Canadian Cross-Border Income Trusts: A Monetization Opportunity for U.S. Assets, presented in New York on November 17, 2011

1. Canadian Cross-Border Income Trusts:
A Monetization Opportunity for U.S. Assets
November 17, 2011 New York www.blakes.com

2. This presentation is not intended to provide legal advice with respect to any particular
transaction or circumstance and no legal or business decision should be based on its
content.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed
by the IRS, we inform you that any U.S. federal tax advice contained in this
document is not intended or written to be used, and cannot be used, for the
purpose of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any transaction or
matter that is contained in this document.
2

3. Overview
• Synopsis
• Background to the first generation of Canadian income trusts
• Introduction of the new generation of Canadian cross-border income trusts
• Discussion of tax structuring considerations
• Overview of Canadian IPO process
• Appendix A – Case Studies
• About Blakes
3

4. Synopsis
• The new cross-border income trust model may provide an attractive
valuation proposition for vendors of U.S. domiciled assets that may also be
suitable for U.S. MLPs
• Investor appetite in the Canadian capital markets remains strong for yield
product and is expected to support additional trust IPOs in Canada
• The Canadian IPO process allows for completion of a transaction in 3-4
months, reducing execution risk relative to the U.S. registration process
• Key drivers:
– Underlying assets with stable, sustainable cash flow profile that will support
distributions by the trust
– Experienced management and strong board
– Transparent structure that is compliant with Canadian SIFT requirements
4

5. Act 1 – Scene 1
• The Canadian income trust structure first emerged 25 years ago
• Concept was to create a publicly traded trust that paid holders of trust units
a stable stream of cash distributions on a pre-tax basis
• Adoption of the income trust model occurred initially in the oil and gas
sector
– IPOs by new royalty trusts/conversions of corporate entities to royalty trusts
– Provided exit opportunity for suitable assets at attractive valuations
• Oil and gas royalty trusts focused on ownership of long-life, producing oil
and gas assets
– Strategy of undertaking low risk exploitation and development activities rather
than higher risk exploration activities
– Sought producing assets with long RLI that generated predictable cash flows
available for distribution to unitholders
– Regular M&A required to replenish reserves and sustain production/cash flows
5

6. Act 1 – Scene 1
• Over time, the Canadian income trust sector matured
– In 1999, S&P adopted a Stability Ratings Scale for income trusts regarding the
prospective relative stability of distributable cash flow generation
– Creation of the S&P/TSX Income Trust Index as a modular component of the
S&P/TSX Composite Index
– Structure modified to accommodate a range of asset classes, including
assets/businesses domiciled outside of Canada
– Proliferation of specialized research coverage by a range of investment dealers
– Specialized Canadian securities rules adopted for income trusts in 2004 via
National Policy 41-201 – Income Trusts and Other Indirect Offerings
– Limited liability legislation adopted by various provinces in 2004-5 to shield trust
investors from personal liability
– Evolution of investor base, from highly retail weighted to increasing institutional
investor acceptance and participation, reflecting in part improved governance
practices
6

7. Act 1 – Scene 1
• The Canadian income trust market peaked in 2006 with 256 funds having
an aggregate market cap of ~ $225 billion
Oil & Gas
Infrastructure
Power
Mining
Diversified
• By 2006, the trust sector had expanded to include a wide range of asset
classes
7

8. Act 1 – Scene 1
• Trust provides a flow-through vehicle for tax purposes and simpler
Canadian tax reporting for the investor than a partnership unit
• To meet eligibility for tax deferred retirement and education plans the trusts
were structured as “mutual fund trusts” under the Canadian Tax Act
• A “mutual fund trust” under the Canadian Tax Act must meet the following
conditions:
– The trust’s only undertaking must be the investing of funds in property (other
than real property that is not capital property)
– The trust must be a unit trust resident in Canada
– The trust must meet prescribed conditions (150 unitholders each having a block
of units with a cost of at least $500) with respect to the dispersal of units and
public trading
8

9. Act 1 – Scene 2
• On October 31, 2006, the Minister of Finance (Canada) announced the
Canadian federal government’s proposal to change the tax treatment of
publicly traded income trusts and other flow-through entities through the
enactment of the “Specified Investment Flow-Through” (“SIFT”) rules.
– The SIFT rules were introduced to level the playing field between publicly traded
income trusts and corporations and eliminated the flow-through advantages
associated with the use of a trust
– Under the SIFT rules, the Canadian-source income of certain publicly traded
mutual fund trusts is subject to an entity-level tax at a rate comparable to the
combined Canadian federal and provincial corporate tax rate and the income
distributed to holders of units in such trusts is taxed as dividends
– The only Canadian asset exemption from the SIFT rules is for REITs
9

