1996 MESSAGE TO UNITHOLDERS | 1996 FINANCIAL AND OPERATING STATS • MESSAGE TO UNITHOLDERS We would like to welcome all unitholders who invested in ARC Energy Trust (the Trust) in 1996, the inaugural year of operations. The Trust was created with the vision to become the premier “blue chip” conventional oil and gas royalty trust in Canada as measured by quality of assets, management expertise and long term investor returns. Your manager is ARC Financial Corporation (ARC Financial). As this is our first annual report, we would like to provide you with some background information on both ARC Financial and on the initial assets acquired by the Trust. The Manager ARC Financial, a private company established in 1989 and based in Calgary, is a specialized oil and gas financial company with established expertise in three key business areas: Advisory, Research and Capital. ARC Financial’s Advisory business involves offering financial advice on oil and gas corporate mergers, acquisitions, divestments, restructurings and valuations. As one of the most active financial advisors in Canada in this business area, within the last eight years, ARC Financial has been directly involved in 46 successful assignments representing approximately $7 billion worth of transactions. ARC Financial is uniquely well positioned to source new acquisition opportunities for the Trust. ARC Financial also has an established, high-quality Research Service which is offered on a private client basis to over 85 clients. ARC Financial follows, on an in-depth and continuous basis, world oil markets, North American natural gas markets, all key aspects of industry fundamentals and financial markets relating to the oil and gas sector. ARC Financial’s ongoing research activities provide unique industry intelligence and a base of information which will be of great benefit to the ongoing management of the Trust. In its Capital business, ARC Financial has proven expertise in all aspects of oil and gas acquisitions and property management. Prior to the formation of the Trust, ARC Financial managed production of 4,500 barrels of oil equivalent per day on behalf of itself and its partners. The creation of the Trust was a natural extension of ARC Financial’s established production management operations. ARC Financial has the management expertise, infrastructure and systems in place to manage and grow the Trust in a cost effective manner. ARC Financial also has an active equity investment and merchant banking business directed towards the oil and gas sector in Canada. This area of business provides increased deal flow exposure for the Trust. The Initial Acquisition ARC Resources Ltd. (ARC Resources) was formed to acquire oil and natural gas properties and to grant a royalty to ARC Energy Trust. The Trust was launched with the acquisition of 21 properties (18 areas) from Mobil Oil Canada (Mobil) and the units commenced trading on The Toronto Stock Exchange on July 11, 1996. The Trust was built on a foundation of strong core properties complemented by other diverse properties to balance the portfolio. The acquired assets are characterized by : high-quality core areas; long life reserves; extensive production histories; low decline rates, resulting in stable near-term distributions; low operating costs, resulting in attractive netbacks; and a diversified property mix, reducing technical risk. The Trust’s core areas consist of three properties in the Pembina area, the largest oil field ever discovered in Canada, and an interest in the Caroline Swan Hills Unit, the largest gas pool discovered in Canada in the last twenty years. Combined, these two areas account for almost 60 percent of the total reserves in the Trust. A good commodity balance has been achieved with a current production split of approximately 60 percent crude oil and natural gas liquids and 40 percent natural gas. The reserve life index of the Trust’s properties, 12.2 years on a proved plus half probable basis, is among the highest of all conventional oil and gas trusts. Approximately 20 percent of the production from the properties acquired from Mobil is operated by the Trust. 1996 Results During 1996, ARC Financial concentrated on integrating the Trust’s assets into its systems and increasing staff to manage the assets. A number of potential acquisitions were pursued without success although certain of these initiatives remain active. Production during 1996 was slightly below the initial public offering prospectus forecast due to the deferral of capital programs in several properties and routine operational maintenance. Notwithstanding the slightly lower production volumes, strong commodity prices, combined with the Board of Director’s decision not to repay any principal on debt, resulted in total distributions to unitholders of $0.81 per unit for the six month period ending December 31, 1996. This represented a 41 percent increase over the prospectus forecast of $0.58 per unit. ARC Energy Trust Units were issued at $10.00 per unit, traded in a range from $9.70 to $13.00 and closed the year at $12.25. Combined with the $0.81 per unit distribution, investor returns for the first six months of operations were very strong. The Trust has developed a high level of support in the market and was one of the top performers among all conventional oil and gas trusts in 1996. John P. Dielwart President and Chief Executive Officer • How do our 1996 numbers measure up?  Click here to find out. View another year: 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | 1997 | 1996