We have elected to be treated as and have qualified each year for special tax treatment afforded a regulated investment company ("RIC") under Subchapter M of the Code. As long as we meet certain requirements that govern our source of income, diversification of assets and distribution of earnings to stockholders, we will not be subject to U.S. federal income tax on income distributed in a timely manner to our stockholders. We intend to invest in U.S. royalty trusts that are expected to derive income and gains from the production of oil and gas. Unlike Canadian royalty trusts, U.S. royalty trusts are legally precluded from making acquisitions financed by new debt and/or equity. U.S. royalty trusts are generally treated as grantor trusts for U.S. federal income tax purposes, which means that we will be taxed directly for our share of the trust income and will be entitled to our share of the trusts' deductions and tax credits. We will be deemed to directly own the assets of each U.S. royalty trust, and will need to look at the underlying items of income in the U.S. royalty trust to determine whether that income will have an effect on our qualification as a RIC. We intend to monitor our investments in U.S. royalty trusts to maintain our continued qualification as a RIC.

We intend to qualify for the special tax treatment afforded to RICs under the Code. As long as we qualify, we (but not our stockholders) will not be subject to federal income tax on the part of our net ordinary income and net realized capital gains that we distribute to our stockholders. In order to qualify as a RIC for federal income tax purposes, we must meet three key tests, which are described below. Failure to meet any of the tests at the end of any quarter would disqualify us from RIC tax treatment for the entire year. However, in certain situations we may be able to take corrective action within 30 days of the end of a quarter, which would allow us to remain qualified.

The Income Test.
At least 90% of our annual gross income must be derived from dividends, interest, payments with respect to securities loans, gains from the sale of stock or securities, foreign currencies or other income (including gains from options, futures or forward contracts) derived with respect to the business of investing in stock, securities or currencies. Net income from a ''qualified publicly traded partnership'' will also be included as qualifying income for purposes of the 90% gross income test. To the extent we hold interests in entities that are taxed as grantor trusts for Federal income tax purposes or are partnerships that are not treated as ''qualified publicly traded partnerships,'' the income derived from such investments may not be treated as qualifying income for purposes of the 90% gross income test.

The Asset Diversification Test.
We must diversify our holdings so that, at the end of each quarter of each taxable year (i) at least 50% of the value of our total assets is represented by cash and cash items, U.S. Government securities, the securities of other RICs and other securities, with such other securities limited for purposes of such calculation, in respect of any one issuer, to an amount not greater than 5% of the value of our total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of our total assets is invested in the securities of any one issuer (other than U.S. Government securities or the securities of other RICs), the securities (other than the securities of other RICs) of any two or more issuers that we control and that are determined to be engaged in the same business or similar or related trades or businesses, or the securities of one or more qualified publicly traded partnerships.

The Distribution Test.
Our deduction for dividends paid to our stockholders must equal or exceed the sum of 90% of (i) our investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital loss and other taxable income, other than any net long-term capital gain, reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) 90% of our net tax-exempt interest (the excess of our gross tax-exempt interest over certain disallowed deductions). For purposes of this distribution test, we will treat as paid on the last day of the fiscal year any dividend declared in October, November, December and paid in January of the following year. Further, we may elect to treat as paid on the last day of the fiscal year all or part of certain dividends that we declare after the end of our taxable year. Such dividends must be declared before the due date for filing our tax return, including any extensions, and may cause us to be subject to an excise tax.

If, in any taxable year, we fail to qualify as a RIC, we would be taxed in the same manner as an ordinary corporation and distributions from earnings and profits (as determined under U.S. federal income tax principles) to our common stockholders would not be deductible by us in computing our taxable income. In such case, distributions to our common stockholders generally would be eligible (i) for treatment as qualified dividend income in the case of individual stockholders, and (ii) for the dividends-received deduction in the case of corporate stockholders. In addition, we could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a RIC that is accorded special tax treatment.

