UNITED STATES ------------------------
SECURITIES AND EXCHANGE COMMISSION OMB APPROVAL
WASHINGTON, D.C. 20549 ------------------------
OMB Number: 3235-0381
Expires: April 30, 2006
FORM 40-F Estimated average burden
hours per response...427
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[_] REGISTRATION STATEMENT PURSUANT TO
SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2005 Commission File Number: 001-32677
ADVANTAGE ENERGY INCOME FUND
(Exact name of Registrant as specified in its charter)
N/A
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(Translation of Registrant's name into English (if applicable))
ALBERTA
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(Province or other jurisdiction of incorporation or organization)
1311
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(Primary Standard Industrial Classification Code Number (if applicable))
N/A
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(I.R.S. Employer Identification Number (if
applicable))
3100, 150 - 6TH AVENUE SW, CALGARY, ALBERTA, CANADA T2P 3Y7 (403) 261-8810
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(Address and telephone number of Registrant's principal executive offices)
CORPORATION SERVICE COMPANY
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1133 AVENUE OF AMERICAS, 31ST FLOOR, NEW YORK, NY
10036 1-800-927-9800 (Name, address (including zip code)
and telephone number (including area code)
of agent for service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which
registered
Toronto Stock Exchange
Trust Units New York Stock Exchange
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
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(Title of Class)
PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
SEC 2285 (08-03) CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE
FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
For annual reports, indicate by check mark the information filed with
this Form:
[X] Annual information form [X] Audited annual financial statements
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the
annual report. 57,846,324 Trust Units.
Indicate by check mark whether the Registrant by filing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the file
number assigned to the Registrant in connection with such Rule.
Yes [_] 82-_______ No [X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
DOCUMENTS INCLUDED IN THIS FORM
The following documents are included in the Form:
No. Document
1. Annual Information Form of the Registrant for the year ended
December 31, 2005. (filed herein as Exhibit 99.1)
2. Consolidated Financial Statements of the Registrant for the
fiscal year ended December 31, 2005; including a reconciliation
to US GAAP (Note 15). (filed herein as Exhibit 99.2)
3. Consent of KPMG LLP to the inclusion of the Auditors' Report
dated March 7, 2006 on the Registrant's Audited Consolidated
Financial Statements for the fiscal year ended December 31,
2005.
4. Comments by KPMG LLP for U.S. readers on Canada - U.S. Reporting
Differences, dated March 7, 2006
5. Consent of Sproule Associated Limited to the incorporation by
reference herein of its Statement of Reserves Data and other
Information in Form 51-101F1, which statement and report is
contained in the Registrant's Renewal Annual Information Form
for the fiscal year ended December 31, 2005.
6. CEO Certification pursuant to rule 13a-14(a) of the Exchange
Act.
7. CFO Certification pursuant to rule 13a-14(a) of the Exchange
Act.
8. CEO Certification pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
9. CFO Certification pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
3
CONSOLIDATED AUDITED ANNUAL FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
A. AUDITED ANNUAL FINANCIAL STATEMENTS
For consolidated audited financial statements, including the report of
independent chartered accountants with respect thereto, see the
Consolidated Financial Statements of the Registrant for the fiscal year
ended December 31, 2005 included herein. The Registrant's financial
statements have been reconciled to United States generally accepted
accounting principles ("US GAAP") as required by Form 40-F under the
Exchange Act. See Note 15 - Reconciliation of Financial Statements to
United States Generally Accepted Accounting Principles on pages 17
through 20 of such 2005 Consolidated Financial Statements.
B. MANAGEMENT'S DISCUSSION AND ANALYSIS
For management's discussion and analysis, see Management's Discussion and
Analysis of the Registrant for the fiscal year ended December 31, 2005
included herein.
DISCLOSURE CONTROLS AND PROCEDURES
As of December 31, 2005, an evaluation was carried out under the
supervision of and with the participation of the Registrant's management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Registrant's disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Exchange Act). Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that as of the end of the fiscal year, the design and operation
of these disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Registrant in reports it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules
and forms.
It should be noted that while the Registrant's principal executive
officer and principal financial officer believe that the Registrant's
disclosure controls and procedures provide a reasonable level of
assurance that they are effective, they do not expect that the
Registrant's disclosure controls and procedures or internal control over
financial reporting will prevent all errors and fraud. A control system,
no matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met. Reference is made in the "Controls and Procedures" and "Evaluation
of Disclosure Controls and Procedures" sections of Management's
Discussion and Analysis of the Registrant for the fiscal year ended
December 31, 2005 included herein.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this Annual Report on Form 40-F no changes
occurred in the Registrant's internal control over financial reporting
that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting.
