                           [Canadian Tax Letter]

                                 March 1996

     New Reporting Rules May Put Your Offshore Assets Under the
     Microscope

     If you or your company has offshore assets, Revenue Canada wants
     to know all about them. And now, with the release of draft law to
     enact comprehensive new reporting requirements, Revenue Canada
     has gained stronger powers to scrutinize your offshore
     investments and to ensure the complete reporting of your income
     earned outside of Canada.

     Revenue Minister Jane Stewart says, "It would be unfair to
     Canadians if we allowed some in our society to hide financial
     assets offshore to avoid paying their fair share of taxes". But
     whether many well-heeled Canadians are actually doing so is
     uncertain. No easy, inexpensive and legitimate ways exist for
     Canadians to invest offshore and pay no tax. Many of the offshore
     structures highlighted in recent media reports constitute fraud
     and tax evasion. Absent outright tax evasion, investments in
     offshore structures create no particular tax benefit for
     individuals or businesses unless they are engaged in active
     international operations.

     However, the new draft rules will give Revenue Canada much more
     information about Canadians' offshore holdings and will permit
     much closer monitoring of how those assets or interests are to be
     taxed in Canada. The data gathered could provide a base for
     future policy changes in the area of international taxation.

     Our summary of the proposed rules and Revenue Canada's draft new
     information return forms is based on legislation that was
     released in draft form on March 5, 1996 and it's possible that
     there will be changes before the new rules are passed into law.
     The draft rules are quite complex and broad in scope and they
     apply to tax and fiscal years which begin on or after January 1,
     1996 - if you or your company is affected, you should carefully
     review the application of these rules with your tax advisor.

     Are You Affected?
     You or your company will be required to file one of more of
     Revenue Canada's new information returns if you are an
     individual, corporation, trust, or partnership and:

        * you have an interest in foreign propety of more than
          $100,000 (including items such as shares, bank accounts,
          real property, but excluding interests in foreign
          affiliates, property used in an active busniess, personal -
          use property and propery in RPPs, RRSPs and RRIFs);
        * you have one or more foreign affiliates (corporations or
          trusts);
        * you have transferred or loaned property to a non-resident
          trust; and/or
        * you have received distributions from, or are indebted tom an
          offshore trust.

     The new rules take effect for tax years starting in 1996, with
     the first filing deadline on April 30, 1997 or later. Failure to
     comply could result in hefty penalties. The following pages offer
     further details about how the new rules will apply to taxpayers
     in the above circumstances.

     If You Have Interests in Foreign Property...
     Canadian resident taxpayers and partnerships, other than certain
     special purpose corporations and trusts, that own or have an
     interest in certain types of foreign property will generally be
     required to file an information return where the total cost of
     all foreign property exceeds $100,000. Types of foreign property
     identified in the draft rules include:

        * funds or intangible property which are situated, deposited
          or held outside of Canada and tangible property situated
          outside of Canada;
        * shares of a non-resident corporation;
        * interests in a non-resident trust or partnership;
        * interests in, or rights with respect to, non-resident
          entities;
        * indebtedness owed by a non-resident person; and
        * properties that are convertible, exchangeable, or confer a
          right to acquire the above types of property.

     Among the types of property excluded from the above list are
     properties used or held in the course of carrying on an active
     business and certain other properties that require separate
     disclosure. Personal-use properties are also excluded, so if you
     only have a vacation property located outside of Canada, you
     won't be required to file a return.

     New Form T1135 - What info is required?
     If you're subject to the reporting requirements for interests in
     foreign property, you'll have to file Revenue Canada's new Form
     T1135 and disclose data such as:

        * the name and address of the foreign entity that holds the
          funds;
        * a description of the property's value and yield;
        * details of ownership of non-resident corporations, including
          the cost of the shares, the amount of dividends received,
          and any gain or loss realized on the disposition of such
          shares in the year;
        * information on indebtedness owed to non-residents and/or
          interests in non-resident trusts, and details of real
          property, tangible property, and intangible property located
          outside of Canada.

     Table A sets out the deadlines for filing new Form T1135 and the
     penalties for missing them.

                                  Table A
                     Form T1135 - Deadlines & Penalties

          When is the deadline for    Partnership filers must
          filing Form T1135?          file by the regular
                                      deadline for partnership
                                      returns. Other filers must
                                      file by their normal
                                      filing deadlines; however,
                                      for the first reporting
                                      period that starts after
                                      1995, the due date is
                                      April 30, 1997 or the
                                      normal due date, whichever
                                      is later.

