How to get the inside scoop on who owns what

It's back-to-school time, and not just for the kiddies. Investor Clinic is back from summer vacation, ready to kick off the fall semester with some fresh investing lessons.

So put on your thinking caps. We'll start by answering a couple of reader questions.

Are there any websites that give info on how much of a company's stock is held by insiders? - R.B.

Yes. You can find information on insider holdings and insider transactions at Sedar.com (System for Electronic Document Analysis and Retrieval) and Sedi.ca (System for Electronic Disclosure by Insiders), respectively. These websites are operated by securities regulators and can be cumbersome to use, so here are some tips to get you started.

Once you're on Sedar.com, click on "search database", then "search for public company documents". Next, enter the company name and under "document type" select "proxy circular". You can also adjust the date range and narrow your search by industry.

If you scroll through the most recent proxy circular (also known as the management information circular), you will see a list of directors and their shareholdings. An increasing number of companies also report holdings of the chief executive and other officers. Companies are required to disclose if any individual or group owns or exercises control over more than 10 per cent of the outstanding common shares.

If you want to see which insiders are buying or selling, visit Sedi.ca and click on "access public filings". Then click on "view summary reports" and select "insider transaction detail." From here you can search insider transactions by issuer name and date range. Warning: You need to enter all of the information correctly or you'll get an error message. If you get stuck and need help, use the " contact us" link at the top of the page.

What's the difference between return on capital and return of capital? Are they the same thing? - J.K.

No, they are not. Return on capital is a profitability measure that shows how effectively a company is using its capital to generate income. Basically, it's the company's earnings divided by the sum of its capital (debt and equity), and expressed as a percentage.

Return of capital is something else entirely, and requires a more detailed explanation. If you own real estate investment trusts, income trusts or exchange-traded funds, chances are that part of your distribution is classified as return of capital.

As an investor, the important thing to know is that return of capital is not taxable immediately. Rather, the amount is subtracted from the price you paid for the investment, lowering your adjusted cost base. This gives rise to a larger capital gain - or smaller capital loss - when you eventually sell your shares.

The tax-deferral benefits aside, some investors are suspicious of return of capital. "You're just getting your own money back," they say.

In some cases, that's true. When a bank extends a mortgage loan, for example, part of the money it gets paid every month is interest, and the rest is a return of its own capital, or principal. This is what's known as economic return of capital.

In other cases, however, return of capital is largely an accounting phenomenon. With REITs, for example, the return-of-capital component represents real cash flow from the business, so you're not getting paid with your own money, says Dennis Mitchell, vice-president and senior portfolio manager with Sentry Investments.

Consider a REIT with a $1-billion office portfolio. The REIT depreciates the value of its assets by $25-million every year, reducing its earnings by that amount. But depreciation is a non-cash expense. And the REIT probably won't spend that much to maintain its properties, which will likely rise in value over time, not fall. Result: The REIT can pay out more cash to unitholders than it makes in accounting earnings. The difference is treated as return of capital, even though it's real cash flow generated by the business.

"It really comes down to, where do the cash flows come from? And from a REIT standpoint, the cash flows come from the operations of the business. It's just classified differently," he said.