment portfolio, reducing overall risk and volatility.

DH: Can you expand on the thought of investors looking to real estate as a bond-type investment?

❝ PC: Of course, the asset class does have inherent bond-like characteristics in that you are not just investing in a building but you are investing in tenant leases that represent commitments to pay

rent/income to you every month over lease terms that can range from 1 year to more than 20 years. If your building is leased to high-quality tenants for long lease terms, it is a bit like a bond in that there is an obligation to make regular payments to the investor/landlord on fixed terms over an extended time period.

DH: Can you expand on the equity notion?

❝ PC: Real estate has some equity-like characteristics in that the investment can also provide capital appreciation. If the site upon which your building is situated is in a strong location that appeals to a broad array of enterprises/tenants, then it is likely to grow in value over time. Picture an office building sitting next to a light rail transit stop and then think about competing for tenants with other buildings that are two blocks from the transit stop. Which building will a tenant prefer, all other things being equal? Which building is likely able to charge more rent? How likely is it that another transit stop will be built two blocks away near the other buildings? In essence, the building has a locked-in locational advantage due to its proximity to mass transit and that generally equates to long-term value appreciation over time.

Not surprisingly well-located, well-tenanted commercial real estate tends to deliver investment returns that are better than bond returns but less than equity returns over time.

DH: Thanks Peter. Are you able to provide some insight into your philosophical view on real estate and how real estate should be viewed as a diversifier?

❝ PC: Real estate simply houses the economy—an investment in real estate is an investment in the broad economy. If you have a good quality, functional building in a strong location you can attract a broad array of tenants. Should, in a worst-case scenario, your tenant fail, it’s okay because there are many other tenants who are happy to lease the well-located, functional building. In other words, unlike a bond or an equity investment, you are not dependent on the success or failure of a single enterprise and, over time and no matter what happens, the land under your building will very likely grow in value over time.

That by far is an over simplification but I believe it captures the essence of real estate investment.



MoneyTip

Real estate can act as a diversifier and can play such a role in any investor’s portfolio. We encourage you to review your allocation and ensure you are utilizing the real estate asset class appropriately for your circumstances. Whether you are focused on capital preservation, looking for stability and income or seeking opportunities to enhance growth, real estate may be a positive addition to your portfolio.

G. Derek Henderson, Portfolio Manager, The Bush-Henderson Investment Team, CIBC Wood Gundy. Email: [email protected] www.Bush-Henderson.com

1. Structuring a private real estate portfolio, Leola Ross, Ph.D., CFA, Senior Investment Strategist and John Mancuso, CFA, Senior Research Analyst

2. Top Canadian pension funds major RE players: Study by Paul Brent | Commercial | Property Biz Canada | 2015-12-17

3. http://www.morningstar.com/advisor/alternative-investments.htm

CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. G. Derek Henderson is an Investment Advisor

with CIBC Wood Gundy in Waterloo. The views of G. Derek Henderson do not necessarily reflect those of CIBC World Markets Inc This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2016. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed. Their values change frequently and past performance may not be repeated. The securities mentioned in this article may not be suitable for all types of investors. This article does not take into account the investment objectives, financial situation or specific needs of any particular client of CIBC Wood Gundy. This article is not an investment recommendation. Recipients should consider this article as only a single factor in making an investment decision and should not rely solely on the information contained herein as a substitution for the exercise of independent judgment of the merits and risks of investments. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this article. Information, opinions and statistical data contained in this article were obtained or derived from sources believed to be reliable, but CIBC Wood Gundy does not represent that any such information, opinion or statistical data is accurate or complete, and they should not be relied upon as such. All estimates, opinions and recommendations expressed herein constitute judgments as of the date of this article and are subject to change without notice.

Tax Saving Tip

As a general rule: At death, all capital assets of the deceased are taxed at their fair market value as of the day before death. Here are two not-well-known exceptions to this “deemed disposition” rule that can save 20-25% of tax related to their exemption.

The exception to this rule is the case where you leave your partner/spouse your assets and rather than paying tax on their fair market value immediately before death, your partner can elect to use their purchase cost or value on acquiring the assets instead, and thus have no capital gains to report. This keeps all of the assets intact, avoids having to sell some to pay the tax, and depending on your marginal tax rate defers paying likely 20% or more of their taxable capital gains.

This second exception to the “deemed disposition” rule is when the deceased person has named their

spouse/partner as the Successor Account Holder for their Tax Free Savings Account. This allows their TFSA to be rolled over to the successor tax-free and all future income from the holdings starting at that time remains tax-free. If the surviving spouse/partner is not officially named as the “successor”, the TFSA goes to the beneficiaries or estate tax-free but all future income and increase in value is taxed. This important tax saving exemption can quickly nullify the impact of the tax costs of no more income splitting at death for the surviving partner. And it suggests maximizing both TFSAs and partners registering each other as successor account holders.

Hedley Dimock MA, Ed.D, Guelph, ON [email protected]


http://www.Bush-Henderson.com

http://www.morningstar.com/advisor/alternative-investments.htm




How long can this U.S. market keep going up? Aren’t the markets due for another major bear decline? Why are commodity prices and

the TSX so depressed?

All good questions. The U.S. stock market (S&P 500 and the Dow) has advanced at a steady ongoing climb since early 2009—seven years—up almost 200 percent, with little deviation. Aren’t bull markets generally four to five years in length?

And what about natural resource prices? Oil (WTI) has fallen almost 60% since mid-2014, gold is off nearly 30% since late 2011 and spot copper has plunged 50% since early 2011 (Chart 1).

And how about the TSX? Though still advancing, its sluggish pace (averaging just 3.85% per year over the last three years compared to an average of 10.86% per year for the S&P 500 over the same period) would make any investor question the rationale for placing their funds into it.

Yet, this all has a surprisingly familiar ring to it.

There was another time when the U.S. markets soared continuously, light crude oil prices remained depressed for years, and gold and copper dropped to less than half of their previous value.

We don’t have to look too far back for this comparison. It was the 1980s and 1990s.

Markets tend to go through periods of similar patterns.

Technical Speculator

Feels Like The 1980s And 1990s Again

Donald W. Dony

Chart 1

Crude oil prices fell almost 60%...

…gold is off nearing 30%...

…and copper has plunged about 50%

since 2011.



For example, during the 1980s and 1990s, there was great concern about the prolonged rise of the U.S. markets (it lasted for almost 20 years). Many market pundits were constantly calling for a major bear to start at any time. But it didn’t happen (Chart 2).

The TSX had a similar ride to the S&P 500 in the 1980s and 1990s. Both markets climbed up over 1000 percent during that 20-year stretch. The one difference was the “style” of the advance. The U.S. index rose steadily whereas the commodity-heavy TSX moved upwards in a bumpier, more irregular rise.

Gold prices were reaching an all-time high. At the end of the previous commodity cycle, in a one-year span (1979 to 1980), gold soared upwards by 300 percent (in comparison, at the end of the last commodity cycle, from 2006 to 2011, the yellow metal jumped 250 percent). However, after the roaring 1970s, commodity prices appeared to “fall off a cliff ” in the 1980s. The continuous ride for natural resources, which started in the late 1960s, just stopped as the early 1980s unfolded.

For the current market, 2011 was the beginning of another major downturn in commodity prices. Again, natural resources appeared to have just rolled over.

