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Abstract
The Canadian income trust is alive and getting stronger by the day. More than 175 income trusts trade on the Toronto Stock Exchange (TSX) at a combined value of over C$110 billion (US$87.6 billion), which represents about 8% of the total market capitalization of the TSX. The combined forces of recent legislation explicitly limiting unit-holder liability and the impending inclusion of the class in the S&P/TSX Composite Index have begun to fuel greater institutional demand for income trusts, which were designed primarily as a retail product. The income trust sector was regarded as a buyers' market, where a handful of institutional players bid up yields, but the balance of power has shifted and offerings are now being priced at yields at, and in some cases below, the low end of the marketed range, even in the context of the more structured US-Canada cross-border income trust offerings. Not surprisingly, this level of activity has caught the attention of securities regulators. The most significant result of this so far has been the publication by Canadian regulators in December 2004 of National Policy 41-201 - Income Trusts and Other Indirect Offerings, which is designed to improve accountability, disclosure and governance practices as they relate to these issuers.