The story of China Investment Corp’s (CIC) recent purchase of 17 percent of Canada-based global mining powerhouse Teck Resources (TSX: TCK/B, NYSE: TCK) is notable for many reasons: it’s another manifestation of China’s relative strength; the terms of the deal suggest China understands the sensitivity in the West to state involvement in the private market; and it’s further reminder that China will play a significant role in Canada’s economic future.

Followed by CIC’s allocation of USD500 million to Blackstone Group LP and purchase of a 40 percent stake in asset manager Citic Capital Holdings, it’s a sign, too, that sovereign wealth funds (SWF), China’s at least, are back in business. And Finance Minister Jim Flaherty wants Canada to receive as much of the SWF’s largesse as possible. To this end, Flaherty is meeting today with CIC Chairman Lou Jiwei.

Flaherty told Bloomberg News that his trip to China is part of a broader effort to strengthen ties with Brazil, Russia, India and China, the so-called BRIC bloc of countries. “The exit from the recession globally is going to be led by the BRIC countries,” Flaherty said.

Many SWFs have suffered along with most market participants in this recession, and most continue to keep their powder dry. But CIC is back in business.

Unlike the oil-rich nations of the Middle East, China is again seeing its foreign-exchange reserves swell. As its economy recovers, capital has flooded in. In the second quarter its reserves grew by a record amount, reaching USD2.1 trillion. China didn’t have to dip into its substantial stock of reserves during the crisis, and CIC is funded by these ever-growing foreign exchange reserves. It essentially has to deploy capital so its coffers can be re-filled.

CIC’s ability to rebound quickly is further aided because it wasn’t fully invested ahead of the meltdown. CIC has fewer wounds to lick than most, despite complaints back home about its performance. Many longer-established funds would be envious of its losses last year, which were just 6 percent according to informed estimates.

China now holds more than USD2 trillion in foreign exchange reserves. That’s a lot more than it needs to meet day-to-day liquidity requirements. In October 2007, CIC was given USD200 billion of the Middle Kingdom’s huge and ever-growing foreign exchange reserve (when CIC debuted, China held USD1.4 trillion) for overseas investment.

China is well aware of the West’s suspicion of state meddling in markets, and the terms of its deal with Teck reflect this awareness. CIC will have no board representation, and, though its stake is 17 percent, it’ll only vote 7 percent of the shares. It bought the shares at a mere 7 percent discount to the market price, despite the fact that CIC was in effect throwing a lifeline to Teck, which had run up excessive debts after purchasing Fording Canadian Coal.

Moreover, thanks to the lengthy negotiations that attended the deal, Teck’s price has sharply recovered. When talks about a deal began during the winter, Teck’s stock price was on the floor; it has now tripled.

CIC explicitly stated that it’s acquiring its Teck shares “for investment purposes as a long-term passive financial investor.” The SWF also agreed to hold the purchased shares for at least one year following closing.

But with CIC’s assistance, Teck has strengthened its balance sheet by paying down part of the remaining debt from its acquisition of Fording. This, like the investments in Western financials, is a mutually beneficial deal.

China is hungry for resources. And many of CIC’s acquisitions reflect underlying needs of the domestic economy: It needs to guarantee supplies of a lot of stuff to keep growing. That alone will help Canada, if only indirectly. Resource prices will rise if rising incomes coalesce into an acquisitive Chinese middle class. The more money people make, the more they spend, on things such as cars.

CIC is buying mineral and mining companies for two reasons. First, CIC deployed as much as half its cash to rescue Western banks in late 2007; needless to say, those investments didn’t work out so well. Now, with the worst of the credit crisis behind us and economic recovery at least in reasonable sight, CIC is simply diversifying its portfolio.

Second, China wants to secure sufficient raw materials to sustain its economic growth. Indeed, the world’s largest consumer of mineral resources is fast becoming a key source of mining capital for Canadian companies, large and small. This reality was underscored when CIC purchased its stake in giant Teck and when a major state-run Chinese mining company  entered discussions with Toronto-based Allana Resources (TSX.V: AAA) to build a potash mine on Allana’s property in Ethiopia’s Danakil Evaporate Basin. The Chinese have also agreed to buy up to a 19.99 percent share position in Allana. Potash mines have extremely high start-up costs, typically in the neighborhood of CAD3 billion. But Allana’s suitor has deep pockets.