Economically, there were some clear differences between the start of the 1980s and the present market

environment. Beginning in 1977, the Fed was waging an ongoing battle against runaway inflation by tightening its interest-rate policies. Rates finally topped out at 20 percent by early 1980. That clearly is not the problem now. Even at the height of last commodity cycle (2008),

U.S. inflation topped out at under 6 percent. Inflation in the U.S. right now is at 1 percent and the Fed Funds rates are at 0.25 percent to 0.50 percent.

Where does this lead us? Markets seldom repeat themselves; however, they do have a tendency to follow rhythms. We are seeing many similarities between this current market and the last secular bull market of the 1980s and 1990s. If these parallels continue to play out, and they have so far, we should see long-term strength in the equity markets, primarily in the S&P 500, Dow, NASDAQ, and moderate growth in our TSX (mainly due to its large commodity weighting). Strength in the U.S. dollar is expected along with ongoing weakness in the Canadian dollar.

Bottom line: The current bull market has many similarities to the last bull market in the 1980s and 1990s. Over the last six or seven years, commodities, currencies and equities have moved in comparable paths to the last secular bull market.

Should these parallels continue, and history suggests that they will, then the TSX and the S&P 500 should continue their upward trends, reaching all-time highs. Commodity prices, driven down primarily by the rising U.S. dollar, are expected to remain depressed in the years to come. And the Canadian dollar, which moves in basically the opposite direction to the U.S. dollar, should move lower over the next few years.

Donald W. Dony, FCSI, MFTA is an analyst, a past instructor for the Canadian Securities (CSI) and the editor at the Technical Speculator.com

Email: [email protected], Ph. 250-479-9463

TSXDOW

Chart 2




Investor Awareness

Fallen Angels

For those who like to look at stocks and sectors that have been out of favour (yet are showing signs of turnaround) this article might offer some starting points for exploration.

I’ve listed a number of “fallen angels” that appear to be technically improving. This list is by no means extensive—it’s just a handful of candidates that appear to be turning around.

Please note that I don’t hold positions in any of the stocks listed, as we at ValueTrend haven’t done enough fundamental analysis to endorse them at this time. I’m simply observing some stocks that appear to be setting up technically, with a focus on former underperformers.

While there are always lots of fallen individual stocks, industry sectors, or country indices we can look at, I am looking for those that show at least some potential for forming a traditional “Phase 1” consolidation, and hopefully an eventual breakout. For more information on understanding market phases, I’d recommend you read my book, Sideways Using the Power of Technical Analysis to Profit in Uncertain Times.

Below are a few charts that illustrate the beginnings of a base breakout. These are not necessarily “buy” candidates – view most of them more as “watch” candidates for your list. I’ve made a few notations with the charts presented.

Keith Richards

Emerging Markets: No Longer Submerging?

The iShares emerging markets ETF (EEM-US) shows us that the recently “submerging markets” may be trying to put in a bottom at this time. A potential head and shoulders bottom—missing the right shoulder—may be in play. A rally through the neckline at around $35.50 may be a bullish sign. A “bullish cross” (50-day MA moving up through the 200-day) occurred on this ETF recently. Further, sentimentrader.com notes that investor

NEW! WATCH NOW! ▶Keith Richards comments on his article Fallen Angels athttps://www.canadianmoneysaver.ca/authorcomment/

https://www.canadianmoneysaver.ca/authorcomment/


https://sentimentrader.com/


sentiment is getting overly bearish on this index. That’s usually an early heads-up on a potential turnaround story.

Britain: Tickety-boo Again?“Brexit” has been in the news lately, pushing

the United Kingdom’s index down. Some signs of the stress abating has given the index a little relief recently. The iShares UK ETF (EWU-US) has broken its one-year downtrend, but needs to cross about $16.25 to suggest a successful Phase 1 bottom breakout.

Pharmaceutical Sector—Returning To Health?

The pharmaceutical (DRG chart) sector index has broken a 1-year downtrend but remains below its 200-day MA and below a key technical resistance point at around 525-530 on the chart. A breakout would imply lots of upside for this sector—resistance targets of 550, 570 and the old highs of 610 are possible. Keep an eye on this one.

Natural Gas Stocks About To Pop?

The XNG Arca Natural Gas Index suggests a Phase 1 bottom is in the works. A move above 575 resistance would verify the bullish Moving Average crossover.

Airlines: Ready For Takeoff?A consolidation pattern between 200 – 260 has been

in place for this US Airlines index since early 2015. Currently, the airlines index is caught in a tight trading pattern. It appears that the index is bouncing off of that significant support level at around 200—a bounce to the top of the pattern would seem possible. Here in Canada, we can also see some signs of improvement in Air Canada (AC-T) and Westjet (WJA-T), as they break through 1-year downtrends—charts not shown. This is a sector worthy of consideration on both sides of the border.

CP Rail Back On TrackCP Rail has felt the heat of reduced coal and oil

shipments (pardon the pun). The stock has been struggling to stay above its 1-year downtrend. However, a recent peak of $190 took out the last peak(s) of $175, and the stock has had a few successive higher lows. Momentum studies are oversold. So long as $175 is held and the stock can rally off that level (or close to it), I’d say it looks technically interesting



Manulife Coming Back To Life?Old support on this Canadian stalwart at $19 has

become near-termed resistance. A breakthrough $19/ share for MFC-T would imply a $22-23 target. That’s a reasonable, although not overly exciting, gain. But it’s supplemented by a 4% dividend, making the package a bit more enticing for investors. The recent rising troughs are encouraging, but don’t buy the stock unless it breaks out through $19.

AG Growth Ready To Sprout?The farming industry in Canada has been under

pressure, and this grain processor has felt that pain. AG Growth (AFN-T) seems to be breaking a neckline at just over $36/sh. Momentum studies suggest waiting to see if this level can hold before considering a position in this stock. However, a move through $40 would be technically encouraging.

Element Financial (EFN-T) I couldn’t think of any snappy sub-titles for Element

Financial’s turnaround potential, but this financing

company looks to be showing early signs of breaking its 12-month downtrend. A symmetrical triangle breakout has taken out the last peak while demonstrating higher lows since February. Moneyflow is improving slightly, while short-termed momentum is overbought at the time of writing. A break above $16 would imply a return to its old highs of around $20/share.

Keith on BNN’s MarketCall: Wednesday July 13, 2016 at 6:00pm

I’m doing the afternoon MarketCall Tonight show on Wednesday July 13th from 6:00PM – 7:00PM. Call in with your questions during the show’s live taping between 6:00 p.m. and 7:00 p.m. The toll free number is 1-855-326-6266.

You can also email questions ahead of time to [email protected] – it’s important that you specify they are for me.

Keith Richards, Portfolio Manager, can be contacted at [email protected]

Keith Richards may hold positions in the securities mentioned. Worldsource Securities Inc., sponsoring investment dealer of Keith Richards and member of the Canadian Investor Protection Fund and of the Investment Industry Regulatory Organization of Canada. The information provided is general in nature and does not represent investment advice. It is subject to change without notice and is based on the perspectives and opinions of the writer only and not necessarily those of Worldsource Securities Inc. It may also contain projections or other “forward-looking statements.” There is significant risk that forward-looking statements will not prove to be accurate and actual results, performance, or achievements could differ materially from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements and you will not unduly rely on such forward-looking statements. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please consult an appropriate professional regarding your particular circumstances.





••• POINT OF VIEW •••

The Nocebo Effect… What To Do About Itby Shelley Johnston, The Pension Specialists

I am sure everyone knows what a placebo is and we have all heard of the placebo effect. Imagine that by taking a sugar pill you could improve your medical condition. In fact, for

some, this fake treatment can actually change a person’s expectations. However as fascinating and successful as the placebo effect may be, there is a darker side to it, something that is sometimes referred to as the nocebo effect.

