2010 Ruling 2009-0343271R3 - Irish Common Contractual 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.

Principal Issues: What is the characterization of an Irish Common Contractual Fund for purposes of the Act?

Position: The Irish Common Contractual Fund itself is an unincorporated body and each investor in the fund is a co-owner in the assets of the fund.

Reasons: The fund is being established such that each investor has an undivided co-ownership interest in the assets of the fund.

XXXXXXXXXX 							2009-034327

XXXXXXXXXX , 2010

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

This is in response to your XXXXXXXXXX request for an advance income tax ruling on behalf of the above entity. We acknowledge receipt of the amendments made to the ruling request and the additional information provided in the correspondence exchanged with your firm regarding the various transactions entered into by the participants to the proposed transactions.

Unless otherwise indicated, all statutory references in this letter are to the corresponding provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended to the date of this advance income tax ruling ("Act").

For greater certainty, all the documents and information submitted in support of your request are part of this letter only to the extent described herein and any reference to these documents is provided solely for the convenience of the reader. The rulings given herein are based solely on the Facts, Proposed Transactions, the Purpose of the Proposed Transactions and the Additional Information described below.

DEFINITION

a) "Arm's length" has the meaning assigned by subsection 251(1);

b) "Authority" means the Irish Financial Services Regulatory Authority, fulfilling the duties of the Central Bank and Financial Services Authority of Ireland set out in the Regulations;

c) "Canadian Corporation" has the meaning assigned by subsection 89(1);

d) "CCF" means XXXXXXXXXX , a Common Contractual Fund, constituted under the laws of Ireland by the Manager;

e) "Class" means a particular class of Units issued by the CCF. A separate portfolio of assets owned by the CCF is not maintained for each class;

f) "Common Contractual Fund" means a common contractual fund, constituted under the laws of Ireland, authorized by the Authority pursuant to Part 2 of the Investment Funds Act and meeting the conditions set out in Section 739I of the Foreign Tax Act;

g) "CRA" means the Canada Revenue Agency;

h) "Custodian" means XXXXXXXXXX , having its registered office at XXXXXXXXXX Ireland and acting as custodian with respect to the assets of the CCF;

i) "Custodian Agreement" means the agreement between the Manager and the Custodian, dated XXXXXXXXXX , relating to the appointment and duties of the Custodian;

j) "Deed of Constitution" means the deed of constitution dated XXXXXXXXXX , entered into between the Manager and the Custodian providing for the constitution of the CCF;

k) "Designated Stock Exchanges" has the meaning assigned by section 262;

l) "Foreign Tax Act" means Taxes Consolidation Act 1997 (Ireland), as amended;

m) "Gross Income Payments" has the meaning assigned in subparagraph 8(f) below;

n) "Investment" means a permitted investment set out in XXXXXXXXXX the Deed of Constitution;

o) "Investment Funds Act" means Investment Funds, Companies and Miscellaneous Provision Act 2005 (Ireland), as amended;

p) "Manager" means XXXXXXXXXX , having its registered office at XXXXXXXXXX Ireland, acting in its capacity as manager of the CCF as set out in the Deed of Constitution;

q) "Mutual Fund Trust" has the meaning assigned by subsection 248(1);

r) "New Investor" means an investor, resident of Canada or not, that qualifies to hold Units offered by the Prospectus and does not hold any Unit in the CCF as of the date of this ruling letter, but will subsequently invest in Units and for greater certainty, includes a resident of Canada only to the extent that the entity qualifies as exempt from tax pursuant to subsection 149(1);

s) "Non-Resident" has the meaning assigned by subsection 248(1);

t) "Prospectus" means the prospectus prepared by the Manager in accordance with the Investment Funds Act, the Deed of Constitution and the requirements of the Authority, and pursuant to which Unitholders acquire Units in the CCF;

u) "Qualifying Investor" has the meaning assigned in the Deed of Constitution and generally means any institution (being an entity other than a natural person):