10. Act 1 – Scene 2
• The SIFT rules had a dramatic impact on Canadian capital markets and
immediately curtailed IPO activity by new income trusts and resulted in the
conversion of many income trusts to a dividend paying corporate model and
M&A activity 40 Oct 31, 2006
Introduction
35
of SIFT tax
8
30
6 5
25 6 4
# of Royalty Trusts
5
8 4
20 8
7 2
3 2 2 2 7 3
15 2 7
1 2
3 3 3 2
1 3
3 2 2
1 1 1 6
10 10 10 10 9 1
1 3 5
3 1 1
9 8 8 8 1 2 1 3
7 6 1
5 1 1 1 1 1 1 1 1 1 1 1 5 4
4 4 3
3 3 3 3 3 3 3 3 3 3 3 3 1 1 1 1 1 1
1 1 1 1 1 1 1 1 1 1 1 1
0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
10

11. Capital Markets Considerations
• Fixed income securities currently providing historically low yields
• Few Canadian companies paying > 7% dividend yield
• Following contraction of income trust sector, investor yield appetite partially
satisfied by preferred share and convertible debenture issuance
TSX Equities(1) Yield Based Equity Issuance
(Dividend Yield by Market Cap and Number of Companies) (2004 – Present)
$30
$300,000
Market Capitalization (C$ Millions) _
28
23 $24.3
36 $25
Number above bars indicates the $22.0
$250,000 number of companies within yield
range $20 $18.4
30 $17.6
$200,000 $17.1
C$ billions
$15.7
133
30 $15
$150,000 $12.0
$10.9
$100,000 20 $10
16
$50,000 6 $5
4 16
$0 $0
0
0% - 1%
1% - 2%
2% - 3%
3% - 4%
4% - 5%
5% - 6%
6% - 7%
7% - 8%
8% - 9%
>9%
2004 2005 2006 2007 2008 2009 2010 2011YTD
Preferred Shares Unit Trusts Convertible Debentures
(1) Includes equities with a market capitalization greater than $500 million, except ETFs.
11

12. Arrival of the Cross-Border Trust
• On November 24, 2010, Eagle Energy Trust closed its IPO of trust units in
Canada, resulting in the first of a new generation of cross-border income
trusts accessing the Canadian capital markets
• Parallel Energy Trust completed an IPO in April 2011
• Argent Energy Trust filed a preliminary prospectus on August 8, 2011 for a
proposed IPO
• North American Oil Trust filed a preliminary prospectus on November 7,
2011 for a proposed IPO
12

13. Arrival of the Cross-Border Trust
Eagle Energy Trust Parallel Energy Trust
IPO Closing Date November 24, 2010 April 21, 2011
IPO Proceeds C$169.5 million C$393 million
(including greenshoe) (including greenshoe)
Vendor Proceeds US$119.2 million + 2 million US$377.4 million
trust units
IPO Yield 10.5% 9.0%
Reserves (P+P) 5,126 mbbls 28,830 Mboe
RLI 8-12 years 13.3 years
Acquired Interest 73% W.I. 59% W.I.
13

14. Attributes of the Cross-Border Trust
• To date, these new trusts have focused on acquiring producing oil and gas
assets and are viewed as offering a potential monetization opportunity for
owners of U.S. domiciled energy assets
– Opportunity for additional IPOs by new income trusts
– Exit strategy through asset sales to an existing income trust, particularly as the
income trust sector expands and matures
– May offer solution for assets (lower RLI and moderate to high PDP as a % of
reserves) not suitable for the MLP model
• Key attributes of completed cross-border trust IPOs:
– Sustainability of distribution profile, including sustaining and expansion capital
expenditures and debt service requirements
– Seasoned and recognized management teams
14

15. SIFT Trust Rules do not Apply
• The new generation of trusts do not fall within the scheme of the SIFT trust
rules
• The SIFT trust rules only apply to a publicly traded Canadian trust which
holds “non-portfolio property”
• “Non-portfolio property” is a direct or indirect interest in
– The assets of a business carried on in Canada, or
– Canadian real property or resource property
• A mutual fund trust (“MFT”) must not be "established or maintained primarily
for the benefit of non-residents" of Canada which is generally interpreted to
mean that no more than 49% of the units of a trust may be held by non-
residents of Canada
– New generation of trusts exempt from this non-resident ownership restriction
15

16. Eagle / Parallel
US Tax View
Interest, Capital
& Income
Interest
MFT
Interest, Income Canada
Notes & Capital
Corp.
CT Canada
Partnership
Income
US
Operating Partnership
US Oil & Gas
Assets
US Oil & Gas
Assets
16

17. Eagle / Parallel
• For US tax purposes, the Commercial Trust (“CT”) elects to be treated as a
corporation, and therefore is taxed as a foreign corporation with effectively
connected US income earned through a US branch
• MFT treated as a partnership for US tax purposes
• The interest on the Notes owed by CT to the MFT is treated as a portfolio
interest and therefore exempt from US withholding tax
• The interest and, in these early trusts, resource drilling and exploration
deductions reduce US corporate tax (and US branch tax) on the effectively
connected income
• In Canada, the income from the US oil and gas partnership flows through
both the CT and the MFT directly to the unitholders without incidence of
Canadian corporate level tax
17

