1) The New Budget and proposed Changes
2) An exclusive interview with Aim Trimark Income and Growth Fund manager, Geoff MacDonald

Friends, If you need to make a last minute RRSP contribution or arrange a loan at prime email us or call us direct at (416)-644-7700. The deadline is Tuesday March 1st.

Highlights of the Federal Budget 2005.

The Federal Budget of February 23, 2005 included several measures that will impact Canadians and their advisors relative to their investment and financial planning. A summary of the talking points follows.

Foreign Content Limits

The 30% limit on foreign content in registered plans has been removed immediately. This will allow individuals to invest globally in the RRSP and RRIF accounts without the necessity of using RSP-clone funds. This means you can eliminate having clone funds in your portfolio. The clone funds come with a higher management fee, putting more money in your pocket. It also means you should re-visit your RRSP portfolio and discuss new allocation percentages.

Editors note - it\\'s about time this took place.

2) Registered Retirement Savings Plans Contribution Limits

The current limit of $16,500 for 2005 and $18,000 for 2006 remain unchanged under the new Budget. The new limits will increase in future years, namely $19,000 in 2007, $20,000 in 2008, $21,000 in 2009 and $22,000 in 2010, with indexation beginning in 2011. This is a minor change, as indexation was scheduled for 2007. Defined benefit pension plans are rising as well, from $2,000 in 2005 to $2,444 by 2009.

Editors note - for you high earners, this is a huge win. Don\\\\'t blow your contributions on the Porche 911 (Turbo charged, of course).

3) Qualified RRSP and RRIF Investments

Rules governing what is acceptable as a �qualified� RRSP/RRIF investment are proposed to expand to include investment grade gold and silver bullion, coins, bars and certificates.

Editors note - Don\\\\'t start melting down your cufflinks with the idea of parking them in your self directed RRSP. Commodities have done well in the past year. However, commodities are cyclical and may even be considered spiking at this point. That being said, the government wants to increase the types of investments availalbe to you. And Mr. Martin wants your vote too.

4) Federal Life Income Funds

Individuals who were members of a federally-regulated pension plan leaves his or her employer, the commuted value of the pension fund can be transferred to a locked-in RRSP, or left intact in the pension plan. If the choice is the locked-in plan, then at age 69 the plan can be used to purchase an annuity from a life insurance company, or convert to a Life Income Fund (LIF) account. Before yesterday�s budget, the LIF had to be converted to an annuity at the time the individual reached age 80. This requirement is now eliminated, so clients who are in this decision process in 2005 now have the option of leaving their funds in the LIF and continuing take withdrawals as they have done.

Editors note - no comment.

Interest Deductibility

A proposal to limit the deductibility of interest on funds used to invest was to have been effective January 1, 2005. This budget does not clarify the proposed legislation as it relates to restrictions based on �reasonable expectation of profit�. An alternative proposal is being worked on and will be released later in 2005. In the meantime, the rules for interest deductibility remain unchanged � borrowing to invest with the expectation of generating taxable income.

Editors note - Let\'s hope they leave this one alone. With higher RRSP limits, people are going to get creamed with taxes when they withdrawl at 69. Non Registered investing (with a deductible interest charge) is the way to go in many cases.

RESP changes

The proposal in the budget is to change rules for single beneficiary Registered Education Savings Plans (RESP) in relation to disabled beneficiaries. In this proposal, contributions can continue for 25 years (up from 21 years), and the RESP can continue for 30 years (up from 25 years) from the date the RESP was established.

In addition, on October 8, 2004, the Government of Canada tabled legislation in the House of Commons, to create a new Canada Education Savings Act.

The purpose of this proposed Act is to encourage families to set up a Registered Education Savings Plan (RESP). The Canada Learning Bond will provide $500 to children born on or after January 1, 2004 in families entitled to the National Child Benefit (NCB) supplement for the child, followed by up to 15 annual $100 entitlements for each year the family is entitled to the NCB supplement for the child.

The legislation will also double the Canada Education Savings Grant from 20 to 40 percent on the first $500 of RESP contributions each year for families with a net income of $35,000 or less. The Bill will also increase the CESG from 20 to 30 percent on the first $500 of RESP contributions per year for families with a qualifying net income greater than $35,000 but not exceeding $70,000. While the Canada Learning Bond will benefit children born on or after January 1, 2004, all eligible children in low- and middle-income families stand to benefit from the improved CESG match rates effective on January 1, 2005.

