Investment Approach

Investment Objectives

The Company's investment objectives with respect to the Preferred Shares are:

To pay to holders of Preferred Shares ("Holders"), on or about September 30, 2009, an amount per Preferred Share equal to the original subscription price of $25.00 per Preferred Share.
To provide Holders with quarterly fixed cumulative preferential distributions of $0.26875 per Preferred Share ($1.075 per annum to yield 4.30% on the subscription price of $25.00 per Preferred Share).

Investment Highlights

Rating of P-1 by Standard & Poor's ("S&P"), a division of The McGraw Hill Companies Inc.
Tax-efficient quarterly distributions of 4.30% on par value consisting primarily of returns of capital.
Unique Credit-Linked Note provides exposure to a diversified portfolio of investment grade rated companies and offers an enhanced return relative to comparably rated debt securities. The Credit-Linked Note is structured to pay quarterly in Canadian dollars and matures on September 30, 2009.
Access to proven fixed income management of Connor, Clark & Lunn Investment Management Ltd.

Investment Strategy

The Company has invested the net proceeds of the offering of Preferred Shares to provide exposure to the Credit-Linked Note, which has been assigned a rating of A+ by S&P. The Credit-Linked Note is issued by HSBC Bank USA, a global financial institution whose long-term debt is rated AA- by S&P. The return on the Credit-Linked Note is linked to the number of defaults experienced over the term of the Credit-Linked Note among the companies in an equally-weighted portfolio of 140 companies.

The Investment Advisor's approach to Selecting the CLN Portfolio

CC&LIM employs a number of screening techniques to construct and manage the CLN Portfolio with the objective of minimizing the expected default rate. CC&LIM will consider such factors as:

diversification by name, industry, country and region, taking into consideration such factors as related entities, parent/subsidiary relationships and guarantees;
a statistical assessment of the expected default rate in the CLN Portfolio to ensure all objectives are met; and
credit analysis from a quantitative and qualitative perspective, including a review of third-party reports from rating agencies and others.

A separate qualitative credit analysis is done with the objective of identifying any unique risks associated with individual businesses. Based on these combined analyses, companies in the portfolio may be eliminated or replaced from time to time.