Former Petrofund Taxation Information

Information for Canadian Petrofund Unitholders

(U.S. Petrofund Unitholders, click here, or scroll down)

To download printable version for Canadian former Petrofund unitholders, click here.

To access Petrofund Section 85 Canadian Tax Election Forms, click here.

To view historical taxation information, please click here.

Introduction

This information is intended to assist individuals who were former unitholders of Petrofund Energy Trust (“Petrofund”) in the preparation of their 2006 T1 Income Tax Returns. It is not intended to constitute legal or tax advice to any former holder of Petrofund units. Readers should consult with their legal or tax advisors as to their particular tax consequences.

The following summary applies if you are a unitholder who:

is a resident of Canada under the Income Tax Act (Canada), and
holds your trust units as capital property.

If this is not the case, please consult with your tax adviser about your Petrofund units.

Trust units held within an RRSP, RRIF or DPSP

If you hold your trust units within a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), or a Deferred Profit Savings Plan (DPSP), NO AMOUNTS are to be reported in your 2006 Income Tax Return.

Trust units held outside of an RRSP, RRIF or DPSP

Follow this table if you hold your trust units outside an RRSP, RRIF or DPSP.

IF	Then
You hold trust units through a broker or other intermediary…	You will receive a T3 Supplementary slip directly from your broker or intermediary, not from the transfer agent or Petrofund Energy Trust.
You are a registered unitholder…	You will receive T3 Supplementary slips directly from the transfer agents (Computershare Trust Company of Canada and CIBC Mellon).

The amount reported in Box (26) on the T3 supplementary slip, “Other income”, should be reported on your 2006 T1 Income Tax Return.

Cash distribution schedule

The following schedule outlines for income tax purposes the cash distributions paid in 2006 and the taxable portion of each distribution per trust unit:

2006 Cash Distribution Information for Canadian Petrofund Unitholders ($/unit)
Record Date	Payment Date	Cash Distribution	Taxable Amount	Return of Capital Amount
Jan 17 2006	Jan 31 2006	0.20	0.17000	0.03000
Feb 14 2006	Feb 28 2006	0.20	0.17000	0.03000
Mar 17 2006	Mar 31 2006	0.20	0.17000	0.03000
Apr 13 2006	Apr 28 2006	0.20	0.17000	0.03000
May 16 2006	May 31 2006	0.20	0.17000	0.03000
Jun 16 2006	Jun 30 2006	0.20	0.17000	0.03000
Jun 30 2006	Jun 30 2006	0.10	0.08500	0.01500
Jun 30 2006	Jun 30 2006	1.00	0.00000	1.00000
Total per unit		2.30	1.10500	1.19500

Note: The taxable portion of Petrofund’s 2006 distributions was 48.043% and the Return of Capital portion was 51.957%. If you sold your Petrofund units prior to the merger with Penn West Energy Trust and did not receive the $1.00 special distribution, the taxable portion of your distributions was 85% and the return of capital was 15%.

Adjusted cost base of units for capital gains purposes

The Adjusted Cost Base (“ACB”) is used in calculating capital gains and losses on the disposition of trust units. Unitholders are required to reduce the ACB of their trust units by an amount equal to the cumulative cash received from distributions in 2006 minus the amount reported as “Other Income” on the T3 slip.

Note: For more information related to the effects of the June 30, 2006 merger with Penn West, click here.

Disclaimer

This information is a general guideline and not intended to be legal advice to any particular previous holder of Petrofund. This information is not exhaustive of all possible Canadian income tax considerations.

Previous unitholders of Petrofund should consult their own legal and tax advisers as to their particular tax consequences.

Information for U.S. Petrofund Unitholders

To download printable version for U.S. former Petrofund unitholders, click here.

Introduction

The following information is provided to assist individual U.S. unitholders in reporting 2006 Petrofund Energy Trust (“Petrofund”) distributions received on their Internal Revenue Service Form 1040, “U.S. Individual Income Tax Return” (“Form 1040”). This summary is of a general nature and is not intended to constitute legal or tax advice to any former holder of Petrofund units. Readers should consult with their legal or tax advisors as to their particular tax consequences.

U.S. unitholders

The following summary applies if you are a unitholder who is a citizen or resident of the United States under the Internal Revenue Code (United States).

Trust units held within a Qualified Retirement Plan

If you hold your trust units within a Qualified Retirement Plan, NO AMOUNTS are to be reported on your 2006 IRS Form 1040-U.S. Individual Income Tax Return.

Trust units held outside of a Qualified Retirement Plan

The following table applies if you hold your trust units outside a Qualified Retirement Plan.

Then

You hold trust units through a broker or other intermediary…

You will receive all necessary tax form(s) directly from your broker or intermediary, not from Petrofund’s transfer agent or Petrofund Energy Trust.

You are a registered unitholder…

You will receive Forms 1099-DIV and NR-4 forms directly from the transfer agents

(Computershare Trust Company of Canada and CIBC Mellon).

In consultation with its U.S. tax advisors, Penn West believes that the Petrofund trust units should be properly classified as equity in a corporation rather than debt. The dividend component of the distributions is based on Petrofund’s current and accumulated earnings and profits determined in accordance with U.S. income tax principles. These dividends should be “qualified dividends” for U.S. federal income tax purposes subject to the reduced rate of tax (15%) applicable to long-term capital gains. Accordingly, the amount included in Line 1b of the Form 1099-DIV should be reported as a “qualified dividend” on Line 9b of Form 1040, unless the factual situation of the individual U.S. unitholder determines otherwise. Commentary on page 23 of the Form 1040 Instruction Booklet for 2006 provides guidance in making this determination.

Trust distributions are subject to a 15% Canadian withholding tax that is withheld and remitted on behalf of U.S. unitholders. Where trust units are held outside of a qualified retirement plan, the full amount of withholding tax paid may be used to offset a portion of the U.S. tax liability. The amount of withholding tax included on Line 6 of Form 1099-DIV representing the amount of foreign tax paid 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 obtained from your broker or other intermediary. This information is not available to Penn West.

Cash distribution schedule

The following schedule outlines for income tax purposes the cash distributions paid in 2006 and the taxable portion of each distribution per trust unit:

2006 Cash Distribution Information for U.S. Unitholders ($/unit)
Record Date	Payment Date	$CDN			$US
Record Date	Payment Date	Cash Distri- bution	Qualified Dividend	Return of Capital	Exchange Rate*	Qualified Dividend $US	Return of Capital Amount $US
Jan 17 2006	Jan 31 2006	0.20	0.14214	0.05786	0.8589	0.12208	0.04970
Feb 14 2006	Feb 28 2006	0.20	0.14214	0.05786	0.8660	0.12309	0.05011
Mar 17 2006	Mar 31 2006	0.20	0.14214	0.05786	0.8630	0.12266	0.04994
Apr 13 2006	Apr 28 2006	0.20	0.14214	0.05786	0.8681	0.12339	0.05023
May 16 2006	May 31 2006	0.20	0.14214	0.05786	0.8999	0.12791	0.05207
Jun 16 2006	Jun 30 2006	0.20	0.14214	0.05786	0.8908	0.12662	0.05154
Jun 30 2006	Jun 30 2006	0.10	0.07107	0.02893	0.8969	0.06374	0.02595
Jun 30 2006	Jun 30 2006	1.00	-	1.00000	0.8969	-	0.89690
Total per unit		2.30	0.92391	1.37609	-	0.80949	1.22644

*Source – Bank of Canada nominal noon exchange rate on record dates ($CDN/$US), will apply for registered unitholders. Non-registered unitholders should use other appropriate exchange rates.

Note: Based on the above illustrative exchange rates, the taxable portions of the 2006 distributions to U.S. residents were determined to be 39.760%, with the remaining 60.240% considered a return of capital, which reduces your basis. When you substitute the applicable exchange rates, your actual percentages in U.S. dollars might vary. If you sold your Petrofund units prior to the merger with Penn West Energy Trust and did not receive the $1.00 special distribution, the taxable portion of your distributions was 71.068% and the return of capital was 28.932%.

Basis of units for capital gains purposes

The return of capital portion of distributions will affect your basis in your units. Please contact your broker or financial advisor for exact calculations.

For information on the effect of the June 30, 2006 merger with Penn West, click here.

Disclaimer

This information letter is a general guideline and not intended to be legal advice to any particular holder or potential holder of Petrofund Energy Trust. This information is not exhaustive of all possible U.S. income tax considerations.

Unitholders or potential holders of the Petrofund Energy Trust should consult their own legal and tax advisers as to the particular tax consequences of holding their Petrofund Energy Trust units.