Our strategy focuses on long-term, stable and superior returns. Our opposition to the Kyoto Protocol should not be misconstrued as being dismissive about greenhouse gas emissions. Rather it is recognition of the fact that, although well intentioned, the Kyoto accord and Canada’s ratification thereof is severely flawed. We believe a better solution exists for our country that takes into consideration the uniqueness of our situation. Our company and our industry will continue to invest in emission reduction initiatives that will benefit future generations of Canadians and we will work constructively with government agencies in all areas of environmental stewardship. As evidence of our commitment in this regard, ARC was recently awarded Gold Champion Level Reporter status (the highest level achievable) from Canada’s Voluntary Climate Change Registry.
2003 Outlook The foregoing discussion already addresses expected trends in certain key aspects of our business and our sector. Looking ahead, we foresee on-going challenges for the industry to replace production in a cost effective manner. We also expect the availability of long-life, high quality assets highly valued by the royalty trust sector to be limited resulting in significant competition among the existing trusts. ARC has consistently replaced production on a cost effective basis while maintaining the high quality nature of our asset base. Despite the competitive market, we will maintain our disciplined approach to selectively pursue attractive assets with upside potential and we believe that our historic, top quartile performance will continue. ARC’s high quality asset base has allowed us to be less reliant on acquisitions than our peers due to a large number of development opportunities on existing properties. Over the past two years, we have spent $193 million on drilling and development activities and our 2003 budget calls for further expenditures of $115 million. The Trust has consistently maintained a conservative distribution policy to enhance long-term returns to our unitholders. High commodity prices should enhance the overall trust sector performance in 2003; however the trend to a lower average RLI will challenge the sector’s ability to maintain current performance levels over time. Our strategy focuses on long-term, stable and superior returns that will allow us to continue to outperform the sector in the future. This will create new opportunities to make value-adding acquisitions for the Trust to further enhance long-term returns. Respectfully submitted on behalf of the Board of Directors,
John P. Dielwart (signed) President and Chief Executive Officer January 28, 2003