| 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
TORONTO,
October 25, 2007 – 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:
- 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).
- 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.
- 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?
- 30 -
Contacts:
JoAnne Hayes, Toronto, joanne.hayes@bmo.com,
(416) 867-3996
Lucie Gosselin, Montreal, lucie.gosselin@bmo.com,
(514) 877-8224
Laurie Grant, Vancouver, laurie.grant@bmo.com,
(604) 665-7596
Internet:
www.ggof.com
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