Distributions we pay to you from our investment company taxable income or from an excess of net short-term capital gain over net long-term capital losses (together referred to hereinafter as ''ordinary income dividends'') are generally taxable to you as ordinary income to the extent of our earnings and profits. Such distributions (if designated by us) may qualify (provided holding period and other requirements are met) (i) for the dividends received deduction in the case of corporate stockholders to the extent that our income consists of dividend income from U.S. corporations, and (ii) in the case of individual stockholders (effective for taxable years beginning on or before December 31, 2010), as qualified dividend income eligible to be taxed at a maximum rate of generally 15% (5% for individuals in lower tax brackets) to the extent that we receive qualified dividend income. The Working Families Tax Relief Act of 2004 clarifies that if our qualified dividend income is less than 95% of our gross income, a stockholder may include as qualifying dividend income only that portion of the dividends that may be and are so designated by us as qualifying dividend income. Qualified dividend income is, in general, dividend income from taxable domestic corporations and certain foreign corporations (e.g., generally, foreign corporations incorporated in a possession of the United States or in certain countries with a qualified comprehensive tax treaty with the United States, or the stock of which is readily tradable on an established securities market in the United States, provided that the dividend is paid in respect of such publicly traded stock). Dividend income from passive foreign investment companies and, in general, dividend income from REITs are not eligible for the reduced rate for qualified dividend income and are taxed as ordinary income. Distributions made to you from an excess of net long-term capital gain over net short-term capital losses (''capital gain dividends''), including capital gain dividends credited to you but retained by us, are taxable to you as long-term capital gain if they have been properly designated by us, regardless of the length of time you have owned our shares. The maximum tax rate on capital gain dividends received by individuals generally is 15% (5% for individuals in lower brackets) for such gain realized for taxable years beginning on or before December 31, 2010. Distributions in excess of our earnings and profits will first reduce the adjusted tax basis of your shares and, after such adjusted tax basis is reduced to zero, will constitute capital gain to you (assuming the shares are held as a capital asset). Generally, not later than 60 days after the close of its taxable year, we will provide you with a written notice designating the amount of any qualified dividend income or capital gain dividends and other distributions.

The sale or other disposition of our shares will generally result in capital gain or loss to you, and will be long-term capital gain or loss if the shares have been held for more than one year at the time of sale. Any loss upon the sale or exchange of our shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received (including amounts credited as an undistributed capital gain dividend) by you. A loss realized on a sale or exchange of shares will be disallowed if other substantially identical shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the shares are disposed of. In such case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Present law taxes both long-term and short-term capital gain of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, under present law, short-term capital gain will currently be taxed at a maximum rate of 35% applicable to ordinary income while long-term capital gain generally will be taxed at a maximum rate of 15%.

Dividends and other taxable distributions are taxable to you even though they are reinvested in additional shares. If we pay you a dividend in January that was declared in the previous October, November or December to common stockholders of record on a specified date in one of such months, then such dividend will be treated for tax purposes as being paid by us and received by you on December 31 of the year in which the dividend was declared.

We are required in certain circumstances to backup withhold on taxable dividends and certain other payments paid to non-corporate holders of our shares who do not furnish us with their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to you may be refunded or credited against your U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.

The American Jobs Creation Act of 2004 (the ''2004 Jobs Act'') amended certain rules relating to RICs. The 2004 Jobs Act modified the 90% gross income test with respect to income of a RIC to include net income derived from interests in ''qualified publicly traded partnerships'' and modified the asset diversification test of a RIC to include a new limitation on the investment by a RIC in such qualified publicly traded partnership interests. Specifically, not more than 25% of the value of a RIC's assets can be invested in the securities of any issuer (other than U.S. Government securities and the securities of other RICs) or of any two or more issuers that the RIC controls and that are determined to be engaged in the same business or similar or related trades or businesses or the securities of one or more qualified publicly traded partnerships. Generally, a qualified publicly traded partnership includes a partnership, such as the MLPs in which we intend to invest, the interests of which are traded on an established securities market or readily tradable on a secondary market (or the substantial equivalent thereof) and which derives income and gains from, inter alia, the exploration, development, mining or production, processing, refining, transportation, or the marketing of any mineral or natural resource.

The 2004 Jobs Act also provided that certain dividends designated by us as ''interest-related dividends'' that are received by most of our foreign investors (generally those that would qualify for the portfolio interest exemptions of Section 871(h) or Section 881(c) of the Code) will be exempt from U.S. withholding tax. Interest-related dividends are those dividends derived from certain interest income (including bank deposit interest and short term original issue discount that is currently exempt from the withholding tax) we earn that would not be subject to U.S. tax if earned by a foreign person directly. The 2004 Jobs Act further provided that certain dividends designated by us as ''short-term capital gain dividends'' that are received by certain foreign investors (generally those not present in the United States for 183 days or more) will be exempt from U.S. withholding tax. In general, short-term capital gain dividends are those that are derived from our short term capital gains over net long-term capital losses. These provisions generally apply, with certain exceptions, to dividends with respect to taxable years of RICs beginning after December 31, 2004 and before January 1, 2008. Prospective investors are urged to consult their tax advisors regarding the specific tax consequences to them.

