Citing tax changes, RBC to close eight corporate-class funds

Rudy Luukko 1 April, 2014 | 3:57AM
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In response to tax changes announced in the March 2013 federal budget that eliminated the ability of derivatives-based funds to convert interest income into tax-advantaged capital gains, RBC Global Asset Management Inc. plans to eliminate eight of its corporate-class funds.

Subject to shareholder and regulatory approval, the terminations are to take effect on Sept. 12. The meeting for shareholders to vote on the proposals is to be held on June 20. RBC GAM's proposals have been approved by the funds' independent review committee.

The termination of each Fund would be considered a taxable disposition, leaving investors with capital gains or losses to report on their 2014 income-tax returns.

Among the affected funds are RBC Bond Capital ClassPhillips, Hager & North Total Return Bond Capital Class and RBC High Yield Bond Capital Class. Also targeted for closure are five funds in the RBC Select portfolio series. (See table.)

In a release today, RBC GAM said the funds were designed to include exposure to forward agreements as part of their investment strategies. Due to the change in tax treatment, the company added, it is in the best interests of investors to close the funds.

Investors in the corporate-class funds who retain their shares will be switched by RBC GAM to another RBC fund. Alternatively, investors can switch to a corporate-class fund that isn't being terminated, or redeem their shares. The deadline for redemptions is the close of business on the business day immediately preceding the effective date of the proposed terminations.

Those who choose not to switch or redeem on their own will receive units in the same series of a corresponding mutual fund trust that does not use forward agreements but otherwise has an investment objective consistent with that of the fund being eliminated.

The affected corporate-class funds and their corresponding mutual fund trusts are:

Terminating corporate classes Mutual-fund trusts
 RBC Bond Capital Class  RBC Bond
 PH&N Total Return Bond Capital Class  PH&N Total Return Bond
 RBC High Yield Bond Capital Class  RBC High Yield Bond
 RBC Select Very Conservative Class  RBC Select Very Conservative Portfolio
 RBC Select Conservative Class  RBC Select Conservative Portfolio
 RBC Select Balanced Class  RBC Select Balanced Portfolio
 RBC Select Growth Class  RBC Select Growth Portfolio
 RBC Select Aggressive Growth Class  RBC Select Aggressive Growth Portfolio
Source: RBC Global Asset Management Inc.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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