Energy Plus Income Trust
TSX : EPF.UN

Energy Plus Income Trust

August 26, 2005 16:16 ET

Energy Plus Income Trust: 2nd Quarter Report 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 26, 2005) - Energy Plus Income Trust (TSX:EPF.UN):

For the six months ended June 30, 2005 (unaudited)



Investment Highlights

Jun. 30, Mar. 31, Dec. 31,
2005 2005 2004
------------------------------------------------------------------------
Net Asset Value per Unit $ 10.01 $ 10.09 $ 9.52
Market Price per Unit $ 9.68 $ 9.91 $ 9.96
Trading Premium (Discount) (3.3%) (1.8%) 4.6%
Quarterly Distributions per Unit (1) $ 0.2499 $ 0.2438 $0.095(1)
Market Capitalization ($millions) $ 108.9 $ 111.1 $ 111.3
------------------------------------------------------------------------
(1) First monthly distribution had a record date of November 30, 2004
and was paid December 15, 2004.


Investment Manager Report

At the end of March 2005, rising interest rate and inflation concerns dominated the income trust market which resulted in a sell-off similar to that experienced in the spring of 2004. Like 2004, the sell-off was short lived as positive year over year funds flow and declining bond yields boosted income trust valuations. With continued strength in oil and natural gas prices, the energy trust sector delivered a strong 8.6% total return in the second quarter of 2005. As a result, the S&P/TSX Income Trust index produced a total return of 7.7% over the second quarter of 2005, again outperforming the S&P/TSX Composite index's return of 3.6%. On a net asset value basis, Energy Plus generated a 1.7% total return. However on a unit price basis, Energy Plus' unit price declined resulting in a disappointing 0.2% total return for the second quarter.

With price volatility in April and May, Energy Plus remained unlevered, however as the oil markets began to firm up in early June, the Fund commenced with the use of leverage. A number of acquisitions and dispositions were transacted during the second quarter of 2005 as the portfolio was repositioned for continued growth. Since June 30, 2005, the Fund has increased its leverage from $8.6 million to $14.0 million and has grown its net asset value to $11.27 per unit as at August 11, 2005.

The prolonged strength of oil & natural gas prices has resulted in Energy Plus generating substantial realized and unrealized gains over the first six months of 2005. The Fund expects to achieve its investment objectives in 2005 with maintenance of its current distribution level.

Management's Discussion & Analysis (August 18, 2005)

Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited interim financial statements for the three months ended June 30, 2005, and the audited financial statements and MD&A for the period ended December 31, 2004.

Strong commodity prices continued to support high valuations of the royalty trusts as well as the oil and gas corporations during the quarter. Net asset value remained strong at $10.01 per unit at June 30, 2005 compared to $10.09 per unit at March 31, 2005. Total investments increased from $112.4 million at March 31, 2005 to $119.1 million at the end of the second quarter as the Fund utilized leverage of $8.6 million. The Fund's unit price closed the quarter at $9.68 per unit down from $9.91 per unit at March 31, 2005.

Total revenue increased slightly to $3.1 million for the three months ended June 30, 2005 compared to $3.0 million for the first quarter of 2005 with the increased asset base. Administrative and investment manager fees, as well as trailer and service fees totaled $0.3 milllion and $0.1 million respectively consistent with the first quarter of 2005. General and administration costs and loan interest totaled $0.1 million. After total expenses of $0.5 million, the Fund generated net investment income of $2.5 million or $0.22 per unit in the second quarter of 2005 compared to $2.4 million or $0.22 per unit in the first quarter. Distributions paid in the quarter were $0.2499 per unit reflecting monthly distributions of $0.0833 per unit.



Portfolio Holdings
----------------------------------------------------
Oil & Gas Royalty Trusts 91%
Cash and Term Deposits 1%
Oil & Gas Service Trusts 4%
Oil & Gas Corporations 4%
----------------------------------------------------


During the second quarter, the Fund incurred realized losses of $0.4 million and unrealized losses of $0.2 million on its existing investments for total results of operations of $1.9 million or $0.17 per unit for the second quarter of 2005. Results of operations were $9.0 million or $0.81 per unit for the first quarter of 2005 due to strong realized and unrealized gains.



