Raymond Chabot Grant Thornton LLP

October 24, 2007 18:14 ET

Transfer of RCGT Fund Assets to Group Segregated Funds Postponed and New Decision Not to Transfer the Non Registered Accounts of the RCGT Balanced Fund No. 1 for Partners to Manulife

MONTREAL, QUEBEC--(Marketwire - Oct. 24, 2007) - Raymond Chabot Grant Thornton LLP ("RCGT"), the manager of the RCGT Balanced Fund No. 1 for Partners, the RCGT Balanced Fund No. 2 for Partners and the RCGT Money Market Fund for Partners (collectively, the "RCGT Funds"), wishes to announce that it intends to postpone the transfer of the assets of the RCGT Funds to group segregated funds with the identical name (the "Segregated Funds") created by Manulife Financial ("Manulife") (hereinafter the "Transfer") to October 31st, 2007 (the "New Transfer Date"), although the Transfer had initially been set for October 1st, 2007. Moreover, RCGT has decided not to transfer the non registered accounts of the RCGT Balanced Fund No. 1 for Partners to Manulife.

These decisions are the direct result of RCGT's choice to withdraw its request to the Canada Revenue Agency for an advanced ruling confirming that the Transfer is not a deemed disposition (the "Advanced Ruling"). This choice was based on the fact that, following an agreement between RCGT and Manulife, the investment strategy of the Segregated Funds changed from initially investing into the same securities as the RCGT Funds to investing into underlying funds. Consequently, the securities held in the portfolio of the RCGT Funds have to be sold, creating a capital gain or a capital loss for the unitholders. The Advanced Ruling could only have been in favour or the RCGT Funds if the securities held in the portfolio of the RCGT Funds were maintained by the Segregated Funds; not sold. As a result, the application for an Advanced Ruling no longer has a purpose since there will be a disposition within the meaning of the federal Income Tax Act and the Quebec Taxation Act (the "Disposition").

A Disposition means that the RCGT Funds will realize either a capital gain or a capital loss following the Disposition of each asset to the extent that the fair market value of the asset is greater or less than its adjusted cost base.

To ensure that it is not subject to income tax with respect to its current taxation year, on the day of the Transfer, the RCGT Funds will distribute to participants as needed an amount corresponding to their realized income and net capital gain. These amounts will be included by participants in calculating their income.

If the units are held in an RRSP, RRIF or other deferred tax plan or transferred from any such plan to another, the revenue and net capital gains which are attributed to participants by the RCGT Funds will be tax exempt until they are withdrawn from the plan. However, if the units are not included in an RRSP, RRIF or other deferred tax plan, participants will be taxed on the income and the net capital gains attributed to them by the RCGT Funds.

The withdrawal of the application for the Advanced Ruling has caused RCGT to evaluate the tax consequences on the non registered accounts of the RCGT Funds. It seems that the unitholders of the RCGT Balanced Fund No. 1 for Partners will be the most affected and consequently, RCGT has decided to only dissolve the RCGT Balanced Fund No. 2 for Partners and the RCGT Money Market Fund for Partners (the "Dissolved Funds") on or no later than October 31, 2007. RCGT wishes to give a few years to the holders of the non registered accounts of the RCGT Balanced Fund No. 1 for Partners to transfer their investments to the Segregated Funds and, by doing so, the holders will be able to divide up the tax consequences on the chosen period, subject to a limited period to be determined by RCGT.

RCGT will first proceed with the Transfer of the registered and non registered accounts of the Dissolved Funds and of the registered accounts of the RCGT Balanced Fund No. 1 for Partners. The Dissolved Funds will then be dissolved and will cease to be reporting issuers.

Since the RCGT Balanced Fund No. 1 for Partners will not be dissolved because of the 31 non registered accounts left in it, such fund will not automatically cease to be a reporting issuer. RCGT has however made a request to revoke such status. As a reporting issuer, the RCGT Balanced Fund No. 1 for Partners must comply with the Securities Act and National Instrument 81-101 on distributions by prospectuses, National Instrument 81-102 on the conditions of the organisation and of the operations of the fund, National Instrument 81-106 on the financial information to be filed with the authorities and sent to the unitholders and National Instrument 81-107 on conflicts of interest. If the RCGT Balanced Fund No. 1 for Partners ceases to be a reporting issuer, the only continuous disclosure document that will be provided to the unitholders will be the annual and the interim financial statements. However, the management of the RCGT Balanced Fund No. 1 for Partners intends to meet most of the principles cited in the legislation cited above.

The holders of the non registered account of the RCGT Balanced Fund No. 1 for Partners are only Quebec residents. The fact that the RCGT Balanced Fund No. 1 for Partners will not have any holder left in the Provinces of Ontario and New Brunswick after the Transfer should facilitate the revocation of the reporting issuer status in such Provinces.

Desjardins Trust Inc. has agreed to continue the Mandates until the month of February 2008 for the non registered accounts of the RCGT Balanced Fund No. 1 for Partners. The RCGT Balanced Fund No. 1 for Partners will have to find another entity to execute such Mandates after February 2008.

The RCGT Balanced Fund No. 1 for Partners will not accept new subscriptions and will not renew its simplified prospectus. Since the receipt on the simplified prospectus of the RCGT Funds expires on November 9, 2007 in Ontario, the RCGT Fund unitholders who reside in Ontario will be able to continue purchasing units of the RCGT Funds until de the New Transfer Date, which is October 31, 2007.

However, since RCGT has decided not to review the simplified prospectus, the RCGT Fund unitholders who reside in Quebec will not be able to purchase units of the RCGT Funds after October 27, 2007 since the receipt on the simplified prospectus expires on such date in Quebec. As for the RCGT Fund unitholders who reside in New Brunswick, they will not be able to purchase units of the RCGT Funds after October 24, 2007 since the receipt on the simplified prospectus expires on such date in New Brunswick.

The account of each RCGT Fund unitholder will be transferred to the Segregated Fund on October 31, 2007. Any subscription subsequent to the New Transfer Date, by automatic withdrawal or otherwise, will be made to the Segregated Fund. If the specified procedure is followed, the RCGT Fund unitholders may redeem their units before or after the New Transfer Date, at no charge.

About the RCGT Funds

The RCGT Funds were set up by declaration of trust to provide an alternative investment to certain persons associated to RCGT.

Contact Information

  • Raymond Chabot Grant Thornton LLP
    Jean-Marie Marcoux
    514-393-4723
    or
    Manulife Financial
    Jasmine Mangalaseril
    514-594-4185