Uranium Participation Corporation
TSX : U

Uranium Participation Corporation

October 05, 2005 16:00 ET

Uranium Participation Corporation Reports Financial Results for the Period Ended August 31, 2005

TORONTO, ONTARIO--(CCNMatthews - Oct. 5, 2005) -

THIS NEWS RELEASE IS NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES DESCRIBED HEREIN

Uranium Participation Corporation ("Uranium Corp.")(TSX:U) reports results for the interim period ended August 31, 2005. All amounts are in Canadian currency unless otherwise noted.

Net asset value per share at August 31, 2005 was CDN$4.84. The Company has purchased and taken delivery of 2,550,000 pounds of U3O8 at a total cost, including commissions, of $89,382,000. Market value of the investment in U3O8, based on the spot price for U3O8 at August 31, 2005 of US$30.20, was $91,557,000.

Revenue for the period totaled $2,668,000 consisting of unrealized gain in the value of U3O8 of $2,175,000 and interest earned on invested cash of $493,000. Expenses for the period totaled $2,019,000 of which $392,000 was operating related and $1,627,000 was a loss on foreign exchange. The foreign exchange loss was due to a decline in the value of US currency acquired and held for purchases of U3O8 made during the period. It is anticipated that the impact of foreign exchange on the Company's expenses will be minimal in future periods. Net earnings, after provision for income taxes, totaled $411,000 or $0.02 per share.

About Uranium Participation Corporation

Uranium Participation Corporation is an investment holding company created to invest substantially all of its assets in uranium oxide in concentrates (U3O8), with the primary investment objective of achieving appreciation in the value of its U3O8 holdings. Additional information on Uranium Participation Corporation is available on SEDAR at www.sedar.com and on Uranium Participation Corporation's website at www.uraniumparticipation.com.



URANIUM PARTICIPATION CORPORATION

FINANCIAL STATEMENTS

AUGUST 31, 2005

These Financial Statements have not been subject to a review by the
Company's Auditors


URANIUM PARTICIPATION CORPORATION
CONSOLIDATED STATEMENT OF NET ASSETS (Unaudited)

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(in thousands of Canadian dollars) As at
August 31
2005

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Net assets
Investment in uranium oxide in concentrates - at market
(Cost - $89,382) $ 91,557
Cash and cash equivalents (note 3) 3,563
Sundry receivables and other assets 189
Future income taxes - net (note 4) 1,873
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$ 97,182

Accounts payable and accrued liabilities 457
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Net assets $ 96,725
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Net assets represented by:
Common shares (note 5) 92,714
Warrants (note 5) 3,600
Retained earnings 411
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$ 96,732
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Common shares:
Issued and outstanding 20,000,000
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Net asset value per common share
Basic and diluted $ 4.84
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The accompanying notes are an integral part of these financial
statements.


URANIUM PARTICIPATION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

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(in thousands of Canadian dollars) Year to date
August 31,
2005(1)
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Income
Unrealized gain of investment in uranium oxide
in concentrates $ 2,175
Interest 493
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2,668

Expenses
Management fees (note 6) 183
Storage fees 89
Audit fees 25
Directors fees 34
Shareholder information and other compliance 52
General office and miscellaneous 9
Foreign exchange loss 1,627
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2,019
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Earnings before income taxes 649
Income tax expense
Current 38
Future 200
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Net earnings 411
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Earnings per common share (note 5)
Basic and diluted $ 0.02

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(1) Period commenced with incorporation on March 15, 2005.


URANIUM PARTICIPATION CORPORATION
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)

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(in thousands of Canadian dollars) Year to date
August 31,
2005(1)
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Net assets at beginning of period $ -
Net proceeds from issue of units after tax 96,314
Net earnings 411
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Net assets at end of period $ 96,725
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(1) Period commenced with incorporation on March 15, 2005.


The accompanying notes are an integral part of these financial
statements.