18. North American Oil Trust
US Tax View
Interest, Capital &
Eligible Dividends
Canada
MFT Corp.
Dividends
and Capital
Canada Canada
Notes Corp. Notes Corp.
Canada
Tax Exempt Dividends
Dividends and Capital
and Capital
US
US US
Corp. Corp.
US Oil & Gas US Oil & Gas
Assets Assets
18

19. North American Oil Trust
• For US tax purposes, the MFT elects to be treated as a corporation and
therefore interest on the Notes owed by US Corp to the MFT is entitled to
the benefit of the 0 percent withholding rate under the Canada/US tax treaty
• The interest and, in these early trusts, resource drilling and exploration
deductions reduce US corporate tax on income of the US Corp
• In Canada, the distributions from US Corp. to Canada Corp are treated as
tax exempt dividends or returns of capital and are paid to the MFT as
“eligible dividends” or tax free returns of capital
• “Eligible dividends” are entitled to a lower effective rate of tax
(approximately 20% less than ordinary income)
• The MFT passes through the eligible dividends, returns of capital and
interest income to the unitholders without intervening tax
19

20. Interest Considerations
• It is critical to either structure that the interest on the Notes is deductible for
US purposes. There are 3 key issues, namely that:
– the terms of the Notes will be respected as debt and not equity for US thin
capitalization purposes
– the interest expense not exceed 50% of EBITDA for the purposes of the earnings
stripping rule in § 163(j) of the Code
– The related party interest rate is defensible as an arm’s length rate for transfer
pricing purposes
• A US financial model is prepared and a debt study and interest rate study
undertaken by an independent financial advisor to substantiate interest
deductibility
20

21. Other Tax Considerations
• Additional structuring may be done underneath US Corp (e.g. use of a
partnership for Texas margin tax purposes)
• Anti-inversion rule in § 7874 of the Code is not applicable provided that the
US vendor retains its interest in the underlying resource properties at the
“working interest” level and not through the MFT or a subsidiary of the MFT
• Modeling of these early trusts has shown limited US tax leakage in the form
of AMT, and refundable FIRPTA withholding tax
• US mind and management at the US Corp. level is beneficial for the
Canadian treatment of the dividends from US Opco once US Opco has E&P
for US purposes
21

22. Canadian IPO Process
• An income trust IPO can be completed in Canada in 3-4 months
• Engage lead
underwriter, legal
counsel, auditors
• Structuring and • Build financial
due diligence model
• Obtain third • Size and price
• Draft preliminary party debt/interest • Clear comments
prospectus issue
study • Commence
• Commence • Complete due roadshow and • Execute
preparation of diligence marketing period underwriting
financial statements agreement
• File preliminary • Receive • Receive TSX
and third party prospectus and first/second conditional listing • File final
15 – 16 reports obtain preliminary comment letter(s) approval prospectus and
WEEKS • Identify board, receipt obtain receipt
• Respond to • Negotiate
management • Apply to TSX for first/second underwriting • Issue press release
• Negotiate PSA listing comment letter(s) agreement • Close Trading commences
WEEK 1 - 6 WEEK 7 - 8 WEEK 9 - 10 WEEK 11-14 WEEK 15 - 16 POST-OFFERING
22

23. Canadian IPO Process
• Securities commission prospectus review and clearance process in Canada
takes approximately one month
– Initial comment letter within 10 business days of filing preliminary prospectus
– Common on IPOs to receive second (and potentially a third) comment letter
– Issuer, lead underwriter(s), counsel and auditors prepare written responses to
securities commission comments
• TSX listing approval process takes approximately 6-8 weeks from filing of
formal listing application
– Key to engage early with listing staff
– Early filing of PIFs and discussion of novel issues with listing staff, including
financial statements, reserves, incentive and compensation arrangements
– File formal listing application concurrent with preliminary prospectus
23

24. Securities Law Considerations
• Financial statement requirements
– Acquired asset financial statements
• Three years audited, plus unaudited interims within 45 days of date of
prospectus
• operating statements for oil and gas assets
– Trust financial statements
• Audited financial statements from date of formation to date not earlier than
90 days prior to the date of the prospectus
– IFRS
• Required for all financial years beginning on or after January 1, 2011
• Allowed for prior periods with exemptive relief from securities commission
24

25. Securities Law Considerations
• Reserve report
– Required for any issuer engaged in oil and gas activities
– Must be prepared in accordance with Canadian National Instrument 51-101 –
Standards of Disclosure for Oil and Gas Activities
– Reserves must be evaluated by an independent evaluator
– Different from SEC reserves reporting (i.e. forecast prices/costs for proved and
probable reserves)
– Reserve report key for:
• development of the internal financial model prepared by the issuer/lead underwriter in
connection with the IPO
• statement of distributable cash contained in the prospectus
25

26. Securities Law Considerations
• Statement of Distributable Cash
– Essential to IPO marketing efforts as source of estimated “distributable cash”,
being the estimated future net cash to be generated by the income trust’s
business available for distribution to public unitholders
– Form and content regulated by Canadian National Policy 41-201
– Based off historical financial statements, asset development plan, reserve report,
contractual arrangements and stated management assumptions (reasonable and
supportable)
– May be considered a “financial outlook” under Canadian securities rules thereby
requiring disclosure in subsequently filed MD&A of material differences between
actual results and the financial outlook
26

