BCE Inc.

BCE INC. $40.46 (Toronto symbol BCE; SI Rating: Above-Average) earned $0.56 a share excluding one-time items in the three months ended June 30, 2007, up 3.7% from $0.54 a year earlier. Revenue rose 1.6%, to $4.44 billion from $4.37 billion. BCE has accepted a $42.75-a-share all-cash takeover offer from a group led by the Ontario Teachers’ Pension Plan. The difference between the takeover price and today’s trading price reflects the possibility that the deal could fall through. However, we see this as unlikely, since the Ontario Teachers’ group has secured financing commitments from several banks. So, despite rising interest rates, the group should be able to go through with the transaction, probably in the first quarter of 2008....

RBC CANADIAN DIVIDEND FUND $49.82 (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 43.8% of its portfolio in Financial services stocks. It has a further 16.9% in Energy stocks and 8.1% in Materials. The $8.9 billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Manulife Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Bank of Montreal, BCE Inc. and Suncor Energy. Over the last five years, RBC Canadian Dividend Fund has posted a 15.8% annual rate of return. That’s less than the S&P/TSX’s gain of 18.4% over the same period....

BMO DIVIDEND FUND $50.82 (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 57.3% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 13.3% and Consumer discretionary at 6.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Alcan, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.9 billion BMO Dividend Fund has posted a 15.3% annual rate of return. That’s under the S&P/TSX’s gain of 18.4%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund gained 15.4% over the last year, compared to a gain of 20.1% for the S&P/TSX index. BMO Dividend’s MER is 1.73%....

BMO Dividend and RBC Canadian Dividend hold mostly high-quality stocks. These stocks sometimes run into trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, 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 these funds won’t overly concentrate your holdings in the financial sector....

BCE INC. $39 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 804.7 million; Market cap; $31.4 billion; SI Rating: Above average) has moved down since it accepted a $42.75-a-share takeover offer from a private group led by the Ontario Teachers’ Pension Plan. That’s partly due to concerns that the group may have trouble borrowing the cash it needs for the purchase. However, the group has already secured financing deals with several banks. BCE has also suspended its stock buyback program, which has put pressure on the stock. Assuming shareholders accept the offer at a special meeting on September 21, 2007, and communication regulators also approve, the group aims to complete the transaction in early 2008. Meanwhile, BCE will continue to pay quarterly dividends of $0.365 a share (3.7% yield)....

UNIVERSAL CANADIAN GROWTH FUND $24 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. Web site: www.mackenziefinancial.com. 1-800-387-0780; Load fund — available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Top holdings include BCE Inc., Canadian National Railway, BorgWarner (U.S. auto parts & equipment) Industrial Alliance Insurance, Manulife Financial, Cognos Inc., Shoppers Drug Mart, EnCana Corporation, Martinrea International and Nova Chemicals. The fund’s breakdown by economic sector is as follows: 24.1% in Consumer discretionary, 15.3% in Financials, 11.9% in Industrials, 8.3% in Energy, 5.1% in Health Care, 4.9% in Telecommunications Services, 4.7% in Information technology and 4.6% in Consumer staples....

TRANSALTA CORP. $29.89 (Toronto symbol TA; SI Rating: Average) jumped as high as $32.36 in July on speculation that the company may follow BCE and Alcan as a takeover target. Luminus Management, a New York-based private equity firm, now owns 6.7% of TransAlta. The recent stock market setback may make it harder for a potential buyer to raise debt and/or equity financing for a takeover. But while a sale is far from certain, takeover interest helps draw attention to TransAlta’s improving outlook and balance sheet (debt is down to 110% of shareholders’ equity from 180% at the end of 2001). Meanwhile, the stock yields 3.4%. TransAlta is still a buy.

TRANSALTA CORP. $29 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 202.6 million; Market cap: $6.1 billion; SI Rating: Average) has gained 15% since late June due to growing speculation that the company may follow BCE and Alcan as a takeover target. Luminus Management, a New York-based private equity firm, now owns 6.7% of TransAlta. TransAlta has done a good job of cleaning up its balance sheet in the past few years. It cut long-term debt from 1.8 times equity in 2001 to a more manageable 1.1 times at the end of 2006. A strong balance sheet makes it easier for a private equity buyer to finance a takeover with new debt. TransAlta’s strong cash flow would also make it easier for new owners to pay down the extra debt. While a sale is far from certain, it helps draw attention to TransAlta’s improving outlook. Meanwhile, the $1.00 dividend yields 3.4%....

SCOTIA CANADIAN GROWTH FUND $72.43 (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 see as investments that have the potential for above-average growth. The $614.0 million Scotia Canadian Growth Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Goldcorp, Nexen, Bank of Montreal, BCE Inc., Bank of Nova Scotia and Alcan. Scotia Canadian Growth currently holds 31% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 22%....

CIBC CANADIAN EQUITY FUND $27.77 (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 $662.8 million fund’s top holdings are Petro- Canada, EnCana, Manulife Financial, Teck Cominco, Bank of Nova Scotia, TD Bank, Canadian National Railway, Brookfield Asset Management, BCE Inc. and Alcan. CIBC Canadian Equity holds 38% of its portfolio in Financial services stocks and 25% in Energy stocks....