Financial Post Letter to the Editor
Dear Editor,
In his Income Trust column appearing November 9 in the Financial Post, Al Rosen reduces the entire debate to “emetic” musings from Bay Street clinging to their “fat year-end bonuses.”
As amusing as this must be to Mr. Rosen, he is mistaken in limiting the fallout of the situation to Bay Street. In truth, the pain has been felt most on Main Street.
More than one million ordinary Canadians own units in Income Trusts and several million more indirectly invest in Income Trusts through mutual funds or pension plans.
Many unit holders are retirees, who rely upon the regular cash distributions that Income Trusts offer. Any tax changes for Income Trusts could put their once comfortable, hard-earned retirements at risk as Income Trusts fill a need that investors cannot find elsewhere in the Canadian capital markets.
I take exception to his assertions that income trusts “employ loose accounting rules to goose profits” and “ignore the working capital investment needed to grow the business.”
In fact, income trusts must comply with Generally Accepted Accounting Principles and are governed by the same securities regulators as apply to regular share corporations. The financial disclosures by Income Trusts are extremely transparent and I can argue that Income Trusts represent the ultimate in shareholder democracy.
Income trusts are real businesses with thousands of real employees who are now also put at risk if Ottawa continues on its current path. These businesses are making highly innovative investments and significant contributions to the Canadian economy.
How can Mr. Rosen compare valuation metrics for dot com’s of more than 100’s times estimated, future revenues to Income Trusts valued on reasonable multiples of actual cash flow? Let’s tone down the hysteria please.
Yours truly,
Stephen Rotz, CA, CFA
Vice President, Canadian Association of Income Funds
C/O Davis + Henderson Income Fund
939 Eglinton Avenue East, Suite 201
Toronto, Ontario M4G 4H7
416-696-7700 (extension 5278)