27. Securities Law Considerations
• Promoter and vendor liability
– Under Canadian securities rules, a promoter is any person, acting alone or with
others that, directly or indirectly, takes the initiative in founding or organizing the
business of the issuer
• “Promoter” includes a person who receives in consideration for property 10%
or more of the proceeds from the sale of securities in connection with
founding or organizing the business of the issuer except as consideration for
property transferred to the issuer if that person does not otherwise take part
in founding or organizing the business
– Characterization as a promoter is highly fact specific
– Promoters must certify the prospectus and have statutory liability (joint and
several with issuer/underwriters) for prospectus misrepresentations
– Securities commissions have indicated their expectation that vendors “take
appropriate responsibility” for the information in the prospectus relating to the
business being acquired by the income trust
27

28. Securities Law Considerations
• Due diligence
– Underwriters have a due diligence defence for prospectus misrepresentations
provided they have undertaken reasonable diligence investigations
– For income trust IPOs, diligence will typically cover:
• Structure documents (compliance with SIFT rules)
• Purchase and sale agreement/PPAs
• Commercial agreements (ROFRs, closing adjustments)
• Environmental and title matters
• Tax diligence, including use of third party debt capacity and debt/equity, and
interest rate, studies/opinions
– Diligence also needed to support borrowing base credit facility for income trust
28

29. Securities Law Considerations
• Other considerations
– Governance
• Capital markets expect governance structures and principles consistent with
corporate issuers
• Trust indenture; delegation by corporate trustee to management company
board
• Voting agreement to facilitate unitholder appointment of public board while
complying with SIFT rules
• Administrative services agreement
• Domicile of mind and management
29

30. Securities Law Considerations
• Other considerations (cont’d)
– U.S. securities law considerations
• Concurrent exempt offering in the United States (typically utilizing Rule
144A)
• Foreign private issuer implications
– Lock-up agreements
• No statutory or stock exchange escrow for IPOs >100 million but
underwriters will expect insiders/vendors to enter into 180 day lock-up
agreements
– Founder stock; incentive/compensation arrangements
– French translation of prospectus
30

31. Commercial Agreements
• Purchase and sale agreement
• Joint operating agreement for third party operated assets
• Joint development agreement
• Credit agreement
31

32. Appendix A – Case Studies
32

33. Asset Profiles
• Eagle acquired a 73% working
interest in the Salt Flat Field
– Light oil property located in
Caldwell County, South Central
Texas
– Non operated at time of IPO;
Eagle assumed operatorship in
August 2011
– Rights to acquire additional assets
• Net P+P reserves of 5,126 mbbls
• Production at closing of >900
bbls/d
• Estimated RLI of 8-12 years
33

34. Asset Profiles
• Parallel acquired a 59% working
interest in certain liquids rich
natural gas assets located in the
West Panhandle Field in Texas
– Assets previously owned by
ConocoPhillips
– Non operated (Bravo Natural Gas,
LLC, a subsidiary of Natural Gas
Partners) operates the properties
• Net P+P reserves of 28,830 Mboe
• Production at closing of ~ 2,900
boe/d
• Estimated RLI of 13.3 years
34

35. About Blakes
35

36. About Blakes
"Great lawyers who take
• Blakes Named "Canada's Law Firm of the Year" for exceptional care in being
Third Consecutive Year in the Who's Who Legal Awards thorough. First class - advice."
2011 - Client comment from PLC Which Lawyer?
Awards 2010
• Blakes Wins "Law Firm of the Year: Canada" Award for
the Third Straight Year at the PLC “Which Lawyer?” “Blakes sees more of its lawyers
Awards selected than any other firm in
Canada.”
• Blakes is proud to hold the dominant Canadian position - The International Who’s Who of
in every major M&A league for the first half of 2011 Business Lawyers 2011
• Blakes Tax Group is Ranked First Tier in “World Tax “Blakes top Canadian firm in
2011” and in the 2011 edition of Chambers Global: The mergermarket league tables.”
World’s Leading Lawyers for Business - Financial Post, July, 2011
• Blakes Tax Group was named “Tax Firm of the Year” for “Blakes is a real market leader in
the fourth consecutive year at International Tax the competition area.”
Review’s “Americas Tax Awards 2011”. - Chambers Global: The World's Leading
Lawyers for Business 2011
36