• which owns or invests on a discretionary basis at least XXXXXXXXXX (or its equivalent in another currency); or
• the beneficial owners of which are Qualifying Investors in their own right;

v) "Register" means the register referred to in XXXXXXXXXX the Deed of Constitution;

w) "Related Persons" has the meaning assigned by subsection 251(2);

x) "Sub-Custodian" means the Canadian branch of XXXXXXXXXX , having its registered office at XXXXXXXXXX ;

y) "Taxpayer" has the meaning assigned by subsection 248(1);

z) "Tax Treaty" means a tax treaty as defined in subsection 248(1);

aa) "Unit" means an undivided co-ownership interest of Unitholders as tenants in common with the other Unitholders in the assets owned by a Common Contractual Fund or the CCF, as the case may be, which may be further divided into further classes of Units; and

bb) "Unitholder" means any person holding a Unit and entered on the register of a Common Contractual Fund or the CCF as being the holder of a Unit such holder being legally entitled to an undivided co-ownership interest as tenants in common with the other holders in the assets owned by a Common Contractual Fund or the CCF, as the case may be.

Our understanding of the Facts, Proposed Transactions and the Purpose of the Proposed Transactions is as follows:

FACTS

1. Common Contractual Funds are established under Irish law such that each investor has an undivided co-ownership interest in the assets the legal title of which are held by the fund and, as such, are considered to be co-ownership arrangements and are not trusts under Irish law and the Regulations.

2. A Common Contractual Fund is a collective investment undertaking that is an unincorporated body without legal personality. By contractual arrangement, i.e. a deed of constitution, the Unitholders acquire, own and share in the property of the Common Contractual Fund as co-owners. As such, the Unitholders are entitled to an undivided interest as tenants in common in the assets owned by the Common Contractual Fund, and are entitled to all income and gains derived from same as such income or gains arise.

3. The Investment Funds Act provides the following:

a. A common contractual fund is generally defined as a collective investment undertaking, being an unincorporated body established by a management company, under which the participants by contractual arrangement participate and share in the property of the collective investment undertaking as co-owners.

b. A deed of constitution is a deed under which the common contractual fund is constituted.

c. A unitholder is defined as the holder of one or more units of a common contractual fund.

d. Units constitute instruments granting an entitlement to share in the investments and relevant income of a common contractual fund.

e. The deed of constitution shall specify the conditions for the replacement of the management company or custodian of the common contractual fund with another management company or custodian and shall contain provisions to ensure the protection of unit-holders in the event of any such replacement. Neither the management company nor the custodian may be replaced without the approval of the Authority.

f. The assets of a common contractual fund shall belong exclusively to the common contractual fund and the assets shall be entrusted to a custodian for safe-keeping in accordance with conditions imposed by the Authority. The liabilities of a unitholder, as such a holder, shall be limited to the amount agreed to be contributed by it for the subscription of units.

g. The provisions of the deed of constitution shall be binding on the unitholder and all persons claiming through the unitholder as if such persons had been party to the deed.

h. The custodian shall exercise due care and diligence in the discharge of its duties and shall be liable to the unitholders and management company for any loss arising from the negligence, fraud, bad faith, wilful default or recklessness in the performance of those duties. Unitholders may enforce this liability either directly or indirectly through the management company.

4. Subsection 739I of the Foreign Tax Act governs the taxation of particular Common Contractual Funds and provides the following:

a. For the purpose of the Foreign Tax Act, relevant income and relevant gains in relation to a common contractual fund shall be treated as arising, or as the case may be, accruing, to each Unitholder of the common contractual fund in proportion to the value of the units beneficially owned by the Unitholder, as if the relevant income and the relevant gains had arisen or, as the case may be, accrued, to the Unitholder in the common contractual fund without passing through the hands of the common contractual fund.

b. Common Contractual Funds are not subject to Irish tax as Unitholders are treated for Irish tax purposes as having directly earned or incurred the income, or gains that arise or accrue in respect of the assets owned by the Common Contractual Fund.

c. The rules mentioned above apply to undertakings for collective investment in transferable securities within the meaning of the Regulations constituted other than by Irish trust law or statute law, i.e. to Common Contractual Fund.

5. The Custodian and the Manager of the CCF have entered into the Deed of Constitution under which the Manager constituted the CCF on XXXXXXXXXX , and the Custodian confirmed its obligations and responsibilities with respect to the CCF.

