Minimum Annual DistributionMinimum Annual Distribution

Minimum Annual Distribution

19. During each *financial year, a *private ancillary fund must distribute at least 5 per cent (minimum annual distribution rate) of the *market value of the fund’s net assets (as at the end of the previous *financial year).

Note 1: While net assets are used to determine the fund’s minimum distribution, the amount of the distribution itself is not net of any amount (for example, expenses of the fund).

Note 2: The minimum annual distribution rate may be lowered under Guidelines 19.2 and 19.7 for a financial year.

19.1. The fund must distribute at least $11,000 (or the remainder of the fund if that is worth less than $11,000) during that *financial year if any expenses of the fund in relation to that financial year are paid directly or indirectly from the fund’s assets or income.

Note: This means that if a fund’s expenses are met from outside the fund, its minimum annual distribution is the amount calculated under Guideline 19. If any of a fund’s expenses are paid out of the fund’s assets or income, its minimum distribution is $11,000 or the amount calculated under Guideline 19, whichever is greater.

19.2. No distribution is required during the *financial year in which the fund is established.

19.3. A distribution includes the provision of money, property or benefits. If the fund provides property or benefits, the *market value of the property or benefit provided is to be used in determining whether the fund has complied with this guideline.

Note: Example 1: If a private ancillary fund makes a gift of land to a public benevolent institution, it would include the market value of the land in calculating how much it has distributed.

Note: Example 2: If a private ancillary fund leases office space to a deductible gift recipient at a discount to the market price, the fund is providing a benefit whose market value is equal to the discount.

Note: Example 3: If a private ancillary fund invests in a social impact bond issued by a deductible gift recipient with a return that is less than the market rate of return on a similar corporate bond issue, the fund is providing a benefit whose market value is equal to the interest saved in the financial year by the deductible gift recipient from issuing the bond at a discounted rate of return.

Note: Example 4: If a private ancillary fund lends money to a deductible gift recipient at a discount to the interest rate which would be charged on a comparable loan sourced from a financial institution at arm’s length, the fund is providing a benefit whose market value is equal to the discount.