Income Trusts
Income trusts offer regular cash distribution payments which in many cases are treated
favourably for tax purposes. The majority of investment returns tend to be generated by the distribution stream while total returns may be enhanced or hindered by capital appreciation or depreciation of unit prices. The greatest risk to investing in income trusts is that their distributions are not guaranteed. Should a distribution payment be reduced or cancelled, an investor's income stream will be reduced and the market tends to respond negatively to these announcements, resulting in lower market prices. Changes in the taxation of income, and interest rates can also have a significant effect on trust unit prices. Trusts that are involved in commodity related business may be further influenced by supply and demand issues.