URANIUM PARTICIPATION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

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(in thousands of Canadian dollars) Year to date
August 31,
2005(1)
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Operating Activities
Net earnings after income taxes $ 411
Adjustments for non-cash items:
Unrealized gain of investment in uranium
oxide in concentrates (2,175)
Future income tax expense 200

Changes in non-cash working capital:
Change in sundry receivables and other assets (189)
Change in accounts payable and accrued liabilities 457
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Net cash used in operating activities (1,296)
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Investing Activities
Purchases of investments in uranium oxide in concentrates (89,382)
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Net cash used in investing activities (89,382)
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Financing Activities
Common share and warrant issues net of pre-tax issue costs 94,241
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Net cash generated by financing activities 94,241
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Increase in cash and cash equivalents 3,563
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Cash and cash equivalents - beginning of period -
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Cash and cash equivalents - end of period $ 3,563
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(1) Period commenced with incorporation on March 15, 2005.


URANIUM PARTICIPATION CORPORATION
STATEMENT OF INVESTMENT PORTFOLIO (Unaudited)

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(in thousands of Canadian dollars, except pound amounts)

As at August 31, 2005
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Pounds Cost Market
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Investment in uranium oxide
in concentrates 2,550,000 $ 89,382 $ 91,557
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Per pound values:
- In Canadian dollars $ 35.05 $ 35.90
- In United States dollars $ 28.78 $ 30.20
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The accompanying notes are an integral part of these financial
statements.


URANIUM PARTICIPATION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1. URANIUM PARTICIPATION CORPORATION

Uranium Participation Corporation ("Uranium Corp") was established under the Business Corporations Act (Ontario) ("OBCA") on March 15, 2005. Uranium Corp is an investment fund as defined by the Canadian securities regulatory authorities in National Instrument 81-106 "Investment Fund Continuous Disclosure". Uranium Corp was created to invest substantially all of its assets in uranium oxide in concentrates (U3O8) with the primary investment objective of achieving appreciation in the value of U3O8 holdings. Uranium Corp trades publicly on the Toronto Stock Exchange under the symbol U.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of Uranium Corp and its wholly owned subsidiary, Uranium Participation Alberta Corp. The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). Interim financial statements do not include all information required by GAAP for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in these financial statements.

Significant Accounting Policies

(a) Investment in Uranium Oxide in Concentrates (U3O8)

Investments in U3O8 are valued at fair value based on the spot price for U3O8 published by Ux Consulting Company, LLC translated to Canadian dollars using the month end foreign exchange rate. Unrealized gains or losses in U3O8 represent the difference between the fair value and average cost of U3O8 purchases, in Canadian dollars, and is recorded in the statement of operations in accordance with CICA Accounting Guideline 18, Investment Companies.

(b) Foreign Exchange Translation

United States dollar investments are translated to Canadian dollars at the rate of exchange prevailing at the transaction date. Any differences between the period end rate of exchange and the rate of exchange prevailing at the time the investments were acquired is recorded in the statement of income as foreign exchange gain or loss. Expenses incurred in United States dollars are translated at the rates of exchange prevailing when the transaction occurred.

(c) Future Income Taxes

Uranium Corp follows the liability method of accounting for future income taxes. Under this method, current income taxes are recognized from the estimated income taxes payable for the current period. Future income tax assets and liabilities are determined based on temporary timing differences between financial reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that are expected to apply when the differences are expected to reverse. The benefit of tax losses which are available to be carried forward are recognized as assets to the extent that they are more likely than not to be recoverable from future taxable income. The Canadian large corporations tax on capital is included in the provision for income taxes within current tax expense.



