With more than 100 income trust/fund issuers in Canada with a cumulative market capitalization of more than $40 billion, it was inevitable new products would be developed to capitalize on the burgeoning sector.

One of the most recent is a prospectus for the Barclays Advantaged Equal Weighted Income Fund, an investment trust that will invest in each of the income funds included in the S&P/TSX Capped Income Trust Index.

The trust’s investment objectives are to provide unitholders with: tax-efficient monthly distributions consisting of capital gains and returns of capital equal to the distributions paid on the securities that make up the index; and, exposure to the returns of an underlying fund (the Equal Weighted Income Fund).

Also debuting is the Tax Optimized Return Oriented Securities Trust, a closed-end trust managed by Lawrence Asset Management Inc. The manager has retained Lawrence Decter Investment Counsel Inc. as the trust’s portfolio manager. It will invest in an actively managed diversified portfolio consisting primarily of income funds, including commodity-based trusts, operating business trusts, REITs and power and pipeline trusts.

The prospectus notes that the portfolio manager believes that the trust can generate its targeted returns “by selecting and investing in a diversified portfolio of undervalued securities and securities with growth potential initially drawn primarily from the two highest-yielding income trust classes, namely commodity-based trusts and operating business trusts, and supplemented by the stability of REITs and power and pipeline trusts.”

The so-called TOROS Trust has been created using a dual security structure to provide investors with a greater ability to choose the tax character of distributions they receive from a portfolio of income funds. The offering consists of ROC Securities and Income Securities. The ROC Securities and Income Securities are being offered separately. By deducting interest on the Income Securities, the TOROS Trust expects to be able to designate a higher proportion of distributions to ROC Holders as a return of capital.

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