2007 Ruling 2006-0182221R3 - Reorganization of a mutual fund trust - s. 132.2

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.

Principal Issues: See Statement of Principal Issues.

Position: See Statement of Principal Issues.

Reasons: See Statement of Principal Issues.

XXXXXXXXXX 								2006-018222

XXXXXXXXXX, 2007

Dear XXXXXXXXXX:

Re : XXXXXXXXXX (Account Number XXXXXXXXXX )
Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX in which you request an Advance Income Tax Ruling on behalf of the above named taxpayer. We also acknowledge the information provided in subsequent correspondence in connection with your request.

We understand that, to the best of your knowledge and that of the taxpayer involved, none of the issues involved in this Ruling request:

(i) is in an earlier return of the taxpayer or a related person;

(ii) is being considered by a Tax Services Office or Taxation Center in connection with a previously filed tax return of the taxpayer or a related person;

(iii) is under objection by the taxpayer or a related person; or

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

This document is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader.

Our understanding of the facts, proposed transactions and purposes of the proposed transactions is as follows:

Definitions

The following definitions apply in respect of this Ruling request:

XXXXXXXXXX;

"Act" means the Income Tax Act R.S.C. 1985 (5th Supp.), c. 1, as amended from time to time;

"Canadian partnership" has the meaning assigned by subsections 102(1) and 248(1) of the Act;

"cost amount" has the meaning assigned by subsection 248(1) of the Act;

"designated beneficiary" has the meaning assigned by section 210 of the Act;

"Fund" means XXXXXXXXXX, as described in paragraphs 1 through 6 hereof;

"mutual fund corporation" has the meaning assigned by subsections 131(8) and 248(1) of the Act;

"mutual fund trust" has the meaning assigned by subsections 132(6) and 248(1) of the Act;

"non-resident" means a person who is not resident of Canada or is deemed not to be resident in Canada for the purposes of the Act;

XXXXXXXXXX;

"XXXXXXXXXX Notes" means the indebtedness of XXXXXXXXXX to the Fund;

"XXXXXXXXXX Units" means a unit representing a beneficial interest in XXXXXXXXXX;

XXXXXXXXXX;

"XXXXXXXXXX Common Shares" means all of the issued and outstanding common shares of XXXXXXXXXX;

"XXXXXXXXXX GP" means XXXXXXXXXX, as described in paragraph 15 hereof;

"XXXXXXXXXX Notes" means the unsecured, subordinated and interest-bearing notes of XXXXXXXXXX, as described in paragraph 11 hereof;

"XXXXXXXXXX Holdco" means XXXXXXXXXX, as described in paragraph 14 hereof;

"public corporation" has the meaning assigned by subsections 89(1) and 248(1) of the Act;

"Regulations" means the Income Tax Regulations, as amended from time to time;

"taxable Canadian corporation" has the meaning assigned by subsections 89(1) and 248(1) of the Act;

XXXXXXXXXX;

"Unit" means a unit representing a beneficial interest in the Fund; and

"Unitholder" means a holder of one or more Units.

Facts

1. The Fund was formed under the laws of the Province of XXXXXXXXXX pursuant to a declaration of trust dated XXXXXXXXXX. The principal office of the Fund is located at XXXXXXXXXX. The Fund has a XXXXXXXXXX taxation year-end. The tax account number for the Fund is

XXXXXXXXXX.

2. The Units are listed and posted for trading on the XXXXXXXXXX under the symbol XXXXXXXXXX. As of this date, there is approximately XXXXXXXXXX Units issued and outstanding. The Fund believes that it has more than XXXXXXXXXX Unitholders.

3. The Fund qualifies as a unit trust pursuant to paragraph 108(2)(a) of the Act and as a mutual fund trust.

4. The Fund's amended and restated declaration of trust provides as follows:

(a) Each Unit is transferable (subject to restrictions on certain transfers to non-residents) and represents the right to an equal interest in the portion of any distributions or other amounts payable to Unitholders.

(b) All Units are of the same class with equal rights and privileges.

(c) Each Unit entitles the holder thereof to one vote at all meetings of Unitholders.

(d) The Fund has been created primarily for the benefit of Unitholders who are not non-residents and not primarily for the benefit of Unitholders who are non-residents. At no time may non-residents be the beneficial owners of a majority (or such lesser number as the administrator may stipulate) of the Units.

(e) Distributions are made on a monthly basis. Distributions are made in cash and may, under certain circumstances, be made in additional Units.