3. CASH AND CASH EQUIVALENTS

The cash and cash equivalents balance consists of:

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(in thousands of Canadian dollars) August
2005

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Cash $ 14
Cash equivalents 3,549
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$ 3,563
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4. INCOME TAXES

Uranium Corp operates in two provincial jurisdictions and the related income is subject to varying rates of taxation. The following is a reconciliation of income taxes, calculated at the combined Canadian federal and Ontario provincial rate, to the income tax expense (benefit) included in the consolidated statement of operations for the year to date period ending August 31, 2005:



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(in thousands of Canadian dollars) August
2005

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Earnings before income taxes $ 649
Combined federal and Ontario provincial income tax rate 36.12%
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Computed income tax expense 234

Large corporations tax in excess of surtax 38
Difference between combined federal and Ontario
provincial income tax rate and rates applicable
to subsidiaries in other provinces (34)
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Provision for income taxes $ 238
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Provision for (recovery of) income taxes comprised of:
Current tax expense $ 38
Future tax expense 200
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$ 238
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The components of the Company's future tax asset (liability) are as
follows:

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(in thousands of Canadian dollars) August
2005

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Future tax assets:
Tax benefit of share issue costs $ 2,073
Tax benefit of loss carryforwards 537
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$ 2,610
Less: valuation allowance -
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$ 2,610
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Future tax liabilities:
Unrealized gain of investment in U3O8 (737)
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Future income taxes - net $ 1,873
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5. COMMON STOCK, WARRANTS AND EARNINGS PER SHARE

Common Stock

The movement in common stock for the period March 15 to August 31,
2005 is as follows:

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(in thousands of Canadian dollars, except share numbers)

August 2005
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Shares $
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Common stock - beginning of period - $ -
Gross proceeds from issue of equity
units during the period 20,000,000 100,000
Less: Gross equity unit issue costs (5,759)
Add: Tax effect of unit issue costs 2,073
Less: Allocation of proceeds to
issued warrants (3,600)
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Common stock - end of period 20,000,000 $ 92,714
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Common share financings

During the period, Uranium Corp issued 20,000,000 equity units at $5.00 per unit for total gross proceeds of $100,000,000. Each unit consisted of one common share and one-quarter purchase warrant to purchase one common share at $6.25 exercisable prior to May 10, 2007. The pre-tax net proceeds, after issue costs, was $94,241,000. Approximately $3,600,000 of the proceeds has been allocated as the value of the issued warrants.

Warrants

The movement in warrants for the period March 15, 2005 to August 31, 2005 is as follows:



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(in thousands of Canadian dollars, except warrant numbers)

August 2005
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Warrants $
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Warrants - beginning of period - $ -
Warrants issued during the period
May 2005 equity unit financing 5,000,000 3,600

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Warrants - end of period 5,000,000 $ 3,600
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The $3,600,000 allocation of fair value to the warrants was
calculated using the Black-Scholes model using the following
assumptions:

Dividend yield - nil
Risk-free interest rate - 4 %
Expected life of the warrants - 2 years
Expected volatility factor of future expected
market prices - 35 %


Earnings Per Share

The calculation of basic earnings per share is based on the weighed average number of shares outstanding during the period March 15 to August 31, 2005 which is 20,000,000.

6. RELATED PARTY TRANSACTIONS

Uranium Corp is a party to a management services agreement with Denison Mines Inc. (the "Manager") and as a result, Uranium Corp and the Manager are considered to be related parties. Under the terms of the agreement, Uranium Corp will pay the following fees to the Manager: a) a commission of 1.5% of the gross value of any purchases or sales of U3O8 completed at the request of the Board of Directors; and b) a minimum annual management fee of $400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of up to 0.3% per annum based upon Uranium Corp's net asset value in excess of $100,000,000.

The following transactions were incurred with related parties during the period March 15, 2005 to August 31, 2005:



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(in thousands of Canadian dollars) Year to date
August 31,
2005(1)
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Fees incurred with the Manager:
Management fees $ 167
General office and miscellaneous 5
Commissions on purchase of U3O8(2) 1,321

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Total fees incurred with related parties $ 1,493
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(1) Period commenced with incorporation on March 15, 2005.
(2) Purchase commissions incurred with the Manager have been
capitalized and are included in the cost of the investment
in U3O8.


At August 31, 2005, accounts payable and accrued liabilities includes
$265,000 of amounts due to the Manager with respect to the fees
indicated above.

