Key Market Facts

December 31, 2003

Level YTD Indices     S&P 500 1,111.92 26.38% DJIA 10,453.92 25.32% S&P/TSX 8,220.88 24.28% Currencies / Commodities CAD / US 1.2952 -17.70% US / EURO 1.2533 19.51% Gold $US 416.70 19.67% Crude Oil $US 32.52 4.23% Natural Gas $US 6.189 29.23% Interest Rates Canadian Bank Rate 3.00% 0.00 Canadian Prime Rate 4.50% 0.00 Fed Funds Rate 1.00% -0.25 Us Prime Rate 4.00% -0.25

2003 was a very different year for the markets when compared to 2002. In 2002, the aftermath of terrorism and the number of corporate scandals and bankruptcies took its toll on investors. In 2003, however, despite a number of global events including the Iraqi War, SARS, mad cow disease and the blackout back east, the equity markets managed to return a very strong overall performance. To follow is a brief summary of the past year. The new year is a time for past reflection and future planning, the time to evaluate your current investment strategy, goals, objectives and risk tolerance to ensure that your existing financial plan is still current.

Equity Markets rose sharply across the board in 2003. The Standard & Poors Index (SPX), the Dow Jones Industrial Average (INDU) and the Toronto Stock Exchange (TSE) respectively returned 26.4%, 25.3% and 24.2% for the year (excluding dividends). These are strong returns when compared with their historical fifteen-year annual average compounded rates of return of 12.0%, 11.2% and 6.20% respectively.

Improved company valuations, strong corporate earnings and a resurgence of investor confidence were the main contributing factors to these high returns. 2004 will continue to provide investors with positive returns, however, due to elevated valuations and the expectation of higher interest rates in the US for the second half of 2004, performance will be closer to average historical levels.

Income Trusts were again one of the best performing group of equities in Canada in 2003. I have recommend a select group of securities from this sector for the past four years and I still believe that they have a place in all equity portfolios. Although the amount you invest in income trusts will vary from client to client depending on your income needs and risk tolerance levels, I believe a minimum of 15% should be considered.

It is becoming more and more difficult to select income trusts for first time buyers however there are a few very good quality trusts that I would still purchase cautiously in today's market. As an indication of their strength, I have provided you with the 2003 returns (including distributions) for each of the income trusts recommended in the August 31, 2002 Markets @ A Glance. In total, I currently closely follow 20 of these securities, however depending on the timing you may only own 5-6 of them.

Currencies, specifically the relationship between the US dollar and other global currencies, including the Canadian dollar, made a significant move in 2003. The US dollar depreciated relative to all major currencies. Against the Euro it fell 16.3% and against the Canadiann dollar it fell 17.7%.

The US, in a successful attempt at stimulating their economy allowed the dollar to fall. This made US production more competitive in the global market place, reduced some of the excess capacity in the US manufacturing sector and provided a significant amount of liquidity in their market. All of this contributed to the strong growth in US GDP. Although we may still see some additional weakening of the US dollar in the short-term, once interest rates start to move up in the US, we will see a reversal of the current trend. The last time the Canadian dollar was at these levels was August 1993.

Interest Rates on bonds in general went down slightly in Canada in 2003 and up slightly in the US. The bank of Canada increased and decreased short tem rates netting the change to zero and leaving the Canadian bank rate at 3.0% for 2003.

The US Federal Reserve reduced short tem rates once by 25 basis points in 2003. The Fed Funds rate is currently at 1.00%. I expect the US to start increasing short term rate in the second half of 2004 however in Canada, given the strength of the dollar and its affect on exports, I believe we will see one additional cut of 25 basis points in the Canadian bank rate.

Commodity Prices should remain strong in 2004 specifically in energy and mining. Although I believe that oil and gas prices will fall marginally as winter unwinds, I believe that everyone should hold 10-20% of their equity portfolio in this sector. With increasing economic growth will come the fear of inflation, which tends to help the mining sector. Reducing North American dependence on middle-east oil will also play an important role in the prosperity of the oil and gas sector.

Living Benefits Part III - Long Term Care

There are three types of Living Benefits: Critical Illness, Disability and Long Term Care. In the previous two issues I wrote about the first two of these three products, critical illness and disability insurance. In this issue I will look at Long Term Care.

Long Term Care is the newest type of Living Benefit. It provides you with a daily benefit to pay for additional health care once you are no longer able to take care of yourself. The funds can be used to cover the cost of either home visits from a qualified individual or a room at a public or private care facility.

The costs associated with long term care can be quite excessive. A private care facility typically cost $3,000 - $6,000 per month. Full time care in the home can cost over $100,000 per year. More and more, the burden of the cost for caring for yourself or an older family member is increasing, so we should be prepared for it.

With a maximum benefit of $300 per day, individuals can receive up to $110,000 tax free per year to cover the cost of care. These policies have a return of premium benefit option so that if you never use this insurance during your lifetime the premiums are paid out to your beneficiary upon your death.

Long Term Care insurance removes the financial burden of your care from your portfolio and from your family. Please contact me directly at 604 257-7055 if you have any interest in this product or would like additional information

Did You Know?

It is very important to us to know how we are doing and whether the amount of servicing and advice you are receiving on your account is adequate for you. Are you receiving enough communication from our office either from myself directly, my newsletters, seminars or my associate? Would you like to see additional seminars? What topics do you find most useful to cover? Is the frequency of your portfolio review adequate? Enclosed with this newsletter is a questionnaire, which addresses all of these questions. Here is your chance to let us know how we are doing. Please fax or mail back your completed questionnaire. Thank you and Happy New Year!

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