Parkland reports record fourth quarter and fiscal year

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    Performance Highlights

    - Record fourth quarter and full year EBITDA
    - Monthly distributions increased in December and January
    - Special distribution at year end

    RED DEER, AB, Feb. 25 /CNW/ - Parkland Income Fund today announced its
business performance for the three months and year ended December 31, 2007.
Annual volumes, revenue, earnings and EBITDA were all at record levels and
allowed the Fund to increase monthly distributions to $0.105 per unit and
declare special distribution payments at year end.
    President and CEO Mike Chorlton commented "Parkland's results set a new
record for fourth quarter EBITDA. The Commercial Division acquisitions that
were completed during 2007 and specifically propane marketing contributed to
our strong fourth quarter performance. These operations are counter-seasonal
to Parkland's traditional Retail fuel marketing business and contribute most
strongly in the winter season.
    Parkland's financial results for the year ended December 31, 2007 set a
new record for EBITDA at $115 million, substantially exceeding the previous
record of $70.7 million realized in 2006. The performance of the acquisitions
as well as growth in fuel volume and gross margins per litre within our
existing business added significant earnings in 2007.
    We were able to increase monthly distributions for the second time in
2007 by a further 8.5 percent in December to $0.105 per unit and declare an
additional special distribution in December totaling $0.77 per unit. The
increased level of monthly distributions was established after considering
Parkland's budgets and business prospects for 2008."
    Parkland's accounting policy related to valuation of inventory was
changed from LIFO to FIFO in the fourth quarter of 2007. This change resulted
in an increase in EBITDA and net earnings before tax in the amount of
$4.2 million for the year ended December 31, 2007, $1.0 million for 2006 and
$4.5 million for 2005. The 2006 and 2005 comparative numbers in this report
are restated for this change.

    Outlook
    -------

    Fuel margins in the first quarter of 2008 are at seasonal levels and
operations remain profitable. Propane sales volumes are sensitive to weather
conditions and as our marketing region experienced colder temperatures in
parts of January and February, volumes increased. Oil and gas drilling in
northern Alberta has been less robust than the prior year and forestry
harvesting is at a cyclical low with the result that demand for fuels in the
Commercial sector has moderated from the high growth levels seen in recent
years. The grain segment of agriculture is at an all-time high driving strong
demand for fuel and crop inputs. Parkland's operations in this region remain
profitable with positive growth prospects. Management continues to assess
acquisitions which will add accretive cash flow and unitholder value.Consolidated Operating and Financial Highlights
    ($millions except volume and per unit amounts)

                           Three months ended         Twelve months ended
                               December 31                December 31
                           2007     2006     2005     2007     2006     2005
    -------------------------------------------------------------------------
    Fuel volumes
     (millions of
     litres)                541      386      297    2,030    1,501    1,177
    Net sales and
     operating revenue $  456.2 $  278.9 $  231.3 $1,697.6 $1,199.9 $  875.5
    EBITDA             $   17.9 $   10.6 $    8.6 $  115.0 $   70.7 $   41.2
    Net earnings
     (loss)            $   10.2 $   15.5 $    4.7 $   80.7 $   59.6 $   29.5
      Per unit -
       basic           $   0.24 $   0.39 $   0.12 $   1.66 $   1.50 $   0.75
      Per unit -
       diluted         $   0.23 $   0.38 $   0.11 $   1.64 $   1.48 $   0.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Year Over Year Changes in EBITDA (in millions of dollars)

    2006 EBITDA                                                     $   70.7
    Fuel volume increase                                                39.7
    Fuel gross profit increase                                          25.2
    Merchandise and related gross profit increase                        3.0
    Commercial gross profit increase                                    26.5
    Operating and MG&A increase                                        (50.1)
    2007 EBITDA                                                        115.0MANAGEMENT DISCUSSION and ANALYSIS

    Non-GAAP Measures

    EBITDA refers to Earnings Before Interest on Long-Term Debt, Income Tax
Expense, Amortization of Capital Assets, Refinery Remediation Accrual and Loss
on Disposal of Capital Assets and can be calculated from the GAAP amounts
included in the Fund's financial statements. Management believes that EBITDA
is a relevant measure to users of its financial information as it provides an
indication of pre-tax earnings available to distribute to debt and equity
holders in the Fund. The Fund's definition of EBITDA may not be consistent
with other providers of financial information and therefore may not be
comparable.

