Review of Consolidated Results

Large Corporations Tax and Other

In the second quarter of 2006, the federal government enacted legislation eliminating federal capital tax, retroactive to January 1, 2006.

The Trust and its operating subsidiaries are structured to minimize the incidence of income tax. Trust income is sheltered by taxable distributions to Unitholders. Distributions made from the Trust are classified as either “taxable” or “tax-deferred”. Rather than being treated as taxable income in the year the distributions are received, tax-deferred distributions reduce the Unitholders’ tax-cost base. In 2006, 97% of distributions were taxable, and 3% were tax-deferred, similar to the prior year.

Under current tax legislation, the taxable portion of distributions is partially dependent upon income and tax deductions available to shelter this income at both the Trust and the subsidiary level. The tax balances available for deduction are disclosed in Note 11 to the audited Consolidated Financial Statements. The federal government’s recently proposed tax changes for income trusts will have a substantial impact on the taxability of the Trust if legislated, as discussed in the “Proposed Changes in Tax Legislation” section of this MD&A.