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CIBC Income Trust Conference Presentation. September 9, 2004 Toronto. Forward-looking Statement Disclaimer.

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forward looking statement disclaimer
Forward-looking Statement Disclaimer

Statements made during this conference which are not historical facts – including any statements about the Company\'s targets, beliefs, plans, or expectations – are forward-looking statements and are based on Management’s current plans, estimates, and projections. The Company does not undertake to update any of these statements in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties, and investors should not place undue reliance on them. There are a number of important factors that could cause actual results to differ materially from those contained in such statements. These factors are described in more detail in the Company’s news releases and in filings with Canadian securities regulatory authorities, including the Company’s latest annual report.

use of non gaap measures disclaimer
Use of Non-GAAP Measures Disclaimer

References in this presentation to ‘‘EBITDA’’ are to earnings before interest, income taxes, depreciation and amortization, after giving effect to foreign currency gains or losses and net earnings from discontinued operations. The Fund and Management of its operating subsidiaries believe that, in addition to net earnings, EBITDA is a useful complementary measure of cash available for distribution prior to debt service, capital expenditures and income taxes. However, EBITDA is not a recognized measure under Canadian GAAP or U.S. GAAP and does not have a standardized meaning prescribed by Canadian GAAP or U.S. GAAP. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings determined in accordance with Canadian GAAP or U.S. GAAP, as an indicator of performance of the Bumble Bee or Clover Leaf businesses or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Fund’s method of calculating EBITDA may differ from the methods used by other entities and, accordingly, its EBITDA may not be comparable to similarly titled measures used by other entities.

Distributable cash is not a recognized measure under Canadian GAAP or U.S. GAAP, and the Fund’s method of calculation may differ from methods used by other entities. Accordingly, distributable cash as presented may not be comparable to similar measures presented by other entities. The Fund and management of its operating subsidiaries believe that the method of determining distributable cash is comparable to cash flow from operating activities before changes in non-cash working capital, future income taxes and one-time gains/losses. In addition, the Fund’s method of determining distributable cash is derived directly from net earnings, which is a measure under Canadian GAAP and U.S. GAAP and is a measure of operating performance understood by unitholders. The Fund’s method of determining distributable cash is also consistent with the Fund’s historical operations as publicly disclosed to unitholders. Management believes that consistent disclosure enhances the comparability with prior periods and this method presents cash that will be distributable to unitholders based on the results of the relevant period, after adjusting for non-cash depreciation, the direct payment of interest and taxes and after adjusting for maintenance capital expenditures.

connors bros income fund highlights
Connors Bros. Income Fund Highlights
  • North American branded seafood powerhouse
  • Flexible low-cost global sourcing
  • Diversified revenue streams
  • Stable cash flow with significant growth potential
  • Strong and balanced management team
  • Attractive yield and payout ratio
north america s largest branded seafood company

Connors Bros

Connors Bros

North America’s Largest Branded Seafood Company

Revenue1(C$ Millions)

  • Canada’s largest consumer products income fund

AmericanSeafoodsGroup

Connors BrosIncome Fund

Clearwater

High Liner

FPI

Star-kist

Chickenof theSea

1. Latest 12 months 2003 at US$ 1.30 per C$.

leadership in all higher margin categories

Connors Bros

Leadership in all Higher Margin Categories

U.S.

CANADA

  • 66% of revenues in higher margin products

Share

Rank

Share

Rank

  • Tuna
    • Albacore #1 56% #1 39%
    • Lightmeat #1 42% #3 17%
    • Total Tuna #1 45% #2 28%
  • Salmon
    • Sockeye #1 63% #1 31%
    • Pink #1 49% #2 17%
    • Total Salmon #1 56% #1 20%
  • Specialty Seafoods1 #1 40% #1 20%

Source: AC Nielsen

1 Includes oysters, clams, sardines, herring, crab and other specialty

diversified product revenue

Connors Bros

Diversified Product Revenue

Pro Forma LTM Sales1:$918 Million

Other7%

Albacore Tuna37%

Pink Salmon5%

Sockeye Salmon6%

Specialty - Other 7%

Lightmeat Tuna22%

Specialty –Sardines/Herring 16%

For the 12 months periods ending Sept. 30, 2003 for Connors and Aug. 31, 2003 for Bumble Bee

