What is a split share fund?

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A Split Share Fund is a unique investment vehicle that generally has two classes of shares – a Preferred share and a Class A (or capital) share. Investors may hold both shares or may choose the one that best suits their investment objectives. The underlying fund typically holds a basket of high quality dividend paying companies in the portfolio. A Preferred share investor would typically receive dividends that are generated from the fund’s investment holdings. Like other fixed income instruments, Preferred shareholders do not generally expect to have gains or losses but expect to receive their initial investment back upon termination. The Class A share investor would typically participate in any capital appreciation (depreciation) in the portfolio and any additional dividends or income generated on the underlying portfolio. The Class A shareholder receives all of the gains (losses) on the entire portfolio including assets attributable to the Preferred shareholders, meaning that a Class A shareholder would see a more magnified return from the structure rather than just holding the same basket of stocks directly. Like equity or mutual fund investors, Class A shareholders participate in gains and losses and their return upon termination is dependent upon the performance of the underlying portfolio.

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For more information, please see our Split Share Overview.

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What should investors consider upon receipt of an "annual" retraction/redemption notice?

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Shareholders who wish to dispose of their shares may sell them at any time on the TSX for the market price, often at a premium to the net asset value ("NAV").  Or, once a year each fund offers an optional retraction where you may concurrently retract equal amounts of all classes of shares (Class A shares and Preferred shares) prior to the deadline in order to receive the NAV as of the valuation date.  

 

Option 1 gives the fund consent to attempt to recirculate your shares in the market if possible for at least the NAV (potentially more).

Option 2 withholds consent to attempt to recirculate therefore shareholders would receive the NAV without potential for more.

Or, take no action and continue to hold your shares.

Each fund also offers an ongoing monthly retraction/redemption option at a penalty.  For complete retraction details, please refer to each fund's most recent Annual Information Form posted under "Fund Documents" on the web sites, or consult your financial advisor.

 What should investors consider upon receipt of a "recurring special retraction" notice?

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In the case of a term extension, each fund offers an additional retraction right for those shareholders not wishing to continue holding their investment, allowing existing shareholders to tender one or all classes of Shares and receive a retraction price based on the NAV as at the last business day of November.   For repayment formulas pertaining to specific funds, please refer to the "Recurring Special Retraction Right" section of the latest Annual Information Form posted under "Fund Documents" on the web sites.

 

Alternatively, shareholders may sell their shares for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their shares.