Canadian Income Funds: Your Complete Guide to Income Trusts, Royalty Trusts, and Real Estate Investment Trusts


Income trusts are booming. They have been one of the best-performing classes of investments in one of the worst markets in decades. With over 150 trusts currently trading on the Toronto Stock Exchange at a combined value of over $90 billion, this relatively new vehicle, the income fund, is one of the hottest tickets on the Canadian investment landscape today.

Written by two of the industry's top experts and commentators, this is the first book ...

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Income trusts are booming. They have been one of the best-performing classes of investments in one of the worst markets in decades. With over 150 trusts currently trading on the Toronto Stock Exchange at a combined value of over $90 billion, this relatively new vehicle, the income fund, is one of the hottest tickets on the Canadian investment landscape today.

Written by two of the industry's top experts and commentators, this is the first book of its kind: a complete guide to the income trust industry in Canada.

Includes complete coverage on: what income funds are and how to use them to your advantage; myths and facts about income funds; different types of income trusts; what to look for in an income trust, and how to assess the risks involved; how income trusts, and the investors in them, are taxed; funds of income funds; and much more.

  • Explains what business owners need to know if they are considering converting their businesses into an income trust.
  • Features listings and profiles of over 160 income funds currently available in Canada, including a description of each fund, performance history, and contact information.
  • Designed for anyone interested in knowing how Canadian income funds work, including: investors, business owners, directors, trustees, stockbrokers, financial advisors, lawyers, accountants, investment bankers, and commercial bankers.
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What People Are Saying

From the Publisher
"Income trusts are popular, but many people stay away because they can’t figure out what to buy. This book explains them carefully and sorts through the complexities. Here’s the guide you need to find an investment that won’t let you down."

Ellen Roseman, personal finance columnist, Toronto Star, and author of Money 101 and Money 201

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Product Details

  • ISBN-13: 9780470834954
  • Publisher: Wiley
  • Publication date: 10/8/2004
  • Edition number: 1
  • Pages: 250
  • Product dimensions: 5.96 (w) x 9.02 (h) x 0.55 (d)

Meet the Author

Peter Beck is a well-known financial expert and President ofSwiftTrade Inc., Canada’s leading proprietary trading firm.

A European-trained chef, Mr. Beck immigrated to Canada in 1979and set up a number of successful businesses, including a coffeeshop, a water bottling company, a pet food delivery service, andITN Corporation, the first legally operating long distance companyin Canada. In 1998, he founded SwiftTrade, which was #7 onProfit Magazine’s "10 Hottest Startups in Canada" for2001, and was named #2 on the "Top 100 Fastest Growing Businessesin Canada" for 2004, also by Profit, with an astoundingfive-year growth rate of almost 9000%.

Mr. Beck has been featured in media across the country,including The Globe and Mail, the Toronto Star, CTVNews, ROB TV, and Canadian Business. He regularly appears ontelevision to offer commentary on the markets, writes articles forfinancial publications across the country, and is the co-author ofHedge Funds for Canadians: New Investment Strategies for Winningin Any Market (John Wiley & Sons).

Simon Romano is a partner at Stikeman Elliott LLP, a440-lawyer firm with an international reputation in all areas ofbusiness law, most notably securities, tax, banking, corporatefinance, M&A, securitizations and derivatives, commerciallitigation, competition law, commercial real estate,labour/employment and pension law, environmental law, intellectualproperty and related fields. Mr. Romano practices principally inthe area of securities, M&A and finance, as well as acting forprivate equity funds, income trusts, and alternative tradingsystems.

Mr. Romano has practiced in both Toronto and New York, and wasformerly a clerk at the Supreme Court of Canada. During 1995 and1996, he was Special Counsel to the Ontario Securities Commission,where he dealt with take-over bids as well as other projects. Hehas written a number of articles, is a frequent speaker atseminars, and was a member of the Ontario SecuritiesCommission’s Securities Advisory Committee.

He is particularly active in the area of income trusts, havingadvised the Livingston International Income Fund and the SIRRoyalty Income Fund, among others. He has been recognized byLexpert/American Lawyer as one of Canada’s top 500 lawyers,and by Chambers Global as one of the world’s leadinglawyers.

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Table of Contents



Chapter One: What are Income Trusts Anyway?

Today’s Income Trust Landscape.

The Basics: What is a Trust?

The History of Trusts.

The Players in a Trust: Which one is the Investor?

Reasons for Setting up a Trust.

Tax Mitigation.

A Possible Downfall: Liability.

The Basic Structure of an Income Trust.

Setting up a Trust Structure.

Other Structures.

The Economic Climate: Fuel for the Recent Boom.

Chapter Two: The Different Types of Income Trusts.

How Does an Income Trust Differ from a Regular PublicCompany?

The Types of Income Trusts.

Business Trusts.

Trademark Royalty Trusts.

Oil and Gas Royalty Trusts.

Real Estate Investment Trusts (REITs).

Funds of Income Funds.


Chapter Three: Tax Matters.


Debt and Equity.

Financial Leverage.

Internal Leverage.

The Tax Benefits of Leverage to the Investor.

Return of Capital and Other Tax Nuances.

Is There an Effect on Overall Government Tax Revenues?

IDSs, IPSs, and Other Products.

Chapter Four: How to Choose an Income Trust.