(f) Each Unitholder is entitled to require the Fund to redeem at any time at the demand of the Unitholder for cash all or any part of the Units registered in the name of the Unitholder at a price per Unit calculated by reference to the market price of the Units, provided that the total amount payable by the Fund in respect of the Units tendered for redemption in the same calendar month will not exceed $XXXXXXXXXX. If the $XXXXXXXXXX limit is exceeded, or in certain other circumstances (for example, when the Units are not listed for trading or trading in the Units is suspended), Units tendered for redemption will, subject to regulatory approval, be redeemed by way of a distribution in specie of securities of XXXXXXXXXX held by the Fund or notes of the Fund itself.

5. Pursuant to the Fund's declaration of trust, the trustee of the Fund is XXXXXXXXXX, a Canadian resident. Pursuant to an Administration Agreement with XXXXXXXXXX acts as administrator of the Fund.

6. The material assets of the Fund are held as capital property and consist of all of the issued and outstanding XXXXXXXXXX Units and the XXXXXXXXXX Notes.

7. XXXXXXXXXX is a unit trust pursuant to paragraph 108(2)(a) of the Act that was established under the laws of the Province of XXXXXXXXXX pursuant to a trust indenture dated XXXXXXXXXX. The material assets of XXXXXXXXXX are held as capital property and consist of a XXXXXXXXXX% interest in XXXXXXXXXX GP, the XXXXXXXXXX Common Shares and the XXXXXXXXXX Notes. The trustee of XXXXXXXXXX is XXXXXXXXXX, a Canadian resident, and XXXXXXXXXX's tax number is XXXXXXXXXX.

8. The XXXXXXXXXX declaration of trust provides as follows:

(a) the trustee may make distributions to the holders of XXXXXXXXXX Units in such amounts as it may determine in its discretion;

(b) distributions may be made in cash or XXXXXXXXXX Units, or a combination of both;

(c) the XXXXXXXXXX Units will be redeemable at any time on demand by the holders thereof;

(d) the redemption price for each XXXXXXXXXX Unit tendered for redemption will be equal to its fair market value as determined by the trustee acting reasonably;

(e) the aggregate redemption price payable by XXXXXXXXXX in respect of any XXXXXXXXXX Unit tendered for redemption by the holders thereof during any month will be satisfied, at the option of the trustee of XXXXXXXXXX, in cash or by such other form of immediately available funds approved by the trustee of XXXXXXXXXX from time to time; and

(f) in certain circumstances, XXXXXXXXXX may satisfy the redemption price in respect of the XXXXXXXXXX Units by issuing promissory notes.

9. XXXXXXXXXX is a corporation amalgamated under the XXXXXXXXXX, is resident in Canada and is a taxable Canadian corporation. XXXXXXXXXX's principal office is located at XXXXXXXXXX. It has a XXXXXXXXXX taxation year-end and its tax account number is XXXXXXXXXX.

10. As of this date, all the XXXXXXXXXX Common Shares are held by XXXXXXXXXX.

11. XXXXXXXXXX has outstanding indebtedness owing to XXXXXXXXXX represented by the XXXXXXXXXX Notes. The cost amount to XXXXXXXXXX of the XXXXXXXXXX Notes is equal to their principal amount. The XXXXXXXXXX Notes are capital property to XXXXXXXXXX for purposes of the Act.

12. In addition to the XXXXXXXXXX Notes, XXXXXXXXXX has trade debt and obligations under credit facilities with financial institutions. The Fund has provided guarantees in respect of the obligations of XXXXXXXXXX under the credit facility.

13. The material assets of XXXXXXXXXX consist of a XXXXXXXXXX% interest in XXXXXXXXXX GP and all of the issued and outstanding shares of XXXXXXXXXX Holdco and XXXXXXXXXX.

14. XXXXXXXXXX Holdco is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation.

15. XXXXXXXXXX GP is a general partnership established under the Partnership Act (XXXXXXXXXX ) and is a Canadian partnership. XXXXXXXXXX hold, respectively, a XXXXXXXXXX%, XXXXXXXXXX% and XXXXXXXXXX% interest in XXXXXXXXXX GP. XXXXXXXXXX GP is engaged in the XXXXXXXXXX business.

16. The taxation year of each of the Fund, XXXXXXXXXX, XXXXXXXXXX , XXXXXXXXXX Holdco and XXXXXXXXXX GP ends on XXXXXXXXXX of each year.

