Canadian Business Trust

1
Canadian Business Trust

• Betty Ho
• Stephen Wasmuth
• Greg Logan
• Stella Li

2
Canadian Business Trust

• Agenda
• Introduction (pre-October 31st 2006)
• Event on October 31st

3
Business Trusts to be Analyzed

• Stephen Inter Pipeline Fund

• Greg Yellow pages Income Fund

• Stella Boston Pizza Royalty Fund

4
Introduction of Income Trust

• A legal entity traded on securities exchange like
  stocks ending with the .UN symbol
• Hold income-producing assets
• Debt or Equity instruments
• Royalty Interests
• Real Properties
• Monthly or quarterly distribution (6-30
  annually) in the form of interest, royalty or
  lease payments
• Payout to investors on a tax-efficient basis
• Also known as Income Funds, Unit Trusts,
  Investment Trusts

5
History of Income Trusts

• 1985 First business trust conversion(Enermark
  Income Fund)
• 1986-1997 Energy trusts and REIT trusts
• 1998-2000 Trust was neglected
• 2001 Income trust rediscovered
• 2002 SP and TSX commenced 3 Trust
  Indices
• 2003-2004 Establishment of limited liability
• 2005-2006 SP announces inclusion of trusts in
  SP/TSX Composite Index

6
History of Income Trusts
Graph from TSX website
7
History of Income Trusts
Chart taken from globeinvestor
8
Types of Income Trust
Proportion of trusts per type based on Total
number of trusts 247

1. Business Trusts
2. REITs
3. Resource Trusts
4. Utility Trusts

9
Characteristics of an Business Income Trust

• Mature business cycle
• Require limited capital maintenance
• Stable cash flows (cash/trust units)
• Companies with basic sets of transactions, year
  after year

10
Businesses that are Income Trusts
11
Typical Investors of Income Trust

• Large investor groups (Canadian Pension Plan
  /Ontario Teachers Pension Plan)
• Individual investors
• Those who want stable cash flow
• Retirees or baby boomers preparing for retirement

12
How Does it Operate?
Unitholders
Unitholders provide funds to the trust.
The trust uses these funds to invest in income
generating assets.
The asset pays a return to the trust.
Trust
Unitholders receive cash distributions and return
on capital
Corporation
Figure taken from www.fin.ge.ca
13
Reasons to Invest in Income Trusts

• Potential higher yield than bonds
• The flow-through tax-efficient structure
  generally gives higher distributions than
  dividends
• It provides income distribution and potential
  gain in value
• When interest rates are low

14
Reasons to Convert to Income Trust

• Reduction in corporate tax
• Raise capital while retaining control
• Deleveraging
• Management discipline
• More efficiency in cash flow allocation
• Elimination of adverse investment incentives
• An announce of intention to convert can increase
  share price

15
Reasons to convert to Income Trust
16
Risks for Investors

• Lack of Diversification
• Surrendering growth opportunity
• No guarantees in distributions or return on
  capital
• Sustainable tax benefits is not certain
• Limited liability
• Volatility

17
Risks for Converting Companies

• Slow down in growth opportunity
• Interest rate movements
• Compatibility with business industry
• Companies may need to retain some capital

18
Governance of Business Trusts

• Declarations of trust (DOTs)
• Canadian Securities Administrators (CSA)
• Policy 41-201
• Interim and annual MDA
• Ontarios Securities Act
• Internal audit committee

19
Declaration of Trust

• Defined An agreement between the trustees of the
  trust
• Type of business
• Operation of trust
• Rights of unitholders
• Rules and provisions

20
National Policy 41 201 Income Trusts and Other
Indirect Offerings

• Purpose to indicate how existing regulations
  apply to non-corporate issuers
• Provides guidance and recommendations on
  disclosure, accountability and liability for
  insider trading
• Vendor liability
• Stability ratings
• Prospectus disclosure

21
Disclosure and Prospectus Requirements

• Required Public companies/sole holder of
  majority of units
• Source of funding (current and future)
• Specific risk
• Impact of risk
• Approaches to diminish risk
• Goodwill calculation
• Executive compensation
• Restrictive financial covenant
• Done on a timely basis

