Distribution Policy

Distributions are fixed and cumulative and are paid quarterly. For historical distribution amounts, please see distribution information.

The Company’s current policy in funding its Preferred Share distributions is to use a combination of dividend income from the underlying portfolio and proceeds from the sale of the underlying portfolio shares to cover any funding deficit. Distributions will consist of ordinary dividends and will generally include capital gains dividends and non-taxable returns of capital. Any portion of the Preferred Share distribution, which is derived from the proceeds of sale on the Portfolio Shares, will consist of a non-taxable return of capital or a combination of a capital gains dividend and a non-taxable return of capital. The Board of Directors reviews the distribution policy annually.

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 and 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 March 15th 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 $25.00. 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 $25.00 (plus $0.05 delivery charge for every two Capital Shares) 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 $25.00 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 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.
John B. Newman	Director	Chairman, Multibanc Financial Holdings Limited
Derek Brown	Director	Corporate Director
Peter Eby	Director	Corporate Director
Michael K. Warman	Director	Corporate Director