Energy Plus Income Trust
Statement of Net Assets

(Unaudited)

June 30, December 31,
As at 2005 2004
------------------------------------------------------------------------
Assets
Investments, at market $119,103,954 $ 80,253,226
Cash and term deposits 616,448 26,503,912
Revenue receivable 1,084,544 641,224
Accounts receivable 1,424,128 274,991
Prepaid expenses 33,859 56,186
------------------------------------------------------------------------
122,262,933 107,729,539
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities
Accounts payable 173,206 708,896
Distributions payable 937,219 614,442
Loan Payable 8,550,000 -
------------------------------------------------------------------------
9,660,425 1,323,338
------------------------------------------------------------------------
Net Assets $112,602,508 $106,406,201
------------------------------------------------------------------------
------------------------------------------------------------------------
Units outstanding 11,251,131 11,171,679
------------------------------------------------------------------------
------------------------------------------------------------------------
Net asset value per unit $ 10.01 $ 9.52
------------------------------------------------------------------------
------------------------------------------------------------------------


Energy Plus Income Trust
Statement of Operations

(Unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
For the periods ended 2005 2005
------------------------------------------------------------------------
Revenue
Investment income $ 3,054,426 $ 6,040,978
------------------------------------------------------------------------
3,054,426 6,040,978
------------------------------------------------------------------------
Expenses
Administrative and investment manager fees 320,658 653,032
Trailer and service fees 112,511 224,623
General and administration costs 87,865 155,058
Loan interest 25,571 62,598
------------------------------------------------------------------------
546,605 1,095,311
------------------------------------------------------------------------
Net investment income 2,507,821 4,945,667
Net realized gain (loss) on investments (363,899) 3,783,517
Net change in unrealized gain (loss) on
investments (237,218) 2,225,328
------------------------------------------------------------------------
Total results of operations $ 1,906,704 $ 10,954,512
------------------------------------------------------------------------
------------------------------------------------------------------------
Results of operations per unit:
Net investment income $ 0.22 $ 0.44
Net realized gain (loss) on investments (0.03) 0.34
Net change in unrealized gain (loss) on
investments (0.02) 0.20
------------------------------------------------------------------------
$ 0.17 $ 0.98
------------------------------------------------------------------------
------------------------------------------------------------------------


Energy Plus Income Trust
Statement of Changes in Net Assets

(Unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
For the periods ended 2005 2005
------------------------------------------------------------------------
Net Assets - beginning of period $113,116,695 $106,406,201
Operations:
Net investment income 2,507,821 4,945,667
Net realized gain (loss) on investments (363,899) 3,783,517
Net change in unrealized gain (loss) on
investments (237,218) 2,225,328
------------------------------------------------------------------------
1,906,704 10,954,512
------------------------------------------------------------------------
Unitholder Transactions:
Distributions to unitholders (2,808,353) (5,538,336)
Issuance of trust units, net 387,462 780,131
------------------------------------------------------------------------
(2,420,891) (4,758,205)
------------------------------------------------------------------------
Net Assets - end of period $112,602,508 $112,602,508
------------------------------------------------------------------------
------------------------------------------------------------------------
Distributions per unit $ 0.2499 $ 0.4937
------------------------------------------------------------------------
------------------------------------------------------------------------


Energy Plus Income Trust
Statement of Investments

(Unaudited)

As at June 30, 2005
------------------------------------------------------------------------
% of
Cost Market Market
------------------------------------------------------------------------
Oil & Gas Royalty Trusts
APF Energy Trust $ - $ -
ARC Energy Trust 2,683,275 2,991,000
Acclaim Energy Trust - -
Baytex Energy Trust 3,601,518 3,370,000
Bonavista Energy Trust 7,566,364 8,536,000
Bonavista Energy Trust subscription
receipts - -
Crescent Point Energy Trust 7,955,647 8,316,000
Daylight Energy Trust 9,141,912 9,000,000
Fairborne Energy Trust 7,165,220 7,020,000
Focus Energy Trust 6,113,887 6,480,000
Freehold Energy Trust 3,518,196 3,198,000
Harvest Energy Trust 3,151,925 3,828,576
Ketch Resources Trust 7,205,892 5,700,000
NAL Oil & Gas Trust 9,283,638 9,405,000
Paramount Energy Trust 9,877,984 10,320,000
Peyto Energy Trust 5,351,858 7,020,000
Progress Energy Trust 9,177,567 8,577,649
Shiningbank Energy Trust - -
Starpoint Energy Trust 8,671,232 8,482,500
Zargon Energy Trust 6,991,999 7,518,000
------------------------------------------------------------------------
107,458,114 109,762,725 91.7%
------------------------------------------------------------------------
Oil & Gas Corporations
Arsenal Energy Inc. 277,478 260,680
Bankers Petroleum Ltd. 520,245 519,436
Fairborne Energy Ltd. - -
Fairquest Energy Limited 563,721 597,402
Innova Exploration Ltd. 419,902 425,425
Ketch Resources Ltd. - -
Midnight Oil Exploration Ltd. - -
Mission Oil and Gas Inc. 626,055 628,000
Starpoint Energy Ltd. - -
Stratic Energy Corporation 397,193 400,000
TransGlobe Energy Corporation 1,230,295 1,399,786
Western Prospector Group Ltd. 596,479 558,000
------------------------------------------------------------------------
4,631,368 4,788,729 4.0%
------------------------------------------------------------------------
Oil & Gas Service Trusts
CCS Income Trust 1,366,420 1,740,000
Peak Energy Services Trust - -
Stoneham Drilling Trust - -
Trinidad Energy Services Income Trust 2,455,825 2,812,500
Wellco Energy Services Trust - -
------------------------------------------------------------------------
3,822,245 4,552,500 3.8%
------------------------------------------------------------------------

