Trust agreements for mutual fund trusts (the "Funds") are amended to provide that the trustee shall allocate all or a portion of net capital gains realized by the Fund in the year to unitholders who have redeemed units of the Fund at any time in the year, provided that the amount of net capital gain so allocated to a particular redeeming unitholder shall not exceed the amount by which the amount payable on the redemption of the units (based on their NAV) exceeds the adjusted cost base of the units being redeemed, and to provide that proceeds of redemption otherwise payable will be reduced by the amount of such allocation. On the year's final distribution date, each Fund will make payable to its unitholders their pro rata share of the amount by which the net income and net capital gains of the Fund for the year exceed any amount previously made payable or allocated on an interim basis during the year. As an exception, a portion of net income of the Fund may be distributed to certain unitholders as a management fee distribution and a portion of net capital gains of the Funds may be distributed to the unitholders who have redeemed units of the Fund. Distributions payable to a non-redeeming unitholder are reinvested in additional units of the relevant series at the series net asset value per unit.
Rulings that the trust may deduct the taxable portion of the capital gains payable to a redeeming unitholder and make a s. 104(21) designation in respect of that amount, that the proceeds of disposition of the redeemed units will be equal to the excess of the net asset value of the units over the capital gains distribution in respect of those units, and that s. 107(4.1) will not apply.