Investments by us in certain ''passive foreign investment companies'' (''PFICs'') could subject us to federal income tax (including interest charges) on certain distributions or dispositions with respect to those investments which cannot be eliminated by making distributions to stockholders. Elections may be available to us to mitigate the effect of this provision provided that the PFIC complies with certain reporting requirements, but the elections would generally function to accelerate the recognition of income without a corresponding receipt of cash. Dividends paid by PFICs will not qualify for the reduced tax rates discussed above applicable to qualified dividend income.

The tax treatment of our investments in U.S. royalty trusts will differ depending on whether such entities are treated as corporations, partnerships, or grantor trusts for federal income tax purposes. In particular, certain U.S. royalty trusts are treated as grantor trusts for federal income tax purposes and generally pass through tax items such as income, gain or loss. In such cases, we would be deemed for tax purposes to directly own the assets of such royalty trusts. As a result, we will be required to monitor the individual underlying items of income that we receive from such grantor trusts to determine how we will characterize such income for tax purposes, including for purposes of meeting the income distribution requirements applicable to RICs.

Securities issued by certain Energy Companies (such as U.S. royalty trusts which are grantor trusts) may not produce ''qualified'' income for purposes of determining our compliance with the tax diversification rules applicable to RICs. To the extent that we hold such securities indirectly through investments in a taxable subsidiary formed by us, those securities may produce ''qualified'' income. However, the net return to us on such investments would be reduced to the extent that the subsidiary is subject to corporate income taxes.

Unlike a holder of a direct interest in MLPs, a preferred stockholder will not include its allocable share of our gross income, gains, losses, deductions, or credits in computing its own taxable income. Our distributions are treated as a tax dividend to the stockholder to the extent of our current or accumulated earnings and profits. If the distribution exceeds our earnings and profits, the distribution will be treated as a return of capital to our common stockholder to the extent of the stockholder's basis in our common stock, and then as capital gain. Common stockholders will receive a Form 1099 from us (rather than a Schedule K-1 from each MLP if the stockholder had invested directly in the MLPs) and will recognize dividend income only to the extent of our current and accumulated earnings and profits.

Generally, a corporation's earnings and profits are computed based upon taxable income, with certain specified adjustments. As explained above, based upon the historic performance of the MLPs, we anticipate that the distributed cash from an MLP will exceed our share of such MLP's income. As a corporation for tax purposes, our earnings and profits will be calculated using (i) straight-line depreciation rather than accelerated depreciation, and cost rather than a percentage depletion method, and (ii) intangible drilling costs and exploration and development costs are amortized over a five-year and ten-year period, respectively. Because of the differences in the manner in which earnings and profits and taxable income are calculated, we may make distributions out of earnings and profits, treated as dividends, in years in which we have no taxable income.

Our distributions that are treated as dividends generally will be taxable as ordinary income to holders, but (i) are expected to be treated as "qualified dividend income" that is currently subject to reduced rates of federal income taxation for noncorporate stockholders, and (ii) may be eligible for the dividends received deduction available to corporate stockholders, in each case provided that certain holding period requirements are met. Qualified dividend income is currently taxable to noncorporate stockholders at a maximum federal income tax rate of 15% for taxable years beginning on or before December 31, 2010. Thereafter, qualified dividend income will be taxed at ordinary income rates unless further legislative action is taken.

If a distribution exceeds our current and accumulated earnings and profits, such distribution will be treated as a non-taxable adjustment to the basis of the stock to the extent of such basis, and then as capital gain to the extent of the excess distribution. Such gain will be long-term capital gain if the holding period for the stock is more than one year. Individuals are currently subject to a maximum tax rate of 15% on long-term capital gains. This rate is currently scheduled to increase to 20% for tax years beginning after December 31, 2010. Corporations are taxed on capital gains at their ordinary graduated rates.

Sale of Our Preferred Stock
The sale of our preferred stock by holders will generally be a taxable transaction for federal income tax purposes. Holders of our stock who sell such shares will generally recognize gain or loss in an amount equal to the difference between the net proceeds of the sale and their adjusted tax basis in the shares sold. If such shares of stock are held as a capital asset at the time of the sale, the gain or loss will generally be a capital gain or loss, generally taxable as described above. A holder's ability to deduct capital losses may be limited.

Similarly, a redemption by us (including a redemption resulting from our liquidation), if any, of all our preferred stock actually and constructively held by a stockholder generally will give rise to capital gain or loss under Section 302(b) of the Code if the stockholder does not own (and is not regarded under certain tax law rules of constructive ownership as owning) any of our common stock, and provided that the redemption proceeds do not represent declared but unpaid dividends. Other redemptions may also give rise to capital gain or loss, but certain conditions imposed by Section 302(b) of the Code must be satisfied to achieve such treatment, and Holders should consult their own tax advisors regarding such conditions.

Backup Withholding
Backup withholding of U.S. federal income tax at the rate of 28% may apply to the distributions on our common stock to be made by us if you fail to timely provide taxpayer identification numbers or if we are so instructed by the Internal Revenue Service, or IRS. Any amounts withheld from a payment to a U.S. holder under the backup withholding rules are allowable as a refund or credit against the holder's U.S. federal income tax liability, provided that the required information is furnished to the IRS in a timely manner.

Other Taxation
Foreign stockholders, including stockholders who are nonresident alien individuals, may be subject to U.S. withholding tax on certain distributions at a rate of 30% or such lower rates as may be prescribed by any applicable treaty. In addition, recently enacted legislation may impose additional U.S. reporting and withholding requirements on certain foreign financial institutions and other foreign entities with respect to distributions on and proceeds from the sale or disposition of our stock. This legislation will generally be effective for payments made on or after January 1, 2013. Foreign stockholders should consult their tax advisors regarding the possible implications of this legislation as well as the other U.S. federal, state, local and foreign tax consequences of an investment in our stock.

Our common stock dividends also may be subject to state and local taxes. Tax matters are very complicated, and the federal, state, local and foreign tax consequences of an investment in and holding of our common stock will depend on the facts of each investor's situation. Investors are encouraged to consult their own tax advisors regarding the specific tax consequences that may affect such investors.

The following is a summary of the principal Canadian federal income tax considerations generally applicable to us in respect of our proposed investment in royalty trusts. The summary is of a general nature only and is based upon the applicable Canadian tax laws as of the date hereof. There can be no assurance that the tax laws may not be changed or that Canada Revenue Agency (''CRA'') will not change its administrative policies and assessing practices. This summary reflects specific proposals to amend the Tax Act and the Regulations (the ''Tax Proposals'') publicly announced by or on behalf of the Canadian Minister of Finance prior to the date hereof. This summary does not take into account provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those discussed herein. This summary assumes that each royalty trust that we will invest in will qualify as a ''mutual fund trust'' as defined in the Tax Act at all relevant times. If a royalty trust were not to qualify as a mutual fund trust at any particular time, the Canadian federal income tax considerations described below would, in some respects, be materially different.

Any distribution of the income of a royalty trust (excluding any net realized taxable capital gain that the royalty trust has validly designated as a taxable capital gain), that is paid, credited or deemed paid or credited will be subject to Canadian non-resident withholding tax of 15% in accordance with the Canada United States Income Tax Convention (the ''Treaty'') whether the distribution is made in cash or additional Units. A royalty trust may designate under the Income Tax Act (Canada) (the ''Canadian Tax Act'') the portion of taxable income distributed to non-resident unitholders as net realized taxable capital gains of the royalty trust. This capital gain portion of a distribution to a non-resident unitholder such as us will not be subject to tax under the Canadian Tax Act (but see the discussion of the Tax Proposals below).

Draft legislation released by the Canadian Minister of Finance on December 6, 2004 will generally treat distributions to a non-resident unitholder by a royalty trust out of net gains a royalty trust realizes on dispositions of ''taxable Canadian property'' (as defined in the Canadian Tax Act), which includes real property situated in Canada, as taxable distributions of Canadian source trust income. Accordingly, such distributions will be subject to Canadian non-resident withholding tax at 15% under the Treaty. Also under these tax proposals, distributions made by certain types of royalty trusts to us that would otherwise not be subject to tax (generally distributions in excess of the income and capital gains of the royalty trust, commonly referred to as ''returns of capital'') will be subject to a special tax at the rate of 15%. The types of royalty trusts subject to this special tax are those in respect of which the Units are listed on certain prescribed stock exchanges, which includes the Toronto Stock Exchange, and more than 50% of the fair market value of the Units is attributable to real property situated in Canada, Canadian resource properties or timber resource properties, as defined in the Canadian Tax Act. If applicable, this tax must be withheld from such distributions by a royalty trust. Some or all of this special tax may be refunded to us if we realize a capital loss on the disposition of Units or of other ''Canadian property mutual fund investments'', as defined in these Tax Proposals.

