30 November 1996 Ruling E9725063 - splitting up a mutual fund trust

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.

XXXXXXXXXX							972506
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs/Mesdames:

Re: XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX. We also acknowledge the information provided in your letters of XXXXXXXXXX.

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

i) is in an earlier return of the taxpayers or a related person,

ii) is being considered by an office of Revenue Canada in connection with a previously filed tax return of the taxpayers or a related person,

iii) is under objection by the taxpayers or a related person,

iv) is before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired, and

v) is the subject of a ruling previously issued by the Directorate to the taxpayers or a related person.

In this letter, unless otherwise indicated, all statute references are to the Income Tax Act (Canada) (R.S.C. 1985, 5th Supplement, c.1, as amended) (the "Act"), and the following terms have the meanings specified:

"Trustco A" refers to XXXXXXXXXX

"Trustco B" refers to XXXXXXXXXX

"XCo" refers to the XXXXXXXXXX

"YCo" refers to the XXXXXXXXXX

"Corporation 1" refers to XXXXXXXXXX

"Corporation 2" refers to XXXXXXXXXX

"Fund 1" refers to XXXXXXXXXX

"Fund 2" refers to XXXXXXXXXX

"Fund A" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund B" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund C" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund D" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund E" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund F" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund G" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund H" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund I" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund J" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

"Fund K" refers to XXXXXXXXXX Fund of the XXXXXXXXXX

Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows.

I. FACTS

1. Trustco A is a trust company continued under the laws of Canada and is a taxable Canadian corporation as defined in subsection 248(1) of the Act. Trustco A is a wholly-owned subsidiary of XCo.

2. Trustco B is a trust company incorporated under the laws of Canada and is a taxable Canadian corporation as defined in subsection 248(1) of the Act. Trustco B is a wholly-owned subsidiary of YCo.

3. Corporation 1 is a corporation incorporated under the laws of Canada and is a taxable Canadian corporation as defined in subsection 248(1) of the Act. YCo holds approximately XXXXXXXXXX% of the outstanding shares of Corporation 1 and is entitled to vote approximately XXXXXXXXXX% of such shares. Corporation 1, which was established in

XXXXXXXXXX

4. Corporation 2 is a corporation incorporated under the laws of Canada and is a taxable Canadian corporation as defined in subsection 248(1) of the Act. Corporation 2 is a wholly-owned subsidiary of Corporation 1. Corporation 2 is also a XXXXXXXXXX. Corporation 1 and Corporation 2 are collectively referred to herein as "Corp 1&2".

5. Corporation 2 is a party to a trust indenture pursuant to which certain trusts, collectively referred to as Fund 2, have been created and Corporation 1 is a party to a different trust indenture pursuant to which certain trusts, collectively referred to as Fund 1, have been created.

Fund 2

6. Corporation 2, as investment counsel, and Trustco A, as trustee, entered into a pooled trust fund indenture dated XXXXXXXXXX pursuant to which Fund 2 was created. The original trust indenture was subsequently amended by two supplemental pooled trust indentures dated XXXXXXXXXX. The original indenture as amended by the two supplemental indentures is hereinafter referred to as the "Fund 2 Indenture".

7. The principal terms of the Fund 2 Indenture are as follows:

(a) Fund 2 is comprised of XXXXXXXXXX specified sections, XXXXXXXXXX of which are active at the date hereof and each of which is maintained as a separate trust by the trustee. (Section XXXXXXXXXX of the Fund 2 Indenture)

(b) The Fund 2 Indenture describes the investments in which each section is permitted to invest its assets. (Section XXXXXXXXXX of the Fund 2 Indenture)

(c) Each of the sections issues units, which rank pari passu with all other units of the section and represent the rights of each unitholder as a beneficiary of that section. (Section XXXXXXXXXX of the Fund 2 Indenture). The Fund 2 Indenture provides that a person which is a designated beneficiary as defined in section 210 of the Act is not eligible to acquire units of any section. (Section XXXXXXXXXX of the Fund 2 Indenture)