Reference is made in the "Evaluation of Disclosure Controls and
Procedures" section of Management's Discussion and Analysis of the
Registrant for the fiscal year ended December 31, 2005 included herein.
4
NOTICES PURSUANT TO REGULATION BTR
None.
CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER
AND SENIOR FINANCIAL OFFICERS
The Trust has adopted a Code of Ethics for its senior officers, principal
financial officer and controller or principal accounting officer,
directors and employees. This code applies to President and Chief
Executive Officer, Senior Vice-President, Vice President Corporate
Development, the Vice-President, Finance and Chief Financial Officer,
Vice President, Exploitations, Vice President Operations, Directors and
employees. It is available on the Registrant's web site at
www.advantageincome.com and in print to any unitholder who requests it.
All amendments to the code, and all waivers of the code with respect to
any of the officers covered by it, will be posted on the Registrant's web
site and provided in print to any unitholder who requests them.
AUDIT COMMITTEE
IDENTIFICATION OF AUDIT COMMITTEE
The following individuals comprise the entire membership of the Advantage
Audit Committee: Steven Sharpe, Rodger Tourigny, Ronald McIntosh and
Lamont Tolley.
AUDIT COMMITTEE FINANCIAL EXPERTS
Rodger Tourigny has been determined by the board of the Registrant to
meet the "audit committee financial expert" criteria prescribed by the
Securities and Exchange Commission and has been designated as audit
committee financial expert for the Audit Committee of the board of the
Registrant.
Each of the directors serving on the Audit Committee has also been
determined by the board of the Registrant to be independent within the
criteria established by the New York Stock Exchange, Inc. for audit
committee membership.
5
PRINCIPAL ACCOUNTING FEES AND SERVICES - INDEPENDENT AUDITORS
Fees payable to the Registrant's independent auditor, KPMG LLP, for the
years ended December 31, 2005 and December 31, 2004, totaled $320,725 and
$321,997, respectively, as detailed in the following table. All funds are
in Canadian dollars.
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YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
2005 2004
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AUDIT FEES $269,000 $244,500
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AUDIT-RELATED FEES $30,000 $51,000
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TAX FEES $21,725 $26,497
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ALL OTHER FEES $ 0 $0
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TOTAL $320,725 $321,997
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The nature of the services provided by KPMG LLP under each of the
categories indicated in the table is described below.
AUDIT FEES
Audit fees were for professional services rendered by KPMG LLP for the
audit of the Registrant's annual financial statements and services
provided in connection with statutory and regulatory filings or
engagements. These services include prospectus work and audit or review
of financials forming part of such prospectus and US GAAP reconciliation
matters.
AUDIT-RELATED FEES
Audit-related fees were for assurance and related services reasonably
related to the performance of the audit or review of the annual
statements and are not reported under "Audit Fees" above. These services
include French translation in connection with prospectus filing.
TAX FEES
Tax fees were for tax compliance, tax advice and tax planning
professional services. These services consisted of: tax compliance,
including the preparation and review of tax returns; and general tax
planning and advisory services relating to common forms of domestic and
international taxation (i.e., income tax, capital tax, goods and services
tax).
ALL OTHER FEES
None.
6
PREAPPROVAL POLICIES AND PROCEDURES
It is within the Advantage's Audit Committee Charter to approve all audit
and non-audit related fees. The Audit Committee have pre-approved
specifically identified non-audit tax-related services, including tax
compliance, the review of tax returns, and tax planning and advisory
services relating to common forms of domestic and international taxation
(i.e. income tax, capital tax, goods and services tax). The Audit
Committee will be informed routinely as to the non-audit services
actually provided by the auditor pursuant to this pre-approval process.
The auditors also present the estimate for the annual audit related
services to the Committee for approval prior to undertaking the annual
audit of the financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
None.
