August 2, 2002
FOR IMMEDIATE RELEASE
Burlington, Ontario - A recent study conducted by Morningstar Canada, the leading investment fund research firm in Canada, validates the tax efficiency of AIC Funds and concludes that "AIC deserves high marks - for both creativity and effectiveness".
Analyst Iain Giles of Morningstar investigated the AIC claim that a buy-and-hold investment strategy contributes to tax minimization through active management of the total capital gain position in the fund to eliminate distributions. Three AIC funds were studied including the AIC Advantage Fund, the Company's flagship fund, which has not issued any taxable distributions to unitholders since 1989.
In his findings, Mr. Giles states that "AIC's tax smart strategy has effectively sheltered roughly 12% and 27% of the AIC Advantage's total capital gains, both realized and unrealized, over the last five calendar years". To determine how the strategy ultimately benefits investors, Mr. Giles compared the tax efficiency ratios (the percentage of the funds' total return that is retained by the investor) of some AIC Funds to the median fund in each applicable category. "These historical comparisons show tax savings for AIC Fund investors relative to investors in other funds because of the absence of distributions" explains Giles. Over the past five years, investors in the AIC Advantage Fund had a 100% tax efficiency ratio as compared to 84.9% for the comparable median fund.
AIC makes use of the Capital Gains Refund Mechanism (CGRM, section 132 of the Federal Income Tax Act) which seeks to eliminate the double taxation that an investor and a mutual fund trust could incur. Mutual funds can use the redemptions during the year to crystallize capital gains that become non-taxable, because they've already been taxed in the hands of the investors who redeemed their units.
"In a sense, investors continuing to buy-and-hold are actually benefiting from those redeeming, as management is using these redemptions to boost up the cost base through the CGRM," states Mr. Giles. "The patient and disciplined strategy results in higher levels of unrealized gains relative to other comparable funds, but AIC has been successful in managing this liability and not passing it along to investors through distributions."
"I am very pleased that Morningstar Canada has published the result of their study of our strategy and validated AIC's Buy. Hold. And Prosper philosophy," says Michael Lee-Chin, AIC Limited's Chairman and Chief Investment Officer. "Minimizing taxes through a highly disciplined investment philosophy and by maintaining portfolio turnover well below industry average, is a major component of the wealth creation process followed by AIC. Regardless of market volatility, at AIC we remain committed to meeting the three basic needs of investors: preserving capital; growing capital; and minimizing taxes."
The Morningstar Canada findings by analyst Iain Giles are available at www.morningstar.ca or by contacting AIC at 1-800-263-2144.
AIC commenced operations in 1985 and has grown to become Canada's largest privately-held mutual fund company servicing almost one million Canadian investors, with assets under management of approximately $13 billion.
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Media Contact:
Terri Oswald
Director, Media Relations
AIC Limited, Burlington ON
(905) 331-4242, ext. 4345
1-888-710-4242, ext. 4345
toswald@aic.com