37. Blakes in M&A League Tables
For the last four years, Blakes has been Canada’s busiest M&A law firm. Our No. 1 rankings in a wide
range of M&A categories continued in 2011.
Our No. 1 rankings in Thomson Reuters's M&A league Our No. 1 rankings in Bloomberg's M&A league tables
tables for 2011 include: for 2011 include:
•Canada Announced Deals by deal value
•No. 1 in Any Canadian Involvement Announced Deals by deal •Canada Announced Deals by deal count
count •Canadian firm in United States Announced Deals by deal value
•No. 1 in Any Canadian Involvement Completed Deals by deal •Canadian firm in United States Announced Deals – Counsel to
count Principals by deal value
•No. 1 Canadian firm in Any United States Involvement Announced •Canadian firm in Global Announced Deals by deal value
Deals by deal value •Canadian firm in Global Announced Deals by deal count
•No. 1 Canadian firm in United States Target Announced by deal •Canadian firm in Global Announced Deals – Counsel to Principals
value by deal value
•No. 1 Canadian firm in Worldwide Announced Deals by deal value •Canadian firm in Global Announced Deals – Counsel to Principals
•No. 1 Canadian firm in Worldwide Completed Deals by deal value by deal count
•Canadian firm in Cross Border Announced Deals by deal value
•No. 1 Canadian firm in Worldwide Completed Deals by deal count •Canadian firm in Cross Border Announced Deals by deal count
Our No. 1 rankings in mergermarket M&A league tables for 2011
include:
•No. 1 in Canada Announced Deals by deal value
•No. 1 in Canada Announced Deals by deal count
•No. 1 Canadian firm in United States Announced Deals by deal value
•No. 1 Canadian firm in United States Announced Deals by deal count
•No. 1 Canadian firm in Americas Announced Deals by deal value
•No. 1 Canadian firm in Americas Announced Deals by deal count
•No. 1 Canadian firm in Global Announced Deals by deal value
37 •No. 1 Canadian firm in Global Announced Deals by deal count

38. Our Capital Markets Rankings
Through the third quarter of 2011, Blakes continues to dominate corporate finance league tables for
public financings in Canada:
• No. 1 Canadian law firm for equity-based offerings (Bloomberg)
• No. 1 Canadian law firm for debt and equity prospectus financings (Financial Post), assisting our issuer and
underwriter clients in raising over C$13-billion year to date
• No. 1 legal advisor to underwriter clients on Canadian debt and equity financings (Financial Post)
Bloomberg:
– No. 1 law firm in Canada for equity-based offerings by deal count and dollar volume in 2010
• 20% share of the securities finance market
– No. 1 Canadian law firm in 2010 for retail structured product offerings by deal count and dollar volume
• 40% share of the total retail structured product market
Thomson Reuters:
– No. 1 Canadian law firm, by a significant margin, in Canadian debt, equity and equity-related offerings in
2010
– globally, Blakes ranked 11th for issuer legal advisor and 14th for manager legal advisor in global debt, equity
and equity-related offerings based on deal count (the only Canadian law firm to make the rankings)
Financial Post:
– No. 1 law firm for combined debt and equity offerings for issuer and underwriter clients in 2010
• 20% share of the Canadian corporate finance market
38

39. Blakes Contacts
Securities
Ross Bentley (403) 260-9720, ross.bentley@blakes.com
Chad Schneider (403) 260-9660, chad.schneider@blakes.com
Tax
Edward Rowe (403) 260-9798, edward.rowe@blakes.com
Robert Kopstein (604) 631-3317, robert.kopstein@blakes.com
Carrie Aiken Bereti (403) 260-9775, carrie.aiken@blakes.com
39

40. Accessing Canadian Capital Markets for
Global Oil & Gas Companies
Julie K. Shin
Director, Listed Issuer Services
Toronto Stock Exchange

41. Disclaimer
This document is for information purposes only and is not an invitation to purchase securities
listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange. TMX
Group Inc. and its affiliates do not endorse or recommend any securities referenced in this
document. Please seek professional advice to evaluate specific securities.
While the information herein is collected and compiled with care, neither TMX Group Inc. nor
any of its affiliated companies represents, warrants or guarantees the accuracy or the
completeness of the information. You agree not to rely on the information contained herein
for any trading, business or financial purpose.
This information is provided with the express condition, to which by making use thereof you
expressly consent, that no liability shall be incurred by TMX Group Inc. and/or any of its
affiliates as a result of any errors or inaccuracies herein or any use or reliance upon this
information.
© 2010 TMX Group Inc.
2

42. TMX Group is at the Heart of Canada’s Capital Markets
Derivatives Energy Market data Cash trading Issuer services
& related
(51% Ownership)
(~54% Ownership)
(19.9% Ownership)
3

43. Canadian Markets… Global Leaders
7th
1st in the World by
Market 2nd
in North America by Capitalization in the World by
Number Number
of Issuers of Issuers
8th
in the World by
Equity
Financing
4

44. Strong Fundamentals
Canada:
• Resource rich
• Financially strong
• Balanced corporate governance
TSX & TSXV:
• Robust capital markets
• Strong trading liquidity
• Earlier access to capital +
access to North American capital
5

45. Global Leadership Strengths
474 issuers
Over 35% of the world’s
public oil and gas companies
64 going public events
$12.2 B equity raised
Energy & Energy Services $271 B value traded
1531 issuers
58% of the world’s public
mining companies
3670 issuers 208 going public events (RECORD Year)
524 going public events $17.8 B equity raised
Mining $416 B value traded
$54.0 B equity raised
Average Financing: 132 issuers
TSX $54.2 M Number one in the world by
number of public clean
TSXV $3.8 M technology companies
11 going public events
Clean Technology $1.3 B equity raised
$7.3 B value traded
6 As of December 31, 2010

