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Advantaged Canadian High Yield Bond Fund Announces the Termination of its Forward Agreement and Proposed Changes to its Structure

Montag, 18.01.2016 18:15 von PR Newswire

Canada NewsWire


TORONTO, Jan. 18, 2016 /CNW/ - Scotia Managed Companies Administration Inc. (the "Manager"), the manager of Advantaged Canadian High Yield Bond Fund (the "Fund") (TSX: AHY.UN), announces that as a result of changes to the Income Tax Act (Canada) the Fund's forward agreement (the "Forward Agreement") will be settled on March 31, 2016 (the "Forward Date"), the scheduled termination date of the Forward Agreement. Following this, it is proposed that the Fund will invest directly in securities of the kind that comprise the portfolio  of Canadian high yield fixed income securities (the "Portfolio") held by CHY Fund, the reference fund of the Fund. After the Forward Date, distributions made by the Fund will no longer have the same tax-advantaged nature.

For distributions declared after the Forward Date, the Fund is proposing to initially set its targeted distributions at $0.46 per Class A unit and $0.52 per Class F unit, per annum, representing an approximate annual yield of 6.5% and 7.2% on the Class A units and Class F units, respectively, based on the net asset value per unit as at January 4, 2016. Following the Forward Date, distributions paid by the Fund are no longer expected to be characterized primarily as capital gains or returns of capital and instead all or a portion of the distributions will be characterized as ordinary income, although the Fund may still distribute capital gains or returns of capital in the future. The termination of the Forward Agreement will not affect the status of the Fund as a "mutual fund trust" under the Tax Act.

Subject to regulatory approval, the Manager proposes to amend the declaration of trust of the Fund to remove the words "tax-advantaged" and references to the Forward Agreement from its investment objectives. The investment objectives of the Fund after the proposed amendments will be to: (i) preserve and enhance the net asset value of the Fund; and (ii) provide unitholders with quarterly distributions through investment in the Portfolio.

As a result of the changes proposed for the Fund, the Manager has created a special retraction right to provide unitholders of the Fund who do not wish to continue their investment in the Fund after the Forward Date with the option of retracting their units on March 31, 2016 (the "Retraction Date") and to receive retraction proceeds equal to the net asset value per unit as of such date. Unitholders who wish to exercise the special retraction right must deliver their notice of retraction to the Manager on or prior to 5:00 p.m. (Eastern time) on February 3, 2016 (the "Retraction Notice Date").  Payments for units tendered pursuant to the special retraction right will be made no later than 15 business days after the Retraction Date, provided that such units have been properly surrendered for retraction on or prior to the Retraction Notice Date.

On or about the Forward Date, the Manager expects that the Fund will amend its declaration of trust and other ancillary documents as required to reflect the termination of the Forward Agreement, changes to the investment objectives of the Fund as described above and delete the references to the exposure to CHY Fund through the Forward Agreement. It is expected that the investment restrictions will also be amended to reflect substantially the same investment restrictions of CHY Fund and to reflect the aggregate fees payable to the Manager from the Fund.

The Manager will receive the same aggregate management fees from the Fund as have been paid by the Fund and CHY Fund prior to the Forward Date. The Manager will continue to pay a service fee to registered brokers, dealers and advisors at a rate of 0.40% per annum on the Class A units held by their clients.

Certain statements included in this news release constitute forward-looking statements. The forward-looking statements are not historical facts but reflect current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. The Manager undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law. Investment funds are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There is no assurance that the Fund will be able to achieve its distribution and capital preservation objectives or that the full amount of a unitholders investment in the Fund will be returned.

SOURCE Advantaged Canadian High Yield Bond Fund