(d) Corporation 2, as investment counsel, is responsible for advising the trustee on investment matters regarding Fund 2 and ensuring that the assets of Fund 2 are invested and reinvested in accordance with the provisions of the Fund 2 Indenture. (Section XXXXXXXXXX of the Fund 2 Indenture)

(e) A unitholder may, at any time, by notice in writing to the trustee, demand the redemption of all or any of the units held by such unitholder and the trustee shall effect payment to such unitholder for the units so redeemed by paying, within a stipulated period of time, cash and/or, if approved by Corporation 2 in its capacity as investment counsel, assets in specie equal to the value of the units redeemed. (Section XXXXXXXXXX of the Fund 2 Indenture)

(f) Net income (to the extent not otherwise distributed during the fiscal year) and capital gains of each section for each fiscal year are distributed to unitholders of the section as at the last day of the fiscal year. Unless a unitholder elects not to reinvest distributions prior to the relevant distribution dates, distributions made by the section will be reinvested in units of the section. Income and capital gains of each section are allocated for purposes of the Act to unitholders in accordance with the amounts so distributed. (Sections XXXXXXXXXX of the Fund 2 Indenture)

(g) The trustee may resign by giving ninety days notice to the investment counsel and unitholders, or the investment counsel may demand the resignation of the trustee by written notice to the trustee and unitholders. The investment counsel may enter into an agreement with another eligible trust company to become the successor trustee. (Section XXXXXXXXXX of the Fund 2 Indenture)

(h) The provisions of the Fund 2 Indenture may be amended by the investment counsel (which in certain specified cases requires the consent of the trustee) and notice of any amendments (other than certain specified types of amendments) is to be given to unitholders. (Section XXXXXXXXXX of the Fund 2 Indenture)

8. Each of the sections created under the Fund 2 Indenture qualifies as a unit trust as defined in paragraph 108(2)(a) of the Act, but does not qualify as a mutual fund trust as defined in subsection 132(6) of the Act solely because it has not met the requirement in paragraph 4801(a) of the Income Tax Regulations, in that, a prospectus or offering memorandum has not been filed with the relevant public regulatory authorities in Canada. For securities regulatory purposes, units of the sections are issued pursuant to exemptions from prospectus requirements, including the exemptions stipulated in clauses 72(1)(a) and 72(1)(d) of the Securities Act (Ontario) and equivalent provisions of securities legislation in other provinces.

9. The names of the relevant sections of Fund 2 (hereinafter referred to collectively as "Relevant Fund 2 Sections" and individually as "Relevant Fund 2 Section") in respect of which a ruling is requested and their tax account numbers are as described below. The full name of each of the Relevant Fund 2 Sections includes the words "Fund 2" (e.g. Fund 2 Fund A), but for ease of reference, the Relevant Fund 2 Sections are referred to herein without repeating that phrase in each case. Each of the Relevant Fund 2 Sections files its tax returns with the XXXXXXXXXX Taxation Centre. Certain of the sections specified below are registered investments for registered retirement savings plans, registered retirement income funds and deferred profit sharing plans under section 204.4 of the Act and Fund G has made an election under section 259 of the Act.

Relevant Fund 2
Section
Tax Account Number
Registered Investment
Fund A
XXXXXXXXXX
Yes
Fund B
XXXXXXXXXX
No
Fund C
XXXXXXXXXX
Yes
Fund D
XXXXXXXXXX
Yes
Fund E
XXXXXXXXXX
No
Fund F
XXXXXXXXXX
No
Fund G
XXXXXXXXXX
No

10. Section XXXXXXXXXX of the Fund 2 Indenture contains restrictions as to the type of investments that each Relevant Fund 2 Section may hold. A general description of the type of property actually held by each of the Relevant Fund 2 Sections as at XXXXXXXXXX is as follows:

(a) Fund A holds cash; Canadian federal and provincial government treasury bills and notes, and commercial paper and bankers' acceptances of corporate issuers, all maturing in less than one year; short-term bonds of numerous Canadian federal, provincial, municipal and corporate issuers; and mortgage backed securities.