46. TMX Group Serves Companies at all Stages of Growth
Market Capitalization Unique feeder system
Toronto Stock Exchange and TSX Venture Exchange
As at December 31, 2010
86%
% of TSX Issuers 491
% of TSXV Issuers graduates
+ 97 M&A*
40%
28% 31%
12%
428 1847 476 612
2% 51
Issuers Issuers Issuers 256 Issuers Issuers
<$50 Million $50 - $250 Million >$250 Million *From January 1, 2000 – December 31, 2010
Toronto Stock Exchange issuer base: 1,516 issuers, ~$2.2 trillion market cap
TSX Venture Exchange issuer base (excludes NEX): 2,154 issuers, ~$71.5 billion market cap
7 7

47. The North American Stock Markets Continuum
NYSE
NASDAQ
•Senior listing standards
AIM
• Disclosure rules
• Junior listing
standards
OTCBB
CNSX •Minimal/No listing
OTC - Pink standards
Sheets
8

48. TSX & TSXV Issuers are Top Tier
Performers
In 2010, 956 TMX Issuers provided
annual returns greater than 50%
2004 2005 2006 2007 2008 2009 2010
614 713 930 556 96 1,301 956
9 9

49. Global Exchange Leader for New Listings in 2010
NYSE/AMEX Hong Kong
TSX/TSXV LSE/AIM Nasdaq ASX
Euronext (US) Exchanges
Number of Issuers
3,670 2,966 2,317 2,778 1,999 1,413
Listed
Quoted Market Value
2,277.5 3,613.1 13,394.1 3,889.4 1,454.5 2,711.3
(US$ Billions)
New Listings 524 161 113 220 127 113
Equity Capital Raised
52.4 60.7 208.1 8.2* 53.8 109.5
(US$ Billions)
Value Traded
1,383.6 2,741.3 17,795.6 12,659.2 1,062.6 1,496.4
(US$ Billions)
Broad Stock Market
Indexes (%Change 14.5% 11.0% 10.8% 16.9% -0.7% 7.2%
over Dec. 31 2009)
Data as at or for the year ended December 31, 2010
10 *NASDAQ Information does not include secondary financings
Source: Exchange Websites, World Federation of Exchanges, (TMX analysis of public information)

50. Going Public in Canada - Benefits
Unique capital market
infrastructure & listing standards
Canadian Capital Markets
• operate within a world-class Proportionate governance
financial services environment;
• trade during North American Extensive analyst community
business hours; and
• by a vibrant institutional and
retail investor base Access to U.S. + international
capital
Alternative options for going public
11

51. International Investment Community Trades
on Toronto Stock Exchange
25 International Brokers including:
• Barclays Capital Toronto Stock Exchange Volume
• Citigroup
• CSFB and Transactions (2004-2010)
• Deutsche Bank
• Goldman Sachs Volume 191.3 189.1
125.0 182.9 200
• HSBC CAGR 9%
• JP Morgan Transactions 118.5
150
• Macquarie Capital Markets CAGR 29%
100.0
118.6 109.2
104.6
• Merrill Lynch
• Morgan Stanley 85.7
96.1
100
• Raymond James 75.0 55.2
• Thomas Weisel 40.3 82.0 50
• State Street 64.2
61.3
• UBS 50.0 0
2004 2005 2006 2007 2008 2009 2010
80 Canadian Brokers including: Volume (B) Number of Transactions (M)
• BMO Nesbitt Burns
• Canaccord Genuity
• CIBC World Markets ~40% of daily trading originates from
• GMP Securities International brokers
• RBC Capital Markets
• Scotia Capital Markets
• TD Securities
• National Bank Financial
12

52. Growth Markets for Oil & Gas Companies
Number of Oil & Gas Issuers Oil & Gas Analyst Coverage
394 Analyst Coverage
Comes at Earlier Stages
220 12
155
8
117 7 7 7
5
4
52 3 3 3
36
14 10 1 1
TSX ASX LSE-AIM NYSE NASDAQ NYSE Oslo HKEx $50-$150 Million $150-$500 Million $500-$1,000 Million >$1,000 Million
TSXV Amex Bors
AIM ASX TMX
Sources:
Number of Oil & Gas Issuers: Capital IQ and Exchange Websites as at December 31 2010
13 Analyst Coverage: Capital IQ

