There is no tax impact on nly. Think about it this way: if in 2015 your convertible which you bought for $1,000 is worth $2,000 because of the increased number of shares you will receive, instead of a one-time capital gain of $1,000 in 2015, as an individual (tax-paying) you will account for the $1,000 gain over each of the five years at "dividend received" rates based on the "dividend" increase in the value of the convertible. So, roughly, if you, as an individual, buy the convertible and the convertible conversion rate goes down in 2011 by (for example sake) $1.00, you will pay taxes at your normal rate in 2011 on the $1.00. But you will not receive cash to pay the tax. So this is why this is oriented to a non-tax/current yield buyer.