Mackenzie fund change could trigger tax event

Mackenzie Financial Corporation plans to merge three of its fixed income corporate class funds into comparable trust funds, subject to investor approval.

These merger proposals are in response to changes to Canadian tax laws announced in the 2013 federal budget. Since each terminating fund is a fixed-income fund that relies on character conversion transactions to provide tax-efficient returns to investors, the dates of the proposed mergers generally correspond with the dates when each funds’ character conversion transactions expire.

The funds and merger details are:

*Fixed Income Class and Fixed Income Fund (Portico) are part of the Quadrus Group of Funds.

It’s important to note the mergers will be taxable events for investors who hold shares of the terminating funds outside of registered accounts such as RRSPs. For this reason, Mackenzie Investments is proposing the mergers well in advance of the merger dates, so as to provide clients as much lead time as possible for their financial and tax planning.

Read: A smooth exit from character conversion funds

“To defer the tax liability, investors may want to consider switching to different corporate class funds prior to the merger date,” says Carol Bezaire, senior vice president of Mackenzie Tax and Estate Planning. “All switches within Capitalcorp, and all switches within Quadruscorp, will be tax-deferred.”

Investors in Fixed Income Class, in particular, will enjoy lower fees as a consequence of the merger into Fixed Income Fund (Portico).

Special meetings of all effected investors are scheduled for December 8, 2014 to consider and vote on the proposed mergers. Investors who hold securities of the funds as of October 31, 2014 will be entitled to vote at the meetings.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.