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FINNING INTERNATIONAL INC. $54 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 89.5 million; Market cap: $4.8 billion; SI Rating: Above average) is one of the world’s largest dealers of heavy equipment made by Caterpillar Inc., such as tractors, bulldozers, pavers and trucks. Major customers include the mining, forest products and construction industries. Revenue grew at a compound annual rate of 11.8%, from $3.2 billion in 2002 to $5.0 billion in 2006. Most of that growth is due to higher commodity prices, which have spurred strong demand for heavy equipment from mining and oil exploration firms. Profits from continuing operations were $1.68 a share (total $132.3 million) in 2002 and $1.68 a share ($132.0 million) in 2003, but rose to $2.27 a share ($240.7 million) in 2006. (These per-share figures do not reflect a 2-for-1 stock split planned for May 2007.) Cash flow per share rose from $5.99 in 2002 to $6.55 in 2003. It fell to $6.37 in 2004, and to $5.95 in 2005, but grew to $6.71 in 2006....

ISHARES MCSI CANADA INDEX FUND $26 (American Exchange symbol EWC; buy or sell through brokers) invests in most of the stocks in the Morgan Stanley Capital International Canada Index. These stocks represent Canada’s largest and most-established public companies, accounting for about 60% of the market capitalization of all publicly traded stocks. These shares are managed by Barclays Global Investors. There are now 27 different MCSI index funds. This fund has an MER of 0.84%. That’s a lot higher than the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. It’s also no better than most open-end index funds, which have MERs as low as 0.54%. We think MCSI Canada’s high MER defeats the main advantage of index funds. The spread between iShares MCSI Canada’s high MER and that of a low-fee fund may not appear to make a lot of difference in a single year, but there is no point in paying more than you need to. We don’t recommend iShares MCSI Canada Index Fund.

DIAMONDS TRUST SHARES $125 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. Expenses are about 0.18% of assets. Currently, the fund’s top 10 holdings are IBM, 3M, Boeing Co., United Technologies, Caterpillar, Altria Group, American International Group, Johnson & Johnson, Procter & Gamble and Exxon Mobil....

S&P DEPOSITORY RECEIPTS $144 (American Exchange symbol SPY; buy or sell through brokers) are commonly called ‘Spiders’. The fund holds the stocks in the S&P 500 Index. This index is comprised of 500 major U.S. stocks chosen for market size, liquidity, and industry group representation....

NASDAQ-100 TRUST SHARES $44.16 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers) or ‘Qubes’, hold the stocks that represent the Nasdaq-100 Index. This index is made up of the 100 largest and most heavily traded stocks on the Nasdaq Exchange. The index reflects firms across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. Expenses are about 0.20% of assets. The top 10 highest-weighted stocks are Apple Computer, Microsoft, Qualcomm, Google, Cisco, Intel, Gilead Sciences, Comcast, Oracle and eBay. Nasdaq-100 Trust Shares are a buy for aggressive investors only.

ISHARES CDN LARGECAP 60 INDEX FUND $76.72 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSE. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSE. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Cott Corporation and Celestica. The index’s top holdings are: Royal Bank, 7.1%; Manulife, 6.0%; Bank of Nova Scotia, 5.1%; TD Bank, 4.9%; EnCana Corporation, 4.4%; Suncor Energy, 3.9%; Bank of Montreal, 3.9%; Canadian Natural Resources, 3.3%; CIBC, 3.3%; Sun Life Financial, 2.9%; Barrick Gold, 2.8%; BCE Inc., 2.6%; and Canadian National Railway, 2.5%....

RBC CANADIAN DIVIDEND FUND $48.90 (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) has 41.4% of its portfolio in Financial services stocks. It has a further 15.9% in Energy stocks. The $8.5 billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, TD Bank, Manulife Financial, CIBC, TransCanada Corporation, Bank of Montreal, Canadian National Railway and Power Corporation. Over the last five years, RBC Canadian Dividend Fund has posted a 13.5% annual rate of return. That’s just over the S&P/TSX 60’s gain of 13.4% over the same period. The fund gained 10.6% over the last year, compared to the S&P/TSX 60’s gain of 15.0%. RBC Canadian Dividend’s MER is 1.72%....

