by Paolo Taruc
First National Financial announced Wednesday its mortgage investment fund will be terminated by next month.
Unitholders are not required to take any action, according to the fund’s manager, Stone Asset Management. Instead, the fund will pay them a special distribution before termination. The payout will be based on the amount necessary to eliminate the fund’s liability for non-refundable income tax under the Income Tax Act.
The move comes as the favourable tax treatment for the forward purchase and sale agreement (“Forward Agreement”) – an integral part of the fund’s portfolio – is set to expire on 19 December.
First National said it will no longer be possible for the fund to provide its unitholders with exposure to the Portfolio on the originally intended tax-advantaged basis.
“As a result of the upcoming Forward Termination Date, loss of the intended favourable tax treatment and reduction in the size of the Fund’s assets as a result of redemptions over the past number of years, the Manager [Stone Asset] has determined to terminate the Fund on or about the Forward Termination Date,” it added.
Stone Asset will apply to delist the units of the fund from the Toronto Stock Exchange. It is expected that the units will be delisted at the close of trading on or about 15 December this year.