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Press Release: March 11, 2004

Study Finds Neutral Effect of Income Trust on Government Tax Revenues

Toronto, March 11, 2004 – A study commissioned by The Canadian Association of Income Funds (CAIF) and the Canadian Institute of Public and Private Real Estate Companies (CIPPREC), entitled Tax Revenue Impact of Income Trusts, was released today, and showed that the effect of income trusts on government tax revenues is likely neutral to net positive.

The growing public income trust sector, now having a market capitalization of just under $90-billion CAD, has recently been the subject of growing speculation as to their tax revenue impact. CAIF and CIPPREC commissioned this study last fall to put an end to the debate and develop a reliable and robust tax impact assessment that governments would find credible.

“This is a comprehensive and thorough study that not only provides a benchmark for determining the tax effects of income trusts on Government revenue, but shows it to be largely a non-issue,” said CAIF Chair Stephen Probyn. “It also shows income trusts are about more jobs, more growth and more investment in Canada.”

The study was designed and conducted by HLB Decision Economics Inc. using a rigorous economic model that was subjected to peer review.* “This study puts the tax revenue impact issue in a realistic light, based on the best available data and juried assumptions,” said Dr. David Lewis, President of HLB. “The risk analysis is a key and critical part of this study and we are confident that these conclusions are accurate.”

Key findings were that current year tax losses to government for 2004 are estimated at about $217-million, but that doesn’t take into account the government’s increased tax revenue in the future, when accrued gains are taxed or withdrawals made from RRSP’s. When those tax revenues are factored in, the tax revenue impacts are positive on a present value basis.

“Both Canada’s real estate investment trusts and income trusts are major economic success stories. We should all be focusing our attention now on making the trust vehicle more viable” said CIPPREC Executive Director Michael Brooks, who represents the majority of Canada’s publicly traded REITs.

The Tax Revenue Impact of Income Trusts study is available at www.caif.ca or www.cipprec.ca.

Canadian Institute of Public and Private Real Estate Companies (CIPPREC)
CIPPREC is a national investment real estate association comprised of the largest owners and developers of commercial real estate in Canada including REITs, publicly traded and large private companies, banks, brokerages, crown corporations, investment dealers, life companies, and pension funds. CIPPREC’s members currently own in excess of CDN $70 Billion in real estate assets located in the major centres across Canada. CIPPREC represents the industry’s point of view to government at all levels on legislative and regulatory matters and researches changes affecting and potentially affecting its members. CIPPREC also develops, publishes and maintains national real estate standards for accounting, terminology, leasing and telecommunications access and is the principal sponsor of national annual real estate conferences.

Canadian Association of Income Funds (CAIF)
In 2003, the heads of Canada’s leading income funds created the Canadian Association of Income Funds (CAIF)/L’Association Canadienne des Fonds de Revenues (ACFR). CAIF is designed to represent income funds and promote the interests of their stakeholders.

Income funds are a new arm of corporate Canada. They are real businesses focused in core Canadian industries ranging from natural resources to the food Canadians eat – employers of thousands of Canadians in communities from coast to coast. Additionally, hundreds of thousands of Canadian families depend on income funds for investment income.

Income funds – whether income trusts or publicly-listed limited partnerships – are an increasingly popular investment alternative that (unlike mutual funds) are traded on Canada’s stock exchanges. They provide investors with a regular share of the cash flow from operations held within the income trust or LP. Initially designed to invest in the resource sector, income funds have gained popularity in recent years for a much wider variety of goods and services. Today, there are over 100 income funds operating across Canada, managing total market capitalization of some $45 billion. They now represent approximately 6% of the total value of the Toronto Stock Exchange.

For additional information please contact:
Michael Brooks, Executive Director, CIPPREC at 416-642-2700 ext. 25 or mbrooks@cipprec.ca.
Visit CIPPREC at www.cipprec.ca.
Stephen Probyn, Chairman, CAIF, at 416-777-2800 or sprobyn@probyngroup.com.