BMO DIVIDEND FUND $50.87 (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) currently holds about 58.3% of its portfolio in the Financial services industry. Its largest holding is Energy at 16.1%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.7 billion BMO Dividend Fund has posted a 13.2% annual rate of return. That’s just under the S&P/TSX 60’s gain of 13.4%. The fund gained 9.9% over the last year, compared to a gain of 15.0% for the S&P/TSX 60. BMO Dividend’s MER is 1.73%....

MCGRAW-HILL COMPANIES LTD. $63 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 351.3 million; Market cap: $22.1 billion; WSSF Rating: Average) has three main operations: school textbooks (40% of sales in 2006, 21% of profit); financial information under the Standard & Poor’s brand (44%, 76%); and the media division which includes BusinessWeek magazine and four TV stations (16%, 3%). McGraw-Hill’s specialized information products and databases are ideally suited for the Internet, and it is rapidly expanding its online services. Electronic distribution speeds up delivery and cuts costs for postage and paper, while its mainly subscription based services gives it predictable revenue streams. In 2006, McGraw-Hill’s profits before one-time items grew 12.3%, to $2.56 a share (total $939.3 million) from $2.28 a share ($872.3 million) in 2005. The company began expensing stock option costs in 2006, which cut its earnings by $0.23 a share. Revenue grew 5%, to $6.3 billion from $6.0 billion....

DOW JONES & CO. INC. $34 (New York symbol DJ; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 83.8 million; Market cap: $2.8 billion; WSSF Rating: Above average) publishes The Wall Street Journal, which is the second most widely read newspaper in the United States. It also publishes Barron’s magazine, and over 20 smaller newspapers. Dow Jones recently redesigned The Wall Street Journal to make it easier to read, and added more general interest features to expand its appeal beyond its traditional readership and advertisers. The company also shrank the width of the paper, which cuts its newsprint and delivery costs by roughly $18 million a year. Other cost cutting initiatives will save it $46 million a year. Thanks to these moves, earnings before restructuring costs and other unusual items rose 13.3% in 2006, to $1.11 a share (total $92.6 million) from $0.98 a share ($81.8 million) in 2005. Revenue grew 6.6%, to $1.78 billion from $1.67 billion....

GANNETT CO. INC. $56 (New York symbol GCI; Conservative Growth Portfolio; Shares outstanding: 234.9 million; Market cap: $13.2 billion; WSSF Rating: Above average) publishes 90 daily newspapers in 38 states, including USA Today, the nation’s most widely read newspaper. Other operations include over 1,000 non-daily community newspapers, and 23 TV stations. Gannett also owns 17 daily papers and over 300 non-dailies in the UK. Gannett’s broad array of newspapers gives its Internet operations an edge over other news sites. In fact, its web sites accounted for about 15% of the U.S. Internet audience in January. The company now plans to expand its online content by taking better advantage of the news gathering capabilities of its newspapers and TV stations. It will also look for acquisitions that enhance its web sites, such as last year’s purchase of a company that specializes in mobile phone search services....

CANADIAN UTILITIES LTD. (Toronto symbols CU $42 (Class A) and CU.X $42 (Class B); Income Portfolio, Utilities sector; Shares outstanding: 125.4 million; Market cap: $5.3 billion; SI Rating: Above average) is a leading supplier of natural gas and electricity in Alberta. It has 970,000 gas customers, and 216,000 electricity customers. It also operates power plants in other parts of Canada, as well as in the UK and Australia. ATCO Ltd. controls about 74% of the company’s class B voting common shares. In the past few years, Canadian Utilities has sold many of its unregulated operations. That hurts its growth prospects, but also limits its overall risk. It now gets about half of its revenue and income from regulated operations....

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 110.9 million; Market cap: $2.2 billion; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, with 470,000 customers. It also provides power to 115,000 customers in Bangor, Maine. Right now, the company gets over 80% of its income from its main Nova Scotia Power subsidiary. Through acquisitions and investments, Emera eventually aims to cut this to 65%. For example, the company plans to invest $350 million in a new pipeline that will transport natural gas from a planned liquefied natural gas terminal in Saint John, New Brunswick to markets in Canada and the Northeastern United States. Emera also recently paid $22 million U.S. for a 19% stake in the main electrical utility on the Caribbean island of St. Lucia....