          What is the minimum         $12,000 (i.e., $500 per
          penalty for not filing?     month for up to 24
                                      months).

          What is the additional      10% of the total cost of
          minimum penalty for not     the foreign property,
          filing for more than 2      minus the initial penalty.
          years?

     If You Have a Foreign Affiliate...
     A Canadian taxpayer or partnership that owns together with
     related persons at least 10% of a non-resident corporation is
     considered to have an interest in a foreign affiliate. The
     existing tax rules relating to the taxation of foreign affiliates
     are elaborate and complex, and the proposed rules will require
     much more detailed reporting of each foreign affiliate owned by a
     Canadian taxpayer or partnership.

     New Form T1134 - What info is required?
     If you're subject to the reporting requirements for interests in
     foreign affiliates, you'll have to file Revenue Canada's new Form
     T1134 and disclose data such as:

        * identity of the foreign affiliate, including country of
          residence and principal place of business;
        * description of the number and class of capital stock issued
          and outstanding;
        * the shareholder's country of residence, number of shares
          owned and the shares' adjusted cost base;
        * unconsolidated financial statements;
        * information on the affiliate's income, including sales, cost
          of sales, sales of intangible property and interest income;
        * countries where the foreign affiliate has a permanent
          establishment and the income earned therein;
        * exempt and taxable surplus calculations where the Canadian
          person has received a dividend;
        * disclosure of any corporate or other reorganizations; and
        * if the entity is a controlled foreign affiliate, data on the
          number of employees, composition of income, amount of
          foreign accrual property income, capital gains and losses,
          and active business income.

     Deadlines and penalties in respect of new Form 1134 are set out
     below in Table B.

                                  Table B
                     Form 1134 - Deadlines & Penalties

          When is the deadline for    Partnership filers must
          filing Form T1134?          file by the regular
                                      deadline for partnership
                                      returns. Other filers must
                                      file by their normal
                                      filing deadlines; however,
                                      for the first reporting
                                      period that starts after
                                      1995, the due date is
                                      December 31, 1997 or the
                                      normal due date, whichever
                                      is later.

          What is the minimum         $12,000 (i.e., $500 per
          penalty for not filing?     month for up to 24
                                      months).

          What is the additional      10% of the total cost of
          minimum penalty for not     the filer's cost of shares
          filing for more than 2      or debts issued by the
          years?                      foreign affiliate, minus
                                      the initial penalty.

     If You've Loaned or Transferred Property to an Offshore Trust...
     The new reporting rules are broad in their scope as they apply to
     trusts which are not resident in Canada but in which Canadians
     have a beneficial interest. The new rules will come into play
     where property has been transferred or lent by any person to a
     non-resident trust (or to a corporation controlled by it) at any
     time before the end of the foreign trust's taxation year. In
     these cases, the Canadian resident who transferred the property
     or lent the funds must file an information return with Revenue
     Canada.

     Which offshore trusts are affected?
     Affected foreign trusts are essentially those which are not
     resident in Canada and which have certain Canadian beneficiaries.
     Also affected are trusts having provisions which allow persons to
     be added as beneficiaries who may be resident in Canada, or
     property to be distributed to another affected foreign trust.

     Watch out for "non-arm's length indicators"
     The rules will also apply if a "non-arm's length indicator" with
     respect to the transfer or loan existed at the end of the trust's
     year. A "non-arm's length indicator" exists with respect to a
     transfer of property made at an earlier time where the transferor
     was a Canadian-resident beneficiary under the trust, or was an
     uncle, aunt, nephew, or niece, or another person related to a
     Canadian resident beneficiary.

     Other non-arm's length indicators include situations where
     consideration for the transfer was less than the value of the
     property transferred or loans exist which are at a low or no
     interest rate or interest remains unpaid for more than 180 days
     after the end of the calendar year.

     Five-year immigrant trusts
     A non-arm's length indicator will exist for "five year immigrant
     trusts" where the transferor is a beneficiary of the trust, is
     related to a beneficiary of the trust, or where debt exists
     having an interest rate that is less than fair market value or
     that is unpaid for more than 180 days. If the transferor or
     lender is a resident of Canada at the end of the year, reporting
     will be required. Beneficiaries that receive distributions or are
     indebted to the trust must also report separately.

