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Table of Content

1. Taxation Year-End Dates and Distribution Dates
2. Impact of Distributions
3. Distributions of funds
4. Management Fees and Redemptions
5. 2021 Distribution estimates

When it comes to mutual fund distributions, there are few important facts that must be keep in mind as an investor.

  • The majority of Canadian mutual funds are structured as trusts. Investors receive units of the mutual fund trust (“the Fund”) as consideration for the capital they invest, which is determined based on the net asset value per unit at the time of subscription.
  • The Fund’s net earnings are allocated to investors based on their proportionate holdings in the Fund. For example, an investor that holds 10 units of a Fund with 1,000 units outstanding will receive a 1% distribution of the Fund’s earnings. The allocation of earnings by the Fund to investors are called distributions.
  • The primary objective of distributions from a Fund is to pay out sufficient taxable income (including net capital gains) so that the Fund itself is not subject to income tax. Earnings retained by a Fund are generally otherwise subject to tax at the highest marginal rate.
  • Distributions received by individual investors are taxed at their own marginal tax rates, which may be lower than the rate applicable to the Fund. By reducing tax paid by the Fund, investors will generally see an improvement on the return of their investment. The size of the distribution is based on the Fund’s performance.
  • The timing and frequency of the distributions will vary from fund to fund.

1. Taxation Year-End Dates and Distribution Dates

Pembroke fundTaxation year-end of the FundDistribution Date
Pembroke American Growth Fund Inc.December 31Dividend declared at the discretion of the Board of directors of the Fund
Pembroke Canadian Bond Fund December 15Quarterly, on the final business day of March, June, September and the third Tuesday of December
Pembroke Corporate Bond Fund December 15Quarterly, on the final business day of March, June, September and the third Tuesday of December
Pembroke Canadian Balanced Fund December 15Quarterly, on the final business day of March, June, September and the third Tuesday of December
Pembroke Global Balanced Fund December 15Quarterly, on the final business day of March, June, September and the third Tuesday of December
Pembroke Canadian Growth Fund December 15Annually, on the third Tuesday of December
Pembroke International Growth Fund December 15Annually, on the third Tuesday of December
Pembroke Concentrated Fund December 15Annually, on the third Tuesday of December
Pembroke Dividend Growth Pooled FundDecember 15Quarterly, on the final business day of March, June, September and the third Tuesday of December
Pembroke Canadian Growth Pooled FundDecember 15Annually, on the third Tuesday of December
Pembroke U.S. Growth Pooled FundDecember 15Annually, on the third Tuesday of December
Pembroke Canadian All Cap Pooled FundDecember 31Annually, on the third Tuesday of December
Pembroke Global Equity Pooled FundDecember 15Annually, on the third Tuesday of December

Funds with a distribution on the third Tuesday of December (December 21st, 2021)

What this means is that the Fund will elect a December 15th taxation year-end (Financial year-end remains December 31st) and, as such, the Fund’s income and capital gains are calculated as at and including December 15th.

Income and capital gains earned by the Fund during the period of December 16th to December 31st will be part of the distribution calculation for the following year (2022). The distributions will be calculated and posted on the valuation of December 21st, 2021.

Electing to adopt a taxation year ending on December 15th gives fund managers more time to ensure the taxable income and distribution calculations are accurate.

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2. Impact of Distributions

Distributions from Funds held in Non-Registered AccountsDistributions from Funds held in Registered Accounts
A. There are various categories of distributions which is ultimately dependent on the composition of earnings experienced by the Fund. Distributions from Funds held in non-registered accounts are noted on T3 slips and Relevé 16 (for Québec residents) issued to individuals resident in Canada for income tax purposes. The tax treatment for the various types of distributions incurred by these individuals are detailed in the chart below.

B. Earnings where cash is not distributed to investors are considered to be reinvested in the Fund. As a result, the investor will receive additional units representing this reinvested capital and such distributions are added to the investor’s adjusted cost base (“ACB”) for tax purposes.
Distributions from Funds held in registered accounts (Registered Retirement Savings Plans, Registered Retirement Income Fund, Tax-Free Savings Accounts, Locked-in Retirement Accounts) are not taxable to investors in the year of distribution. Instead, these distributions are reinvested in the Fund and are not taxable until the investor withdrawals from their investment account. (In the case of a Tax-Free Savings Account, cash withdrawals are not taxable.)

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3. Types of Fund Distributions

DistributionWhat is the tax treatment?Which fund (s) can an investor expect this type of distribution from?
Interest income
Earned when a Fund invests in debt securities/instruments

Interest income is fully taxable at the investor’s marginal tax rates.
Pembroke Canadian Bond Fund
Pembroke Corporate Bond Fund
Pembroke Global Balanced Fund
Pembroke Canadian Balanced Fund
Canadian dividend income
Earned when a Fund invests in shares of Canadian public corporations

Canadian dividend income is taxable at the investor’s marginal tax rates and is eligible for a dividend tax credit.Pembroke Canadian Growth Fund
Pembroke Global Balanced Fund
Pembroke Canadian Balanced Fund
Pembroke Concentrated Fund
Pembroke Canadian Growth Pooled Fund
Pembroke Dividend Growth Pooled Fund
Pembroke Canadian All Cap Pooled Fund
Foreign non-business income
Earned when a fund invests in shares of foreign securities. This includes dividends received from foreign corporations

