Daylight Resources Trust
TSX : DAY.UN

Daylight Resources Trust

March 19, 2007 19:49 ET

Daylight Resources Trust Provides 2006 Tax Information for U.S. Unitholders

CALGARY, ALBERTA--(CCNMatthews - March 19, 2007) - Daylight Resources Trust (TSX:DAY.UN) ("Daylight") is pleased to provide 2006 tax information for its U.S. unitholders. The information in this press release also applies to Daylight's predecessor trusts - Daylight Energy Trust and Sequoia Oil & Gas Trust.

2006 U.S. TAX INFORMATION

The following information is being provided to assist U.S. individual unitholders of Daylight and its predecessor trusts in reporting distributions received from Daylight and its predecessor trusts on their Internal Revenue Service ("IRS") Form 1040 - U.S. Individual Income Tax Return ("Form 1040") - for the calendar year 2006.

This summary is of a general nature only and is not intended to be legal or tax advice to any particular holder or potential holder of Daylight and its predecessor trust units. Holders or potential holders of Daylight and its predecessor trust units should consult their own legal and tax advisors as to their particular tax consequences of holding these trust units.

Qualified Dividends

In consultation with its U.S. tax advisors, Daylight believes that its trust units and the trust units of its predecessors should be properly classified as equity in a corporation, rather than debt, and that dividends paid to individual U.S. unitholders should be "qualifying dividends" for U.S. federal income tax purposes. As such, the portion of the distributions made during 2006 that are considered dividends for U.S. federal income tax purposes should qualify for the reduced rate of tax applicable to long-term capital gains. However, the individual taxpayer's situation must be considered before making this determination.

Daylight and its predecessor trusts have not received an IRS letter ruling or a tax opinion from its tax advisors on these matters.

It has come to Daylight's attention that a database established on behalf of a number of U.S. brokerage firms in the U.S. may not recognize Daylight and its predecessor trusts - and many other non-SEC registered foreign entities that do not issue common shares - as "qualified foreign corporations". Accordingly, U.S. brokerage firms and other intermediaries may report a portion (or perhaps all) of Daylight and its predecessor distributions received in 2006 as ordinary dividends. The IRS has provided guidance that they contemplate there will be situations where intermediaries may be required to report distributions as ordinary dividends on Form 1099-DIV although the U.S. taxpayer may be entitled to (and, therefore, should) report the distributions as qualified dividends. Likewise, they are also aware that there may be situations where the intermediaries report distributions as qualified dividends although the taxpayer knows they are not. In light of these potential differences, we have been advised by our U.S. tax advisors that the Form 1099-DIV reporting does not control how the taxpayer is entitled to report distributions.

Subject to the advice of a unitholder's legal and tax advisors, we recommend that this press release be referenced as support for the treatment of the 2006 distributions from Daylight and its predecessors as qualified dividends. Furthermore, unitholders may also wish to obtain a copy of a letter issued by KPMG LLP entitled "U.S. Investors in Canadian Income Trusts - Do Your Dividends Qualify for Low U.S. Tax Rate". A copy of the KPMG letter will be available on Daylight's website.

Daylight Units Held Outside of a Qualified Retirement Plan

With respect to the distributions paid during the 2006 year to U.S. individual unitholders, 93.46% of Daylight Resources Trust, 71.36% of Daylight Energy Trust and 64.13% of Sequoia Oil & Gas Trust distributions should be reported as a qualified dividend, with the remaining amounts being a return of capital.

The portion of the distributions treated as "qualified dividends" should be reported on Line 9b of Form 1040, unless the fact situation of the U.S. individual unitholders determines otherwise. Commentary on page 23 of the Form 1040 Instruction Booklet for 2006 with respect to qualified dividends provides examples of individual situations where the dividends would not be qualified dividends. Where, due to individual situations, the dividends are not qualified dividends, the amount should be reported on Schedule B - Part II - Ordinary Dividends and Line 9a of Form 1040.

For U.S. federal income tax purposes, in reporting a return of capital with respect to distributions received, U.S. unitholders are required to reduce the cost base of their trust units by the total amount of distributions received that represent a return of capital. This amount is non-taxable if it is a return of cost base in the trust units. If the full amount of the cost base has been recovered, any further return of capital distributions should be reported as capital gains.

U.S. unitholders are encouraged to utilize the Qualified Dividends and Capital Gain Tax Worksheet of Form 1040 to determine the amount of tax that may be otherwise applicable.

