Distribution Policy

Distributions on the Preferred Shares are fixed and cumulative and are paid quarterly. Holders of Capital Shares are entitled to receive any dividends or distributions that the Board of Directors may declare subject to the rights of the holders of Preferred Shares. If dividends received by the Company in a year exceed the amount of the Preferred Share dividends and expenses of the company, the excess may be paid as distributions or dividends on the Capital Shares. For historical distribution amounts, please see distribution information.

Retraction Rights

The following provides a summary of the retraction rights available to shareholders. Please refer to the prospectus for complete details.

Unlike most mutual funds the Capital and Preferred Shares are listed allowing holders to exit by selling their Shares. In addition, they are also retractable at any time. Because of the manner in which the retraction prices are calculated, investors are almost always better off selling their Shares on the market rather than retracting them. It should be noted that all the retractions listed below constitute a taxable disposition of the Company’s Shares at the time of the retraction whether the retraction is received in the form of cash or portfolio shares.

Regular Retraction

Capital and Preferred Shares may be surrendered for retraction at any time for payment on the last day of each month or the preceding business day. A Capital Shareholder who surrenders two Capital Shares is entitled to receive 95% of the unit value less the cost of purchasing a Preferred Share, less $1.00. Preferred Shareholders who elect to retract are entitled to a payment equal to 95% of the unit value less the cost of purchasing two Capital Shares in the market, less $1.00.

Concurrent Retraction

A holder who concurrently retracts two Capital Shares together with one Preferred Share will be entitled to receive 95% of the unit value, less $1.00.

Special Annual Retraction

The special annual retraction date occurs on July 31st of each year. On that date Capital Shareholders who surrender two Capital Shares are entitled to receive the amount, if any, by which the unit value exceeds $36.84. If the holder tenders two Capital Shares and one Preferred Share, then the holder is entitled to receive an amount equal to the unit value. If the holder tenders 10,000 or more Capital Shares and $36.84 in cash or one Preferred Share for every two tendered Capital Shares, such holder may instead choose to receive a pro rata interest in the common shares held by the Company.

Redemption

The Company may redeem Preferred Shares on any annual retraction date at a price per share equal to $36.84 to the extent that Capital Shares are retracted under a special annual retraction.

Taxation

Dividends other than the capital gains dividends received by individuals on the Preferred or Capital Shares will be subject to the normal gross-up and dividend tax credit rules applicable to dividends received on shares of a taxable Canadian corporation.

Return of capital payments to a holder of Preferred Shares will not be subject to tax but will reduce the adjusted cost base of the Preferred Shares to the holder.

The amount of any capital gains dividend received by a holder of Preferred Shares or Capital Shares will be considered to be a capital gain of the holder in the taxation year in which the capital gain dividend is received.

The Company qualifies as a “mutual fund corporation” and a “financial intermediary corporation” as defined in the Income Tax Act (Canada). As a result thereof and after deduction of expenses in computing its income, the Company does not anticipate that it will be subject to any material non-refundable income tax liability.

Directors and Officers

The following are the names, office(s) held and principal occupations of the directors and officers of the Company:

Name	Office(s) Held	Principal Occupation
Brian D. McChesney	President, Chief Executive Officer and Director	Managing Director, Scotia Capital Inc.
Stephen D. Pearce	Chief Financial Officer, Secretary and Director	Director, Scotia Capital Inc.
Robert C. Williams	Director	Chief Executive Officer, Headwater Investments Ltd.
Michael A. Hasley	Director	Corporate Director
John Latimer	Director	Corporate Director
Sydney R. McMorran	Director	Corporate Director
Michael K. Warman	Director	Corporate Director