Placebos and nocebos can come in many forms mainly because our experiences as a customer have varying degrees of subjectivity. Quite frankly it all comes down to expectations. A product that does its job well can be perceived as superb or simply quite good. For example, if, prior to using a product, we read an article in Consumer Report proclaiming the product to be “the best we’ve ever tested” we would no doubt concur that the product is indeed excellent.

In the example above if the product was reviewed as good to poor, we would be unlikely to rave to our friends about our superb experience with that product no matter how satisfied we were—in fact with a good-to-poor review, we might not even try the product.

You are probably thinking: what does this have to do with markets and investing?

Think about it this way: when a stock meets or exceeds the analyst’s targets, the market sentiment is positive and the stock goes up. If the same stock misses target even by a minimal amount, the market sentiment is negative and the stock drops. You can apply the same theory to all market indicators—unemployment numbers, housing starts, consumer spending etc. All this

news, whether positive or not, emotionally affects investors and ultimately the market

It’s a well-known fact that most of the investing public continually sell low and buy high. Why? Market sentiment. When things are going well (in other words, the markets are going up), investors will invest in the market; when stocks are going down, investors shy away, sit on the sidelines or, worse, sell. This is the nocebo effect.

The moral of the story is that positive news tends to have a positive effect on stock markets and one can see share prices rising soon after the news. Stock prices react slowly but steadily to positive news. Negative news has a more detrimental effect on stock markets and investor sentiment than positive news. Stock prices react much faster to negative news.

The sentiment of the market is also an important factor. In a largely negative atmosphere, the slightest bit of worrisome news is enough to send a stock or the markets tumbling versus when the market sentiment is positive.

Therefore as we can see that news whether good or bad will have a direct impact on the market. News can change a bad day into a good day or a good day into a bad day depending on your outlook.

Remember, successful investors will tune out most of the “noise” from the media, and turn their thoughts to positives so that in 2016 they will see positive returns on their investments.

Positivity is contagious…as are smiles.

◆

The views expressed in this column are solely those of the author and do not in any way represent the views Canadian MoneySaver Magazine.



Portfolio Management

Volatility: Often The Spark To Investor Fear

F ear. It can do funny things to investors. When the stock market goes down significantly, people sometimes start to panic. People begin to act in a way they know they shouldn’t, but

emotion sets in and rational thinking can be hard. It can be very difficult sometimes not to act rashly when fear and emotion sets in. But the worst thing you can do is panic-sell, because you’ll often regret the decisions you make at that time.

What Sparks The Fear?Surprisingly, it’s not necessarily the fact that the

market or an investment is down that sparks fear in investors. It’s often the volatility associated with it—the rollercoaster ride of ups and downs of the market and the unpredictability—that shakes investors. This can generate fear, particularly if it happens over a longer period of time.

Volatility is actually something that is around all the time in the markets, but most people don’t notice it when the peaks and valleys are small. However, when the peaks and valleys become more pronounced, fear can take hold. This is certainly something we saw at the beginning of 2016 when the markets were off to a rough start. There was a week in mid February where the market was up 800 points followed by another week when it was down a little under 800 points. Those kinds of swings can leave investors feeling very uncertain and unsettled.

How Can You Avoid Falling Into The Traps?

The first thing you need to do when the stock market falls significantly is take a step back and not panic. Call your investment advisor to see if what’s going on in the markets actually affects your investments.

Allan Small

It may be that your investments are not in areas that are being negatively impacted and an advisor can offer sober second thoughts.

Look for opportunities. In turbulent times, you can often buy investments ‘on the cheap’, which means looking for good quality investments at an inexpensive price. If you have investments that are not doing well, you have to assess them to make sure that the reasons for owning them are still intact. If they are, perhaps you buy more at the current (cheaper) price. If the story has changed regarding the investments you own, then those are the investments you want to get out of to move into other areas that you think will perform better in the future.

Consider subtle changes to your portfolio. In volatile times, you can often make subtle changes within the portfolio to try to move money to areas that have a good story behind them. In my opinion, you want to avoid making big trades that involve timing the markets. I would rather make small changes but stay in the market than to try to time the markets by getting out of investments and then consequently go back in when you feel times look better.

Have a plan. Having a plan always helps. I believe that the days of the buy-and-hold strategy are long gone. The markets are too volatile today to just hold an investment and expect you will always make money over time. If you look at the performance of the Dow Jones Industrial Average from 2000 to 2010 – a span of 10 years – you’ll notice that the Dow passed the 10,000 point mark at least six times. Investors who were passive during this period would have seen very little positive results. They would have been flat or just marginally higher because the index didn't move much higher over that 10-year period.



MoneyTip

By contrast, active investors could have seen much better results. If investors bought quality investments and then set price targets of when to sell, they could have done very well. By selling part or all of their investments when they reached their targets, investors would have gains and have locked in their profits before the market pulled back.

And that’s the key: set targets for investments and when the targets are reached, re-evaluate your strategy. Decide if it’s the time to sell some or all of it or, in some cases, add even more, if the investment is doing well and looks like it will have a continued upside.

Sitting Out The Market Can Create Challenges

When markets become highly volatile and investors get scared, some investors choose to step away completely and sit on the sidelines until the markets pick up. It can be a natural response to get away from the turbulence, but the challenge for those who chose to sit out becomes knowing when to get back into the market. In essence, investors find themselves trying to time the market – knowing when an investment has reached its low point and getting back in. This is extremely difficult to achieve.

Most people wait until they see the market recovering and get back in too late, re-entering when investments have already made some significant gains. Consequently, they miss the initial part of the rebound and their returns aren’t as strong as they could be.

It’s often better to stay in the market and follow an active investing strategy so that you can realize the benefits of the initial rebounds. With some careful investing, you can use the volatility to purchase investments that previously might have been too expensive, but now have become a better value as a result of drops in the market.

Allan Small is the Senior Investment Advisor with Allan Small Financial Group with HollisWealth, a Division of Scotia Capital Inc. (www.allansmall.com) as well as the author of How To Profit When Investors Are Scared.

This article was prepared solely by Allan Small, registered representative of HollisWealth ® (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views, including recommendations expressed in this article are those of Allan Small and not those of HollisWealth. ® Registered Trademark of The Bank of Nova Scotia, used under license. Allan Small Financial Group is a personal trade name of Allan Small.

The New Bond Market Reality

Extremely low interest rates are something of a double whammy of bad news for bond investors. Not only does it mean that returns will be lower than they were in the past, but investors should also prepare for an increase in the volatility of bond prices, as the decrease in rates has led to an increase in bond duration on a handful of developed country sovereign bond markets.

Lower yields give investors a much smaller cushion when rates change. The same magnitude of an interest rate move will have a much larger effect on the price of these bonds, all else equal, than it would have at higher yields. So there will be much higher volatility at lower interest rates, thus a lower margin for error.

What’s an investor to do in this low rate world?

Understand why you’re invested in bonds in the first place. Bonds can still soften the blow from an

equity bear market, even at lower rates. If stocks drop 30%, it’s not going to affect total returns all that much if your bonds earn you 2% instead of 6% during an upheaval in the stock market.

Reset your expectations. The next cycle in the bond market will not resemble the last one. At such low yields it’s obvious that returns will be lower going forward and volatility will be higher. Investors should prepare themselves for both.

Look to diversify your fixed income allocation. Bonds have basically been a one-decision asset class since the early 1980s. It didn’t really matter where you invested because high quality fixed income in the U.S. has provided phenomenal returns for such a safe asset class. Investors may need to look beyond the basics and diversify broadly with assets such as TIPS and high quality mortgage-backed securities.

