Core Canadian Dividend Trust [cdd.un] Notes to Financial Statements December 31, 2010 and 2009 7. Distributions 8. Income Taxes 6. Management Fees and Expenses 9. Transaction Fees 10. Capital Disclosures Annual Report 2010 16 Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 1535, “Capital Disclosures” requires the disclosure of (i) an entity’s objectives, policies and processes for managing capital; (ii) quantitative data and qualitative information about what the entity regards as capital; (iii) whether the entity has complied with any capital Total transaction fees paid for the year ended December 31, 2010 in connection with portfolio transactions were $60,622 (2009 - $70,778). Of this amount $17,730 (2009 - $16,202) was directed for payment of client brokerage commissions. Mulvihill amalgamated with MCM on September 1, 2010. As successor, MCM became the Manager and the Investment Manager of the Fund. Fees are payable to the Manager under the terms of the trust agreement and to the Investment Manager under the terms of an investment management agreement. The fees are payable at annual rates of 0.10 percent and 1.00 percent respectively of the Fund’s net asset value, calculated and payable monthly, plus applicable taxes. The Fund is responsible for all ongoing trustee, manager, legal, accounting and audit fees as well as all other expenses incurred by the Trustee and the Manager in the ordinary course of business relating to the Fund’s operations. The Fund is also responsible for commissions and other costs of portfolio transactions and any extraordinary expenses of the Fund which may be incurred from time to time. The basic net assets per unit was calculated without giving effect to the dilutive impact of the outstanding warrants. The diluted net assets per unit refers to the net assets of the Fund plus the net proceeds that would have been received by the Fund if all outstanding warrants were exer- cised, divided by the number of units outstanding plus the additional units that would be outstanding if all of the outstanding warrants had been exercised on the applicable valuation date. The diluted net assets per unit was calculated when the basic net assets per unit exceeds $6.99 per unit, equivalent to the subscription price of $7.11 less the dealer fees of $0.12, on the applicable valuation date. At December 31, 2010, there was no diluted net assets per unit as all warrants expired. Issue costs of approximately $0.8M (2009 - $1.5 M) remain undeducted for tax purposes at year-end. Accumulated non-capital losses of $0.3M (2009 - $0.2M) and capital losses of approximately $4.8M (2009 - $4.8M) are available for utilization against realized gains on sale of investments in future years. The capital losses can be carried forward indefinitely. The non-capital losses expire in 2029. Given the investment and distribution policies of the Fund and taking into account expenses, the Fund does not expect to bear any appreciable non-refundable income tax. The Fund is a “mutual fund trust” as defined in the Act. The Fund is subject to tax in each taxation year under Part I of the Act on the amount of its income for the year, including net realized taxable capital gains, less the portion thereof that it claims in respect of the amount paid or payable to unitholders in the year. Income tax paid by the Fund on any net realized capital gains not paid or payable to unitholders is recoverable by the Fund to the extent and in the circumstances provided in the Act. No amount was required to be included in computing the income of a unitholder as a consequence of acquiring warrants under the Offering, provided that the income of the Fund for its taxation year ending in 2009 did not exceed the cash distributions from the Fund for 2009. However, unitholders were required to reduce the adjusted cost base of their units by the aggregate fair market value of all the warrants acquired under the Offering. To the extent that the adjusted cost base of a unit would otherwise be less than zero, the negative amount is deemed to be a capital gain recognized by the unitholder and the unitholder’s adjusted cost base of the unit is increased by the amount of such deemed capital gain. The fair market value and the cost of a warrant acquired under the Offering were nil, as of the date the warrant was issued. Upon exercise of a warrant, the Fund paid a fee of $0.12 per warrant to the dealer whose client has exercised the warrant. Such fees were paid by the Fund out of the assets attributable to the units. During the year warrant exercise fees paid amounted to $2,063 (2009 - nil). basis of one warrant for each unit held November 19, 2009. Each warrant entitled the holder thereof to acquire one unit upon payment of $7.11 (the “Subscription Price”) on or before on June 15, 2010 (the “Expiry Date”). Warrants not exercised by the Expiry Date were rendered void and of no value. During the year, 17,193 (2009 - nil) warrants were exercised. The Fund will pay a service fee equal to 0.40 percent annually of the net asset value of the Fund which it pays to dealers in connection with amounts held by clients of the sales representatives of such dealers, plus applicable taxes. This service fee is payable quarterly. The Fund endeavours to make monthly distributions of net income and net realized capital gains to unitholders on the last day of each month at an amount targeted to be 6.5 percent per annum of the net asset value of the Fund. If after such distributions there would otherwise remain in the Fund additional net investment income or net realized capital gains, the Fund intends to make a special distribution of such portion of the remaining net investment income and net realized capital gains as is necessary to ensure that the Fund will not be liable for income tax thereon under the Income Tax Act (Canada) (the “Act”).