53. TMX Group Issuers Have Global Assets
Africa: UK/Europe: Russia: Canada:
TSXV: 21 Companies TSXV: 20 Companies TSXV: 1 Companies TSXV: 171 Companies USA:
TSX: 13 Companies TSX: 13 Companies TSX: 1 Companies TSX: 95 Companies TSXV: 60 Companies
TSX: 21 Companies
Mexico,
Central America
& Caribbean:
TSXV: 5 Companies
TSX: 0 Companies
Middle East:
TSXV: 12 Companies
TSX: 4 Companies
Australia/NZ/PNG:
TSXV: 9 Companies
TSX: 1 Company
India/Asia: South America:
TSXV: 10 Companies TSXV: 26 Companies
TSX: 7 Companies TSX: 11 Companies
Number of TMX Group Companies with Oil & Gas assets located around the world. Note - A single
company may have operations or assets in multiple countries/regions.
14 Source: TMX Group analysis of company websites as at December 31, 2010

54. Oil & Gas Listed Issuers Span the Spectrum
Distribution of Oil & Gas Market Capitalization ($CMM)
36%
25%
20%
17%
16%
11% 12% 11%
10%
8% 9%
6% 5% 5% 5%
3%
2%
0% 0% 0%
<1 1-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1B >1B
TSX Venture - 272 Issuers, $18.0 B Total QMV
TSX - 122 Issuers, $407 B Total QMV
*TSXV data excludes NEX
As at Dec 31 2010
15

55. Snapshot of the Oil & Gas Sector on
TSX & TSXV as at Dec. 31, 2010
TSXV TSX
$425B
As at Sept 30, 2011:
18
-394 Listed Issuers
37
-Total QMV: $335.9B
Total QMV of O&G
-35 New Listings YTD
issuers on TSX & New Listings
TSXV -$7.9B Equity capital raised
-350 Financings
TSXV
29.4B
TSX
$3.3B -$236.6B Value traded
$8.0B
Shares Traded
Through 37 Million
Equity Capital Raised Transactions
Dec 31 2010
16

56. TMX - Oil & Gas Market Leader in 2010
No. of Quoted Equity No. of No. of
Issuers Market Capital Financings New
Listed Value (C$) Raised (C$) Listings
TSX & TSXV 394 $425B $11.3B 504 55
TSX 122 $407B $8.0B 101 18
TSXV 272 $18B $3.3B 403 37
LSE 68 $1,230B $4.3B 11 4
AIM 87 $26B $2.5B 61 5
ASX 220 $100B $4.1B 145 2
NASDAQ 52 $38B $2.9B 36 0
NYSE 117 $2,930B $10.6B 26 2
NYSE Amex 36 $46B $0.831B 23 0
17
Source: Capital IQ, Exchange Websites. As at and for the year ended December 31, 2010

57. Energy Services Companies Range from Micro to
Large Cap
Distribution of Energy Services’ Market Capitalization
45%
27%
18% 18% 18%
13%10% 14% 14%
10%
8%
6% l
6%
2% 3%
0% 0% 0%
0-5 5-10 10-25 25-50 50-100 100-250 250-500 500-1B >1B
TSXV - 31 Issuers, $1.4B Total QMV
TSX - 49 Issuers, $25.2B Total QMV
*TSXV data excludes NEX
As at December 31 2010
18

58. Snapshot of the Energy Services Sector on
TSX & TSXV (2010)
TSXV
$27B
As at Sept 30, 2011:
49 -81 Listed Issuers
31 -Total QMV: $28.6B
TSX
Market Cap UP 40% -6 New Listings YTD
from Dec 31 2009 # of Listed Issuers -$960MM Equity capital raised
-22 Financings
$.9B 2.1B
-$18.4B Value traded
Equity Capital Shares Traded
Raised Through 32 Through 2.8 Million
Financings Transactions
19

59. Benefits of TMX Listing for Oil & Gas Issuers
Superior access to capital for junior growth companies
Access to Listing criteria and transaction policies specific to oil & gas
Capital Exchange staff with relevant energy business experience
Rules facilitate fast raisings
Strong energy trading liquidity
Trading Graduation potential between junior & senior market
Liquidity Vibrant retail & institutional investor base - understands energy
Equity culture - 50% of Canadians own shares
Home to 35% of the world’s public oil and gas companies
Global Large analyst community that covers juniors & seniors
Visibility Able to finance international projects even in high risk places
In same market as merger, acquisition and JV candidates
20

60. Accessing Capital is Key to Fund Growth
Oil & Gas Equity Capital Raised on Toronto Stock Exchange and TSX Venture Exchange (C$B)
Oil & Gas Issuers $11.7B $11.3B
have raised $10.4B $10.5B
$73+ Billion $9.2B
since 2002
$8.2B $7.9B
$5.3B
$4.1B
$2.6B
2002 2003 2004 2005 2006 2007 2008 2009 2010 to Sept 30
2011
Secondary Offerings Private Placements IPOs
21

61. Oil & Gas Equity Financing Comparatives
2010 OIL & GAS EQUITY CAPITAL RAISED BY EXCHANGE (C$BN)
TSX/TSXV $11.3B
NYSE $10.6B
LSE/AIM $6.8B
ASX $4.1B
NASDAQ $2.9B
22 Source: Capital IQ

62. Highly Liquid Oil & Gas Market
$409
$347 $337
$283
$261 $258
$155
$129
$117
$95 $94
$87
$56
$12 $41
$23
$17 $20 $19 $15 $19
$1 $6 $13
2003 2004 2005 2006 2007 2008 2009 2010
AIM ASX TMX
Source: Captus Partners, Capital IQ, Amounts are in C$Billions
23

