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Coalition of Canadian Energy Trusts
Gordon Kerr, President
[email protected]

Dear Mr. Kerr:

Over one week has passed since that "Easterner", Finance Minister Jim Flaherty, presented us with his Halloween night "trick" -- devastating the energy trust sector of our economy in Western Canada. I am one of those "targeted" retired widowed Canadians, who has just turned 65 this year and who has invested heavily in Energy Trusts in both my modest RRSP and individual investment accounts.

For my purposes, the oil and gas trusts were an ideal investment. It provided me with cash flow and also with modest capital appreciation. The DRIP features allowed me the option of converting payouts into extra units. The trusts had the flexibility to adjust their payouts from 50% to 100% of cash flow. They could adjust their exploration and/or acquisitions as required. Their well-structured and detailed quarterly reports clearly informed me of the status of the trust. (This is in contrast to the quarterly reports of many "regular"corporations, which often seem to be masterpieces of obfuscation and deceit.)

In my opinion, the income trust format is far superior to the operation methodology of the integrated oil giants, who skimmed off the easily recoverable portions of the oil/gas deposits and are abandoning the partially depleted fields for greener pastures elsewhere. Indeed, I would think that income trusts would be the ideal format to be utilized throughout the world for the extraction and utilization of non-renewable natural resources. As far as I can ascertain, the financial responsibility of the income trusts towards investors far exceeds that of the "regular" corporations.

I listened to your news conference on Monday, Nov. 06, 2006 via www.newswire.ca. Frankly, I was disappointed at your panel's restrained politically correct approach. The politicians and news commentators have repeated ad nauseum that income trusts are simply a tax-avoidance scheme by corporations -- a "loop-hole", which had to be corrected. I would submit that it is far healthier for the Canadian economy to have the individual investors rather than the corporation pay the tax. (Indeed, "regular" corporations should be encouraged to increase dividend payments to their shareholders.)

Someone on your panel insisted that U.S. investors must be treated in the same way as Canadian investors -- citing access to cheap capital. I disagree. Because of different taxation regimes, U.S. investors have an advantage over Canadian investors. The oil and natural gas are (Western) Canadian resources. It is bad enough that we export some 80% of these raw materials (without upgrading in Canada). I would prefer investment benefits accrue Canadians rather than foreigners.

One final note. I have noticed that the banks and their investment houses charge exorbitant fees of about 5% for issuing extra trust units. No one will convince me that it costs $10 million to distribute a $200 million offering to the investing public. It seems to me that a 1% fee would be sufficient.

I trust that you will find my diatribe useful!

Respectfully yours
William Zuzak, Ph.D., P.Eng. (retired); 2006-11-08


CC:
Jim Flaherty, Minister of Finance
[email protected]