Risk Management

Changes to Tax Legislation

Tax changes enacted by the federal or provincial government can have a material impact on Unitholder distributions. Of specific note is the Minister of Finance’s announcement on October 31, 2006 of the federal government’s intention to impose a new tax on certain distributions from existing income and royalty trusts effective in 2011. If the proposed legislation is passed, the Trust’s net income, cash from operating activities and distributions will be materially negatively impacted. However, in the absence of final legislation implementing the 2006 proposed changes, the implications are difficult to fully evaluate and quantify. Canadian Oil Sands will evaluate alternatives for the Trust once further clarity on the legislation is available. A detailed discussion of this issue is contained in this MD&A under the heading “Proposed Changes in Trust Tax Legislation”.