Editors note - RESP\\\\'s are the best way to go if you are hell driven to send your kid to college / university. Even with the 20 % CESG, it\'s a great deal. For the lower income households, it\'s even better.

CDIC Coverage

The budget proposes an increase to the amount of insurance available under the Canada Deposit Insurance Corporation. Current rules allow bank deposits, term deposits of five years or less and savings accounts, etc. coverage of up to $60,000 per individual account. This coverage is proposed to rise to $100,000. Mutual funds are not covered under CDIC and this fact sometimes affects the investment decisions of risk-averse investors.

Editor\'s note - This may be an issue to watch for in future discussions.

Reduction in Corporate Income Taxes

Under the proposals, Corporate Income Tax Rates will be reduced from 21% to 20.5% effective January 2008, and to eliminate the 4% corporate surtax by 2008. This proposal does not change any corporate planning for years prior to 2008.

Taxation of Income Trusts The Government will be conducting consultation sessions related to taxation of income trusts and flow-through entities such as limited partnerships.

Editors note - Tpical government. Let\'s form a committee to have a discussion to form another committee and discuss the committee that is in the discussion...blah blah blah.

Ok, that\'s the Budget. As discussed, it\\\\'s got a little something for everyone. Even Stephen Harper was pleased!

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Financialmentor.ca recently had the opportunity to interview Geoff MacDonald, MBA, CFA, Vice President, Aim Trimark Geoff is the lead manager for the Aim Trimark Income and Growth Fund. Geoff shared with us his exclusive thoughts on this very well managed balanced fund.

Financialmentor.ca (FM): Geoff, What is the mandate of the Trimark Income and Growth Fund?

Geoff Macdonald (GM): Trimark Income Growth Fund seeks to generate capital growth and income over the long term. The Fund invests primarily in Canadian equities, fixed-income securities of Canadian issuers, both government and corporate, and foreign equities and fixed-income securities up to the maximum allowable foreign content limit.

Top 10 Holdings as of Dec 31, 2004

1. The Bank of Nova Scotia
2. BCE Inc.
3. Molson Inc., Class A
4. Manitoba Telecom Services Inc.
5. Govt of Canada, 5.75% , due Jun 1, 2029
6. Power Corp of Cda
7. Govt of Canada, 8.00% , due Jun 1, 2027
8. Royal Bank of Canada
9. The Toronto-Dominion Bank
10. Onex Corp

FM: How are the investments selected? Process?

GM: The Trimark investment team takes the view of �business people buying businesses� in managing investors� assets. In selecting securities for the Fund the portfolio manager focuses on companies that are leaders in their respective industries. Selected companies must exhibit financial strength and profitability through their relatively low debt to equity ratio, strong working capital ratio, strong long-term return on equity and profit margins and positive free cash flow generation. In addition, companies must also offer future growth potential through their ability to generate new products, to establish new markets and to create market share growth. A great deal of importance is placed on a company�s management, as the manager seeks experienced and reputable management that are focused on growing the business and increasing shareholder value.

The portfolio manager completes his own fundamental company research to develop a deep understanding of the economics and characteristics of the business and its industry as well as any sustainable competitive advantages it may possess. He applies independent thinking and judgment to connect different pieces of information to develop a proprietary view on how a company will grow in the future. The analysis includes a meticulous study of a company�s financial statements and a thorough evaluation of the profitability and competitiveness of the industry in which the company operates.

Before investing the manager will also meet with the company�s management teams. This helps to better understand the vision and corporate strategy of a company and to ensure management is capable of delivering results and is focused on growing the business and increasing shareholder value. After establishing a position in a company, the manager will continue to challenge the validity of his view and the assumptions that were used in building the financial models. This requires him to constantly test his thesis by following the company and the industry it is in, and meeting with its management team to determine if the company is delivering the expected results. The manager does not pay attention to short-term market volatility. As long as the proprietary view is still intact and he still has a high level of conviction, he will maintain or build on positions in a company.

FM: Geoff, the Income and Growth fund currently holds 27% in govt bonds. Why? And can you change this and if so, to what amount can you increase your holdings to equities?

