Unitholders' Capital And Unit Trading Activity

Canadian Oil Sands issues Unit options (“options”) as part of its long-term incentive plan for employees. There were 203,310 options granted in 2006 with an average exercise price of $29.70 per option and a fair value of approximately $1 million, which will be amortized into income over a three-year vesting period. On January 29, 2007, another 163,652 options were granted with a fair value of approximately $1 million. There were 2.9 million options outstanding at February 22, 2007, representing less than 1% of Units outstanding. Each option represents the right of the optionholder to purchase a Unit at the exercise price determined at the date of grant. For options granted after June 1, 2005, the exercise price is reduced by distributions over a threshold amount. The options vest by one-third following the date of grant for the first three years and expire seven years from the date of grant.

In addition, 34,345 performance unit rights (“PUPs”) were issued in 2006 and had an accrued value of approximately $1 million at December 31, 2006. On January 29, 2007, an additional 33,275 PUPs were granted with a fair value of approximately $1 million. The PUPs are earned based on total unitholder return at the end of three years compared to a peer group, with the actual unit equivalents earned ranging from zero to double the target award. More detail on the Trust’s stock-based compensation plans can be found in Note 13 to the audited Consolidated Financial Statements, as well as the Trust’s Management Proxy Circulars dated March 10, 2006 and March 11, 2005.

Canadian Oil Sands Units trade on the Toronto Stock Exchange under the symbol COS.UN. In May 2006, Canadian Oil Sands’ Trust Units were split on a five-for-one basis. At December 31, 2006, based on the closing market price of $32.61 per Unit, our market capitalization and enterprise value were approximately $15 billion and $17 billion, respectively, up from $12 billion and $13 billion, respectively, at December 31, 2005 based on a closing Unit price of $25.20 (post-split basis) at that date. A table summarizing the Units issued in 2006 is included in Note 12(a) of the audited Consolidated Financial Statements. On January 2, 2007, the Trust issued another 8.2 million Units to Talisman, valued at approximately $237.5 million, as part of the consideration paid by the Trust to acquire the 1.25% indirect Syncrude working interest.

Unitholder distributions paid in 2006 totalled $512 million, or $1.10 per Unit, compared with $184 million, or $0.40 per Unit (adjusted for the 5:1 Unit split) recorded in the prior year. In 2005, distributions were paid to Unitholders on the last business day of the second month following the quarter end and were recorded as payable at each quarter end even though they were not declared. In the last quarter of 2005, the Trust changed how its Unitholder distributions were recorded in the Consolidated Financial Statements to reflect distributions paid in the quarter, rather than accrued; therefore, the prior year financial statements reflect only three quarters of distributions paid as there was no accrual at December 31, 2005, for the distribution of $0.20 per Unit paid on February 28, 2006. The change did not impact the distributions declared and paid to our Unitholders or the timing of such payments.

On January 29, 2007, the Trust declared a distribution of $0.30 per Unit for total distributions of approximately $144 million. The distribution will be paid on February 28, 2007 to Unitholders of record on February 8, 2007.