Uranium Participation Corporation
Interim Management Report of Fund Performance
August 31, 2005


This interim management report of fund performance contains financial highlights but does not contain the complete interim financial statements of the investment company. This report should be read in conjunction with the interim financial statements of Uranium Participation Corporation as at and for the interim period ended August 31, 2005 which, if not attached, are available by contacting the Manager, Denison Mines Inc. by telephone at 416-979-1991 or in writing at 595 Bay Street, Suite 402, Toronto, ON, M5G 2C2 or by visiting our website at www.uraniumparticipation.com or SEDAR at www.sedar.com.

Uranium Participation Corporation ("Uranium Corp.") is a corporation established pursuant to a certificate of incorporation dated March 15, 2005 under the Business Corporations Act (Ontario). Uranium Corp is administered by its board of directors and by Denison Mines Inc. (the "Manager") pursuant to a management services agreement.

Investment Objectives and Strategy

Uranium Corp. is an investment holding entity created to invest substantially all of its assets in uranium oxide in concentrates (U3O8) with the primary investment objective of achieving appreciation in the value of its U3O8. While it is not the current intention of Uranium Corp. to do so in the short term, it may subsequently sell some or all of its holdings in U3O8. Uranium Corp provides an investment alternative for investors interested in investing directly in U3O8. The corporation's common shares represent an indirect interest in physical U3O8 owned by Uranium Corp.

The strategy of Uranium Corp. is to invest in holdings of U3O8 and not to actively speculate with regard to short-term changes in uranium prices. This strategy will provide investors with an ability to effectively invest in U3O8 in a manner that does not directly include risks associated with investments in companies that explore for, mine and process uranium.

Investment Risk

Uranium Corp.'s activities almost entirely involve investing in U3O8. Therefore, the principal factors affecting the price of the common shares are factors which affect the price of U3O8.

Uranium Corp. does not engage in any hedging activities involving its U3O8, so the value of its common shares and warrants will depend upon, and typically fluctuate with, fluctuations in the price of its U3O8.

The market prices of U3O8 are affected by rates of reclaiming and recycling of uranium and rates of production of uranium from mining, and may be affected by a variety of unpredictable international economic, monetary and political considerations, including increased efficiency of nuclear power plants and increased availability of alternative nuclear fuel, such as mixed oxide fuel generated in part from weapons grade plutonium.

Macroeconomic considerations include: expectations of future rates of inflation; the strength of, and confidence in, the U.S. dollar, the currency in which the price of U3O8 is generally quoted, and other currencies; interest rates; and global or regional economic events.

In addition to changes in production costs, shifts in political and economic conditions affecting uranium producing countries may have a direct impact on their sales of uranium.

Results of Operations

Uranium Corp. was incorporated on March 15, 2005. On May 10, 2005, Uranium Corp. completed an initial public offering totaling $90,000,000 and, on May 19, 2005, completed a further issue of $10,000,000 resulting from an over allotment option granted to the underwriters. In total 20,000,000 equity units were issued, each unit consisting of one common share and one-quarter of one warrant. Each whole warrant entitles the holder to purchase a common share at $6.25 until May 10, 2007. Net proceeds of the offering, after issue costs, totaled $94,241,000.

Uranium Corp. has purchased 2,550,000 pounds of uranium oxide in concentrates (U3O8) at a total purchase price of $89,382,000, including commissions of $1,321,000. At August 31, 2005, the market value of the U3O8 purchased was $91,557,000 based on the Ux Consulting Company, LLC published spot price for U3O8 of US$30.20 and the month-end US/Canadian dollar exchange rate of $1.1889.

For the period ended August 31, 2005 net income totaled $411,000 or $0.02 per share on a basic and fully diluted basis. Revenue consisted of interest earned on invested cash of $493,000 and unrealized gain on the investment in U3O8 of $2,175,000. Expenses, before income tax provisions, totaled $2,019,000, of which $392,000 was operating related and $1,627,000 was a loss on foreign exchange.

