2002 Ruling 2002-0123153 - AMALGAMATION OF REG 6801(d) PLANS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Will an amendment consolidating two 6801(d) plans, of two related corporations, into one 6801(d) plan, be acceptable for purposes of 6801(d) of the Income Tax Act?

Position: Yes.

Reasons: The provisions of 6801(d) continue to be satisfied.

XXXXXXXXXX 								2002-012315

XXXXXXXXXX, 2002

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Corporation"), XXXXXXXXXX
XXXXXXXXXX (the "Subsidiary"), XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayers. We also acknowledge your letters of XXXXXXXXXX that amend the Master DSU Plan and/or your letter of XXXXXXXXXX and the information provided during our various telephone conversations (XXXXXXXXX).

We understand that, to the best of your knowledge and that of the Corporation and the Subsidiary, none of the issues involved in the ruling request is:

(i) in an earlier return of the Corporation, the Subsidiary, or a related person;

(ii) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Corporation, the Subsidiary, or a related person;

(iii) under objection by the Corporation, the Subsidiary, or a related person;

(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; nor

(v) the subject of a ruling previously issued by the Directorate, other than as described in 9 below.

The relevant facts, proposed transactions and the purpose of the proposed transactions are as follows:

Facts

1. The Corporation is incorporated under the laws of Canada, a resident of Canada and a public corporation. The Corporation's common shares are listed on XXXXXXXXXX. The expression "public corporation" has the meaning assigned by subsection 89(1) of the Act.

2. XXXXXXXXXX

3. The Corporation currently has a board of directors composed of XXXXXXXXXX directors. The number of directors may be increased or decreased within limits set forth by the articles of incorporation of the Corporation and the Canada Business Corporations Act.

4. For the upcoming term of office, the Corporation will pay its non-employee directors the following:

(a) an annual retainer fee;

(b) a fee for each board and committee meeting attended and reimbursements for associated traveling expenses;

(c) a fee for services as a member of any standing committee of the board and an additional fee for services as chairman of any standing committee of the board; and

(d) such other fees or stock based compensation as the board may decide to pay to one or more directors from time to time.

5. The Subsidiary was incorporated XXXXXXXXXX and continued under the Canada Business Corporations Act, effective XXXXXXXXXX. The Subsidiary is a resident of Canada and a taxable Canadian corporation. The Subsidiary is XXXXXXXXXX owned by the Corporation and XXXXXXXXXX owned by XXXXXXXXXX.

6. XXXXXXXXXX.

7. The Subsidiary currently has a board of directors composed of XXXXXXXXXX directors.

8. For the upcoming term of office, the Subsidiary will pay its non-employee directors the following fees:

(a) an annual retainer fee;

(b) a fee for each board and committee meeting attended and reimbursements for associated traveling expenses;

(c) a fee for services as a member of any standing committee of the board and an additional fee for services as chairman of any standing committee of the board; and

(d) such other fees as the board may decide to pay to one or more directors from time to time.

9. Each of the Corporation and the Subsidiary has established a deferred share unit plan entitled "XXXXXXXXXX" (the "Corporation DSU Plan") and "XXXXXXXXXX" (the "Subsidiary DSU Plan"), respectively. Both of the aforementioned deferred share unit plans are prescribed under paragraph 6801(d) of the Income Tax Regulations (the "Regulations"). The Corporation DSU Plan is the subject of advance income tax rulings #970236 dated XXXXXXXXXX, 1997 and #2000-0004163 dated XXXXXXXXXX, 2000. The Subsidiary DSU Plan is the subject of advance income tax rulings #971577 dated XXXXXXXXXX, 1997 and #2000-0004153 dated XXXXXXXXXX, 2000.