First and Foremost: Due Diligence.

The Stages of Your Investment Life.


Getting Married.

Kid(s) Arrive(s).

Kid(s) Leave(s) Home.


Some Economic Conditions to Consider.

Today’s Interest Rate Climate.

Equity Market Outlook.

Exchange Rate Considerations.

Commodity Price Outlook for Oil and Gas.

Understanding the Underlying Business.

Stability of Distributions.

Growth Possibilities.

Management Experience and Reputation.


Funds of Funds – Management and Fees.

When to Sell.

Need Some Cash?

Found a Better Investment Vehicle?

Is the Fund Performing Badly?

Setting Your Own Risk Controls.

Stop Loss.

The Rolling Stop.

Discipline, Discipline, Discipline.

Case in Point: Specialty Foods Group.

Chapter Five: Measuring Risks: The UnderlyingBusiness.

The Nature of the Particular Industry.

Vulnerability to General Economic Conditions.

Interest Rate Fluctuations.


Labour and Employee Relations.

Regulatory or Environmental Risks.

Foreign Exchange Risk.

Litigation Risks.

The Quality of Corporate Governance.

The Extent of Insurance Coverage.

Seasonality and Weather.

Supplier-Related Risks.

The Nature of Customers and Customer Relationships.

Commodity Price Risks.

The Impact of Technology.

Other Risks.

Chapter Six: Measuring Risks: The Trust Structure.

Structural Complexity.

Possible Unlimited Liability to Unit Holders.

Dependence on the Underlying Business.

Cash Distributions Are Not Guaranteed, and Fluctuate withPerformance.

Restrictions on the Potential Growth of the UnderlyingBusiness.

Nature of the Trust Units.

Distributions in Kind on Redeeming Units, or on Termination ofthe Income Fund.

Absence of a Prior Public Market.

Issue of Additional Trust Units Diluting Existing UnitHolders’ Interest.

Investment Eligibility and Foreign Property.

Income Tax Matters.

Restrictions on Non-Resident Unit Holders.



Chapter Seven: Measuring Risks: Management, Sponsors, andOther Issues.

Management Arrangements.

Internal Management and LTIPs.

External Management and "Internalization" Costs.

Management Equity Ownership.

Overall Management Arrangement Assessment.

Sponsor-Related Risks.

The Nature of Retained Interests.

Non-Competition Agreements.

Governance Issues – Voting and Veto Rights.

Representations and Warranties.

Overall Assessment of Sponsor Relationship.

The Spectre of Unlimited Liability of Unit Holders.

Chapter Eight: Measuring Risks: Stability Ratings.

Some Things to Consider about Stability Ratings.

Standard and Poor’s (S&P).

Dominion Bond Rating Service (DBRS).

A Final Note on Risk.

Chapter Nine: IPOs and Conversions: The Recipes for MakingIncome Trusts.

The IPO Process.

The Preliminary Prospectus.

Stock Exchange Listing and Liquidity.

Withdrawal Rights.

Investors’ Rights on a Misrepresentation.

IPO Closing Mechanics.

Post-IPO Obligations of Income Trusts.

Available Information.

The Income Trust Conversion Process.

Management Proxy Circular.

Arrangement Proceedings.

Stock Exchange Listing.

Investors’ Rights on a Misrepresentation.

Post-Conversion Obligations of Income Trusts.

Pricing on Conversion.

Closing Mechanics.

Available Information.

Chapter Ten: The Legal State of Affairs in Canada:Preventative Medicine for Liability.

Ontario’s Bill 198.

Making the Facts Clear: The Disclosure Policy.

Disclosure Compliance System.

Insider Trading Policies.

Corporate Governance Matters.

Rules of the Canadian Securities RegulatoryAuthorities.

Corporate Governance Disclosure: The Proposed Policy andRule.


Chapter Eleven: Selling a Business to an Income Trust –Issues for Business Owners.

Why Sell Your Business to an Income Trust?

First Steps.


Exchangeable Securities, Retained Interests, andSubordination.

Audited Financial Statements.

Reporting Systems and Internal Controls.

Business and Strategic Plan.

Pre-IPO Restructuring or Changes.

Outside Directors and Trustees.

The Prospectus.

The Underwriting and Sale Agreements.

The Marketing Process.

Post-IPO Obligations.

Insider Trading.


Chapter Twelve: The Canadian Income Trust MarketToday.

The Two Main Benefits.

Tax Effectiveness.

Higher Distributions.

Looking to the Future of Income Trusts.

Increasing Size and Quality.

Unit Holder Limited Liability Protection Is On theWay!

More Institutional Involvement.

More Choices.

More Funds of Income Funds.

Don’t Forget the Risks!

A Key Question: Is This a Bubble?

The Long-Term Under-investment Risk Facing Canada.


Canadian Income Fund Profiles.

Index of Funds.


Author Biographies.

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  • Anonymous

    Posted October 2, 2005

    Very vague

    I was very disappointed with the book. I was hoping for a book that would point out what to look for in a financial balance sheet and how to determine a good unit trust from a bad unit trust. What I found was a book that covered a wide range of topics relating to trusts, but to such a shallow depth as to be unusable. It is ok if you have no idea what a unit trust is, but almost useless in helping you make an informed decision. The list of unit trusts (almost half the book) was good, but again it offered only cursory information regarding the trust.

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