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XEROX CORP. $15 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) is one of the world’s leading makers of printers, copiers and document publishing equipment. Overseas markets account for about half of its sales and profits. In the three months ended June 30, 2006, Xerox’s earnings fell 35.0%, to $0.26 a share (total $260 million) from $0.40 a share ($423 million) a year earlier. However, the year-earlier quarter included a non-recurring net gain of $213 million. Sales rose 1.5%, to $3.98 billion from $3.92 billion. The company spends around 5% of its annual revenue of around $16.00 a share on research. It has to write off these costs immediately, which hurts its earnings. But this spending has helped Xerox become the largest maker of black-and-white publishing systems in the United States and Europe....

AT&T INC. $30 (New York symbol T; Income Portfolio, Utilities sector; WSSF Rating: Average) is the largest telecommunications company in the United States, with 47.9 million traditional lines in service in 13 states. It’s also the nation’s largest provider of wireless services, with over 57 million customers. The company took its present form and name in November 2005 when SBC Communications Inc. acquired the old AT&T Corp. for $16.3 billion in cash and stock. AT&T stockholders wound up owning 16% of the combined company. The new company gets roughly 50% of its revenue from providing telephone and data services to businesses. Its wireless and consumer businesses each supply 25% of its revenue....

ACE CASH EXPRESS INC. $29 (Nasdaq symbol AACE; Aggressive Growth Portfolio, Finance sector; WSSF Rating: Speculative) has accepted an all-cash offer of $30 a share. We first recommended ACE in our January 2000 issue at $18, so this offer represents a 66.7% gain. ACE stockholders should tender their shares to get the full $30.

GOLDEN WEST FINANCIAL CORP. $76 (New York symbol GDW; Conservative Growth Portfolio, Finance sector; WSSF Rating: Average) plans to merge with Wachovia Corp. (New York symbol WB) in a cash-and-stock deal currently worth $77.24 per Golden West share. We first recommended Golden West in our December 1999 issue at $16.83 (adjusted for splits), which works out to a 359% gain....

FORTIS INC. $24 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) supplies electrical power to around 915,000 customers in five Canadian provinces. It also owns or invests in electrical utilities in New York State, Belize and the Cayman Islands. Its real estate division owns hotels and other commercial properties, mainly in Atlantic Canada. The company has increased its dividend in each of the past 32 years. The current rate of $0.64 a share yields 2.7%. That’s lower than TransAlta, TransCanada and Emera, but we feel that Fortis’s focus on expanding its operations outside of Atlantic Canada should enhance its earnings growth, and let it continue its policy of annual dividend increases. In the second quarter of 2006, Fortis earned $37.9 million, down slightly from $38.2 million a year earlier; per-share earnings remained unchanged at $0.37....

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, and Bangor, Maine. Emera’s high market share and largely regulated operations give it plenty of steady cash flow to increase dividends (its current dividend of $0.89 a share yields 4.5%) and fund new projects. For example, Emera recently agreed to build a $350 million pipeline that would transport natural gas from a proposed liquefied natural gas (LNG) terminal near Saint John, N.B. to the U.S. portion of the Maritimes & Northeast Pipeline in Maine. (Emera owns 12.9% of the Maritimes & Northeast pipeline.)...

TRANSCANADA CORP. $35 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) operates a 41,000-km pipeline network that transports natural gas from Alberta to central Canada and the United States. This business supplies 60% of its profit. The remaining 40% comes from its energy division, which owns or operates 23 electrical power plants. The company has increased its dividend every year since 2000. The current annual rate of $1.28 yields 3.7%. In the second quarter ended June 30, 2006, TransCanada’s earnings from continuing operations grew 22.0%, to $0.50 a share (total $244 million) from $0.41 a share ($200 million) a year earlier....

TRANSALTA CORP. $24 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; SI Rating: Average) operates 51 electric power plants in Canada, the United States, Mexico and Australia. The company currently pays a quarterly dividend of $0.25 a share, for an annual yield of 4.2%. TransAlta’s stock has stayed in a narrow range in the past three years. Investors feared that rising coal and natural gas prices, which account for 85% of TransAlta’s fuel needs, would force it to cut the dividend. Concerns over future maintenance costs at some of TransAlta’s older plants have also weighed on the stock....

IGM FINANCIAL INC. $47 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s largest mutual fund company, with $103.7 billion in assets under management. It also offers retirement planning and other investment services. Power Financial controls roughly 55% of IGM’s stock. IGM has two main subsidiaries. Investors Group sells its products through its own network of 3,600 financial advisors. Mackenzie Financial sells its funds through independent brokers....

GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is one of Canada’s largest insurance companies, with $191.3 billion in assets under administration. It sells its insurance products directly and through brokers to both individuals and groups. Power Financial controls about 75% of Great-West. The company also provides wealth management and other financial services. Great-West gets roughly 50% of its profit from Canada, 30% from the U.S. and 20% from Europe. Great-West’s revenues rose from $16.1 billion in 2001 to $23.9 billion in 2005, or 10.4% compounded annually. Much of that growth is due to Great-West’s 2003 purchase of rival Canada Life Financial Corp. for $7.2 billion in cash and stock....

SCOTIA CANADIAN GROWTH FUND $63.03 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers sees as investments that have the potential for above-average growth. The $571.6 million Scotia Canadian Growth Fund’s 10 largest holdings are Manulife, Suncor Energy, Royal Bank, TD Bank, Barrick Gold, Alcan, CN Railway, CIBC, Talisman Energy and EnCana. Scotia Canadian Growth currently holds 29.3% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 21.3%....

BMO EQUITY FUND $31.50 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) generally invests in the shares of 20 to 40 “blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management, and the potential for growth. BMO Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Sun Life Financial, Petro-Canada, Canadian National Railway, CIBC, Bank of Nova Scotia and EnCana. The $2 billion BMO Equity currently holds 37.6% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 23.2%....

CIBC CORE CANADIAN EQUITY FUND $23.21 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and yet have growth potential. The $627.6 million fund’s top holdings are Petro-Canada, EnCana, Manulife Financial, Falconbridge, Bank of Nova Scotia, TD Bank, Canadian National Railway, Bank of Montreal, Canadian Natural Resources and Suncor Energy. CIBC Core Canadian Equity holds 33.4% of its portfolio in Financial services stocks and 26.4% in Energy stocks....

RBC CANADIAN EQUITY FUND $25.15 (CWA Rating: Conservative)(RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks. The fund’s 10 largest holdings are TD Bank, Manulife Financial, Bank of Nova Scotia, Royal Bank, EnCana Corporation, Petro-Canada, CN Railway, Talisman Energy, Suncor Energy and Canadian Natural Resources. The $4.4 billion fund holds a relatively high 28.8% of its holdings in Financial stocks. It also holds 25.3% in Energy stocks....

TD CANADIAN EQUITY FUND $30.99 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Western Oil Sands, Canadian Oil Sands Trust, CN Railway, Inco, Falconbridge and Teck Cominco. The $2.6 billion fund currently holds about 28.6% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 28.9% of its holdings in that sector....

T. ROWE PRICE GROUP, INC. $37 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; WSSF Rating: Average) sells and manages over 80 no-load mutual funds. The company also provides wealth management, brokerage and other financial services. It currently oversees assets worth roughly $293 billion. The company prefers to sell its funds directly to investors with no commission fees. That helps keep its management expense ratios down, which gives it an advantage over funds sold through brokers. T. Rowe Price earned $0.42 a share (total $116.7 million) in the three months ended March 31, 2006 (all per-share amounts adjusted for a 2-for-1 split in June 2006)....

STATE STREET CORP. $59 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; WSSF Rating: Average) provides custodial, research, accounting and other services to large institutional investors, such as pension plans and mutual funds. The company gets about 80% of its revenue from management and other fees, while the remaining 20% comes from lending. Equity markets have slumped in the past few months and higher interest rates have cut bond prices. However, State Street’s assets under custody in the second quarter of 2006 rose 13.5%, to $10.9 trillion from $9.6 trillion a year earlier, due to new clients and more business from existing clients. Total assets under management rose 7.1%, to $1.5 trillion from $1.4 trillion a year earlier....

AMERIPRISE FINANCIAL INC. $44 (New York symbol AMP; Conservative Growth Portfolio, Finance sector; WSSF Rating: Average) provides financial planning, brokerage and insurance services to over 2.7 million clients through a network of roughly 12,370 advisors. It currently owns, administers or manages assets worth $428 billion. The company was a wholly owned subsidiary of American Express Co. (see page 75) prior to September 2005. That’s when American Express handed out all of its Ameriprise shares to its own stockholders as a special tax-deferred dividend. In the three months ended June 30, 2006, the company earned $0.57 a share from continuing operations, down 6.6% from $0.61 a year earlier. If you disregard costs related to the spin-off and other unusual items, per-share income grew 21.5%, to $0.79 from $0.65. Revenue rose 13.9%, to $2.05 billion from $1.8 billion....

