Mark Davis, President & CEO

Good morning, ladies and gentlemen.

Chemtrade's key financial objective is to deliver reliable, sustainable and growing distributions.

•  Increased Chemtrade's asset value by 100%, and market capitalization by 200%; and

•  Most importantly, significantly diversified its earnings base.

•  Financial Prudence - specifically, a conservative distribution policy and leverage position. Under our distribution policy, we plan to meet our indicated distributions despite holding back some distributable cash to provide stable distributions even in the event of unforeseen interruptions to the normal course of business, which indeed happened in 2003. Vic will comment later on our capital structure.

•  Business Model - our business model seeks to mitigate the effect that changes in commodity prices and volume could have on our earnings. I'll illustrate this a little later when I'm reviewing our operating segments.

•  Sustainable Earnings - our strong focus on operational excellence, including integration of our acquisitions, attention to cost control, relationship management and incremental growth, are key elements in delivering long-term sustainable earnings from our businesses.

•  Growing Distributions - the increased scale and diversity of our earnings, which was clearly evident in 2003 with our acquisitions, results in lower overall business risk.

With the increased array of income trusts now in existence, and the great variety of businesses they cover, I think it's important to understand Chemtrade's business; how it has evolved; and how it all ties back to our business model, which is the cornerstone of our success. Some of you have no doubt heard parts of this before, but I hope you will bear with us for a few minutes.

Chemtrade provides industrial chemicals and services to customers in North America and around the world. In North America we operate two business segments - Sulphur Products & Performance Chemicals, or SPPC, and Pulp Chemicals. SPPC encompasses our original North American sulphur products operations, and sodium hydrosulphite, or SHS, operations. Pulp Chemicals was acquired in August last year. BCT Chemtrade conducts our international business.

•  Following a conservative distribution policy;

•  Entering into contracts that mitigate typical commodity risks;

•  Enhancing our competitive position; or

•  Differentiating the products or services we offer in the market place.

Through marketing services agreements and our own production facilities we are one of the world's largest suppliers of sulphuric acid, liquid sulphur dioxide and SHS. We are also a leading regional supplier of sulphur and sodium chlorate.

Our business model is intended to mitigate the effect that changes in commodity prices and volumes could have on our earnings. As a general statement we seek to mitigate the effect that commodity fluctuations could have on distributions by:

Outside of our Pulp Chemicals business, we have primarily focused on sulphur-based chemicals. We obtain sulphuric acid, SO2 and sulphur primarily from base metal smelters and oil refineries. These products are produced as a result of environmental laws requiring industries to capture sulphur emissions resulting from the production of their core products.

Removal of these products is critical to producers, as they could not operate without Chemtrade's removal services. Chemtrade provides guaranteed removal services for approximately 40 key producers, and in its 70 year history has never caused unscheduled downtime for a producer. The products we remove are valued core ingredients for other industries. So Chemtrade markets and distributes the products it removes to a number of different industries and over 300 customers. Most of these products are commodities.

Therefore, it is important to minimize our exposure to commodity price and volume fluctuations. Our business model follows the general premise that the less you can differentiate your product in the market place the more the commodity risks should be allocated to the producer of the product. Accordingly, through long-term contracts with our producers, the majority of price and volume risk is borne by the producers and not by Chemtrade. These contractual provisions are a significant stabilizing influence on our earnings.

Following the acquisition of the Performance Chemicals assets at the end of 2002, Chemtrade became the largest North American producer of SHS and one of the largest producers in the world. This is a great fit with our original business since one of the key raw materials is liquid SO2.

The majority of our SHS sales are to the pulp and paper industry, where it is used primarily for bleaching mechanical and recycled pulps used in newsprint production. Most of the remainder is sold to the textile industry for bleaching indigo and vat dyes. We are the sole supplier to most of our customers and have excellent long-term customer relationships.

We are the clear market leader in North America, with a market share more than double that of our nearest competitor. Finally, Chemtrade is the only North American producer of powder SHS and, accordingly, is the only producer able to offer product in either powder or liquid form.

From a business model perspective, SHS is a product that can be differentiated in the market, we have a strong competitive position, and through the SO 2 linkage we can add further stability to the cost of the commodity inputs.

Our newest business is Pulp Chemicals.

In August last year, we acquired the operations and assets of BC Chemicals, a wholly owned division of Canfor.

Based in Prince George, British Columbia, Pulp Chemicals produces sodium chlorate and crude tall oil, or CTO, both of which are chemicals used by the pulp and paper industry. Sodium chlorate is used to bleach pulp, and crude tall oil is used as a less expensive alternative energy source to natural gas. The bulk of Pulp Chemicals' earnings are generated from sales of sodium chlorate.

The Pulp Chemicals business diversifies Chemtrade's contractually based cash flow among a broader group of customers, products and geographies, reducing the risk associated with any one factor.

From a business model perspective, we expect that the majority of the Pulp Chemicals earnings will be generated from the long term contracts we have with Canfor. Pulp Chemicals has 10-year exclusive contracts with Canfor under which Canfor will continue to purchase about 70% of the sodium chlorate capacity at a price that adjusts for changes in raw materials, and pay a fee to Chemtrade for toll processing Canfor's soap skimmings into CTO.

As you know, the Performance Chemicals acquisition at the end of 2002, and the Pulp Chemicals acquisition in August 2003, substantially changed Chemtrade financially as well as operationally. Year over year numbers are not directly comparable; however, they do illustrate the point Mark made about the scale and scope of our operations, and how they have benefited unitholders.

Revenue for 2003 was $291 million compared with $207 million in 2002, and EBITDA for the purposes of calculating distributable cash was $45.8 million compared with $26.3 million in 2002. The most important metric, distributable cash increased by 59% from $21.9 million in 2002 to $34.9 million.

