MD Financial Management Inc. (MD), a Canadian Medical Association (CMA)-owned financial management organization, released year-end income and capital gains distributions for the MDPIM pools and most MD funds on December 19, 2014. Distributions will also be announced for three additional MD funds and MD Precision Portfolios™ on December 23, 2014. If applicable, the year-end distribution for MD Growth Investments Ltd. will be announced in February 2015.
Year-end 2014 distributions for some MD funds and MDPIM pools have been higher this year than in previous years. In addition to making any final income distributions for the year, certain funds also distributed sizeable capital gains.
Following the market events of 2008 and early 2009, certain funds and pools realized capital losses. Unused capital losses were carried forward and applied against capital gains in subsequent years in order to minimize capital gains distributions. Many MD funds and MDPIM pools have now fully utilized these capital-loss, carry-forward amounts. As part of MD’s ongoing asset-management process, MD’s active managers have realized gains on some assets held by those funds. The end result is higher-than-normal year-end distributions for some funds
Although income distributions can result in a tax liability for investors in non-registered accounts, they also reflect the active management taking place in a client’s portfolio. By realizing gains on an asset that has attained its full potential, MD’s managers are able to replace the asset with one that may have better growth potential going forward.
Income distributions do not result in an immediate tax liability if the fund or pool is held in a registered account (for example, a Registered Retirement Savings Plan; or Registered Retirement Income Fund).
What is a Distribution?
As a general rule, distributions are made if a fund earns income in excess of the expenses it incurred during the year.
It is important to note that distributions are a result of the holdings activity within the fund. These should not be confused with a fund’s performance, yield, or rate of return.
When a fund pays an income distribution, its Net Asset Value per unit (unit value) will go down by an amount equivalent to the distribution. The majority of investors automatically reinvest their income distribution; that is, the distribution is automatically used to buy new units in the fund. Even though the unit value has decreased, the additional units compensate for this price drop. As an investor, the value of your investment account remains the same (other than through regular market fluctuations).
For more information about MD Financial Management, go to md.cma.ca, talk to an MD Advisor or call the MD Service Centre at 1 800 267-2332.
About MD Financial Management
MD Financial Management Inc. (MD), with more than $38 billion in assets under administration, is a wholly owned subsidiary of the Canadian Medical Association. MD is dedicated to serving physicians and their families. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit md.cma.ca.
Communications Manager, MD Financial Management Inc.