asset management

INDIA FUND $44 (New York symbol IFN; CWA Rating: Aggressive) invests mainly in largecapitalization Indian stocks. The manager of the fund is Oppenheimer Asset Management. India Fund is being helped by strong growth in the Indian economy, and by relatively low inflation and interest rates. The government encourages foreign investment, and has boosted infrastructure spending and rural development, and cut taxes. India will likely report growth in its economy of 8.3% in 2006. Growth in 2007 is forecast at 7.3%. We still like the long-term outlook for Indian stocks. The fund now sells for a 2% premium above the value of its assets. That’s not unreasonable given India’s rapid growth rate....

TD CANADIAN EQUITY FUND $30.40 (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 Bank of Nova Scotia, Suncor Energy, Royal Bank, TD Bank, Rogers Communications, Canadian Oil Sands Trust, CN Railway, Tim Hortons, Canadian Natural Resources and Teck Cominco. The $2.9 billion fund currently holds about 28.0% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 21.7% of its holdings in that sector....

Here are five large funds run by each of Canada’s big-five banks. Each holds the kind of conservative, well-balanced portfolios of high quality stocks we like. All five have a high weighting in Financial services and Energy stocks. However, they stick with high-quality issues with sound fundamentals, so these concentrations don’t add a lot of risk. Each has its quirks, but overall they are well positioned for low-risk returns. TD CANADIAN EQUITY FUND $30.40 (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 Bank of Nova Scotia, Suncor Energy, Royal Bank, TD Bank, Rogers Communications, Canadian Oil Sands Trust, CN Railway, Tim Hortons, Canadian Natural Resources and Teck Cominco....

BANK OF AMERICA CORP. $53 (New York symbol BAC; Income Portfolio, Finance sector; Shares outstanding: 4.5 billion; Market cap: $238.5 billion; WSSF Rating: Above average) is the second-largest bank in the United States by assets, after Citigroup. The company has used big acquisitions to expand in the past few years. In 2004, it acquired FleetBoston Financial for $47.3 billion in cash and stock. In 2006, it paid $34.6 billion in cash and stock for credit card specialist MBNA Corp. It recently agreed to pay $3.3 billion for U.S. Trust Corporation, which provides asset management to high net worth clients. The company aims to complete this purchase in the first quarter of 2007. Growth by acquisition can be a source of risk. But these purchases increased Bank of America’s presence in markets that it would probably never reach through internal growth....

Bank stocks have been among our top performers in the past few years, as an improving economy and low interest rates spurred strong demand for loans. Many banks have used their strong earnings to make acquisitions. Their bigger size gives them access to new clients and economies of scale. (However, a bigger market cap also limits the possibility of a takeover by a domestic or foreign competitor.) Although higher interest rates have slowed their earnings growth and increased the potential for loan write-offs, their prospects remain strong. Cost cuts and growing fee income will also help offset any drop in lending. Investors should aim to own one or two of these four banks. We like all four, but Bank of America is our top choice for new buying....

AIC DIVERSIFIED CANADA FUND $46.74 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds stocks of some U.S. firms. The $1.7 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Loblaw, Thomson Corp., Brookfield Asset Management, Royal Bank, Manulife Financial and Royal Bank of Scotland. The fund holds just 23 stocks. The fund holds 47.8% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 19.4%; Energy, 8.6%; Consumer discretionary, 7.6%; and Health care, 5.5%....

These two AIC funds hold much of their portfolios in financial services stocks. We prefer diversified funds. But if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so they won’t overly concentrate your stock and mutual fund holdings in the financial sector. AIC AMERICAN ADVANTAGE FUND $8.21 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks, with over 99% of assets in the financial services area....

Starting in 2011, Ottawa will impose a tax on income trust distributions that will put the income trusts on an equal tax footing with conventional taxable corporations. Trusts will pay a 31.5% tax on distributions to unit holders, so your cash flow from those trusts will fall by the same amount. However, if you hold trusts outside of registered plans such as RRSPs and RRIFs, you will not see a large change in your after-tax position — even though the distributions you receive will likely drop by 31.5%. That’s because the distributions will now be taxed as dividends and Canadians will benefit from the lower tax rates provided by the combination of the dividend tax credit and the dividend gross-up (foreigners don’t quality for the favourable dividend treatment). For example, in Ontario, investors in the top tax bracket now end up with about $536 after tax on each $1,000 of trust income. Under the new tax proposals, investors holding trusts outside of RRSPs will end up with about $532 after tax. The difference is roughly similar for the other provinces....

GREAT LAKES HYDRO INCOME FUND $19.08 Toronto symbol GLH.UN; SI Rating: Extra Risk) owns 26 hydroelectric generating stations located on seven river systems in four distinct geographic regions: Quebec, Ontario, British Columbia and New England. Its facilities have 1,015 megawatts of generating capacity. In the three months ended September 30, 2006, Great Lakes’ revenues rose 19.3%, to $37.7 million from $31.6 million. Cash flow per share rose 31.8%, to $0.29 from $0.22. Strong rainfall and improved operating performance boosted the fund’s power generation throughout its operating systems. Great Lakes is 50.1% owned by Brookfield Asset Management (formerly Brascan). That enhances its ability to raise capital. Great Lakes raised its monthly distribution twice last year. It now yields 6.6%....

TD SCIENCE & TECHNOLOGY FUND $15.37 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W1P9. 1-800-461-3863; Web site: www.tdcanadatrust.com. No load — deal directly with the company) invests mostly in U.S. firms. The fund’s gain over the last year was 7.8%. The Nasdaq index rose 6.5%. The $135.5 million fund’s manager is well-respected U.S. mutual fund manager T. Rowe Price Associates. Its MER is 2.79%. TD Science & Technology’s top holdings include: Microsoft, 5.1%; Juniper Networks, 3.0%; Samsung Electronics, 2.8%; Yahoo!, 2.8%; American Tower, 2.5%; Google, 2.5%; Hoya Corporation, 2.4%; Cisco Systems, 2.4%; Taiwan Semiconductor, 2.2%; and Adobe Systems, 2.1%. TD Science & Technology Fund is a buy for aggressive investors only....