6. The Manager and the Custodian XXXXXXXXXX are both Non-Residents.

7. The CCF is structured as a single strategy fund within the meaning of Part 2 of the Investment Funds Act and comprises a single portfolio of assets.

8. The Deed of Constitution provides, among other things, the following:

a. Unit is defined as one undivided co-ownership interest in the assets of the CCF which may be further divided into different Classes of Unit.

b. Units of the CCF may be further divided into different Classes to accommodate different entitlements to gross income net of withholding tax which arise because of the different tax profiles and countries of residence of Unitholders.

c. Each Unit represents an undivided co-ownership interest of a Unitholder as tenant in common with the other Unitholders in the assets of the CCF. No Unit shall confer any interest or share in any particular part of the assets of the CCF.

d. Unitholder is defined as any person holding a particular Class of Units and entered on the Register as being the holder of a Unit such holder being legally entitled to an undivided co-ownership interest as tenants in common with the other holders in the assets of the CCF.

e. The Unitholders are legally entitled to participate and share in the property of the CCF, including, without limitation, income arising thereon and profits derived therefrom as such income and profits arise as co-owners and, accordingly income accrues to Unitholders as it arises.

f. The Manager has the authority to distribute such income and profits to the Unitholders as "Gross Income Payments" in accordance with XXXXXXXXXX of the Deed of Constitution. In determining the Gross Income Payment that may be made, the Manager will be entitled to deduct from the income of the CCF any reasonably incurred expenses in respect of the CCF. Unitholders are absolutely entitled to the income of the CCF as it arises whether or not a Gross Income Payment is made.

g. Unitholders have a legally enforceable right to receive their Gross Income Payments (if any) less any applicable fees, costs, taxes, charges and expenses, on a yearly basis.

h. The liability of each Unitholder of the CCF is limited to the issue price of Units for which it has agreed to subscribe.

i. The provisions of the Deed of Constitution shall be binding on the Unitholders and all persons claiming through the Unitholders as if such persons had been party to the Deed of Constitution.

j. The Units of the CCF do not have any voting rights (save the right, on written notice signed by Unitholders holding XXXXXXXXXX % of the Units, to require the manager to resign). Neither the Unitholders, nor their heirs or successors, have rights with respect to the representation or management of the CCF. The incapacity, failure or insolvency of a Unitholder shall have no effect on the existence of the CCF.

k. Each Unit is indivisible with respect to the rights conferred on it.

l. Units in any Class within the CCF are issued in registered form only.

m. The Manager may impose such restrictions as it may think necessary for the purpose of ensuring that no Units are acquired or held directly or beneficially by, among others,

i. any person in breach of the law or requirements of any country or governmental authority by virtue of which such person is not qualified to hold Units including without limitation any exchange control regulations,

ii. any person or persons in circumstances (whether directly or indirectly affecting such person or persons and whether taken alone or in conjunction with any other person or persons connected or not, or any other circumstances appearing to the Manager to be relevant) which, in the opinion of the Manager is likely to result or results in any tax, fiscal, legal, regulatory, pecuniary liability or material administrative disadvantage to the CCF or the Unitholders as a whole, or

iii. a person other than a Qualifying Investor.

n. Units of the CCF may be redeemed or be converted from one Class to another Class.

o. The transfer of Units is permitted with the prior consent of the Manager and, where the Manager concludes that such a transfer would not result in regulatory, pecuniary, legal, taxation or material administrative disadvantage for the CCF or the Unitholders as a whole.

p. The Manager shall not be held liable for and shall be indemnified out of the assets of the CCF and held harmless from any actions, proceedings, claims, costs, demands, charges, losses, damages or expenses suffered or borne by the CCF, a Unitholder or any other person, arising as a result of the activities of the Manager hereunder including, without limitation, any error of judgement or for any loss suffered by the CCF or any Unitholder or any person claiming under him as a result of the acquisition, holding or disposal of any Investment, unless the same arises as a result of the Manager's negligence, fraud or wilful default or failure in a material respect to comply with its obligations as set out in the Deed of Constitution or in the Investment Funds Act.

q. The Custodian shall not be held liable and shall be indemnified and held harmless from any actions, proceedings, claims, costs, demands, charges, damages or expenses suffered or borne by the CCF, a Unitholder or any other person arising as a result of the activities of the Custodian hereunder unless the same arises as a result of its negligence, fraud, bad faith, wilful default or recklessness in the performance of its duties.

