Fidelity Investments announces changes to its capital yield funds

Apr 01, 2013, 16:30 ET from Fidelity Investments Canada ULC

TORONTO, April 1, 2013 /CNW/ - The 2013 federal budget, tabled March 21, 2013, included proposed changes to what are described as "character conversion transactions" that have been used in certain mutual funds to effectively convert income to capital gains for tax purposes. These changes, as proposed by the government, are expected to remove the tax advantages of mutual funds that employ these transactions (commonly referred to as "capital yield funds"). Specifically, the budget noted that the returns produced under these structures will be treated as income, as early as 180 days following March 21, 2013.

While definitive legislation has not yet been released, Fidelity is taking proactive steps to protect existing investors in these funds.  It has become clear that increasing the size of existing character conversion transactions is not permitted.  Accordingly, as of end of business Tuesday, April 2, 2013, Fidelity will be closing its capital yield funds to additional investments.

It is important to note that the fundamental benefits of mutual fund corporations (commonly referred to as "class funds") remain, including tax-deferred switching and the ability to potentially reduce taxable distributions.

Investors are encouraged to speak with their financial advisor and/or tax advisor about their options regarding capital yield funds.

The funds that will be closing to additional investments are:

  • Fidelity Premium Fixed Income Capital Yield Private Pool Class
  • Fidelity Premium Tactical Fixed Income Capital Yield Private Pool
  • Fidelity Corporate Bond Capital Yield Class
  • Fidelity U.S. Monthly Income Capital Yield Fund
  • Fidelity American High Yield Capital Yield Fund
  • Fidelity Tactical Fixed Income Capital Yield Fund
  • Fidelity Canadian Bond Capital Yield Fund

About Fidelity Investments

Fidelity Investments Canada ULC is part of the Fidelity Investments organization of Boston, one of the world's largest providers of financial services. Recipient of the 2012 Morningstar Advisors' Choice Fund Company of the Year, Fidelity Canada manages a total of $73 billion in mutual fund and institutional assets. This includes $14 billion in assets for institutional clients, including public and corporate defined benefit pension plans, endowments, foundations and other corporate assets on behalf of clients across Canada.

Fidelity Canada provides Canadian investors a full range of domestic, international and income-oriented mutual funds, as well as asset allocation and managed solutions and the high net-worth program Fidelity Private Investment Program. Fidelity Funds are available through a number of advice-based distribution channels, including financial planners, investment dealers, banks and insurance companies.

Fidelity is a proud supporter of the Boys and Girls Clubs of Canada, and we are dedicated to helping young Canadians realize their full potential as productive, responsible and caring citizens.

SOURCE Fidelity Investments Canada ULC