10. The Corporation has determined that it is appropriate to have a single deferred share unit plan that could be applicable to all Canadian and non-resident non-employee directors of the Corporation, the Subsidiary and any other corporation related to the Corporation as may be identified by the committee of the board of directors of the Corporation generally responsible for directors' compensation related matters (the "Committee") for participation in the Corporation DSU Plan (as amended). (The Subsidiary and any other corporation related to the Corporation so identified by the Committee for participation in the Corporation DSU Plan (as amended) are collectively herein referred to as "Corporation Entities" and individually as a "Corporation Entity".) The Corporation has also determined that such a single plan should extend to and govern the existing rights of participants under the Corporation DSU Plan and the Subsidiary DSU Plan. Accordingly, the Corporation wishes to amend the Corporation DSU Plan: (i) to extend its application to non-employee directors of the Corporation Entities including, for greater certainty, non-employee directors of the Subsidiary who are currently participants under the Subsidiary DSU Plan, so that a single plan will govern the rights of all non-employee directors who are currently participants under the Corporation DSU Plan and the Subsidiary DSU Plan and all non-employee directors of the Corporation and Corporation Entities who, in the future, elect to participate, or may be required to participate, in the Corporation DSU Plan (as amended), and (ii) to make certain other modifications regarding the operation and administration of the Corporation DSU Plan.

Definitions

11. Certain terms are defined in the Master DSU Plan (as defined in 13 below) and for the purpose of this ruling as follows:

(a) "Common Share" means a common share without nominal or par value of the Corporation.

(b) "Eligible Director" has the meaning assigned thereto in XXXXXXXXXX the Master DSU Plan and in XXXXXXXXXX means all members of the board of directors of the Corporation or the board of directors of any Corporation Entity allowed by the Corporation and the Committee to participate in the Master DSU Plan who, at the time of execution of the Agreement (as defined in 13(a) below), and at all times thereafter while they continue to serve as a member of at least one of the board of directors of the Corporation or the board of directors of any Corporation Entity, are not employees of the Corporation or of any Corporation Entity.

(c) "Market Value" on any particular day means the market value of one Common Share and shall be calculated on the basis of the average of the closing prices for a board lot of Common Shares on XXXXXXXXXX Stock Exchange on that day, or if at least one board lot of Common Shares shall not have been traded on XXXXXXXXXX Stock Exchange on that day, on the immediately preceding day for which at least one board lot was so traded; or if, at any time, the Common Shares are no longer listed on XXXXXXXXXX Stock Exchange, then the Market Value shall be calculated on the basis of the closing price, on the aforesaid day, for a board lot of Common Shares on the stock exchange on which the Common Shares are listed and had the greatest volume of trading on that particular day.

(d) "Proportional Adjustment" means an adjustment as described in XXXXXXXXXX the Master DSU Plan and reproduced below:

(i) In the event that the Common Shares shall be subdivided or consolidated into a different number of Common Shares, or a dividend shall be declared upon the Common Shares payable in Common Shares (other than a dividend which may be paid in cash or in shares at the option of the shareholder), the number of Share Units (as defined in 17(a) below) then recorded in the Participant's (as defined in 13 below) account shall be adjusted by replacing such number by a number equal to the number of Common Shares which would be held by the Participant immediately after the dividend, subdivision or consolidation, should the Participant have held a number of Common Shares equal to the number of Share Units recorded in the Participant's account on the record date fixed for such stock dividend, subdivision or consolidation.

(ii) In the event that the outstanding Common Shares shall be changed into or exchanged for a different number or kind of securities of the Corporation or of another corporation, whether through an arrangement, amalgamation or other similar statutory procedure, or a share recapitalization, then there shall be substituted for each Common Share referred to in the Master DSU Plan (as defined in 13 below) the kind of securities into which each outstanding Common Share shall be changed or for which each such Common Share shall be exchanged and an equitable adjustment shall be made, if required, in the number of Share Units then recorded in the Participant's account, such adjustment, if any, to be reasonably determined by the Committee and to be effective and binding for all purposes.

(iii) In the event there shall be any change, other than as specified in (d)(i) and (d)(ii) above, in the number or kind of outstanding Common Shares or of any securities into which such Common Shares shall have been changed or for which it shall have been exchanged, then there shall be substituted for each Common Share referred to in the Master DSU Plan or for each security into which such Common Shares shall have been so changed or exchanged, the kind of securities into which each outstanding Common Share or each such security shall be so changed or exchanged and an equitable adjustment shall be made, if required, in the number of Share Units then recorded in the Participant's account, such adjustment, if any, to be reasonably determined by the Committee and to be effective and binding for all purposes.

(iv) In the case of any such substitution, change or adjustment as provided for in (d)(i), (d)(ii) and (d)(iii) above, the variation shall generally require that the dollar value of the Share Units then recorded in the Participant's account prior to such substitution, change or adjustment will be proportionately and appropriately varied so that it be equal to such dollar value after the variation.

