UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ----------------------
WASHINGTON, D.C. 20549 OMB APPROVAL
----------------------
FORM 40-F OMB NUMBER: 3235-0381
Expires: September 30,
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 2007
12 OF THE SECURITIES EXCHANGE ACT OF 1934 Estimated Average
burden hours per
OR response ........ 4.27
------------------------
[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, 2006 Commission File Number: 001-32677
ADVANTAGE ENERGY INCOME FUND
(Exact name of Registrant as specified in its charter)
N/A
- --------------------------------------------------------------------------------
(Translation of Registrant's name into English (if applicable))
ALBERTA
- --------------------------------------------------------------------------------
(Province or other jurisdiction of incorporation or organization)
1311
- --------------------------------------------------------------------------------
(Primary Standard Industrial Classification Code Number (if applicable))
N/A
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification Number (if
applicable))
3100, 150 - 6TH AVENUE SW, CALGARY, ALBERTA, CANADA T2P 3Y7 (403) 261-8810
- --------------------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive offices)
CORPORATION SERVICE COMPANY
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.
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- ----------------------------
Trust Units New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
- --------------------------------------------------------------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
- --------------------------------------------------------------------------------
(Title of Class)
PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
SEC 2285 (11-06) 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. 105,390,470 Trust Units as of December 31, 2006.
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 this Form 40-F:
NUMBER DOCUMENT DESCRIPTION
- -------------------------------------------------------------------------------
1. Annual Information Form of the Registrant for the year ended
December 31, 2006 (filed herein as Exhibit 99.1)
2. Consolidated Financial Statements of the Registrant for the
fiscal year ended December 31, 2006; including a reconciliation
to US GAAP (Note 17) (filed herein as Exhibit 99.2)
3. Management's Discussion and Analysis of the Registrant for the
fiscal year ended December 31, 2006 (filed herein as Exhibit
99.3).
4. Consent of KPMG LLP to the inclusion of the Auditors' Report
dated March 21, 2007 on the Registrant's Audited Consolidated
Financial Statements for the fiscal year ended December 31, 2006
(For a reconciliation of important differences between Canadian
and United States generally accepted accounting principles, see
Note 17 to the Consolidated Financial Statements).
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 Annual Information Form for the
fiscal year ended December 31, 2006.
6. CEO Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
7. CFO Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
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. ANNUAL INFORMATION FORM
For the Annual Information Form for the fiscal year ended December 31,
2006, see Exhibit 99.1 included herein.
B. AUDITED ANNUAL FINANCIAL STATEMENTS
For consolidated audited financial statements, including the report of
independent chartered accountants with respect thereto, see Exhibit
99.2, the Consolidated Financial Statements of the Registrant for the
fiscal year ended December 31, 2006 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 17 - Reconciliation of Financial
Statements to United States Generally Accepted Accounting Principles
in the 2006 Consolidated Financial Statements.
C. MANAGEMENT'S DISCUSSION AND ANALYSIS
For management's discussion and analysis, see Exhibit 99.3,
Management's Discussion and Analysis of the Registrant for the fiscal
year ended December 31, 2006 included herein.
CERTIFICATIONS AND DISCLOSURE REGARDING
CONTROLS AND PROCEDURES
(a) CERTIFICATIONS. See Exhibits 32.1 and 32.2 to this Annual Report on
Form 40-F.
(b) DISCLOSURE CONTROLS AND PROCEDURES. As of the end of the registrant's
fiscal year ended December 31, 2006, an evaluation of the
effectiveness of the registrant's "disclosure controls and procedures"
(as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) was
carried out by the registrant's management with the participation of
the principal executive officer and principal financial officer. Based
upon that evaluation, the registrant's principal executive officer and
principal financial officer have concluded that as of the end of that
fiscal year, the registrant's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the
registrant in reports that it files or submits under the Exchange Act
is (i) recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and
forms and (ii) accumulated and communicated to the registrant's
management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required
disclosure.
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
4
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, 2006, included herein.
(c) MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING. The required disclosure is included in the "Management
Report" that accompanies the registrant's Consolidated Financial
Statements for the fiscal year ended December 31, 2006, filed as part
of this Annual Report on Form 40-F.
(d) ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM. The
required disclosure is included in the "Auditors' Report" that
accompanies the registrant's Consolidated Financial Statements for the
fiscal year ended December 31, 2006, filed as part of this Annual
Report on Form 40-F.
(e) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the
fiscal year ended December 31, 2006, there were no changes in the
registrant's internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting. Reference
is made in the "Controls and Procedures" section of Management's
Discussion and Analysis of the Registrant for the fiscal year ended
December 31, 2006, included herein.
NOTICES PURSUANT TO REGULATION BTR
Not Applicable.
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. 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.
Since the adoption of the Code of Ethics, there have not been any
amendments to the Code of Ethics or waivers, including implicit
waivers, from any provision of the Code of Ethics.
AUDIT COMMITTEE
IDENTIFICATION OF AUDIT COMMITTEE
The following individuals comprise the entire membership of the
Advantage Audit Committee: Carol Pennycook, Rodger Tourigny, Ronald
McIntosh and Roderick Myers.
5
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.
PRINCIPAL ACCOUNTING FEES AND SERVICES - INDEPENDENT AUDITORS
Fees payable to the Registrant's independent auditor, KPMG LLP, for
the years ended December 31, 2006 and December 31, 2005, totaled
$797,540 and $320,725, respectively, as detailed in the following
table. All funds are in Canadian dollars.
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
--------------------------------------------------------------------
AUDIT FEES $617,000 $269,000
--------------------------------------------------------------------
AUDIT-RELATED FEES $144,500 $30,000
--------------------------------------------------------------------
TAX FEES $36,040 $21,725
--------------------------------------------------------------------
ALL OTHER FEES $0 $ 0
--------------------------------------------------------------------
TOTAL $797,540 $320,725
--------------------------------------------------------------------
The nature of the services provided by KPMG LLP under each of the
categories indicated in the table is described below.
AUDIT FEES
Audit fees were for professional services rendered by KPMG LLP for the
audit of the Registrant's annual financial statements and services
provided in connection with statutory and regulatory filings or
engagements. These services include prospectus work and audit or
review of financials forming part of such prospectus and US GAAP
reconciliation matters.
AUDIT-RELATED FEES
Audit-related fees were for assurance and related services reasonably
related to the performance of the audit or review of the annual
statements and are not reported under "Audit Fees" above. These
services include French translation in connection with prospectus
filing.
TAX FEES
Tax fees were for tax compliance, tax advice and tax planning
professional services. These services consisted of: tax compliance,
including the preparation and review of tax returns; and general tax
planning and advisory services relating to common forms of domestic
and international taxation (i.e., income tax, capital tax, goods and
services tax).
ALL OTHER FEES
None.
6
PREAPPROVAL POLICIES AND PROCEDURES
In 2006, Advantage's Audit Committee pre-approved all audit,
audit-related and tax fees. The Audit Committee will be informed
routinely as to the non-audit services actually provided by the
auditor pursuant to this pre-approval process. The auditors also
present the estimate for the annual audit related services to the
Committee for approval prior to undertaking the annual audit of the
financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
None.
CONTRACTUAL OBLIGATIONS
Payments due by period (Cdn$MM)
Less than 1 More than 5
TOTAL year 1-3 years 4-5 years years
------- ----------- --------- --------- -----------
Building Lease 5.4 2.2 2.2 1.0
--
Capital Lease 2.9 2.6 0.3 -- --
Pipeline/Transportation 5.9 4.2 1.7 -- --
Convertible Debentures 180.7 1.4 62.5 116.8 --
TOTAL CONTRACTUAL OBLIGATIONS 194.9 10.4 66.7 117.8 --
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 21, 2007 on the Registrant's Audited Consolidated
Financial Statements for the fiscal year ended December 31,
2006 (For a reconciliation of important differences between
Canadian and United States generally accepted accounting
principles, see Note 17 to the Consolidated Financial
Statements).
23.2 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, 2006.
31.1 CEO Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
31.2 CFO Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
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, 2006.
99.2 Consolidated Financial Statements of the Registrant for the
fiscal year ended December 31, 2006, including a reconciliation
to US GAAP (Note 17).
99.3 Management's Discussion and Analysis of the Registrant for the
fiscal year ended December 31, 2006.
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 26, 2007
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