(b) Fund B holds cash; Canadian federal and provincial government treasury bills and notes and commercial paper and banker's acceptances of corporate issuers, all maturing in less than one year.

(c) Fund C holds cash; Canadian government treasury bills; short-term commercial paper; short-term, medium-term and long-term federal, provincial and municipal bonds; and short-term, medium-term and long-term Canadian corporate bonds.

(d) Fund D holds cash; Canadian government treasury bills; short-term commercial paper; and common shares of numerous Canadian corporate issuers.

(e) Fund E holds cash; U.S. dollar denominated Canadian government treasury bills; U.S. dollar denominated short-term commercial paper; common shares and rights to acquire common shares of numerous U.S. corporate issuers.

(f) Fund F holds cash, Canadian and foreign currency, Canadian government treasury bills, shares of numerous foreign issuers, foreign index futures and foreign currency forward contracts.

(g) Fund G holds cash, Canadian and foreign currency, Canadian short term notes and shares of numerous foreign issuers.

11. The equity investments held by each of the Relevant Fund 2 Sections in all cases represent minority interests in the issuers of the securities. The assets of each of the Relevant Fund 2 Sections referred to in paragraph 10 are held by the section as capital property except for the futures and forward contracts held by Fund F, the gains or losses from which are reported on income account.

12. The unitholders of each of the Relevant Fund 2 Sections represent two different categories of investors. The first category is comprised of those unitholders who receive investment management services from Corporation 2 or Corporation 1 (collectively, the "Corporation 2 Unitholders"). The second category consists of those unitholders who receive investment management services from Trustco B (the "T2 Unitholders"). T2 Unitholders began to acquire units of the Relevant Fund 2 Sections approximately XXXXXXXXXX months ago, after Trustco B entered into an arrangement with Corp 1&2 to permit Trustco B to buy units of the Relevant Fund 2 Sections for client accounts managed by them. Trustco B purchased units of the Relevant Fund 2 Sections in order to utilize the investment management expertise of Corp 1&2, using a proven investment vehicle. T2 Unitholders do not hold any units of sections of Fund 2 other than the Relevant Fund 2 Sections. The following table sets forth the number of Corporation 2 Unitholders and T2 Unitholders who hold units in each of the Relevant Fund 2 Sections and the proportion of the total units of each Relevant Fund 2 Section that is held by each group of unitholders as at XXXXXXXXXX:

Relevant
Fund 2 Section

No. of
T2 Unitholders

No. of
Corporation2 Unitholders

NAV of Units held by T2
Unitholders
NAV of Units held by Corporation
2
Unitholders
% of
Units
Held by
T2 Unitholders
% of Units
Held by
Corporation 2
Unitholders
Fund A

XXXXXXXXXX

XXXXXXXXXX
Fund B

XXXXXXXXXX

XXXXXXXXXX
Fund C

XXXXXXXXXX

XXXXXXXXXX
Fund D

XXXXXXXXXX

XXXXXXXXXX
Fund E

XXXXXXXXXX

XXXXXXXXXX
Fund F

XXXXXXXXXX

XXXXXXXXXX
Fund G

XXXXXXXXXX

XXXXXXXXXX

13. In general, each T2 Unitholder is a member of a household with more than $XXXXXXXXXX in investible assets. Trustco B works with its client to establish an investment plan to reflect its particular situation and from that, one of XXXXXXXXXX model portfolios is established. Each model portfolio has a different underlying asset allocation, differing in expectations for both risk and return. The average age of T2 Unitholders is over XXXXXXXXXX and average size of each account (excluding registered retirement savings plans and similar plans of such unitholders) is approximately $XXXXXXXXXX.

XXXXXXXXXX

14. The Corporation 2 Unitholders can generally be described as follows:

(a) Those who receive investment management services from Corporation 2 are typically well-established and normally vary in age between XXXXXXXXXX. The portfolio size of such unitholders varies from $XXXXXXXXXX, and a large proportion of such unitholders have a portfolio in excess of $XXXXXXXXXX. Portfolios are customized to the needs of the particular unitholder, who is typically more sophisticated and astute than the average investor and, at times, has institutional characteristics.

XXXXXXXXXX;

		 and 

(b) Those that receive investment management services from Corporation 1 are tax exempt entities such as pension funds and endowment funds. The portfolio size of such unitholders varies from approximately $XXXXXXXXXX and the unitholder would usually have an investment committee that deals with Corp 1&2. The investment committee is often assisted by sophisticated consultants.

XXXXXXXXXX

15. The Corporation 2 Unitholders and the T2 Unitholders hold their units in the Relevant Fund 2 Sections as capital property for purposes of the Act.

Fund 1

16. Corporation 1, as investment counsel, and Trustco A, as trustee, entered into a pooled trust fund indenture dated XXXXXXXXXX pursuant to which Fund 1 was created. The original trust indenture was subsequently amended by supplemental indentures dated XXXXXXXXXX and was restated to include such amendments on XXXXXXXXXX. Thereafter, the restated indenture was amended by five further supplemental indentures dated XXXXXXXXXX. The original indenture as amended by all such supplemental indentures is hereinafter referred to as the "Fund 1 Indenture".

17. The principal terms of the Fund 1 Indenture are as follows:

(a) Fund 1 is comprised of XXXXXXXXXX specified sections, XXXXXXXXXX of which are active at the date hereof and each of which is maintained as a separate trust by the trustee. (Section XXXXXXXXXX of the Fund 1 Indenture)

(b) The Fund 1 Indenture describes the investments in which each section is permitted to invest its assets. (Section XXXXXXXXXX of the Fund 1 Indenture)

(c) Participants in sections are restricted to non-taxable trusts, such as pension plans or funds for hospital, educational or charitable institutions. (Section XXXXXXXXXX of the Fund 1 Indenture)

(d) Each of the sections issues units, which rank pari passu with all other units of the section and represent the rights of each unitholder as a beneficiary of that section. (Section XXXXXXXXXX of the Fund 1 Indenture)

(e) Corporation 1, as investment counsel, is responsible for advising the trustee on investment matters regarding Fund 1 and ensuring that the assets of Fund 1 are invested and reinvested in accordance with the provisions of the Fund 1 Indenture. (Section XXXXXXXXXX of the Fund 1 Indenture)

(f) A unitholder may, at any time, by notice in writing to the trustee, demand the redemption of all or any of the units held by such unitholder and the trustee shall effect payment to such unitholder for the units so redeemed by paying, within a stipulated period of time, cash and/or, if approved by Corporation 1 in its capacity as investment counsel, assets in specie equal to the value of the units redeemed. (Section XXXXXXXXXX of the Fund 1 Indenture)

(g) A unitholder of a section has the right to enforce payment of its share of net income for tax purposes, including taxable capital gains, of the section for each fiscal year and, unless a unitholder provides the relevant notice to receive payments in cash prior to the end of the fiscal year, such amounts are capitalized by the issuance of units of the section. (Sections XXXXXXXXXX of the Fund 1 Indenture)

(h) The trustee may resign by giving ninety days notice to the investment counsel and unitholders or the investment counsel may demand the resignation of the trustee by written notice to the trustee and unitholders. The investment counsel may enter into an agreement with another eligible trust company to become the successor trustee. (Section XXXXXXXXXX of the Fund 1 Indenture)

(i) The provisions of the Fund 1 Indenture may be amended by the investment counsel (which in certain specified cases requires the consent of the trustee) and notice of any amendments (other than certain specified types of amendments) is to be given to unitholders. (Section XXXXXXXXXX of the Fund 1 Indenture)

18. Each of the sections created under the Fund 1 Indenture qualifies as a unit trust as defined in paragraph 108(2)(a) of the Act, but does not qualify as a mutual fund trust as defined in subsection 132(6) of the Act solely because it has not met the requirement in paragraph 4801(a) of the Income Tax Regulations, in that, a prospectus or offering memorandum has not been filed with the relevant public regulatory authorities in Canada. For securities regulatory purposes, units of the sections are issued pursuant to exemptions from prospectus requirements, including the exemptions stipulated in clauses 72(1)(a) and 72(1)(d) of the Securities Act (Ontario) and equivalent provisions of securities legislation in other provinces.

19. The names of the relevant sections of Fund 1 (hereinafter referred to collectively as "Relevant Fund 1 Sections" and individually as "Relevant Fund 1 Section") in respect of which a ruling is requested and their tax account numbers are as described below. The full name of each of the Relevant Fund 1 Sections includes the words "Fund 1" (e.g. Fund 1 Fund H), but for ease of reference, the Relevant Fund 1 Sections are referred to herein without repeating that phrase in each case. Each of the Relevant Fund 1 Sections files its tax returns with the XXXXXXXXXX Taxation Centre. Certain of the sections specified below are registered investments for registered retirement savings plans, registered retirement income funds and deferred profit sharing plans under section 204.4 of the Act and Fund K has made an election under section 259 of the Act.

Relevant Fund 1
Section
Tax Account Number
Registered Investment
Fund H
XXXXXXXXXX
Yes
Fund I
XXXXXXXXXX
Yes
Fund J
XXXXXXXXXX
Yes
Fund K
XXXXXXXXXX
No

20. Section XXXXXXXXXX of the Fund 1 Indenture contains restrictions as to the type of investments that each Relevant Fund 1 Section may hold. A general description of the type of property actually held by each of the Relevant Fund 1 Sections as at XXXXXXXXXX is as follows:

(a) Fund H holds cash; Canadian federal and provincial government treasury bills and notes and commercial paper and banker's acceptances of corporate issuers, all maturing in less than one year.

(b) Fund I holds cash; Canadian government treasury bills; short-term, medium-term and long-term federal, provincial and municipal bonds; and short-term, medium-term and long-term Canadian corporate bonds.

(c) Fund J holds cash; Canadian government treasury bills; short-term commercial paper; and common shares of numerous Canadian corporate issuers.

(d) Fund K holds cash; U.S. dollar denominated Canadian government treasury bills and short-term notes; and common shares and rights to acquire common shares of numerous U.S. corporate issuers.

21. The equity investments held by each of the Relevant Fund 1 Sections in all cases represent minority interests in the issuers of the securities. The assets of each of the Relevant Fund 1 Sections referred to in paragraph 20 are held by the section as capital property.

22. The unitholders of each of the Relevant Fund 1 Sections represent two different categories of investors. The first category is comprised of those unitholders who receive investment management services from Corporation 1 or Corporation 2 (collectively, the "Corporation 1 Unitholders"). The second category consists of those unitholders who receive investment management services from Trustco B (the "T1 Unitholders"). T1 Unitholders began to acquire units of the Relevant Fund 1 Sections approximately XXXXXXXXXX months ago after Trustco B entered into an arrangement with Corp 1&2 to permit Trustco B to buy units of the Relevant Fund 1 Sections for client accounts managed by them. Trustco B purchased units of the Relevant Fund 1 Sections in order to utilize the investment management expertise of Corp 1&2, using a proven investment vehicle. T1 Unitholders do not hold any units of sections of Fund 1 other than the Relevant Fund 1 Sections. The following table sets forth the number of Corporation 1 Unitholders and T1 Unitholders who hold units in each of the Relevant Fund 1 Sections and the proportion of the total units of each Relevant Fund 1 Section that is held by each group of unitholders as at XXXXXXXXXX:

Relevant
Fund 1 Section

No. of
T1 Unitholders

No. of
Corporation 1
Unitholders

NAV of Units held by T1
Unitholders

NAV of Units held by Corporation 1
Unitholders
% of Units
Held by
T1
Investment Unitholders
% of Units
Held by
Corporation
1
Unitholders
Fund H

XXXXXXXXXX

XXXXXXXXXX
Fund I

XXXXXXXXXX

XXXXXXXXXX
Fund J

XXXXXXXXXX

XXXXXXXXXX
Fund K

XXXXXXXXXX

XXXXXXXXXX

23. In general, each T1 Unitholder is a registered retirement savings plan or a registered retirement income fund, the annuitant of which is a member of a household with more than $XXXXXXXXXX in investible assets. Trustco B works with its client (the annuitant) to establish an investment plan to reflect its particular situation and from that, one of XXXXXXXXXX model portfolios is established.

Each model portfolio has a different underlying asset allocation, differing in expectations for both risk and return. The average age of the annuitants of the registered funds that are the T1 Unitholders is over XXXXXXXXXX and average size of each registered account is approximately $XXXXXXXXXX.

XXXXXXXXXX

23. Corporation 1 Unitholders are comprised essentially of tax exempt entities such as pension plans and endowment funds. The portfolio size of Corporation 1 Unitholders varies from $XXXXXXXXXX and usually a Corporation 1 Unitholder has an investment committee that deals with Corporation 1. The investment committees are often assisted by sophisticated consultants.

XXXXXXXXXX

24. The Corporation 1 Unitholders and T1 Unitholders hold their units in the Relevant Fund 1 Sections as capital property for the purposes of the Act.

II. PROPOSED TRANSACTIONS

Fund 2

25. Trustco A and Corporation 2 will enter into a supplemental trust indenture which will amend the terms of the Fund 2 Indenture (hereinafter referred to as the "Amended Fund 2 Indenture") to (a) permit the appointment of different trustees for different sections of Fund 2, (b) specify XXXXXXXXXX new sections of Fund 2 (hereinafter referred to collectively as "New Fund 2 Sections" and individually as "New Fund 2 Section") with similar names and the same investment restrictions as the Relevant Fund 2 Sections (other than Fund G), each of which will be maintained as separate trusts pursuant to Section XXXXXXXXXX of the Fund 2 Indenture, and (c) provide for other specified minor amendments. A New Fund 2 Section will not be specified in respect of Fund G since the units of that section are held only by T2 Unitholders.

26. Trustco A and Corporation 2 will enter into an agreement (the "Fund 2 Agreement"), which will be approved by Corporation 2 or Corporation 1, as the case may be, on behalf of Corporation 2 Unitholders and by Trustco B on behalf of T2 Unitholders, the principal terms of which will provide that the following will occur in sequential order at XXXXXXXXXX (the "Division Date"):

(a) With respect to each Relevant Fund 2 Section (other than Fund G) a portion of each group of identical property held by that Relevant Fund 2 Section on the Division Date will be declared by Trustco A to be held in trust solely for the T2 Unitholders in the New Fund 2 Section of the similar name and will no longer be held in trust for the Corporation 2 Unitholders in that Relevant Fund 2 Section, which portion will be determined first by multiplying the percentage (to ten decimal places) that the T2 Unitholders in that Relevant Fund 2 Section represent of unitholders in that Relevant Fund 2 Section on the Division Date by the number of properties in the group of identical property, except where the identical property consists of debt obligations or foreign currency forward contracts, such percentage will be multiplied by the total principal or face amount of the identical property, (the resulting product being referred to as the "Product") and second, by applying the following rules to the Product so obtained in respect of the group of identical property:

(i) the identical property consists of debt obligations, shares or warrants, the Product will be rounded to four decimal places.

XXXXXXXXXX

(ii) if the identical property consists of futures contracts, the Product will be rounded upward or downward to ten decimal places

XXXXXXXXXX

(iii) if the identical property consists of foreign currency forward contracts, the Product will be rounded upward or downward to the nearest whole number

XXXXXXXXXX

			and

(iv) if the identical property consists of currency, the Product will be rounded to the nearest cent, in the case of Canadian currency, and to the nearest lowest unit of currency, in the case of foreign currency.

(b) With respect to each Relevant Fund 2 Section (other than Fund G), the units held by T2 Unitholders in that Relevant Fund 2 Section on the Division Date will be declared by Trustco A to represent a beneficial interest in the New Fund 2 Section of the similar name as of the Division Date and will cease to represent a beneficial interest in the Relevant Fund 2 Section.

28. On the day after the Division Date, each Relevant Fund 2 Section (other than Fund G) will transfer to the New Fund 2 Section of the similar name (or vice versa), at fair market value on the Division Date such properties as are designated by Corporation 1 and Corporation 2 (and agreed to by Trustco B) so that, to the extent possible and practicable in the circumstances, the Relevant Fund 2 Section and the New Fund 2 Section of the similar name will, after such transfers, each hold

(i) in respect of each group of identical property that consists of money market instruments (such as treasury bills and notes, commercial paper and bankers acceptances), property having an aggregate principal amount that is a multiple of 1,000;

(ii) in respect of each group of identical property that consists of bonds, property having an aggregate principal amount that is a multiple of 10,000;

(iii) in respect of each group of identical property that consists of shares or warrants to acquire shares, property of a number that is a multiple of 100; and

(iv) in respect of each group of identical property that consists of futures contracts, property of a number that is a multiple of 1.

29. Immediately after the completion of the above proposed transactions, it is contemplated that Corporation 2 will remove Trustco A as trustee of the New Fund 2 Sections and of Fund G and will appoint Trustco B as trustee of the New Fund 2 Sections and Fund G pursuant to the terms of the Amended Fund 2 Indenture. As a matter of administrative convenience, the Amended Fund 2 Indenture will be restated as two indentures.

Fund 1

30. Trustco A and Corporation 1 will enter into a supplemental trust indenture which will amend the terms of the Fund 1 Indenture (hereinafter referred to as the "Amended Fund 1 Indenture") to (a) permit the appointment of different trustees for different sections of Fund 1, (b) specify four new sections of Fund 1 (hereinafter referred to collectively as "New Fund 1 Sections" and individually as "New Fund 1 Section") with similar names and the same investment restrictions as the Relevant Fund 1 Sections, each of which will be maintained as separate trusts pursuant to Section XXXXXXXXXX of the Fund 1 Indenture, and (c) provide for other specified minor amendments.

31. Trustco A and Corporation 1 will enter into an agreement (the "Fund 1 Agreement"), which will be approved by Corporation 1 or Corporation 2, as the case may be, on behalf of the Corporation 1 Unitholders and by Trustco B on behalf of the T1 Unitholders, the principal terms of which will provide that the following will occur in sequential order at XXXXXXXXXX (the "Division Date"):

(a) With respect to each Relevant Fund 1 Section, a portion of each group of identical property held by that Relevant Fund 1 Section on the Division Date will be declared by Trustco A to be held in trust solely for the T1 Unitholders in the New Fund 1 Section of the similar name and will no longer be held in trust for the Corporation 1 Unitholders in that Relevant Fund 1 Section, which portion will be determined first by multiplying the percentage (to ten decimal places) that the T1 Unitholders in that Relevant Fund 1 Section represent of all unitholders in that Relevant Fund 1 Section on the Division Date by the number of properties in the group of identical property, except where the identical property consists of debt obligations, such percentage will be multiplied by the principal or face amount of the identical property, (the resulting product being referred to as the "Product") and second, by applying the following rules to the Product so obtained in respect of the group of identical property:

(i) if the identical property consists of debt obligations, shares or warrants, the Product will be rounded to four decimal places

XXXXXXXXXX

			and

(ii) if the identical property consists of currency, the Product will be rounded to the nearest cent, in the case of Canadian currency, and to the nearest lowest unit of currency, in the case of foreign currency.

(b) With respect to each Relevant Fund 1 Section, the units held by T1 Unitholders in that Relevant Fund 1 Section on the Division Date will be declared by Trustco A to represent a beneficial interest in the New Fund 1 Section of the similar name as of the Division Date and will cease to represent a beneficial interest in the Relevant Fund 1 Section.

32. On the day following the Division Date, each Relevant Fund 1 Section will transfer to the New Fund 1 Section of the similar name (or vice versa), at fair market value on the Division Date, such properties as are designated by Corporation 1 (and agreed to by Trustco B) so that, to the extent possible and practicable in the circumstances, the Relevant Fund 1 Section and the New Fund 1 Section of the similar name will, after such transfers, each hold

(i) in respect of each group of identical property that consists of money market instruments (such as treasury bills and notes, commercial paper and bankers acceptances), property having an aggregate principal amount that is a multiple of 1,000;

(ii) in respect of each group of identical property that consists of bonds, property having an aggregate principal amount that is a multiple of 10,000; and

(iii) in respect of each group of identical property that consists of shares or warrants to acquire shares, property of a number that is a multiple of 100.

33. Immediately after the completion of the above proposed transactions, it is contemplated that Corporation 1 will remove Trustco A as trustee of the New Fund 1 Sections and will appoint Trustco B as trustee of the New Fund 1 Sections pursuant to the terms of the Amended Fund 1 Indenture. As a matter of administrative convenience, the Amended Fund 1 Indenture will be restated as two indentures.

III. PURPOSE OF THE PROPOSED TRANSACTIONS

34. The purpose of the proposed transactions is primarily to separate the unitholders of a section that are clients of Trustco B from the unitholders of that section that are clients of Corp 1&2 because of the concern of Corp 1&2 that the different characteristics associated with one group of unitholders could adversely affect the other group.

XXXXXXXXXX

Once the groups are separated, the sections can be more appropriately managed by Corporation 2 and Corporation 1, taking into account the differing characteristics of the unitholder groups, albeit with the same investment objectives and restrictions as currently exist.

35. It is also desired that Trustco B replace Trustco A as trustee for the sections of Fund 2 and Fund 1 in which its clients invest.

XXXXXXXXXX

IV. RULINGS REQUESTED AND GIVEN

Provided that the preceding statements are accurate and constitute complete disclosure of all the relevant facts, proposed transactions and the purpose thereof, and the proposed transactions are carried out as described above we confirm the following:

A. Other than the transfers of properties described in paragraphs 28 and 32 of the proposed transactions, the completion of the proposed transactions will not result in the disposition of any of the property of the Relevant Fund 2 Sections or the Relevant Fund 1 Sections for purposes of the Act.

B. For purposes of the Act, the completion of the proposed transactions will not result in

(a) the T2 Unitholders or Corporation 2 Unitholders having disposed of their units in the Relevant Fund 2 Sections or, in the case of T2 Unitholders, in the New Fund 2 Sections, or

(b) the T1 Unitholders or Corporation 1 Unitholders having disposed of their units in the Relevant Fund 1 Sections or, in the case of T1 Unitholders, in the New Fund 1 Sections.

C. Subsection 107(2.1) of the Act will not be applicable as a result of the completion of the proposed transactions.

D. The adjusted cost base of each unit in the New Fund 2 Sections held by T2 Unitholders immediately after completion of the proposed transactions will equal the adjusted cost base of each unit in the Relevant Fund 2 Sections held by those T2 Unitholders immediately before the completion of the proposed transactions, and the adjusted cost base of each unit in the New Fund 1 Sections held by T1 Unitholders immediately after completion of the proposed transactions will equal the adjusted cost base of each unit in the Relevant Fund 1 Sections held by those T1 Unitholders immediately before the completion of the proposed transactions.

E. The adjusted cost base of each unit in the Relevant Fund 2 Sections held by Corporation 2 Unitholders and of each unit in the Relevant Fund 1 Sections held by Corporation 1 Unitholders immediately after completion of the proposed transactions will equal the adjusted cost base of each unit in those sections immediately before the completion of the proposed transactions.

F. The cost amount to a New Fund 2 Section immediately after completion of the proposed transactions described in paragraph 27 of a particular property identified and declared to be held in trust solely for T2 Unitholders will equal the cost amount of that property to the Relevant Fund 2 Section immediately before the completion of such proposed transactions.

G. The cost amount to a New Fund 1 Section immediately after completion of the proposed transactions described in paragraph 31 of a particular property identified and declared to be held in solely for T1 Unitholders will equal the cost amount of that property to the Relevant Fund 1 Section immediately before the completion of such proposed transactions.

H. Subsection 245(2) of the Act will not be applied to redetermine the tax consequences confirmed in the rulings given above as a result of the completion of the proposed transactions, in and by themselves.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996 and are binding on Revenue Canada provided the proposed transactions are completed by XXXXXXXXXX.

Yours truly,

for Director
Resources, Partnerships,
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch