What is a MIC?
A company designed specifically for mortgage lending. Owning shares in a mortgage investment corporation (MIC) enables you to invest in a company which manages a portfolio of secured mortgages. Shares of a MIC are qualified investments under the Income Tax Act, which means that they are eligible to be invested in registered accounts of all types. Profits generated by MICs are distributed to its shareholders according to their proportionate interest.
Our MIC’s management is responsible for all aspects for the Company’s operation which include sourcing suitable mortgage investments, analysis of mortgage applications, negotiation of interest rate, terms and conditions, instruction of lawyers, mortgage portfolio and general administration.
Liahona MIC is regulated by the Ontario Securities Commission and the federal Income Tax Act (ITA). A MIC must distribute 100% of its annual net income to its shareholders in the form of a dividend under the ITA regulations. This dividend is taxed as interest income. It is for this reason that the MIC is such a suitable vehicle for registered investments (i.e. RRSPs, RRIFs and TFSAs)
Section 130.1 of the Income Tax Act (ITA) sets out the criteria governing an MIC, which act as safeguard for investors.
Income Tax Act, Section 130.1: Salient Rules
- A MIC must have at least 20 shareholders.
- A MIC is generally widely held. No shareholder may hold more than 10% of the MIC’s total capital.
- At least 50% of a MIC’s assets must be residential mortgages, and/or cash and insured deposits at Canada Deposit Insurance Corporation member financial institutions.
- A MIC may invest up to 25% of its assets directly in real estate, but may not develop land or engage in construction. This ceiling on real estate holdings does not include real estate acquired as a result of mortgage default.
- A MIC is a flow-through investment vehicle, and distributes 100% of its net income to its shareholders.
- A MIC is a tax-exempt corporation as its income is instead taxed in the hands of its shareholders.
- Dividends received with respect to directly held shares, not held within RRSPs or RRIFs, are taxed as interest income in the shareholder’s hands. Dividends may be received in the form of cash, or additional shares.
- MIC shares are qualified RRSP and RRIF investments.
- A MIC may distribute income dividends, typically interest from mortgages and revenue from property holdings, as well as capital gains dividends, typically from the disposition of its real estate investments.
- A MIC’s annual financial statements must be audited.
- A MIC may employ financial leverage by using debt to partially fund assets.
WHAT IS THE DIFFERENCE BETWEEN INVESTING IN A MIC VS. A PRIVATE MORTGAGE?
Investing in a MIC allows an investor to pool their funds in multiple mortgages. Investing in a single private mortgage, the investor would bear 100 percent of the credit risk associated with the specific mortgage. In a MIC, any credit risk is diversified across multiple mortgages.
WHAT types of mortgages does LMIC underwrite and where?
LMIC underwrite a diversified portfolio of mortgages, concentrating on 1st and 2nd residential mortgages, along with a small number of commercial and construction mortgages that fit our risk and geographic profile. Our lending standards are stringent to minimize credit losses and ensure consistent returns.
Will I receive statements?
Yes, all shareholders will receive a trade confirmation after each purchase. In addition, statements are issued quarterly which captures your earning and holdings. A T5 (tax slip) will be issued to shareholders holding their shares in a non-registered account. The amount will reflect the annual taxable dividend.
Are LMIC shares RRSP, RRIF, OR TFSA Eligible?
Yes, Liahona is a qualified investment for self-directed RRSP, RRIF and TFSA accounts.
How is income from this fund taxed?
The Income Tax Act requires that 100% of a MIC’s annual net income, be distributed to its shareholders, in the form of a dividend. This dividend is taxed as interest income.
Who Can Invest in LMIC Shares?
Click below to see if you qualify.
When do I receive dividends?
LMIC distributions are based on a targeted return.
Non-declared dividends are issued quarterly. A final distribution will be issued after the year-end audit has been completed and a dividend is declared.
For investors who opt to receive their distribution in cash, the funds will be deposited on or before the 5th business day following the quarter-end.
What is the liquidity of my Shares?
Redemption fees for exiting the fund are waived after 12 months. Early exit fees are applied as follows, based on the original settled purchase date:
- 0-6 months= 3.0% fee
- 6-12 month= 1.5% fee
- 12+months= No fee
See full Redemption Policy outlined in the Offering Memorandum.
How to Invest
We issue shares at a fixed price of $1.00 per share. Shares can be held in non-registered or registered accounts (i.e. RRSP, RRIF, LIRA, TFSA etc.)
Liahona is a tax-exempt Mortgage Investment Corporation. We distribute 100% of our net profits to our investors.
Investors can opt to have quarterly dividends paid in cash or reinvested into shares.
Investors will receive quarterly statements.
Contact us to meet with a Dealing Representative to obtain further information including financial statements and mortgage portfolio data.
Audited financial statements available upon request