    Accounting Policy Change

    Parkland changed its accounting policy related to the valuation of
inventory from last-in first-out (LIFO) to first-in first-out (FIFO) basis for
the year ended December 31, 2007. This change has been mandated by new
accounting standards for 2008 and the Fund has chosen to adopt the new
standard early. With the acquisitions in 2007 of businesses with substantial
volumes of non-fuel business, Parkland had significant categories of inventory
that were historically recorded on a FIFO basis. In order to harmonize the
accounting methods we opted for early adoption of the FIFO basis and applied
the change retrospectively. The change resulted in higher gross profits,
EBITDA and net earnings of $0.4 million in the fourth quarter of 2007 (2006 -
$1.0 million, 2005 - decrease of $2.9 million). For the year ended
December 31, 2007, gross profits, EBITDA and net earnings before tax increased
by $4.2 million (2006 - $1.0 million, 2005 - $4.5 million).

    THREE MONTHS ENDED DECEMBER 31, 2007Quarterly Financial Information

    Three months ended                   March      June September  December
    ($millions except fuel volumes          31        30        30        31
     and per unit amounts)
    -------------------------------------------------------------------------
    2007  Fuel volumes (millions of
           litres)                         440       471       578       541
          Net sales and operating
           revenues                     $334.0    $424.6    $482.9    $456.2
          Net earnings                   $17.1     $22.0     $31.4     $10.2
          EBITDA                         $23.1     $48.2     $25.8     $17.9
          Earnings per unit (restated)
            - basic                      $0.37     $0.42     $0.63     $0.24
            - diluted                    $0.37     $0.42     $0.62     $0.23
    -------------------------------------------------------------------------
    2006  Fuel volumes (millions of
           litres)                         329       374       412       386
          Net sales and operating
           revenues                     $241.6    $320.2    $359.3    $278.9
          Net earnings                    $8.7     $27.2      $8.2     $15.5
          EBITDA                         $11.3     $29.7     $19.1     $10.6
          Earnings per unit (restated)
            - basic                      $0.22     $0.68     $0.21     $0.39
            - diluted                    $0.22     $0.68     $0.20     $0.38
    -------------------------------------------------------------------------Volume

    Fuel volumes increased by 155 million litres in the fourth quarter of
2007 to 541 million litres. The propane business acquired through the
acquisitions of Neufeld and Joy earlier in 2007 contributed 44 million litres
of new fuel volume. The wholesale, industrial and cardlock volumes of diesel
and gasoline acquired through Neufeld and UPPI contributed significantly to
the 109 million litre increase (44 percent) in wholesale gasoline and diesel
compared to the same quarter in 2006. Fuel volumes from the retail business
increased by 2 million litres compared to the fourth quarter of 2006
experiencing some restraint due to higher retail fuel prices and a modest
weakening of the economy in western Canada.

    Sales Revenue

    Net sales and operating revenue for the quarter ended December 31, 2007
was $456.1 million compared to $278.8 million in 2006, an increase of
$177.3 million or 64 percent, as our results show the activity from the
companies that were acquired in 2007. Fuel sales revenue accounted for
$414.2 million compared to $263.7 million in the same period last year, an
increase of $150.5 million. The increase in fuel sales revenue of 57 percent
was greater than the fuel volume increase of 40 percent, which reflects the
increased retail selling prices in the fourth quarter of 2007.
    Commercial product sales were $26.3 million for the quarter with a
significant contribution from late season fertilizer sales. Parkland did not
have significant operations in this segment prior to 2007.
    Convenience store merchandise sales increased moderately with sales of
$15.6 million in the quarter as compared to $15.2 million last year, an
increase of 3 percent.

