HST implementation

1. HST implementation

2. June 10, 2010 | 2 Agenda Introduction

3. June 10, 2010 | 3 Participants KPMG Walter Sisti, KPMG, Associate Partner, Indirect Tax Cliff Lee, KPMG, Senior Manager, Indirect Tax RBC Dexia Investor Services Sherrie Ann Pollock, Head, Taxation Paulette Jervis, Director, Fund Accounting Support Kevin Greene, Manager, Shareholder Services Canada

4. June 10, 2010 | 4 Introduction Effective July 1, 2010, HST will come into effect in BC and Ontario The HST will combine the federal GST rate of 5% with a provincial component (8% for Ontario and 7% for BC), creating a combined rate of 13% in Ontario and 12% in BC The HST has been in effect for several years in NB, NL and NS and is currently 13% in those provinces. NS will increase its rate of HST to 15% on July 1.

5. June 10, 2010 | 5 General Overview Walter Sisti Associate Partner, Indirect Tax, KPMG Cliff Lee Senior Manager, Indirect Tax, KPMG

6. June 10, 2010 | 6 Practical implications of SAM What and Why a SAM? Where, When, and Who Reports SAM?

7. June 10, 2010 | 7 The purpose of the Special Attribution Method (SAM) is to level the competitive playing field between service suppliers in a non-HST province with service suppliers in an HST province What and Why a SAM? Formula to calculate actual PVAT liability versus PVAT paid Driven by Province of Unitholders/members Creates an additional adjustment to Net GST/HST Return Calculated for each reporting period Formula to calculate actual PVAT liability versus PVAT paid Driven by Province of Unitholders/members Creates an additional adjustment to Net GST/HST Return Calculated for each reporting period

8. June 10, 2010 | 8 SAM formula calculates actual PVAT liability versus PVAT paid What and Why a SAM?

9. June 10, 2010 | 9 SAM formula

10. June 10, 2010 | 10 Attribution percentage

11. June 10, 2010 | 11 Attribution percentage

12. June 10, 2010 | 12 Attribution percentage

13. June 10, 2010 | 13 Attribution percentage - Example

14. June 10, 2010 | 14 Attribution percentage - Example

15. June 10, 2010 | 15 Attribution percentage - Example

16. June 10, 2010 | 16 Attribution percentage For all three methods, where the MFT obtains the location of individuals for 90% or more of the value of the units of a fund series, then that attribution percentage would be deemed to be the attribution percentage for 100% of the units in that series If investor information is not received with respect to 90% or more of the value of the units of a fund series With respect to units that info is not received would be treated as unallocated Unallocated will be deemed to be at highest provincial rate

17. June 10, 2010 | 17 Institutional Investors - non-retail investors (e.g., pension plan) Institutional Investor required to provide its attribution percentage to MFT Institutional Investor may be required to look through other Institutional Investors for multi-tiered investments scenario Example Fund has $100,000 in assets 20% by retail clients of which 10% are in Ontario and 10% in Alberta 80% is held by a pension fund who has 40% in Ontario, 40% in Quebec Attribution Percentage for Ontario = 50% Look through for institutional investors

18. June 10, 2010 | 18 Institutional investors will be obligated to provide Attribution percentage by province For each series Total investment in series Within 3 Months of MFT�s Attribution date � Sept 30 Penalties for failure to provide information Relief for �Specified Investor� or small investment plan (<$10M) Information requirement

19. June 10, 2010 | 19 No look through for institutional investor Determine attribution percentage At two points One must be September 30 Other must be three months before or after If more than two points must be equal distance from another If a 90% test for determining held in a province cannot be met ? seeks pre-approval from CRA Exchange Traded Funds (ETF)

20. June 10, 2010 | 20 PVAT Ratio

21. June 10, 2010 | 21 Fund A is a SLFI � distributed in all provinces Value of Fund is $100M MGT Fee = 2% or $2M Attribution Percentage: Preceding Year (without Reconciliation) � election Fund A is managed in Ontario, 13% HST applied ($100,000 GST + $160,000 OVAT) SAM Example

