Renaissance Corporate Bond Capital Yield Fund
Advisor Essentials Meeting investors’ needs for higher-yielding, tax-efficient fixed income solutions
An attractive, tax-efficient income opportunity Higher-quality investment grade and high-yielding corporate bonds can provide investors with reliable income and the potential for superior yield. When accessed through the Renaissance Corporate Bond Capital Yield Fund, the distribution will be realized as tax-efficient capital gains.
Corporate bonds offer an attractive investment opportunity Corporate bonds offer the potential for greater long-term absolute returns than government bonds. In addition, corporate bonds are secured by corporate assets ahead of equities, and can offer the potential for equity-like returns with lower volatility. The Renaissance Corporate Bond Capital Yield Fund provides exposure to a corporate bond fund (the Reference Fund) with an asset mix of 80% high-quality corporate bonds and 20% high-yield bonds in order to seek increased yields while managing risk. The fund’s blended benchmark reflects its target asset mix and enhanced yield potential. Average Yield DEX Government Bond Index
2.02%
DEX Corporate Bond Index
3.09%
Merrill Lynch U.S. High Yield Cash Pay Index
7.19%
Merrill Lynch Canadian and U.S. Dollar High Yield Canadian Issuers Index
7.84%
Renaissance Corporate Bond Capital Yield Fund Blended Benchmark1
3.95%
Source: PC Bond and Bank of America/Merrill Lynch Global Index Data as at June 30, 2012. 1 8 0% DEX Corporate Bond Index, 14% Merrill Lynch U.S. High Yield Cash Pay Index, (100% hedged back to Canadian dollars), 6% Merrill Lynch Canadian and U.S. Dollar High Yield Canadian Issuers Index (100% hedged back to Canadian dollars). Blended benchmark average yield is gross of fees.
Target 80/20 asset mix of the Reference Fund.
Key benefits Higher yield The fund offers exposure to a diversified pool of higher-quality corporate and high-yield bonds with the potential for superior yield and compelling after-tax returns relative to most fixed income alternatives, while managing risk.
Reliable, tax-efficient income The fund is focused on delivering reliable income and significantly enhancing after-tax returns by distributing the income in the form of capital gains.
Experienced management CIBC Global Asset Management Inc. (CGAM), manager of the Reference Fund, follows a research-driven approach to analyze credit risks and add value through active portfolio management. CGAM is one of Canada’s largest fixed income managers and currently manages more than $18 billion in corporate credit assets.2
High-yield bonds (20%) Investment grade corporate bonds (80%)
2
As at September 30, 2011
For Advisor Use Only
Renaissance Corporate Bond Capital Yield Fund
Advisor Essentials Capital Yield structure: higher after-tax returns Fixed income investments play a substantial role in most investors’ portfolios. But they have a drawback — the tax treatment of interest income. The Renaissance Corporate Bond Capital Yield Fund addresses this by seeking to generate tax-efficient returns. It does so by purchasing a portfolio of equity securities and entering into ‘forward sale agreements’ with a counterparty where the sale price is based on the value of the Reference Fund, which holds fixed income and corporate bond securities. This structure enables the fund to generate attractive fixed income returns on an after-tax basis, while maintaining the risk profile of investment grade corporate bonds. The Renaissance Corporate Bond Capital Yield Fund can significantly enhance after-tax returns when compared to a conventional bond fund. The table below illustrates a 43% increase in cash flow when after-tax returns are paid out as capital gains rather than interest income. Description
Interest income
Capital gains
Dollars received
$10,000
$10,000
Tax rate
46%
23%
Income tax
$4,600
$2,300
What your client keeps
$5,400
$7,700
43% increase in cash flow from capital gains over interest income Based on a maximum marginal tax rate of 46% on ordinary income.
Fund details:
Class A Front-end load: Back-end load: Low load: MER (Class A): Front-End Trailer (Class A):
Class F: Premium Class: MER (Premium Class): Front-End Trailer (Premium Class):
ATL1002 ATL1102 ATL2102 1.63%3
ATL016 ATL1202 0.95%3 0.50%
0.75%
1 888 888 FUND (3863)
www.renaissanceinvestments.ca
MER annualized as at February 29, 2012. Please refer to the Annual/Interim Management Reports of Fund Performance for further details. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. There are risks associated with an investment in the Renaissance Corporate Bond Capital Yield Fund, including risks with respect to the tax treatment of the return generated. For further information regarding these risks, please refer to the Simplified Prospectus. There is a counterparty fee associated with the forward sale agreement. Renaissance Investments is offered by CIBC Asset Management Inc. Please read the Renaissance Investments family of funds Simplified Prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ™ Renaissance Investments and “invest well. live better.” are registered trademarks of CIBC Asset Management Inc. 3
Source: Moody’s, maximum 5-year cumulative default rate between 1920 and 2007, AA-rated, 1.56%. Average 5-year default rate, AA-rated, 0.27%.
4
Features Competitive MER and compensation • A front-end load trailer of 0.75% and competitive MER of 1.63%3 for Class A units. • A front-end load trailer of 0.50% and competitive MER of 0.95%3 for Premium Class units.
Consistent, stable distributions The fund aims to provide a fixed monthly distribution, making it an excellent option for the incomegeneration portion of a portfolio.
Extensive risk management The CGAM team’s conservative style focuses on risk management. In addition, corporate bonds can offer risk-reducing diversification when blended with other fixed income and equity holdings.
The corporate bond advantage Corporate bonds offer an opportunity to earn higher yields. History shows that, even in the worst economic conditions, default rates on high-quality corporate bonds are typically low.4
Tax planning The fund’s tax-efficient structure makes it ideal for non-registered accounts.
For Advisor Use Only 82
2288E(201207)