9. Units of the CCF will be issued pursuant to the Prospectus, which provides, among other things, the following:

a. The CCF is both authorised and supervised by the Authority as a common contractual fund pursuant to the Investment Funds Act.

b. The CCF is a common contractual fund within the meaning of Section 739I of the Foreign Tax Act in which the Unitholders by contractual arrangement participate and share in the property of the CCF as co-owners.

c. The Fund does not have separate legal personality and is transparent for Irish tax purposes. On this basis, the CCF is not chargeable to Irish tax on its relevant income or relevant gains.

d. The Manager may restrict the ownership of Units by any person, firm or corporation where such ownership would be in breach of any regulatory or legal requirement or may affect the tax status of the CCF.

e. The Prospectus constitutes an offering of the securities only in those jurisdictions and to those persons where and to whom they may be lawfully offered for sale, and therein only by persons permitted to sell such securities.

f. The offering in Canada of Units in the CCF is being made solely to subscribers resident in XXXXXXXXXX in reliance on exemptions from the prospectus and dealer registration requirements contained in applicable Canadian securities laws.

g. Unit is defined as one undivided co-ownership interest in the assets of the CCF. Units in a Class are not "Units" but serve to determine the proportion of the underlying assets of the CCF to which each Unitholder is beneficially entitled.

h. Unitholder is defined as any person holding a particular Class of Units and entered on the Register as being the holder of a Unit such holder being legally entitled to an undivided co-ownership interest as tenants in common with the other holders in the assets of the CCF.

i. All Unitholders are entitled to the benefit of, are bound by and are deemed to have notice of the provisions of the Deed of Constitution.

j. Confirmation of each purchase of Units will be sent to Unitholders once the net asset value per Unit is available on any dealing day. Title to Units will be evidenced by the entering of the investor's name on the Register and no certificates will be issued.

k. Unitholders may redeem their Units on and with effect from any dealing day at the net asset value per Unit calculated on or with respect to the relevant dealing day in accordance with the procedures specified in the Prospectus (save during any period when the calculation of net asset value is suspended).

l. Unitholders may request conversion of their Units in one Class to Units in another Class in accordance with the formula and procedures specified in the Prospectus.

m. Tax reclaims will be filed on behalf of Unitholders and may be recorded in the relevant Class by accounting on a cash basis. Therefore, reclaims may be shared at the time of payment amongst the existing Unitholders in a Class of Units. The composition of Unitholders and/or their holdings in the Class at the time at which reclaims were generated may change.

n. A transfer of Units may only occur with the prior consent of the Manager and, where the Manager concludes that such a transfer would not result in regulatory, pecuniary, legal, taxation or material administrative disadvantage for the Fund or the Unitholders as a whole.

10. The Custodian Agreement provides, among other things, the following:

a. The Fund shall retain at all times exclusive beneficial ownership of the Investments.

b. During the continuance of its appointment, the Custodian in its capacity as trustee, shall ensure that the sale, issue, conversion, repurchase, redemption, and cancellation of Units effected by or on behalf of the Manager, are carried out in accordance with the Investment Funds Act and the Deed of Constitution.

c. The Custodian in its capacity as custodian of the CCF, shall maintain its records which relate to the Investments, cash and other assets attributable to the CCF so as to ensure that it is readily apparent that the Investments, cash and other assets are held solely on behalf of and belong to the CCF and do not belong to the Custodian or any of its affiliates or any person to whom the Custodian may from time to time delegate any of its functions or any of their affiliates or delegates.

d. The Custodian shall execute or procure the execution of appropriate ownership and other certificates and affidavits in connection with the collection of income, setting forth if required in any such certificates or affidavits the name of the CCF as beneficial owner of such securities and, subject to XXXXXXXXXX of the Custodian Agreement, do or instruct its agent to do all other things reasonably necessary or proper in connection with the collection, receipt and deposit of such income.