    Net Earnings

    Net earnings for the fourth quarter were $10.2 million compared to
$15.5 million in the same period in 2006. Fourth quarter earnings in 2007
included $0.4 million ($1.0 million in 2006) arising from the inventory
accounting policy change. Parkland was able to generate $8.4 million of gross
profit from its commercial sales segment which was entirely attributable to
the acquisitions completed in 2007.
    Gross profits of $61.8 million for the quarter increased significantly
from the $29.1 million in 2006. Marketing, general and administrative expenses
increased by $5.3 million or 86 percent compared to the fourth quarter of
2006. The increase reflected the acquisitions of the new businesses and higher
costs related to incentive compensation driven by both higher earnings and
expanded operations. Operating and direct costs increased by $20.1 million or
162 percent over 2006 as a result of the acquisitions. The increase in
operating costs related primarily to the acquired businesses.
    In the fourth quarter of 2007, Parkland recorded a non-cash charge for
future refinery remediation in the amount of $2.7 million (nil in 2006).
    Current income tax charges were $1.3 million for the three months ended
December 31, 2007 compared to a credit of $7.8 million in the comparative
quarter of 2006. In the third quarter of 2006 taxable income was significantly
greater than distributions made to unitholders and a tax provision was
recorded in that period. An increase in monthly distributions combined with
special distribution payments at December 29, 2006 reduced taxable income
considerably which resulted in the Fund recording a current income tax
recovery in the fourth quarter of 2006.
    EBITDA for the quarter increased to $17.9 million, up from the $10.5
million generated in the same period of 2006.

    Capital Assets

    Capital expenditures in the fourth quarter of 2007 totalled
$16.4 million. The major items include two small business acquisitions and
three new retail sites.

    YEAR ENDED DECEMBER 31, 2007

    Net Earnings

    Significantly higher fuel volumes, higher average fuel margins, increased
convenience store sales and margins all contributed to higher net earnings in
2007. The acquisitions in 2007 played a major part in the increased business
activity and earnings for the year. Parkland was able to generate
$28.2 million of gross profit from its commercial sales segment which was
mostly attributable to the Neufeld, Joy and UPPI acquisitions.
    Gross profit was $232.5 million, an increase of $94.5 million over 2006.
This increase was partially offset by a $19.8 million increase in marketing,
general and administrative expenses over 2006 and a $30.4 million increase in
operating and direct costs. The increased costs related primarily from the
acquired businesses and higher incentive compensation arising from higher
profits and expanded operations.
    EBITDA in 2007 was $115.0 million, an increase of $44.3 million or
63 percent over 2006, consistent with the increases in gross profits. Net
earnings for the year of $80.7 million were significantly higher than the
$59.6 million reported in 2006 and $32.9 million in 2005.

    Volume

    Fuel volumes increased by 529 million litres in 2007 to just over
2.0 billion litres. The propane business acquired through the acquisitions of
Neufeld and Joy earlier in 2007 contributed 114 million litres of new fuel
volume. The wholesale, industrial and cardlock volumes of diesel and gasoline
acquired through Neufeld and UPPI contributed significantly to the 392 million
litre increase (40 percent) in wholesale gas and diesel volumes over 2006.
Retail volumes increased by 23 million litres (4 percent) over 2006.
    The Fund's station upgrade program and addition of new Esso sites
continues to drive moderate growth in retail volumes. Reseller volumes also
increased to match product purchase availability. Retail volumes are driven by
the number of stations in operation, general business and economic conditions,
weather and competitive conditions in various markets. Reseller volumes are
more dependent on general industry supply and demand conditions. Parkland
plans to continue to generate modest volume increases through general market
growth, improved performance at existing sites and the addition of new sites
as opportunities arise.

