Notes to Financial Statements December 31, 2010 and 2009 Core Canadian Dividend Trust [cdd.un] 1. Establishment of the Fund Valuation of Investments 2. Investment Objectives of the Fund Transaction Fees Investment Transactions and Income 3. Summary of Significant Accounting Policies Financial Instruments – Disclosures Core Canadian Dividend Trust (the “Fund”) is a closed-end investment trust established under the laws of the Province of Ontario on October 27, 2006. The Fund began operations on November 16, 2006. The Manager of the Fund is Mulvihill Capital Management Inc. (“MCM”). Prior to September 1, 2010, the Manager of the Fund was Mulvihill Fund Services Inc. (“Mulvihill”) which amalgamated with MCM on September 1, 2010. As successor, MCM is the Manager and the Investment Manager of the Fund. RBC Dexia Investor Services Trust is the Custodian of the assets of the Fund. Investments are recorded in the financial statements at their fair value determined as follows: Securities are valued at fair value, which is determined by the closing bid price on the recognized stock exchange on which the securities are listed or principally traded. If no bid prices are available, the securities are valued at the closing sale price. Short-term investments are included in the statement of investments at their cost. This value, together with accrued interest, approximates fair value at bid price. Listed options are valued at fair values as reported on recognized exchanges. Over the counter options are valued using the Black-Scholes valuation model. The Fund’s investment objectives are to: Transaction fees have been expensed as incurred and included in the transaction fees line in the Statement of Financial Operations. Transaction fees are costs that are directly attributable to portfolio transactions which include fees and commissions paid to brokers and dealers. The Fund invests its assets primarily in dividend-paying shares listed on the Toronto Stock Exchange (“TSX”). The Fund will generally invest not less than 4 percent and not more than 10 percent of the NAV in each of the issuers in the portfolio. In addition, up to 15 percent of the NAV of the Fund may be invested in equity securities of other issuers listed on the TSX which the Investment Manager believes is consistent with the Fund’s objectives. To generate additional returns above the dividend income earned on the portfolio, the Fund may, from time to time, write covered call options in respect of all or part of the securities in the portfolio. In addition, the Fund may write cash covered put options in respect of all of the securities in which the Fund is permitted to invest. These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which include estimates and assumptions by management that may affect the reported amounts of assets, liabilities, income and expenses during the reported periods. Primary estimates include valuation of investments. While management believes that the estimates used in preparing its financial statements are reasonable and prudent, actual results could differ from these estimates. The Fund uses a three-tier hierarchy as a framework for disclosing fair value based on inputs used to value the Fund’s investments. See additional note disclosures in Note 11. The significant accounting policies of the Fund are as follows: Realized gains and losses related to options are included in gains (losses) on derivatives. Investment transactions are accounted for on a trade date basis. Realized gains and losses on the sale of investments and change in unrealized appreciation/depreciation of investments are determined on an average cost basis. Realized gains and losses relating to written options may arise from: (iii) Sale of purchased put options whereby realized gains or losses are equivalent to the sale proceeds, net of any premium paid. (ii) Exercise of purchased put options whereby realized gains or losses are equivalent to the realized gain or loss from disposition of the related investments at the exercise price of the option less the premium paid; and (i) Expiration of purchased put options whereby realized losses are equivalent to the premium paid; Realized gains and losses relating to purchased put options may arise from: (iii) Closing of written options whereby realized gains or losses are equivalent to the cost of purchasing options to close the positions, net of any premium received. (ii) Exercise of written covered call options whereby realized gains or losses are equivalent to the premium received in addition to the realized gain or loss from disposition of the related investments at the exercise price of the option; and (i) Expiration of written options whereby realized gains are equivalent to the premium received; (i) provide unitholders with a stable stream of monthly distributions targeted to be 6.5 percent per annum on the net asset value (“NAV”) of the Fund; and (ii) preserve and grow the NAV per unit. Annual Report 2010 14