e. In consideration of the services to be performed by the Custodian under the Custodian Agreement, the Custodian shall be entitled to receive such fees out of the assets of the CCF as may be agreed between the Custodian and the Manager from time to time and set forth in XXXXXXXXXX of the Custodian Agreement, subject to the maximum annual fee as disclosed in the Prospectus.

f. The Custodian shall exercise due care and diligence in the discharge of its duties under the Custodian Agreement and, subject to XXXXXXXXXX of the Custodian Agreement, shall be liable to the Manager and the Unitholders for any loss arising from negligence, fraud, bad faith, willful default or recklessness in the performance of those duties.

11. Pursuant to the Deed of Constitution and the Custodian Agreement, the Custodian is responsible for the safekeeping of the assets of the CCF, executing related transactions, some of which may only be executed at the direction of the Manager or its delegates, and complying with obligations imposed on the Custodian by the Authority.

12. One of the Custodian's responsibilities is to ensure that the appropriate amount of withholding tax is deducted and remitted to the tax authorities in the countries where the assets owned by the CCF are held.

13. The tax profile and country of residence of each Unitholder will determine which tax convention and rate of withholding tax should be applied to each item of income. In order to ensure that each Unitholder receives an amount of gross income that reflects their entitlement to reduced withholding tax rates under applicable tax convention, investors with different tax profiles and/or country of residence invest in different Unit Classes.

14. In Canada, the Custodian would delegate his duties and responsibilities to the Sub-Custodian, a Non-Resident corporation.

15. The Sub-Custodian and the Custodian are Related Persons.

16. The Manager is responsible for managing the assets of the CCF in accordance with the Prospectus, the Deed of Constitution, the Investment Funds Act and the requirements of the Authority.

17. The CCF's sole objective is to invest primarily in publicly traded equity securities; the CCF will not invest in partnerships or Mutual Fund Trusts.

18. The CCF will not purchase more than XXXXXXXXXX % of the outstanding shares of any one issuer and will monitor its portfolio to ensure that its holdings do not exceed this XXXXXXXXXX % threshold.

19. XXXXXXXXXX .

20. Each Unitholder of the CCF will be a Qualifying Investor beneficially holding Units, or a custodian or trustee holding Units for the benefit of such a Qualifying Investor.

21. The current Unitholders of the CCF are exclusively pension funds in the following countries:

XXXXXXXXXX

22. We understand that, to the best of your knowledge and that of the participants to the Proposed Transactions, no issue involved in this ruling letter:

a) is in an earlier return of a participant to the Proposed Transactions or a Related Person,

b) is being considered by a Tax Services Office or Taxation Centre in connection with a previously filed tax return of a participant to the Proposed Transactions or a Related Person,

c) is under objection by a participant to the Proposed Transaction or a Related Person,

d) is before the courts, or

e) is the subject of a ruling previously issued by the Income Tax Rulings Directorate.

PROPOSED TRANSACTIONS

1. The CCF intends to issue Units of the CCF to any New Investor that qualifies as a Qualifying Investor.

2. In addition to securities already held by the CCF as of the date of this ruling request, the CCF may invest in publicly traded shares of Canadian Corporations listed on Designated Stock Exchanges.

3. One of the Custodian's responsibilities will be to ensure that the appropriate amount of withholding tax is deducted and remitted to the tax authorities. In this connection, the Custodian, through the Sub-Custodian, intends to withhold and remit amounts on behalf of the Unitholders in respect of their tax liabilities under Part XIII of the Act ("Part XIII"), if any. The Sub-Custodian will determine the appropriate withholding tax rate applicable to each Unitholder based on the requirements of provisions of the Act and the provisions of the relevant Tax Treaty that apply to a particular Unitholder based on the country of residence of the Unitholder. The Sub-Custodian will then withhold the appropriate tax from the amount paid or credited to each Unitholder resident a particular country. At the end of each month the Sub-Custodian will compute the total amount withheld on behalf of a Unitholder for that month as determined above and remit that amount to the CRA by the XXXXXXXXXX th day of the following month. Within XXXXXXXXXX days after the end of each year, the Sub-Custodian will provide each Unitholder with NR4 Supplementary form reporting the total amount of Part XIII tax withheld and remitted to the CRA on behalf of that Unitholder and will forward to the CRA a copy of all the NR4 Supplementaries issued as well as NR4 Summary for the year. Any claim pursuant to subsection 227(6) for excess amounts withheld, if any, will be the responsibility of the Unitholder.

