WHAT IS A MORTGAGE INVESTMENT CORPORATION (MIC)?
Mortgage Investment Corporations are companies incorporated under the Canada Business Corporations Act, which allow investors to invest in a pool of mortgages from which they receive regular income distributions by way of dividends which are typically distributed on a monthly, quarterly or sometimes an annual basis depending on the MIC’s distribution policies. MICs are typically established and managed by experienced managers such as Bancorp Financial Services Inc. who have the responsibility to source and administer mortgages funded by the MIC. MICs are governed by the Canadian Income Tax Act and can distribute profits to shareholders without payment of corporate income tax if all income is distributed each calendar year but such distributions, while classified as dividends, are subject to payment of income tax by the recipient on the same basis as interest income unless held in a registered plan such as an RRSP, RRIF or TFSA. In order to qualify for this tax status each MIC has to be at least 50 per cent invested in residential mortgages on Canadian property.
Mortgage Investment Corporations are companies incorporated under the Canada Business Corporations Act, which allow investors to invest in a pool of mortgages from which they receive regular income distributions by way of dividends which are typically distributed on a monthly, quarterly or sometimes an annual basis depending on the MIC’s distribution policies. MICs are typically established and managed by experienced managers such as Bancorp Financial Services Inc. who have the responsibility to source and administer mortgages funded by the MIC. MICs are governed by the Canadian Income Tax Act and can distribute profits to shareholders without payment of corporate income tax if all income is distributed each calendar year but such distributions, while classified as dividends, are subject to payment of income tax by the recipient on the same basis as interest income unless held in a registered plan such as an RRSP, RRIF or TFSA. In order to qualify for this tax status each MIC has to be at least 50 per cent invested in residential mortgages on Canadian property.
WHO INVESTS IN MICs?
MICs are ideal for investors who want to diversify their investment portfolio outside of stocks and bonds, would like a regular income stream offered from a portfolio of mortgages secured on real estate and who do not want to actively find and manage individual mortgages but prefer their mortgage investment to be chosen and managed by professionals with a solid understanding of this industry.
MICs are ideal for investors who want to diversify their investment portfolio outside of stocks and bonds, would like a regular income stream offered from a portfolio of mortgages secured on real estate and who do not want to actively find and manage individual mortgages but prefer their mortgage investment to be chosen and managed by professionals with a solid understanding of this industry.
HOW DO I EARN RETURNS?
The net income of a MIC, being the interest earned on all mortgages held by the MIC less operating expenses, is regularly distributed to shareholders according to their shareholdings in the MIC. Essentially, MICs operate like a mutual fund except instead of being invested in shares of multiple corporations or a pool of bonds, MICs are invested in a diversified pool of mortgages.
The net income of a MIC, being the interest earned on all mortgages held by the MIC less operating expenses, is regularly distributed to shareholders according to their shareholdings in the MIC. Essentially, MICs operate like a mutual fund except instead of being invested in shares of multiple corporations or a pool of bonds, MICs are invested in a diversified pool of mortgages.
ARE MICS RRSP, RRIF AND TFSA ELIGIBLE?
Yes, MICs are fully qualified under Canadian Income Tax legislation for investment in an RRSP, a RRIF and a TFSA. However there is sometimes an issue with RRSP, RRIF and TFSA administrators and trustees as their policies often do not allow investment in private companies such as MICs that are not listed on public stock exchanges. You should always contact your RRSP trustee to ensure they will allow you to invest in and hold shares in MICS in your registered plan. BFSI offers an in-house RRSP and RRIF plan for its investors to hold Bancorp MIC shares.
Yes, MICs are fully qualified under Canadian Income Tax legislation for investment in an RRSP, a RRIF and a TFSA. However there is sometimes an issue with RRSP, RRIF and TFSA administrators and trustees as their policies often do not allow investment in private companies such as MICs that are not listed on public stock exchanges. You should always contact your RRSP trustee to ensure they will allow you to invest in and hold shares in MICS in your registered plan. BFSI offers an in-house RRSP and RRIF plan for its investors to hold Bancorp MIC shares.
HOW DO I PURCHASE SHARES IN THE FUNDS?
Each fund is sold by way of an offering memorandum and subscription agreement. A copy of the offering memorandum can be obtained from this website or by calling your investment advisor or BISL dealing representative at (604) 608-2717.
Each fund is sold by way of an offering memorandum and subscription agreement. A copy of the offering memorandum can be obtained from this website or by calling your investment advisor or BISL dealing representative at (604) 608-2717.
IS THERE A MINIMUM INVESTMENT?
Yes, $10,000 is the minimum investment required. Once the minimum investment has been made, additional shares may be purchased with a minimum $5,000 subscription. Note: All contributions must be made with the assistance of a licensed securities dealer such as BISL.
Yes, $10,000 is the minimum investment required. Once the minimum investment has been made, additional shares may be purchased with a minimum $5,000 subscription. Note: All contributions must be made with the assistance of a licensed securities dealer such as BISL.
WHAT IS THE LIQUIDITY OF THE FUNDS?
An option to redeem exists in each fund subject to the terms set out in the Offering Memorandum for each MIC but there are some restrictions on redemption. More detail on these restrictions can be found in the offering memorandums and you should discuss with your investment advisor.
An option to redeem exists in each fund subject to the terms set out in the Offering Memorandum for each MIC but there are some restrictions on redemption. More detail on these restrictions can be found in the offering memorandums and you should discuss with your investment advisor.
CAN I SELL/TRANSFER/TRADE MY SHARES?
No. There is no public market for the sale and trading of MIC shares as they are private non-listed companies, liquidity is provided through the redemption privileges. However there are some limited circumstances which a shareholder can make use of for non-arm’s length transfers such as:
No. There is no public market for the sale and trading of MIC shares as they are private non-listed companies, liquidity is provided through the redemption privileges. However there are some limited circumstances which a shareholder can make use of for non-arm’s length transfers such as:
- Shares can be transferred between a shareholder and the shareholder’s RRSP, RRIF, IPP or personal holding company.
- Shares can be transferred from sole ownership to joint ownership with a spouse or child.
- Shares can be transferred from one RRSP/RRIF trustee to another RRSP/RRIF trustee, provided the beneficial owner remains unchanged.
- Shares can be transferred to another person upon the death of the shareholder and receipt of appropriate documentation from the executor of the estate.
WHAT IS THE KEY DIFFERENCE BETWEEN A MIC AND A SYNDICATED LOAN?
A MIC is an investment in a portfolio of mortgages, whereas a mortgage loan syndication is a group of investors investing in a single mortgage. A syndicated mortgage is more hands-on than an investment in an MIC because the investor is directly involved in selecting a specific project to invest in and does not provide the same diversification as investing in a MIC with a pool of mortgages to spread investment risk over.
A MIC is an investment in a portfolio of mortgages, whereas a mortgage loan syndication is a group of investors investing in a single mortgage. A syndicated mortgage is more hands-on than an investment in an MIC because the investor is directly involved in selecting a specific project to invest in and does not provide the same diversification as investing in a MIC with a pool of mortgages to spread investment risk over.
CAN I HAVE MY DIVIDENDS DEPOSITED DIRECTLY TO MY BANK ACCOUNT?
Yes. Investors in Bancorp MICs who have elected to receive their dividends in cash can have the dividends deposited directly to their RRSP, RRIF, TFSA or bank account, (often referred to as EFT payments). Investors can make this selection when subscribing for shares of a Bancorp MIC or any time after they have become shareholders. If an investor has previously elected to receive a cheque payment, they can change to EFT simply by sending Bancorp a note requesting the change and enclosing a void copy of a cheque for the account into which they want the dividends deposited.
