Income Streams III

Income Streams III

August 18, 2005 09:01 ET

Income STREAMS III: Monthly Distribution Declared for Equity Dividend Shares

TORONTO, ONTARIO--(CCNMatthews - Aug. 18, 2005) - The Board of Directors of Income STREAMS III (TSX:STQ)(TSX:STQ.E) ("IS STREAMS) declares its regular monthly distribution of $0.0875 per Equity Dividend Share (TSX:STQ.E). In accordance with the distribution program described below, there will be no distribution to the Capital Yield Shareholders for the month of August 2005. The Equity Dividend Share distribution will be payable September 9, 2005 to shareholders on record as of August 31, 2005.

Holders of Equity Dividend shares continue to receive their regular cumulative monthly fixed distribution of $0.0875 per share. To date Equity Dividend shareholders have received 50 monthly distributions for a total of $4.34 per share inclusive of this distribution.

The Board of Directors implemented a variable distribution program in July 2002 based on equity market conditions at that time in order to preserve its asset base over the long term. As market conditions have improved and stabilized, the Board, effective July 2003, expects to declare distributions going forward based on the size of the mid-month managed portfolio of the Corporation as follows:

Managed Portfolio Capital Yield Share
per unit Mid month Distribution Payment Capital Yield Share
(net of distributions) Annual Rate Monthly Payment

Over $20.00 $ 2.50 $ 0.2083
$19.50 to $20.00 $ 2.00 $ 0.1667
$19.00 to $19.49 $ 1.50 $ 0.1250
$18.50 to $18.99 $ 1.25 $ 0.1042
$18.00 to $18.49 $ 1.00 $ 0.0833
Under $18 Nil Nil

The managed portfolio as of August 15, 2005 was $16.47 therefore the August 31, 2005 distribution for the Capital Yield Share will be set at nil per share. Elimination of the Capital Yield Share distribution when the Managed Portfolio per unit declines below $18.00 (net of Capital Yield share distribution) is compliant with the requirements of the initial prospectus dated June 27, 2001. The Board believes this is a prudent decision and in the best interest of both classes of shareholders over the long term. Based on the current market conditions, the Board expects the above distribution policy to continue. To date, Capital Yield shares have received a total of 25 monthly distributions for a total of $3.97 per share.

The Corporation's capital repayment forward agreement remains in force with Merrill Lynch and TD Global Finance, a guaranteed subsidiary of TD Bank. This will provide Capital Yield shareholders with a payment of $25 on December 1, 2013. Capital Yield shareholders are also entitled to an additional payment equal to the value of the Managed Portfolio at wind-up, if any, after payment to satisfy Equity Dividend Share obligations of $15.00 per share.

The managed portfolio (the managed portion of the assets of IS STREAMS not subject to the Capital Yield share repayment forward contract) is invested primarily in a diversified portfolio of companies included in the S&P 500 and the S&P/TSX 60. To provide additional returns above the dividend and interest income earned on the managed portfolio, a covered call writing program generates option premium income on stocks held in the portfolio.

IS STREAMS top holdings include CIBC, Bank of Montreal, Royal Bank of Canada, BCE, Toronto-Dominion Bank, American Express, Citigroup, FedEx, Morgan Stanley and J.P. Morgan as of August 15, 2005. The economic exposure will vary according to the level of option premiums written against the underlying holdings. The list of holdings is subject to change as the portfolio is actively managed.

Quadravest Capital Management Inc., the investment manager of IS STREAMS, is focused on the creation and management of enhanced yield products for retail investors.

Distribution Details:
Distribution per Capital Yield Share (STQ): $ Nil
Distribution per Equity Dividend Share (STQ.E) $ 0.0875
Ex-Dividend Date: August 29, 2005
Record Date: August 31, 2005
Payable Date: September 9, 2005

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