royal bank

FIDELITY CANADIAN LARGE CAP FUND $26.81 (CWA Rating: Conservative) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mostly in large-sized firms like those on the S&P/TSE Index, although it may also invest in small and mid-cap stocks. The top holdings of this $396.2 million fund are Bank of Nova Scotia, Canadian Natural Resources, EnCana Corporation, Cameco Corporation, Suncor Energy, Manulife Financial, Royal Bank of Canada, ING Canada, Bank of Montreal and TD Bank. The fund is diversified by industry sector as follows: 39.5% in Financials, 21.2% in Energy, 11.1% in Materials, 6.4% in Industrials, 4.7% in Consumer discretionary, 3.7% in Health care, and 3.6% in Information technology....

IUNITS DIVIDEND INDEX FUND $20.50 (Toronto symbol XDV; buy or sell through a broker) began trading in December, 2005. The fund currently holds the 30 highest yielding Canadian stocks. These stocks are included in the index based on their proportionate dividend-per-share weight. The weight of any one stock in the fund is limited to 10% of the fund’s assets. The fund’s MER is 0.50%. The fund will have a dividend yield of about 3.3%. The fund’s top holdings are CIBC at 7.3%; Manitoba Telecom, 6.4%; Royal Bank, 7.2%; Bank of Montreal, 5.5%; National Bank, 4.8%; TD Bank, 4.7%; Magna International, 4.2%; IGM Financial, 3.7%; Bank of Nova Scotia, 3.9%; and BCE, 3.4%. iUnits Dividend Index Fund is a buy. If you buy it, however, you should adjust your portfolio to offset its over 50% weighting in the Finance sector.

RIOCAN REAL ESTATE INVESTMENT TRUST $23.07 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.2 billion consisting of ownership interests in a portfolio of 201 retail properties across Canada, including 14 under development. These properties contain over 50 million square feet of gross leasable area. RioCan is Canada’s largest owner of neighbourhood shopping centres. These are enclosed malls in smaller urban centres. But where it’s showing the strongest growth is as the largest owner of ‘New Format’ malls. These are in the suburbs of larger cities, and are made up largely of ‘Big Box’ stores with lots of parking and room for new building. RioCan’s revenue in the three months ended September 30, 2005 was $149.8 million, up 8.6% from $138 million a year earlier. Cash flow per unit fell 3.3%, to $0.29 from $0.30. RioCan’s annual distribution of $1.29 gives it a current yield of 5.6%....

RBC CANADIAN EQUITY FUND $24.09 (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 Montreal, Bank of Nova Scotia, Royal Bank, EnCana Corporation, Petro- Canada, CN Railway, Suncor Energy and Manulife Financial. The $4.1 billion fund is reasonably well-balanced by industry sector. But it does hold a relatively high 31.7% of its holdings in Financial stocks. These stocks will benefit as the economy continues to recover, and it’s hard to match the big-five banks’ record of consistent earnings and dividend growth. But if you hold this fund, remember to adjust your overall portfolio to reflect the addition of a large Financial services component....

TD CANADIAN EQUITY FUND $29.13 (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, EnCana, TD Bank, Petro-Canada, Rogers Communications, Bank of Nova Scotia, Falconbridge and Valero Energy.

The $2.4 billion fund currently holds about 31.8% of its portfolio in Financial services shares....

Many bank-run funds share common faults: they are run by committees and anonymous bank employees who produce mediocre results, yet they charge high fees. Here, however, are two big funds run by individual managers that hold the kind of conservative, well-balanced portfolios of high quality stocks we like. Each has its quirks, but overall they are well positioned for low-risk returns. TD CANADIAN EQUITY FUND $29.13 (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, EnCana, TD Bank, Petro-Canada, Rogers Communications, Bank of Nova Scotia, Falconbridge and Valero Energy....

ROYAL BANK OF CANADA $88 (Toronto symbol RY; SI Rating: Above average) is the largest of Canada’s big five banks, with total assets of $469.5 billion. In its fourth fiscal quarter ended October 31, 2005, Royal set aside $591 million to cover possible lawsuit settlements related to its involvement with U.S. energy trader Enron Corp. It also set aside $203 million more to cover costs at its U.S. insurance operations related to three major hurricanes. These charges cut Royal’s net income from continuing operations in the fourth quarter by 21.9%, to $0.82 a share (total $543 million) from $1.05 ($687 million) a year earlier. If you disregard all unusual charges, per-share earnings grew 18.3%, to $1.68 from $1.42. Revenue rose 4.3%, to $4.8 billion from $4.6 billion....

Bank stocks have been among the market’s top performers in the past few years — as they have for the past few decades. Now some investors worry that rising interest rates will hurt their loan growth, and that the banks’ loan losses will rebound to the long-term average from their recent lows. That may happen, and bank stocks may face a setback. But banks always face these kinds of risk, while still providing top long-term returns. Meanwhile, in the past five years, Canadian banks have increased their share of Canada’s mutual fund market from 25% to 35%. This and other sources of growth will continue to expand their appeal. We still feel all Canadian investors should aim to own two or three of the top five banks. We like all five, particularly now that Ottawa plans to cut taxes on dividends....