Update on Government Tax Changes

On October 31, 2006, the Federal Government announced tax proposals pertaining to taxation of distributions paid by Trusts and the personal tax treatment of Trust distributions. Currently, the Trust does not pay tax on distributions as tax is paid by the unitholders. The proposals would result in a two-tiered tax structure similar to that of corporations whereby distributions would be subject to a 31.5 per cent tax at the Trust level and personal tax equivalent to that of a taxable dividend. At present, Canadian Pension Funds, Registered Retirement Savings Plans and Registered Retirement Income Funds (“Canadian Tax Exempt Entities”) are not subject to tax on Trust distributions. Under the proposals, Canadian Tax Exempt Entities would be subject to tax as a result of the tax imposed at the Trust level. The proposals would also increase the tax for non-resident unitholders due to the tax imposed at the Trust level. If enacted, the proposed plan would apply to the Trust effective January 1, 2011. The Trust is currently assessing the proposals and the potential implications to the Trust.

Yours truly,

John P. Dielwart
President and Chief Executive Officer