The amount distributed to us in a taxation year by a royalty trust may exceed the income of the royalty trust for tax purposes for that year giving rise to ''returns of capital'' as described above. Subject to the above discussion of the Tax Proposals, such distributions in excess of the royalty trust's income in a year to us will not be subject to Canadian non-resident withholding tax but will reduce the adjusted cost base of the Units we hold. If, as a result, our adjusted cost base of the Units in any taxation year would otherwise be a negative amount, we will be deemed to realize a capital gain in such amount for that year, and our adjusted cost base of the Units will be zero immediately thereafter. The treatment of any such capital gain deemed to be realized by us is described below. The non-taxable portion of net realized capital gains of a royalty trust that is paid or payable to us and the amount of any distribution subject to the proposed special tax on returns of capital described above will not reduce the adjusted cost base of the Units we hold.

We generally will not be subject to tax under the Canadian Tax Act in respect of a capital gain, or entitled to deduct any capital loss, realized upon the disposition or deemed disposition of Units of a royalty trust (whether on redemption, by virtue of our adjusted cost base becoming negative or otherwise) unless the Units represent ''taxable Canadian property'' to us for the purposes of the Canadian Tax Act and we are not entitled to relief under the Treaty. Units of a royalty trust held by us generally will not be considered to be ''taxable Canadian property'' unless (i) at any time during the 60-month period immediately preceding the disposition by us, not less than 25% of the issued Units were owned by us and/or persons with whom we do not deal at arm's length; (ii) at the time of disposition, the royalty trust is not a ''mutual fund trust'' for purposes of the Canadian Tax Act; or (iii) the Units are otherwise deemed to be ''taxable Canadian property''. Where the Units we hold are ''taxable Canadian property'', a capital gain from their disposition or deemed disposition generally will be exempted by the Treaty from tax under the Canadian Tax Act provided the Units do not derive their value principally from real property situated in Canada.

Currently, a royalty trust that is a mutual fund trust will not be considered to be a mutual fund trust if it is established or maintained primarily for the benefit of non-residents of Canada (the ''maintained or established test''), unless all or substantially all of its property is property other than ''taxable Canadian property'' as defined in the Canadian Tax Act. Draft legislation released by the Minister of Finance (Canada) on September 16, 2004 relating to certain measures contained in the March 23, 2004 Canadian federal budget included certain Tax Proposals which would have amended the operation of the ''maintained or established test.'' In addition, these Tax Proposals contained a proposal which would have ensured that, together with other forms of ''taxable Canadian property'', Canadian resource property and timber resource property would also be included in restricting the availability of relief under the ''maintained or established test''. On December 6, 2004, the Department of Finance issued a Notice of Ways and Means Motion and draft legislation which did not include either of the proposed changes just described. In announcing the proposals, the Department of Finance indicated that they will review with the private sector concerning the appropriate Canadian tax treatment of non-residents investing in resource property through mutual funds. Accordingly, further changes in this area are possible, some of which might be material. However, we have no way of predicting what changes, if any, would be made, and any consequence thereof.

We intend to invest in Canadian Royalty Trusts that are expected to derive income and gains from the exploration, development, mining or production, processing, refining, transportation (including pipeline transporting gas, oil, or products thereof), or the marketing of any mineral or natural resources. Canadian Royalty Trusts are generally treated as either corporations or partnerships for U.S. federal income tax purposes. If the Canadian Royalty Trusts in which we invest are treated as corporations for U.S. federal income tax purposes, our income and gain generated from such investments will generally be qualifying income, and a unit of such a trust will generally be a qualifying asset, for purposes of our qualification as a RIC. Moreover, if the Canadian Royalty Trust is a PFIC (as defined above), we will be subject to additional rules described above relating to tax consequences of an investment in a PFIC.

If the Canadian royalty trusts in which we invest are treated as partnerships for U.S. federal income tax purposes, the effect on our qualification as a RIC will depend on whether the Canadian royalty trust is a qualified publicly traded partnership (as described above) or not. If the Canadian royalty trust is a qualified publicly traded partnership, our investment therein would generally be subject to the rules described above relating to investments in MLPs. If the Canadian royalty trust, however, is not treated as a qualified publicly traded partnership, then the effect on our qualification as a RIC of an investment in such Canadian royalty trust will depend upon the amount and type of income and assets of the Canadian royalty trust allocable to us. We intend to monitor our investments in Canadian royalty trusts to maintain our continued qualification as a RIC.

Investing in our common stock involves certain tax risks, which are more fully described in our prospectus and other SEC filings.