Source: http://awealthofcommonsense.com/2016/04/how-to-invest/

http://www.allansmall.com

http://awealthofcommonsense.com/2016/04/how-to-invest/



Over the years I have had individuals say to me, “Why bother with a plan as it doesn’t work out in the end anyway?” They claim that the rate of return assumption falls

short of what was anticipated or that job loss, a divorce, or other factors can derail the outcome of a long term plan. I agree that the further you are from retirement, the greater the probability that your projected net worth will deviate from what we project today.

I have also found that those without a plan discover later in life that there were missed financial opportunities that would have been uncovered with thorough planning.

I hope that many of you have a written holistic financial plan in place, one you review and monitor annually. Some of you start the planning process sooner than others depending on your level of concern over your financial affairs. Understandably, building in time to work through the planning process is not always at the top of the priority list as other daily events take over. In fact, vacation planning takes priority for some over financial planning. Those who don’t have a plan hope they will achieve their goals as they move along, and try to adapt to the situation at hand. Most of us however need a game plan and structure.

This is the first article of a three part series on planning for the unexpected life events that could disrupt the successful outcome of your plan.

A 2015 report published by the Brondesbury Group entitled Financial Stages of Older Canadians identified two key overall findings through their research that have major implications for both planning and managing retirement:

• Unexpected financial crises that disrupt savings and planned retirement spending are far more common than anticipated, especially in pre-retirement years.

Why Your Retirement Plan Requires Flexibility

Ross McShane

• The financial ramifications of personal health become increasingly important as Canadians age.

Their study determined that 6 of 10 people experienced major life events that challenged their financial plans. Flexibility needs to be part of financial planning.

Events cited in the study that, from my experience, challenge a retirement plan include:

• Lost income or benefits

• Providing financial support to an adult family member

• Paying significant health care costs for self or a family member

• Divorce or loss of a spouse

• Investment portfolio underperformance or investment fraud

• Unanticipated major home expenses after a disaster

• Changes in tax rates

John Klaas, Adjunct Professor, Rowe School of Business, Dalhousie University and long-time financial planning coach and educator feels that risk mitigation is key. “Plan for the normal and layer on risk mitigation,” says Mr. Klaas. Over the course of his coaching career (which has involved observing and critiquing over 12,000 advisor/client consultations), Mr. Klass has found that knowing which questions to ask the client is crucial.

Let’s examine two events in this first article.

Lost Income Or Benefits:The days when we worked for one company for life and

retired with a defined benefit pension plan are largely over.

Tax Issues



These days it is fair to assume that we will not be with the same organization for life and that defined benefit pension plans are not nearly as abundant as they are being replaced (if you are lucky!) by defined contribution pension plans and group RRSPs. With self-employment more common these days and the fact that the variable component of a salaried employee’s remuneration can form a larger share of his/her income, planning can be challenging.

Start by running your retirement projections based on your current income and see where you end up. If you are self-employed, be careful not to be over-confident as there can be a tendency to assume that the bottom line will continue to grow at the same rate when it may not be sustainable in the long run. I have found that business owners prefer to use more conservative numbers to allow for possible future downturns. Retirement planning for physicians is more unpredictable these days given cuts to their remuneration. Building in a reduction in their current practice income and projecting income in constant dollars is often a more realistic option.

If your plan counts on eventually realizing the value of your business, be sure to obtain a sound valuation and seek tax counsel that maximizes the net after-tax proceeds. Business owners are understandably proud of their business but can also be overly optimistic of its value and contribution to their retirement plan. A sound succession plan is crucial.

Lost income might include forced retirement for health reasons. Risk mitigation includes ensuring adequate disability and critical illness insurance coverage. I have seen examples of situations where coverage was insufficient to allow for continued savings to achieve your retirement goals.

How would your retirement plan be impacted if, as an employee, you lose your job to due to company downsizing? Do you have the skills and marketability to find employment elsewhere? Would you be able to generate the same income with another employer or would relocation to another city be necessary? If there is any doubt about the stability of your income, a second scenario could be run based on a lower salary to determine the impact on your plan. A plan ‘B’ will be critical for your peace of mind.

Then there are those who feel they are invincible. Instead of ensuring adequate sources of retirement capital are available at 65, they aim to work until 70+ to cover the gap. This is fine as long as you remain in good health. But what if suddenly your health deteriorates to the point where you are no longer able to work at the same pace

and income level? Or, not at all? Does your disability coverage end at 65?

Providing Financial Support To Family Members:

This can come in all different shapes and sizes whether support is to an adult child or an aging parent.

You find yourself in your peak accumulation years (mortgage is paid off, rate of savings has increased, children have moved out) when—surprise!—a child loses his/her job, goes through a messy divorce, or has a major health crisis. They are forced to return home and require financial support. Your disposable income and hence savings could be reduced if he/she needs funding for retraining and day-to-day expenses. Perhaps they had purchased a home and are now in need of your financial support to carry the mortgage. A permanent life insurance policy could be considered to ensure that your dependent child is financially sound when you are no longer around to provide support.

As life expectancies increase, aging parents may require expensive long term care or medical support. If you are part of the ‘sandwich generation’ that is dealing with adult children returning home as well as aging parents who need support then you are facing a double whammy that could seriously impact your retirement plans.

When modelling a retirement plan, I often ask the clients about their grandchildren and how they intend to assist them. Any gifts such as RESP funding should be factored into the plan. Says Mr. Klaas, “It is imperative that the right dosage of probing is administered during a client meeting.” For instance, “Tell me about your children and grandchildren and what are the chances they will need support? What contingency has been made for that support?”

In the event one of these life challenges threatens your retirement goals, it is critical that your financial planner has built in contingencies. Your financial plan is not a static document—it will have to be updated regularly in order to keep it relevant and ensure that you are still on track. Your plan needs to be flexible and as Mr. Klaas says, “be designed with the appropriate level of thoroughness and due diligence”.

In our next article we will look at other events that can challenge your plan.

Ross McShane, CPA, CGA, CFP, RFP, CIM is Director, Financial Planning at McLarty & Co Wealth Management in Ottawa, Ontario.



Sector Focus

The Power Of Reinvested Dividends Use Your Dividends To Buy More Shares And Ignore Market Fluctuations

L ike many of those born during the Great Depression, my wife’s aunt Joan, who passed away last year at age 78, was financially disciplined. She saved 10% of her income

and never used a credit card. “If I can’t pay cash, I can’t afford it,” she always said.

In 1954, when she was just 17, Joan began working at what was then known as The Bell Telephone Company. The young secretary immediately began investing as much of her paycheque as was allowed in the employee share purchase plan. During a 40-odd year career at the company, Joan regularly added to her Bell stake, getting a few shares when the price was high and a few more when it was low. Joan made no effort to time the market, didn’t study charts or read analyst reports and never bothered with an advisor.

Joan held only BCE shares, having preferred to ignore my advice that a diversified portfolio of dividend-paying holdings including banks, insurers, telecoms, utilities, industrials and resource stocks would help reduce industry-specific risk.

By the time she retired Joan had 10,000 BCE shares and could have spent her nest egg on a lavish retirement, but she preferred to live modestly from her pension alone. As a result, Joan’s heirs inherited a substantial estate and learned valuable lessons: start investing early, gradually accumulate shares in a blue-chip company, don’t fret over market fluctuations, hold for the long term, and perhaps most importantly, reinvest the dividends.