CIC wasn’t fully invested prior to the crisis, limiting its losses. It is now clearly shifting out of cash and money market funds into various “risk” assets. And if China’s government decides it wants to hold more market risk, it could easily redirect some of its new reserve growth into the fund.

CIC’s deal with Teck is another demonstration of the complex interdependence of the Pacific Rim with the North American economy. It’s the single biggest investment by a Chinese entity in a Canadian company.

And it was a coup for Teck to secure CIC’s investment for 17 percent of the company with a guaranteed lock-in period of 12 months. The deal not only brought in much needed cash for the debt-laden company, but also a formidable partner with connections in the markets that will drive demand for Teck’s production of metallurgical coal and other minerals. This deal alone has quadrupled the stock of Chinese foreign direct investment in Canada.

The CIC-Teck deal has also come at a critical time in Canada-China relations. The Conservative government is making a serious effort to repair a relationship that got off to a rocky start in 2006. The visits to China earlier this year by Trade Minister Stockwell Day and Foreign Minister Lawrence Cannon were reciprocated by Chinese Foreign Minister Yang Jiechi. Transport Minister John Baird visited China in July, and Prime Minister Stephen Harper has confirmed that he’ll likely visit in the fall.

Two-way investment will be central in the next chapter in Canada-China relations; the two governments must promote and facilitate capital flows in both directions. In the post-crisis economic landscape, China will emerge as a major source of long-term capital, and not just a major destination. The CIC-Teck deal demonstrates that Canada can be at the nexus of these flows.

Speaking Engagements

Roger Conrad is making the trip to the Great White North for The World MoneyShow Toronto, October 20-22 at the Metro Toronto Convention Centre.

Roger will, of course, discuss Canadian income trusts and high-yielding corporations as well as the utility universe. Click here to register and attend as his guest.

The Roundup

Conservative Holdings

AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF) reported net income of CAD36.9 million (CAD0.47 per unit), compared to CAD32.9 million (CAD0.49 per unit) a year ago. This consistency further reveals the stabilizing affect of AltaGas diversified asset base as well as the benefits of competent risk management.

The trust issued CAD300 million of medium-term notes during the quarter, extending its debt maturity profile to match up with its long-term assets. Changes to its debt structure also leave AltaGas with considerable financial flexibility to pursue acquisitions.

Total net debt as of June 30, 2009 was CAD592.8 million, compared to CAD540.2 million at March 31, 2009 and CAD582 million at Dec. 31, 2008. The trust’s debt-to-total capitalization ratio as at June 30, 2009 was 36.1 percent, versus 33.6 percent at March 31, 2009 and 37.8 percent at the end of 2008.

Funds from operations (FFO) for the second quarter were CAD46.1 million (CAD0.58 per unit), down from CAD50.6 million (CAD0.75 per unit) a year ago.

Operating income from the gas business was flat at CAD24.6 million despite a challenging operating environment. In the power business, operating income was CAD19.6 million, down from CAD29.4 million a year ago on historically low spot prices, higher volumes sold at spot price and a reduced contribution from gas-fired peaking plants.

Net revenue for the quarter was CAD114.3 million compared to $117.3 million a year ago. In the gas business, net revenue decreased due to lower spot commodity prices, lower throughput in most finding, gathering and processing areas and lower operating cost recoveries. In the power business, net revenue decreased due to lower revenue from the sale of power at spot power prices which were partially offset by strong hedge prices and lower costs. The corporate segment reported higher net revenue due to unrealized gains and short-term investment income.

Management noted in its commentary accompanying the second quarter numbers that the trust will likely convert to a corporation in the second half of 2010. Crucially, management expects to pay a dividend between CAD1.10 and CAD1.40 per share on an annual basis; the trust currently pays CAD2.16 per unit per year. AltaGas Income Trust is a buy up to USD20.

Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF) produced 247,764 megawatt hours (MWh) of power in the second quarter, a 1 percent increase over the same period in 2008 that translated into CAD16.5 million in gross operating revenue.

Overall, revenues increased 5 percent over the second quarter of 2008, on the increased generation as well as higher sales prices resulting from increased purchase rates as specified in long-term power purchase agreements.