Gross foreign non-business income is fully taxable at the investor’s marginal tax rates. Any foreign taxes paid by the Fund on such income is allocated to investors and noted on a T3 slip and Relevé 16 (for Québec residents). A foreign tax credit is generally permitted for investors to claim.Pembroke Corporate Bond Fund
Pembroke Global Balanced Fund
Pembroke International Growth Fund
Pembroke Concentrated Fund
Pembroke Global Equity Pooled Fund
Pembroke U.S. Growth Pooled Fund
Pembroke Canadian Balanced Fund
Capital gains
Generated from security trades incurred within the Fund resulting in gains in excess of losses. Capital losses are not allocated to investors by the Fund.
Half of capital gains are subject to tax at the investor’s marginal rates.
Pembroke Canadian Bond Fund
Pembroke Canadian Growth Fund
Pembroke Corporate Bond Fund
Pembroke Global Balanced Fund
Pembroke Canadian Balanced Fund
Pembroke International Growth Fund
Pembroke Concentrated Fund
Pembroked Canadian Growth Pooled Fund
Pembroke Dividend Growth Pooled Fund
Pembroke Canadian All Cap Pooled Fund
Pembroke Global Equity Pooled Fund
Pembroke U.S. Growth Pooled Fund
Return of capital
Generated when the fund returns to investor's their original invested capital
A return of capital is tax free to investors, and reduces an investor’s ACB in the Fund. Pembroke funds do not normally return capital to investors.
  • A mutual fund may also be structured as a corporation. An example of a mutual fund structured as a corporation is the Pembroke American Growth Fund Inc.
  • Unlike a mutual fund structured like a trust, investors are considered shareholders and such funds do not distribute its earnings to shareholders. Instead, Directors of the mutual fund corporation may occasionally declare dividends to investors.
    • Canadian dividend income is taxable at the investor’s marginal tax rates and is eligible for a dividend tax credit. Such dividends are reported to investors on a T5 slip and Relevé 3 (for Québec residents).

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4. Management Fees and Redemptions

Management fees are charged outside of all Pembroke funds, meaning a portion of investors’ units in the Fund are redeemed on a monthly basis to satisfy the payment of management fees.  As a result, an investor will likely experience a capital gain on these redemptions.  Similarly, investors that request cash redemptions from their investment holdings will also trigger a capital gain.  The size of the capital gain is dependent on the amount redeemed and the individual’s ACB in the Fund.  Half of capital gains are subject to tax at the investor’s marginal rates.

A summary of such dispositions resulting from management fees and cash redemptions will be reported to investors on a T5008 and Relevé 18 (for Québec residents) at year-end.

Furthermore, a letter summarizing management fees paid will be distributed to investors. It is recommended that you speak with your personal accountants regarding the deductibility of management fees for income tax purposes.  Management fees incurred on Funds held in registered accounts are not deductible for income tax purposes.

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5. 2021 Distribution Estimates

Below are the estimated 2021 year-end distributions for the Pembroke Mutual Funds and Pooled funds.

Mutual FundsCapital Gain/UnitIncome/Unit
Pembroke Canadian Bond Fund$0Regular Quarterly Income
Pembroke Corporate Bond Fund$1.05427Regular Quarterly Income
Pembroke Candian Balanced Fund$1.96138Regular Quarterly Income
Pembroke Global Balanced Fund$0.50389Regular Quarterly Income
Pembroke Canadian Growth Fund$8.68623$1.00361
Pembroke International Growth Fund $4.77959$0.19353
Pembroke American Growth Fund Inc.$0$0
Pembroke American Growth Fund Inc. $US$0$0
Pembroke Concentrated Fund Class A $0.45556$0.01633
Pembroke Concentrated Fund Class A $US$0.36268$0.01301
Pembroke Concentrated Fund Class F$0$0
Pembroke Concentrated Fund Class F $US$0$0
Pooled Funds *Capital Gain/UnitIncome/Unit
Pembroke Dividend Growth Pooled Fund$1.67935Regular Quarterly Income
Pembroke Canadian Growth Pooled Fund$1.40917$0.24650
Pembroke U.S. Growth Pooled Fund$1.49728$0.07183
Pembroke U.S. Growth Pooled Fund $US$1.19305$0.05724
Pembroke Canadian All Cap Pooled Fund$0.08900$0.02581
Pembroke Global Equity Pooled Fund $0.34993$0.05045

(*) The Pembroke Pooled Funds are prospectus-exempt products that are offered to investors who meet the definition of an “accredited investor” under securities legislation.

 

Please note: These are estimates only.  They are calculated based on portfolio information as of November 16, 2021.  Please contact your Pembroke Representative for further details.

Disclaimer: The figures represent estimates and are subject to change based on portfolio, market, and shareholder activity and tax adjustments.  Keep in mind that market conditions, portfolio changes and/or changes in outstanding mutual fund and pooled fund units could affect these estimates substantially.  This information is NOT FINAL and is subject to change.  Pembroke does not provide tax, accounting or legal advice.  Specific questions regarding your personal income tax situation should be referred to a tax advisor.

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