FORTIS INC. $27 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 104.9 million; Market cap: $2.8 billion; SI Rating: Above average) operates electrical power plants in Atlantic Canada, Ontario, Alberta and British Columbia. It also invests in power utilities in the United States and the Caribbean region, and owns hotels and commercial real estate. In 2006, the company earned $1.37 a share (total $148.8 million), up 10.5% from $1.24 a share ($137.1 million) in 2005 (the 2005 earnings included an unusual $7.9 million after-tax gain). Most of the higher earnings came from strong growth at its regulated power plants in Western Canada and the Caribbean. Revenue rose 2.1%, to $1.47 billion from $1.44 billion. In the past few years, Fortis has used acquisitions to geographically diversify its operations. Its latest purchase is the regulated gas distribution business of Terasen Inc. (formerly called BC Gas), which supplies gas to over 900,000 customers in British Columbia....

IVY CANADIAN FUND $30.79 (CWA Rating: Conservative) invests in high-quality, large capitalization stocks. The $4.4 billion fund’s top holdings include Shoppers Drug Mart, United Parcel Service, Manulife Financial, Danaher Corporation, Reckitt Benckister plc, Bank of Nova Scotia, Bank of Montreal, Thomson Corporation, Diageo plc and PepsiCo. Ivy Canadian’s breakdown by industry is: Consumer staples, 26.5%; Financials, 17.8%; Industrials, 14.8%; Consumer discretionary, 9.6%; Energy, 3.1%; Utilities, 3.1%; Information technology, 1.4%; and Health care, 1.1%....

IVY EUROPEAN FUND $14.61 (CWA Rating: Aggressive) holds mostly good quality stocks, although it has underperformed the benchmark Morgan Stanley indexes. We don’t see any reason to hold a mutual fund that concentrates in Europe. If you want European exposure, consider Ivy Foreign Equity Fund, or the closed-end European Equity Fund. Ivy European Fund is a sell.

IVY ENTERPRISE FUND $4.78 invests in smaller and medium-sized companies. The $220.1 million fund has an MER of 2.42%. The fund’s overall choice of stocks doesn’t inspire our confidence. Its top holdings are Winpak, Richie Brothers Auctioneers, Daktronics Inc., Resources Connection, Idexx Laboratories, Astral Media, Canadian Western Bank, Brown & Brown, Henry Schein and Stratasys Inc. We think investors can do better by buying some of the other small-cap funds we recommend in Canadian Wealth Advisor. ...

IVY FOREIGN EQUITY FUND $30.39 (CWA Rating: Conservative) outperformed the Morgan Stanley benchmark international index over the last 10 years. The fund gained 8.6%, and that was better than the Morgan Stanley benchmark’s gain of 6.7%. Ivy Foreign Equity Fund made 21.3% over the last year. The fund invests in companies based outside of Canada, but cuts risk by avoiding direct investment in emerging markets. Ivy Foreign Equity is one of our top foreign fund recommendations. Still, we think non-U.S. international funds should make up at most 10% of the holdings of a conservative investor. The fund’s top 10 holdings are Reckitt Benckister plc (UK household & healthcare products), Danaher Corp. (U.S. control products and tools), Essilor International SA (corrective eyewear), Henry Schein Inc., (U.S. healthcare), PepsiCo (U.S. food & beverage), William Demant (hearing health products), United Parcel Service (U.S. express carrier, Diageo plc (UK alcoholic drinks) and Ecolab Inc. (U.S. maintenance & cleaning products). The fund holds 42.1% of its assets in the U.S., 14.7% in the UK, 12.9% in France, 5.6% in Denmark, 5.0% in Canada and 3.0% in Switzerland....

IVY GROWTH AND INCOME FUND $23.87 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 7.5% annually for the 10 years. It made 10.2% over the last year. The fund’s MER is 2.14%. The fund’s top stock holdings are Shoppers Drug Mart, PepsiCo, Omnicom Group (U.S. media services), Bank of Nova Scotia, Danaher Corp. (U.S. control products and tools), Reckitt Benckiser plc (UK household & healthcare products), Thomson Corp., Manulife Financial and United Parcel Service. This $3.5 billion fund holds 21% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, and some of their principal besides....

