It’s budget day in Canada.

Prime Minister Stephen Harper and Finance Minister Jim Flaherty will table a proposal in Parliament at 4 pm ET after extensive discussions with interest groups, premiers, economists and others across Canada. More than 7,000 people sent ideas to Flaherty on the finance department’s online consultation site.

Efforts by Mr. Harper, Mr. Flaherty and other Conservative politicians were as much about public relations in the aftermath of last fall’s economic update; business leaders as well as ordinary Canadians were disappointed with the minority government’s response to what was then a looming crisis. Significant job losses and a corresponding deterioration in consumer confidence means small government/fiscal discipline must give way to political reality.

Mr. Harper’s minority government, struggling to meet public demands for an aggressive response has announced a spate of spending initiatives in recent weeks, including:

• CAD7 billion for infrastructure
• CAD2 billion for low-income housing
• CAD1.5 billion for job retraining for laid-off workers
• CAD1 billion for communities affected by the downturn in the forestry, mining and agriculture sectors
• CAD550 million for agriculture
• CAD300 million for tourism projects
• CAD250 million to create a new regional economic development agency for southern Ontario
• CAD160 million for cultural programs
• CAD150 million for the forestry sector
• CAD32.5 million for a contract with a Manitoba company to make camouflage rain gear for the military
• CAD25 million each to Saskatchewan and British Columbia for economic development
• CAD19 million for Quebec for biofuels research
• CAD12.4 million for research and development in Nova Scotia
• CAD10.7 million to create a “center of excellence” for high technology around Waterloo, Ontario
• CAD10 million to create a regional development agency for the Northern Territories
• CAD7 million for airport safety improvements
• CAD481,300 to the Girl Guides of Canada to develop safety programs for girls
• CAD203,000 for Newfoundland to develop peat moss as an alternative to sawdust as bedding for dairy cows
• CAD6,400 to a music festival in Medicine Hat, Alberta

The 2009-10 budget–the most important spending plan in decades, according to many observers–is expected to contain more than CAD30 billion in spending promises, including: new investments in infrastructure; measures to protect the stability of Canada’s financial system and ensure access to credit for businesses and consumers; support for industries in difficulty, including forestry, manufacturing, auto manufacturing, tourism and agriculture; and measures to protect the vulnerable, including the unemployed, lower-income Canadians, seniors and aboriginals.

Mr. Harper has also indicated he’ll propose tax changes to help average Canadians, modest but permanent breaks for people in middle- and lower-income brackets.

Though the New Democratic Party and the Bloc Quebecois have already said they’ll vote against the package. NDP Leader Jack Layton said his party no longer trusts Mr. Harper to implement the recovery package, while Bloc Quebecois Leader Gilles Duceppe noted that Monday’s throne speech re-opening Parliament offered no new direction on important issues to his party, such as climate change or provincial transfers.

Michael Ignatieff’s Liberal Party will wait to read before judging it. But signs point to passage. The newly elevated Liberal leader is well aware Canadians neither need nor want an election during this season of economic turmoil. Mr. Ignatieff will look favorably upon the infrastructure initiatives as well as plans to ease access to and increase employment insurance, but has said he won’t support permanent tax cuts that jeopardize Canada’s ability to balance its budget once the current crisis abates.

The budget is automatically a matter of confidence, meaning its defeat would bring down the government. The first budget vote, on a Bloc-sponsored sub-amendment, will take place Thursday, followed by a vote on a Liberal amendment on Monday.

We’ll have a complete review of the budget, including an update on the political fallout, in next week’s MLM. Assuming for now prudence and non-partisanship prevail, the budget will pass and Harper’s government will survive, we’ll take a look at how spending initiatives will impact specific segments of the income and royalty trust universe.

Speaking Engagements

Join Roger Conrad, Elliott Gue, Gregg Early and Benjamin Shepherd at the 18th Atlanta Investment Conference. Sponsored by Friends for Autism, the conference is held in a mountain setting north of Atlanta from Thursday, April 23 to Saturday, April 25.

Roger, a steady hand through many market events such as the one we’re dealing with now, will talk about Canadian income and royalty trusts as well as his new service focused on exploiting the greatest spending boom in history, New World 3.0.

Elliott will detail the new direction for Personal Finance and provide insight into his approach to stock selection and portfolio management. What’s required now amid these difficult times are clarity and focus, qualities Elliott has demonstrated in these pages and through The Energy Strategist for years.

Gregg, a constant at PF for nearly two decades, will be there to address recent developments with the publication. He’ll also discuss the Smart Grid, an endeavor he’s exploring as part of his role with New World 3.0.

Ben, editor of Louis Rukeyser’s Mutual Funds and Louis Rukeyser’s Wall Street, the in-house mutual fund expert, will discuss efficient, cost effective ways to simplify the investing process.

Be sure to bring your questions. These guys love to talk markets and everything that impacts them.

Attendance is limited to 175 of the most enlightened, savvy individual investors. Go to http://www.aicatchota.com/ for more information. Meals are included for the Canadian Edge discounted price of $459 for a single and $599 for couples. Call 770-952-7861 or e-mail altinvestconf@mindspring.com to register.

The Roundup

Oil and Gas

Advantage Energy Income Fund (TSX: AVN-U, NYSE: AAV) has adopted a shareholder rights plan. The plan, which has already taken affect, is subject to unitholder approval. Advantage said in a press release announcing the move that it comes in response to no specific offer or threat. A unitholder vote will be held at the fund’s annual meeting in late May. Advantage Energy Income Fund is a buy up to USD10.

