Canexus Income Fund

drip

TSX SYMBOL: CUS.UN
UNIT PRICE	5.90
CHANGE	0.050
March 9 3:59 PM

TSX SYMBOL: CUS.DB
UNIT PRICE	114.00
CHANGE	2.150
Data delayed at least 15 minutes. March 9 12:07 PM

Purpose

The Distribution Reinvestment Plan (the “Plan”) provides eligible holders (“Unitholders”) of trust units (“Trust Units”) of Canexus Income Fund (“Canexus”) and eligible holders (“Exchangeable LP Holders” and, together with the Unitholders collectively, “Holders”) of exchangeable limited partnership units (“LP Units”) of Canexus Limited Partnership (“Canexus LP”) the opportunity to accumulate additional Trust Units or LP Units, as applicable, at a 5% discount to the Average Market Price (as defined herein). The Plan provides an efficient and cost-effective way for Canexus and Canexus LP to issue additional equity to existing Holders.

Canexus and Canexus LP will determine for each distribution payment date the amount of new equity, if any, that will be made available under the Plan on that date. No assurances can be made that new Trust Units or LP Units will be made available under the Plan on a regular basis, or at all.

Definitions

“Average Market Price” means the arithmetic average of the daily volume weighted average trading prices of the Trust Units on the Toronto Stock Exchange for the ten trading days immediately preceding the applicable Distribution date, appropriately adjusted for certain capital changes (including Trust Unit subdivisions, Trust Unit consolidations, certain rights offerings and certain distributions).

“Business Day” means any day in which the Plan Agent’s offices are generally open for the transaction of commercial business other than a Saturday, Sunday or other day on which banks are required to be closed in Calgary, Alberta or Toronto, Ontario or a day on which the Toronto Stock Exchange does not publicly trade.“CDS” means CDS Clearing and Depository Services Inc., which acts as a nominee for many Canadian investment dealers and brokerage firms, or its nominee, as applicable. “Distribution” means the cash distribution declared payable by Canexus and Canexus LP for any particular month.

“Nominee” means a broker, investment dealer, financial institution or other nominee holder of Trust Units or LP Units.

“Participants” means holders of at least one Trust Unit or LP Unit, as applicable, who, on the applicable record date for a Distribution, are eligible to participate in the Plan and have elected to do so by, in the case of registered Holders, completing and delivering to Computershare, or in the case of beneficial Unitholders, having their Nominee complete and deliver to Computershare (through CDS, if applicable) an Authorization Form, as more particularly described in the Plan.

“Plan Agent” means Computershare Trust Company of Canada, its successors or assigns or such other trust company as is appointed by Canexus and Canexus LP from time to time to act as Plan agent under the Plan.

Advantages

An eligible Holder may, by enrolling in the Plan, direct that Distributions in respect of all or some of the Trust Units or LP Units held for the account of such Unitholder under the Plan, be applied to the purchase of additional Trust Units or LP Units, as applicable, and have the additional Trust Units or LP Units, as applicable, held for the account of such Holder under the Plan. In either case, the price of Trust Units or LP Units purchased with reinvested Distributions will be 95% of the Average Market Price.

Trust Units issued pursuant to the Plan are purchased directly from Canexus and LP Units purchased pursuant to the Plan are purchased directly from Canexus LP by the Plan Agent on behalf of the Participants. The Plan Agent will credit the additional Trust Units or LP Units, as applicable, to the Participant’s (or the applicable Nominee’s) account.

Distributions in respect of Trust Units or LP Units that are held under the Plan for the account of a Participant will automatically be reinvested in additional Trust Units or LP Units, as applicable, in accordance with the Plan.

No commissions, service charges or brokerage fees are payable by Participants in connection with the purchase of additional Trust Units or LP Units under the Plan. Full investment of funds is possible because the Plan permits fractions of Trust Units or LP Units (to six decimal places) as well as whole Trust Units or LP Units to be credited to Participants’ (or their Nominees’) accounts.

Administration

Computershare Trust Company of Canada currently acts as Plan Agent under the Plan. If Computershare Trust Company of Canada ceases to act as Plan Agent for any reason, another trust company will be designated by Canexus and Canexus LP to act as Plan Agent and Participants (or their Nominees) will be promptly notified of the change.

