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General Income Trust
1. What are distributions and how are they determined?
As an Income Fund, we pay monthly cash payments to our Unitholders called distributions. They are based on the amount of cash flow generated from the sale of our oil and natural gas production after expenses.
2. What are some of the main risk factors associated with an investment in an oil and gas income fund such as Enerplus?
Oil and gas income funds face many of the same risks as an oil and gas company. Commodity prices and production levels are the main factors that affect our cash flow and therefore the amount of cash available to distribute to investors. Other factors such as global energy production and policy, political conditions, currency fluctuations and weather conditions also impact risk factors. Please read page 73 of our Annual Information Form to understand more about risks related to Enerplus' business. Click Here
General Enerplus
3. What is your ticker symbol?
Enerplus Resources Fund trades on the Toronto Stock Exchange under the ticker symbol ERF.un and on the New York Stock Exchange under the symbol ERF.
4. Can I buy units of Enerplus directly from the company?
No. All purchases of Enerplus trust units must be made through a broker or other financial intermediary.
5. Are cash distributions paid on a monthly or a quarterly basis?
Cash distributions are paid on the 20th day of each month to unitholders of record on the 10th of the month. The one exception is the January 20th payment which has a record date of December 31 of the previous year. The payment is converted into US$ for U.S. unitholders on the payment date.
6. Where can I find information on past cash distributions?
Visit the "Cash Distribution" section on our website. CDN$ information is available for Enerplus Resources Fund going back to inception (1987). US$ information starts in 2001 as Enerplus obtained its listing on the NYSE in November of 2000.
For Canadian unitholders, please Click Here.
For U.S. investors, please Click Here
7. Does Return of Capital mean I'm getting back part of my original investment?
Return of Capital (ROC) is the tax-deferred portion of the monthly cash payments we distribute to Unitholders. As an income trust, at this point in time, we pay no corporate income tax in Canada, as an oil and gas producer, we earn deductions that shelter part of our income. Therefore, we pass on these deductions to our Unitholders in the form of non-taxable distributions. Generally, your cost base of the units is decreased by the amount of the ROC each month.
8. What is your current yield and what factors may influence the monthly payments (or how stable are the payments)?
The current yield is calculated by dividing the amount of distributions paid on an annual basis by the current trading price of the units. Enerplus' distribution policy is to pay approximately 60% to 90% of the annual cash flow and retain 10% to 40% to fund capital expenditures and/or debt repayment. As an oil and gas producer, our funds flow is directly influenced by commodity prices. Please read page 73 of our Annual Information Form to understand more about risks related to Enerplus' business. Click Here
9. How is it possible for Enerplus to pay out more cash distributions than its net income to Unitholders?
Our monthly payments are based on the net cash flow (also called "cash flow from operations" in our reports), resulting from the sale of our oil and natural gas production. The earnings (also called "net income") calculation deducts all non-cash items (such as Depletion, Depreciation, Amortization & Accretion, future income taxes and non-cash charges for hedging) as well as the cash items. As a result, it is quite possible for earnings per unit to be less than the actual cash distributions per unit.
10. What does "ex-dividend" mean?
Ex-dividend means that units must be purchased PRIOR to this date to be entitled to receive the current declared distribution. We announce the distribution on a monthly basis. Ex-dividend and record date information is published in each monthly news release. The dates are also published on our Events Calendar: http://www.enerplus.com/investor_information/events/2008_events_
11. What is the Total Return?
In 2007, we had a total return of -11.4% for Canadian unitholders and 2.9% for U.S. unitholders. Additional information on our historical returns can be found at the following link:
http://www.enerplus.com/performance
12. What is the split between your oil and natural gas production?
Enerplus' production is well balanced with roughly 60% of our current production coming from natural gas and the remaining 40% coming from crude oil and natural gas liquids.
13. How many years of reserves do you have and what will happen to the Trust when these assets are depleted?
Based on 2007 year-end proved plus probable reserves and including the reserves from the Focus acquisition, Enerplus currently has a reserve live index (RLI) of 14.0 years. Part of our business strategy is to replace 100% of our annual production each year through internal development and acquisition activities thereby replenishing our assets and ensuring the ongoing business of the Trust. We have a 22 year track record of reserve replacement and growth and we expect to replace our reserves and grow production this year through internally generated opportunities, without relying upon acquisitions.