With the exception of the impact of foreign exchange, the funds operating expenses were generally in line with the Manager's expectations. Foreign exchange has negatively impacted the net asset value of the fund in two ways. First, it has increased the funds expenses by $1,627,000 during the period, and, it negatively impacted the fair value of the funds U3O8 holdings on a Canadian dollar basis.

Uranium Corp's foreign exchange expense of $1,627,000 (equivalent to a decrease in net asset value of $0.08 per share) resulted primarily from the decline in the value of the U.S currency acquired for the purpose of making U3O8 purchases during the period. The initial public offering proceeds were converted to U.S. dollars at an average foreign exchange rate of 1.2404, compared to an average foreign exchange rate of 1.2179 realized from U3O8 purchase activities. It is anticipated that the impact of foreign exchange on the funds expenses will be minimal in future periods.

As referenced above, the foreign exchange rate has also negatively impacted the fair value of the funds U3O8 holdings. In spite of an increase of 4.9% in the value of U3O8 per pound on a U.S dollar basis, foreign exchange has reduced that increase to 2.4% on a Canadian dollar basis. Since Uranium Corp. commenced its U3O8 purchase activity from May 19, 2005 to the end of August 31, 2005, spot prices for U3O8 have risen from US$29.00 per pound to US$30.20 per pound. The funds average U.S cost per pound, including capitalized commissions paid to the Manager, is US$28.78 per pound.

Related Party Transactions

Uranium Corp. is a party to a management services agreement with Denison Mines Inc. (the "Manager") and, as a result, Uranium Corp. and the Manager are considered to be related parties. Under the terms of the agreement, Uranium Corp. is required to pay the following fees to the Manager: a) a commission of 1.5% of the gross value of any purchases or sales of U3O8 completed at the request of the Board of Directors; and b) a minimum annual management fee of $400,000 (plus reasonable out-of-pocket expenses) plus an additional fee of up to 0.3% per annum based upon Uranium Corp.'s net asset value in excess of $100,000,000.

The following transactions were incurred with related parties during the period March 15, 2005 to August 31, 2005:



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(in thousands of Canadian dollars)
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Fees incurred with the Manager:
Management fees $ 167
General office and miscellaneous 5
Commissions on purchase of U3O8 1,321

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Total fees incurred with related parties $ 1,493
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At August 31, 2005, accounts payable and accrued liabilities includes
$265,000 of amounts due to the Manager with respect to the fees
indicated above.


Financial Highlights

The following table shows selected key financial information about the corporation and is intended to help you understand the company's financial performance for the period since inception on March 15, 2005 to August 31, 2005:



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Financial Highlights
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Net asset value per share (in Canadian dollars)(1)
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Net asset value, beginning of period (after initial
public offering) $ 4.82
Increase (decrease) from operations:
Total income
Unrealized gains for the period 0.11
Interest 0.02
Total expenses, including taxes(2) (0.11)
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Total increase from operations 0.02
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Net asset value, end of period $ 4.84
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Spot price of U3O8 per pound (in U.S dollars)
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Spot price of U3O8 , beginning of period $ 21.75
Spot price of U3O8 , end of period $ 30.20

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(1) These calculations are based on 20,000,000 common shares
outstanding;
(2) Includes a net asset value decrease of ($0.08) attributable to
foreign exchange losses;


Summary of Investment Portfolio

Uranium Corp.'s investment portfolio consists of the following:

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(in thousands of Canadian dollars, except pound amounts)

As at August 31, 2005
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Pounds Cost Market
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Investment in U3O8 2,550,000 $ 89,382 $ 91,557
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Per pound values:
- In Canadian dollars $ 35.05 $ 35.90
- In United States dollars $ 28.78 $ 30.20
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The corporation also has cash and cash equivalents of $3,563,000. It is the corporation's current intention to hold its U3O8 as a long term investment.

Contact Information

  • Uranium Participation Corporation
    E. Peter Farmer
    President
    (416) 979-1991 Ext. 231
    or
    Uranium Participation Corporation
    James Anderson
    Chief Financial Officer
    (416) 979-1991 Ext. 372