    Sales Revenue

    Net sales and operating revenue for the year ended December 31, 2007 was
$1.7 billion compared to $1.2 billion in 2006, an increase of 42 percent. In
2007, fuel sales revenue accounted for $1.558 billion compared to $1.140
billion in 2006, an increase of $418 million. Fuel sales revenue varies with
fuel volumes, overall average crude prices and retail and wholesale margins.
The increase in fuel sales revenue of 37 percent was slightly greater than the
fuel volume increase of 35 percent, reflecting the increased retail selling
prices in 2007.
    Commercial product sales were $74.9 million for the year ended
December 31, 2007 (nil in 2006) as this business segment originated with the
acquisitions completed in 2007.
    Convenience store merchandise sales also increased with sales of $64.5
million in 2007 as compared to $59.6 million in 2006, an increase of 8
percent. Convenience store merchandise sales were up primarily as a result of
higher average sales per store.

    Cost of Sales and Gross Profit

    Fuel cost of sales increased to $1.370 billion in 2007 as compared to
$1.018 billion in 2006. Similar to sales revenue, cost of sales increased as a
result of higher volumes and higher average per litre costs of fuel products.
Fuel costs are generally driven by changes in the underlying cost of crude
oil. Convenience store merchandise cost of sales increased to $48.2 million in
2007 from $44.1 million in 2006, consistent with the increase in merchandise
sales.
    These factors led to gross profit of $232.5 million in 2007, which was
$94.5 million higher than the $138.0 million achieved in 2006. This increase
was primarily driven by higher average fuel margins which were 8.79 cents, on
a per litre basis, compared to 7.58 cents the prior year. Additional increases
resulted from a $0.9 million increase in convenience store margins, $28.2
million addition of gross profit on sales of commercial products and higher
overall fuel volumes.
    A key driver to margins is the Fund's ability to competitively purchase
both fuel and convenience store merchandise. As one of the largest independent
fuel retailers in western Canada, the Fund has established positive
relationships with the key fuel suppliers in its market area and has long-term
contracts with its three principal fuel suppliers. These contracts provide the
Fund with a consistent source of supply at competitive prices. Additionally,
the growth in the convenience store network and the implementation of the
Short Stop Express marketing program has improved the Fund's relationships
with wholesalers and other merchandise suppliers, providing better pricing,
increased incentives and additional promotional support.

    Operating Expenses

    Operating and direct expenses for 2007 were $77.7 million, up from
$47.3 million in 2006, an increase of 64 percent. These increased costs were
primarily as a result of the acquisitions. Site operating costs are sensitive
to changes in fuel sales volume and, as a result, total costs were higher than
the prior year. Also affecting site operating costs is the continued upward
pressure on wages that is being experienced in western Canada due to a robust
economy and tight labor supply, specifically for convenience store personnel,
truck drivers and trades personnel.
    Marketing, general and administrative expenses were $39.8 million for the
year ended December 31, 2007, an increase of $19.8 million over 2006 expenses
of $20 million. Significant drivers of these increased costs were the
inclusion of overhead costs of the acquired businesses and provision for
higher variable compensation costs arising from strong profits. Staffing
levels increased as a result of the acquisitions. The cost of hiring,
compensating and retaining employees and consultants remains relatively high
due to strong demand, particularly for those with specialized training and
experience. The Fund is investing heavily in its employee base by providing
for increased training throughout the organization, including the acquired
companies. The Fund believes that this investment in its people will generate
long term benefits including higher retention and improved efficiency. More
onerous regulatory compliance activities are also contributing to the higher
costs. Parkland incurred consulting costs during the second half of the year
related to a business process reengineering project that has been initiated to
improve efficiencies, strengthen internal controls and complete the
integration of systems with the acquired companies.
    The Fund incurred $0.2 million in maintenance expenses in 2007 and 2006
related to the Fas Gas Plus upgrade program. Although portions of the Fas Gas
Plus program are recorded as maintenance capital, there are significant
components which represent maintenance expenses. To a large extent these
expenses are discretionary and are generating improved results at the upgraded
sites.
    Included in expenses for the 2007 calendar year are $2.5 million for
environmental remediation costs as compared to $1.1 million in 2006.
Generally, remediation costs for which the Fund is legally obligated are
recorded as an Asset Retirement Obligation and expensed as accretion over the
estimated life of the asset. Amounts included in remediation costs generally
relate to costs at sites where the Fund decided to replace underground storage
tanks even though it was not legally obligated to do so. It is the Fund's
policy to upgrade tanks when a major site upgrade takes place, such as a
conversion to a Short Stop convenience store. The Fund has a discretionary
long-term tank replacement program and plans to continue incurring expenses
annually to modernize its underground tank network and reduce its exposure to
future environmental liabilities.