(e) "Quarter" means any of the four quarters, of any financial year of the Corporation, currently ending on March 31, June 30, September 30, and December 31.

(f) "Quarterly Retainer Fee" means the amount, expressed in dollars, representing XXXXXXXXXX of the Annual Retainer Fee (as defined in the Master DSU Plan) which would, but for the Master DSU Plan, be payable in cash on the last day of each Quarter by the Corporation or a Corporation Entity to an Eligible Director, or if, with respect to any Quarter, an Eligible Director has served as a member of the board of directors of the Corporation or of a Corporation Entity for a number of days that is less than the full Quarter, the amount, expressed in dollars, which is the product of: (i) the quotient determined by dividing: (A) the number of days in the particular Quarter during which the Eligible Director served as a member of the board of directors of the Corporation or of a Corporation Entity, and (B) the aggregate number of days in the particular Quarter; and (ii) the amount, expressed in dollars, of the quarterly retainer fee which would otherwise have been payable for such Quarter had the Participant served as a member of the board of directors of the Corporation or of a Corporation Entity for the full Quarter.

(g) "Reference Date", with respect to any Quarter, means the date which shall be used to determine, on a quarterly basis, the Market Value of a Common Share for purposes of determining the number of Share Units to be credited, for such Quarter, to a Participant's account pursuant to XXXXXXXXXX the Master DSU Plan, which date shall be, unless otherwise determined by the Committee and approved by the board of directors of the Corporation, the last trading day of such Quarter on which the Market Value of a Common Share may be determined or, if a Participant's Termination of Board Service occurs during the Quarter prior to such last trading date, the date of Termination of Board Service of the Participant, provided that if the date of Termination of Board Service is not a trading day on which the Market Value of a Common Share may be determined, the Reference Date shall be the immediately preceding trading day on which such Market Value may be determined.

(h) "Termination of Board Service", with respect to any Participant shall mean the earliest date on which both of the following conditions are met: (i) the Participant has ceased to be a member of the board of directors of the Corporation or of the board of directors of a Corporation Entity for any reason whatsoever, including the death of a Participant; and (ii) the Participant is neither an employee of the Corporation or of any Corporation Entity, nor a member of the board of directors of the Corporation or of the board of directors of a Corporation Entity.

Proposed Transactions

12. The board of directors of the Subsidiary has approved certain amendments to the Subsidiary DSU Plan (such amendments to be effective only from the Effective Date, as defined at 21 below) to allow a Participant under that plan to elect: (i) to have the share units standing to his or her credit as of the Effective Date transferred from the Subsidiary DSU Plan to the Corporation DSU Plan (as amended) and for such share units to be governed thereafter solely by the terms of the Corporation DSU Plan (as amended), and (ii) to be paid up to XXXXXXXXXX% of his or her annual retainer fee, and such other fees as may be allowed by the Committee, in the form of Share Units under the Master DSU Plan in lieu of being paid in cash.

13. The board of directors of the Corporation has approved certain amendments to the Corporation DSU Plan (such amendments to be effective only from the Effective Date) and will approve such other amendments as may be deemed necessary or appropriate in order to: (i) extend the Corporation DSU Plan so that it is applicable to Canadian and non-resident non-employee directors of the Corporation, the Subsidiary and of any other Corporation Entity (the Corporation DSU Plan (as amended) is herein referred to as the "Master DSU Plan"; any director who is currently a participant under the Corporation DSU Plan and the Subsidiary DSU Plan and all present and future Canadian and non-resident non-employee directors of the Corporation or of any Corporation Entity are collectively herein referred to as "Participants"), and (ii) allow a Participant who is a director of a Corporation Entity to elect to be paid up to XXXXXXXXXX% of his or her annual retainer fee, and such other fees as may be allowed by the Committee, in the form of Share Units under the Master DSU Plan in lieu of being paid in cash. The principal features of the Master DSU Plan will be as follows:

