Frequently Asked Questions
These FAQs will allow you to learn more about certain characteristics of Meritage Portfolios. Explore by theme to obtain answers to questions that are frequently asked.
Are Meritage Portfolios automatically rebalanced?
Meritage strategic portfolios are rebalanced on an ongoing basis to fit the initial selection and prevent overexposure in any specific asset category. If a specific fund market value deviates more than 2.5% from its original target or an asset class varies by more than 5%, we will proceed with a rebalancing of the portfolio.
What is a corporate class portfolio?
Your personal situation and financial needs will change over your lifetime. For this reason, some Meritage Portfolios are also offered in a corporate class. These portfolios are specifically designed to adapt to the various stages of your life and help you reach your investment goals.
The Meritage Corporate Class Portfolios are share classes of the same mutual fund corporation. In contrast to traditional “trust” type mutual funds, corporate class portfolios allow you to shift assets from one portfolio to another (conversion) within a structure (the corporation) with no immediate tax repercussions.
Who can benefit from this solution?
This solution is particularly beneficial to:
- Affluent investors who have maximized their RRSP and TFSA contributions, and who have additional liquidities to invest.
- Retired investors who wish to maximize their eligibility to government benefits by reducing their level of taxable investment income.
What are the benefits of corporate class portfolios?
Deferred taxation of portfolio conversions combined with tax-efficient distributions over many years allow you to get the most out of your investment.
Corporate class portfolios allow you to shift assets from one corporate class portfolio to another without triggering any immediate capital gains tax. This benefit provides you with the flexibility to be invested in the portfolio that is most in line with your objectives, at any time.
You can transition from the accumulation phase to the payout phase within the corporate class structure without triggering a tax event. In addition, the T Series provides tax-efficient monthly distributions, consisting mainly of return of capital.
How to benefit from a tax-efficient distribution?
Certain Meritage Portfolios are also offered as income portfolios to provide you with stable monthly distributions1 made up of, in part, return of capital (ROC), capital gains and dividends, which are tax-efficient sources of income compared to others. For instance, ROC distributions2 are not taxable for the year in which they are collected, due to the tax deferral.
Example of Meritage Portfolios distributions
|| 2015 ACTUAL DISTRIBUTION
|| % Income/foreign
||% Capital gains
|Diversified Fixed Income
1 Distributions are said to be stable as they do not usually change from one to the next. However, the distribution amount per security is not guaranteed and may be adjusted if this is required by market conditions. For more information, please consult the simplified prospectus of the Meritage Portfolios.
2 Return of capital (ROC) distributions gradually reduce the adjusted cost base (ACB) and are considered tax free until the fund units are redeemed. The annual distribution rate of each portfolio is adjusted to avoid a precipitous decline in the ACB. When the ACB drops to zero, subsequent ROC distributions are treated as capital gains in the year they are received.