14. What is the company's forecast on commodity prices and distributions?
The company does not forecast cash distributions as we have no control over commodity prices. We do provide guidance on the factors that we can influence our cash flows such as production volumes, capital expenditures, operating costs, etc. In addition we provide a sensitivity analysis which helps investors determine what impact fluctuations in commodity prices will have on our cash flows annually:
http://www.enerplus.com/performance/cash_distributions/current_sensitivities.shtml
15. Does Enerplus hedge any of its production?
Enerplus does utilize physical and financial option contracts on a portion of our oil and natural gas production in order to protect our balance sheet and minimize the impact of a commodity price downturn on our cash distributions. For full disclosure of all contracts, please read Note 12 Financial Instruments on page 56 of our 2007 Financial Summary. Click Here
16. Do trust unitholders have the same liability protection as common shareholders?
Yes. In May 2004, the Alberta government passed Bill 34 - legislation that provides a statutory limitation on the liability of unitholders of Alberta income trusts such as Enerplus Resources Fund.
The legislation provides protection for trust unitholders similar to the protection afforded to shareholders of corporations.
U.S. Specific
17. What is the tax treatment for U.S. residents and how is the Canadian withholding tax calculated?
For U.S. tax purposes, Enerplus is considered a corporation. Our monthly distributions are considered a combination of "qualified" dividends and non-taxable return of capital. A 15% Canadian withholding tax is applied against the entire monthly distribution and is withheld at source by the Canadian government (i.e. before the cash is paid into your account). Based upon advice from our U.S. tax advisors, where units are held in a cash account, we believe the full amount of all withholding tax should be creditable for U.S. tax purposes in the year in which the withholding taxes are applied.
18. I want to add Enerplus units in my IRA. Will I still have to pay Canadian withholding tax?
Yes the withholding tax still applies. As Enerplus Resources Fund (ERF) is considered a trust for Canadian tax purposes, distributions of income by ERF are not eligible for tax relief for the purposes of the Tax Treaty between Canada and U.S. If you hold the units in a cash account, you will receive a Form 1099-DIV from your broker which will show an amount in Box 6 representing the "foreign taxes" during the year. This amount can be used as a foreign tax credit on your personal income tax return. Where units are held in an IRA, the same withholding taxes apply, however, the amount of the withholding tax is not creditable for U.S. tax purposes.
19. Is there any way for me to avoid paying the 15% Canadian withholding tax?
Not to our knowledge. Some charitable organizations are eligible for an exemption. If you wish to pursue an enquiry, please visit the Revenue Canada website at: http://www.cra-arc.gc.ca or contact the Revenue Canada International Tax Services Office directly at 1-800-267-5177.
20. Do Enerplus distributions qualify for the dividend tax reduction in the U.S.? (i.e. qualified dividends)
Yes. Enerplus meets all requirements of the "tests" identified by the IRS.
21. Does your company have a DRIP for U.S. residents?
Unfortunately no. We have a Distribution Reinvestment and Unit Purchase Plan available to Canadian Residents only at this time, but we are investigating the possibility of implementing a DRIP for U.S. residents. Once a determination is made we will issue an announcement to all investors.
22. Does your company issue a K1 at the end of the year?
No. Enerplus is treated as a corporation for U.S. tax purposes. At the end of the year, you'll receive a Form 1099 DIV from your broker. If you are a registered unitholder, the 1099 will come from our transfer agent, Computershare Trust Company of Canada. They can be reached directly at 1-866-921-0978.
23. When I look on various web sites (U.S.), I can't find information on your company before November 2000. Why is this?
We obtained our listing on the New York Stock Exchange on November 17, 2000, and therefore some investment websites don't show the Fund's performance before that date. We have traded on the Toronto Stock Exchange since 1986. We recommend you visit our website to find all pertinent information on Enerplus.
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