investment trusts

GUARDIAN MONTHLY HIGH INCOME II FUND $15.14 (CWA Rating: Income) (GGOF Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668-5613; Web site: www.ggof.com. Available from brokers) emphasizes more stable real estate investment trusts (REITs), and high-quality, long-lived resource trusts. We still think investors should diversify carefully with trusts, and emphasize those with stable cash flows, a low need for capital expenditures and mature business operations. The $1.0 billion fund’s top holdings are: Canadian Oil Sands Trust, RioCan REIT, Alta- Gas Income Trust, ARC Energy, Cominar REIT, Yellow Pages Income Fund, Vermilion Energy Trust, Bonavista Energy Trust, Enerplus Resources Fund and BFI Canada Income Fund....

SWISS HELVETIA FUND $17.44 (New York symbol SWZ; CWA Rating: Conservative) invests mainly in large-capitalization Swiss stocks. The manager of the fund is Hottinger Group, which, as Banque Hottinger, dates back to 1786. The Swiss economy has picked up lately, despite slower growth in the U.S., one of Switzerland’s largest markets. Switzerland’s growth rate is now forecast at 2.5% this year, just under its 2.6% growth in 2006. Still, a longer-term recovery in the U.S. will help the export-oriented Swiss economy even further. The fund’s top holdings are Roche Holdings (pharmaceuticals) at 12.2%; Nestle SA (food & beverages), 11.6%; UBS AG (banking), 10.4%; Novartis AG (health care and pharmaceuticals), 8.1%; Basilea Pharaceutica (biopharma), 6.5%; Actelion NV (Swiss biopharma), 5.3%; Credit Suisse Group (financial services), 5.3%; Galenica Holding (Swiss pharma), 4.8%; Julius Baer (Swiss-based private bank), 3.4%; and Syngenta AG (agribusiness), 3.3%....

Real Estate Investment Trusts (REITs) have moved down lately, largely due to rising interest rates. Higher real estate and construction costs could also slow the expansion plans of some REITs. We still advise against overindulging in REITs. But if you stick with the highest quality, like the REITs we recommend on this page, you should make attractive long-term returns with low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $22.30 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has 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....

Real Estate Investment Trusts (REITs) dropped in price last November when Ottawa announced that it will impose a tax on income trust distributions in 2011. However, REITs were exempt from the prosposed new tax, and all of our REIT recommendations went on to reach new all-time highs. We advise against overindulging in REITs. But if you stick with the highest quality, like the REITs we recommend on this page, you should make attractive long-term returns with low risk. 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....

ISHARES CDN REIT SECTOR INDEX FUND $17.55 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT in the value of the S&P/TSX Capped REIT Index is limited to 25%. RioCan REIT makes up 23.7% of the index’s value; H&R REIT, 14.5%; Boardwalk REIT, 9.2%; Calloway REIT, 8.5%; Canadian REIT, 8.4%; Dundee REIT, 6.1%; Chartwell Seniors Housing REIT, 5.6%; Canadian Apartment Properties REIT, 5.6%; Primaris Retail REIT, 5.0%; Extendicare REIT, 4.6%; Legacy Hotels, 4.1%; and Innvest REIT, 3.6%. We’ve glad to see that the top holding is RioCan, one of our favorite REITs. In fact, three of the top five holdings are among our recommendations. Note that iShares REIT holds a couple of REITs we don’t recommend....

SWISS HELVETIA FUND $20.07 (New York symbol SWZ; CWA Rating: Conservative) invests mainly in large-capitalization Swiss stocks. The manager of the fund is Hottinger Group, which, as Banque Hottinger, dates back to 1786. The Swiss economy has slowed lately, along with the U.S., one of Switzerland’s largest markets. Switzerland’s growth rate may slow to 1.5% this year, after growing at 3.0% in 2006. Still, a longer-term recovery in the U.S. will help the export-oriented Swiss economy, particularly if it stimulates growth in Europe, its largest market. The fund’s top holdings are Roche Holdings (pharmaceuticals) at 13.3%; Nestle SA (food & beverages), 12.5%; Novartis AG (health care and pharmaceuticals), 11.8%; UBS AG (banking), 9.9%; Basilea Pharaceutica (biopharmaceuticals), 5.1%; Credit Suisse Group (financial services), 4.8%; Actelion NV (Swiss biopharmaceutical), 4.5%; BKW FMB Energie (Swiss electricity generator), 4.4%; Galenica Holding (Swiss pharmaceuticals), 3.8%; and Julius Baer (Swiss-based private bank), 3.4%....

High quality Real Estate Investment Trusts, or REITs, are among the most stable of the royalty and investment trusts. That’s because they own nondepleting assets, and can lock in lease rates and financing costs for long terms. Investors are also aware of the takeover prospects for REITs these days. That’s not reason enough alone to buy them, but it’s a plus. The REITs we recommend hold top-quality assets. In contrast, many other types of trusts hold lowquality assets in volatile industries such as resources and commodities, sugar production or restaurants. These trusts expose holders to hidden business risks that could have a sudden, devastating effect on their cash flow and yields....

ISHARES CDN REIT SECTOR INDEX FUND $14.78 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT, in terms of market capitalization (unit price times units outstanding), is limited to 25%. RioCan REIT makes up 24.1% of the index’s value; H&R REIT, 13.6%; Summit REIT, 10.8%; Calloway REIT, 9.1%; Boardwalk REIT, 8.4%; Canadian REIT, 7.8%; Canadian Apartment Properties REIT, 5.3%; Chartwell Seniors Housing REIT, 4.8%; Primaris Retail REIT, 4.8%; Legacy Hotels, 4.1%; Innvest REIT, 3.8%; and Retirement Residences REIT, 3.5%. We’ve glad to see that the top holding is RioCan, one of our favorite REITs. In fact, four of the top six holdings are among our recommendations. Note that iShares REIT holds a couple of REITs we don’t recommend....

Income trusts as a group are more speculative than most investors realize. They carry a lot of hidden risk, due to the way they are organized as investments, and to the way they are valued by investors. Share prices of many companies rise in price when they announce plans to convert into income trusts. But that leaves a lot of room for share prices to fall when business conditions weaken. Income trusts are generally set up to hand out most of their cash flow to their investors. However, that often leaves them with no reserves to carry them through a period of slow sales and falling asset values....

GUARDIAN MONTHLY HIGH INCOME II FUND $16.06 (CWA Rating: Income) (GGOF Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668- 5613; Web site: www.ggof.com. Available from brokers) emphasizes more stable real estate investment trusts (REITs), and high-quality, long-lived resource trusts. We think investors should diversify carefully with trusts, and emphasize those with stable cash flows, a low need for capital expenditures and mature business operations. The $1.3 billion fund’s top holdings are: ARC Energy Trust, Canadian Oil Sands Trust, Rio- Can REIT, Canadian REIT, Yellow Pages Income Fund, Enerplus Resources Fund, Penn West Energy Trust, Peyto Energy Trust and BFI Canada Income Fund....