H&R REAL ESTATE INVESTMENT TRUST $25.75 (Toronto symbol HR.UN; SI Rating: Extra risk) holds interests in 34 office properties, 115 single-tenant industrial properties and 143 retail properties. Over half are in the Greater Toronto Area. The rest are elsewhere in Ontario, in Quebec, western Canada and the U.S. H&R aims to acquire only properties that it can lease long-term to creditworthy tenants. It now has an industry-leading portfolio occupancy rate of 99.6%. Revenue in the three months ended December 31, 2006 was $151.1 million, up 21.4% from $124.4 million a year earlier. Cash flow per unit fell 2.3%, to $0.43 from $0.44. H&R’s units now yield 5.3%....

CANADIAN REIT $32.98 (Toronto symbol REF.UN; SI Rating: Extra Risk) owns a portfolio of more than 140 income properties consisting of retail, industrial and office properties across Canada and in the Chicago, Illinois area. The company’s portfolio contains more than 19.1 million square feet of space.

CREIT’s revenue in the three months ended December 31, 2006 was $71.8 million, up 13.4% from $63.3 million a year earlier. Cash flow per unit was unchanged at $0.49. The units now yield 3.9%.

CREIT focuses on acquiring properties in prime locations, usually near major metropolitan centres, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income.

Canadian REIT is a buy.

RIOCAN REAL ESTATE INVESTMENT TRUST $26.61 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.6 billion, consisting of ownership interests in a portfolio of 206 retail properties across Canada, including nine under development. These properties contain over 52.1 million square feet of leasable area. RioCan’s revenue in the three months ended December 31, 2006 was $151.2 million, up 8.8% from $138.9 million a year earlier. Cash flow per unit rose 14.7%, to $0.39 from $0.34. Portfolio occupancy is at an all-time high of 97.7%. RioCan’s annual distribution of $1.32 gives it a current yield of 5.0%. RioCan is still a buy.

GREAT-WEST LIFECO $36.20 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $210.6 billion in assets under administration. The company also provides wealth management and other financial services. It also operates in the U.S. and Europe. Power Financial controls about 75% of Great-West. Great-West’s earnings in the three months ended December 31, 2006 rose 4.9%, to $491 million or $0.55 a share from $456 million or $0.51. Revenues rose 29.7%, to $8.5 billion from $6.5 billion. Great-West recently raised its quarterly payout by 6.3%, to $0.255 from $0.24. It now yields 2.8%. Great-West has agreed to buy U.S.-based investment management firm and mutual fund company Putnam Investments Trust for $3.9 billion U.S. The deal also gives Great-West a 25% stake in Thomas H. Lee Partners, a private equity firm. It will more than double Great-West’s assets under administration....

MANULIFE FINANCIAL $39.22 (Toronto symbol MFC; SI Rating: Above-average) sells life and other forms of insurance, as well as mutual funds and investment management services. It operates in 19 countries and territories worldwide. Manulife has assets under administration of $414 billion, up 11.4% from $371.5 billion at the end of 2005. In the three months ended December 31, 2006. Manulife’s earnings rose 14%, to $1.1 billion or $0.70 a share, from $908 million or $0.56 a share a year earlier. Revenue rose 9.5%, to $9.2 billion from $8.4 billion. The shares yield 1.8%. Manulife’s operations are well diversified among life and health insurance, segregated mutual funds, and reinsurance. Its geographic diversification in the U.S. and Asia, including China, offers growth prospects....

SUN LIFE FINANCIAL $50.54 (Toronto symbol SLF; SI Rating: Above-average) offers savings, retirement, pension and life and health insurance products and services to individuals and corporations. The company operates mainly in Canada, the U.S. and the UK, and also in Asia and India. It has assets under administration of $436.5 billion. In the three months ended December 31. 2006, Sun Life’s earnings rose 14%, to $545 million or $0.95 a share, from $478 million or $0.82 a share a year earlier. Revenue rose 15%, to $6.1 billion from $5.3 billion a year earlier. The company recently raised its quarterly dividend by 6.7%, to $0.32 from $0.30. The shares now yield 2.4%. Sun Life is still a buy.