63. on TSX / TSX V
24

64. Going Public in Canada - Overview
• Canadian capital markets operate within a world-class
financial services environment
– Traded during North American business hours
– Vibrant institutional and retail investor base
• Unique capital market infrastructure and listing standards
• Proportionate governance
• Extensive analyst community
• Access to U.S. capital
• Alternative options for going public
• Raising capital on TSX does not require reincorporation or
operations in Canada
25

65. Canadian Public Markets are “right-sized” for
Mid & Small-Cap Issuers
• Good fit for small - mid cap U.S. companies
– Canadian capital markets have long history of financing smaller
companies
– Investors comfortable with risk – willing to support
– Regulatory regimes consider the particular needs of smaller
public companies
– Infrastructure of market professionals with expertise in smaller
public companies
– May provide greater liquidity for smaller public companies
26

66. Alternative Methods for Going Public Available
27

67. Capital Pool Company™ (CPC) Program has a Strong
Track Record
Since inception:
•Over 2140 CPCs were created
•80% have completed their QT – over
1700 companies
Currently:
•342 Graduates now trade on TSX
•103 of the grads were CPCs
•128 QTs in 2010
28

68. Proportionate governance
• TMX Group, Inc. has “principle based”
regulation
• Proportionate Governance
– TSX companies do not require external
auditor attestation regarding internal
controls (SOX 404)
– In addition, TSX Venture companies have
the benefit of a basic certification
29

69. Specific Oil & Gas Listing Criteria
• TSX requires issuers to have proved developed reserves
(Minimum NPV $3MM, Exempt $7.5MM) or significant
contingent resource + financial stability
• TSX Venture listing requirements offer increased flexibility
• Can accommodate smaller companies with proved or probable
reserves or resources
• Companies with no reserves may still be eligible – unproven
property with prospects / recommended diversified exploration
program of at least $1.5MM*
• Energy companies required to report their reserves /
resources in compliance with NI 51-101; globally
recognized standard that affords transparency
30 *See TSX Venture Exchange Policy 2.1 for complete details 30
30

70. Timelines & Other Considerations
• Timelines for listing vary significantly depending on deal complexity
• Can be as quick as 2 months in ‘perfect’ situations for TSX listings
• IFRS Accounting/Audit Standards; U.S. GAAP* accepted without
reconciliation
• No Exchange requirement for Canadian officers / directors but
acceptable senior market public company experience is required
• 200 global public board lot shareholders on TSXV and 300 on TSX
• Canadian office not required but contact person in Canada must be
accessible for shareholders and analyst inquiries
• Sponsorship generally required (can be waived in certain situations)
*Dependent upon issuer’s reporting status in the U.S.
31

71. Estimated Costs of Listing
Initial Listing Fees $10,000 - $200,000 $7,500 - $40,000
Annual Sustaining Fees $12,500 – $95,000 $5,000 – $90,000
Accounting & Audit Fees $75,000 - $100,000 $25,000 - $100,000
Legal Fees $400,000 - $750,000 $75,000+
Underwriters’ commission 4-6% Up to 12 %
Other fees to consider include: Securities Commission fees ♦ Transfer agency fees ♦ Investor
relations costs ♦ Geological or engineering reports ♦ Printing / translation costs
♦ Valuation reports ♦ Director and Officer liability insurance
Actual individual and total costs will vary from these estimated ranges depending on the nature and complexity of the
transaction and relative sophistication of the company, its management, internal controls and reporting processes.
32

72. Toronto Stock Exchange and TSX Venture Exchange
listing fees are competitive
Min and Max Initial Fees (C$000s) Min and Max Sustaining Fees (C$000s)
700 700
588
600 600
493
500 500
400 400
336
300 246 300
222
200 194
200 200 150
115 98 95 90
82 74 69 66
100 100
40 25 27 25
39 8
0 0
LSE ASX* NYSE** NASDAQ TSX AIM*** HKEx NASDAQ NYSE TSXV HKEx NYSE** ASX HKEx NASDAQ TSX TSXV LSE NYSE NASDAQ HKEx AIM
GM CM Amex GEM GM Amex CM GEM
*There is no maximum fee. Market cap of $1B was used for illustration purposes
**NYSE has a USD $500,000 cap on listing fees per issuer, per year
***Does not include NOMAD fees
NB: For international companies, TSX initial listing fees max out at $150K
Source: TSX analysis of exchange listing fee documents. Bank of Canada rates as of February 22, 2011. USD rate =
0.9859, GBP rate = 1.5901,
AUD rate = 0.9851, HKD rate = 0.126516
As at February 22, 2011
33

73. Julie K. Shin
Director, Listed Issuer Services
Toronto Stock Exchange
416.947-4539
julie.shin@tsx.com
Cindy Gray
Head, Business Development, Global Energy
403.218-2822
cindy.gray@tsx.com
34

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