Income Portfolio September 15, 2007:

The global credit market turmoil continues to cause higher than normal volatility in the bond markets around the world. The US mortgage market is in a tail spin that appears to have a lot more room on the downside. The bulk of the potential problem loans will be up for renewal and interest reset in the next 6 months or so.

The Collateralized Debt Obligation problems have spread globally and each week there is more news of a major financial institution that is on the verge of collapse due to bad investment or poor lending decisions.

The Canadian bond market has been in turmoil due to the complete collapse of liquidity in the market for Asset Backed Corporate Paper (ABCP) issued by non bank institutions. The fallout has caught a wide range of companies who are now scrambling to find short term sources of cash to replace the cash that is now tied up in these ABCP’s.

These companies may be looking for long term replacements if the so called Montreal accord goes ahead, the plan appears to be  to turn these short term obligations in to long term bonds matched to the underlying assets. The uncertainty create by the revelations in these two markets ahs caused investors to question the viability of a broadening range of investments and it will be along time before the volatility returns to more normal levels.

Stay short term and hold only Government issued bonds until the market returns to normal.

Income Portfolio September 15, 2007:

Original Cost: April 15, 2004: $200,663.00

Bond holdings:

Canadian Housing Trust 3.55% March 15, 2009, purchased April 15, 2005 at $100.66 to yield 3.40%

Government of Canada 4.25% September 24, 2009, 5.25 year bond issued by the Government of Canada. Original cost $101.80 to yield 3.91%

Preferred Shares:

Bank of Nova Scotia preferred series 12, straight preferred redeemable @$25.00 on October 29, 2013. original cost: $26.90 to yield 4.87%

PNG.PR.A: Pacific Northern Gas series A, straight preferred callable on 30 days notice @ $26.00. Original cost; $26.26 to yield 6.44%

ENB.PR.A: Enbridge preferred series A, straight preferred callable @ $25.00 on 30days notice. Original cost $25.05 to Yield: 5.49%

W.PR.H: WestCoast Energy preferred series 7, straight preferred redeemable on October 15, 2013 @ $25.00, original cost $26.71 to yield 5.17%

CPD: Claymore S&P/TSX CDN Preferred Share ETF: Holds 52 individual preferred shares with 63% of the issues from Banks and Insurance companies. MER 0.45%, Dividend yield 4.86%

Income Trust:

AW.UN: A&W Revenue Royalties Income Fund. Units receive 3% of the revenue for A&W restaurants. Original cost $11.60 to Yield: 9.3%

NPI.UN: Northland Power Income Fund owns a cogeneration power plant at Iroquois Falls Ontario. Sell power to Ontario Hydro. Original cost $11.70 to Yield: 8.62%

YLO.UN: Yellow Pages Income Fund printing and publishing of Telephone directories across Canada. Original cost $13.28 to yield 8.21%

PIF.UN: Pembina Pipeline Income Fund operates an OIL & Gas pipeline transporting from Western Canada to Eastern markets. Original cost $12.27 to Yield: 8.56%.