slide8

Flexible Low-Cost Global Sourcing

Owned/Leased Plants – Tuna, Sardines, Shrimp

Tuna Co-packers

Specialty Co-packers

Salmon Co-packers

first half 2004 highlights
First Half 2004 Highlights
  • Completed business combination between Connors Bros. and Bumble Bee
  • Made significant progress integrating sales, logistics and administration
  • Generated adjusted year-to-date distributable cash of $0.87/unit, up from $0.36/unit for the same period in 2003.
  • Achieved adjusted pro forma payout ratio for the first half of 78%
  • Announcing increase in annual distribution rate from $1.35 to $1.40 effective with September distributions (October payments)
reported pro forma fund results
Reported Pro Forma Fund Results
  • Volume off 3% year to date due primarily to soft U.S. lightmeat tuna demand
  • Revenues down 7% year to date, reflecting soft volume but a favorable mix; results also impacted $32 million by translation of U.S. dollar-denominated revenue.
  • Gross Profit, Operating Income, and other earnings figures are not meaningful without adjustments related to acquisition accounting. These will be discussed on subsequent pages.
key adjustments to consider
Key Adjustments to Consider

Three key adjustments are recommended to supplement evaluation of the Company’s operating results:

  • Elimination of the inventory step-up, a purchase accounting requirement that increases inventory value at time of acquisition and negatively affects gross profit
  • Elimination of foreign exchange contract mark-to-market gains or losses, which do not represent true business health and do not impact cash
  • Elimination of restructuring charges in CY04 related to achieving cost synergies
adjusted fund first half results
Adjusted Fund First Half Results
  • On an adjusted basis, Gross Profit was up $8.3 million year to date, reflecting strong performance in fish purchasing and factory cost savings
  • Earnings before tax were up $10.9 million on a year to date basis, due to the absence of mark-to-market gains in the year ago period
  • Distributable Cash was up notably, at $0.87/unit on a year to date basis, for a year to date payout ratio of 78% at an annualized $1.35/unit level
adjusted ebt to distributable cash bridge
Adjusted EBT to Distributable Cash Bridge
  • Net interest, depreciation and amortization were slightly higher in 2004 vs. comparable periods in 2003, while year-to-date maintenance capital expenditures were reduced at Bumble Bee vs. year ago
  • Taxes paid were dramatically reduced at Bumble Bee vs. year ago, when Bumble Bee paid at U.S. corporate tax rates
  • Payments to the non-controlling interest represent the 31.7% ownership interest retained by the former owners of the Bumble Bee business
increase in monthly distribution
Increase in Monthly Distribution
  • Based on solid distributable cash performance and good progress with the business integration, we have announced an increase in our monthly distribution
  • On annual basis, moving from $1.35/unit to $1.40/unit – monthly basis $0.1125/unit to $0.1167/unit
  • Based on year-to-date results, this slightly increases distributable cash payout ratio to 81%, but still better than sector average
integration update
Integration Update
  • Integration of U.S. sales / administration / logistics /IT completed end of June
  • Integration of Canadian sales / logistics completed end of July
  • Integration of Canadian and International IT and administration to be completed by end of September
  • Factory optimization opportunities identified and under evaluation; DoJ hampered ability to move more rapidly but results expected to be in place for 2005 pack season
  • Projected synergies continue to be estimated in the range of C$6-8 million
business challenges for q3 and year to go
Business Challenges for Q3 and Year-to-go
  • With resolution of DoJ investigation, complete divestiture of Port Clyde and smaller sardine brands before calendar year end
  • Complete IT and administrative integration in Canada
  • Execute pricing actions to compensate for cost increases in tuna, steel, aluminum, packaging, fuel and soya oil
  • Initiate factory optimization initiatives
  • Launch new, higher margin items
outlook for second half
Outlook for Second Half
  • Revenue expected to be favorable versus YAG behind new items and higher pricing
  • Additional ‘inventory step-up’ entries will affect Q3 reported income
  • Adjusted gross profit expected to be favorable to first half but down versus CY03 due to strong prior year performance
  • Second half adjusted EBIT / EBITDA expected to be slightly favorable versus YAG with integration cost savings offsetting reduced gross profit
  • Second half distributable cash ahead of first half due to cash flow seasonality
outlook for 2005 and beyond
Outlook for 2005 and Beyond
  • As we complete the integration of Connors and Bumble Bee, we are beginning to look at other growth opportunities
  • Income trust platform provides attractive acquisition vehicle, and current debt-to-EBITDA ratio is very low
  • In all cases, looking for opportunities that:
    • Are strategic and accretive
    • Provide strong brands
    • Fit with CBIF core competencies
    • Provide synergistic cost-savings
in conclusion
In Conclusion
  • Thank you for your continued support of Connors Bros.
  • We look forward to tremendous opportunities ahead
  • Prepared to answer questions
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