With the exception of Warren Buffett’s Berkshire Hathaway, which has never paid a dividend, investors are generally better served by large, well-established dividend-paying companies. Of course, past results are no guarantee of future results, but if you accumulate gradually and reinvest the dividends, you’ll tilt the odds in your favour.

The key element in successful long-term growth is reinvesting the dividends in more shares, which you can do yourself or preferably through a company’s dividend reinvestment plan (DRIP). Dividend reinvestment plans are an incentive offered by companies to persuade buy-and-hold shareholders to keep buying and holding, and some companies even allow plan subscribers to use the dividend to buy more shares at a discount to the market price. If the company has a habit of increasing its dividend, DRIPs can be a huge contributor to long-term growth.

The power of reinvested dividends is illustrated at longrundata.dom, developed by brothers Harvey and Dennis Malovich. The free site lets users input stock symbols and a start date, then instantly calculates annualized return and what the current value of $1,000 would be if it had been invested at the beginning of the period.

I used longrundata.com to find the long-term total returns for each of the 60 companies in the TSX 60 Composite Index. The top six, based on percentage annualized return, are illustrated in the table on the next page.

Enbridge Inc.Enbridge was first incorporated as Interprovincial

Pipe Line Co. in 1949. The company’s first pipeline, opened in late 1950, carried Alberta crude oil to Regina, Saskatchewan and Superior, Wisconsin. The line was extended to Sarnia, Ontario in 1954; Buffalo and Chicago in the 1960s, and Montreal in 1976. In 1996, the company, then known as IPL Energy Inc., acquired Consumers Gas, the country’s biggest natural gas distributor. In 1998, IPL energy changed its name to Enbridge, combining the terms “energy” and “bridge.” Along with its natural gas distribution services, Enbridge has interests in wind, solar and geothermal power.

Richard Morrison



Enbridge’s website says its shareholders have enjoyed an average annual return of 13.5% since its founding, but longrundata.com shows the last 20 years have been much more lucrative, with an average gain of nearly 20%. Except for a nine-year period between 1986 and 1995, the company has increased its dividend almost every year. Despite a dismal 2015—in which falling earnings dragged down its share price to December lows near $40 from April highs near $65—Enbridge’s board raised its dividend by 14%, to $2.12 from $1.86, to yield about 4%.

“We expect that our highly transparent growth outlook will translate into 14-15% dividend growth between 2015 and 2019,” the company says on its site. Enbridge’s target dividend payout is between 40% to 50% of earnings, “providing a healthy balance between returning income to shareholders and retaining income for reinvestment in new growth opportunities.”

Figures from Morningstar show Enbridge’s payout ratio fluctuating from between 34.8% of earnings to more than 150%, reflecting the consistent dividend increases as measured against variable profits.

Canadian National RailwaysCanadian National is a giant Class 1 North American

railway, with about 20,000 miles of lines throughout Canada and the United States. With a market capitalization of $61.8B, CN is one of the largest companies in Canada, and is about 2.4 times larger than its rival, Canadian Pacific.

Over the past year, CN shares have outperformed CP and its big U.S. competitors, Union Pacific, Norfolk Southern and CSX. CN shares periodically dip below $75, which typically represent a solid buying opportunity, although long-term investors will be more interested in the dividend.

CN’s site shows annual dividends steadily increasing to $1.50 in 2016 from a split-adjusted 6.75 cents in 1996—a phenomenal record that puts daily, weekly and even annual share-price fluctuations in perspective. At a share price of about $78, CN’s dividend yields less than 2%, but it’s the steady dividend increases that are behind CN shareholders’ long-term gains.

CN typically pays out between 20% and 30% of its earnings as dividends, figures from Morningstar show.

Saputo Inc.Montreal-based Saputo makes and sells cheese, milk,

cream and other dairy products, with most of its growth coming through acquisitions of businesses around the world. There are plenty of acquisitions yet to make in Asia and developing countries, and Saputo has the capital to make them, so the growth should continue—although acquisitions do carry more risk than internally generated growth.

The company’s shares have been a superb investment over the past 20 years, thanks to steadily rising earnings and dividends. The company pays out about one-third of its earnings as dividends. Although it looks like a solid long-term investment, the current annual dividend of 54 cents yields just 1.34%, which probably makes it unsuitable for income-seekers.

Canadian Natural ResourcesOil and gas producer CNQ, as investors call Canadian

Natural, has been another long-term gem. CNQ did not even begin paying a dividend until 2001. Since then, however, dividend increases have been as regular as clockwork.

Like many other oil producers, CNQ had a horrible 2015, losing $637-million or 57 cents per share. CNQ lost half its value, falling from levels near $50 in mid-2014 to the $25 range at the end of last year. Despite

Company Symbol Earliest Date Found Annualized Return Value of $1,000

Enbridge Inc. ENB 95-01-12 19.50% 45,202

Canadian National Railway CNR 96-11-22 19.31% 31,462

Saputo Inc. SAP 97-10-24 18.87% 24,977

Canadian National Resources CNQ 95-01-12 18.34% 36,701

Royal Bank RY 95-01-12 17.13% 29,448

BCE BCE 96-05-06 16.60% 21,861

LONGRUNDATA.COM



the slump, the company still increased its dividend to 92 cents, yielding about 2.4%. The latest dividend increase pushed its payout ratio to an obviously unsustainable 232.6%, up dramatically from the safe 25% to 30% range of the last few years. Eventually, earnings must increase or the dividend will have to be cut.

Royal Bank Of CanadaThe Royal Bank, founded in Halifax, Nova Scotia in

1864, is not just Canada’s largest bank; it’s Canada’s largest company, both by revenue and market capitalization. The bank has more than 1000 branches in Canada, more than 400 in the southwest U.S. and 127 in the Caribbean. The bank also has an investment and corporate banking unit, RBC Capital Markets and RBC Dominion Securities, an investment brokerage.

Royal Bank’s shares are up nearly 70% over the past ten years, second only to Toronto-Dominion’s huge 90% gain over the same period, and both Royal and TD are well ahead of all other Canadian banks.

Royal’s board has generally decided to increase its dividend, although the annual payout was frozen at $2 between October 2007 to April 2011. For the last two years, the dividend has been rising by two cents per quarter.

BCE Inc.BCE owns Bell Canada, which carries phone and

DSL services for eastern Canada and the northern

territories. Bell’s Bell Mobility unit is one of Canada’s largest cellphone signal carriers, while Bell TV provides television services. BCE also owns Bell Media, with assets in television (CTV), the Montreal Canadiens and Toronto’s Maple Leaf Sports and Entertainment, which owns several sports franchises.

BCE has steadily increased its dividend, although the increase has not been consistent. Annual common-share dividends were held at $1.20 between 2000 and 2004, and were suspended through most of 2008.

A long-term price chart for BCE’s common shares shows the stock climbing smoothly and steadily since 2009, vastly outperforming the S&P/TSX index with only brief and relatively small interruptions. The current dividend of $2.73 yields 4.5%, making it well suited for income seekers.