    Refinery Assets

    During 2007, Parkland continued its program of repairs to its storage
tanks and voluntary remediation at the Bowden refinery site and incurred costs
of $0.9 million related to this program. The refinery site generated revenue
of $2.0 million during the year from its custom processing agreement with a
petrochemical plant operator. The Fund has received notification from the
petrochemical plant operator of its intent to terminate the agreement at the
end of 2008. This will be an early termination under the contract and will
give rise to a termination fee which will be quantified during 2008 depending
on final processed volumes
    The Fund incurred operating and repair costs totalling $2.4 million
during 2007, resulting in a net loss of $0.4 million at its refinery site.
Many of the repair costs were incurred in advance of applying for renewal of
the refinery operating license and in preparation for potential additional
operations at the site such as temporary fuel storage. The refinery license
renewal was approved in 2007 and the Fund continues to pursue revenue
generating opportunities at this site.
    The Refinery Remediation Accrual represents the present value estimate of
the Fund's cost to remediate this site. The total undiscounted estimated
future cash flows, to be incurred over an extended period after operations
cease, are approximately $13.8 million net of salvage value of equipment and
will be accreted. Discounting these incremental cash flows resulted in a
$2.7 million increase in the refinery remediation accrual at December 31,
2007. The costs are expected to be incurred between 2018 and 2027. The
discount rate used to determine the present value of the future costs is
6.9 percent (2006 - 6.9 percent).

    Capital Assets and Amortization

    Amortization expense increased to $21.6 million in 2007 from $8.5 million
in 2006. Amortization for capital assets acquired in 2007 plus amortization on
intangible assets accounted for most of the increase compared to 2006.
    During 2007, the Fund expended $28.9 million in capital investments, of
which $14.6 million was classified as maintenance capital and $14.3 million
was classified as growth capital. The classification of capital as growth or
maintenance is subject to judgment as many of the Fund's capital projects have
components of both. It is the Fund's policy to treat all capital related to
service station upgrades as maintenance capital even though it includes the
expectation of a financial return, while the construction of a new building on
an existing site is considered growth capital. For accounting purposes,
amounts expended on both maintenance and growth capital are treated as
purchases of capital assets.
    The primary components of maintenance capital in 2007 were $3.5 million
for service station upgrades, $1.5 million for tank replacements, $2.0 million
for technology initiatives, $1.3 million for trucks and trailers and
$1.3 million for other projects.
    The 2007 growth capital related primarily to major upgrades at existing
retail sites, expansion of the trucking fleet, propane storage, tanks and the
addition of three new company operated service station sites and 15 new
independent dealers. The growth capital incurred related to independent
dealers consisted primarily of new signage and pumps.
    Parkland owns 110 of the sites in the Fas Gas and Short Stop retail
chains, an industrial property in Red Deer which is used as a maintenance
facility, a fuel terminal facility in Whitehorse and the refinery property.
During 2007, the Fund acquired through corporate acquisition land, land
improvements and buildings valued at $28.5 million including major facilities
in Grande Prairie AB and Burnaby BC together with 17 branch locations. These
properties are primarily in northern Alberta and British Columbia and
represent branch locations. The Fund has lease-to-purchase arrangements on
four of the Fas Gas properties and long-term lease arrangements on an
additional 38 sites.
    Parkland operates through its Petrohaul division its own fleet of trucks
to meet its fuel hauling needs. During 2007, the Fund also acquired the
trucking fleets of Neufeld, Joy and UPPI. The long distance bulk carrier fleet
as at December 31, 2007 consists of 62 trucks and 71 trailer units. Parkland
is focused on continuing to integrate the distribution piece of its operations
and capturing additional synergies in 2008. In the third quarter of 2007, the
Fund recruited for and successfully filled the Vice President, Supply and
Distribution position to provide strategic planning and leadership to this
business unit.
    The Fund is looking to consolidate and grow its trucking fleet to better
serve its widespread and growing marketing network. The Fund's capital plan
calls for the addition of 12 power units and trailers in 2008 as part of its
long term objective of handling substantially all of its fuel hauling and
reducing its reliance on third party carriers.
    It is the Fund's policy to treat all capital related to the replacement
and betterment of its fleet as maintenance capital even though it includes the
expectation of a financial return, while the addition of new trucks and
trailers to increase the size of the fleet is considered growth capital.