GM: Currently approximately 35%-40% of the portfolio is invested in fixed-income securities. The fixed income portion of the Fund is patterned after Trimark Canadian Bond Fund. At the end of December 2004, 35% of Trimark Canadian Bond Fund was invested in corporate bonds which equated to a 10% weight within Trimark Income Growth Fund. This corporate bond allocation is down slightly from the last couple of years where it neared 45%, as it has become more difficult to find securities at attractive valuations. However, it should be noted that the allocation to government bonds also includes higher-yielding government securities such as provincial bonds and mortgage-backed securities.

Generally speaking, the long-term equity/fixed-income split is around 60%/40%. However, the allocation decision is driven by the equity manager and is based on the portfolio management team�s view of where the best relative value is available in the market place. It is entirely a bottom-up decision. If better opportunities are potentially available among equity securities, then the equity weight will trend higher. If good opportunities in equities are scarce relative to fixed-income then bond weightings will trend upwards. Historically, the equity allocation has ranged from around 70% on the higher end to around 50% on the lower end.

Explanation of two purchases

Two recent purchases Ross Stores Inc. Molson Inc.

Company description

Ross Stores Inc. operates a national chain of off-price retail apparel stores. The stores offer brand-name apparel, apparel-related merchandise for the entire family, fragrances, gift items, and linens for the home.Ross Stores Inc. offers brand-name clothing at discounts as high as 50% versus department stores.

Molson Inc. operates breweries across Canada, and in Brazil, and the United States. The Company holds a 49.9% interest in the Coors Canada partnership, and owns a 50.1% interest in Molson USA, which markets and distributes the Molson brands in the United States.

Why invest in Ross Stores?

1. Market leadership- The second largest off-price apparel retailer in the U.S, with 22% market share of off-price industry.- One of two retailers that dominate the industry � Ross Stores & TJ Maxx 2. Growth prospects- Ross has a durable business model that is highly transportable across regions.- Opportunity to expand in U.S. and globally. Potential to increase store base by 50%- Better growth prospects than major competitor. TJ Maxx already operates 2000 stores in 47 states; Ross operates 600 stores in only 28 states.3. Valuation- Despite favorable growth characteristics for Ross, compared to TJ Maxx, both trading at same valuation (13-14x 2005P/E).- Factors affecting short-term financial results are temporary issues - provided opportunity for purchase.

Why invest in Molson\'s?

1. Market leadership- Molson is Canada�s largest brewer and one of the world�s leading brewers of quality beer. A global brewer, Molson has Cdn$3.5 billion in gross annual sales.2. A Proprietary view- Molson is a leader in the industry and has demonstrated that it is a stable free cash flows business.- CEO Dan O�Neill has established a good track record the prior 4 years generating a lot of shareholder value.- The manager took a proprietary view on the company in January 2004 as the stock sold off 14% to $30 after announcing a weak quarter due to its Brazilian operations. The manager valued the stock between $38-40, and realized that at $30, the market had discounted out all growth in the Brazilian market. The Fund would participate in any growth in the Brazilian market for free. 3. Valuation- The manager stepped in at a time when the market was irrationally fearful and bought a great company with great management at a point of adversity. Molson Inc. has since become one of the biggest weights in the portfolio despite us having bought almost our entire position in January.

FM: How do you forecast the economy on a go forward basis? How do you see this fund performing?

GM: We do not make economic forecasts or predict fund performance.

FM: Are you concerned about the markets ie. A recession.

GM: We take a bottom-up perspective in our investing philosophy. At Trimark, managers take the perspective that they are �business people buying businesses.� Our discipline is focused on searching for high-quality businesses with great management teams that are available at attractive prices. Regardless of economic conditions, this discipline remains the same. As well, economic downturns or recessions have historically proven to be great buying opportunities to acquire strong businesses at very attractive prices.

Currently, there are few bargains available in the markets, however we feel very good about the stocks we do own in the portfolio.

FM: What is the tax efficiency of this fund like?

GM: Investment decisions are not based primarily on tax considerations. The manager is aware of the fund�s tax position as year-end approaches. If he is considering exiting a position at year-end he will execute the trade in December if it offers the fund a potential tax benefit.

FM: Why should someone invest in this fund?

GM: Above all else, the primary reason someone would invest in this fund is to take advantage of our disciplined approach to investing. Many fund managers, under pressure to compete with short-term performance pressures versus their peers, drift from their original approach and inevitably attempt to engage in momentum investing by investing in the latest hottest trends or sectors. We pride ourselves on never wavering from our discipline. Our ability to create proprietary views on companies through extensive research and just plain hard work and having the patience to wait for attractive prices before buying is definitely a competitive advantage that investors might be interested in.