Proposed Transactions

17. A "Management Information Circular" containing prospectus level disclosure will be prepared in contemplation of a meeting of Unitholders and shareholders to inter alia, approve the proposed transactions described herein. As described below, the Unitholders and shareholders who will be entitled to receive the Management Information Circular will receive Class A Shares of Newco and XXXXXXXXXX Special Units under the proposed transactions described herein. This document will also be filed with XXXXXXXXXX. There is no legal requirement for this document to be "accepted" by XXXXXXXXXX or any other public authority in Canada.

18. Following receipt of required regulatory approvals, Unitholder approval and the receipt of the rulings requested hereunder, all of which are conditions that must be met prior to implementation of the transactions described below, the following transactions will be undertaken. The proposed transactions described hereinafter will occur in sequence and in such manner that once the first proposed transaction is completed all other proposed transactions must also be completed.

19. Newco will be incorporated under the XXXXXXXXXX and will be a taxable Canadian corporation. The charter documents of Newco will state that its only undertaking will be the activities described in subparagraphs (i), (ii) and (iii) of paragraph 131(8)(b) of the Act. The issued and outstanding capital of Newco will consist of three classes of shares:

(a) The Common Shares will, subject to the XXXXXXXXXX:

(i) entitle the holder thereof to one vote in respect of each Common Share on all matters to be voted on at all meetings of shareholders;

(ii) entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco, and to the exclusion of holders of Class A Shares or Class B Shares; and

(iii) on the liquidation, dissolution or winding-up of Newco, subject to the rights of the holders of any other class of shares of Newco entitled to receive assets of Newco upon such a distribution in priority to or rateably with the holders of the Common Shares, entitle the holder thereof to share rateably in any remaining assets of Newco.

(b) The Class A Shares will, subject to the XXXXXXXXXX:

(i) be non-voting;

(ii) entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco, and to the exclusion of holders of Common Shares or Class B Shares;

(iii) be redeemable at the option of Newco without notice to the holders thereof for a redemption amount of $XXXXXXXXXX per share plus all declared and unpaid dividends to the date of payment, which redemption amount may be paid in XXXXXXXXXX Special Units as determined by Newco in its sole discretion;

(iv) be redeemable at the option of the holder upon not less than XXXXXXXXXX business days prior written notice to Newco for a redemption amount of $XXXXXXXXXX per share plus all declared and unpaid dividends to the date of payment, which redemption amount may be paid in XXXXXXXXXX Special Units (the "Class A Redemption Amount"); and

(v) on the liquidation, dissolution or winding-up of Newco, entitle the holder thereof to receive the aggregate redemption amount before any amount will be paid or any assets of Newco will be distributed to the holders of Common Shares, or any shares ranking junior to the Common Shares.

(c) The Class B Shares will, subject to the XXXXXXXXXX:

(i) be non-voting;

(ii) entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco, and to the exclusion of holders of Common Shares or Class A Shares;

(iii) be redeemable at the option of Newco without notice to the holders thereof for an aggregate redemption amount equal to the fair market value of the XXXXXXXXXX Common Shares, the XXXXXXXXXX Notes and the XXXXXXXXXX LP Units on the date that they are transferred to Newco by the Fund in consideration for the issuance of Class B Shares (the "Class B Redemption Amount") plus all declared and unpaid dividends to the date of payment, which aggregate redemption amount may be paid in XXXXXXXXXX Special Units;

(iv) be redeemable at the option of the holder upon not less than XXXXXXXXXX business days prior written notice to Newco for an aggregate redemption amount equal to the Class B Redemption Amount plus all declared and unpaid dividends to the date of payment, which aggregate redemption amount may be paid in XXXXXXXXXX Special Units as determined by Newco in its sole discretion; and

(v) on the liquidation, dissolution or winding-up of Newco, entitle the holder thereof to receive the aggregate redemption amount before any amount will be paid or any assets of Newco will be distributed to the holders of Common Shares, or any shares ranking junior to the Common Shares.

The Class A Shares and the Class B Shares will rank equally with one another with respect to priority in the event of liquidation, dissolution or winding-up. At all times following the issuance of the Class A Shares, the fair market value of the issued shares of Newco that are retractable in accordance with the provisions described above will be at least 95% of the fair market value of all of the issued shares of Newco.

20. Following the incorporation of Newco, XXXXXXXXXX will subscribe for XXXXXXXXXX Common Shares for a cash payment of $XXXXXXXXXX.

21. XXXXXXXXXX's declaration of trust will be amended to redesignate the XXXXXXXXXX Units as "XXXXXXXXXX Ordinary Units" and to permit the issuance of a second class of units to be designated as "XXXXXXXXXX Special Units", which will be identical to the XXXXXXXXXX Ordinary Units in all but one respect. The declaration of trust currently provides that a Unitholder who tenders XXXXXXXXXX Ordinary Units for redemption will be entitled to have such units redeemed in one month. The XXXXXXXXXX Special Units will be redeemable within XXXXXXXXXX days of the demand for redemption.