For the three months ended June 30 Innergex generated CAD8.5 million in distributable cash, in line with the CAD8.3 million for the same period of 2008. The fund declared distributions of CAD7.4 million (CAD0.25 per unit), for a second quarter payout ratio of 87 percent, down slightly from 89 percent a year ago.

A continuing effort to diversify the fund’s facilities has had a stabilizing effect on operating results and distributable cash. Innergex Power Income Fund is a buy up to USD12.

Just Energy Income Fund (TSX: JE-U, OTC: JUSTF) reported an 8 percent year-over-year increase in sales, which reached USD432.6 million in its fiscal first quarter, and a 25 percent increase in gross margin. Distributable cash increased 36 percent.

Net customer additions for the quarter were 11,000, while margin per customer surged 14 percent on rising Green Energy Option (GEO) sales. In the last 12 months, 39 percent of all customers took GEO and on average elected to consume 71 percent of GEO supply.

The percentage of Just Energy customers choosing GEO is increasing steadily, which will drive margin growth; according to managements, “a new Ontario electricity customer taking 100 percent ‘brown’ electricity generates an annual $121 in margin. The same customer taking 100 percent GEO would generate margins of approximately $200 per year.”

On July 1 Just Energy completed the acquisition of Toronto-based Universal

Energy Group, a former competitor that will add more than 500,000 customers to Just Energy’s rolls. The deal should allow Just Energy to continue its impressive growth; management is holding off on revising its full-year distributable cash guidance (currently 5 to 10 percent) until the integration is complete.

Overall results were certainly impressive, given that the first is seasonally Just Energy’s weakest quarter. In fact, the payout ratio came in below 100 percent for the first time in the history of the fund. Just Energy Income Fund is a buy up to USD12.

Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF) reported strong results from all three of its business lines.

Additional plant ownership and solid throughput volumes enabled the Gathering and Processing segment to deliver contribution of CAD31.7 million, up 10 percent from a year ago despite lower drilling activity. Contribution from the NGL Infrastructure segment was CAD15 million, 32 percent higher than the second quarter of 2008 on strong demand for storage and fractionation services. The Marketing segment contributed CAD8.4 million, down from an exceptionally strong CAD18.6 million in the second quarter of 2008.

Distributable cash flow was CAD53 million (CAD0.84 per unit), slightly lower than the record CAD56.6 million (CAD0.92 per unit) of a year ago. Distributions to unitholders totaled CAD28.4 million (CAD0.45 per unit), a payout ratio of 54 percent. Net income was CAD21.1 million (CAD0.33 per unit), down slightly from CAD22.7 million (CAD0.37 per unit) in the same period in 2008.

Keyera currently expects to convert to a dividend paying corporation in January 2011. According to management, upon conversion “Keyera is positioned to maintain current distribution levels.” Keyera Facilities Income Fund is a buy up to USD20.

Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) reported lower power production in the second quarter because of maintenance outages and reduced water flows, but stable occupancy, increased government funding and rising rates for premium rooms kept Leisureworld Senior Care LP’s performance in line with year-ago results.

Revenue for the quarter was CAD32.6 million, compared with CAD34.9 million in the second quarter of 2008. Distributable cash was CAD10.2 million (CAD0.205 per unit), down slightly from CAD11.2 million (CAD0.224 per unit) a year ago. Declared distributions were CAD13.1 million (CAD0.262 per unit), a payout ratio of 128 percent, up from 117 percent a year ago.

Total power production was 458,511 MWh was down 6.6 percent from the second quarter of 2008. Cardinal produced 264,729 MWh, down from 285,727 due to 307 hours of outage. Erie Shores produced 55,487 MWh, up from 53,976 a year ago, reflecting higher average wind speeds. The fund’s hydro power facilities produced 55,004 MWh, down from 59,411 MWh on lower-than-expected water flows. Whitecourt produced 34,372 MWh of electricity, down from 38,941 on 731 hours of outage. The fund’s indirect 45 percent equity interest in Leisureworld buoyed results, as the senior care facility generated a 6.7 percent revenue increase.

The fund signed a new credit agreement during the quarter that eliminates refinancing needs until 2012 while preserving its ability to make acquisitions. The fund reported a debt-to-capital ratio of 45.1 percent as of June 30. Macquarie Power & Infrastructure Income Fund is a buy up to USD8.