PURPOSES OF THE PROPOSED TRANSACTIONS

The purpose of the Proposed Transactions is to provide New Investors with the opportunity to access an array of pooled investment options (including investing in shares of Canadian Corporations).

Common Contractual Funds are generally only viable as pooling vehicles for institutional investors' property if they do not materially increase the tax costs incurred by institutional investors. Accordingly, it is of critical importance that the CCF is treated as fiscally transparent for tax purposes to allow the institutional investors to claim treaty benefits in respect of the income and gains they earn from their share of the assets owned by the CCF, based on an application of the tax convention between their country of residence and the country where the assets of the CCF are located.

ADDITIONAL INFORMATION

The CCF will provide to each Unitholder such information as is required to comply and file its tax returns in accordance with the Act. The Custodian or the Sub-Custodian will maintain records that would allow it to provide detailed statements to each Unitholder. In order that each Unitholder might be able to comply with the Act, those statements should notably provide the following information:

• The cost of all undivided interests in each property co-owned by each Unitholder through the CCF;
• The proportionate share in all proceeds or income realized through the CCF; and
• The proportionate share in the expenses made or incurred through the CCF, with sufficient detail to determine its nature and deductibility for the purposes of the Act.

In the event that a Unitholder is taxable in Canada pursuant to Part I of the Act, those statements would have to be provided by the Custodian upon request at any time and for any period corresponding to the Unitholder's taxation year in order that such Unitholder might be able to comply with the Act.

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 Proposed Transactions, if any, are completed in the manner described above, our rulings are as follows:

A. For the purpose of the Act, each New Investor will be treated as the co-owner of an undivided interest as tenant in common with the other Unitholders in each property owned by the CCF, and such an interest, as a percentage of all the Units of the CCF will be determined at any point in time based on the percentage of all of the Units owned by the New Investor at that time. Consequently, a Unit will not be regarded as an interest in a trust (i.e. as a distinct property) for the purposes of the Act.

B. For the purposes of Part I of the Act ("Part I"), each New Investor of the CCF will be treated as directly earning and realizing, as the case may be, its proportionate share of income or loss, as established in accordance with section 4, and capital gains or capital losses from the property owned by the CCF, whether or not such amounts are distributed to New Investors.

C. For the purposes of Part I, the character, source and timing of income, losses, capital gains and capital losses earned by each New Investor from the property owned by the CCF will not be affected by the fact that they pass through the CCF.

D. For purposes of the Act, Gross Income Payments paid by the Manager from the assets owned by the CCF to the New Investor will not be taxable events.

E. Provided that a Non-Resident New Investor is not considered to be carrying on business in Canada with respect to its ownership of the Units, for the purposes of Part XIII, any amount paid or credited by a Canadian payer to the Custodian in respect of the property owned by the CCF will be an amount paid or credited to each Unitholder in proportion to the Unitholder's ownership interest in the assets of the CCF.

F. Provided that a Non-Resident New Investor is not considered to be carrying on business in Canada with respect to its ownership of the Units, for the purposes of Part XIII, the character, source and timing of income in the hands of a New Investor will be the same as the character, source and timing of the related amount paid or credited by the Canadian payer to the Custodian, through the Sub-Custodian, and will not be affected by the fact that they pass through the CCF.

G. Provided that a Non-Resident New Investor is not considered to be carrying on business in Canada with respect to ownership of the Units and subject to the limitation on benefits provisions in the applicable Tax Treaty, for the purposes of applying Part XIII, a New Investor that is resident for the purposes of any Tax Treaty in a particular jurisdiction shall be entitled to benefits of that Tax Treaty in respect of such investor's proportionate interest in the assets of the CCF, as applicable, to the extent that such income or gains qualifies for relief under the provisions of the relevant Tax Treaty.

