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Patrick Kim Connors Bros. Income Fund CBF.UN-T BUY Aug 19, 2005

A lot of nervousness going into Q2 because their Q1 numbers were siginificantly below expectations driven by higher input costs, particularily tuna, but also steel cans. Actually beat some of the numbers in Q2 and were in line with management's guidance. Payout ratio will be well south of 100% this year. Distribution shouild be safe.

Patrick Kim

Owned

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$16.040

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DON'T BUY

Payout is in Cdn$ and most of its earnings are in US$’s. Also have been hurt by rising energy prices. Have improved profit margins by more efficient processes, but will be difficult going forward.

BUY

The distribution is fairly safe at this time. Has gone through some transitions over the last couple of years. Herring to Tuna. Management is consistent, and financials are consistent. Feels the price of the product will increase to cover the cost of transporting goods.

BUY

Had some difficulties, but has proven to be a well managed company. Attractively priced. Well financed, so distributions are not threatened. 11.9% yield.

SELL

Has been subject to a recall because of botulism, but this will only affect a small part of their business. However, this could be a growing problem.

SELL

Too early to go into this one yet. Management did a great job. Very proactive in recalling the tainted product (only a small portion of their business). Had to shut down a plant and not sure when that will reopen. Also have cost pressures in their core business of tuna and sardines.

COMMENT

His partner bought into this, but not attractive enough for him. If they get their house in order, there will be better distributions going forward. He couldn't see that the upside was attractive enough.

DON'T BUY

Distribution story has been a long-term issue. Have had to cut them several times. It took too much debt onto its balance sheet. Income trusts have to have very conservative balance sheets.

SELL

Will have to get their fiscal house in order before they can go back to the prior distribution level. There are facing increases in commodity prices. Will possibly take another year or so before they can realistically raise distributions.

DON'T BUY

There are quite a few things in play with this trust. Had a recall that forced them to shut down production and for a longer period than expected. There are some headwinds that food, tin manufacturers will be facing. Steel and tin prices are continuing to move higher. Also expecting protein prices to move higher. There are better places to go.

SELL

(Market Call Minute.) Have had difficulty with making acquisitions in the US outside of their sardine business.

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Patrick Kim Connors Bros. Income Fund CBF.UN-T BUY Aug 19, 2005

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