Northern Property REIT’s (TSX: NPR-U, OTC: NPRUF) net income per unit increased to CAD0.268 from CAD0.228 a year ago, while distributable income per unit was CAD0.56, up from CAD0.518.

FFO per unit was CAD0.569, compared to CAD0.526 for the second quarter of 2008. Same-door net operating income (NOI) was down 1.2 percent, reversing same-door NOI growth of 1.8 percent a year ago. Northern Property’s payout ratio based on FFO was 65 percent, down from 70.3 percent a year ago.

Rising vacancies in northern Alberta and British Columbia were a drag on results, but reduced fuel oil consumption and lower fuel oil prices compared to 2008 offset the impact of a slow economy. Acquisitions completed in 2008 and early in 2009 also contributed positively as the REIT basically maintained consistent year-over-year performance despite Canada’s recession.

The weighted average cost of mortgage debt decreased to 4.95 percent as of June 30 from 5.13 percent as of Dec. 31, 2008 and 5.02 percent as of March 31, 2009. Northern Property REIT is a buy up to USD20.

Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF) reported distributable cash flow per share came of CAD0.35, down from CAD0.36 a year earlier. Not counting restructuring costs, income from operations was up slightly (2.7 percent), while consolidated adjusted revenue slid 2 percent.

Online revenue continued to grow robustly by 22.5 percent, reaching 17.9 percent of the total sales in the quarter and illustrating the continued success of management migrating the business to the Internet.

Overall cash flow from the core directory business rose 3 percent, excluding one-time items, largely on cost savings though margins slipped slightly to 58.9 percent of revenue. Consolidation initiatives are expected to improve that in the second half of the year.

As was the case in the first quarter, it was the vertical media operation that presented Yellow with its greatest challenges. The slump in auto and real estate advertising carried down revenue by 26.6 percent, or 22.4 percent factoring out the sale of US operations. Cash flow margin fell to 32.1 percent from 35.8 percent a year earlier as cash flow fell 34.3 percent. Yellow Pages Income Fund remains a hold.

• Artis REIT (TSX: AX-U, OTC: ARESF)–August 12
• Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF)–August 12
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–August 21*
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–August 12
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–August 12

*Bloomberg estimate

Aggressive Holdings

ARC Energy Trust (TSX: AET-U, OTC: AETUF) reported that production for the quarter was ahead of budget at 63,969 barrels of oil equivalent per day (boe/d), despite the fact that the trust completed 37 facility turnarounds during the period. Higher production was the result of better-than-anticipated results from horizontal development wells that were drilled during the winter.

Cash flow from operating activities was CAD104.3 million (CAD0.44 per unit), a 62 percent decline from CAD273.4 million (CAD1.27 per unit) a year ago that reflects a 54 percent decrease in commodity prices.

Net income of CAD66.1 million (CAD0.28 per unit) is comparable to last year’s CAD57.3 million (CAD0.27 per unit); this year’s decline in commodity revenue was offset by a CAD39.7 million non-cash foreign exchange gain on trust’s US denominated debt and a decrease in non-cash losses on the trust’s risk management contracts.

In response to the decreased cash flow levels, ARC reduced its monthly distribution to CAD0.10 per unit, or 72 percent of cash flow from operating activities; the distribution reduction left sufficient cash flow to fund 55 percent of trust’s second quarter capital program. 

At June 30, 2009 ARC had approximately CAD650 million of unused credit available and a net debt-to-annualized cash flow from operating activities of 1.6 times. As of its second quarter earnings announcement, ARC plans to convert to a dividend-paying corporation effective Dec. 31, 2010. Management is still in the planning stages of the process. ARC Energy Trust is a buy up to USD17.

Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF) reported record production volumes of 23,047 boe/d on year-over-year production growth of 11 percent. FFO increased to CAD48.5 million for the second quarter from CAD44.9 million in the first quarter due to higher production volumes and increases in oil and natural gas liquids (NGL) prices. Operating netback increased to CAD27.84 per barrel of oil equivalent (boe), up from a first quarter figure of CAD27.43. Operating expenses improved slightly to CAD11.86 per boe from CAD11.91. The second quarter payout ratio was 54 percent.

