CAPITAL INVESTMENT FUND
- +0.52% (Class A)
- +0.58% (Class F)
- -2.24% (Class A)
- -2.15% (Class F)
Opportunities Fund 2016 Distribution Amounts:
Class A $1.3858
Class F $1.4059
Dividend Distributions for 2016
Capital Investment Fund 2016 Distribution Amounts:
Class A $0.8422
Class F $0.8555
Starting with the 2016 tax year, the RSAM funds will be flowing through tax allocations to our unit holders based on the way returns were generated within the funds (the majority of which will be capital gains and losses), rather than entirely as income as we have done in the past. We are excited about this change and view it as a positive step forward in the evolution of our company and we endeavor to communicate with you as much as possible to avoid any confusion. We are acting on the advice of KPMG, our tax advisors.
The distribution you receive this year will be larger than the NAV increase of the funds for 2016. The majority of this difference is a result of the timing of certain trades within the funds and more gains than losses were realized throughout the year. In other words, the size of the distribution is based on the taxable income attributable to each investor. Of course, due to the favorable tax treatment of capital gains, your tax bill will be much lower than the distribution you receive. As a continued unit holder of RSAM, the losses that were not available for tax purposes at the end of 2016 will be available for crystallization in future periods, at which point they will be used to offset capital gains and result in a lower future tax bill.
If you are on the reinvestment plan, you receive additional units of the fund equal to the amount of the distribution divided by the post distribution NAV. If you are not on the reinvestment plan but would like to be, please contact our Manager, Investor Relations Paige Knight via phone 587-233-4065 or email email@example.com.
Not only will this new tax treatment reduce the tax burden on investors going forward, this process follows more closely to industry standard which we think ultimately makes things easier on investors and tax professionals.
It’s important to recognize that under this same tax approach, it’s not unreasonable to have a year where the funds are up substantially and the capital gains bill would be relatively small.
As a result of this larger than normal distribution, you will see a significant drop in the NAV/unit of our funds. This is not a fund performance issue but a function of the distribution. For tracking purposes, the starting NAV values for class A units for 2017 are $9.2953 for the Investment Fund and $8.8853 for the Opportunities Fund.
The purpose of this letter was to notify you that we are working on your behalf to make positive changes, but I am personally not a tax professional, so please seek independent tax advice should you need it – much like we did.
Please see Julian’s comments on January performance below.
Capital Investment Fund
Market conditions were optimal for our VIX futures roll strategy in January; it generated a positive return for the Fund this month. The Structured Product portfolio was up slightly on a tightening of spreads. The Merger Arbitrage portfolio registered modest gains while the Multifactor portfolio was down slightly.
An investment in Patterson-UTI Energy’s acquisition of Seventy Seven Energy contributed to a gain for the Merger strategy. Tightening of the discounts to NAV for the VMWare tracking stock and Liberty Expedia spin-off contributed to an increase in our Relative Value strategy. The Special Situations strategy was down on weakness in spin-offs Vista Outdoor and Knight Therapeutics, in addition to a decline in sum-of-parts story HBC. In addition, the modification of terms and ultimate cancellation of the TransAlta preferred share exchange also contributed to the monthly decline for the Fund. The Liquidation and High Yield portfolios were down slightly.
Julian Klymochko, CFA