HARTE-HANKS, INC. $26 (New York symbol HHS; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) helps companies identify and target potential customers, and works with them to develop an advertising strategy. Direct marketing provides roughly 60% of its revenue, and just over half its profit. The remaining 40% of its revenue comes from its shopper division. Shoppers are free, advertising-supported publications that the company mails to households in a particular geographic area. Harte-Hanks is the largest publisher of shoppers in the United States, with nearly 1,100 weekly editions in California and Florida that reach over 12.8 million readers. Harte-Hanks’ revenue rose from $917.9 million in 2001 to $1.14 billion in 2005, or 5.6% compounded annually. Profits grew at a compound annual rate of 13.1%, from $0.82 a share (total $79.7 million) in 2001 to $1.34 a share ($114.5 million) in 2005....

SAPUTO INC. $35 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; SI Rating: Average) is the largest dairy food processor in Canada. Its main brands include “Armstrong”, “Frigo” and “Stella”. Canada accounts for two-thirds of its revenue. Saputo also has dairy operations in the United States and Argentina. Saputo’s revenue fell from $3.5 billion in 2002 (fiscal years end March 31) to $3.4 billion in 2003, but grew steadily to $4.0 billion in 2006. Income rose from $1.54 a share (total $160.2 million) in 2002 to $2.20 a share ($232.1 million) in 2005. However, a writedown cut Saputo’s earnings in 2006 to $1.82 a share ($192.1 million). The company relies on acquisitions to fuel its growth. Although this adds to its risk, Saputo has a good history of quickly integrating new businesses and cutting their costs....

CANADA BREAD COMPANY, LTD. $61 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; SI Rating: Above average) is a leading supplier of fresh and frozen baked goods to supermarkets and restaurants. It also makes pastas and sauces. Its main brands include “Dempster’s”, “Tenderflake” and “Olivieri”. Canada Bread’s revenue rose from $678 million in 2001 to $1.35 billion in 2005, mainly due to its $262.3 million acquisition of the U.S. and UK bakery operations of Maple Leaf Foods Inc. (see below). Maple Leaf now owns 87.5% of Canada Bread. Earnings before restructuring costs jumped from $0.97 a share (total $36 million) in 2001 to $1.80 a share ($64 million) in 2002. Income fell to $1.61 a share ($63 million) in 2003, but grew to $2.62 a share ($99 million) in 2004, and to $3.07 a share ($111 million) in 2005....

MAPLE LEAF FOODS INC. $13 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; SI Rating: Average) is one of Canada’s largest food processing companies. It makes fresh and frozen meat products under the “Maple Leaf” and “Schneiders” brand names. It also supplies animal feeds and other agricultural services to farmers, and owns 87.5% of Canada Bread. The company’s revenue rose from $4.8 billion in 2001 to $5.1 billion in 2002, but slipped to $5.0 billion in 2003. In 2004, Maple Leaf paid $499 million for rival meat processing company Schneider Corp. Consequently, revenue grew to $6.4 billion in 2004, and to $6.5 billion in 2005. Income rose from $0.55 a share (total $57.4 million) in 2001 to $0.71 a share ($84.7 million) in 2002. Restructuring costs cut Maple Leaf’s profit in 2003 to $0.27 a share ($35.1 million), but income improved to $0.89 a share ($102.3 million) in 2004....

CAE INC. $8.65 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Above average) is a leading maker of full-size, computerized flight simulators. Airlines use these devices to train pilots to fly certain aircraft, and to prepare flight crews to handle emergencies. CAE also makes simulators for military aircraft, including fighter jets and helicopters. In 2001, the company began operating pilot-training facilities, which nicely complements its simulator business. CAE is now the world’s second-largest provider of pilot training services, with 22 facilities on four continents. Demand for these services should grow, since it’s cheaper for airlines to send pilots to CAE’s schools than to train them in-house. CAE gets about half of its revenue from civilian airlines, and half from military organizations. That helps cut its exposure to the highly cyclical air travel industry. Revenue from continuing operations fell from $1.01 billion in 2002 (fiscal years end March 31) to $938.4 million in 2004, mostly due to the drop in air travel after 9/11. Revenue grew to $986.2 million in 2005, and to $1.11 billion in 2006....

TIMBERWEST FOREST CORP. $14.30 (Toronto symbol TWF.UN; SI Rating: Speculative) is an income trust operating in the forest products industry. It is the largest owner of private forest lands in western Canada. To raise cash, TimberWest is selling land to real-estate developers, and selling non-core assets....

GATEWAY CASINOS INCOME FUND $15.07 (Toronto symbol GCI.UN; SI Rating: Speculative) operates the Burnaby Casino and Cascades Casino in Vancouver, B.C., the Palace Casino in Edmonton, Alberta and the Lake City Casinos in Kamloops, Kelowna, Penticton and Vernon, B.C....