Canadian Money Saver July 11, 2005:

Over the past year or two the commodity sector has been a very rewarding area to be invested in Canada. The only draw back has been the level of volatility that has accompanied the move higher. The mining and oil& gas sectors have traditionally been more volatile than the broad market. Investors who are unwilling to accept this higher level of price movement have other sectors that can be utilized.

The financial services sector in Canada has been a very rewarding area to be invested over the long term. The sector includes banks, insurance and fund management companies. The sector is dominated by the big five banks, Bank of Nova Scotia (BNS), Bank of Montreal (BMO), CIBC (CM), TD Bank (TD) and the Royal Bank (RY) and the two large insurance companies Manulife Financial Corporation (MFC) and Sun Life Financial Inc (SLF).

All of the major banks in Canada have diversified in to other sectors adding products and services outside of the traditional deposit and lending businesses. The banks now offer a wide array of services including mutual funds, investment and insurance brokerage. The banks have also diversified geographically by expanding into the US, Europe and Asia. The increased diversification has created global financial services companies with predicable and growing incomes.

For investors with a low tolerance for price volatility and a long term investment time frame the Canadian banks offer good potential on a total return basis. The combination of capital appreciation and dividend income has historically rewarded the patient investor.

Using the Bank of Nova Scotia as an example, if an investor had purchased 100 shares of the Bank of Nova Scotia on July 12, 2000 the cost would have been $3545.00 they would now hold 200 shares with a total value of $8284.00 and the dividend income would have increased from $100.00 annually to $272.00 over the five year period.

Over the five year period the shares increased in price from $35.45 ($17.725 after taking into account a 2 for 1 split in April 2004) to $41.42 today or 133.84% over five years. On July 12, 2000 the shares paid an annual dividend of $1.00 per share. The annual dividend increased each year in 2001 to $1.24 per share, 2002 to $1.45, 2003 to $1.68 in 2004 the shares split 2 for 1 and the dividend increased to $1.20 per share post split ($2.40 pre-split) and to $1.36 for 2005.

The other major banks have had a similar track record over the long term with a history of increasing dividends and increased profitability leading to higher shares prices.

Of the smaller regional banks the Canadian Western Bank (CWB) has an excellent track record of growth and increased dividends. The company operates mainly in Alberta and British Columbia two of the strongest growing provincial economies.

Canadian Western Bank recently purchased an insurance company that operates under the Canadian Direct Insurance brand this subsidiary has proven to be an excellent addition to the traditional banking business.

The Bank recently announced second quarter results reporting a 23% increase in net income to $12.1 million and record revenues of $44.6 million. Canadian Western Bank has consistently increase revenues and net income over the past five years which has allowed the bank to increase the annual dividend from 18 cents to 40 cents per share in that time.

This well managed regional bank continues to offer excellent potential for income and capital growth.

The major insurance companies offer excellent potential for growth and increased income as well. The insurance industry in Canada went through a major change in 1999 when all of the insurance companies changed their ownership structure from mutual or policy holder to shareholder. This change allowed a much broader ownership and allowed increased access to capital. Since the change the insurance industry has been expanding and diversifying globally.

Manulife Financial Corporation (MFC) is now one of the largest financial services companies in Canada offering insurance and wealth management services. Manulife operates in Canada, the USA, and Asia.

Manulife purchased John Hancock a US wealth management company in April 2004 and significantly increased its presence in the US market. Manulife now manages over $350 billion as compared to $163 billion before the John Hancock purchase. The integration of John Hancock into Manulife is going well and should be completed by the end of 2005. The opportunities for increased growth due to a much larger distribution system in the US are only just starting to be realized.

The company has been aggressively expanding in Asia and recently announced that it had received approval from the China Insurance Regulatory Commission for offices in Hangzhou this will be the 8th city in China and Manulife excepts to have offices in 10 cities by the end of the year. There is excellent growth potential in Asia and the company appears well positioned to capitalize on the opportunity.

The company recently reported first quarter earnings of $801 million with earnings per share of $1.04 a 13% increase over the first quarter of 2004. The company increased the quarterly dividend by 15% to 30 cents per share from 26 cents reflecting the higher earnings potential.

Manulife is a well managed globally diversified financial powerhouse that should continue to reward investors over the long term