Vancouver-based HSBC Global Asset Management (Canada) Ltd. (HSBCAM) is trimming fees of its manager series of mutual funds and sharing important information about the taxation of two of its HSBC Wealth Compass Funds that were launched in 2018, the company announced Thursday.
Effective Dec. 18, HSBCGAM will reduce management fees by up to 35 basis points on the manager series of 12 mutual funds.
The list of new management fees is available in the company’s news release.
Earlier this year, HSBCGAM launched the HSBC Wealth Compass Funds, which includes HSBC Wealth Compass Conservative Fund and HSBC Wealth Compass Moderate Conservative Fund.
The company has determined that it does not expect the two funds to meet the requirements to qualify as a mutual fund trust (MFT) for tax purposes for 2018 by the required deadline, which is the end of March 2019.
“This determination, along with the fact that for some or all of 2018 HSBC Bank Canada has held greater than 50% of the outstanding units, means that the taxation of the non-MFT funds will differ from the other funds,” HSBCGAM says in a news release.
For the period in which HSBC Bank Canada holds greater than 50% of the outstanding units, the non-MFT fund will be subject to taxation on a mark-to-market basis. Mark-to-market means that all net unrealized gains of the fund will be recognized and distributed to unitholders at the end of the taxation year of the fund, the company says. Mark-to-market income distributed to unitholders is 100% taxable and will be reported as other income (like interest income) on T3 slips.
If, within 2018, HSBC Bank Canada’s holdings of a non-MFT fund fall to 50% or below, the fund will be deemed to have a year-end for tax purposes and will distribute its income for that period of time. The fund will also have a regular year-end of Dec. 31. Therefore, unitholders may receive two distributions for 2018. Similarly, if HSBC Bank Canada’s holdings of the fund fall to 50% or below within 2019 or the fund qualifies as a mutual fund trust within 2019, unitholders may receive two distributions for 2019, the company says.