    Interest

    For the year ended December 31, 2007 interest on long-term debt was
$1.7 million which was $0.7 million higher than the prior year. Debt levels
have increased during the year while interest rates have stayed relatively
steady, resulting in the increase in overall interest costs. Approximately 81
percent of the Fund's long-term debt bears interest at variable rates linked
to prime.

    Income taxes

    In 2007, the Fund retained taxable income within corporate subsidiaries
resulting in a current tax provision of $1.3 million compared to $0.8 million
for 2006. Parkland's income taxes payable are typically nominal as it is a
trust and taxes are paid on distributions directly by the Unitholders in
Parkland or in its subsidiary, Parkland Holdings Limited Partnership. The 2007
provision results from capital taxes and from retaining funds for corporate
purposes.
    During the second quarter of 2007, a $7.5 million charge was recorded due
to the enactment of the specified investment flow-through ("SIFT") tax
legislation during the period. Under the new legislation, in 2011 and beyond,
as distributions will no longer be tax deductible, the Fund will not be able
to make distributions to reduce its taxable income and is no longer considered
to be exempt from income taxes for accounting purposes. Accordingly, the
future income tax liability was increased to reflect the current temporary
differences expected to be remaining at the Trust level in 2011 using the SIFT
tax rate of 31.5 percent. On October 30, 2007, the Government of Canada
proposed rate reductions which, if and when enacted, would lower the SIFT tax
rate to 28 percent and will reduce future corporate income tax rates by an
additional 3.5 percent. With the new legislation, distributions to unitholders
would be taxable beginning in 2011 as distributions will no longer be
deductible by the Trust for income tax purposes. Such distributions would not
be immediately taxable to investors: they would generally reduce the adjusted
cost base of units held by investors, however, such distributions would
potentially be at a lower payout ratio. The new legislation is not currently
expected to directly affect our cash flow levels and distribution policies
until 2011 at the earliest. The estimate of future income taxes is based on
the current tax status of the Fund. Future events, which could materially
affect future income taxes such as acquisitions and dispositions and
modifications to the distribution policy, are not reflected under Canadian
GAAP until the events occur and the related legal requirements have been
fulfilled. As a result, future changes to the tax legislation could lead to a
material change in the recorded amount of future income taxes.
    It should be noted that the charges for future income taxes are a
non-cash charge, and are not a proxy for the amount of taxes the Fund may
expect to pay starting January 1, 2011, effective with implementation of the
federal government's Tax Fairness Plan.
    The allocation of taxes to the Unitholders for 2007 is based on the
calculated taxable income of the Fund as follows:-------------------------------------------------------------------------
    $000's
    -------------------------------------------------------------------------
    Net income before tax                                            $88,739
    -------------------------------------------------------------------------
    Permanent differences                                                106
    -------------------------------------------------------------------------
    Timing differences                                                 4,320
    -------------------------------------------------------------------------
    Taxable income                                                   $93,165
    -------------------------------------------------------------------------
    Less income retained in taxable entities in the Fund               2,647
    -------------------------------------------------------------------------
    Taxable income to allocate to Unitholders                        $90,518
    -------------------------------------------------------------------------
    Distributions                                                    $90,518
    -------------------------------------------------------------------------
    Taxable portion of distributions                                     100%
    -------------------------------------------------------------------------The Fund's business has historically been seasonal and can be
significantly affected by events occurring throughout the year. In the first
quarter, fuel demand is relatively weak which causes excess supply and weaker
market conditions. The second and third quarters significantly improve with
spring and summer driving seasons and increased industrial and farm activity
creating higher demand, while the fourth quarter sees a return to more average
market conditions. With the addition of the acquired companies, some of whose
business activities are counter seasonal to Parkland's, the impact of
seasonality on the financial results each quarter have diminished in 2007.
Propane and heating fuel sales are strong in the colder months and fertilizer
and agricultural sales and services are strong in the spring and late fall.
    In 2006, margins exceeded historical levels in each of the quarters with
the second and third quarters being exceptionally strong. Margins were
influenced by supply shortages within the western Canadian market as well as
the North America wide market. Margins have continued to remain strong
throughout 2007, with the peak in fuel margins occurring in the second
quarter. Margins declined somewhat during the third quarter but remained
strong by historical comparison.