The taxable portion (for Canadian income tax purposes) of the distributions is subject to a minimum 15% Canadian withholding tax that is withheld prior to any payments being distributed to U.S. unitholders. Beginning in 2005, the return of capital portion (for Canadian income tax purposes) of the distributions is also subject to a 15% withholding tax that is withheld prior to any payments being distributed to U.S. unitholders. Where trust units are held in a cash account, we believe the full amount of all withholding tax should be creditable, subject to numerous limitations, for U.S. tax purposes in the year in which the withholding taxes are withheld. Where trust units are held in a qualified retirement account, the same withholding taxes apply but the amount is not creditable for U.S. tax purposes.

The amount of Canadian tax withheld should be reported on Form 1116, "Foreign Tax Credit (Individual, Estate, or Trust)". Information regarding the amount of Canadian tax withheld in 2006 should be determined from your own records and is not available from Daylight. Amounts over withheld, if any, should be claimed as a refund from the Canada Revenue Agency no later than two years after the calendar year in which the payment was paid.

Investors should report their dividend income and capital gain (if any), and make adjustments to their tax basis in Daylight's units, in accordance with this information and subject to advice from their tax advisors. U.S. individual unitholders who hold their Daylight trust units through a stockbroker or other intermediary should receive tax reporting information from their stockbroker or other intermediary. We expect that the stockbroker or other intermediary will issue a Form 1099-DIV, "Dividends and Distributions" or a substitute form developed by the stockbroker or other intermediary. Daylight is not required to furnish such unitholders with Form 1099-DIV. Information on the Form 1099-DIV issued by the brokers or other intermediaries may not accurately reflect the information in this press release for a variety of reasons. Investors should consult their brokers and tax advisors to ensure that the information presented here is accurately reflected on their tax returns. Brokers and/or intermediaries may or may not be required to issue an amended Form 1099-DIV.

Daylight Units Held Within a Qualified Retirement Plan

There should be no amount that is required to be reported on an IRS Form 1040 where the Daylight units are held in a Qualified Retirement Plan.

2006 DISTRIBUTION INFORMATION FOR U.S. UNITHOLDERS ($U.S./UNIT)

During 2006, for tax U.S. purposes, Daylight and its predecessor trusts made cash distributions and in addition to these cash distributions, Daylight Energy Trust and Sequoia Oil and Gas Trust also distributed Trafalgar Energy Ltd. common shares and arrangement warrants (the "Trafalgar Distribution") to unitholders of record on September 21, 2006. Daylight Energy Trust unitholders received 0.04170 Trafalgar Energy Ltd. common shares and 0.01208 arrangement warrants per trust unit held on September 21, 2006. Sequoia Oil & Gas Trust unitholders received 0.05170 Trafalgar Energy Ltd. common shares and 0.01498 arrangement warrants per trust unit held on September 21, 2006.

While the appropriate tax treatment is not entirely clear, and may also depend upon an individual taxpayer's situation, the Trafalgar Distribution has been treated below as a taxable distribution of property similar in all respects to cash distributions received during the year. While this manner of approach appears to be the most reasonable, unitholders may want to discuss the characterization of the receipt of the Trafalgar Distribution with their personal tax advisors.



DAYLIGHT RESOURCES TRUST
----------------------------------------------------------------------------
Distri- Taxable
Record Payment bution Conversion Qualified Return of
Date Date ($CDN) Rate (1) Distribution Dividend Capital
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Sept. 29, Oct. 16,
2006 2006 $0.195 0.8783 $0.171269 $0.160068 $0.011201
----------------------------------------------------------------------------
Oct. 31, Nov.15,
2006 2006 $0.195 0.8780 $0.171210 $0.160013 $0.011197
----------------------------------------------------------------------------
Nov. 30, Dec. 15,
2006 2006 $0.195 0.8640 $0.168480 $0.157461 $0.011019
----------------------------------------------------------------------------
Total
Cash $0.585 $0.510959 $0.477542 $0.033417
----------------------------------------------------------------------------

