CrestStreet

• 2010 July Newsletter

This Fund is designed for investors seeking a stable level of income and, to a lesser extent, the potential for capital appreciation. This Fund is not intended to be a complete investment program and may only be suitable if you:

• are seeking regular monthly income
• can accept exposure to changes in interest rates;
• can withstand medium volatility in the value of the Fund’s securities; and
• are willing to accept a medium level of investment risk.

• The Fund’s objective is to provide a high level of stable investment returns through a combination of interest, dividends and capital gains while emphasizing capital preservation.
• The Fund invests in a diversified portfolio of equity and fixed income securities of primarily Canadian issuers which will include income trusts including one or more of business income trusts, convertible debenture of trusts, oil and gas trusts and real estate investment trusts.
• The Fund may choose to deviate from its investment objectives by temporarily investing most or all of its assets in cash or fixed income securities during periods of market downturn or for other reasons.
• The Fund may invest in foreign securities up to a maximum of 50% of the Fund’s NAV.

• The Fund will employ a value-based approach to investing with an emphasis on long-term value. This involves direct assessments and detailed analysis on a company basis of management, its industry, business and asset strengths, weaknesses and exposures. Greater emphasis will be placed on valuation criteria applicable to both corporations and trusts such as EBITDA multiples, cash flow multiples, net asset values and other industry specific measures. In addition, security specific factors such as cash-on-cash yields and stability ratings will be included. Assessments of the company’s or trust’s industry position, balance sheet strength, future growth potential, its ability to execute successful acquisitions and its access to capital are also key components.
• The Fund’s turnover will be driven by target prices being reached for specific investments or changes in relative value versus other attractively priced investment alternatives. Turnover will also be effected by call writing strategies where the underlying security is called. As such, the Fund expects portfolio turnover to be greater than 70%.
• Up to 70% of the portfolio’s holdings are typically concentrated within a limited number of issuers, usually 15 to 30, to maintain awareness of corporate developments and communication with each issuer’s management, and the portfolio’s investment in such issuers may include debt securities, preferred shares, common shares or other dividend and fixed income securities.
• The investment strategy follows strong disciplines with regard to diversification and relative values. The Fund will seek to take advantage of short term company specific value fluctuations to enhance its return but wi l l maintain an appropriate diversified core base of securities. This approach is designed to provide an extra margin of safety, which in turn serves to reduce overall portfolio risk. v
• The portfolio manager may decide to maintain a larger portion of the Fund’s assets in larger, more liquid investments or in short-term fixed income securities during periods of high market valuations or volatility. This strategy may be undertaken to protect capital and enhance liquidity to take advantage of more favourable market conditions in the future.
• The Fund may purchase shares of smaller or non-income producing public corporations being acquired by suitable investment candidates as a more favourable way of acquiring attractively priced positions in such investment candidates.
• Investment in fixed income securities will consider maturity terms based on the outlook for interest rates, an analysis of the the yield curve in order to identify securities offering good relative value, analysis of credit ratings, leverage and other measures of issuers to determine securities offering the best risk adjusted yields. The Fund will invest in a number of different issuers in order to reduce credit risk.
• The Fund will focus on Canadian currency denominated securities to minimize foreign exchange risk.
• The Fund may use derivative instruments, including debt-like securities, forward contracts, futures contracts, warrants, options or options on futures and swaps, as permitted by National Instrument 81-102. A derivative is an investment whose value is based on the performance of other investments or on the movement of interest rates, exchange rates or market indexes. Derivatives are often used for hedging against potential losses because of changes in interest rates or foreign exchange rates. There are many different kinds of derivatives, but they usually take the form of an agreement or security, the price, value or payment obligations of which are derived from or based on an underlying interest. For a description of the risks associated with the use of derivatives by the Fund, please see Derivatives risk above.
• The Fund may engage in short selling. The Fund is permitted to engage in short selling as a result of special relief it obtained from the Canadian securities regulators. This relief imposes limits and conditions on the Fund’s short selling activities including that: (i) if the Fund is selling short an equity security, the Fund will short sell only securities of issuers that have a market capitalization of not less than $100 million of the security sold short at the time the short sale is made or that the investment advisor has pre-arranged to borrow for the purposes of such short sale, or the security is a bond, debenture or other evidence of indebtedness of or guaranteed by the Government of Canada or any province or territory of Canada or the Government of the U.S., (ii) the Fund will limit its short sale exposure to any single issuer to 5% of the Fund’s net assets and its aggregate short sale exposure to 20% of its net assets, (iii) the Fund will place a “stop-loss” order with a dealer to immediately repurchase for the Fund the securities sold short if the trading price of the securities exceeds 120% (or a lower percentage determined by us) of the price at which the securities were sold short, (iv) the Fund will hold cash cover in an amount (including the Fund’s assets deposited with lenders) that is at least 150% of the aggregate market value of all securities sold short, and (v) the Fund will deposit collateral only with lenders which fulfill certain criteria for creditworthiness.
• The Fund will have the primary discipline of buying securities with the expectation that they will appreciate in market value. The Fund may also sell short securities with the expectation that they will depreciate in value.
• The Fund anticipates a portfolio turnover rate in excess of 70%. The higher the Fund’s portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund.

2009 Investor Tax Information

No T5 tax slips will be issued for the 2009 tax year as the Fund did not have any distributions for the 2009 tax year.

Corporate Information

Officers & Directors				Position with the Fund		Principal Occupation
Robert J. Toole Toronto, Ontario		|		President, Chief Executive Officer and Director		President, Chief Executive Officer and Managing Director of Creststreet
Jeffrey S. Boyce1 Calgary, Alberta		|		Director		President, Chief Executive Officer and Director of SURE Energy Inc.
Stuart P. Hensman1 Toronto, Ontario		|		Director		Member of the Board of Governors of the mutual funds managed by CI Investments and a director of Rifco Inc. and Brazalta Resources Corp.
John E. Thompson1 Calgary, Alberta		|		Director		President, Chief Executive Officer and a director of Sirius Energy Inc.
Donna E. Shea Toronto, Ontario		|		Senior Vice President, Finance and Chief Financial Officer		Senior Vice President, Finance, Chief Financial Officer and a director of Creststreet
Sheryl J. Chiddenton Toronto, Ontario		|		Vice President, Secretary-Treasurer		Vice President, Compliance and Investment Services, Secretary-Treasurer and a director of Creststreet

¹ (Independent Director and Member of the IRC)