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TORONTO, June 6, 2016 /CNW/ - Further to its press release dated March 27, 2013, Aston Hill Capital Markets Inc. (the "Manager"), as the manager of Voya Floating Rate Senior Loan Fund (the "Fund") (TSX: Class A: ISL.UN; Class U: ISL.U) announces that its forward purchase and sale agreement with The Bank of Nova Scotia (the "Forward Agreement") will expire on or before June 30, 2016 (the "Termination Date"). Currently the Fund obtains exposure to ISL Loan Trust (the "Reference Fund") through the Forward Agreement. The Reference Fund holds a diversified portfolio (the "Portfolio") consisting primarily of senior, secured floating rate corporate loans and other senior debt obligations of non-investment grade North American borrowers.
The Income Tax Act (Canada) was amended in December 2013 to implement proposals that were first announced in the March 21, 2013 federal budget regarding the income tax treatment of character conversion transactions (the "Tax Changes"). Under the Tax Changes, the favourable tax treatment of character conversion transactions will be eliminated. After a prescribed date (the "Effective Date"), gains (and losses) realized by a fund under certain forward purchase and sale agreements will be treated as ordinary income (or loss) rather than a capital gain (or capital loss). The Effective Date for the Fund is the Termination Date.
As a result of the Tax Changes, the Forward Agreement will be terminated on or before the Termination Date and the Fund will invest directly in the Reference Fund. The Manager intends to continue to pursue the Fund's investment strategy directly without the Forward Agreement.
As a result of the termination of the Forward Agreement, subject to regulatory approval and as soon as practicable after all regulatory conditions have been met, the Fund's investment objectives will be amended to delete references to "tax-advantaged" distributions.
The investment objectives of the Fund after the proposed amendments will be to (i) provide distributions; (ii) preserve capital; and (iii) generate increased returns in the event that short-term interest rates rise, in each case, through exposure to the Portfolio actively managed by Voya Investment Management Co, LLC and, if applicable, its successor.
The amendments to the investment objectives of the Fund are clarifications and will not change the Portfolio to which unitholders are currently indirectly exposed through the Reference Fund and the Forward Agreement. It is expected that the Fund will realize capital gains upon the termination of the Forward Agreement. If the capital gains realized on the termination, together with other capital gains realized by the Fund in its current taxation year before June 30, 2016, exceed distributions previously paid in 2016, the Fund intends to declare a special capital gains distribution to unitholders of record on June 30, 2016 (the "Special Distribution"). The Fund intends to pay a portion of the Special Distribution in cash (expected to be sufficient to permit payment of all or substantially all of the tax liability of unitholders of the Fund resulting from the Special Distribution) and the remainder of the Special Distribution in units that will be immediately consolidated following the distribution.
Following the termination of the Forward Agreement, distributions paid by the Fund will be characterized primarily as income for tax purposes to the extent they exceed available non-capital losses of the Fund. The termination of the Forward Agreement will not affect the status of the Fund as a "mutual fund trust" under the Tax Act.
The Manager is a wholly-owned subsidiary of Aston Hill Financial Inc. (TSX: AHF). Aston Hill Financial Inc. is a diversified asset management company with a suite of retail mutual funds, closed end funds, hedge funds and segregated institutional funds. Aston Hill Financial is headquartered in Toronto.
SOURCE Aston Hill Capital Markets Inc.
For further information: please contact your financial advisor, call Aston Hill's Sales and Marketing support line at 416-583-2300 (toll-free at 1-800-513-3868), or visit our website at www.astonhill.ca