Aside from our investing discipline, the main advantages of the Fund are (a) the equity allocation of the portfolio is concentrated on the manager�s best ideas, diversified by business idea as opposed to competitors� funds that are so broadly diversified they have little chance of outperforming the index; (b) the fund benefits from a high level of foreign holdings within the equity component which exposes the investor to sectors and businesses not available in Canada; (c) the foreign equity content has a small-to-mid cap focus which historically has been shown to deliver superior long-term returns; (d) the Trimark fixed income team has an outstanding track record with Rex Chong one of the most highly regarded fixed income managers in the industry and (e) the fund has a lower than average MER.

Trimark Income Growth Fund also was recognized as Best Canadian Balanced Fund in both 2001 and 2002 at the Canadian Mutual Fund Awards.

FM: Geoff, what is your overall market commentary:

GM: The Fund returned 13.86% for the year ended December 31, 2004 as compared to 7.67% for the median Canadian balanced fund*. Over five years, annual compound returns were 11.74% for the Fund versus the median* return of 4.36%.

Two thousand and four was full of surprises. The biggest surprise was the strength of the market. In my commentary from last year, I talked about how easy 2003 was for making money in the market. I was convinced that 2004 wouldn�t be such an easy �walk in the park,� as I described it. Although not quite as easy as 2003, 2004 was once again a decent year for making money for our unit-holders. The number of winners in the S&P/TSX outpaced losers by a 2:1 margin in 2004!

We are often asked to name the contributors and detractors to the Fund for the year. Usually it is an easy task (�here are the top five contributors and here are the bottom five detractors to performance for the year�). Doing so this year won�t tell the whole story. Let me explain�..

Most Canadian funds for 2004 would have been helped by big weights in oil and gas - the TSX Energy Sector Index was up 30% in 2004. The fund�s oil & gas holdings this year were insignificant Most Canadian funds for 2004 may have found foreign holdings dragging on performance given the rise in the Canadian dollar. Trimark Income Growth Fund�s foreign equity holdings (which have been 27-29% of the Fund�s equity portion all year) were actually up over 20% even with the currency drag.

In terms of individual contributors and detractors, there were 33 names that contributed at least 10 basis points (bps) to the yearly performance and only one stock that detracted more than 10 bps from performance. This ratio should not be expected to be replicated in the future.

What I hope I highlighted is that even by missing (and missing it bad) the wonderful performance in the oil and gas sector, the Fund wasn�t hurt. Of course it could have done better, but it wasn�t hurt. And exposing unit-holders to such a large �currency risk� (and at a bad time to do so!) didn�t seem to matter even though people were complaining all year about the rising Canadian dollar.

The purpose of the above is to highlight that investing is about buying companies. It�s not about getting the right sector, or predicting currency movements. If you can find the right companies, with the right managers, and purchase them at a reasonable price, everything else will simply turn to noise.

Going forward, the Fund is positioned in high-quality companies that were purchased for reasonable prices. However, given the lack of great opportunities, disregard for risk in the marketplace and overvaluation (or at best, fair valuation) of most asset classes, it is more difficult today than any time during the past five years to find great new purchases for the Fund. Thus, the significant performance the Fund has had these past couple years should not be expected to be duplicated in the immediate future. I remain enthusiastic that the Fund remains much better positioned than the market, but the market has become less and less attractive.

Regarding fixed income, corporate bonds generated relative out-performance, driven by robust corporate profits. Throughout 2004, the Fund�s corporate bond weighting was approximately 35% of the fixed-income portfolio. The Fund�s asset mix remained relatively unchanged during 2004. The asset mix at the end of 2004 was 57% equities, 38% fixed income and 5% cash.

With bond yields at such low levels, we maintained a cautious approach in 2004. We remain optimistic that broader credit risk remains in check and may even continue to recede moderately. However, tight credit spread valuations suggest price risk is mounting. Individual credit selection will become increasingly important. On this front, our portfolio management discipline remains unchanged.

FM: Geoff � thank-you for your thoughts and feedback. We appreciate the opportunity to have you enlighten our readers about your well managed portfolio.

GM: John - it�s my pleasure.

Please note that the views shared by Geoff MacDonald are simply his opinion. We are not endorsing this product nor do we recieve a compensation for placing this article about the Aim Trimark. This interview was strictly informational.