Aggressive and successful hedging also boosted the bottom line, as Daylight realized a gain of CAD30 million on derivative contracts in the second quarter, compared to a realized gain of CAD25.3 million in the first three months of 2009.

The trust reduced bank debt to approximately CAD160 million; it has approximately CAD190 million available on its bank credit facility, which should provide enough room to make acquisitions. As of June 30, Daylight had a net debt-to-annualized cash flow ratio of 1.1-to-1. Daylight was also able to raise CAD172 million through a public offering of new trust units.

As of June 30, Daylight and its subsidiaries had tax pools of approximately CAD1.1 billion, which gives it significant ability to shelter cash flow from income taxes now and well beyond 2011. The trust has current “safe harbor” capacity to issue approximately CAD800 million of new equity. Daylight Resources Trust is a buy up to USD11.

Enerplus Resources’ (TSX: ERF-U, NYSE: ERF) second quarter operating results were in line with management expectations. Production averaged 94,501 boe/d, operating costs were CAD9.93 per boe, and general and administrative costs were CAD2.49 per boe.

Cash flow was CAD210.6 million for the quarter, a 42 percent decrease from CAD364.5 million a year ago. The fund reported a net loss of CAD3.6 million, reversing net income of CAD112.2 million in the second quarter of 2008.

Crude oil and natural gas revenues were marginally higher quarter-over-quarter, though the impact of increased oil prices was generally offset by lower natural gas prices and a slight decrease in production. Crude oil and natural gas revenues were CAD306.2 million, down from CAD734.4 million in 2008. The majority of the decrease in revenues in 2009 was due to the significant decline in commodity prices.

Vermilion’s payout ratio was 43 percent, reflecting a reduced distribution and decreased capital spending.

Vermilion also closed a CAD338.7 million senior unsecured note offering during the quarter, the proceeds of which were used to pay down bank debt. The fund has approximately CAD1.3 billion of available credit on its bank facility and a debt-to-trailing 12-month cash flow ratio of 0.7 times; it has ample room to pursue acquisition opportunities.

Vermilion continues to “develop plans for the conversion to a corporation by late 2010.” Management noted in its second quarter earnings report, “The conversion to a corporation would be a change to our legal structure only and not a change to our fundamental business model of being a distribution-oriented entity in the oil and gas industry.” Enerplus Resources is a buy up to USD25.

Newalta’s (TSX: NAL, OTC: NWLTF) second quarter numbers were boosted by improving demand and rising commodity prices that started late in the first quarter and continued in the three months ended June 30.

In fact, the second quarter of 2009 marked the first time that any year’s second quarter performance exceeded that of the first quarter; this illustrates the extreme conditions prevailing in the first quarter as well as the beneficial impact of management efforts to maintain profitability. After adjusting for the impact of commodity prices, financial performance in the second quarter was equivalent to the year-ago period.

Revenue declined 22 percent and net income was off 102 percent on a steep year-over-year drop in commodity prices, but the company realized CAD8 million in cost savings during the period.

Revenue for the Western segment declined by 33 percent and net margin contracted by 39 percent due primarily to the 47 percent decline in crude oil prices as well as weak North American drilling activity. The Eastern division recorded a 6 percent year-over-year revenue decline and a 23 percent net margin decrease, largely due to a 49 percent decline in lead pricing. Selling, general and administrative costs across the regions were reduced by 19 percent compared to last year.

As of June 30 senior long-term debt was CAD258.7 million, down nearly CAD5 million from Dec. 31, 2008. Newalta is a buy up to USD5.

Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) reported oil and natural gas revenue of CAD137.1 million in the second quarter, down from CAD154.3 million a year ago on a 12 percent reduction in natural gas production. However, despite a 64 percent decrease in spot prices from year to year, Paramount’s realized natural gas price actually increased from CAD9 per thousand cubic feet equivalent (Mcfe) to CAD9.10.

Average production was 165.5 million cubic feet equivalent per day (MMcfe/d), down from 188.4 MMcfe/d reported in the second quarter of 2008. Total operating costs decreased 12 percent to CAD25.2 million from CAD28.6 million a year ago. Transportation costs decreased to CAD3.2 million from CAD3.7 million.