22. June 10, 2010 | 22 SAM Example

23. June 10, 2010 | 23 SAM Example

24. June 10, 2010 | 24 GST/HST Registration and Return Timing Special Elections Timing Where, When and Who Reports SAM?

25. June 10, 2010 | 25 Investment plans may need to register Non-registrants are normally monthly filers Registrants that are FI�s are generally annual filers Can elect to quarterly or monthly Annual filers need to make quarterly installments Filing deadline to move to 6 months after year-end GST/HST Registration and Return

26. June 10, 2010 | 26 Reporting Entity Election (REE) Consolidated Filing Election (CFE) Tax Transfer Elections (TTF) Transitional Year Election � Attribution Calculation Method Preceding Year Method Election Special Elections

27. June 10, 2010 | 27 Generally, the mutual fund trustee would be responsible for the filing of returns, remittance of any tax owing or claiming of any refund on behalf of the fund  With this election, those duties are transferred to the fund manager Joint election between fund manager and trustee � jointly and severally liable Election must be made before the fund�s fiscal year Election must be made in prescribed form and manner and filed with CRA Reporting Entity Election (REE)

28. June 10, 2010 | 28 Where a fund manager has filed a REE with respect to a fund, the fund manager can file a second election to allow it to file a single consolidated return One single registration number required for all funds under a consolidated return CRA can allow fund manager to file more then one consolidated return but with another registration number Still need to calculate PVAT, provincial attribution, liability/refund for each series and to maintain detailed records Joint election between fund manager and trustee � jointly and severally liable Election must be made before the fund�s fiscal year Election must be made in prescribed form and manner and filed with CRA Consolidated Filing Election (CFE)

29. June 10, 2010 | 29 Cash flow election Fund manager required to charge GST/HST to fund PVAT would be deducted in calculating SAM liability/deduction and could result in a refund to the fund Rather than wait for the refund, the refund could be transferred to the fund manager as an adjustment on its own return Transfer of PVAT at time tax charged Detailed records still need to be maintained Joint election between fund manager and trustee � jointly and severally liable Election must be made before the fund�s fiscal year Election must be made in prescribed form and manner and filed with CRA Tax Transfer Election (TTF)

30. June 10, 2010 | 30 Cashflow Issue

31. June 10, 2010 | 31 Cashflow Issue

32. June 10, 2010 | 32 Attribution Calculation Method For the period between July 1, 2010 and December 31, 2010 if 90% or more retail investors, no �look through� of institutional investors Attribution date could be any date July 1, 2009 and July 1, 2010 If less that 90% retail investors �Look through� required if able to �look through� No �look through� required if unable. Location of institutional investor Election kept in books and records Transitional Year Election (2010)

33. June 10, 2010 | 33 Use attribution percentage based on preceding year No reconciliation Second election for averaging Elections made before the beginning of the fiscal year Effective for at least 3 years Elections kept in books and records Preceding Year Method Election (2011 forward)

34. June 10, 2010 | 34 Impact to funds Sherrie Ann Pollock Head, Taxation, RBC Dexia Paulette Jervis Director, Fund Accounting Support, RBC Dexia Kevin Greene Manager, Shareholder Services Canada, RBC Dexia

35. June 10, 2010 | 35 Practical Implications Invoicing Accounting for the GST/HST Shareholder Services Unitholder Recordkeeping

36. June 10, 2010 | 36 Invoicing of services Generally, services that are currently subject to GST will be subject to HST in the harmonized provinces Most custodial and administrative services provided by RBC Dexia are subject to GST/HST RBC Dexia will apply GST/HST based on your primary place of business When we have multiple addresses or conflicting information, we have asked you to provide confirmation of your primary place of business

37. June 10, 2010 | 37 Invoicing of services Blended Rate There has been much discussion and debate regarding the blended rate Arises from confusion between the rate of tax to be invoiced (5%/12%/13%) and the ultimate liability for HST The blended rate represents the net impact of the SLFI SAM computation to the fund RBC Dexia will charge either GST or HST on a gross basis

