38 — Sunday, February 14, 1999 — North Shore News Pervez H. Patel and Andrew W.S. Donald -, Contributing Writer COMPARISONS of RRSP and non-RRSP investments sometimes conceal an essential truth — while a non- RRSP investment can literally be made in anything under the sun, in the case of a RRSP, we have a 20% maximum foreign con- tent limit. Stated differently: at least 80% of your RRSP should be in what are labelled as accepr- able Canadian content securi- tics — usually Canadian stocks, bonds or mutual funds. The distinction gains more relevance in the light of the pathetic performance of Canadian equities in recent years and particularly in 1998 vis-a-vis their international counterparts. Fund = companies in Canada have been pretty innovative in devising ways to get around the foreign con- tent rule. The first measure was maximizing the foreign con- tent in a Canadian content fund or a fund cligible for the 80% limit. Thus a Canadian equity fund could have 20% of the cost of its investments in international equitics. This would theoretically stretch the forcign content limit to 36% — i.e. 20% plus (20% of 80%). Of course if the foreign content of the fund appreciated more than its Canadian content, you could end up with more than even 36%. Some funds like AIM GT Canada Growth Class Fund have in fact made it part of their mandate to invest in for- cign securities, stating their “..intention is to invest a minimum of 15% of its assets in foreign equity securities based on original cost.” The next frontier for fund companies was to form 100% RRSP eligible products which reflected international rather than Canadian market perfor- mance. This was done by hav- ing 80% of the find invested in money market securities, which provided the asset backing for a basket of inter- national securities. The remaining 20% of the fund was of course, directly invested in international secu- rities. There is a certain lack of flexibility that this process brings — the basket of securi- ties cannot be altered fre- quently because of the cost involved in the process of alteration. Assuming that the fund style of investing is long term, this is hardly a disadvantage. In fact, 1998 was the year, when some of these 100% eli- gible “foreign” funds provid- ed dramatically better returns that their pur laine Canadian counterparts. In 1998, the CLI. International Balanced RRSP fund achieved a 16.05% rotal return compared to a 7.48% return on the C.I, Canadian Balanced fund of the same family. Finally, we have a rather Narrow window of opportuni- ty for the neat two veary. Thanks to some of the more prominent fund compa- nies like Templeton embrac- ing the segregated fund con- cept, it is now possible over the next two years to have a professionally managed and well known “foreign” segre- gated fund as 100% of the RRSP. This is because technically every segregated fund is regarded as a Canadian con- tent fund, and though the authorities have clamped down on this beyond the next two years, it makes good sense for the present, to take full advantage of this legiti- mate loophole available to us. The segregated fund docs come with an additional cost in terms of a higher manage- ment fee — usually about 0.5%. However, given that inter- national securities consider- ably outperform Canadian securities over any reasonable duration of time, this cost is not significant in the ieast. — Pervez H. Patel and Andrew WS. Donald are with Canadian Investment Consultants and can be reached at 436-3556. | SERVICE «|Income tax preparation * Money back guarantee Refund within 24 hrs* ¢ Convenient hours © FREE electronic filing ¢Senior discount 15% © Year round service 232 Lonsdale Ave., North Vancouver 990-7707 *Avnilable with Tax Refund/Discounting Service at participating locations (Tax Refund less a prescribed government fee) HOW TO AVOID JFIVE CRITICAL RRSP MISTAKES & 4) Plus Simple Strategies to Maximize the Power of Your RRSP Is your RRSP really safe? How much do you need to save for retirement? What are the best tools for the job? How do you maximize foreign content? Where are the best RRSP opportunities? Knowing the RRSP mistakes to evade can mean the difference between financial security and ruin. Maximize the full potential of your RRSP. Call (604) 899-0829 for a recorded message and order a FREE REPORT: Five Critical RRSP Mistakes to Avoid. Web Site: www.TFPgroup.com This information is most appropriate for B.C. residents with a high income or a minimum $100,000 in RRSPs. FA THE Coto WE’RE staying home more ... § In 1986, the average Canadian household spent $1,685 in restaurants -—— in 1996, that dropped to $1,513. @ In 1986, 34% of Canadian house- holds owned microwaves — in 1996, 85% did. Mi In 1986, the average household spent $594 per year on telephone services — in 1996 it spent $707. B In 1986, the average houschold spent $141 on cable — in 1996 it spent $254. Source: Statistics Canad: Glad to be of Service Geiting fron where you are today to where you want to he doesn’t just happen. It takes a carefully planned investment portfolic. Your North Shore Investment Services Team This kind of planning requires personalized attention, the kind of attention you'll receive from your North Shore investment Services Team. iva Dietrich, CFP Edgemont Village Branch tel: 983-7952 As a member of the HSBC Group, we can offer you global expertise through our network of over 5,500 offices in 81 countries and territories. That means you can take advantage of a full range of investment products and services as well as traditional banking services. Heather Brandy, CFP Stella Tong North Vancouver Branch tel: 903-7021/7022 Tom Ronneng, CFA West Vancouver Branch tel: 922-3311 HSBC yy For a personal appointment, call us today!