     Exempt trusts
     Exclusions from the new rules exist for interests in certain
     "exempt trusts" that are maintained primarily for non-residents
     and have been established to administer benefits under one or
     more superannuation, pension or retirement funds or to provide
     employee benefits. Some special purpose foreign mutual fund
     trusts may also be considered exempt trusts, but reporting of
     interests in such trusts may be required as an interest in
     foreign property (i.e., on Form 1135 as discussed above).

     New Form 1141 - What info is required?
     If you're subject to the reporting requirements because you or
     your company has transferred or loaned property to an offshore
     trust, you'll have to file Revenue Canada's new Form T1141 and
     disclose data such as:

        * the amount lent or transferred to the trust;
        * residence of the trust and information about the trustee;
        * the trust deed, memorandum of wishes and any subsequent
          variation of the trust indenture; and
        * information on the beneficiaries of the trust.

     Deadlines and penalties in respect of new Form 1141 are set out
     below in Table C.

                                  Table C
                      Form 1141 - Dealines & Penalties

          When is the deadline for    By the taxpayer's normal
          filing Form T1141?          filing deadlines; however,
                                      for the first reporting
                                      period that starts after
                                      1995, the due date is
                                      April 30, 1997 or the
                                      normal due date, whichever
                                      is later.

          What is the minimum         $12,000 (i.e., $500 per
          penalty for not filing?     month for up to 24
                                      months).

          What is the additional      10% of the amount
          minimum penalty for not     transferred or loaned to
          filing for more than 2      the offshore trust, minus
          years?                      the initial penalty.

     If You've Received Distributions from an Offshore Trust...
     Canadian residents, other than certain special purpose
     corporations and trusts, that are beneficiaries of an offshore
     trust and receive distributions from the trust after 1995 or are
     indebted to the trust will be required to file an information
     return to report the distribution received or the amount of the
     indebtedness.

     Like the rules for transfers and loans to offshore trusts,
     exclusions exist for interests in certain "exempt trusts"
     maintained primarily for the benefit of non-residents which are
     established to administer benefits under one or more
     superannuation, pension or retirement funds or to provide
     employee benefits. Some special purpose foreign mutual fund
     trusts may also be considered exempt trusts, but reporting of an
     interests in such trusts may be required as an interest in
     foreign property (i.e., on Form 1135 as discussed above).

     New Form 1142 - What info is required?
     If you're subject to the reporting requirements because you or
     your company has received distributions from a foreign trust,
     you'll have to file Revenue Canada's new Form T1142 and disclose
     data such as:

        * the name of the person or partnership;
        * the amount of funds received, the description and fair
          market value of other property received, and the nature of
          the payment as either income or capital; and
        * details of the indebtedness owed to the non-resident trust
          including the date issued, principal amount, the unpaid
          principal at the period's end, the interest rate applicable
          to the debt, and details of any payments of interest made
          during the year.

     Deadlines and penalties in respect of new Form 1142 are set out
     below in Table D.

                                  Table D
                      Form 1142 - Dealines & Penalties

          When is the deadline for    Partnership filers must
          filing Form T1142?          file by the regular
                                      deadline for partnership
                                      returns. Other filers must
                                      file by their normal
                                      filing deadlines; however,
                                      for the first reporting
                                      period that starts after
                                      1995, the due date is
                                      December 31, 1997 or the
                                      normal due date, whichever
                                      is later.

          What is the minimum         $2,500 (i.e., $25 per day
          penalty for not filing?     for up to 100 days). (No
                                      additional penalty applies
                                      for failing to file for
                                      more than 2 years.)

     More Penalties
     In addition to the penalties for failing to file the new
     information returns, penalties may be charged to persons or
     partnerships who may make or participate in the making of a false
     statement or omission in the filing of any of the above returns.

     We can help
     If you or your company is engaged in offshore activities, you
     should review the nature and extent of information to be gathered
     so that you can start taking steps now to obtain the relevant
     information by the filing deadline. Often information located in
     foreign jurisdictions is not readily available or takes extra
     time to obtain.

     Further, many of the questions asked may be ambiguous and will
     require interpretation or clarification - these issues should be
     considered before your return is filed.

     Your KPMG advisor can help you to fully review your international
     holdings or structure in the context of the current Canadian and
     international tax laws so that you can anticipate the impact of
     these new disclosure rules. And if you have concerns about the
     impact of these draft rules in your circumstances, your KPMG
     advisor can help you bring these issues to the attention of the
     Department of Finance.
