TORONTO and MONTREAL, Jan. 4, 2016 /CNW Telbec/ – Fiera Capital Corporation (TSX: FSZ) (the “Manager”), the Manager of Canadian Convertibles Plus Fund (the “Fund”) (TSX: CCI.UN), announces that the Fund’s forward agreement (the “Forward Agreement”) will expire on March 6, 2016 (the “Expiry Date”). The Fund currently obtains exposure to the portfolio (the “Portfolio”) held by Diversified Convertibles Fund (the “Reference Fund”) through the Forward Agreement. The Portfolio is comprised primarily of convertible debentures of Canadian issuers.
The Income Tax Act (Canada) was amended in December 2013 to implement proposals that were first announced in the March 21, 2013 federal budget regarding the income tax treatment of character conversion transactions (the “Tax Changes”). Under the Tax Changes, the favourable tax treatment of character conversion transactions will be eliminated.
After a prescribed date gains (and losses) realized by a fund under certain forward purchase and sale agreements will be treated as ordinary income (or loss) rather than a capital gain (or capital loss) (the “Effective Date”). The Expiry Date for the Fund is the Effective Date.
Upon expiry of the Forward Agreement on the Expiry Date, the Manager intends to continue to pursue the Fund’s investment strategy directly without the Forward Agreement.
Subject to obtaining the required regulatory approvals, the Fund’s investment objectives will be amended on or about the Expiry Date to remove all references to the use of the Forward Agreement to gain exposure to the Reference Fund, to delete references to “tax-advantaged” distributions and to clarify that the Fund will invest directly in securities similar to those held by the Reference Fund. The Fund’s declaration of trust will be amended in accordance with its terms to reflect the termination of the Forward Agreement and other necessary amendments associated with the change.
The investment objectives of the Fund after the amendments will be to provide holders of units with:
Following the termination of the Forward Agreement, a greater portion of distributions paid by the Fund will be characterized primarily as income for tax purposes to the extent they exceed available noncapital losses of the Fund.
However, it is anticipated that the Fund, and therefore its holders, will save approximately 0.30% of net asset value per annum by not employing the Forward Agreement. The aggregate management fee received by the Manager from the Fund will remain the same as received from the Fund and the Reference Fund prior to the Expiry Date. The termination of the Forward Agreement will not affect the status of the Fund as a “mutual fund trust” under the Tax Act.
About Fiera Capital Corporation
Fiera Capital Corporation is a leading North American independent asset management firm listed on the Toronto Stock Exchange. The firm offers a wide range of traditional and alternative investment solutions, including depth and expertise in asset allocation. At September 30, 2015, Fiera Capital’s AUM was approximately CAD$89 billion. The firm delivers distinctive investment management capabilities to institutional, private wealth and retail clients in Canada. In the U.S., asset management services are provided by its U.S. affiliates, which are investment advisers registered with the U.S. Securities and Exchange Commission. For more information, visit www.fieracapital.com.