Investment Approach

Connor, Clark & Lunn Investment Management Ltd. (the "Portfolio Manager") will employ a disciplined, conservative process with respect to managing the Portfolio aimed at generating stable cash flows and preserving capital.

The Portfolio’s sensitivity to quantitative macro economic factors such as interest rates and economic growth will be continuously monitored. When the Portfolio Manager considers it appropriate, adjustments will be made to the composition of the Portfolio.

Duration Management

Duration, which is expressed in number of years, is a measure of the sensitivity of a fixed income investment or portfolio to changes in interest rates. Longer duration typically reflects an investment or portfolio with a longer term to maturity and hence greater price sensitivity to a given change in interest rates. By managing duration, the Portfolio Manager can manage the overall risk of interest rate changes on the Portfolio. In a period of falling interest rates, a portfolio manager will want to have a longer duration, as that portfolio will experience greater price appreciation, and conversely in a period of rising interest rates, a portfolio manager will want to have a portfolio of shorter duration to protect capital. The Portfolio Manager uses the first date upon which the securities may be called at par (rather than the legal maturity) in order to calculate duration. Based on this approach, the duration of the Indicative Portfolio is approximately 6.36 years.

Interest Rate Hedging

When the Portfolio Manager believes it is appropriate, it will employ a hedging strategy that is designed to mitigate the expected impact of significant interest rate increases on the Net Asset Value. NAPT will never be net short as a result of hedging. The Portfolio Manager anticipates using various hedging instruments and techniques, including derivatives and entering into options on futures contracts, interest rate swap positions and options thereon, known as ‘‘swaptions’’. The hedging strategy is designed to hedge against substantial interest rate increases that may occur over an investment horizon. It is not intended to enhance the returns of NAPT but rather only to minimize the impact of increases in interest rates. In circumstances where there is an interest rate hedge employed, the total return on the Portfolio may be higher with the hedge than without it when interest rates rise significantly, but total return may be lower than it otherwise would be in a stable to falling interest rate environment.

Foreign Exchange Hedging

The Fund will be exposed to U.S. dollars. The Portfolio Manager will take currency exposure into account in managing the Portfolio and will attempt to maximize the Fund’s total returns in Canadian dollars. In addition, it is intended that at least 90% of the value of the Portfolio that is exposed to US dollars will be hedged back to the Canadian dollar. Derivative instruments used by the Fund may include but are not limited to futures, forwards, options and swaps.

Leverage

The Fund’s exposure to the securities in the Portfolio through the Forward Agreement may be increased to 25% of the Total Assets (tested daily) for the purposes of adding leverage to the Portfolio and such other short term funding purposes as may be determined by the Portfolio Manager from time to time and in accordance with the Investment Strategy. The use of leverage has the potential to enhance or reduce returns. Initially, the Fund is expected to employ leverage of 25% of Total Assets.

Securities Lending

In order to generate additional returns, NAPT may lend securities included in the Portfolio to securities borrowers acceptable to NAPT pursuant to the terms of a securities lending agreement between NAPT and such borrower. Under a securities lending agreement: (i) the borrower will pay to NAPT a negotiated securities lending fee and will make compensatory payments to NAPT equal to any distributions received by the borrower on the securities borrowed; (ii) the securities loans must qualify as ‘‘securities lending arrangements’’ for the purposes of the Tax Act; and (iii) NAPT will receive collateral security. NAPT is not limited in the amount of securities lending transactions it may engage in.

Use of Derivatives

NAPT may invest in or use derivative instruments, other than commodity derivatives, for hedging purposes consistent with its investment objectives and subject to the investment restrictions of NAPT. For example, NAPT may use derivatives, including interest rate hedges, with the intention of offsetting or reducing risks associated with an investment or group of investments. NAPT may use derivatives to hedge the currency risk of any non Canadian dollar denominated securities. No assurance can be given that the Portfolio will be hedged from any particular risk from time to time.