For Immediate Release

Adrian Mastracci, wealth manager with KCM Wealth Management says, "Income portfolios will have to adjust strategies to make the best of the current times."

Vancouver, BC (November 19, 2001): Several changes have taken place in the 2001 world of interest bearing investments.

Adrian Mastracci, fee-only investment counsel and wealth manager with Vancouver based KCM Wealth Management comments, "In particular, all categories of interest rates have been reduced in 2001, especially the short-term rates up to one year. This poses a wonderful problem for borrowers; however, it presents a challenge to those who depend on their portfolio for income."

Mastracci goes on, "The interest rate declines have affected all income portfolios. Personal accounts, registered plans, corporate accounts, pension funds and family trusts have all felt the reduction in income. Investors in retirement are affected the most."

"A small consolation for the income portfolio is that income taxes are lower," says Mastracci, "However, income portfolios will have to adjust strategies to make the best of the current times. Just have a peek at the rates outlined below to get a sense of the pain."

Mastracci provides the following table to illustrate the typical interest rate damage sustained in 2001:

All rates quoted above are from the same institution for non-redeemable Guaranteed Investment Certificates, paying annual compound interest, minimum investment of $1,000.

Investors who require a redeemable feature have faced these typical rate declines:

Mastracci pointed out "This decline clearly demonstrates the significant impact we've had on income producing portfolios in such a short time." Mastracci indicated that income portfolio investors should start by asking the question, "What is important about money to you?"

• Is it enjoying a comfortable retirement with your family?
• Is it the preservation or growth of your portfolio?
• Is it your small business, RRSP or RRIF?
• Is it about estate planning and minimizing taxes?
• Is it funding education for the children or grandchildren?
• Is it leaving a legacy to a charitable cause and to your loved ones?

Your candid answers will help you steer towards your chosen destination.

Mastracci offers these strategies for income portfolios:

• Take the time to review your investment game plan. It should contain all the policies and strategies you will follow to reach your chosen destination. If you're unsure about the plan's appropriateness, resolve to pay for professional counsel.
• The bond and cash component of your portfolio is the stable part of your portfolio return. Therefore, make sure that the income generating portion is prudent for your situation.
• The 1990 Nobel Prize studies concluded that asset allocation decisions have the greatest impact on your portfolio returns. They explained, on average, 94% of the contribution to total return.
• Clearly, if asset allocation is not the focus in your investment portfolio, it ought to be.
• A ladder of interest rate maturities has long been recognized as an effective way of protecting against the ravages of falling rates of interest.
• Review your investment horizon and a look at structuring a ladder of interest rate maturities to match your investment time frame.
• As an illustration, a five-year ladder would have one fifth of the portfolio value maturing every year. This strategy is more likely to avoid all maturities occurring during low interest rate periods.
• If you are contemplating retirement, or in the midst of it, be careful about choosing instruments that offer low quality. While the increase in yield is tempting, it may not be sufficient compensation for the added risk you incur.
• Be mindful of all the investment costs. Some vehicles, such as bond funds, are subject to an ongoing management expense ratio (MER) and, perhaps, a front load fee on purchase or a back end fee on disposition.
• Be aware of the CDIC coverage available, if any, on the interest bearing vehicles that you purchase.

"The fixed income strategy that you follow, especially during leaner interest rate periods, is vitally important for your portfolio's financial health," summarizes Mastracci, "This is even more critical when a prudent return from your portfolio is required to sustain your ongoing income needs."

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.