LID SLAMMED DOWN ON AGGRESSIVE CHARITIES

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  If you’ve been tempted by one of those “charities” that claims you’ll get a tax receipt for a lot more money than you donate, I have bad news for you. On Friday, the federal government slammed down the lid on this proliferating mini-industry with a bang. As of 6 p.m. that day (Dec. 5) it appears they have been effectively put out of business.

Finance Minister John Manley announced that the Income Tax Act will be amended to prohibit the issuing of tax receipts for donated property that in amounts that are in excess of the purchase price of the goods, if they were acquired within the past three years. In other words, you can only claim your out-of-pocket cost, nothing more.

In the past couple of years, several organizations have appeared that offer people the opportunity to buy items such as comic books, trading cards, and art at “wholesale” prices. These are then donated to a charity at a higher valuation and the donor receives a tax receipt that may be several times the amount actually given.

We warned about the dangers of these plans in this newsletter last year. Since then, Canada Customs and Revenue has taken a hard line in dealing with them. Some 5,000 taxpayers have been reassessed to date and another 5,000 audits are in progress.

Despite this, I have received numerous e-mails this year from people who are intrigued by the idea. One was even under the mistaken impression that I endorsed these plans! In fact, I have been concerned from the start that they were too aggressive and have advised extreme caution.

Mr. Manley’s proposed amendments must be passed by Parliament, which could take some time. So, technically, these plans are still legal. However, when the amendments become law, as they likely will, they will be retroactive to Friday. This is the same way in which Budget changes are handled.

There will be a few exceptions to the tougher rules, including publicly-traded securities, certified cultural property, ecological gifts, and Canadian real estate. Also, items you have owned more than three years are not affected, which will be good news to charities that raise money through rare wine auctions.

None of this should dissuade you from donating to legitimate charities, and I encourage you to do so before Dec. 31 if you want to get a 2003 tax receipt. Just don’t expect to be able to claim for more than you give.

MY FAVOURITE CHARITY

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  Since we’re on the subject of year-end charitable donations, I’d like to put in a plug for one that I support and am actively involved with.

I was diagnosed with a form of neck cancer in 1997. I went through two major operations and a prolonged course of radiation treatment at Toronto’s world-famous Princess Margaret Hospital. During that difficult period, I came to understand a great deal about this complex illness and I continue to learn more as a member of the Head and Neck Cancer Team of the Princess Margaret Hospital Foundation. One of the most important things I have discovered is that leading-edge technology already exists that can increase the survival rate for certain types of cancer and greatly improve the quality of life for many of those who beat the disease.

The problem is that the equipment is expensive and money is short. Government budgets can stretch only so far. If we are going to be able to offer the best possible treatment to cancer victims, the rest of the money must come from us, you and me. That’s why I am personally making the bulk of my charitable donations this year to a program with the unwieldy name of Intensity Modulated Radiation Therapy (IMRT) and Biologically Adapted Radiation Therapy (BART) Clinical and Research Programs at Princess Margaret Hospital/Ontario Cancer Institute (PMH/OCI).

It’s not the name that matters. It’s what this project can do. Your money will be used to help purchase leading-edge equipment that allows radiation beams to be much more accurately tailored to the tumour while sparing surrounding normal tissues. The positive implications are enormous for patients with specific types of cancer, including head, neck, and prostate tumours.

If you would like to participate with me, please send a donation to the High Precision Radiation Therapy Research Fund at The Princess Margaret Hospital Foundation. You may address it to: High Precision Radiation Therapy Research Fund, c/o The Princess Margaret Hospital Foundation, 610 University Avenue, Toronto, ON M5G 2M9. Their phone number if you would like more information is 416-946-6560.

PRAISE FROM THE GLOBE AND MAIL

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  We were greatly honoured when Globe and Mail columnist Rob Carrick selected two of our newsletters among his top five picks for Canadian investment letters.

In the issue of Nov. 22, he named the Internet Wealth Builder and The Income Investor as good choices for those seeking “reliable, unbiased advice”.