22. The Fund's declaration of trust will be amended to permit the issuance of a second class of units to be designated as "Fund Special Units". These Fund Special Units will be redeemable within XXXXXXXXXX days of the demand for redemption and will have a fixed redemption amount of $XXXXXXXXXX per Fund Special Unit.

23. The Fund's declaration of trust will be amended in respect of in specie redemption rights. Under certain circumstances the Unit redemption price may be paid in XXXXXXXXXX Notes. Since those securities will cease to exist as a result of the proposed transactions described herein, the in specie redemption provision of the Fund's declaration of trust will need to be amended to provide that in the event that the redemption price is to be paid in specie, then each Unit tendered for redemption shall be redeemed by way of a distribution in specie of notes or other securities of the Fund.

24. Other amendments will be made to the Fund's declaration of trust in order to permit the proposed transactions described herein to take place. For example, the provision dealing with the consolidation of Units will be amended to permit a consolidation under the circumstances described in paragraph 42 hereof and such other amendments will be made as may be necessary or appropriate to complete the proposed transactions described herein. In addition, certain other amendments may be made at the same time to the Fund's declaration of trust that are unrelated to the proposed transactions and that amount to general "housekeeping" or "cleanup" matters.

25. XXXXXXXXXX will agree to convert XXXXXXXXXX GP into a limited partnership. XXXXXXXXXX and XXXXXXXXXX will be limited partners and XXXXXXXXXX Holdco will be the general partner. The limited partnership will be called XXXXXXXXXX ("XXXXXXXXXX LP") and the interests therein will be described as XXXXXXXXXX LP Units. There will be no significant changes in the rights and obligations of the partners other than the change to limited liability status. Specifically, there will be no change to contributed capital accounts of any partners and there will be no difference in the percentage of partnership interests held by any of the partners. The business of the partnership will not change. Furthermore, the percentage interest of each partner in the profits will not change and the percentage liability for losses of each partner will not change save for the potential unlimited liability of the partners.

26. The limited partnership agreement governing XXXXXXXXXX LP will indicate that XXXXXXXXXX and XXXXXXXXXX, and any other eventual limited partner:

have a liability in respect of the debts, liabilities and obligations of XXXXXXXXXX LP which is limited to the amount that it contributed to XXXXXXXXXX LP plus any undistributed income. Should the limited partner's liability not be limited for any reason, XXXXXXXXXX Holdco is required to indemnify the limited partner for such liability unless such liability arises out of any act or omission of the limited partner;

cannot control or manage the business of XXXXXXXXXX LP;

cannot execute any document binding XXXXXXXXXX LP or XXXXXXXXXX Holdco;

cannot undertake any obligation or responsibility on behalf of XXXXXXXXXX LP;

cannot bring any action for partition or sale of property of XXXXXXXXXX LP; and

cannot take any action which jeopardizes the status of XXXXXXXXXX LP as a limited partnership.

27. The Fund will subscribe for that number of Class A Shares of Newco as is equal to the number of its issued and outstanding Units in consideration for a cash payment estimated at $XXXXXXXXXX per Class A Share (the "Class A Share Subscription Proceeds"). Based on the number of Units currently issued and outstanding, the Class A Share Subscription Proceeds will be approximately $XXXXXXXXXX.

28. The Fund will subscribe for that number of XXXXXXXXXX Special Units as is equal to the number of its issued and outstanding Units in consideration for a cash payment estimated at $XXXXXXXXXX per XXXXXXXXXX Special Units. Based on the number of Units currently issued and outstanding, the total subscription price payable by the Fund will be approximately $XXXXXXXXXX.

29. In accordance with the Management Information Circular described in paragraph 18 hereof, the Fund will undertake a return of capital in respect of its Units by distributing: (i) to each Unitholder one Class A Share of Newco for each Unit held; (ii) to each Unitholder who is not a designated beneficiary one XXXXXXXXXX Special Unit for each Unit held; and (iii) to each Unitholder who is a designated beneficiary one Fund Special Unit for each Unit held.

Following this distribution, Newco will have at least XXXXXXXXXX shareholders holding Class A Shares having a fair market value of at least $XXXXXXXXXX , and insiders of Newco will hold less than XXXXXXXXXX % of the issued and outstanding Class A Shares. The distribution of the Class A Shares to the Unitholders will comply with provincial securities legislation and regulation.

