What is the expected impact on the fund’s underlying portfolio composition and credit risk profile?

Impact on portfolio composition

The five‑year term extension pushes the fund’s investment horizon out to 2031, which gives the managers a much longer “runway” to hold the underlying split‑corporate assets. In practice this will:

• Tilt the portfolio toward longer‑duration, higher‑yielding split‑corporate securities – assets that can sustain a 10‑plus % distribution over a multi‑year horizon are favoured, so we can expect a higher weighting to mature, cash‑generating businesses (e.g., utilities, infrastructure, REITs) that historically underpin split‑corp yields.
  
• Reduce the need for near‑term re‑balancing or asset sales – because the maturity date is no longer looming in 2026, the fund can keep its current holdings rather than liquidating positions to meet a redemption deadline. This should lead to a more “buy‑and‑hold” profile, with lower turnover and a steadier asset mix.

Impact on credit risk profile

• Credit‑risk compression: A longer term reduces the pressure to replace expiring assets with potentially lower‑quality replacements, allowing the fund to retain higher‑quality, longer‑track‑record issuers. The overall credit quality of the portfolio is therefore likely to improve or at least remain stable.
  
• Interest‑rate exposure: Extending the maturity also raises the fund’s sensitivity to the yield curve. If rates rise, the cost of funding the preferred‑share dividend could increase, modestly widening the spread over risk‑free rates. However, because the dividend rate will be set based on prevailing market yields for comparable preferreds, the fund can price the distribution to reflect the new rate‑environment, limiting upside credit‑risk surprises.
  
• Liquidity and default risk: Holding assets for a longer period improves the ability to monitor issuer fundamentals and to work through any temporary credit‑downgrades without forced sales. Consequently, the probability of forced liquidations—one of the main sources of credit‑risk spikes in split‑corp funds—is reduced.

Trading implication

The extension removes a near‑term redemption catalyst, supporting the current 10.7 % distribution and allowing the share price to trade on a more stable, higher‑yield, lower‑turnover base. For investors, the fund now offers a longer‑dated, credit‑safer dividend play; a modest long‑position or “buy‑and‑hold” approach is justified, while short‑term speculative trades (e.g., betting on a pre‑2026 sell‑off) lose relevance. Keep an eye on the preferred‑share dividend rate announcement (≥ 60 days out) for any shift in yield that could re‑price the equity.