Investments 115,911,727 119,103,954 99.5%
Cash and Term Deposits 616,448 616,448 0.5%
------------------------------------------------------------------------
Total $116,528,175 $119,720,402 100.0%
------------------------------------------------------------------------
------------------------------------------------------------------------


Energy Plus Income Trust
Notes to the Financial Statements

(Unaudited)


THE TRUST

Energy Plus Income Trust (the "Fund" or "Energy Plus") is an open-end investment trust established under the laws of Alberta pursuant to a Declaration of Trust dated September 23, 2004. The Fund commenced operations upon the completion of its initial public offering on November 16, 2004. The Fund does not have a fixed termination date but may be terminated at any time upon not less than 90 days written notice to the Administrator with the prior approval of the unitholders.

The Fund's investment objective is to provide investors with monthly cash distributions from a portfolio consisting of oil and gas trusts and other resource based securities. The Fund seeks to achieve a total return on the portfolio that is greater than the total return provided by the S&P/TSX Capped Energy Trust Index.

SIGNIFICANT ACCOUNTING POLICIES

These interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include estimates and assumptions by management. Actual results may differ from these estimates. Significant accounting policies used in these statements include:

a) Cash and cash equivalents consists of cash on account and short term bankers' acceptances with maturities of less than 90 days on acquisition.

b) Investments are stated at market values based on closing market quotations. Average cost is used to compute realized and unrealized gains or losses on investments. Investment transactions are recorded on the trade date.

c) The Fund qualifies as a unit trust within the meaning of the Income Tax Act (Canada). Provided the Fund distributes to its unitholders its net income for tax purposes, the Fund will not generally be liable for income tax under Part 1 of the Canadian Income Tax Act.

d) Dividend income is recorded on the ex-dividend date, distribution income is recorded on the ex-distribution date and interest is recognized as earned.

UNITHOLDERS' CONTRIBUTION

The authorized capital of the Fund consists of an unlimited number of trust units which are transferable redeemable units of beneficial interest.

The Fund issued 29,968 units for administrative and investment manager fees and 9,978 units under its distribution reinvestment plan during the second quarter of 2005.

The Fund has a mandatory repurchase program whereby units offered for sale at a discount to the Fund's net asset value per unit of greater than 5% are repurchased for cancellation, subject to a maximum of 1.25% of the total number of units outstanding at the beginning of each calendar quarter. During the quarter ended June 30, 2005, the Fund repurchased no units under this program.

ADMINISTRATIVE AND INVESTMENT MANAGER FEES

N.A. Energy Management Inc. is the administrator of the Fund and Galileo Equity Management Inc. is the investment manager of the Fund. Pursuant to the administrative and investment management agreements, the aggregate fees for these services are based upon 1.1% of the average weekly net asset value of the Fund, payable in units monthly in arrears. During the second quarter of 2005, the Fund recorded an expense of $320,658 in respect of these fees.

TRAILER AND SERVICE FEES

The Fund pays a trailer fee to investment dealers calculated and payable quarterly in arrears at an annual rate of 0.4% of the net asset value of the Fund held by unitholders in accounts with investment dealers. For the quarter ended June 30, 2005, the Fund recorded an expense of $112,511 related to the trailer fee.

CREDIT FACILITY

The Fund maintains a credit facility with a Canadian chartered bank for up to a maximum amount of $25 million. At June 30, 2005, $8.55 million was drawn under the facility. The credit facility is a revolving facility that will revolve until November 25, 2005 and for a further 364 days at the option of the bank. Borrowings are collateralized by a general security agreement which provides a first and floating charge over the Fund's assets. Advances under the facility are made in the form of bankers' acceptances or prime rate loans.



CORPORATE INFORMATION

Administrator
N.A. Energy Management Inc.
Suite 3500, 350 7th Avenue S.W.
Calgary, Alberta T2P 3N9
Telephone: (403) 261-9674
Fax: (403) 261-8670
Website: www.citadelfunds.com

Investment Manager
Galileo Equity Management Inc.
161 Bay Street, Suite 4730
Toronto, Ontario M5J 2S1

Trustee
Computershare Trust
Company of Canada
6th Floor, 530 8th Avenue S.W.
Calgary, Alberta T2P 3S8

Stock Exchange Listing
Toronto Stock Exchange
Trust units: EPF.un


Contact Information

  • Energy Plus Income Trust
    Joe MacDonald
    Executive Vice President, Sales and Marketing
    1-877-261-9674
    Website: www.citadelfunds.com