(a) The Master DSU Plan will be administered by the Committee. Each Participant who has not previously entered into an agreement and made an election with the Corporation or the Subsidiary and who wishes to make an election referred to in 13(c) or 13(e) below, shall, as soon as practicable after the Effective Date, enter into an agreement with the Corporation (the "Agreement"). The elections referred to in 13(c) and 13(e) below will not form part of the Agreement. Such Agreement shall set out certain rights and obligations of the parties thereto under the Master DSU Plan. An account will also be established in order to carry out the objectives of the Master DSU Plan, more particularly described below. The administrator of such account is referred to herein as the "Administrator";

(b) Each Participant who is a director of the Corporation shall be paid XXXXXXXXXX% of his or her annual retainer fee in the form of Share Units, more particularly described below;

(c) Each Participant who is a director of the Corporation may be allowed by the Committee to elect to be paid up to XXXXXXXXXX% of any fees (other than the annual retainer fee) in the form of Share Units in lieu of being paid in cash. This election is a one-time election that shall be made in advance of when the amount to which the election relates would otherwise become available or payable to the Participant, and will apply unless revoked or modified by the Participant. The Participant will receive the remainder (if any) of his or her compensation (i.e., meeting, committee and committee chairman fees) in cash net of applicable withholdings;

(d) All Participants under the Subsidiary DSU Plan who have entered into an agreement and made elections in accordance with the terms of that plan shall be deemed to have entered into an Agreement and to have made elections under the Master DSU Plan for the XXXXXXXXXX and subsequent calendar years (unless such elections are revoked or modified by the Participant) as if the agreement and elections entered into and made under the Subsidiary DSU Plan had been entered into and made under the Master DSU Plan;

(e) With respect to the XXXXXXXXXX and subsequent calendar years, each Participant who is a director of a Corporation Entity and who shall not be deemed to have elected in accordance with 13(d) above, or who was deemed to have so elected but has modified or revoked that election, may elect to be paid up to XXXXXXXXXX % of his or her annual retainer fee (and, if allowed by the Committee, fees other than the annual retainer fee such as meeting and committee fees described in 8(b), (c) and (d) above) paid by such Corporation Entity in the form of Share Units under the Master DSU Plan in lieu of being paid in cash. In order for such a Participant to participate in the Master DSU Plan with respect to the XXXXXXXXXX and subsequent calendar years, such Participant shall elect the extent (expressed as a percentage) to which such Participant wishes to participate in the Master DSU Plan in advance of when the amount to which the election relates would otherwise become available or payable to the Participant. This election is a one-time election and will apply unless revoked or modified by the Participant. The Participant will receive the remainder (if any) of his or her compensation (i.e., the balance of his or her annual retainer fee, meeting, committee and committee chairman fees) in cash net of applicable withholdings; and

(f) A Participant who becomes an employee (otherwise than in the capacity as a director) of the Corporation or of a Corporation Entity shall no longer be eligible to receive Share Units; however, the Share Units standing to the credit of a Participant's account on the particular date on which he or she becomes an employee (otherwise than in the capacity as a director) of the Corporation or a Corporation Entity, plus the number of Share Units credited to the Participant's account at the end of the Quarter in which he or she became an employee (otherwise than in the capacity as a director) of the Corporation or of a Corporation Entity will continue to be governed by the terms and conditions of the Master DSU Plan. In respect of any fees described in 4(a) and (c) above, the number of Share Units to be credited to the account of a Participant at the end of the Quarter in which he or she becomes an employee (otherwise than in the capacity as a director) of the Corporation or of a Corporation Entity, will be pro-rated (by virtue of the pro-ration of fees) based on the number of days in the Quarter that the Participant was not an employee (otherwise than in the capacity as a director) of the Corporation or of a Corporation Entity. In respect of any other fees payable to a Participant before the Participant became an employee (otherwise than in the capacity as a director) of the Corporation or of a Corporation Entity, such other fees will be paid in the form of Share Units to the extent the Participant has elected to have such other fees paid in the form of Share Units in lieu of cash, as described in 13(c) and (e) above.