Yes. Investors in Bancorp MICs who have elected to receive their dividends in cash can have the dividends deposited directly to their RRSP, RRIF, TFSA or bank account, (often referred to as EFT payments). Investors can make this selection when subscribing for shares of a Bancorp MIC or any time after they have become shareholders. If an investor has previously elected to receive a cheque payment, they can change to EFT simply by sending Bancorp a note requesting the change and enclosing a void copy of a cheque for the account into which they want the dividends deposited.
CAN I REINVEST MY MIC DITRIBUTIONS INTO NEW SHARES OF THE MIC
Yes. Bancorp MICs have a dividend reinvestment policy (DRIP) that allows payments made to investors to be directly deposited into additional shares of the MICs. There is no minimum investment amount for DRIP investment in shares. Investors can make the election to reinvest through the DRIP program at any time and can elect to change to cash distributions at any time as well.
Yes. Bancorp MICs have a dividend reinvestment policy (DRIP) that allows payments made to investors to be directly deposited into additional shares of the MICs. There is no minimum investment amount for DRIP investment in shares. Investors can make the election to reinvest through the DRIP program at any time and can elect to change to cash distributions at any time as well.
ARE SHARES LISTED ON THE STOCK EXCHANGE?
No. The MICs are private companies and shares are not listed and cannot be traded in the public market
No. The MICs are private companies and shares are not listed and cannot be traded in the public market
WHY ARE MIC DIVIDENDS REPORTED AS INTEREST INCOME ON MY T5?
MICs have a special status under the Income Tax Act. The Act provides that the MIC can pass 100 per cent of its income along to shareholders without payment of corporate income taxes. As no corporate taxes have been paid, there are no dividend tax credit benefits to pass on to shareholders. Therefore the Canada Revenue Agency has directed that the income received be reported as interest income.
MICs have a special status under the Income Tax Act. The Act provides that the MIC can pass 100 per cent of its income along to shareholders without payment of corporate income taxes. As no corporate taxes have been paid, there are no dividend tax credit benefits to pass on to shareholders. Therefore the Canada Revenue Agency has directed that the income received be reported as interest income.
ARE THE RATES OF RETURN GUARANTEED?
No. This is not a GIC or bond investment. The yield is determined entirely by the performance of the mortgages held by the MIC.
No. This is not a GIC or bond investment. The yield is determined entirely by the performance of the mortgages held by the MIC.
IS MY PRINCIPAL GUARANTEED?
No. Your investment is secured by the mortgages held by the MIC and, like most investments there are always risks. Success and security of your investment is directly related to quality of the mortgages in the MIC, economic events, real estate markets and the risk management and experience of the MIC’s management team.
No. Your investment is secured by the mortgages held by the MIC and, like most investments there are always risks. Success and security of your investment is directly related to quality of the mortgages in the MIC, economic events, real estate markets and the risk management and experience of the MIC’s management team.
ARE THERE ANY FEES OR CHARGES TO PAY?
There are no fees or charges applicable for the purchase of shares but as outlined in the OM’s, BFSI as Manager does earn a Management Fee for operating and managing each MIC and this forms part of the operating expenses paid by a MIC before net income is determined.
There are no fees or charges applicable for the purchase of shares but as outlined in the OM’s, BFSI as Manager does earn a Management Fee for operating and managing each MIC and this forms part of the operating expenses paid by a MIC before net income is determined.
HOW CAN I LEARN MORE?
If you’re interested in investing in one of the Bancorp mortgage MICs, you should review the respective Bancorp OM’s click here and quarterly fact sheets click here and then contact a licensed securities dealer of your choice. BISL is also a licensed securities dealer and one of its dealer representatives can be of assistance. You can contact BISL or one of our dealer representatives at click here.
If you’re interested in investing in one of the Bancorp mortgage MICs, you should review the respective Bancorp OM’s click here and quarterly fact sheets click here and then contact a licensed securities dealer of your choice. BISL is also a licensed securities dealer and one of its dealer representatives can be of assistance. You can contact BISL or one of our dealer representatives at click here.