The Plan Agent acts for and on behalf of the Participants. On each distribution payment date, Canexus and Canexus LP will pay to the Plan Agent all Distributions in respect of Trust Units and LP Units, respectively, registered in the name of, or held under the Plan for the account of, Participants who have enrolled in the Plan. The Plan Agent will use such funds to purchase additional Trust Units and LP Units directly from Canexus and Canexus LP, respectively. Additional Trust Units and LP Units purchased under the Plan will be registered in the name of the Plan Agent or its nominee, as agent for the Participants, and credited to Participants’ (or their Nominees’) accounts.

Any Distributions in respect of Trust Units or LP Units (including fractions of Trust Units or LP Units) that are enrolled in the Plan will be reinvested in new Trust Units or LP Units, and such additional Trust Units or LP Units, as applicable, will be credited to the Participant’s (or the applicable Nominee’s) account. Under the Plan the Plan Agent will purchase, on each distribution payment date, for each Participant’s account, that number of Trust Units or LP Units (including fractions computed to six decimal places) equal to the amount invested under the Plan for such Participant’s account divided by 95% of the Average Market Price. See “Price of New Trust Units and LP Units” below.

New Trust Units and LP Units purchased pursuant to the Plan will be credited to the Participant’s (or the applicable Nominee’s) account in accordance with the Plan. All funds received by the Plan Agent under the Plan, including cash Distributions received from Canexus and Canexus LP, will be applied to the purchase of new Trust Units and LP Units directly from Canexus and Canexus LP, respectively. In no event will interest be paid to Participants on any funds held for investment under the Plan.

Participation

Except as noted below, all holders of at least one Trust Unit or one LP Unit are eligible for enrolment in the Plan at any time. Beneficial Holders whose Trust Units or LP Units are registered in the name of a Nominee may not directly enroll in the Plan, but may participate in the Plan only through their Nominee. Beneficial Holders may only participate in the Plan if they (i) transfer their Trust Units or LP Units into their own name and then enroll in the Plan directly, or (ii) arrange for their Nominee to enroll in the Plan on their behalf.

Beneficial Holders should contact their Nominee to provide instructions on how they would like to participate in the Plan. Not all Nominees will allow, nor are required to allow, participation in the Plan. Unitholders interested in participating in the Plan who hold their Trust Units or LP Units through a Nominee that does not allow participation are responsible for either transferring their Trust Units or LP Units to a different Nominee or into their own name in order to participate. An eligible Holder becomes a Participant by completing and delivering to the Plan Agent, or by having such Participant’s Nominee complete and deliver to the Plan Agent (through CDS, if applicable) on its behalf, a duly completed Authorization Form. If required, an Authorization Form may be obtained from the Plan Agent at any time upon request or from Canexus’ website at www.canexus.ca. By enrolling in the Plan, a Participant is deemed to have directed Canexus or Canexus LP, as applicable, to forward to the Plan Agent all Distributions in respect of Trust Units held on behalf of the Participant, and to have directed the Plan Agent to reinvest such Distributions in additional Trust Units and LP Units, as applicable, in accordance with the Plan.

An initial Authorization Form must be received by the Plan Agent no later than 5:00 p.m. (E.S.T.) on the third Business Day immediately preceding a distribution record date in order for the Distribution to which such record date relates to be reinvested under the Plan. Where a beneficial Holder wishes to participate in the Plan with respect to Trust Units or LP Units registered through a Nominee, that Nominee must provide the initial Authorization Form to CDS regarding a Participant’s participation in the Plan no later than 5:00 p.m. (E.S.T.) on the third Business Day immediately preceding a distribution record date (or such other deadline as CDS may set from time to time) in order for the Distribution to which such record date relates to be reinvested under the Plan. If an initial Authorization Form is not received by the Plan Agent from a registered Holder, or by CDS from a Participant’s Nominee in the case of a beneficial Holder, on or before such deadlines, the Distribution to which such record date relates will not be reinvested under the Plan and a Participant’s enrolment in the Plan will only be effective for purposes of subsequent Distributions. Beneficial Holders who wish to participate in the Plan will need their Nominee to elect to participate on their behalf every distribution period.

Once a registered Holder has enrolled in the Plan, participation by the Participant continues automatically until the Participant’s participation in the Plan is terminated by delivery to the Plan Agent of, or by having such Participant’s Nominee in the case of a beneficial Holder, deliver to the Plan Agent (through CDS) on its behalf, new instructions. The time at which a termination of Plan participation becomes effective is described under “Termination of Participation” below. The effect of these provisions is that a Participant (or the applicable Nominee) cannot terminate participation in the Plan after 5:00 p.m. (E.S.T.) on the third Business Day immediately preceding a distribution record date to and including the distribution payment date to which such record date relates.

