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Future of Canadian Income Trusts is Positive Says GGOF At the one year anniversary of the trust taxation announcement, income trust valuations now reflect any discounts associated with future taxation

As the first year anniversary of the “Trust Fairness” announcement approaches, the GGOF Monthly High Income Fund management team believes the future of Canadian income trusts is positive. According to John Priestman, Kevin Hall and Michele Robitaille, there are three key indicators to support their optimistic outlook:

  1. Current valuations of income trusts largely reflect the impact of future taxation, as evident by the 18 per cent underperformance of the S&P/TSX Income Trust Index versus the S&P/TSX Composite Index since the trust tax announcement on October 31, 2006 (to September 30, 2007).
  2. Demand for tax-effective income is growing steadily. According to a recent GGOF / Ipsos Reid survey, 70 per cent of baby boomers plan to use money from investments to pay for retirement. Yet as boomers prepare to retire, the supply of high quality income options like fixed income securities, common shares and preferred shares, is contracting.
  3. Most trusts will morph into high yielding, dividend paying corporations, but not until they have to. However, regardless of whether trusts convert into a corporation or retain their current structures, companies with capable management teams, solid business propositions and strong operating platforms will continue to grow and prosper through 2011 and beyond.

The GGOF Monthly High Income Fund management team are available to discuss the current state and future prospects of the income trust market, including:

  • Will income trusts have the capability to sustain their current distributions post the 2011 tax hit?
  • Why is there a 25 per cent performance differential between the S&P/TSX Income Trust Index and S&P/TSX Composite Index since last year's announcement?
  • Are there “good trusts” and “bad trusts” and how can investors tell the difference? What matters most when analyzing and valuating a trust?
  • What should investors expect over the next three years and beyond? An outlook on the evolution of the income trust market.
  • Why should investors consider investing in income trusts; what are the income-generating options available?
  • A review of the takeover activity: Some 32 deals have closed since Halloween 2006, and 14 more are pending. What are the key takeovers and what do they mean for the income trust market?

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