H. If the Custodian, through the Sub-Custodian, calculates and remits Part XIII tax on behalf of a New Investor in the manner set out in paragraph 3 under Proposed Transactions above, the amounts paid by the Custodian in respect of a New Investor's Part XIII tax will be treated as being paid on behalf of the New Investor in respect of its Part XIII tax liability and both the Unitholder and the Custodian through its Sub-Custodian will be considered to have complied with Part XIII of the Act in respect of income earned through the CCF by the Unitholder.

The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 issued by the CRA on May 17, 2002, and are binding on the CRA provided that the proposed transactions are entered into before XXXXXXXXXX .

These rulings are based on the Act in the present form and do not take into account amendments to the Act which, if enacted into law, could have an effect on the rulings provided herein.

OPINIONS

Provided that the proposed subsection 94(3) is enacted in substantially the same manner as that described in former Bill C-33 that was reintroduced as Bill C-10 in the House of Commons on October 29, 2007 in the 2nd session of the 39th Parliament, it is our opinion that proposed subsection 94(3) will not apply to the CCF.

The 39th Parliament of Canada was dissolved on September 7, 2008 and as a result federal bills outstanding as of September 7, 2008 cannot become law unless they are reintroduced to the 40th Parliament. Bill C-10 has not yet been reintroduced to the 40th Parliament. Instead, the Federal Budget of March 4, 2010 stated that the Government plans to submit to the Parliament revised proposals based on the outstanding proposals with respect to non-resident trusts, but with substantial modifications meant to simplify the outstanding proposals and to better target arrangements that seek to avoid paying the appropriate amount of Canadian tax. Those revised proposals are subject to a consultation process ending on May 4, 2010 before being tabled in Parliament.

In accordance with paragraph 22 of Information Circular 70-6R5, the comments in the two immediately preceding paragraphs are only an expression of opinion, and as such should not be construed as an advance income tax ruling, nor are they binding on the CRA.

ADDITIONAL COMMENTS

Nothing in this ruling should be construed as implying that the CRA has agreed to or ruled on whether the Unitholder is a resident of any country with which Canada has entered into a Tax Treaty, whether income referred to herein is taxable under Part I or Part XIII, or the manner in which any article of a Tax Treaty applies to any Unitholder. In addition, nothing in this letter should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the Facts and Proposed Transactions described herein other than those specifically described in the rulings given above. In particular, the CRA has not examined and therefore takes no position on whether any Unitholder would be considered to be carrying on business in Canada because of the provision of services to them by the Custodian or the Sub-Custodian in reference to their investments in Canadian equity securities.

Without restricting the generality of the preceding statement, it should be noted that nothing in this letter should be interpreted as confirming, either expressly or implicitly, that the CRA has reviewed or made any determinations in respect of the compliance of any Canadian payer, otherwise than as specifically provided in the above rulings, concerning its duties and obligations under Part XIII in respect of any amount paid or credited to a Unitholder through the CCF.

Finally, it is appropriate to underline that, for the purposes of the Act, if a Unitholder of the CCF redeems Units:

• The Unitholder will have disposed of a proportionate interest in the properties owned by the CCF for purposes of calculating any income, losses, capital gains and capital losses on such dispositions.
• The remaining Unitholders will have acquired a proportionate interest in the properties disposed of by the redeemed Unitholder.
• The remaining Unitholders will have disposed of a proportionate interest in the property used to pay the redeemed Unitholder for purposes of calculating any income, losses, capital gains and capital losses on such disposition.

In the same perspective, if a New Investor subscribes to Units:

• The previous Unitholders will have disposed of a proportionate interest in the properties owned by the CCF for purposes of calculating any income, losses, capital gains and capital losses on such dispositions.
• The New Investor will have acquired a proportionate interest in the properties disposed of by the previous Unitholders.
• The previous Unitholders will have acquired a proportionate interest in the property used to subscribe to Units by the New Investor.

We trust the above comments will be of some assistance.

Yours truly,

XXXXXXXXXX , Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch