Marc Tellier, head of the Yellow Pages income fund (YLO.UN) spoke to a Canadian Club group of businessmen and media in Toronto and addressed the impact of and requirements for policy related to income trusts. His comments included words surely welcome by informed investors including do-it-yourself individual investors.

Mr. Tellier said, “Speculation about the laws and tax treatment led to a massive transfer of wealth from the portfolios of ordinary Canadians to those of the professional money managers...Everyone would benefit if we could put an end to such uncertainties in the market.”

According to Tellier, Yellow Pages wants, “to see people addressing the issue of tax leakage and being responsible about it, not speculating out loud in terms of ‘Should we or should we not do this or that.”

After his speach, Mr. Tellier went to to say that government “has a responsibility to refrain from speculating publicly about trusts and whether they should be taxed.”

From the Yellow Pages perspective, “Thousands of our fellow Canadians turn to income trusts as a way to protect their families’ assets and to save for their retirement.” And as part of his presentation, Mr. Tellier specifically described Yellow Pages’ based of unit holders:

There are more than 100,000 retail investors who hold units. A vast majority of retail investors sold units of YLO.UN following tax policy controversy. But the average holdings are 1,500 units at about $25 per unit.

There are also more than 200 institutional investors who hold units.  These groups were net buyers of units during the finance consultation process. And combined with retail investors, institutional holders contribute to a market value for YLO.UN of $8 billion.

Tellier said that, “The challenge is to ensure that the distributable cash figure presented by management is a fair reflection of sustainable cash generation at the time of distribution....Investors need to have the confidence that the information they receive is accurate...They need information that they can compare to other investments before they make their decisions.”

He argued that there are inconsistencies in the manner with which income trusts calculate and report their distributable cash.  He referred to the Standard & Poor’s Corp. paper that indicated that, of a sampling of 40 income trusts including Yellow Pages Income Fund, there were 19 different definitions for distributable cash. And Tellier suggested the sector requires solutions to lack of standardization.

Tellier said that, “The time has come to raise the bar and establish best practices for plain full disclosure on distributable cash across the income trust sector...We need to have a dialogue so we can improve disclosure and demystify the income-trust asset class.”

As discussed as part of our iTrustReport, Mr. Tellier suggested that. in particular, “The difficulty is that income trusts use different, non-standard bases for their distributable cash calculations.”

The Canadian Association of Income Funds (CAIF) was described as working on guidelines for reporting distributable cash. And the iTrust Institute aims to support such efforts by maintaining an active voice for investors’ interests in the process.