Toronto-based Arrow Capital Management Inc. confirmed Tuesday tax-advantaged distributions on two of its closed-end funds will continue until 2017.
Last week’s federal contains a proposed character conversion amendment to Canada’s Income Tax Act, which would affect certain tax benefits gained by taxable unitholders of investment funds, such as the East Coast Investment Grade Income Fund (TSX:ECF.UN) and the Raven Rock Strategic Income Fund (TSX:RRF.UN), that use forward sale agreements to obtain exposure to an underlying reference portfolio.
The funds’ forward sale agreements currently allow unitholders to receive tax-advantaged distributions of return of capital.
Based on its review to date, Arrow, the manager of the funds, believes that the funds and the tax characterization of distributions received by unitholders will be unaffected by the character conversion amendment until the expiration of the forward agreements in May 2017 and November 2017, respectively.
Arrow says it is waiting for further guidance from the federal government on the implementation of the budget proposals and will provide additional details as soon as it is in a position to do so.