Mutual Funds: Best and Worst

Mutual Funds: Best and Worst

First, the good news: the bear didn't strike in 1997, although only the hard-of-hearing could have missed the growling and gnashing of teeth off in the distance. With panic sweeping through Southeast Asian financial markets and share prices zigzagging wildly on computer screens around the globe, stock market investors needed patience and steady nerves to hang in when many of the pros were advising them to sell. For holders of Canadian equity mutual funds - the basic ingredient in many investors' retirement portfolios - the reward for keeping the faith was an average 1997 return of 13.6 per cent, down sharply from 25.6 per cent in 1996, but still about three percentage points higher than the stock market's long-term historical average.

The bad news? As 1998 gets under way, the investment outlook is more uncertain than it has been in years - witness the 4.2-per-cent drop in the Toronto Stock Exchange 300 composite index since Jan. 1. Economists are still struggling to assess the full extent of the Far East crisis, but even the optimists acknowledge that it will cut deeply into demand for Canadian forestry and mining products, rendering unlikely a speedy recovery in the share prices of some of the country's biggest companies. Some analysts go much further, suggesting that the recent flurry of currency devaluations in South Korea, Thailand and other Asian-Pacific countries will hammer companies that do business in that part of the world and force North American manufacturers to compete against a flood of cheaper imports, from cars to computer parts.

If those predictions are right, Canadian investors may be in for a nasty surprise this year. If they are wrong, investors who opt to remain on the sidelines in the early months of 1998 may miss out on some screaming bargains - funds that have taken a big hit recently but could recover quickly if analysts decide that the seriousness of the Asian situation has been overblown. "The big problem, of course, is that nobody knows really what's going on in Asia and what the ultimate impact will be," says Fred Pynn, Canadian equity fund manager for Bissett & Associates Investment Management Ltd. in Calgary. That said, Pynn is worried that investors have been lulled into a false sense of security by several years of above-average gains. (The most recent bear market, commonly defined as a drop in securities prices of 15 per cent or more, lasted from January to October of 1990.) "You have to be prepared for occasional down markets," Pynn warns. "The market's been very good to people, and I think a lot of people have let their guard down."

How good has the market been? That all depends on where investors put their money, as can be seen from this year's Maclean's mutual fund rankings, calculated by BellCharts Inc., an independent Toronto-based company that analyzes fund performance. The accompanying tables show the best and worst funds in six major categories based on three different measures: the annual compound return over three years; the risk-adjusted return over three years; and the average annual return in each of the past five years. This 20-page report also includes a follow-up assessment of funds that did well in last year's rankings, a mutual fund roundtable with analysis and advice from the experts and a report on the burgeoning number of Internet sites with information of use to Canadian investors. In addition, there is a feature profile of money manager Jonathan Wellum of Burlington, Ont.-based AIC Ltd., whose controversial investment style has yielded huge gains for unit-holders throughout the recent bull market. Wellum's AIC Advantage Fund piled up an astonishing 46.1-per-cent annual compound return over the past three years, putting it at the head of the class for Canadian equity funds for the second year running.

Out of the more than 1,500 mutual funds available to Canadian investors, the charts on the following pages identify funds that have performed exceptionally well or poorly in the recent past. (The figures shown are net of all management fees and are based on total returns, including dividends, to Dec. 31, 1997.) Funds that have been in existence for less than three years were not included in the rankings. Nor do the rankings consider specialty funds, such as those that invest primarily in precious metals or resources, which tend to be more volatile than other stock-based funds and are therefore suitable mainly for experienced investors.

Experts caution, however, that a fund's history is no guarantee of future performance, a point underscored by the wide variation in the returns generated in 1997 by funds that scored highly in last year's Maclean's rankings. As well, market veterans say investors should not put money into any fund without defining their objectives and examining the fund's particular investment style. Stock-based funds, for example, are typically suitable only for people who can afford to leave their savings invested for at least four or five years. If the money is likely to be needed sooner - for retirement income, a child's education or some other purpose - the investor might be forced to sell at a time when share prices are in a slump.

In addition to the rankings of best and worst funds, this year's report includes a special listing of "best-of-class" mutual funds based on a more detailed rating system that takes into account past performance, volatility and consistency over three years. The funds that score highest according to this approach are not always the ones that have earned the highest returns. Instead, they have tended to produce returns significantly above the average on a consistent basis in the recent past given the amount of risk they took with unit-holders' money.

BellCharts president Rob Bell says the ratings are intended to assist investors in making their selections, but should only be used as a starting point. "Blindly buying a fund solely because it has a high score is fraught with danger since there is no understanding of the nature of the investment," he says. Even top-ranked funds, he adds, "will have their down periods." An investor's best strategy is often to accept those dips as inevitable "and ride them out or, even better, use them as buying opportunities."

Over the past 12 months, that is exactly what many Canadian mutual fund owners were doing. The year began with a sharp run-up in share prices on the TSE, but the fear of rising interest rates - which tend to depress corporate earnings and increase the attractiveness of low-risk fixed-income securities - kept stock market investors on edge for most of 1997. In April and again in August, major North American stock indexes drifted steadily downward, only to rebound quickly on both occasions and go on to establish new record highs. "People learned not to worry whenever the market dropped 10 per cent, because each time it bounced back again in three or four weeks," says Kim Buitenhuis, executive vice-president of Marketing Solutions, a financial services consulting firm based in Toronto.

That sentiment is clear in the results of an exclusive cross-Canada poll carried out for the magazine by Marketing Solutions. Telephone interviews were conducted between Oct. 16 and Oct. 26 with principal or joint decision-makers in a representative sample of 650 households with at least $10,000 in savings. (Results are considered accurate to within 3.9 percentage points, 19 times out of 20.) Nationally, 60 per cent of the respondents said they had money invested in mutual funds. Broken down by region, fund ownership varied from a low of 50 per cent in the Atlantic provinces to a high of 64 per cent in Ontario.

By a wide margin, respondents who invest in mutual funds said they are pleased with their decision to do so. Fifty-five per cent said they are "very satisfied" with the funds they hold, while 40 per cent are "somewhat satisfied." Only four per cent were "dissatisfied" to some degree. Similarly, 96 per cent said they are "very" or "somewhat confident" that mutual funds are the best investment for them right now. Asked how they chose the fund in which they have the largest amount of money invested, 47 per cent said they based their decision on the performance or reputation of the fund. The next largest group, 34 per cent, said they acted on the recommendation of a friend or financial adviser.

As it turned out, the poll was completed just before a sharp drop in Hong Kong share prices triggered a wave of selling on North American stock markets in late October. To find out whether that event had shaken investors' confidence, the survey's organizers conducted a series of follow-up interviews with half of the original sample. Ninety-two per cent of the respondents were aware of the dramatic fall in stock values, yet the vast majority - 94 per cent - continued to express confidence in mutual funds as their best investment.

More to the point, 50 per cent of those interviewed after the Oct. 27 market drop said they had done nothing to change their investment mix and had not sought advice about whether they should do so. A quarter of the sample said they had talked to someone who normally advises them about their investments; a similar number said they had consulted a friend who is knowledgeable about the stock market. Yet in spite of the obvious concern on the part of many investors, there was no indication of fear or panic. In fact, 17 per cent took the opportunity to put more money into mutual funds after the sudden market drop, while only three per cent decided to sell some of their funds.

Looked at one way, those results suggest that Canadian mutual fund unit-holders have taken to heart one of the fundamental rules of financial planning: focus on long-term performance objectives and ignore day-to-day swings in share prices. Buitenhuis, however, questions whether investors are psychologically prepared for a prolonged market downturn. She points to research showing that more than half of all mutual fund holders in Canada did not invest in funds prior to 1993 - and therefore have no firsthand experience of a bear market. What's more, they have been bombarded in recent years with advertisements trumpeting one-year returns of 20 or 30 per cent - sometimes more. "Remember, a lot of these people came into the market from GICs, searching for higher returns," Buitenhuis says. "I don't think they'll necessarily bolt at the first sign of trouble because GIC rates are still low. But you have to wonder how they're going to feel if we have a year in which equity returns are flat or negative."

For some, the experience would undoubtedly come as a shock. Asked to predict the market's course over the next year, 76 per cent said they thought it would rise or remain at its current level, while only 24 per cent expected it would go down. Respondents were also asked to forecast the greatest percentage decline in the stock market that is likely to occur over the next 10 years. Only seven per cent were prepared for a decline of 20 per cent or more - a figure that history would suggest is well within the realm of possibility. Forty per cent do not expect a decline of 10 per cent or more, something that over the long term has tended to happen about once a year. At the close of trading last week, for example, the TSE 300 was down 791 points, or 11 per cent, from its record close of 7,210 set on Oct. 7.

Of course, the longer the Asian crisis lasts, the more likely it is that investors will lower their expectations. Although the final numbers for December will be not be available until this week, there are signs that the flow of new money into mutual funds dropped sharply last month after a strong November. As of Nov. 30, total mutual fund assets in Canada stood at $278 billion, up from $212 billion at the start of 1997. Not only have new contributions dropped off, industry representatives say, but what money is being invested is going into more conservative bond and balanced funds, rather than Canadian and foreign equities. "There still is a flow of money into this fund, but not much," says John Weatherall, manager of Toronto Dominion Bank's Green Line Canadian Equity fund. "There are storm clouds around in financial circles, and Canadians' propensity to buy mutual funds in the short term is declining." Adds Karl Schulz, managing director of TD Asset Management Inc.: "People are moving some of their assets to more safe investments, taking out some of those very significant equity gains that they have earned over the last couple of years and rebalancing some of that back into fixed-income investments."

In much the same way, many fund managers are rebalancing their portfolios to reduce their exposure to the battered economies of Southeast Asia. In Calgary, Bissett's Pynn is tilting away from overseas exporters and looking for companies whose financial results depend mainly on domestic or U.S. sales. "The theme has changed a little bit," he says. "Five years ago, everybody was trying to find companies that exported or were multinational in nature to get money out of Canada because the situation here was so poor. Well, now it's almost the opposite. You want to find companies that have a strong domestic franchise - a Canadian Tire, for example, that could potentially benefit from problems in Asia because their import costs are going to drop." On the other hand, Pynn thinks companies such as The Seagram Company Ltd. of Montreal are in for a difficult year. "Seagram reports in U.S. dollars and that currency has been extremely strong, so any of the profits it earns outside the United States will be translated into fewer U.S. dollars."

With the overall outlook for stocks cloudy, Pynn also advises tilting investments away from equities and towards bonds, which tend to be less volatile. Bond prices drop when interest rates go up, but few analysts expect that to happen anytime soon. On the markets last week, investors were betting that the U.S. Federal Reserve board will soon lower rates to compensate for an expected slowdown in economic growth. Another factor that makes bonds appear more attractive is the perceived threat of deflation. "If there was a deflationary scare, probably the response would be to lower rates," says Pynn. Bonds, he adds, "could provide double-digit returns in 1998. The upside potential is the same as it is for stocks, with less downside risk."

It sounds simple, but as always the economic forecasts come with plenty of caveats and qualifiers. Kelly Rodgers, a private asset management consultant in Toronto, is every bit as concerned as Pynn about the potential fallout from Asia's troubles, but cautions investors not to make big bets on any one set of assumptions about the market's direction. It is much safer, she says, to maintain a balanced portfolio of stocks, bonds and fixed-income securities, while altering the mix at the margins to reflect changing market conditions. "I call it the what-if-I'm-wrong strategy," says Rodgers, president of Rodgers Investment Consulting, which provides wealth-management advice to individuals and foundations. "If you want to roll the dice, go ahead, but be aware that those 100-per-cent swings are extremely risky. You might think that bonds look conservative in '98, but what happens if you're out of the market for six months and they happen to be the wrong six months? Whether people realize it or not, those sorts of all-or-nothing moves can be extremely risky."

Risk, of course, is what every mutual fund investor would dearly love to avoid, and yet without it there is little chance of reward. The key is to manage the risk, to understand the potential hazards that lie ahead and balance them against one's financial objectives. In 1998, that means paying close attention to the turmoil in Asian markets while bearing in mind that the experts who failed to see it coming are unlikely to know in advance how the crisis will play out. Better to stick with a long-term investment strategy, one that allows mutual fund holders to sleep soundly now while quietly building a portfolio that will allow them to realize their dreams.

WHAT THE RANKINGS MEAN

Three-year annual compound return:

Annual compound return over three years to Dec. 31, 1997.

CANADIAN EQUITY

Funds that invest in shares of Canadian corporations (3 years: 153 funds; 5 years: 131 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

AIC Advantage Fund 46.1%

AIC Diversified Canada Fund 40.1

Chou RRSP Fund 29.8

Clean Environment Equity Fund 29

Bissett Canadian Equity Fund 27.7

COTE 100 REER Fund 25.9

COTE 100 EXP Fund 25.8

Associate Investors Ltd. 25.5

Phillips, Hager & North Vintage Fund 25.1

McLean Budden Pooled Canadian 24.8

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

Manulife Vista Capital Gains Growth 2 5.8

All-Canadian Capital Fund 5.75

All-Canadian Compound Fund 5.4

University Avenue Canadian Fund 5.3

Canadian Protected Fund 3.6

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

AIC Diversified Canada Fund 9.6

AIC Advantage Fund 8

Chou RRSP Fund 7.48

Associate Investors Ltd. 7.477

Ivy Canadian Fund 7.3

Clean Environment Equity Fund 7

Bissett Canadian Equity Fund 6.7

Spectrum United Canadian Investment 6.4

COTE 100 EXP Fund 6.04

Cundill Security Fund A 5.97

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

All-Canadian Capital Fund 0.2

Manulife Vista Capital Gains Growth 2 0.14

All-Canadian Compound Fund 0.1

University Avenue Canadian Fund 0

Canadian Protected Fund -0.9

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

AIC Advantage Fund 38.7%

ABC Fundamental Value Fund 37.6

Navigator Value Investment Retirement 27.6

Dynamic Canadian Growth Fund 25.3

Bissett Canadian Equity Fund 23

Clean Environment Equity Fund 22.8

AGF Growth Equity Fund Ltd. 22.5

Trans-Canada Pension Fund 21.2

Universal Future Fund 21.1

Phillips, Hager & North Vintage Fund 21

BOTTOM 5 AVERAGE 1-5 YEAR ANNUAL RETURN

University Avenue Canadian Fund 9.9

Manulife Vista Capital Gains Growth 1 9.8

Middlefield Growth Fund 9.7

Manulife Vista Cap Gains Growth 2 9

Canadian Protected Fund 6

CANADIAN SMALL CAP

Funds that invest in small and midsize corporations (3 years: 43 funds; 5 years: 23 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

Colonia Special Growth Fund 37.5%

Millennium Next Generation Fund 35.3

Bissett Small Cap Fund 30.3

Sceptre Equity Growth Fund 29.6

Guardian Enterprise Classic 29.2

Multiple Opportunities Fund 27.8

Talvest/Hyperion Small Cap Canadian Equity 27.6

20/20 RSP Aggressive Equity 26.8

Fidelity Canadian Growth Company 26.7

Quebec Growth Fund Inc. 26.5

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

CIBC Capital Appreciation Fund 12

Royal Canadian Small Cap Fund 9.5

Industrial Equity Fund Ltd. -4.2

Cambridge Growth Fund -9.1

Cambridge Special Equity -10.4

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

Ivy Enterprise Fund 10.6

Fidelity Canadian Growth Company 7.1

Bissett Small Cap Fund 6.5

Quebec Growth Fund Inc. 6.2

Millennium Next Generation Fund 6

Colonia Special Growth Fund 5.8

Sceptre Equity Growth Fund 5.5

Guardian Enterprise Classic 5.4

Talvest/Hyperion Small Cap Canadian Equity 5.2

First Canadian Special Growth 4.9

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

Lion Knowledge Industries Fund 1.5

Royal Canadian Small Cap Fund 1

Cambridge Special Equity -1.5

Industrial Equity Fund Ltd. -1.8

Cambridge Growth Fund -2.1

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

Multiple Opportunities Fund 48.3%

Bissett Small Cap Fund 39.4

Marathon Equity Fund 36.7

Sceptre Equity Growth Fund 27.4

Mawer New Canada Fund 25.3

Spectrum United Canadian Growth 23.8

Cambridge Special Equity 22

Guardian Enterprise Classic 21.7

GBC Canadian Growth Fund 21.1

Saxon Small Cap 20

BOTTOM 5

Ontario Teachers Group Growth 12.3

Industrial Equity Fund Ltd. 11.1

CIBC Capital Appreciation Fund 10.4

Royal Canadian Small Cap Fund 9.9

Cambridge Growth Fund 3.6

CANADIAN BOND

Funds that invest in bonds and other fixed-income securities (3 years: 103 funds; 5 years: 85 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

Altamira Bond Fund 18.4%

Trimark Advantage Bond Fund 15.261

Batirente-Section Obligations 15.259

Maxxum Income Fund 15.24

McLean Budden Pooled Fixed Income 15.21

Spectrum United Long-Term Bond 14.71

Green Line Canadian Bond Fund 14.706

Optimum Obligations 14.3

C.I. Canadian Bond Fund 14.2

Co-operators Fixed Income Fund 14.17

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

Manulife Cabot Diversified Bond 8.2

Clean Environment Income Fund 7.9

Trans-Canada Bond Fund 7.43

Templeton Canadian Bond Fund 7.36

Dynamic Income Fund 6.4

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

Fonds de Professionnels Bond 7.4

Atlas Canadian High Yield Bond 7.3

Navigator Canadian Income Fund 6.8

C.I. Canadian Bond Fund 6.65

Trimark Advantage Bond Fund 6.59

Mawer Canadian Income Fund 6.4

McLean Budden Pooled Fixed Income 6.14

Batirente-Section Obligations 6.101

Empire Group Bond Fund 6.096

SSQ-Obligations Canadiennes 5.8

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

Pursuit Canadian Bond Fund 2

Green Line Real Return Bond Fund 1.6

Trans-Canada Bond Fund 1.5

BPI Canadian Bond Fund 1.3

Dynamic Income Fund 1

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

Altamira Bond Fund 13.7%

Batirente-Section Obligations 11.94

McLean Budden Pooled Fixed Income 11.87

Empire Group Bond Fund 11.63

Maxxum Income Fund 11.62

Optimum Obligations 11.2

SSQ-Obligations Canadiennes 11.1

Green Line Canadian Bond Fund 11

Co-operators Fixed Income Fund 10.82

Phillips, Hager & North Bond Fund 10.8

BOTTOM 5 AVERAGE 1-5 YEAR ANNUAL RETURN

Metlife MVP Bond Fund 7

Dynamic Income Fund 6.9

BPI Canadian Bond Fund 6.7

Templeton Canadian Bond Fund 6.3

Trans-Canada Bond Fund 5.7

CANADIAN BALANCED

Funds with mixed portfolios of stocks and bonds (3 years: 131 funds; 5 years: 106 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

Fidelity Canadian Asset Allocation 23.1%

Common Sense Asset Builder III 21.8

Common Sense Asset Builder V 21.6

Common Sense Asset Builder IV 21.3

Common Sense Asset Builder II 20.9

Bissett Retirement Fund 20.7

FMOQ Investment Fund 20.5

Ivy Growth and Income Fund 20.4

Global Strategy Income Plus Fund 20.2

Sceptre Balanced Growth Fund 20.1

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

McDonald Canada Plus Fund 9.4

AIM Canadian Balanced Fund 8.9

APEX Balanced Allocation Fund 8.5

Altamira Growth & Income Fund 2.9

Cambridge Balanced Fund -5.8

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

Ivy Growth and Income Fund 9.2

Global Strategy Income Plus Fund 8

BG Private Balanced Fund 7.9

Common Sense Asset Builder V 7.38

Bissett Retirement Fund 7.37

Common Sense Asset Builder III 7.32

Common Sense Asset Builder I 7.274

Common Sense Asset Builder IV 7.265

Common Sense Asset Builder II 7.242

Atlas Canadian Balanced Fund 7

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

Acadia Balanced Fund 1.6

Greystone Managed Wealth Fund 1.4

McDonald Canada Plus Fund 1.1

Altamira Growth & Income Fund -0.5

Cambridge Balanced Fund -1.9

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

ABC Fully Managed Fund 25.4%

Industrial Pension Fund 22.2

Clean Environment Balanced Fund 18.3

Global Strategy Income Plus Fund 17.3

Caldwell Associate Fund 16.8

Saxon Balanced Fund 16.7

Bissett Retirement Fund 16.5

Sceptre Balanced Growth Fund 16

BG Private Balanced Fund 15.6

FMOQ Investment Fund 15.5

BOTTOM 5 AVERAGE 1-5 YEAR ANNUAL RETURN

AIM Canadian Balanced Fund 9.425

Fonds de Professionnels équilibré 9.424

Guardian Canadian Balanced Classic 9.37

Altamira Growth & Income Fund 9.366

Cambridge Balanced Fund 3.2

U.S. EQUITY

Funds that invest in shares of U.S. companies (3 years: 81 funds; 5 years: 60 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

Global Manager U.S. Geared Fund ($U.S.) 48.6%

Co-operators U.S. Equity Fund 42.7

AIC Value Fund 34.7

MD U.S. Equity Fund 31.2

Chou Associates Fund 31.14

McLean Budden Pooled American 31.08

Ethical North American Equity 30.7

Green Line U.S. Index Fund ($U.S.) 29.7

Investors U.S. Growth Fund 29.1

McLean Budden American Growth 28.57

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

Caldwell International Fund 8

Cambridge American Growth 7.7

Century DJ Fund 4.7

First American Fund 0.7

Global Manager U.S. Bear Fund ($U.S.) -19.5

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

Chou Associates Fund 9.7

AIC Value Fund 8.5

Atlas American Advantage Value 8.4

Investors U.S. Growth Fund 8.1

Margin of Safety Fund 7.7

Green Line U.S. Index Fund ($U.S.) 7.5

Phillips, Hager & North U.S. Equity 7.278

Global Manager U.S. Geared Fund ($U.S.) 7.277

Mawer U.S. Equity Fund 7.26

Global Manager U.S. Index Fund ($U.S.) 7.2

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

AGF Special U.S. Class 1

Cambridge American Growth 0.4

First American Fund -3

Century DJ Fund -3.2

Global Manager U.S. Bear Fund ($U.S.) -8

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

AIC Value Fund 27.2%

BPI American Small Companies 25.6

MD U.S. Equity Fund 23.7

Ethical North American Equity 23

C.I. American Fund 22.3

Investors U.S. Growth Fund 21.8

Chou Associates Fund 21.52

C.I. American Sector Shares 21.48

Spectrum United American Growth 21.2

McLean Budden Pooled American 21.1

BOTTOM 5 AVERAGE 1-5 YEAR ANNUAL RETURN

University Avenue U.S. Growth Fund 8.7

AGF Special U.S. Class 8.2

Cambridge American Growth 6.3

Century DJ Fund 4.5

First American Fund 3.7

GLOBAL EQUITY

Funds that invest in companies anywhere in the world (3 years: 84 funds; 5 years: 53 funds)

TOP 10 3-YEAR ANNUAL COMPOUND RETURN

Bissett Multinational Growth 27.7%

Global Strategy World Companies 25

Clean Environment International Equity 22.5

AGF International Value Fund 19.2

MD Growth Fund 18.9

Canada Life U.S. & International Equity 18.6

Ivy Foreign Equity Fund 18.15

Fidelity International Portfolio Fund 18.08

Investors Growth Portfolio Fund 17.8

CentrePost Foreign Equity Fund 17.3

BOTTOM 5 3-YEAR ANNUAL COMPOUND RETURN

First Canadian International Growth 4.5

Green Line International Equity 4.4

GBC International Growth Fund 3.3

Spectrum United Global Growth -0.8

Cambridge Global Fund -25.8

TOP 10 RISK-ADJUSTED 3-YEAR RETURN

Bissett Multinational Growth 7.8

Ivy Foreign Equity Fund 6

Global Strategy World Companies 5.7

MD Growth Fund 5.1

AGF International Value Fund 4.85

Investors Growth Portfolio Fund 4.77

Templeton Growth Fund Ltd. 4.63

Clean Environment International Equity 4.6

Fidelity International Portfolio Fund 4.2

Canada Life U.S. & International Equity 4.1

BOTTOM 5 RISK-ADJUSTED 3-YEAR RETURN

Green Line International Equity -0.217

First Canadian International Growth -0.223

GBC International Growth Fund -0.6

Spectrum United Global Growth -1.9

Cambridge Global Fund -2.6

TOP 10 AVERAGE 1-5 YEAR ANNUAL RETURN

Templeton International Stock 20.6%

Saxon World Growth 20.2

MD Growth Fund 20.1

Fidelity International Portfolio Fund 19.2

Trimark Fund 18.8

Templeton Growth Fund Ltd. 17.9

Investors Growth Portfolio Fund 17.3

AIM International Fund 17.2

Canada Life U.S. & International Equity 17.1

Beutel Goodman International Equity 16.5

BOTTOM 5 AVERAGE 1-5 YEAR ANNUAL RETURN

Strategic Value Commonwealth 9.7

GBC International Growth Fund 8

Cambridge Americas Fund 7.5

Spectrum United Global Growth 6.9

Cambridge Global Fund -8.1

Maclean's

January 26, 1998

Three-year annual compound return:

Annual compound return over three years to Dec. 31, 1997.

Risk-adjusted three-year return:

A ratio that measures return against the degree of risk. The number is arrived at by subtracting the amount of money an investor would have made over three years by investing in 90-day treasury bills (which are risk-free) from the fund's three-year compound return. The result is then divided by its standard deviation - a measure of volatility. The higher the final number, the greater the return for the amount of risk.

Average one- to five-year annual return:

The average of the returns in each of the past five years. Shows which funds performed best in the medium term.