The Internet Wealth Builder was the first one we launched, way back in 1996 when the Internet was in its infancy. It is delivered weekly (44 times a year) by e-mail and covers all aspects of investing, from stocks to debentures. The newsletter also contains strategic advice from some of Canada’s top experts. You can find more details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=467

The Income Investor is our most recent creation. It was started in April and is designed to provide advice on securities that offer a combination of above-average yield and below-average risk for investors who want more cash flow than they can get from GICs or money funds. It is primarily delivered by e-mail but a print edition sent by mail is also available at a higher price. Details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=466 If you would like to read Rob Carrick’s article in its entirety, go to: http://www.globeinvestor.com/servlet/ArticleNews/story/GAM/20031122/STMAIN22

THREE MUTUAL FUNDS YOU SHOULD LOOK AT

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  We recently added three funds new funds to the Recommended List of our Mutual Funds Update newsletter, which you may want to look at. However, it is important to note that not all of these funds will be suitable to every investor. They each add a different dimension to a portfolio, but in some cases with added risk as well, so be sure to discuss them with a financial advisor before making a decision. Here are the newcomers.

Sprott Gold and Precious Minerals Fund. Precious metals funds are notoriously volatile and anyone who is risk-averse will be uncomfortable with the big price swings they can produce. That said, gold has been a hot commodity over the past couple of years and big moves always attract attention. So I am recommending this fund, with the caveat that it is high-risk and is not suitable for inclusion in registered plans. The decision to include this fund was made easier by a recent announcement from Sprott Asset Management that the minimum initial investment required for entry has been reduced to $5,000 (it was previously $25,000).

This is one of the top performers in the Precious Metals category, with a one-year gain of 103.4% (to Oct. 31). The fund is managed by John Embry, who for years ran the highly successful RBC Precious Metals Fund. Despite his departure last winter, the RBC fund also continues to do well, with a one-year gain of 117.6%, tops in the category. The Sprott fund has outpaced it over the past six months, but if you prefer a no-load choice or don’t have $5,000 handy, it is a great alternative.

This is a relatively new fund, having been in operation only since the fall of 2001. However, the Sprott team has plenty of experience in the gold sector and with Embry at the helm they have the best precious metals manager in the business.

There are no load charges if you buy your units directly from Sprott. However, you must hold the units for at least six months or face a 3% early withdrawal penalty.

Burgeonvest Hirsch Opportunistic Canadian Growth Fund. Throughout the bear market, we placed our emphasis on value funds, which historically have proven to be more effective at preserving capital in difficult times. However, when stock markets rise growth-oriented funds usually fare better than value funds. This is one of the top performers, managed by veteran Veronika Hirsch.

The fund has above-average returns over all time frames and the risk level is only slightly higher than average for the Canadian Equity category as a whole and better than that of the S&P/TSX Composite Index. The one-year gain to Oct. 31 was 41.8% and the fund proved to be quite resilient during the 2000-2002 bear market. You can buy units through investment advisors.

TD Monthly Income Fund. All of the big banks now offer some type of monthly income fund. This one has emerged as the best of the bunch and we have raised its rating to a top $$$$ level in the 2004 Buyer’s Guide to Mutual Funds. (The book can be purchased on-line at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=436 )

This is a consistent, low-risk performer that pays monthly distributions of 4c a unit. It’s a fund that fits perfectly into a RRIF or a conservative RRSP. The one-year gain was 20.4% and the fund shows a three-year average annual compound rate of return of 12.4%, which means that it fared well in the bear market. It is available on a no-load basis at any TD branch.

DON’T PASS ON BONDS

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  Many people have written to ask whether they should avoid bonds and bond funds given the possibility that interest rates will rise in 2004. The answer is no, but you need to understand how to invest properly in these securities. Read my comments at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=1687

EUROPEAN OUTLOOK BLEAK

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  Are there any European mutual funds in your portfolio? If so, you’ll want to read Tom Slee’s assessment of the prospects for the European Community in 2004. Tom is a contributing editor to the Internet Wealth Builder newsletter and holds both CFA and CGA designations. You will find the article at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=1678

SAVE $20 ON OUR PLATINUM PACKAGE

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  As one of our Holiday Specials this year, we’re offering $20 off the already low price of our Platinum Package. This is the cheapest way to subscribe to a variety of our newsletters and services, including the Internet Wealth Builder, The Income Investor, and Mutual Funds Update. You’ll find details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=381

If you’re only interested in Mutual Funds Update, we have a 15% off special that will last until the end of the month. Details at: http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=471

That wraps up this edition. On behalf of all of us at Buildingwealth.ca, our best wishes for a safe, healthy, and happy holiday season. We’ll see you in January.