The key measurement of our performance is cash distributions, and in 2003 unitholders enjoyed a steady increase in the distribution rate. Following both the Performance Chemicals acquisition and the Pulp Chemicals acquisitions, we increased our distribution rate. We have currently indicated an annual intended distribution rate of $1.80 per unit.

Our practice is to establish a distribution rate that permits us to hold back a portion of the distributable cash generated in the year. This hold back assists us in maintaining a consistent distribution rate, even if we experience unexpected interruptions to our normal business. For example, in 2003 despite increasing our distributions and encountering the difficult issues I mentioned, our payout ratio was 93% of distributable cash, which meant that we not only continued to meet our distributions but were also able to hold back a portion of the distributable cash generated.

Before moving on to a review of our renewed financing arrangements and the matter of foreign exchange, let me briefly summarize our results for the first half of 2004.

For the six months ended June 30, 2004, cash available for distribution was $21.9 million, or 96 cents per unit, generated from revenue of $171 million and EBITDA of $27.7 million. In the first half of last year, distributable cash was $14.1 million, or 87 cents per unit, revenue was $135.4 million, and EBITDA was $18.9 million.

The principal reason for the year over year increase was the acquisition of Pulp Chemicals at the end of August 2003.

Although cash available for distribution in the first half was 96 cents per unit, distributions for the first six months were only 90 cents per unit. That's a payout ratio of less than 94%.

Overall, the results for the first half met our expectations. Planned maintenance shutdowns at our SHS plant in Leeds, South Carolina and at Pulp Chemicals' plant in Prince George, British Columbia in the second quarter resulted in a second quarter which was softer than the first, but this was expected.

Looking at the segmented results, SPPC generated EBITDA of $21.4 million in the first half compared with $20.3 million last year.

These improved results reflected solid performances from sulphur products in both the first and second quarters, driven by higher sulphuric acid volumes and favorable product cost. Performance Chemicals, although ahead of last year, was slightly behind our expectations. As mentioned in our second quarter conference call, sales of powder SHS were lower than expected as a result of competitive pressures from Chinese manufacturers, particularly in our export markets.

Pulp Chemicals reported EBITDA of $9.5 million for the first half. Of course there is no comparative for last year. This was slightly below our expectations, reflecting lower sales of sodium chlorate as a result of some weather-related and operating issues at Canfor. Those issues now seem to be resolved and we expect Canfor sales to return to normal in the second half of 2004.

It's now just over one year since we completed the Pulp Chemicals acquisition and we're pleased with the smooth integration and the contribution the business is making to our overall results.

Our third operating group is International, which is conducted by BCT Chemtrade. EDITDA for the first half this year was $2.8 million, level with last year. Although revenue was higher this year by about $10 million, this is essentially a matched contract business and the flat EBITDA reflects the tight international market for sulphuric acid.

Let me turn for a minute to our capital structure. In early March, we finalized a new bank deal, which ensures that the earliest maturity date of our term bank debt is now March 2008. Our previous bank deal required a repayment of principal in May 2005.

At the same time as we extended the term of our debt, we also entered into a four-year interest rate swap. This transaction currently results in an all-in interest rate of less than 5%. Further to our earlier comments on our distribution policy, we believe that the extension of the term of our debt and fixing our interest rate are key components of financial prudence.

One of the factors that adversely affected our 2003 results was the stronger Canadian dollar, and I would like to comment briefly on the impact of foreign exchange on Chemtrade, and actions we have taken to manage it. Prior to the Pulp Chemicals acquisition, approximately 60% of the Fund's EBITDA was generated in US dollars. With the inclusion of Pulp Chemicals, this has declined to approximately 50%.

We do have some natural hedges such as US dollar bank interest, certain capital expenditures and transportation costs that mitigate the impact. However, we have now adopted a policy of hedging a portion of the US dollars generated which must be converted to Canadian dollars. We roll these hedges forward for an 18-month period. For example, we have now entered into a number of contracts that lock in 100% of our expected cross-border flows for 2004 at a rate essentially equal to the exchange rate assumed in our Plan.

We have also hedged a significant portion of our expected 2005 cross-border cash flows.

Thank you, and I'll now hand the presentation back to Mark.

As an example, in the first quarter we implemented certain organizational changes at SPPC and also completed a relatively minor purchase of SO2 customer contracts and assets. Although not significant in terms of size, this acquisition provides incremental growth to our existing business and is a step forward in realizing the synergistic opportunities we outlined when we acquired the Performance Chemicals business and the accompanying SO2 demand.

The benefits of the broadened earnings base and increased scale were clearly evident in 2003 as we were able to increase distributions to unitholders despite unexpected operational interruptions, cost pressures, and the strengthening Canadian dollar that affected distributable cash. This year, we have maintained our distributions.

Looking ahead, the outlook for the balance of 2004 looks consistent with the first half results.

Pulp Chemicals should benefit from stronger sodium chlorate volumes, offsetting SPPC results that are expected to be somewhat softer than realized in the first half of 2004. 

The acid market both internationally and in North America remains tight, and the SO2 market appears to have stabilized.

Our liquid SHS products are expected to continue performing well.  However, excess capacity in China is resulting in our powder SHS facing competitive pressures from Chinese products in both North American and the export markets. 

We are taking steps to improve our competitive position and defend our customer base, however we expect contribution from this product to be negatively impacted for the balance of 2004. 

Results from the International business are expected to remain stable.

As stated, despite the potential weakness in powder SHS, we expect the second half of the year to deliver similar distributable cash numbers to those generated in the first half. We therefore remain confident in continuing to deliver on our goal of reliable and sustainable distributions.

Thank you for your interest.