The six stocks mentioned here are merely the top performers among a list of solid investments. Using longrundata.com, I was able to find 18 other TSX 60 companies that have achieved annualized returns of more than 10%, which essentially means a $1,000 made 20 years ago would be worth $6,727. The key is to buy and hold, and reinvest the dividends.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. [email protected]

Coming Events

EVENT/TOPIC PRESENTER DATE TIME

The CMS Young Money Webinar Series (3-part): "Get Serious about Your Money" Cost: $6.00 (+TAX)

For details and to register online:canadianmoneysaver.ca/events

The MoneyShow - Metro Toronto Convention CentreTo register visit www.canadianmoneysaver.ca/events

September 16-17, 2016

Webinar: The U.S. Stock MarketCost: $3.00 (+TAX)

Matt McCall October 6, 2016 11am-12:30pm EST

Webinar: Tax Changes and the Benefits of Annuitizing Before 2017Cost: $3.00 (+TAX)

Rino Racanelli October 20, 2016 1pm EST

Please go to www.canadianmoneysaver.ca/events for more information and to register.


http://www.canadianmoneysaver.ca/events


http://www.canadianmoneysaver.ca/events


The ABCs of RRSPs

A Different Perspective On Spousal RRSPs

During this tax season there have been lots of tax-savings suggestions to be found in the various financial magazines, Canadian MoneySaver included. One of these tax-

savings tips being put forth is that of contributing to your spousal RRSP. This is especially useful if one of the individuals has much higher income and consequently a larger dollar amount in their RRSP. By contributing to the other person’s RRSP, you achieve an income splitting at a future point in time. Hopefully when the funds are withdrawn from the RRSP, the dollar amounts will be closer to an equal amount, but more importantly fall into the same lowest possibe tax bracket.

Now lot s o f advi sors a re promoting this technique, however I do not believe they are giving full disclosure! This is only a tax savings manoeuvre if everything remains exactly the same! That is, that the higher wage earner always remains the high wage earner between the two people. Advisors need to ask their clients if the wage-earning potential is going to remain the same all the way into the retirement future. Sure, presently the stay-at-home parent is the low wage earner, but are they always going to remain the lower earner between the two individuals?

What happens if down the road the positions are reversed? The low wage earner now becomes the high wage earner and ultimately ends up with their own RRSP. Their own RRSP could have the potential to become larger than their partner’s RRSP in part because of these extra spousal contributions.

Dean Neald

Another aspect is to take a close look at is the age of each partner. The timing of when you access these RRSP funds will likely be based upon the age of the participant. If the current high wager earner is, say, ten

years older than the spouse, then you have effectively delayed accessing these funds by ten years, assuming the withdrawals start at the usual 65 years of age. In addition, what is happening with the participants during this ten-year gap? Is the younger person still working? If so there is a good chance the working individual is in a higher tax bracket than the other (retired) person. You won’t want to access this Spousal RRSP while you are in a higher tax bracket, so you must delay until the younger person goes into retirement. In addition, you must be aware of

the three-year contribution delay. Withdrawals from Spousal RRSPs cannot begin before three clear years from the last contribution. So the individuals must factor this three-year delay into their plans.

I think advisors are doing a disservice to their clients by focusing way too much on the present day situation of an immediate tax saving versus considering what the future tax implications will be. The advisors and their clients must try and visualize what the future situation will look like. They must work through the above-mentioned situations to help them determine if this Spousal RRSP contribution is truly the best route for them to take.

Dean Neald, CPA, CMA, resides in Regina, Saskatchewan.

... advisors are doing

a disservice to their

clients by focusing way

too much on the present

day situation of an

immediate tax saving...



This column offers excerpts from published and online sources to provide other viewpoints.

Pembina Pipeline Corporation is a North American oil and gas stock that transports crude oil and natural gas liquids. The company’s high-quality assets and integrated structure should permit it to realize significant growth opportunities, while providing shareholders with a relatively defensive oil and gas stock investment in the energy sector.

Rising oil prices have lent considerable support to oil and gas stocks since January. In that month, West Texas intermediate crude oil fell to a low of about US$27. Since then, however, it has risen to approximately $43 on optimism that slower production will rebalance the oil market in the next couple of years. One beneficiary of this optimism is Pembina Pipeline Corporation (TSX—PPL; NYSE—PBA). In January, the company’s shares fell to a low of about $26. Now the shares are trading at nearly $38, a rise of close to 50 per cent in three months.

Pembina is a leading transportation and midstream service provider that has served North America’s energy industry for over 60 years. The company owns and operates an integrated system of pipelines that transports various products derived from natural gas and hydrocarbon liquids produced in western Canada and North Dakota. It also owns and operates gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business.

Despite the difficult commodity price environment, the company posted its highest ever adjusted cash flow last year. For the year ended Dec. 31, 2015, Pembina’s adjusted cash flow from operating activities (ACFFO) was $878 million,

or $2.53 a share, compared with $777 million, or $2.38 a share, in 2014.

The increase was primarily due to a rise in operating margin and lower current tax and share-based compensation expenses. The operating margin rose 3.7 per cent to $1.1 billion, thanks largely to increases in the company’s conventional oil and gas services business from new assets being placed in service and increased volumes.

Indeed, $1.3 billion of new fee-for-service assets were placed into service during the year. The additional cash flows from these assets, as well as the anticipated cash flows from the $556-million acquisition of midstream assets earlier this year, has let Pembina raise its dividend once again. The company will now pay a monthly dividend of $0.16 a share, up 4.9 per cent from the $0.1525 it paid previously. This is the fifth consecutive year in which the dividend has been increased.

Pembina continues to advance growth projects in all its businesses. For example, the company recently received regulatory approval to construct two 270 kilometer pipelines between Fox Creek and Namao, Alberta. These pipelines form part of the company’s Phase III expansion program, which is the largest capital project in its history.

Pembina yields 5.1 per cent and trades at 14.2 times its forecast 2016 ACFFO of $2.65 a share. We believe this premium valuation is justified by the company’s high-quality assets.

Pembina Pipeline is one of our best buys for growth and income.

Source: MPL Communications

PEMBINA UP 31% IN THE FIRST FIVE MONTHS OF THE YEAR. MORE GAINS AHEAD?



Real Estate

Figuring Out Where Your Business Will Thrive, Not Just Survive

T he location a business owner leases is like the foundation upon which every other brick of the business is laid. Tenants understand this intellectually but often make poor site

selection choices based on unit scarcity, bad timing, or other factors that positively or negatively influence them. Prospective first-time tenants need to adopt the mindset that if they don’t find the right location, at the right rental rate, at the right time – they’ll walk away and not lease the wrong location. This, however, rarely happens in real life

When it comes to leasing commercial space, in general, you get what you pay for – and the more you pay, the better the location. But if that was an absolute truth, all a tenant would have to do would be find the most expensive location for lease and set up shop. But it isn’t an absolute truth. Tenants frequently sign long-term lease agreements, agreeing to pay rental rates that could have been negotiated much lower.

When you’re looking for the right property, having a checklist of desirable criteria can help you stay on track. Here are just a few of the many factors to consider:

Demographics: Consider the average age of people living in a particular area, the type of home people are living in (people living in apartments can’t physically accumulate consumer goods like a large homeowner can), the mean income and proportion of two-income households, and ethnicity (leasing space for an Italian coffee shop in an area populated by Asians who may be more inclined to favour tea over coffee could be a mistake).

Traffic flow and visibility: Study the number of pedestrians and motorists at various times throughout the day. Do motorists have to turn left across a busy intersection to enter your parking lot? Evaluate which side of the street is better for your business (liquor stores do much better on the side of the street where most people are driving home from work). Lack of visibility for your store front can cause people to drive right by it, especially if

Jeff Grandfield and Dale Willerton – The Lease Coach

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, email [email protected]

the traffic is heavy. Trees in a parking lot can block signage. Some landlords overbuild their pad sites near the road, thereby blocking the visibility of the retail plaza behind. Is there a bare patch of ground between your desired site and the roadway? If so, you can safely assume that someday your landlord will lease that pad site or construct a building there that blocks visibility to your signage and store front.