Following this distribution, XXXXXXXXXX will have at least XXXXXXXXXX unitholders holding XXXXXXXXXX Special Units having a fair market value of at least $XXXXXXXXXX . The distribution of XXXXXXXXXX Special Units to the Unitholders will comply with provincial securities legislation and regulation.

The Fund will remit to the Receiver General, on behalf of each Unitholder that is a non-resident, an amount equal to the amount required by the Act to be withheld on behalf of the Unitholder in respect of the return of capital, and will remit such amount to the Receiver General on behalf of the Unitholder, pursuant to subsection 215(1) of the Act and the Fund will pay to each Unitholder that is not a non-resident a cash amount per Unit equal to the amount remitted to the Receiver General for every Unit held by a non-resident.

30. Following the distribution described in paragraph 30 hereof, Newco will elect to be a public corporation pursuant to subparagraph (b)(i) of the definition of "public corporation" in subsection 89(1) of the Act.

31. XXXXXXXXXX and Newco will enter into an agreement of purchase and sale under which XXXXXXXXXX will transfer the XXXXXXXXXX Common Shares, the XXXXXXXXXX Notes and its XXXXXXXXXX LP Units to Newco for an aggregate purchase price equal to the respective fair market value of each property so transferred. Newco will satisfy the purchase price by issuing to XXXXXXXXXX Class B Shares. The Class B Redemption Amount will be established by reference to the aggregate fair market value at that time of the XXXXXXXXXX Common Shares, the XXXXXXXXXX Notes and the XXXXXXXXXX LP Units transferred by XXXXXXXXXX, which will be determined by reference to the trading value of the Units prior to the time of the transfer to Newco and the relative value of such assets. XXXXXXXXXX and Newco will jointly elect under subsection 85(1) of the Act, in prescribed form and within the time prescribed under subsection 85(6) or 85(7) of the Act, with respect to the transfer of the XXXXXXXXXX Common Shares, the XXXXXXXXXX Notes and the XXXXXXXXXX LP Units. The elected amount for purposes of the election for each property transferred will be within the limits prescribed by paragraphs 85(1)(b), (c) and (c.1) of the Act.

32. Newco and XXXXXXXXXX will undertake an amalgamation under the XXXXXXXXXX to form one corporation (referred to herein as "Amalco"), which amalgamation will be governed by the provisions of section 87 of the Act and will include the following provisions:

i) the authorized capital of Amalco will be the same as the authorized capital of Newco;

ii) the XXXXXXXXXX Common Shares will be cancelled without payment;

iii) every holder of Common Shares will receive one common share of Amalco (the "Amalco Common Shares") for each Common Share held;

iv) every holder of Class A Shares will receive one Class A share of Amalco (the "Amalco Class A Shares") for each Class A Share held;

v) every holder of Class B Shares will receive one Class B share of Amalco (the "Amalco Class B Shares") for each Class A Share held; and

vi) the articles of Amalco will state that its only undertaking will be the activities described in subparagraphs (i), (ii) and (iii) of paragraph 131(8)(b) of the Act.

33. Immediately following the amalgamation described in paragraph 33 hereof (the "Asset Transfer Time #1"), Amalco will transfer the XXXXXXXXXX LP Units, the shares of XXXXXXXXXX Holdco and XXXXXXXXXX, and the Class A Share Subscription Proceeds (collectively, the "Amalco Properties") to XXXXXXXXXX (the "Asset Transfer #1") solely in exchange for:

i) that number of XXXXXXXXXX Special Units having an aggregate fair market value equal to the Class A Redemption Amount; and

ii) that number of XXXXXXXXXX Ordinary Units having an aggregate fair market value equal to the Class B Redemption Amount.

Subsequent to this transfer, Amalco will not have any property other than: (i) the $XXXXXXXXXX of cash subscription proceeds received by Newco (a predecessor of Amalco) on the issuance of the Common Shares; (ii) the cash that had remained in XXXXXXXXXX (a predecessor of Amalco) to cover any liabilities that cannot be assumed, such as tax liabilities; and (iii) the XXXXXXXXXX Special Units and XXXXXXXXXX Ordinary Units received on the transfer.

34. Within XXXXXXXXXX days of Asset Transfer Time #1, Amalco will redeem all of its outstanding Class A Shares in exchange for XXXXXXXXXX Special Units and all of its Class B Shares in exchange for XXXXXXXXXX Ordinary Units, as acquired by Amalco in the immediately preceding transaction. No consideration other than XXXXXXXXXX Special Units will be received by the Unitholders on the redemption of the Class A Shares and no consideration other than XXXXXXXXXX Ordinary units will be received by XXXXXXXXXX on the redemption of the Class B Shares.

35. The XXXXXXXXXX Ordinary Units received by XXXXXXXXXX on the redemption of the Class B Shares described in paragraph 35 hereof will be immediately cancelled.

36. Following the transactions described above, XXXXXXXXXX and Amalco will jointly file an election in prescribed form and within the prescribed time in respect of the Asset Transfer #1 pursuant to paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(1) of the Act.

37. At the time immediately following the transactions described above (the "Asset Transfer Time #2"), XXXXXXXXXX will transfer all of its assets (save for $XXXXXXXXXX cash and cash to cover any liabilities that cannot be assumed) (the "XXXXXXXXXX Assets") to the Fund (the "Asset Transfer #2") solely in exchange for:

i) that number of Fund Special Units having an aggregate fair market value equal to the sum of the aggregate redemption amount of the XXXXXXXXXX Special Units; and

ii) that number of Units having an aggregate fair market value equal to the aggregate of the redemption amount of the XXXXXXXXXX Ordinary Units and the amount of the XXXXXXXXXX Notes.

Subsequent to this transfer, XXXXXXXXXX will not have any property other than: (i) an amount of $XXXXXXXXXX ; (ii) the cash to cover any liabilities that cannot be assumed, such as tax liabilities; and (iii) the Fund Special Units and Units received on the transfer.

38. Within XXXXXXXXXX days of Asset Transfer Time #2, XXXXXXXXXX will redeem all of its outstanding XXXXXXXXXX Special Units in exchange for Fund Special Units, and all of its XXXXXXXXXX Notes and Ordinary Units (save one) in exchange for Units which XXXXXXXXXX acquired pursuant to Asset Transfer #2. No consideration other than Fund Special Units will be received by the Unitholders on the redemption of the XXXXXXXXXX Special Units and no consideration other than Units will be received by the Fund on the redemption of the XXXXXXXXXX Ordinary Units.

39. The Units received by the Fund on the redemption of the XXXXXXXXXX Ordinary Units will be immediately cancelled.

40. Following the transactions described above, the Fund and XXXXXXXXXX will jointly file an election in prescribed form and within the prescribed time in respect of the transfer pursuant to paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(1) of the Act.

41. Each Fund Special Unit will be converted into a fraction of a Unit the numerator of which is $XXXXXXXXXX and the denominator of which is the fair market value of a Unit. The outstanding Units will then be consolidated on a basis such that the number of Units outstanding following such consolidation will be equal to the number of Units that were outstanding immediately before the proposed transactions described herein were undertaken. Every holder of Units or of Fund Special Units will have the same rights and beneficial ownership as it did prior to the conversion and consolidation and the beneficiaries of the Fund will be the same before and after the conversion and consolidation.

42. Amalco will not be dissolved but will continue to exist, at least until the last day on which the election under subsection 85(1) of the Act can be filed pursuant to subsection 85(6) of the Act.

Purposes of the Proposed Transactions

43. The purpose of the proposed transactions described herein is to simplify the organizational structure of the Fund and the entities in which it holds substantial interests and to reduce complexity of accounting, legal, reporting and income tax compliance required by the existing structure. The proposed structure will eliminate much of this burden. Additionally, the proposed transactions described herein will result in a structure which is desirable for a number of reasons:

(c) the proposed structure will be substantially similar to many other business trusts and should therefore be more acceptable to a wider public;

(d) the proposed structure has the advantage of being familiar to the unitholders and analysts who follow the trading of the Units; and

(e) it is believed that this structure will be of assistance in maintaining the Fund's public profile.

Other Information

The Board of Directors of XXXXXXXXXX Holdco will consist of XXXXXXXXXX or more persons, the majority of which will not also serve as trustees of the Fund. The Board of Directors of XXXXXXXXXX Holdco will have the powers and authority to manage the business and affairs of XXXXXXXXXX Holdco and XXXXXXXXXX Holdco will administer, manage, control and operate the business of XXXXXXXXXX GP and, when reconstituted as a limited partnership, XXXXXXXXXX LP, as noted below.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purposes of the proposed transactions, and provided further that the proposed transactions are carried out as described above, our Rulings are as follows:

We confirm that

A. Provided there is no dissolution of XXXXXXXXXX GP pursuant to the Partnership Act (XXXXXXXXXX ), the conversion of XXXXXXXXXX GP from a general partnership to a limited partnership, as described in paragraph 26 hereof, will not result, for the purposes of the Act, in a disposition of the assets of XXXXXXXXXX GP or in the partners of XXXXXXXXXX GP having disposed of their interests in XXXXXXXXXX GP.

B. Provided elections are filed pursuant to the provisions of subsection 85(1) of the Act, the elected amounts referred to in paragraph 32 hereof will apply to the transfer of property described in this paragraph so as to determine XXXXXXXXXX 's proceeds of disposition and Newco's cost of the transferred properties, and XXXXXXXXXX 's adjusted cost base of the Newco Class B Shares received in exchange for the transferred properties. For greater certainty, paragraph 85(1)(e.2) of the Act will not apply to the transfer described in paragraph 32 hereof.

C. Immediately prior to the Asset Transfer Time #1 described in paragraph 34 hereof, subject to subsection 131(8.1) of the Act, Amalco will qualify as a mutual fund corporation within the meaning assigned by subsection 131(8) of the Act and, subject to subsection 132(7) of the Act, XXXXXXXXXX will qualify as a mutual fund trust within the meaning assigned by subsection 132(6) of the Act.

D. Provided that, at the Asset Transfer Time #1, Amalco is a mutual fund corporation and XXXXXXXXXX is a mutual fund trust for the purposes of the Act, that the fair market value of the Amalco Properties transferred by Amalco at the Asset Transfer Time #1 is at least 90% of the fair market value of all property owned by Amalco at the Asset Transfer Time #1, and provided that the joint election referred to in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2) of the Act is filed in prescribed form within the time set forth in that paragraph, the Asset Transfer #1, as described in paragraph 34 hereof, will constitute a "qualifying exchange" within the meaning of subsection 132.2(2) of the Act, such that the rules in subsection 132.2(1) of the Act will apply to such transfer and to the transaction described in paragraph 35 hereof. As a result of the application of subsection 132.2(1) of the Act to the Asset Transfer #1 and to the transaction described in paragraph 35 hereof:

(a) Amalco's proceeds of disposition of each particular property that is included in the Amalco Properties and XXXXXXXXXX 's cost in respect of each such property will be determined under paragraph 132.2(1)(c) of the Act to be the lesser of (i) the fair market value of the particular property at the Asset Transfer Time #1 and (ii) the greatest of the cost amount to Amalco of the particular property at the Asset Transfer Time #1 and the amount that Amalco and XXXXXXXXXX have agreed upon in respect of the property in their election;

(b) except as provided in paragraph 132.2(1)(p) of the Act, Amalco's aggregate cost of the XXXXXXXXXX Ordinary Units and XXXXXXXXXX Special Units received by it from XXXXXXXXXX as consideration for the Amalco Properties will be deemed under subparagraph 132.2(1)(h)(i) of the Act to be nil;

(c) Amalco's aggregate proceeds of disposition of the XXXXXXXXXX Ordinary Units and XXXXXXXXXX Special Units distributed to XXXXXXXXXX and the Unitholders and pursuant to the redemptions described in paragraph 35 hereof will be deemed under paragraph 132.2(1)(i) of the Act to be nil;

(d) the proceeds of disposition to each Unitholder of the Amalco Class A Shares redeemed by Amalco in accordance with paragraph 35 hereof, and the cost to each Unitholder of the XXXXXXXXXX Special Units received as consideration for the redemption, will be deemed under subparagraph 132.2(1)(j)(i) of the Act to be equal to the cost amount to each Unitholder of the Amalco Class A Shares held by each respective Unitholder immediately before the Asset Transfer Time #1;

(e) the proceeds of disposition to XXXXXXXXXX of the Amalco Class B Shares redeemed by Amalco in accordance with paragraph 35 hereof will be deemed under subparagraph 132.2(1)(j)(i) of the Act to be equal to the cost amount to XXXXXXXXXX of the Amalco Class B Shares held by it immediately before the Asset Transfer Time #1; and

(f) with respect to any Amalco Class A Share and Class B Share disposed of by the Unitholders and XXXXXXXXXX in accordance with paragraph 35 hereof, pursuant to subsection 131(4) and subparagraph 132.2(1)(o)(i) of the Act section 84 of the Act will not apply to deem a dividend to be paid by Amalco to the Unitholders or XXXXXXXXXX , nor to deem the Unitholders or XXXXXXXXXX to have received a dividend.