38. June 10, 2010 | 38 Fund accounting Accounting for the HST Expense accruals will be based on the estimated effective or blended rate. The difference between the actual HST rate and the estimated effective or blended rate will be treated as an asset or liability of the fund Impact on NAV of a fund or series will be computed based on the net HST liability and will be netted against expenses in reporting net income Accounting for the HST NAV will reflect the �blended rate� of the fund or series YTD Income Statement will reflect the net expense Quarterly instalment payments may be required Accounting for the HST NAV will reflect the �blended rate� of the fund or series YTD Income Statement will reflect the net expense Quarterly instalment payments may be required

39. June 10, 2010 | 39 Fund accounting Information Required Provincial allocation of unitholders RBC Dexia Shareholder Services Non-RBC Dexia information Invoices submitted for payment should indicate GST/HST separately from the expense amount

40. June 10, 2010 | 40 Fund accounting What will change? Accruals will separate GST and HST from the underlying expense accruals Recoverable/payable HST (PVAT portion) will be set up based upon computed blended rate GST/HST and Recovery will be reflected at the fund/series level

41. June 10, 2010 | 41 Fund accounting What will RBC Dexia provide? Monthly report indicating GST and HST paid (gross) and HST recoverable/payable (PVAT portion) based upon information provided to us Reconciliation of GST and HST paid accounts

42. June 10, 2010 | 42 Shareholder Services What will RBC Dexia provide? Comma Delimited Excel file Provincial allocations by fund number including the blended rate Summary by fund group is also available Provincial data is based on unitholder information received from fund managers and dealers July 1, 2010 to December 31, 2010 allocation based on data as of June 25 2011 allocation will be based on September 30, 2010 data

43. June 10, 2010 | 43 Shareholder Services What will RBC Dexia be unable to provide? Look through capability on omnibus positions not possible for 2010 Will be ready for Jan 1, 2011 Clients must elect for the look through requirement not to apply for the period of July 1, 2010 to December 31, 2010 Transitional year election will address look through requirements

44. June 10, 2010 | 44 Elections For those clients for whom we act as Trustee, we have prepared a letter agreement to address the three elections It will be replaced when the election forms become available from CRA Please contact your RBC Dexia representative for this agreement

45. June 10, 2010 | 45 Elections

46. June 10, 2010 | 46 Questions?

47. June 10, 2010 | 47 Contact Information Please contact your RBC Dexia representative if you have any additional questions or concerns

48. June 10, 2010 | 48 HST Service Offering

49. June 10, 2010 | 49 Walter Sisti, CA wsisti@kpmg.ca Walter is an Associate Partner in KPMG�s Indirect Tax practice. Walter has specialized in Indirect Tax for 17 years, and co-leads KPMG�s GTA Indirect Tax Recovery practice. This practice is responsible for the large-scale projects for many of Canada�s leading financial institutions. Walter leads a team that consists of approximately 20 professionals who work exclusively on indirect tax advisory and recovery engagements. Walter and his team have been advising clients, including Financial Institutions, on the implementation of HST and the changes relating to pension plans. Walter can be reached at 416-777-3920. Cliff Lee, LL.B. clifflee@kpmg.ca Cliff is a Senior Manager in KPMG�s Indirect Tax Practice for the Greater Toronto Area. He advises clients in a broad range of indirect tax areas and specializes in GST issues for financial institutions. Cliff provides financial institutions, including insurance companies, banks and investment dealers with tax planning, compliance, and recovery ideas to help manage their GST obligations and entitlements and has managed sales tax reviews for some of Canada�s largest insurance companies. Cliff has also advised numerous financial institutions with respect to the impact of the proposed GST legislation affecting financial institutions, as well as the impact of Ontario sales tax harmonization Prior to joining KPMG, Cliff was a GST/HST rulings officer with Canada Revenue Agency. Cliff holds an LL.B., with a specialty in taxation law and has also served as a tutor for the CICA�s In-Depth GST Course. Cliff can be reached at 416-777-8566.