CONTRACTUAL OBLIGATIONS
Payments due by period (Cdn$MM)
Less than 1 More than 5
TOTAL year 1-3 years 4-5 years years
----- ----------- --------- --------- -----------
Building Lease $3.4 $1.4 $2.0 - -
Capital Lease $1.8 $0.4 $1.4 - -
Pipeline/Transportation $3.1 $2.4 $0.7 - -
Convertible Debentures $135.1 - $10.1 $75.3 $49.7
TOTAL CONTRACTUAL OBLIGATIONS $143.4 $4.2 $14.2 $75.3 $49.7
DISCLOSURES PURSUANT TO REQUIREMENTS OF THE
NEW YORK STOCK EXCHANGE
PRESIDING DIRECTOR AT MEETINGS OF NON-MANAGEMENT DIRECTORS
The Registrant schedules regular executive sessions in which the
Registrant's "non-management directors" (as that term is defined in the
rules of the New York Stock Exchange) meet without management
participation. Steven Sharpe serves as the presiding director (the "Chair
of the Board") at such sessions. Each of the Registrant's non-management
directors is "independent" as such term is used in the rules of the
Canadian Securities Commissions and the New York Stock Exchange Corporate
Governance Standards.
COMMUNICATION WITH NON-MANAGEMENT DIRECTORS
Unitholders may send communications to the Registrant's non-management
directors by writing to Investors Relations, Petro-Canada Centre, West
Tower, Suite 3100, 150 - 6th Avenue SW, Calgary, Alberta T2P 3Y7, or
calling the toll free number at 1-866-393-0393. Communications will be
referred to the Chair of the Board for appropriate action. The status of
all outstanding concerns addressed to the Chair of the Board will be
reported to the board of directors as appropriate.
7
CORPORATE GOVERNANCE GUIDELINES
According to NYSE Rule 303A.09, a listed company must adopt and disclose
a set of corporate governance guidelines with respect to specified topics
and must disclose any significant ways in which its practices differ from
those followed by US domestic companies under the NYSE rules. Such
guidelines and disclosures are required to be posted on the listed
company's website. The Registrant has adopted the required guidelines and
made the required disclosures, all of which are available on the
Registrant's website at www.advantageincome.com and in print to any
unitholder who requests them.
BOARD COMMITTEE CHARTERS
Advantage's Audit Committee Charter, the Terms of Reference of the Human
Resources, Compensation and Corporate Governance Committee and the Terms
of Reference for the Independent Reserve Evaluation Committee are
available for viewing on the Registrant's website at
www.advantageincome.com and are available in print to any person who
requests them. Requests for copies of these documents should be made by
contacting: Investor Relations, Petro-Canada Centre, West Tower, Suite
3100, 150 - 6th Avenue S.W., Calgary, Alberta T2P 3Y7.
UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and
to furnish promptly, when requested to do so by the Commission staff,
information relating to: the securities registered pursuant to Form 40-F;
the securities in relation to which the obligation to file an annual
report on Form 40-F arises; or transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Registrant has previously filed with the Commission a Form F-X in
connection with the Trust Units.
Any change to the name or address of the agent for service of process of
the registrant shall be communicated promptly to the Securities and
Exchange Commission by an amendment to the Form F-X referencing the file
number of the relevant registration statement.
8
EXHIBITS
The following exhibits are filed as part of this report.
Exhibit
Number Description
23.1 Consent of KPMG LLP to the inclusion of the Auditors' Report
dated March 7, 2006 on the Registrant's Audited Consolidated
Financial Statements for the fiscal year ended December 31, 2005.
23.2 Comments by KPMG LLP for U.S. readers on Canada - U.S. Reporting
Differences, dated March 7, 2006
23.3 Consent of Sproule Associated Limited to the incorporation by
reference herein of its Statement of Reserves Data and other
Information in Form 51-101F1, which statement and report is
contained in the Registrant's Renewal Annual Information Form for
the fiscal year ended December 31, 2005.
31.1 CEO Certification pursuant to rule 13a-14(a) of the Exchange Act.
31.2 CFO Certification pursuant to rule 13a-14(a) of the Exchange Act.
32.1 CEO Certification pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 CFO Certification pursuant to U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 Annual Information Form of the Registrant for the year ended
December 31, 2005.
99.2 Consolidated Financial Statements of the Registrant for the
fiscal year ended December 31, 2005, including a reconciliation
to US GAAP (Note 15).
99.3 Management's Discussion and Analysis of the Registrant for the
fiscal year ended December 31, 2005.
9
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant
certifies that it meets all of the requirements for filing on Form 40-F
and has duly caused this Annual Report on Form 40-F to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of
Calgary, Province of Alberta, Canada.
Dated: March 7, 2006
ADVANTAGE ENERGY INCOME FUND
By: /s/ Peter Hanrahan
--------------------------------------
Name: Peter Hanrahan
Title: Vice-President, Finance and
Chief Financial Officer of
Advantage Oil & Gas Ltd. on
behalf of Advantage Energy
Income Fund
10