FFO increased to CAD91.2 million (CAD0.81 per unit) from CAD81.4 million (CAD0.73 per unit) for the second quarter of 2008, a result of realized gains on hedging contracts totaling CAD75.2 million. Distributions totaled CAD17.2 million (CAD0.15 per unit), a payout ratio of 18.9 percent of funds flow, down from 41 percent a year ago.

The outstanding balance on Paramount’s credit facility was CAD265.4 million as of June 30, down from CAD290.2 million at March 31. Debt repayment was funded by strong funds flow resulting from realized gains on hedges. Paramount now has net bank debt of CAD318.5 million on a combined borrowing base of CAD422 million. The trust’s credit facilities are subject to lender review prior to Oct. 31, 2009. Paramount Energy Trust is a buy up to USD5.

Trinidad Drilling (TSX: TDG, OTC: TDGCF) posted a second quarter loss of CAD8.6 million (CAD0.09 per share), compared with a profit of CAD1.1 million (CAD0.01 per share) a year ago. Revenue fell by 11.1 percent to CAD125.5 million. Trinidad was able to preserve gross margins by realigning its cost structure and reducing debt.

The bottom line was hurt by lower utilization rates and lower day-rates. Utilization rates fell 54.8 percent to 14 percent in Canada, about 30 percent to 61 percent in the US. Trinidad’s high number of rigs under contract, its deeper capacity fleet and its focus on cost controls allowed it to record a gross margin percentage of 42 percent, up from 38 percent a year ago.

Cash flow from operations before changes in non-cash working capital was CAD25.6 million (CAD0.27 per share), down 5.8 percent from a year ago. The impact of reduced revenue was mitigated by improved cost controls. Trinidad also posted a foreign exchange loss of CAD9.5 million and a loss on disposal of assets of CAD5.6 million.

In its conference call to discuss the numbers, management said it doesn’t expect a meaningful recovery in drilling activity in Canada until the first quarter of 2010. Trinidad Drilling is a buy up to USD5.

Vermilion Energy Trust (TSX: VET-U, OTC: VETMF) recorded production of 32,238 boe/d in the second quarter of 2009, slightly lower than the 32,951 boe/d recorded in the first quarter of 2009. Increases in Canada and France were offset by lower volumes in the Netherlands and Australia. The trust generated FFO of CAD85.5 million (CAD1.10 per unit), up from CAD68.4 million (CAD0.88 per unit) in the first quarter, reflecting improved oil prices, partially offset by further weakness in natural gas prices.

Second quarter 2009 FFO was off considerably from the CAD190.3 million of a year ago; this year-over-year decrease is the result of significantly lower commodity prices. During the three months ended June 30, crude averaged USD59.62 per barrel, less than half of the average price for the same period in 2008. Natural gas clocked a second quarter 2009 average of CAD3.45 per Mcfe, about a third of 2008 levels.

Despite the year-over-year decrease FFO, Vermilion continued to maintain a strong balance sheet. As of June 30 Vermilion’s net debt represented less than 70 percent of its second quarter annualized FFO.

In the second quarter, total net distributions, capital expenditures, reclamation fund contributions and asset retirement costs incurred as a percentage of FFO was 83 percent, up from 34 percent a year ago. The year-over-year increase is a function of the lower second quarter FFO figure versus the same period in 2008.

Verenex (TSX: VNX, OTC: VRNXF), of which Vermilion is a 42.4 percent owner, continues to seek consent from the Libyan National Oil Corp (NOC) for the proposed sale of the company to CNPCI. The chairman of the NOC has stated repeatedly that the NOC intends to exercise a pre-emptive right and purchase Verenex, but this proposal remains under review by Libya’s General People’s Committee (GPC). Verenex has extended the outside date for the CNPCI offer to Aug. 24, 2009, drafted an arbitration claim as a contingency and suspended drilling in Libya to conserve cash.

Management currently expects to convert to a corporation by the end of 2010. According to a statement included with its second quarter earnings announcement, “Vermilion plans to maintain its current business strategy including a steady distribution as a corporation.” Vermilion Energy Trust is a buy up to USD30.

• Ag Growth International (TSX: AFN, OTC: AGGZF)–August 12
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–August 12
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–August 12
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–August 13