Competition: If you don’t know who your competition is and where they’re located, you can’t hope to compete with them. Not only should you be acutely aware of your competitor’s services, products, and pricing, but you should have someone “secret shop” their business, try their products and/or services, and report back to you about the experience. As a bonus, have the secret shopper ask your competitor about your business (if you’re already open) to discover what is being said about you. You also have to think about future competitors. This means anticipating where a competitor may lease space or set up shop in the years ahead.

Remember that there are two sides to the competition coin:

1. Join them. Locating beside or near your competition to siphon off their customers is a legitimate site-selection strategy for some businesses. In many cities, there are “restaurant row” and “fashion mall” areas that attract many shoppers because so many similar tenants are close to each other.

2. Avoid them. Locating away from the competition often makes sense for personalized and/or healthcare businesses (e.g. dental practices, chiropractors, fitness clubs, hair stylists, and/or tanning salons). Customers tend to be loyal to these businesses because they can only use one at a time.

Dale Willerton and Jeff Grandfield are Commercial Lease Consultants who work exclusively for tenants. Got a leasing question? Need help with your new lease or renewal? 1-800-738-9202, [email protected] or visit www.TheLeaseCoach.com.




http://www.TheLeaseCoach.com


Q I received some stock warrants when a convertible debenture I had was converted to common shares and these warrants. What exactly are stock warrants and why do they have an expiry or maturity date? What happens at the expiry date if no action has been taken with the stock warrants? Thanks.

CMS Reader

A On expiry, if they are not exercised, warrants are worthless (they simply expire). Warrants are securities that give you the right to buy stock at a certain price (specified in the terms of the agreement). They expire so that the company knows it may (or may not) get some money in from holders at a certain fixed time.

Peter Hodson, CFA, Canadian MoneySaver Editor

Q My income is a combination of CPP, OAS, and GIS. Longevity is in my jeans and I don't want to help with my money and some relatives who didn't plan ahead financially have. At nearly 70 I'm considering options for increasing my cash flow:

1. Accept a reverse mortgage of $100,000 (about $500 monthly). It is a loan, the payments are not taxable and won’t effect my GIS, OAS and any income-tested seniors’ benefits. I plan on staying in my home for as long as possible. If I need nursing home care, selling the house, repaying the loan and taking what's left could leave me with little money.

2. Use the money and buy a $100,000 single-life fixed immediate annuity (again about $500 per month). This would give me lifetime income and selling the house (the only way I can pay off the loan) might not make such a deep financial impact. The downside is that the annuity is taxable and might disqualify me for GIS and possibly an OAS clawback.

I'm consulting a financial advisor but would appreciate your thoughts on this.

CMS Reader

You must accompany your inquiry with your Membership Number (ID) and telephone number or e-mail to have your question reviewed. Inquiries are responded to directly and the Q&A may be published here later. Hundreds of Q&As are found on www.CanadianMoneySaver.ca

A Annuities may or may not be taxable. It will depend on your age, gender, the amount, and type of annuity you purchase.

If the annuity is registered then it is fully taxable regardless of the above variables.

If the annuity is non-registered then the above variables will determine if it is taxable and by how much.

You will need a licensed insurance agent in your province to run the annuity quote to get exact income and tax amount.

You also want to find out if the non-registered annuity qualifies for prescribed tax status (see my recent article on the subject “an easy way to save money on a prescribed annuity”). Prescribed taxation, levels out the amount of interest payments throughout the entire annuity contract. This will reduce the amount of taxable income in the early years compared to a non-registered annuity that distributes accrual taxation.

Remember, your non-registered assets are most likely already invested and could be generating interest, dividend, or capital gain income. On many cases I have worked on, an annuity should create less tax payable than traditional interest bearing vehicles. Once again you will need to get an insurance agent to run the numbers for you.

For 2015, the OAS threshold is $72,809. The amount of the claw back is equal to your OAS payments or 15% of the amount by which your net income exceeds the threshold, whichever is less. For the 2015 year, assuming you start to receive OAS benefits at age 65 the full amount of the OAS benefit will be eliminated when your net income (including your OAS benefit) is just over $117,000.

Here’s an excellent Government of Canada link for OAS and GIS qualifications.

http://www.esdc.gc.ca/en/cpp/oas/payments.page

Rino Racanelli, Independent insurance advisor, Toronto, ON

http://www.CanadianMoneySaver.ca

http://www.CanadianMoneySaver.ca

http://www.esdc.gc.ca/en/cpp/oas/payments.page



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TSX

are

our

reco

mm

ende

d co

mpa

nies

a D

RIP.

Wit

h th

e DR

IP, y

ou c

an r

einv

est

all y

our

divi

dend

s to

pur

chas

e ad

diti

onal

sha

res

at n

o co

st. S

ome

DRIP

S of

fer

a di

scou

nt s

o th

at a

ddit

iona

l sh

ares

are

bou

ght

at a

dis

coun

t to

the

ave

rage

mar

ket

pric

e. S

ome

divi

dend

s ar

e pa

id in

US

dolla

rs a

nd w

e ha

ve a

djus

ted

num

bers

and

rati

os a

ccor

ding

to

rece

nt e

xcha

nge

rate

s.

Div.

5yr

gr:

We

have

add

ed t

he fi

ve-y

ear d

ivid

end

grow

th ra

te t

o ou

r cha

rt, i

nfor

mat

ion

obta

ined

from

Blo

ombe

rg L

P.Ea

rnin

gs a

re fo

rwar

d ea

rnin

gs e

stim

ates

. Sin

ce o

ur la

st u

pdat

e, B

MO,

Nat

iona

l Ban

k an

d Ex

chan

ge I

ncom

e ha

ve in

crea

sed

divi

dend

s.Yi

eld

= Di

vide

nd d

ivid

ed b

y cu

rren

t pr

ice.

Pay

out

rati

o =

divi

dend

div

ided

by

earn

ings

per

sha

re (

EPS)

. Th

e di

vide

nd p

ayou

t ra

tio

is s

impl

y ca

lcul

ated

by

divi

ding

the

com

pany

’s

divi

dend

by

its

forw

ard

(est

imat

ed)

earn

ings

. If

a co

mpa

ny w

ith

a lo

w p

aym

ent

rati

o ex

peri

ence

s an

ear

ning

s de

clin

e, it

may

con

tinu

e to

pay

the

sam

e di

vide

nd. O

r, at

leas

t, it

may

w

eath

er th

e do

wnt

urn

wit

hout

cut

ting

the

divi

dend

. A h

igh

divi

dend

pay

out r

atio

of 1

00%

indi

cate

s th

at th

e di

vide

nd p

ayou

t is

equa

l or a

bove

the

com

pany

’s e

arni

ngs.

The

refo

re, o

ne

shou

ld b

e ve

ry v

igila

nt a

nd p

lace

the

sto

ck o

n yo

ur “

wat

ch”

list.

Calc

ulat

ion

for i

nter

est e

quiv

alen

t of d

ivid

end

yiel

d fo

r elig

ible

sha

res:

(10

0 - m

argi

nal r

ate

for d

ivid

ends

) di

vide

d by

(10

0 - m

argi

nal t

ax ra

te o

n re

gula

r inc

ome)

. For

exa

mpl

e, in

201

1 an

Ont

ario

tax

paye

r wit

h or

dina

ry in

com

e of

$65

,514

use

s: (

100

– 11

.72)

div

ided

by

(100

– 3

1.15

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app

roxi

mat

ely

1.28

22. T

here

fore

, a s

tock

wit

h a

Cana

dian

div

iden

d yi

eld

of 5

.0%

ha

s an

equ

ival

ent

inte

rest

retu

rn o

f 5.0

x 1

.282

2, w

hich

is a

ppro

xim

atel

y 6.