14. In contemplation of the issuance of this advance income tax ruling, Eligible Directors of two Corporation Entities, XXXXXXXXXX ("Corporation Entity A") and XXXXXXXXXX ("Corporation Entity B"), were afforded the opportunity to elect to be paid up to XXXXXXXXXX of their annual retainer fees and other fees allowed by the Committee for the XXXXXXXXXX and subsequent taxation years in the form of Share Units under the proposed Master DSU Plan in lieu of being paid in cash. Two (2) directors of Corporation Entity A and one (1) director of Corporation Entity B availed themselves of the election and each elected to be paid XXXXXXXXXX of his or her annual retainer fee for the XXXXXXXXXX and subsequent taxation years in the form of Share Units under the proposed Master DSU Plan. In each case, the Eligible Director properly notified Corporation Entity A or Corporation Entity B (as the case may be) of his or her decision to participate in the proposed Master DSU Plan before the last business day of the first Quarter of the XXXXXXXXXX calendar year (that is, by XXXXXXXXXX). Accordingly, each Eligible Director's election was received by Corporation Entity A or Corporation Entity B (as the case may be) prior to the dated on which such Eligible Director's entitlement to the Quarterly Retainer Fee and the other fees allowed by the Committee for the Quarter ending XXXXXXXXXX arose.

The above-mentioned elections were made by the Eligible Directors in contemplation of the board of directors of the Corporation approving certain amendments to the Corporation DSU Plan, which amendments will only be effective as and from the Effective Date. As such, the election made by each Eligible Director is conditional upon the board of directors of the Corporation obtaining an advance income tax ruling from the Canada Customs and Revenue Agency. If the Canada Customs and Revenue Agency does not issue an advance income tax ruling, the election made by each Eligible Director is ineffectual and the Quarterly Retainer Fees and the other fees allowed by the Committee that have been deferred on a conditional basis will become immediately payable, with effect as and from the last day of each Quarter when such Quarterly Retainer Fee and the other fees allowed by the Committee were payable or otherwise made available to the Eligible Directors.

15. Share units standing to the credit of a Participant under the Subsidiary DSU Plan shall be deducted from the Participant's account maintained for such deferred share unit plan and an equal number of Share Units shall be credited to the Participant's account under the Master DSU Plan and the Share Units so credited shall be governed solely by the terms of the Master DSU Plan. For greater certainty, share units standing to the credit of a Participant's account under the Corporation DSU Plan will not be adjusted as such share units will be governed by the Master DSU Plan, being the Corporation DSU Plan (as amended). The Subsidiary DSU Plan shall not be terminated as a consequence of the transactions or events proposed in this paragraph.

16. The Corporation DSU Plan and the Subsidiary DSU Plan state that such plans may not be amended in any manner that would adversely affect the rights of any Participant under any agreement at the time of such amendment without the consent of the affected Participant. The Corporation and the Subsidiary are of the view that the amendments proposed herein will not in any way adversely affect the rights of any Participant under the Corporation DSU Plan or the Subsidiary DSU Plan.

17. Pursuant to the Master DSU Plan, the following rules will apply on the last trading day of each Quarter (as defined in the Master DSU Plan and reproduced herein at 11(e) above) and, where a Participant's Termination of Board Service (as defined under the Master DSU Plan and reproduced herein at 11(h) above) occurs prior to the last trading day of the Quarter, on the date of Termination of Board Service:

(a) The number of Common Shares (as defined under the Master DSU Plan and reproduced herein at 11(a) above) (including fractional Common Shares) paid to a Participant on a deferred basis ("Share Units") with respect to any Quarter shall be determined by dividing: (a) where the Participant is a Director of the Corporation, the entire amount, expressed in dollars, of such Participant's Quarterly Retainer Fee (as defined in the Master DSU Plan and reproduced herein at 11(f) above), and in the case of a Participant who is a director of a Corporation Entity, the percentage, expressed in dollars, of the Quarterly Retainer Fee that the Participant has elected to be paid in the form of Share Units, by (b) the Market Value (as defined in the Master DSU Plan and reproduced herein at 11(c) above) of a Common Share on the Reference Date (as defined in the Master DSU Plan and reproduced herein at 11(g) above) for that Quarter. For greater certainty, no cash payment by the Corporation or purchase of Common Shares shall take place on a Reference Date in respect of the Quarterly Retainer Fee; instead, the appropriate number of Share Units (including any fractional units) will be credited to the account maintained by the Administrator for this purpose;

(b) A Participant's account shall, from time to time, including the period following Termination of Board Service and until the Entitlement Date (as defined in the Master DSU Plan and reproduced herein at 17(c) below), be credited with additional Share Units, the number of which shall be equal to the quotient determined by dividing: (i) the product determined by multiplying (a) XXXXXXXXXX of each dividend declared and paid by the Corporation on its Common Shares on a per share basis (excluding stock dividends, but including dividends which may be paid in cash or in shares at the option of the shareholder), by (b) the number of Share Units recorded in the Participant's account on the record date for the payment of any dividend, by (ii) the Market Value of a Common Share on the dividend payment date for such dividend, XXXXXXXXXX;

(c) Except as may be determined by the Committee and approved by the board of directors of the Corporation, or except as set forth below, the entitlement date ("Entitlement Date") of a Participant with respect to whom a Termination of Board Service has occurred shall be the fourth day following the release of the Corporation's quarterly or annual results immediately following Termination of Board Service by the Participant, provided that if a Participant's Termination of Board Service shall occur on the same date as the release of the Corporation's results, the Entitlement Date shall, in such a case, be the fifth trading day immediately following such release of the Corporation's results. In no event shall the Entitlement Date occur later than the end of the first calendar year commencing after Termination of Board Service by the Participant. A Participant shall receive no later than the end of the first calendar year commencing after Termination of Board Service by the Participant, in satisfaction of the number of Share Units recorded in the Participant's account on the Entitlement Date, a number of Common Shares to be purchased on the open market by a designated broker equal to the number of Share Units then recorded in the account of the Participant, or as may be adjusted as a consequence of a Proportional Adjustment, and reduced by any applicable withholding taxes and other source deductions reflected in the form of Share Units, required by law to be withheld by the Corporation in connection with the total payments made in satisfaction of the Participant's Share Units. No payment of Share Units shall be made by the Corporation to a Participant under the Master DSU Plan until Termination of Board Service has occurred with respect to such Participant.

If the Entitlement Date would otherwise fall between the record date for a dividend on the Common Shares and the related dividend payment date, the Entitlement Date shall be the day immediately following the date of payment of such dividend for purposes of recording in the account of the Participant amounts referred in 17(b) above (and XXXXXXXXXX of the Master DSU Plan) and making the calculation of Share Units contemplated by 17(a) (and XXXXXXXXXX of the Master DSU Plan). In the event the Corporation is unable, by a Participant's Entitlement Date, to compute the final number of Share Units credited to such Participant's account by reason of the fact that any data required in order to compute the Market Value of a Common Share has not been made available to the Corporation, then the Entitlement Date shall be the next following trading day on which such data is made available to the Corporation.

Prior to XXXXXXXXXX on the Entitlement Date, the Corporation shall notify the broker as to the number of Common Shares to be purchased by the broker on behalf of the Participant on the open market. As soon as practicable thereafter, the broker shall purchase on the open market the number of Common Shares which the Corporation has requested the broker to purchase and notify the Participant and the Corporation of: (1) the aggregate purchase price ("Aggregate Purchase Price") of the Common Shares, (2) the purchase price per Common Share or, if the Common Shares were purchased at different prices, the average purchase price (computed on a weighted average basis) per Common Share ("Price per Common Share"), (3) the amount of any related reasonable brokerage commission, and (4) the settlement date for the purchase of the Common Shares. On the settlement date, upon payment of the Aggregate Purchase Price and related reasonable brokerage commission by the Corporation, the broker shall deliver to the Participant or to his or her legal representative the certificate representing the Common Shares. Any entitlement to fractional Share Units shall be paid in cash based on the Price per Common Share, net of applicable withholdings.

The Corporation will pay all brokerage fees arising in connection with the acquisition of Common Shares by the broker on the open market. The Corporation may make a special cash payment to the Participant in an amount sufficient to cover any income tax liability of the Participant as a consequence of both the special cash payment and the payment of such brokerage fees by the Corporation.

All or part of any amount expended by the Corporation in respect of the settlement of Share Units of a Participant who is not a director of the Corporation, or who is both a director of the Corporation and a director of one or more Corporation Entities, may be reimbursed by a Corporation Entity. This is described at 19 below;

(d) The board of directors of the Corporation or of a Corporation Entity may from time to time amend, suspend or terminate the Master DSU Plan in whole or in part, in respect of its Eligible Directors (as defined under the Master DSU Plan and reproduced herein at 11(b) above). However, any such amendment, suspension or termination shall not adversely affect the rights of any Participant under any agreement existing at the time of such amendment, suspension or termination without the consent of the affected Participant. Notwithstanding the foregoing, any amendment or termination of the Plan shall be such that the Plan continuously satisfies the requirements of Regulation 6801(d) or any successor provision thereto; and

(e) In cases of Participants who are citizens or residents of a country other than Canada, the Corporation shall have the right, in its sole discretion, to pay entirely in cash the value, as computed under the Master DSU Plan, of a Participant's Share Unit entitlement (less any applicable withholdings), should it deem the regulatory or other requirements of the applicable foreign jurisdiction associated with the purchase of, or payment in, Common Shares too onerous to it or the Participant.

18. The Corporation has retained the ability to allow the Master DSU Plan to cover fees other than annual retainer fees such as meeting and committee fees described in 4(b), (c) and (d) and 8(b), (c) and (d) above. In the event that such extension should occur, the principles and methodologies described above will apply to any current or deferred payment of such fees subject to such conditions as the Committee may impose, provided, however, that any such conditions shall be such that the Master DSU Plan will continue to satisfy the requirements of Regulation 6801(d).

19. In the event that the Corporation makes a payment: (i) to a Participant who is or was a director of one or more Corporation Entities for the rights related to fractional shares (as described in 17(c) above); (ii) to the broker to acquire the particular shares (including brokerage fees) distributed to a Participant who is or was a director of one or more Corporation Entities (as described in 17(c) above); or (iii) to a Participant who is or was a director of one or more Corporation Entities in an amount sufficient to compensate for any income tax liability of such Participant as a consequence of the aforementioned payments (as described in 17(c) above), then the Corporation would be authorized to enter into agreements with such Corporation Entity or such Corporation Entities to effect the necessary reimbursements by the Corporation Entity or the Corporation Entities.

20. The terms of the Master DSU Plan do not provide that a Participant will be entitled, either immediately or in the future, either absolutely or contingently, to receive any amount or benefit granted or to be granted for the purpose of reducing the impact, in whole or in part, of any reduction in the fair market value of the common shares of the Corporation.

21. The effective date ("Effective Date") of the proposed amendments to the Corporation DSU Plan to constitute the Master DSU Plan shall be the date on which an advance income tax ruling is received from the Canada Customs and Revenue Agency confirming to the satisfaction of the board of directors of the Corporation that: (i) the Master DSU Plan is a prescribed plan or arrangement as described in Regulation 6801(d), and (ii) there will be no adverse tax consequences to a Participant under the Corporation DSU Plan or the Subsidiary DSU Plan as a result of the proposed transactions described herein.

Purpose of the Proposed Transactions

22. The purpose of the proposed transactions is to: (i) provide Canadian and non-resident non-employee directors of the Corporation and those Corporation Entities designated by the Committee as eligible for participation under the Master DSU Plan with a long-term stock based compensation program, and (ii) establish a single plan applicable to all non-employee directors of the Corporation and of the designated Corporation Entities in order to co-ordinate, facilitate and make more efficient the management and administration of the various deferred share unit plans.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the terms of the Master DSU Plan are as described above, we rule as follows:

A. No gain or loss shall be realized by a Participant under the Corporation DSU Plan or the Subsidiary DSU Plan pursuant to section 38 of the Act as a consequence of the implementation of the proposed transactions, and no amount shall be included in the income of any such Participant pursuant to section 3, subsection 5(1), paragraph 6(1)(a), paragraph 6(1)(c), subsection 6(3), paragraph 56(1)(a) or section 115 of the Act, as a result of the proposed transactions described at 12 and 13 above, in and by themselves.

B. The Master DSU Plan will not constitute an employee benefit plan as that term is defined in subsection 248(1) of the Act.

C. Provided the Master DSU Plan is unfunded, the Master DSU Plan will not constitute a retirement compensation arrangement as that term is defined in subsection 248(1) of the Act.

D. The Master DSU Plan will be a prescribed plan or arrangement as described in Regulation 6801(d) and will therefore be excluded from the definition of a "salary deferral arrangement", as contained in subsection 248(1) of the Act.

E. The amount to be included in the income of a resident Participant (other than a deceased Participant) for a year under the Master DSU Plan will consist of the aggregate of the following amounts:

(a) under paragraph 6(1)(c) of the Act, the amount paid by the Corporation to the Participant (or his or her legal representative) for the rights related to fractional shares as described in 17(c) above;

(b) under paragraph 6(1)(c) of the Act, the amount paid by the Corporation to the broker (excluding brokerage fees) to acquire the particular Common Shares distributed to the Participant (or his or her legal representative) as described in 17(c) above;

(c) under paragraph 6(1)(c) of the Act, the amount of the applicable Share Unit withholdings withheld by the Corporation as described in 17(c) above;

(d) under paragraph 6(1)(c) of the Act, the amount of brokerage fees paid by the Corporation for the acquisition of the particular Common Shares distributed to the Participant (or his or her legal representative) by the broker as described in 17(c) above; and

(e) under paragraph 6(1)(c) of the Act, the amount paid by the Corporation to the Participant (or his or her legal representative) to compensate the Participant for the income tax liability in respect of an amount included in the Participant's income in Ruling E(d) above as described in 17(c) above.

F. The amount to be included in the income of a non-resident Participant for a year (other than a deceased non-resident Participant) under the Master DSU Plan will consist of the aggregate of the following amounts:

(a) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount, to the extent it is attributable to services rendered in Canada, paid by the Corporation to the Participant (or his or her legal representative) for the rights related to fractional shares as described in 17(c) above;

(b) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount, to the extent it is attributable to services rendered in Canada, paid by the Corporation to the broker (excluding brokerage fees) to acquire the particular Common Shares distributed to the Participant (or his or her legal representative), as described in 17(c) above;

(c) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount, to the extent it is attributable to services rendered in Canada, paid by the Corporation to the Participant (or his or her legal representative) in cash in satisfaction of the Participant's Share Unit entitlement, as described in 17(e) above;

(d) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount, to the extent it is attributable to services rendered in Canada, of the applicable Share Unit withholdings withheld by the Corporation as described in 17(c) or 17(e) above;

(e) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount of brokerage fees paid by the Corporation, to the extent it is attributable to services rendered in Canada, for the acquisition of the particular Common Shares distributed to the Participant (or his or her legal representative) by the broker as described in 17(c); and

(f) under paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act, the amount, to the extent it is attributable to services rendered in Canada, paid by the Corporation to the Participant (or his or her legal representative) to compensate the Participant for the income tax liability in respect of an amount included in the Participant's income in Ruling F(d) above as described in 17(c) above.

G. The adjusted cost base to the Participant of the Common Shares acquired by the Participant on the open market shall be the aggregate of the cost to acquire the shares which was included in the Participant's income in Rulings E(b) and F(b) above, as the case may be, and the brokerage fees paid by the Corporation, which were included in the Participant's income in Rulings E(d) and F(d) above, as the case may be, with respect to the acquisition of such Common Shares.

H. The amount payable by the Corporation to the estate of a Participant as a result of the death of the Participant will constitute a right or thing held by the deceased Participant at the time of death for purposes of subsection 70(2) of the Act.

I. Subject to paragraph 18(1)(a) and sections 67 and 78 of the Act, any amounts referred to in Rulings E and F above that are paid by the Corporation in a particular year in respect of services rendered as a member of the board of directors of the Corporation by a Participant who is a former member of the board of directors of the Corporation will be deductible by the Corporation in accordance with section 9 of the Act.

J. Subject to paragraph 18(1)(a) and sections 67 and 78 of the Act, any amounts paid by a Corporation Entity, in respect of services rendered as a member of the board of directors of the Corporation Entity by a Participant who is a former member of the board of directors of the Corporation Entity, as a reimbursement to the Corporation in a particular year, or otherwise in respect of any amounts referred to in Rulings E and F above, including, for greater certainty, the reimbursement of any amount paid by the Corporation in a particular year in satisfaction of any portion of a Participant's entitlement under the Master DSU Plan, will be deductible by that Corporation Entity for that year in accordance with section 9 of the Act and will not be included in the income of the Corporation by virtue of section 9, paragraph 12(1)(x) or subsection 15(1) of the Act.

The above rulings, which are based on the Act in its present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R4 dated January 29, 2001, and are binding on the Canada Customs and Revenue Agency provided that the Master DSU Plan is amended by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate