TOFA FX hedging election for the Resolution Capital Global Property Securities Fund
Announcing an important change in the tax treatment of currency hedge gains and losses for the Resolution Capital Global Property Securities Fund which is intended to benefit investors and deliver more consistent income distributions.
By way of background, forward foreign exchange (FX) contracts are utilised in the Fund to hedge the underlying foreign currency exposures of the portfolio. Historically, gains or losses on these contracts have been classified as gains or losses on revenue account for the purposes of calculating the taxable income of, and distributions from, the Fund.
What is changing?
The Board of Pinnacle Fund Services Limited (as Responsible Entity) has reviewed the tax policy of the Resolution Capital Global Property Securities Fund and has made the FX hedging election allowed under the Taxation Of Financial Arrangements (TOFA) provisions of the Income Tax Act.
The election now allows gains or losses derived from these forward foreign exchange contracts to be classified as capital for the purposes of tax and distribution calculations, aligning them with the treatment of gains or losses derived from the price movement of the listed securities in which the portfolio is invested.
This election has been made for the year ended 30 June 2019.
What does this mean for investors from here?
The treatment of FX gains and losses should assist in reducing the volatility of income of the Fund in future, resulting in more stable income distributions for investors. Distributions will continue to be made semi-annually, subject to income being available for distribution.
Which Resolution Capital Fund is affected?
The TOFA election has been made for the Resolution Capital Global Property Securities Fund (WHT0015AU).
Are any other Resolution Capital Funds affected?
Yes. The Resolution Capital Global Property Securities Funds – Series 2 (IOF0081AU) is also affected as it invests in the Resolution Capital Global Property Securities Fund (WHT0015AU).
Apart from this, no other Resolution Capital Funds are affected.
If you would like further information or have any queries regarding this change, please call our distribution partner, Pinnacle Investment Management Limited on 1300 010 311.