Corporate Governance

General

In general, Zargon Energy Trust has been delegated responsibility for substantially all of the management decisions of the Trust. The Unitholders are entitled to elect all of the Board of Directors pursuant to the terms of the Trust Indenture.

Trust Indenture

Pursuant to the Trust Indenture, Unitholders are entitled to direct the manner in which we will vote our common shares in Zargon Energy Trust at all meetings in respect of matters, relating to the election of the directors of Zargon Energy Trust , approving its financial statements and appointing auditors of Zargon Energy Trust who shall be the same as our auditors. Prior to us voting our common shares in Zargon Energy Trust , in respect of such matters, each Unitholder is entitled to vote in respect of the matter on the basis of one vote per Trust Unit held, and we are required to vote our common shares in Zargon Energy Trust in accordance with the result of the vote of Unitholders.

Decision Making

The Board of Directors has a mandate to supervise the management of our business and affairs, Zargon Energy Trust and our other direct or indirect subsidiaries and partnership and to act with a view to our best interest. The Board of Directors' mandate includes: (i) an offering of securities by us; (ii) ensuring compliance with all applicable laws, including in relation to an offering of our securities; (iii) all matters relating to the content of any documents relating to an offering of our securities; the accuracy of the disclosure contained therein, and the certification thereof; (iv) all matters concerning the terms of, and amendment from time to time of, our material contracts; (v) all matters concerning any subscription agreement or underwriting or agency agreement providing for the sale or issue of Trust Units or securities convertible for or exchangeable into Trust Units or rights to acquire Trust Units; (vi) all matters relating to the redemption of Trust Units; (vii) all matters relating to the voting rights on any of our investments; (viii) all matters relating to the specific powers and authorities as set forth in the Trust Indenture (ix) the adoption of a Unitholder rights plan and other miscellaneous matters relating to the maximization of Unitholder value; and (x) all matters relating to amending Zargon Energy Trust articles to create a class or classes of each exchangeable shares. The Board of Directors holds regularly scheduled meetings at least quarterly to review the business and affairs of our subsidiaries, partnerships and trusts and make any necessary decisions relating thereto.

The Trust Indenture gives to the Board of Directors the authority to exercise the rights, powers and privileges for all matters relating to the maximization of Unitholder value in the context of an Offer including any Unitholder rights protection plan, any defensive action to an Offer, any Directors Circular in response to an Offer, any regulatory or court proceeding relating to an Offer and any related or ancillary matter.

Additional information in respect of corporate governance matters is contained in the Information Circular which has been filed on SEDAR at www.sedar.com.

Distributions and Distribution Policy

Cash distributions are made on the 15th day (or if such date is not a business day, on the next business day) following the end of each calendar month to Unitholders of record on the last business day of each such calendar month or such other date as determined from time to time by the Trustee.

The Board of Directors on our behalf review the distribution policy from time to time. The current distribution policy incorporates the withholding of approximately 50 percent of cash flow generated for the financing of capital expenditures in order to provide sustainable distributions in the long-term. Depending upon commodity prices and the size of the capital budget, Zargon Energy Trust estimates that 50 percent of the cash available for distribution will fund a significant portion of our annual capital expenditure program, including exploration, exploitation expenditures and minor property acquisitions, but excluding major acquisitions.

Distributions are normally announced on a monthly basis in the context of prevailing and anticipated commodity prices. During periods of volatile commodity prices, we may vary the distribution rate monthly.

Directors and Officers

The name, municipality of residence, principal occupation for the prior five years and position, of each of the directors and officers of Zargon Energy Trust are as follows:

Directors

Name and Municipality of Residence	Director Since	Principal Occupation
Craig H. Hansen Calgary, Alberta	1992	President & Chief Executive Officer – Zargon Oil & Gas Ltd.
K. James Harrison(4) Oakville, Ontario	1995	President – K. J. Harrison & Partners Inc.(Investment Management)
Kyle D. Kitagawa(1) (2) Calgary, Alberta	2001	Managing Director, North River Capital Corp.
Margaret A. McKenzie(1) (3) Calgary, Alberta	2007	Chief Financial Officer, Range Royalty Limited Partnership and Spur Resources Ltd.
Geoffrey C. Merritt(2) Calgary, Alberta	2009	Independent Businessman
Jim Peplinski(2) (4) Calgary, Alberta	1997	Managing Partner, Humberview Group; VP Business Development, Calgary Flames Hockey Club
J. Graham Weir(1) (2) Calgary, Alberta	2003	Independent Businessman
Grant A. Zawalsky(3) (4) Calgary, Alberta	2000	Partner, Burnet, Duckworth & Palmer LLP (Barristers and Solicitors)

Notes:

1. Member of the audit committee, which is required under the Business Corporations Act (Alberta).
2. Member of the reserves committee.
3. Member of the governance and nominating committee.
4. Member of the compensation committee.
5. Zargon does not have an executive committee.

Officers

Name and Municipality of Residence	Office
Craig H. Hansen Calgary, Alberta	President & Chief Executive Officer
Brent C. Heagy Calgary, Alberta	Executive Vice President & Chief Financial Officer
Henry J. Baird Calgary, Alberta	Vice President, Reservoir Engineering
Jason B. Dranchuk Calgary, Alberta	Vice President, Finance and Controller
Tracy L. Howard Calgary, Alberta	Corporate Secretary
Brian G. Kergan Calgary, Alberta	Vice President, Corporate Development and Alberta Plains South
Kevin C.Y. Lee Calgary, Alberta	Vice President, Alberta Plains North
Lorne D. Schwetz Calgary, Alberta	Vice President, Land
Al D. Thorsen Calgary, Alberta	Vice President, Operations

As at March 10, 2010, the directors and officers of Zargon Oil & Gas Ltd., as a group, beneficially owned, directly or indirectly, or exercised control or direction over, 1,005,385 Trust Units or approximately 4.3 percent of the issued and outstanding Trust Units and 540,434 Exchangeable Shares or approximately 30.6 percent of the issued and outstanding Exchangeable Shares resulting in an approximate total average ownership of 7.3 percent.

Corporate Cease Trade Orders or Bankruptcies

Except as otherwise disclosed herein, in the ten years preceding the date of this Annual Information Form, none of the proposed directors, officers or insiders of Zargon Oil & Gas Ltd. are or have been a director, officer or promoter of any other issuer that, while acting in such capacity:

1. was the subject of a cease trade or similar order or an order that denied the issuer access to any statutory exemptions for a period of more than 30 consecutive days; or
2. was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy and insolvency or been subject to or instituted any proceedings, arrangement, or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that person, other than Mr. Zawalsky who was a director of Efficient Energy Resources Ltd. (a private electrical generation company) which agreed to the voluntary appointment of a receiver in 2005.

Penalties or Sanctions

None of the proposed directors, officers or insiders of Zargon Oil & Gas Ltd. have been subject to any penalties or sanctions under securities legislations except as disclosed herein.

Personal Bankruptcies

None of the proposed directors, officers or insiders of Zargon Oil & Gas Ltd. have in the ten years preceding the date of this Annual Information Form become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold their assets except as disclosed herein.

Conflicts of Interest

Circumstances may arise where members of the Board of Directors serve as directors or officers of corporations which are in competition to our interests and the interests of Zargon Oil & Gas Ltd.  No assurances can be given that opportunities identified by such board members will be provided to us or Zargon Oil & Gas Ltd.

The Business Corporations Act (Alberta) provides that in the event that a director has an interest in a contract or proposed contract or agreement, the director shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement unless otherwise provided under such Act.  To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of such Act.

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