41%

.



TOP FUNDSTO

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TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF J

UN

E 7,

201

6

CH

ART

NO

TES

For

info

rmat

ion

on t

he c

ateg

ory

defi

niti

ons,

ple

ase

visi

t ht

tp:/

/ww

w.c

ifsc

.org

/en/

inde

x.ph

p. F

ront

loa

d fu

nds

(Frn

t) c

harg

e a

fee

to i

nves

tors

whe

n un

its

are

purc

hase

d; d

efer

red

load

fund

s (D

ef)

char

ge a

fee

whe

n un

its

are

rede

emed

. Fro

nt lo

ads

may

be

redu

ced

(in

per c

ent

term

s) a

s th

e si

ze o

f the

inve

stm

ent

incr

ease

s;

defe

rred

load

s m

ay d

ecre

ase

as t

he t

ime

elap

sed

betw

een

purc

hase

and

rede

mpt

ion

leng

then

s. S

ome

fund

s ha

ve e

ithe

r a fr

ont

load

or a

def

erre

d lo

ad (

FnDf

). O

ther

s

have

no

load

fee

(Non

e). D

efer

red

sale

s ch

arge

s al

so k

now

n as

a b

ack-

end

load

, the

se d

efer

red

char

ges

typi

cally

go

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Specialty ETFsTOP EXCHANGE TRADED FUNDS RANKED BY FIVE-YEAR RETURNS AS OF JUNE 7, 2016 Fund Name Ticker Mkt Tot Return

YTD(Current)

Mkt Tot Ret 1 Mo

(Current)

Mkt Tot Ret 3 Mo (Current)

Mkt Tot Ret 12 Mo

(Current)

Mkt Tot Ret 3 Yr

(Current)

Mkt Tot Ret 5 Yr

(Current)

Mkt Tot Ret urn Since Incept

(Current)

HorizonsBetaPro NASDAQ 100 Bull Plus ETF HQU -5.27 8.51 14.15 -4.52 28.70 24.96 -

HorizonsBetaPro NYMEX NatrlGas Bear+ ETF HND 21.30 -3.95 -32.80 82.06 21.82 23.72 -

iShares S&P/TSX Capped Cnsmr Stapl XST 7.51 4.60 0.96 17.00 24.38 20.92 21.22

HorizonsBetaPro S&P 500 Bull Plus ETF HSU 4.28 3.30 17.66 -3.24 17.98 17.95 -

iShares US Fundamental Adv CLU.B -5.89 -0.42 1.29 -0.89 14.50 17.44 16.62

iShares US Fundamental Comm CLU.C -2.71 5.75 6.48 4.06 17.31 16.98 17.99

BMO Eq Wght US HlthCare Hdgd to CAD ETF ZUH -2.77 1.88 8.06 -7.39 17.38 16.90 -

Horizons S&P 500 ETF HXS -2.09 6.44 5.57 6.64 19.50 16.87 17.74

BMO Global Infrastructure ETF ZGI 8.61 6.31 7.97 -1.15 14.12 15.47 15.97

iShares Global Healthcare (CAD-Hedged) XHC -2.67 2.90 6.73 -6.63 13.22 15.19 16.44

iShares NASDAQ 100 CAD-Hdg XQQ -1.90 4.14 7.20 0.06 15.47 14.70 14.09

iShares Global Water Comm CWW 2.80 5.97 9.39 7.28 16.89 14.56 6.05

BMO NASDAQ 100 Equity Hedged to CAD ETF ZQQ -1.81 4.14 7.27 0.43 15.74 14.56 15.84

HorizonsBetaPro NYMEX Crd Oil Bear+ ETF HOD -40.35 -11.11 -48.93 44.02 27.46 14.56 -

HorizonsBetaPro S&P/TSX Cap F Bull+ ETF HFU 13.38 2.37 25.78 2.91 19.09 13.31 -

iShares Global Water Adv CWW.A -2.95 0.79 4.04 1.54 14.30 12.98 4.73

iShares MSCI World XWD -3.37 5.37 5.40 1.07 14.69 12.87 12.37

iShares Global Real Estate Comm CGR -2.00 4.91 6.33 7.73 14.00 12.81 7.76

iShares Global Real Estate Adv CGR.A -3.43 0.89 4.11 3.79 12.23 12.20 6.81

First Asset Canadian REIT ETF Common RIT 11.42 3.23 10.15 16.92 11.11 12.02 -

Horizons Active Global Dividend ETF Comm HAZ -2.40 4.31 4.10 4.25 15.38 11.88 -

BMO S&P 500 Hedged to CAD ETF ZUE 3.01 1.87 8.58 0.65 10.49 11.27 -

iShares Core S&P 500 (CAD-Hedged) XSP 3.11 1.81 8.73 0.62 10.59 11.15 2.43

iShares S&P/TSX Capped Info Tech XIT 0.61 8.69 4.00 6.09 18.95 10.45 1.61

iShares US Fundamental (CAD-Hedged) Comm CLU 3.11 0.78 8.32 -2.10 8.10 9.81 4.73

iShares Japan Fundamental (CAD-Hdg) Comm CJP -12.79 7.39 4.99 -21.99 5.68 9.40 -4.33

iShares Global Agriculture Comm COW 2.99 6.95 6.81 -1.90 9.94 9.38 6.97

BMO Dow Jones Ind Avg Hdgd CAD ETF ZDJ 2.14 0.66 7.76 -0.04 7.41 9.20 -

iShares US Fundamental (CAD-Hedged) Adv CLU.A 2.81 1.01 9.22 -3.29 7.25 9.13 3.97

iShares Equal Weight Banc & Lifeco Comm CEW 6.92 1.33 13.13 4.30 11.45 8.62 7.08

iShares S&P/TSX Capped Financials XFN 7.49 1.11 12.07 3.89 11.22 8.53 9.13

BMO S&P/TSX Equal Weight Banks ETF ZEB 9.90 -0.21 14.69 5.18 11.64 8.36 10.65

BMO India Equity ETF ZID -1.28 8.52 16.84 -0.53 15.56 8.31 5.16

iShares Global Agriculture Adv COW.A 1.34 6.28 6.04 -3.24 8.28 8.30 6.04

First Asset Active Util & Infra ETF Comm FAI 7.43 2.31 7.37 1.63 9.78 8.25 -

BMO Eq Weight US Banks Hdgd to CAD ETF ZUB -4.63 3.14 18.58 -7.13 5.13 8.03 -

iShares Equal Weight Banc & Lifeco Adv CEW.A 6.43 1.45 12.79 3.72 10.57 7.72 6.18

Horizons Seasonal Rotation ETF Comm HAC 2.16 -0.58 7.66 4.36 8.57 7.54 8.33

BMO Long Corporate Bond ETF ZLC 4.75 0.36 5.15 2.88 5.39 7.46 7.84

iShares US Small Cap (CAD-Hedged) XSU 1.59 2.39 11.57 -6.83 6.65 7.43 3.36

©2016 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed,(4) do not constitute investment advice offered by Morningstar, (5)are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supple-mental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent,and disclosure statement.


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Documents

JULY/AUGUST 2016 Why Your Retirement Plan The Power Of … · 2018-06-02 · iShares S&P/TSX Cdn. Div Aristocrats CDZ CDN. DIVIDEND $24.83 886 $21,999.38 19.0% iShares S&P/TSX Global