ARC Energy Trust (TSX: AET-U, OTC: AETUF) is raising CAD220 million through the sale of 13.5 million new shares at CAD16.35 apiece to a group of brokerages led by RBC Capital Markets. Proceeds will be used to partially finance ARC’s 2009 capital expenditure program, which is focused heavily on maintaining current capacity and developing ARC’s Montney lands. ARC Energy Trust is a buy up to USD25.

Crescent Point Energy Trust (TSX: CPG-U, OTC: CPGCF) used the proceeds from a recent CAD120 million bought-deal stock offering to complete the CAD123 million takeover of Villanova Energy Corp. Villanova produces 1,750 barrels of oil equivalent per day of high-quality light oil production, 95 percent of which is in the southeast Saskatchewan Bakken light oil resource play.

Crescent Point has identified at least 47 low-risk Bakken development drilling locations on the Villanova lands. These assets are adjacent to and contiguous with existing Crescent Point Bakken properties. Crescent Point Energy Trust is a buy up to USD25. 

Electric Power

Canadian Hydro Developers (TSX: KHD, OTC: CHDVF) will receive about CAD59 million in government funding for its CA450 million Wolfe Island wind farm being constructed on Wolfe Island in eastern Ontario.

The 86-turbine, 198 megawatt Wolfe Island wind farm is expected to begin commercial production March 31. Wolfe Island, combined with Canadian Hydro’s Melancthon project, will more than double its revenue base. Canadian Hydro Developers is a buy up to USD3.

Gas/Propane

Energy Savings Income Fund (TSX: SIF-U, OTC: ESIUF), based on the final determination of its undistributed income on hand at Dec. 31, 2008, is upping its previously announced special distribution by CAD0.065 to CAD0.165 per unit. Energy Savings added more customers than projected, and a colder-than-forecast December led to higher gas consumption.

The special distribution will be payable in cash on Jan. 31, 2009 to unitholders of record on Dec. 31, 2008. Energy Savings Income Fund is a buy up to USD10.

Business Trusts

Somerset Entertainment Income Fund (TSX: SOM-U, OTC: SOEIF) cut its distribution by 67 percent to CAD0.0167 per unit effective with the January payment due Feb. 13. Sell Somerset Entertainment Income Fund.

Real Estate Trusts

RioCan REIT (TSX: REI-U, OTC: RIOCF) is buying six Montreal area retail properties totaling approximately 454,000 square feet from ING Real Estate Canada LP for CAD67.5 million. Annualized net operating income expected to be generated from the portfolio is approximately CAD6.1 million. The deal is expected to close by Feb. 26.

The portfolio includes six grocery-anchored shopping centers with a total occupancy of 99.04 percent. Approximately 82.8 percent of the portfolio is comprised of national and regional tenants, and about 74 percent of the income from the portfolio is from a combination of grocery, pharmacy and bank tenancies. The average price per square foot is CAD148.58, well below replacement cost for such assets. RioCan REIT is a buy up to USD18.

Natural Resource Trusts

SFK Pulp Fund (TSX: SFK-U, OTC: SFKUF) has suspended its monthly distributions “until market conditions substantially improve” and will extend quarterly maintenance shutdowns at two US recycling mills.

The fund’s Menominee Mill in Michigan and its Fairmont Mill in West Virginia will extend first-quarter maintenance shutdowns by two and seven days, respectively, to remove about 10,000 tons of pulp from production, allowing SFK to balance its order book with inventory levels. SFK Pulp Fund is a hold.

Tree Island Wire Income Fund (TSX: TIL-U, OTC: TWIRF) reported this week that its raw material and finished goods inventories are overvalued by approximately CAD27 to CAD30 million based on current market prices. In accordance with GAAP requirements, the fund anticipates that approximately CAD12 to CAD17 million of this overvaluation will be written down in the fourth quarter of fiscal 2008.

The writedown will have a material negative impact on fourth quarter results of operations, EBITDA and distributable cash, and will put the fund out of compliance with its current debt services ratio covenant. The remainder of the overvaluation is expected to have an additional impact in coming months as inventories are turned. Hold Tree Island Wire Income Fund.

Energy Services

Precision Drilling Trust (TSX: PD-U, NYSE: PDS) trimmed its January distribution to CAD0.04 per unit from CAD0.13 per unit, another move to strengthen its balance sheet and continue with a previously announced debt-reduction effort. It’s also a reflection of seasonally low equipment utilization levels for Precision’s operations in Canada and a sharp reduction in US rig demand resulting from the steep decline in energy commodity prices over the past three months. Precision Drilling Trust remains a buy up to USD12.

Information Technology

Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF) is spending USD35 million for a 20 percent stake in US-based Dealer.com to bolster its presence in the auto listing business. With consumer spending dwindling, it’s expected that car dealers will have to work harder to move vehicles, and consumers may gravitate toward used or previously leased cars. Yellow Pages CEO Marc Tellier said this creates opportunities to capitalize on increased listings even during a slowdown.

Privately owned Dealer.com is used by car sellers, including large dealer groups, to manage and list inventory online, and as a clearinghouse for new and used vehicles. The deal values Burlington, Vt.-based Dealer.com at USD175 million; Yellow Pages has the right to acquire more of the company. Yellow Pages Income Fund is a buy up to USD10.