22
Taxation of Income Trust - Basics
Resident Unitholders
Non-resident Unitholders
Tax-exempt Unitholders
Income from trust 39 Tax (38) 14.82
Income from trust 22 Tax (15) 3.30
Income from trust 39 Tax (0) 0
Trust
Income from corp. 100 Tax (45) 0
Corporation
Business income 100 Tax (35) 0
23
Taxation of Income Trust
CorporateStructure IncomeTrust
Entity level 35.00 NIL
Investor level
Taxable Canadian 5.70 14.82
Non-resident 2.15 3.30
Tax-exempt N/A N/A
Total tax 42.85 18.12
Example from www.fin.gc.ca
24
Taxation of Income Trust

• Income Tax Act under Mutual Funds
• Funds retained in trusts are taxed heavily
• Federal tax 29
• Provincial tax 45 average (on federal tax
  payable)
• Ex. if earnings were 100, federal tax29
  provincial tax is 45 x 2913.05
• Funds retained in companies are taxed at
  corporate rates
• Trust can payout higher than their income in the
  form of dividends

25
Issues

• Loss in tax revenue
• Growth in Canada
• Others

26
Canadian Business Trust Issues Loss in tax
revenue

• Estimated loss in revenue of 300 million
• Government action
• Increase tax on trust
• Limit amount of trust investment in pension funds
• Increase Dividend Tax Credit
• Market response
• Lost of 23 billion
• Recovered
• Jack Mintz of University of Toronto vs. CAIF

27
Canadian Business Trust Issues Growth in Canada

• Trust misallocate capital, the savings of
  Canadians and that capital is the primary source
  of our economic growth Peter Godsoe, former
  chairman and CEO of Bank of Nova Scotia
• Canadas competitiveness at danger
• No retained earning for capital expenditures
  (plant/equipment/technology)

28
Canadian Business Trust Issues others

• Disclosures and Accounting methods
• 85 of business trust have accounting issues
• CSA reports
• Trust funding distributions through L/T credit
  facilities and reserves
• Management must match distribution
• Yield are matched to competitors
• Not according to corporate model
• Lack of flexibility in management
• Good?
• Debt covenants are not required to be disclosed
• High yields are comparable to junk bonds
• Canadian junk trust market

29
What happened on Oct 31, 2006?!?
30
Tax Fairness Plan

• Distribution Tax
• Decrease in Corporate Income Tax of 0.5 in 2011
• Increase in Age credit amount by 1000
• Permission for income splitting for pensioners
  starting 2007

31
Tax Fairness Plan Distribution Tax

• Specific Investment Flow-Through (SIFT)
• When trust is resident of Canada
• Trust units are of OR have investments in a stock
  exchange or other public market
• When the trust holds one or more non-portfolio
  properties
• Canadian Corporation, Resource properties, Timber
  Resource properties and Real properties,
  investments (2 conditions)
• Non-portfolio earnings
• Business income in Canada
• Income or capital gains from non-portfolio
  properties
• Not dividends received
• No more deduction allowed

32
Tax Fairness Plan Distribution Tax
Table 6 SIFT Tax Rates Distributed
Non-Portfolio Earnings, 2007-2011
(percent) 2007 2008 2009 2010 2011
Basic rate (federal) 21.0 20.5 20.0 19.0 18.5
Additional rate(in lieu of provincial tax) 13.0 13.0 13.0 13.0 13.0
Total 34.0 33.5 33.0 32.0 31.5
Those amount that is not distributed will be
taxed at the ordinary federal and provincial rate.

Table from www.fin.bc.ca
33
Tax Fairness Plan

• Decrease of Corporate Income Tax rate.

Table 3 Federal Corporate Income Tax Rates,
2007-2011
(percent) 2007 2008 2009 2010 2011
General corporate income tax rate 21.0 20.5 20.0 19.0 19.0
Proposed rates 21.0 20.5 20.0 19.0 18.5
Table from www.fin.bc.ca
34
Tax Fairness Plan

• Increase of Age credit
• Only significant for 65 years or older
• Increase of phase out rate
• Help low to middle class seniors

35
Tax Fairness Plan

• Pension income splitting
• Allow those that qualify for pension income tax
  credit to transfer this credit to spouse

36
Tax Fairness Plan

• New Income Trusts (after Oct 31, 2006)
• This applies on 2007 taxation year
• Existing Income Trusts
• This applies on 2011 taxation year

37
Tax Fairness Plan
Table 2 Simplified Comparison of Investor Tax
Rates in 2011
Current System Current System New System New System
Investor FTE(Income) Large Corporation (Dividend) FTE(Non-Portfolio Earnings) Large Corporation (Dividend)
Taxable Canadian () 46 46 45.5 45.5
Canadian tax-exempt 0 32 31.5 31.5
Taxable U.S. investor () 15 42 41.5 41.5
Table from www.fin.bc.ca
38
Impact of Tax Fairness Plan
39
Impact of Tax Fairness Plan
40
Tax Fairness Plan
In conclusion
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Inter Pipeline Fund (IPL.UN)
Year 2006 (Q3) 2005 2004 2003 2002 2001
Units outstanding (Millions) 201.4 184 180 128 73.8 73.2

• Market Cap 1.7 Billion

43
IPL.UN One Year (Daily)
P/E 15
P/E 12.20
P/E Expansion?
44
IPL.UN 5 year (weekly)
Earnings Growth?
45
Company Overview

• Created 1997 in Calgary Alberta
• Owns and Operates four business segments
• Conventional Gathering
• Oil Sands Transportation
• NGL Extraction
• Simon Storage Limited

46
Conventional Gathering

• Transported approx. 201,400 b/d of crude in 2005
• Moves crude oil from producer owned batteries
  and truck terminals to key market hubs is
  Alberta and Saskatchewan.

47
Oil Sands Transportation

• Sole transporter of Cold Lake bitumen production.
  
• It has the capacity to transport 435,000 b/d
• Can be cost effectively expanded to 705,000 b/d.

48
NGL Extraction

• Processes pipeline quality natural gas to remove
  natural gas liquids (NGL) comprised of ethane,
  propane, butanes and pentanes-plus
• Uses shrinkage gas, profit comes from spread
  between selling all NGLs seperately and the cost
  Shrinkage Gas.

49
NGL Extraction cont

• Inter Pipeline's extraction business consists of
  100 ownership interests in the Cochrane and
  Empress II Plants and a 50 ownership interest in
  the Empress V Plant
• NGLs are generally used directly as an energy
  product and as a feedstock for the petrochemical
  and crude oil refining industries.

50
Simon Storage Limited

• Wholly owned subsidiary of Inter Pipeline Fund
• Multi site operator of bulk liquid storage,
  handling and distribution in the United Kingdom,
  Germany and Ireland
• On January 1, 2006 Simon acquired
  Tanklager-Gesellschaft (TLG) (2nd largest
  independent petrochemical storage business in
  germany.

51
Simon Storage cont

• Also provides complementary services through its
  bulk liquid trucking, engineering, training and
  facilities management divisions.

52
Directors and Officers

• David W. Fesyk
• President and CEO
• Highlights
• 20 years experience in industry
• Responsible for doubling the size of the company
  with the Cold Lake Pipeline acquisition.
• Bachelors in Earth Science, Arizona State, 1984
• MBA from University of Calgary in 1993.

53
Directors and Officers

• John F. Driscoll
• Director Chairman of the Board since October
  22, 2002
• Founder of JF Driscoll Investment Corp., where he
  has served as President since 1981.
• Many years of advising, managing, and consulting
  services in the oil and natural gas industry.

54
Steady Growth
Purchase of Simon Storage Purchase of NGL plants
55
Key Accomplishments (2005)

• Purchased Simon Storage for 250 million and TGL
  for 38 million
• Entered 20-year contract with Greenergy Biofuel
  Ltd. To store and handle biofuel products at the
  Simon Storage Immingham facilities.
• Established a new 500 million revolving credit
  facility to provide greater financial
  flexibility.

56
Strategies for future growth

• Expand storage segment in Europe
• Not clear if this will be through new
  developments or more acquisitions
• Organic Growth and Development
• Conventional Oil Pipelines Improve operating
  efficiencies, not volume (mature region)
• New oil battery connections, better
  infrastructure, more efficient pumps
• NGL Extraction Improve NGL recovery rates
• Oil Sands Transportation Expand capacity to meet
  future needs of Imperial Oil, EnCana, and CNR.

57
Where they plan to put there money

• Putting larger amount (proportionate to earnings)
  into oil sands and Europe. GOOD.
• Investing in areas of highest growth potential

58
2005 Balance Sheet
59
2005 Income Statement
60 of Expenses
60
2005 Statement of Cash Flows
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Industry Comparison
Ratio IPL.UN Industry
P/E 12.20 19.01
ROE 11.97 18.37
ROA 7.05 8.51
D/E .58 1.04
Net Profit Margin 12.88 -3,318.08
Taken from www.reuters.com
66
Note on Hedging Activity
Hedge Profit / (Loss) (millions of dollars)
NGL Contracts (4.1)
Natural Gas Contracts (12.0)
Foreign Currency 0.1
Heat Rate Swap (0.3)
Electricity Price Swap 0.9
Interest Rate Swaps 4.3
Total Unrecognized P/L (11.1)
67
Conclusions

• Financially sound
• Growing profits, intelligent acquisitions, clear
  and informative financials
• Recently undervalued due to external factors
  (fair tax law).
• Positioned to make money in oil sands and oil
  service industry for many years into the future.

68
BUY
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Basic FinancialsAs of November 10, 2006

• Yellow Pages Income Fund
• Listed on TSX
• Symbol YLO.UN-T
• Price 12.87
• EPS 0.70
• P/E 18.4
• Annual Dividend 1.09 per unit
• Monthly Distribution 0.08583 per unit
• Yield 8.46

71
Basic Financials Cont

• 52 week high 17.2
• 52 week low 11.550
• Market Cap 6.5 Billion
• Units outstanding 532,000,000
• Over 2000 employees

72
5 Year Monthly Chart
73
1 Year Daily Chart
74
90 return IPO to 2005
75
Agenda

• Company Overview
• History
• Management
• Products/Businesses
• Strategy
• Income Trust Model
• Financial Analysis
• New Tax Implications
• Recommendation

76
Company Overview

• Yellow Pages Group (YPG) is Canadas largest
  directory publisher
• YPG owns Canadas most visited online
  directories YellowPages.ca, Canada411.ca,
  SuperPages.ca, and CanadaTollFree.ca
• YPG also owns CanadaPlus.ca a net work of 7
  local sites that include MontrealPlus.ca,
  QuebecPlus.ca, TorontoPlus.ca, EdmontonPlus.ca,
  OttawaPlus.ca, and VancouverPlus.ca
• They are also the exclusive owner of YellowPages,
  Pages Jaunes, and Walking Fingers Design
  trademarks in Canada

77
History

• YPG published its first directory in 1908
• They operated as a division of Bell Canada until
  1971 when it was incorporated as Tele-Direct
  (Publications) Inc.
• Company initially limited its publishing
  activities to Canada but by 1980 began expanding
  into international markets
• By mid 1990s the company sold off investments in
  Hong Kong, Behran, Egypt, Jordan, Cayman Islands,
  and the US to focus on Canadian Market
• In 1999 Tele-Direct changed its name to Bell
  ActiMedia
• In 2002 Bell ActiMedia sold its directory
  business YPG
• In August 1 2003 YPG, through Yellow Pages Income
  Fund, completed its initial public offering
• Yellow Pages Income fund initially owned 30.6
• In June 2004 Yellow Pages Income Fund became 100
  owner of YPG

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Key Management

• Marc P. Tellier - President and CEO
• President and CEO of YPG and CEO of Trader
  Corporation
• Previously CEO of Bell ActiMedia
• Helped complete the largest IPO ever in the
  income trust sector in 2003
• Began with Bell in 1990 after graduating from
  University of Ottawa with Bachelors in Economics
• In 2000 named one of Canadas Top forty under
  forty
• Christian M. Paupe Executive VP of Corporate
  Services and CFO
• Before Joining YPG, Paupe was Executive VP, Chief
  Administrative officer, and CFO at Quebecor World
  Inc. from 1999-2003
• Harvard MBA and BBA from Royal Military College
  in St. Jean Quebec
• Jean Pascal Lion VP of Marketing
• Was VP of electronic directories up to June 2006
• Was VP of local markets at Sympatico-Lycos Inc
• Headed the tem that made that made YellowPages.ca
  the 1 online directory in Canada
• MBA from Cancordias John Molson School of
  Business

                             
                             
                             
79
Products and Businesses

• Print Directories
• Online Directories
• Vertical Media Trader Corp.

80
Print Directories

• YPG Publishes more than 340 Yellow Pages and
  residential directories
• These make for a combined circulation of
  approximately 30 million copies
• Cover 97 of the Canadian population

81
Print Directories Cont

• Yellow Pages Directories
• Facilitates search for products and services
• Host of features such as local attractions, maps,
  event calendars, entertainment info and more
• Yellow Pages Neighborhood Directories
• Provide relevant local information for Montreal,
  Toronto, Vancouver, and Quebec city
• Residential Directories
• Includes residential and government listings

82
Online Directories

• YellowPages.ca
• Online business directory
• PagesJaunes.ca
• French equivalent of YellowPages.ca
• Canada411.ca
• Helps to find a person or business in French or
  English listings
• SuperPages.ca
• An extended Version of YellowPages.ca
• CanadaTollFree.ca
• Find any toll free number in Canada
• CanadaSansFrais.ca
• The French equivalent of CnadaTollFree.ca

83
Online Directories Cont

• CanadaPlus.ca
• A network of 7 local sites as seen below

84
Trader Corporation

                                           

• On June 8, 2006 YPG bought all outstanding shares
  of Trader Corporation for 767 million
• Trader is a leader in print and online vertical
  media
• Trader publishes approx 200 publications and 20
  websites covering 4 product verticals
  automotive, real estate, general merchandise, and
  employment
• Some of the brands include Auto Trader, Buy
  Sell, and Homebase
• A great acquisition for YPG

85
YPG Business Strategy

• Goal Yellow Pages Groups goal in directing and
  managing its business is to enhance unitholder
  value and operate with honesty and integrity
• Mission We are aligning print and online
  strategies in a continuous effort to find the
  best seller for each buyer
• Basic strategy is differentiation through two
  avenues
• Organic growth
• External growth

86
Strategy Cont

• Organic Growth
• Enhance and extend print and online product and
  service offerings
• Introduce enhancements to existing product
  offerings to create new revenue and cross-selling
  opportunities
• External Growth
• Invest in or acquire businesses which complement
  core business
• Preference for geographic presence in Canada
• Expand into related media that complement YPGs
  traditional directory advertising

87
YPG Core Competencies
88
YPGs Key Priorities for 2006-2007

1. Expand business with national and regional
   advertisers
2. Continued focus on customer relationship
   management
3. Extension of the directory category
4. Gain a stronger presence in vertical media

89
Why Income Trust Model?

• YPG is a mature business with relatively high
  stable, cash flows
• YPGs business holds income producing assets that
  engage in a similar set of transactions each year
• Not too focused on high growth
• Assets are stable and long lasting
• Converted to avoid paying corporate taxes
• Provide higher more frequent distributions to
  investors than traditional dividends

90
Corporate Strategy Moves

• Supply chain management
• Quebecor World Inc
• Transcontinental Inc
• Acquisitions
• MTS Media

91
1 Billion Deal with Quebecor World Inc

• Signed 1 billion contract on Oct 19, 2006 with
  Quebecor
• Extends directory printing contracts in eastern,
  western, and central Canada through to 2020
• Cover over 300 directory titles
• Solidifies long-term supply chain relationship
• Quebecor World provides high quality print
  solutions to leading publishers, retailers,
  catalogers, and other businesses with advertising
  activities

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115 Million Trader Contract


                    

• On Oct 20, 2006 YPGs Trader Corp awarded a 10
  year contract to Transcontinental Inc
• Contract valued at 115 million decomposed into
• 75 million for extension of contract to print
  vertical guides in the Atlantic provinces,
  Quebec, and Manitoba
• 40 million in new business for Ontario,
  Saskatchewan, and Manitoba
• Secure Traders long term relationship with top
  printer in Canada
• Transcontinental is the largest printer in Canada
  and ranks as the countrys largest publisher of
  consumer magazines

93
MTS Media Acquisition

• On Oct 2, 2006 YPG acquired MTS Media from MTS
  Allstream Inc
• 275 million price tag
• Makes YPG the 1 directory publisher in Canadas
  10 largest markets
• In alignment with external growth strategy
• MTS Media is largest directory publisher in
  Manitoba
• Publishes 11 different titles with circulation of
  1.7 million

94
Financial Analysis
95
Financial Statements

• Annual Statement 2005
• Quarterly Statements 2006 3rd Quarter

96
Distribution Increase
97
2006 Distributions
98
Annual Income Statement

• 45 increase in revenue
• 126 increase in net earnings

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EBITDA Growth
101
Annual Income Statement Cont

• EPS up 53
• 124 Million new units issued
• Dilution of existing unitholders?

102
Annual Cash Flow Statement

• Cash from operation activities up 42

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Whats going on?

• Investing increased more than 3 times
• 2.6 billion in acquisitions
• Results in large financing activities
• 3.2 billion in new debt issued
• 1.6 billion in new equity

105
Key Annual Metrics
106
A More Recent Look

• Q3 Statements

107
2006 3rd Quarter Results

• Adjusted revenue up 33
• Adjusted EBITDA up 23
• Distributable cash up 11

108
Growth
109
Q3 Balance Sheet Assets

• Large build up of cash
• More Acquisitions on the horizon?
• Goodwill Increasing

110
Q3 Balance Sheet L OE

• Large increase in long term debt
• More leverage greater risk
• Exchangeable debentures possible dilution to
  unitholders

111
Q3 Income Statement
112
Q3 Income Statement Cont

• 0.8 increase compared with last Q3
• Large increase in units outstanding

113
Q3 Cash Flow Statement
114
Q3 Cash Flow Cont
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New Tax Announcement

• Announcement came Oct 31, 2006
• Government to impose tax on income trust
  distributions
• Existing trusts (YPG) wont face taxes until 2011

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Result of Announcement
119
A Closer Look

• 20 drop in one day

120
Implications for YPG

• Do not have to pay taxes on distributions until
  2011
• YPG still pays the same distributions
• YPG may have to consider new business model

121
Opportunity to buy?

• Lower P/E ratio down from 21.4 to 18.4
• Room for multiple growth
• Distributions remain the same
• Market may have overreacted
• YPG showing strong financial numbers
• Continuing to grow business
• Units have recovered 5.5 since announcement

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Fishers Dimensions

• Superiority in production, marketing, research
  and financial skills
• Clear, accessible financial statements
• Continued increase in revenues and earnings
• Large investment increase and visible brand and
  trademarks
• People factor
• Experienced management that repeatedly exceed
  expectations
• CEO named to top forty under forty
• Investment Characteristics
• Leader in print directories
• Leader in online directories
• 1 in Canadas 10 largest markets
• Price
• Lower P/E ratio due to tax announcement
• Drop from 21.4 to 18.4

123
Recommendation

BUY
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Company Overview

• As of Nov 24, 2006
•  
• Price 14.60
• Day High 14.82
• Day Low 14.50
• 52 Week High 20.8
• 52 Week Low 13.06

• EPS 1.23
• P/E 11.90
• Market Cap 160.55M
• Yield 8.784
• Units Outstanding10.997M

Company Boston Pizza Royalties Income
Exchange TSE Ticker BPF.UN IPO July
17, 2002 (initial P10.00)
126
Historical One Year Price

• Latest price (Nov 24, 2006 1204 EST) 14.60,
  Volume 10,137

127
Five Year Price vs. SP

• Latest price (Nov 24, 2006 1204 EST) 14.60,
  Volume 10,137

128
Structure of the Fund

• Focus
• BP Royalties Income Fund -
• a limited purpose open-ended trust
  established to acquire indirectly, through Boston
  Pizza Royalties Limited Partnership, certain
  trademarks and trade names used by Boston Pizza
  International Inc. (BPI) in its Boston Pizza
  restaurants in Canada.

129
BP International Inc.

• BPI is the franchisor of the BP concept in CA
  (since 1982). The company competes in the casual
  dining sector of the restaurant industry
• One casual dining brand in Canada
• Charges a 7 royalty fee on Franchise Sales for
  all full-service BP restaurants and a 5 royalty
  fee on Franchise Sales for BP Quick Express
  restaurants
• Pays the Fund a 4 royalty fee based on
  Franchise Sales of the specific royalty pool (195
  restaurants) for the use of BP trademarks (BP
  rights)

130
When new stores are added

• The adjustment for new Franchise Sales added to
  the Royalty Pool is designed to be accretive for
  Uniholders.
• Implications
• BPI aggressively enhances and promotes the
  Boston Pizza brand through national and radio
  advertising. (? business strategic)

131
The Fund

• Stable Structure Provides Uniholders with
  top-line royalty from BP restaurants. The Fund
  has no capital expenditures.
• Distribution Policy equal distribution payments
  to Uniholders on a monthly basis

132
Nature of Units

• Units are hybrids share certain attributes
  common to both equity securities and debt
  instrument
• Units do not represent a direct investment in
  the Trust or the Partnership (should not be
  viewed by investors as units in the Trust or the
  Partnership)
• Units represent a fractional interest in the
  Fund
• Price per Unit is a fraction of anticipated
• distribution of cash

133
The Restaurant Industry and Competitors

• Performance of the fund is directly dependent
  upon the royalty and interest payments received
  from BPI.
• The performance of BPI is dependent on various
  factors that may affect the casual dining sector
  of the restaurant industry.
• The restaurant industry is intensely competitive
  with respect to price, service, location, and
  food quality(?Menu, atmosphere, low price at BP)
• Other factors including economic conditions

134
Royalties
Royalties 4

• Performance of the Fund directly dependent upon
  the Royalty
• and interest payments received from BPI
• How much revenue
• How many new stores? Management Aggressive vs.
  Conservative)

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the Funds Trustees

• John L. Cowperthwaite
• Retired Partner, Ernst Young LLP
• Chartered Accountant since 1965
• 42 years of experience as an auditor at Ernst
  Young LLP
• Subsequently became Chairman of the United Way of
  the Lower Mainland and is currently a governor of
  SFU

136
Robert L. Phillips
the Funds Trustees

• Current president of R. L. Phillips
• Investments Inc.
• President and CEO of BCR Group of
• Companies from 2001- 2004
• Executive BP of MacMillan Bloedel
• Ltd. From 1999 to 2000
• President and CEO of Dreco Energy
• Services Ltd. From 1994 to 1998
• Bachelor of Science, Chemical
• Engineering, and Bachelor of Laws
• degrees from the University of Alberta

137
the Funds Trustees

• William C. Brown
• VP of BC Sugar Refinery Ltd. From 1976-1988,
  President from 1988 to 1997, and CEO from 1990 to
  1997. Chairman of BC Sugar Refinery Ltd. from
  1997 to 1998.
• Significant experience in accounting and
  financial reporting issues through serving on the
  audit committee at Union Gas Ltd. from 2002 to
  present
• Bachelor of Science degree from the University of
  New Brunswick.

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BP International Inc. Management Team

• Walter J. Treliving
• Opened his first restaurant in 1968
• Chairman and owner
• Born entrepreneur and risk taker

139
BP International Inc. Management Team

• George C. Melville
• Joined the company in 1973
• Chairman and owner
• Entrepreneur
• Chartered accountant degree in 1968 and worked
  for the renowned accounting firm, Peat Marwick
  Mitchell Co. in Penticton, B.C

140
The Fund Cash Flow Statement
141
BP Intl Inc.-Cash Flow Statement
142
Key Growth Statistics

• Restaurant Growth31 Store Openings in 050
  Store Closures in 05

• SSSG- Average 6
• key driver for yield growth of the Fund
• was 10.54 for Q4, 05
• increase distribution for Uniholders

143
The Fund- Consolidated Statement of Earnings
144
BP Intl Inc.-Consolidated Statements of
Operations and Deficits
145
Business Strategy

• Commitment for franchise profitability
• Commitment to continually enhance BP brand
• Commitment to continually improve customer
  experience.

146
What does it mean for Uniholders

• In 2005 the Fund delivered two increases in
  distribution to Uniholders.
• Distributions have grown by 21.2 since IPO

147
Appendix- Current Operation of BPI

• 2005 Gross Sales 513 million
• 2005 Franchise Sales 417 million
• 2005 Avg Gross Sales per Location 2.3
  million
• 2005 Customer Visits 30 million
• 2005 Locations Currently Open 250 stores
• 2005 Locations in Royalty Pool 226 stores
• zero closure rate in 2005

148
Appendix-Competitive Strengths

• Drivers
• Low food cost
• Broad demographic appeal
• Single brand focus
• Focus on franchising versus corporate operations.
  
• Award-winning national marketing program
• Increasing number of franchises, allowing Boston
  Pizza to increase purchasing efficiencies and to 
  reduce unit cost overhead.

149
Appendix- A Glance at BP restaurants
150
Appendix-Royalty Pool Locations
151
Outlook

• BP International Inc. will continue aggressive
  expansion into Eastern Canada and Quebec, while
  continuing to infill markets in Western Canada.
• Approximately 40 new BP restaurants in 2006
• 24-26 renovations are planned in 2006

152
Recommendation
BUY
Confident about future Revenue Confident about
big economy