In order to permit some unitholders (who have US dollars to invest) to achieve a return in US dollars that is the same as the Canadian market return without being affected by the US/Cdn. FX rate, various mutual fund trusts will issue a "Series USD" (with subscriptions and distributions payable in US dollars) and purchase currency forward contracts (with resulting gains or losses being allocated to the holders of the Series USD, but with the NAV being determined in a similar manner to the existing series) to accomplish this end. Conversely, each fund will issue "Hedged Series" which, through the purchase of related currency forward contracts, will generate foreign market returns for those with Canadian dollars to invest which are neutral to fluctuations in the Canadian dollar compared to the relevant foreign currency. The costs or benefits sustained from the Hedge Contracts will only be allocated to those investors who hold either Series USD or the Hedged Series, to which the Hedge Contracts relate. Any losses from the Hedge Contracts will first be allocated against income attributable to either Series USD or the Hedged Series and, where losses exceed such income, the losses will then be applied against income of all other Series within the Fund.
Ruling that s. 104(7.1) will not apply. The related CRA summary states:
Consistent with previous rulings given, especially in light of the uncertainty of foreign exchange fluctuations.