E. Immediately prior to the Asset Transfer Time #2 described in paragraph 38 hereof, subject to subsection 132(7) of the Act, both XXXXXXXXXX and the Fund will qualify as mutual fund trusts within the meaning assigned by subsection 132(6) of the Act.

F. Provided that, at the Asset Transfer Time #2, both XXXXXXXXXX and the Fund are mutual fund trusts for the purposes of the Act, that the fair market value of the XXXXXXXXXX Assets transferred by XXXXXXXXXX at the Asset Transfer Time #2 is at least 90% of the fair market value of all property owned by XXXXXXXXXX at the Asset Transfer Time #2, and provided that the joint election referred to in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2) of the Act is filed in prescribed form within the time set forth in that paragraph, the Asset Transfer #2, as described in paragraph 38 hereof, will constitute a "qualifying exchange" within the meaning of subsection 132.2(2) of the Act, such that the rules in subsection 132.2(1) of the Act will apply to such transfer and to the transaction described in paragraph 39 hereof. As a result of the application of subsection 132.2(1) of the Act to the Asset Transfer #2 and to the transaction described in paragraph 39 hereof:

(a) XXXXXXXXXX's proceeds of disposition of each particular property that is included in the XXXXXXXXXX Assets and the Fund's cost in respect of each such property will be determined under paragraph 132.2(1)(c) of the Act to be the lesser of (i) the fair market value of the particular property at the Asset Transfer Time #2 and (ii) the greatest of the cost amount to XXXXXXXXXX of the particular property at the Asset Transfer Time #2 and the amount that XXXXXXXXXX and the Fund have agreed upon in respect of the property in their election;

(b) except as provided in paragraph 132.2(1)(p) of the Act, XXXXXXXXXX's aggregate cost of the Units and Fund Special Units received by it from the Fund as consideration for the XXXXXXXXXX Assets will be deemed under subparagraph 132.2(1)(h)(i) of the Act to be nil;

(c) XXXXXXXXXX's aggregate proceeds of disposition of the Units and Fund Special Units distributed to the Unitholders and to the Fund pursuant to the redemptions described in paragraph 39 hereof will be deemed under paragraph 132.2(1)(i) of the Act to be nil;

(d) the proceeds of disposition to each Unitholder of the XXXXXXXXXX Special Units redeemed by XXXXXXXXXX in accordance with paragraph 39 hereof, and the cost to each Unitholder of the Fund Special Units received as consideration for the redemption, will be deemed under subparagraph 132.2(1)(j)(i) of the Act to be equal to the cost amount to each Unitholder of the XXXXXXXXXX Special Units held by each respective Unitholder immediately before the Asset Transfer Time #2; and

(e) the proceeds of disposition to the Fund of the XXXXXXXXXX Ordinary Units redeemed by XXXXXXXXXX in accordance with paragraph 39 hereof will be deemed under subparagraph 132.2(1)(j)(i) of the Act to be equal to the cost amount to the Fund of the XXXXXXXXXX Ordinary Units held by it immediately before the Asset Transfer Time #2.

G. The conversion of the Fund Special Units into fractions of units and the consolidation of Units as described in paragraph 42 hereof will not result in a disposition, or a partial disposition, by the Unitholders of the Fund Special Units and Units so converted or consolidated.

H. Subsection 245(2) of the Act will not, solely as a result of the proposed transactions described herein, apply to redetermine the tax consequences described in the rulings granted.

I. Neither the Fund nor XXXXXXXXXX will be considered for the purposes of Part X.2 of the Act to be a designated beneficiary of any trust referred to herein.

J. The proposed transactions, in and of themselves, will not result in the application of subsections 15(1), 56(2) or 246(1) of the Act.

K. Pursuant to section 253.1 of the Act the Fund will not, by virtue only of its ownership of XXXXXXXXXX LP Units, be considered to carry on any business of XXXXXXXXXX LP.

Nothing in this Advance Income Tax Ruling should be construed as implying that we are ruling on any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the Rulings given above. More particularly, no Ruling is provided herein with respect to:

(a) the transactions and proposed transactions described in paragraphs 22 through 25 and 33 hereof;

(b) whether any property referred to herein is capital property to its owner for purposes of the Act; and

(c) the fair market value or adjusted cost base of any property referred to herein, or the paid-up capital of any shares referred to herein.

In addition, the measures of the Government's Tax Fairness Plan announced on October 31, 2006 have not been considered for the purposes of the Rulings given herein.

The Rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 and are binding on the Canada Revenue Agency provided that the proposed transactions are completed within six (6) months of the date of issuance of the present letter.

Yours truly,

XXXXXXXXXX
Section Manager
For Division Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch