Malachite Aggressive Preferred Fund has been valued for September, 2007, month-end. The unit value is $9.1489, after a distribution of dividends of $0.116224. Returns over various periods are:
| MAPF Returns to September, 2007 | |
| One Month | -0.70% |
| Three Months | -0.50% |
| One Year | +1.17% |
| Two Years (annualized) | +3.54% |
| Three Years (annualized) | +4.71% |
| Four Years (annualized) | +7.31% |
| Five Years (annualized) | +11.83% |
| Six Years (annualized) | +8.86% |
Returns assume reinvestment of dividends, and are shown after expenses but before fees. Past performance is not a guarantee of future performance. You can lose money investing in Malachite Aggressive Preferred Fund or any other fund. For more information, see the fund’s main page.
Claymore has published their final monthly numbers and I have derived the following table:
| CPD Return, 1- & 3-month, to September 28 | ||||
| Date | NAV | Distribution | Return for Sub-Period | Monthly Return |
| June 29 | 18.97 | |||
| July 31 | 18.95 | -0.11% | -0.11% | |
| August 31 | 19.04 | +0.47% | +0.47% | |
| September 25 | 18.76 | 0.2185 | -0.32% | -1.23% |
| September 28, 2007 | 18.59 | -0.91% | ||
| Quarterly Return | -0.87% | |||
It should be explicitly noted that the CPD returns are shown AFTER ALL FEES AND EXPENSES, while the MAPF numbers are shown after expenses, but before fees … so to make the numbers more comparable, take the annual fee from the fund’s web page and divide by the appropriate number to obtain the period’s fee.
So … perhaps not the greatest of all quarters, but considering that MAPF did not get the benefit of the huge rise in BCE preferreds in the quarter, staying even – actually, just a tad better than the ‘CPD Competition – after fees isn’t the worst thing that could happen. The last few days of September didn’t help, in either relative or absolute terms, when the market did very poorly, presumably due to digestive problems with the new issues.
More later.
Update, 2007-10-02
The DPS.UN NAV for September 26 has been published, so we can calculate the September-ish returns for it:
| DPS.UN NAV Return, August-ish 2007 | |||
| Date | NAV | Distribution | Return for period |
| August 29, 2007 | $22.14 | $0.00 | |
| September 26 | $21.93 | $0.30 | +0.41% |
| Time-Weighted, September-ish | +0.41% | ||
| Adjustment for August stub-period | -0.53% | ||
| Adjustment for September stub-period | -0.80% | ||
| Estimated September Return | -0.92% | ||
| CPD had an NAV of $18.94 on August 29 and $19.04 on August 31. The beginning-of-month stub period return for CPD was therefore +0.53%.CPD had a NAV of $18.74 on September 26 and $18.59 on September 28. The end-of-month stub period return for CPD was therefore -0.80%. | |||
Now, to see the DPS.UN quarterly NAV approximate return, we refer to the calculations for August and July to derive:
| DPS.UN NAV Returns, three-month-ish to end-September-ish, 2007 | |
| July-ish | +1.38% |
| August-ish | +0.22% |
| September-ish | -0.92% |
| Three-months-ish | +0.66% |
I will also note that the “BMO Capital Markets 50” index returned -1.35% for the month and +0.53% for the quarter, but will not analyze the situation further due to the proprietary nature of this index.
This is an unusual quarter. The basic problem is the BCE/Teachers deal, which had the effect of changing the BCE preferreds from junk issues into speculations on a takeover bid at blue-chip prices. This had a marked effect on returns for these issues, which ranged from a low of +9.52% (BCE.PR.H) to +23.52% (BCE.PR.G). The BMOCM-50 is 8.05% BCE issues as of 2007-9-30, but let’s look at the CPD holdings, which are publicly disclosed:
| CPD Holdings of BCE | |||
| Issue | Weight, 2007-10-1 |
Return, 07Q3 |
Effect on Fund Return |
| BCE.PR.F* | 1.99% | +12%* | +0.2388% |
| BCE.PR.A* | 2.83% | +12%* | +0.3396% |
| BCE.PR.C | 2.83% | +10.5% | +0.2972% |
| Total Contribution of BCE Issues | +0.8756% | ||
| *BCE.PR.F is not tracked by HIMIPref™, BCE.PR.A is tracked, but the change in terms as of September 1 does not allow HIMIPref™ to calculate returns for periods which include that date. Somebody should fire that programmer! For both issues, a generic return of +12% has been presumed for the period. | |||
DPS.UN reported its portfolio in the June 30 Semi-Annual Report:
| DPS.UN Holdings of BCE | |||
| Issue | Weight, 2007-6-30 |
Return, 07Q3 |
Effect on Fund Return |
| BCE.PR.C | 1.80% | +10.5 | +0.1890% |
| BCE.PR.A* | 1.41% | +12%* | +0.1692% |
| BCE.PR.I | 1.39% | +22.2% | +0.3086% |
| BCE.PR.Z | 1.36% | +11.4% | +0.1550% |
| BCE.PR.R | 1.33% | +19.3% | +0.2567% |
| BCE.PR.S | 1.25% | +10.5% | +0.1312% |
| BCE.PR.H | 0.85% | +9.5% | +0.0808% |
| BCE.PR.F* | 0.43% | +12%* | +0.0516% |
| BCE.PR.T | 0.29% | +18.7% | +0.0542% |
| Total Contribution of BCE Issues | +1.3963% | ||
| *BCE.PR.F is not tracked by HIMIPref™. BCE.PR.A is tracked by HIMIPref™, but the change in terms as of September 1 does not allow HIMIPref™ to calculate returns for periods which include that date. Somebody should fire that programmer! A generic return of +12% has been presumed for the period for each of these two issues. | |||
Anyway, my point in performing this minor piece of attribution analysis is simply to show the enormous influence the presence or absence of BCE issues has had this quarter in preferred share fund returns. A conscious decision was made to avoid these issues for the fund; this action was taken due to a feeling that with BCE in play, the instruments had become unanalyzable by quantitative measures (in addition to my general disdain for issued tied to Canada Prime!). This helped MAPF’s relative returns during the second quarter of this year and has hurt in the third. I have no regrets about the decision – but it certainly has made relative returns more volatile than would otherwise be the case.
Update, 2007-10-14: A discussion of portfolio composition as of September 28, 2007, is available here.
After-Tax Yield Equivalency
Saturday, September 29th, 2007It must be fall! The time when an old man’s fancy lightly turns to thoughts of tax planning! I received my first indication of the change in season today …
My correspondent sent me the following calculation and wondered why the after-tax yield on a dividend that he was investigating was lower than the pre-tax yield … he attached a calculation:
My correspondent’s problem was that he had been told that “L” should be more than “B”.
Well, he was quite right to be suspicious! An after tax rate of return higher than the pre-tax rate implies a negative taxation rate; and while such things may sometimes happen to a very small extent in some corners of the tax world, given very particular (and relatively small!) numbers, it’s just not there for most of us! It will doubtless be a promise in the next Federal election campaign, however.
I suspect that my correspondent was told a garbled version of something that really is a general rule: that dividend income is better than interest income and that a dividend of $1 will always leave more in your pocket than an interest receipt of $1. Always? Well, there might be some exceptions! I will stress that I am not a tax expert and that anything I say about taxes should be checked!
What we need to illustrate this is a few more lines in the calculation:
So what we conclude from this particular equivalency factor is that:
Note that this 1.14 figure is very low and is probably an error due to the fact that I simply put in a “generic” tax rate for income rather than looking one up that was actually consistent with the other data.
Another problem is that my correspondent’s figure of $1.50 tax on $4.25 dividend is an all-in rate of 35%, which looks pretty high to me. I suspect that the tax factors [(D), (F) and (H)] are incorrect; but more details and sources are required to check this. Most equivalency factors are in the neighborhood of 1.30 – 1.40.
Tax rates for different types of income can be obtained from Ernst & Young’s Tax Calculator. I’ve also written an article in which equivalency factors were vital and calculated for a wide variety of provinces and income levels.
Posted in Reader Initiated Comments, Taxation | 4 Comments »