As the Trust Units are currently held exclusively by CDS as a book-entry only issue, CDS is the only registered holder of Trust Units.

Canexus and Canexus LP reserve the right to determine, from time to time, a minimum number of Trust Units and LP Units, respectively, that a Participant must hold in order to qualify for or continue enrolment in the Plan and reserves the right to refuse participation to, or cancel participation of, any person who, in the sole opinion of Canexus or Canexus LP, as applicable, is either participating in the Plan primarily with a view to arbitrage trading or participating or attempting to participate in the Plan in more than one capacity or as more than one Participant.

Non-Residents of Canada

United States residents are not permitted to participate in the Plan. Residents of any other jurisdiction outside of Canada may participate in the Plan if permitted by the laws of the jurisdiction in which they reside. Distributions to be reinvested under the Plan on behalf of Holders who are not residents of Canada will be subject to applicable non resident withholding tax.

Canexus, Canexus LP, the Plan Agent and any Nominee reserve the right to deny participation in the Plan to, and to not accept an Authorization Form from any person or agent of such person who appears to be, or who Canexus, Canexus LP, the Plan Agent or such Nominee has reason to believe is, subject to the laws of any jurisdiction which do not permit participation in the Plan in the manner sought by or on behalf of such person.

Canexus, Canexus LP and the Plan Agent further reserve the right to terminate non resident Participants’ participation in the Plan, or deny additional non resident participation in the Plan, if Canexus, Canexus LP or the Plan Agent become aware that non residents of Canada constitute, or would constitute upon the further acquisition of Trust Units or LP Units by a non resident, greater than 49% of all beneficial Holders.

Proration in Certain Events

Canexus and Canexus LP will determine on or before each distribution record date the amount of equity, if any, that will be made available under the Plan on the distribution payment date to which such record date relates.

If, in respect of any distribution payment date, fulfilling all of the Participants’ entitlements under the Plan would result in Canexus and Canexus LP exceeding the limit on new equity set by Canexus and Canexus LP, then purchases of Trust Units and LP Units, respectively, on the applicable distribution payment date will be prorated among all Participants.

If Canexus or Canexus LP determines not to issue any equity through the Plan on a particular distribution payment date, or to the extent that the availability of new Trust Units or LP Units is prorated in accordance with the terms hereof, then Participants will receive from Canexus or Canexus LP, as applicable, the Distributions to which they would otherwise be entitled on such date and which are not reinvested as a result of such determination or proration.

Price of New Trust Units or LP Units

On each distribution payment date, Canexus and Canexus LP will, on behalf of the Participants, pay to the Plan Agent all funds that are eligible for investment in new Trust Units or LP Units on such date. The subscription price of new Trust Units or LP Units purchased under the Plan will be 95% of the Average Market Price. Canexus will advise the Plan Agent of such Average Market Price on the Business Day immediately preceding the distribution payment date.

Costs

No commission, service charges or brokerage fees are payable by Participants in connection with the purchase of additional Trust Units or LP Units under the Plan. All administrative costs of the Plan, including the fees and expenses of the Plan Agent, will be paid by Canexus and Canexus LP.

Accounts and Reports to Participants

An account will be maintained by the Plan Agent for each Participant that is a registered Holder, and unaudited statements of that account will be mailed to each such Participant in respect of each distribution period. Statements and reports, if any, with respect to purchases of Trust Units or LP Units under the Plan will be provided to Participants that are beneficial Holders by their Nominee. These account statements and reports are a Participant’s continuing record of purchases of Trust Units or LP Units made for such Participant’s account under the Plan and should be retained for income tax purposes. The Plan Agent, or the Participant’s Nominee in the case of a beneficial Holder, will also send annually to each Participant certain tax forms for tax reporting purposes. The calculation and monitoring of each Participant’s adjusted cost base in Trust Units or LP Units for income tax purposes will be the responsibility of each Participant, as certain averaging rules may apply and such calculations may depend on the cost of other Trust Units or LP Units held by the Participant.

Certificates for Trust Units or LP Units held under the Plan

Trust Units or LP Units purchased and held under the Plan will be registered in the name of the Plan Agent or its nominee as agent for the Participants, and certificates for such Trust Units or LP Units will not normally be issued to Participants unless specifically requested in writing by Participants’ duly completing the reverse side of their Plan statement and delivering it to the Plan Agent. However, a Participant which is a registered holder of Trust Units or LP Units may, upon request to the Plan Agent and without terminating participation in the Plan, have a Trust Unit or LP Unit certificate issued and registered in the Participant’s name for any number of whole Trust Units or LP Units held for the Participant’s account under the Plan. Any remaining whole Trust Units or LP Units and any fractional Trust Units or LP Units will continue to be held by the Plan Agent for the Participant’s account under the Plan.

Participants that are beneficial Holders should contact their Nominee with respect to the treatment of fractional Trust Units or LP Units that could notionally exist from the reinvestment of a Participant’s distribution, as some Nominees will facilitate the accumulation of fractional Trust Units or LP Units in a Participant’s account while others may not.

Accounts under the Plan are maintained by the Plan Agent in the name in which Trust Units or LP Units are registered at the time of enrolling in the Plan and certificates for Trust Units or LP Units will be similarly registered when issued.

Trust Units or LP Units held by the Plan Agent for the account of a Participant may not be sold, pledged or otherwise disposed of by the Participant while so held.

Termination of Participation

A Participant may voluntarily terminate participation in the Plan by delivering to the Plan Agent, or by having such Participant’s Nominee in the case of a beneficial Holder, deliver to the Plan Agent (through CDS, if applicable) on its behalf, a written notice signed by such Participant (or by such Participant’s Nominee, as applicable) stating that such Participant wishes to withdraw its participation in the Plan. In such event, the Participant (or the Participant’s Nominee) will receive a certificate for the number of whole Trust Units or LP Units held by the Plan Agent in such Participant’s (or the applicable Nominee’s) account and a cash payment for any remaining fraction of a Trust Unit or LP Unit so held. Any fractional Trust Unit interest will be paid based on the closing market price of a Trust Unit on the Toronto Stock Exchange on the day following the date notice of termination is received by the Plan Agent.

Participation in the Plan will be terminated automatically following receipt by the Plan Agent of a written notice of the death of a Participant. A certificate for the number of whole Trust Units or LP Units held for the account of a deceased Participant under the Plan will be issued by Canexus or Canexus LP, respectively, in the name of the deceased Participant, the estate of the deceased Participant or the deceased Participant’s Nominee, as applicable, and the Plan Agent will send to the legal representative or Nominee of the deceased Participant such certificate and a cheque in payment for any remaining fraction of a Trust Unit or LP Units in the deceased Participant’s account.

Notwithstanding the foregoing, no certificates will be issued to beneficial Unitholders unless and until such time as CDS ceases to hold Trust Units exclusively in book-entry form.

If a written termination notice, or notice of a Participant’s death, is not received by the Plan Agent prior to 5:00 p.m. (E.S.T.) on the third Business Day immediately preceding a distribution record date, then the Participant’s account will not be closed, and participation in the Plan by such Participant will not be terminated, until after the distribution payment date to which such record date relates.

Rights Offering

In the event that Canexus or Canexus LP makes available to its Unitholders or Exchangeable LP Holders, respectively, rights to subscribe for additional Trust Units, LP Units or other securities, rights will be issued by Canexus in respect of whole Trust Units and by Canexus LP in respect of whole LP Units held in a Participant’s (or Nominee’s) account under the Plan on the record date for such rights issue. No rights will be issuable on a fraction of a Trust Unit or LP Unit held in a Participant’s account.

Subdivisions

If Trust Units are distributed pursuant to a subdivision of Trust Units, the additional Trust Units received in respect of Trust Units held under the Plan will be credited to the accounts of Participants (or their Nominees). The distribution of LP Units pursuant to a subdivision of LP Units will be treated in like fashion.

Unitholder Voting

Whole Trust Units or LP Units of a Participant enrolled in the Plan on the record date for a vote of Holders will be voted in the same manner and in accordance with the same instructions of the Participant as any other Trust Units or LP Units. No voting rights will attach to any fraction of a Trust Unit or LP Unit held in a Participant’s account.

Responsibilities of Canexus, Canexus LP and the Plan Agent

None of Canexus, Canexus LP nor the Plan Agent shall be liable to any Holder for any act or for any omission to act in connection with the operation of the Plan including, without limitation, any claims for liability:

(a) arising out of the failure to terminate, or of a Nominee’s failure to terminate, a Participant’s participation in the Plan upon such Participant’s death;
(b) with respect to the prices and times at which Trust Units or LP Units are purchased on behalf of a Participant;
(c) with respect to decisions by Canexus and Canexus LP to raise or not raise equity through the Plan in any given distribution period, or the amount of equity raised, if any; and
(d) arising out of a prorating, for any reason, of the amount of equity available under the Plan in the circumstances described herein.

Participants should recognize that none of Canexus, Canexus LP nor the Plan Agent can assure a profit or protect them against a loss on the Trust Units or LP Units purchased under the Plan.

Canadian Federal Income Tax Considerations

The following is a summary only of certain Canadian federal income tax considerations relevant to participation in the Plan. The summary applies only to Unitholders who participate in the Plan and thereby acquire additional Trust Units, and not to Exchangeable LP Holders. The information provided is current as of the effective date of the Plan. This summary is not intended to be legal or tax advice to any particular Participant and Participants are urged to consult their tax advisors as to their particular tax position.

Residents of Canada

The fact that Canexus Distributions are reinvested under the terms of the Plan does not relieve Participants of any liability for taxes that may be payable on such Canexus Distributions. To the extent that a Canexus Distribution would be included in the income of Unitholders for the purposes of the Income Tax Act (Canada) (the “Tax Act”), such amount will be included in the income of Unitholders who elect to reinvest such amount in new Trust Units under the Plan.

The Canada Revenue Agency (the “CRA”) generally takes the position that the amount, if any, by which the fair market value of any Trust Units acquired pursuant to the Plan on the date of purchase of such Trust Units exceeds the purchase price therefor must be included in the income of the Participant.

Non Residents of Canada

The fact that Canexus Distributions are reinvested under the terms of the Plan does not relieve a Participant who is not resident in Canada ( a “Non resident Participant”) of any liability for non-resident withholding tax applicable to the Canexus Distribution. The rate of withholding tax under the Tax Act on distributions is generally 25% of the amount of income distributed to a Non resident Participant unless reduced by the terms of an applicable treaty.

Gains realized by a Non resident Participant on the disposition of Trust Units, will generally not be subject to tax in Canada unless (i) the Trust Units are held in the course of carrying on a business in Canada; (ii) the Non resident Participant at any time in the 60 month period preceding the disposition, either alone or together with persons with whom the Non-resident Participant does not deal at arms length, owned not less than 25% of the issued Trust Units; or (iii) the Trust Units are “designated insurance property” of the Non resident Participant.

Holders who are residents of the United States are not eligible to participate in the Plan.

Amendment, Suspension or Termination of the Plan

Canexus and Canexus LP reserve the right to amend, suspend or terminate the Plan at any time, but such action shall have no retroactive effect that would prejudice the interests of Participants. Where required, amendments to the Plan will be subject to the prior approval of the Toronto Stock Exchange. Canexus and Canexus LP will notify Holders of any amendment, suspension or termination of the Plan in accordance with the Plan and any applicable securities law requirements. If Canexus and Canexus LP terminate the Plan, a Participant will receive, depending on the Nominee in the case of beneficial Holders, adjustments or payments may be made for fractional Trust Units or LP Units held in a Participant’s account. If Canexus and Canexus LP suspend the Plan, no investment will be made for the Plan Agent on the distribution payment date immediately following the effective date of such suspension, and any Distributions paid after the effective date of such suspension that would, but for the suspension, be reinvested under the Plan, will be remitted to the Participants.

Interpretation

Any issues of interpretation arising in connection with the Plan or its application shall be conclusively determined by Canexus.

Notices

All notices or other documents required to be given to Participants under the Plan shall be publicly announced by Canexus and Canexus and Canexus LP will notify Participants in accordance with applicable securities law requirements.

Notices to the Plan Agent shall be sent to:

Computershare Trust Company of Canada
100 University Avenue, 9th Floor
Toronto, Ontario M5J 2Y1

Attention: Dividend Reinvestment Department
Telephone: 1-800-564-6253

Notices to Canexus Income Fund or Canexus LP shall be sent to:

Attention: Investor Relations
Telephone: (403) 571-7300
Toll-free: 1-866-574-7833
Facsimile: (403) 571-7800
E-mail: canexus@canexus.ca

Effective Date of the Plan
The effective date of the Plan is February 15, 2008.