1999 Ruling 992226A - MULTI-CLASS MUTUAL FUND

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:

The taxpayer's representative has requested a supplemental ruling to amend the proposed transactions contained in the original ruling request to refer to an additional class of units to be issued. Will this affect the rulings given in 990500?

Position: No. The rulings given will continue to be binding.

Reasons: The proposed transactions set out in ruling 990500 have not been completed and do not have to be completed until XXXXXXXXXX. The proposal to revise the proposed transactions as previously stated and to revise the draft master declaration of trust to include a reference to Class F units and a redesignation feature in respect of these units does not affect the rulings given.

XXXXXXXXXX 1-992226

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: Supplemental Income Tax Ruling
XXXXXXXXXX (Ruling # 990500)

This is in reply to your letters of XXXXXXXXXX, wherein you requested certain amendments to the proposed transactions of advance income tax ruling 990500 dated XXXXXXXXXX, 1999 (the "Ruling"). We also acknowledge receipt of the additional documentation faxed to our attention on XXXXXXXXXX.

As a result of your request, the following amendments (underlined for ease of reference) have been made to the ruling:

1. Paragraph 21 is revised to include a reference to Class F units so that this paragraph will read as follows:

21. It is proposed that a new master Declaration will be created for the Group B Funds, and the existing master Declaration for the other ACo and SCo Funds will be amended (collectively referred to hereafter as the "New Declarations"), to provide for the creation of additional classes of units as follows:

(a) Class F units for the ACo Funds and the SCo Funds,

(b) Class I units and Class O units for the ACo Funds (other than BD Fund and BG Fund) and the SCo Funds,

(c) Class O units only for the BD Fund, and

(d) Class I units only for the BG Fund.

2. Paragraph 22 is revised to describe the type of investor to whom Class F units will be available so that this paragraph will read as follows:

22. Class F units will only be available to investors who are participants in programs (the "dealer sponsored programs") that do not require the payment of sales charges by investors or the payment of trailer commissions to dealers. Investors in dealer sponsored programs include clients of XXXXXXXXXX

Class I and Class O units will only be available on a sales charge basis and will have certain minimum investment requirements (the "Investment Requirement") as follows:

(a) Class I units will be available initially to investors who are investing a minimum of $XXXXXXXXXX in ACo-sponsored Funds on behalf of one beneficial holder (which, for example, would include the amount invested in a person's own account and his or her RRSP), and

(b) Class O units will be available initially to investors who are investing a minimum of $XXXXXXXXXX in ACo-sponsored Funds on behalf of one beneficial holder, or a single large account (such as a pension plan).

3. Paragraph 23 is revised to describe the attributes of the Class F units so that this paragraph will read as follows:

23. All of the ACo and SCo Funds having multiple classes of units are collectively referred to herein as the "Multi-Class Funds". It is also proposed that the basic attributes of each class of units of a Multi-Class Fund will be similar in all respects, except that the management fees charged to the Class F units will be reduced by the amount of the imbedded distribution costs, the management fees charged to the Class I units will be reduced, and no management fee will be charged by the Multi-Class Fund to the Class O units. The unitholders will, however, still have an undivided interest in the same pool of assets proportionately equal to the relative net asset value of each class of units they hold. Class F units will be available only to investors in dealer sponsored programs who are approved by ACo and the dealer organization. The Class I units will be available to investors who meet the Investment Requirement and the Class O units will be available to investors who meet the Investment Requirement and have entered into an agreement with either ACo or SCo. Such agreement will provide for the payment of a fee by the investor to either ACo or SCo, the amount of which fee will be negotiated by each Class O investor and either ACo or SCo.

4. In paragraph 26 the first sentence is revised to include a reference to Class F units and comments concerning the redesignation of the Class F units when a unitholder discontinues participation in a dealer sponsored program are added to the end of this paragraph so that it will read as follows:

26. The New Declarations for the Multi-Class Funds will provide that the outstanding units of one class (other than Class A and Class B units of an SCo Fund) may, at the option of the unitholder, be changed or redesignated (hereinafter referred to as "redesignated") as either Class F, Class I or Class O units of the same Multi-Class Fund having a net asset value equal to the net asset value of the units being redesignated provided that where units are being redesignated as Class I or Class O units, the unitholder meets the Investment Requirement. In the case of a redesignation into Class O units, the unitholder must have entered into an agreement with either ACo or SCo (see 23 above). Similarly, there may be circumstances where a unitholder redesignates Class I or Class O units into another class of units of the same Fund. However, the New Declarations will also provide that Class A and Class B units of the SCo Funds cannot be redesignated as Class I or Class O units at any time. Also, if an investor discontinues participation in a dealer sponsored program, the investor will have 90 days to provide instructions for a redesignation of the Class F units into another class of units of the same Multi-Class Fund. In the absence of such instructions, the manager will redesignate the Class F units into Class A or Class C units of the same Multi-Class Fund at the end of the 90 day period.

We confirm that the above changes to the proposed transactions will not affect the Ruling previously given and it will continue to be binding on the Department subject to the conditions stated therein.

Yours truly,

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