ROI Capital Assesses Effect on Listed Funds of Federal Budget Changes Related to Forward Agreements

TORONTO, May 6, 2013 /CNW/ - The March 2013 federal budget included proposed changes to eliminate character conversion transactions using forward agreements,  affecting many funds in Canada that pursue tax advantaged distribution strategies. Each of the ROI Canadian Mortgage Income Fund ("RIL.UN"), the ROI Canadian Real Estate Fund ("RIR.UN") and the ROI Canadian High Income Mortgage Fund ("RIH.UN") (collectively, the "Funds"), managed by Return On Innovation Advisors Ltd. ("ROI Capital") and the units of which are listed for trading on the Toronto Stock Exchange, uses the type of forward agreements affected by the proposed changes in the budget.

The current forward agreements of the Funds mature by their terms on different dates. The forward agreement settles in whole on May 6, 2013 for RIL.UN, on March 25, 2014 for RIR.UN and on January 16, 2017 for RIH.UN.

While the current forward agreements remain in place without extension, the character conversion aspect of these forward agreements continues to operate by reason of the grandfathering provisions for the proposed changes in the budget.

Since the current forward agreement for RIL.UN is maturing ROI Capital will be entering into a new forward agreement today, on behalf of RIL.UN, with a term of 179 days maturing on November 1, 2013.  ROI Capital anticipates this will not affect the grandfathering of RIL.UN's current forward agreement. The new short-term forward agreement for RIL.UN is intended to permit it to retain the current structure of its arrangements while providing it more time to assess and implement appropriate arrangements beyond the short term that will appropriately address its individual situation and the effects on unitholders.

The immediate impact for unitholders of RIL.UN is that all scheduled monthly cash distributions received in the 2013 tax year are expected to consist of capital gains, which are generally subject to tax in the hands of taxable unitholders.  In the event that net realized capital gains and any net income of RIL.UN in 2013 exceed the aggregate amount of monthly cash distributions, such excess may be allocated to unitholders by way of additional distributions in the form of units that would be consolidated automatically with the units held by the unitholder at year end.

The second impact for RIL.UN is that after the current forward agreement and new short-term forward agreement expire, scheduled monthly distributions to unitholders are expected to consist principally of ordinary income.

For each of RIH.UN and RIR.UN, the timing of the incurrence of taxable capital gains in the future, the potential size of such gains and their effect on the nature of the scheduled distributions is uncertain at this time.  For each of such Funds, after the expiry of its current forward agreement, allocations to its unitholders are expected to consist principally of ordinary income.

ROI Capital is continuing to work with its lawyers and tax advisors to assess the consequences for each of the Funds and their unitholders of the proposed changes for forward agreements under the March 2013 federal budget. ROI Capital will continue to examine the potential implications of the proposed changes in the budget for the Funds and their unitholders and possible changes for the Funds resulting from such implications and will continue to act in the best interest of unitholders in addressing the new circumstances.

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. Return On Innovation Advisors Ltd. 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 guarantee that an investment in a Fund will earn any positive return in the short or long term nor is there any guarantee that a Fund's investment objectives will be achieved or that the net asset value per unit will appreciate or be preserved.

SOURCE ROI Capital




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