(1) Bank of Canada Noon Rate


DAYLIGHT ENERGY TRUST
----------------------------------------------------------------------------
Distri- Taxable
Record Payment bution Conversion Qualified Return of
Date Date ($CDN) Rate (1) Distribution Dividend Capital
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Dec. 30, Jan. 16,
2005 2006 $0.1400 0.8637 $0.120918 $0.086287 $0.034631
----------------------------------------------------------------------------
Jan. 31, Feb. 15,
2006 2006 $0.1400 0.8665 $0.121310 $0.086567 $0.034743
----------------------------------------------------------------------------
Feb. 28, March 15,
2006 2006 $0.1400 0.8656 $0.121184 $0.086477 $0.034707
----------------------------------------------------------------------------
March 31, April 17,
2006 2006 $0.1400 0.8731 $0.122234 $0.087226 $0.035008
----------------------------------------------------------------------------
April 28, May 15,
2006 2006 $0.1400 0.8977 $0.125678 $0.089684 $0.035994
----------------------------------------------------------------------------
May 31, June 15,
2006 2006 $0.1400 0.8947 $0.125258 $0.089384 $0.035874
----------------------------------------------------------------------------
June 30, July 17,
2006 2006 $0.1400 0.8835 $0.123690 $0.088265 $0.035425
----------------------------------------------------------------------------
July 31, Aug. 15,
2006 2006 $0.1400 0.8912 $0.124768 $0.089034 $0.035734
----------------------------------------------------------------------------
Aug. 31, Sept. 15,
2006 2006 $0.1400 0.8933 $0.125062 $0.089244 $0.035818
----------------------------------------------------------------------------
Total
Cash $1.2600 $1.110102 $0.792168 $0.317934
----------------------------------------------------------------------------
Sept. 21, Sept. 21,
2006 2006(2) $0.1676 0.8933 $0.149717 $0.106838 $0.042879
----------------------------------------------------------------------------
Combined $1.4276 $1.259819 $0.899006 $0.360813
----------------------------------------------------------------------------

(1) Bank of Canada Noon Rate
(2) Trafalgar Distribution


SEQUOIA OIL & GAS TRUST
----------------------------------------------------------------------------
Distri- Taxable
Record Payment bution Conversion Qualified Return of
Date Date ($CDN) Rate (1) Distribution Dividend Capital
----------------------------------------------------------------------------
Dec. 23, Jan. 16,
2005 2006 $0.1600 0.8637 $0.138192 $0.088623 $0.049569
----------------------------------------------------------------------------
Jan. 25, Feb. 15,
2006 2006 $0.1600 0.8665 $0.138640 $0.088910 $0.049730
----------------------------------------------------------------------------
Feb. 24, March 15,
2006 2006 $0.1600 0.8656 $0.138496 $0.088817 $0.049679
----------------------------------------------------------------------------
March 24, April 17,
2006 2006 $0.1600 0.8731 $0.139696 $0.089587 $0.050109
----------------------------------------------------------------------------
April 26, May 15,
2006 2006 $0.1600 0.8977 $0.143632 $0.092111 $0.051521
----------------------------------------------------------------------------
May 25, June 15,
2006 2006 $0.1600 0.8947 $0.143152 $0.091803 $0.051349
----------------------------------------------------------------------------
June 26, July 17,
2006 2006 $0.1600 0.8835 $0.141360 $0.090654 $0.050706
----------------------------------------------------------------------------
July 25, Aug. 15,
2006 2006 $0.1600 0.8912 $0.142592 $0.091444 $0.051148
----------------------------------------------------------------------------
Aug. 25, Sept. 15,
2006 2006 $0.1600 0.8933 $0.142928 $0.091660 $0.051268
----------------------------------------------------------------------------
Total
Cash $1.4400 $1.268688 $0.813609 $0.455079
----------------------------------------------------------------------------
Sept. 21, Sept.21,
2006 2006(2) $0.2078 0.8933 $0.185628 $0.119043 $0.066585
----------------------------------------------------------------------------
Combined $1.6478 $1.454316 $0.932652 $0.521664
----------------------------------------------------------------------------

(1) Bank of Canada Noon Rate
(2) Trafalgar Distribution


Daylight Resources Trust is a Calgary-based open-ended unincorporated investment trust with a high quality balanced natural gas and crude oil property base, extensive prospect inventory and large undeveloped land base that is managed by a team of highly skilled technical professionals. Daylight's properties include focused high potential assets in the Peace River Arch and West Central Alberta complemented by stable production and repeatable opportunities in Southern and Eastern Alberta. Daylight's prospect inventory is balanced across natural gas and crude oil with near, medium, long-term and high impact opportunities that will generate significant increased value into the future. Daylight's large undeveloped land base will provide additional opportunities to create value through our highly skilled technical teams as well as through selective farm outs to targeted industry partners. Daylight has approximately 76 million trust units currently outstanding.

The information in this release is not meant to be an exhaustive discussion of all possible U.S. income tax considerations, but a general guideline and is not intended to be legal or tax advice to any particular holder or potential holder of Daylight units. Holders or potential holders of Daylight units should consult their own tax advisors as to their particular tax consequences of holding Daylight units. Daylight has not obtained a legal or tax opinion, nor has it requested a ruling from the IRS, on these matters.

ADVISORY: Certain information regarding Daylight Resources Trust including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources; as a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Contact Information