    LIQUIDITY AND CAPITAL RESOURCES

    Working Capital

    Parkland's working capital increased to $28.1 million at December 31,
2007 as compared to $21.4 million at December 31, 2006. The change in
accounting policy relating to inventories increased working capital by
$13.2 million (2006 - $9.0 million). The cash balance at December 31, 2007 was
$6.3 million compared to the December 31, 2006 balance of $36.5 million and
cash generated from operating activities during 2007 was $82.8 million
compared to $70.3 million in 2006. Cash of $14.8 million net was expended
during the year in connection with financing activities and $98.3 million was
expended in connection with investing activities, primarily the acquisitions
and purchase of capital assets. Further details can be found in the
Consolidated Statement of Cash Flows.
    During the year the Fund entered into a credit agreement which included a
$32.0 million revolving operating facility that will be used primarily for
working capital requirements. The facility also provides for letters of credit
to a maximum of $30.0 million subject to margin calculations. The Fund has
outstanding letters of credit as at December 31, 2007 of $25.1 million (2006 -
$24.7 million).

    The Commercial business typically extends credit to its customers on
terms that exceed average receivable terms in Parkland's traditional fuel
business. It is not uncommon for the Fund to experience an increase in trade
receivables in the fourth quarter with collections occurring in the first and
second quarters of the following year. The Fund increased its operating
facility to ensure adequate working capital during this period.

    Financing Activities

    In January 2007, Parkland completed the issuance of 4,080,000 Fund units
(post split) for net proceeds of $47.5 million on a bought deal basis through
a syndicate of investment dealers. The proceeds were used in part to fund the
purchase of Neufeld.
    The Fund assumed debt totalling $30.1 million during the year in
connection with the acquisitions of Neufeld Petroleum, United Petroleum
Products Inc and Roblyn Bulk Sales. Parkland borrowed an additional $10
million under the Neufeld credit facility shortly after the acquisition. The
Fund repaid all assumed debt using proceeds of $22.3 million from its
revolving operating facility and $19.5 million in additional term loans.
    At December 31, 2007 Parkland had $14.4 million in long-term debt
(excluding $4.1 million of the current portion). Management believes that cash
flow from operations will be adequate to fund maintenance capital, interest
and targeted distributions. Growth capital expenditures in 2007 have been
funded by existing cash balances, new debt financing and cash flow from
operations. It is management's intent, on an ongoing basis, to finance growth
capital through debt or the issue of additional units. Any additional debt
would be serviced by anticipated increases in cash flow and it is expected
that current debt to EBITDA ratios would be maintained.
    On December 31, 2007, the Company was in compliance with all of the
financial covenants under its syndicated credit facility. The ratios are
tested on a trailing rolling four quarter basis. The financial covenants under
the syndicated credit facility are as follows:1.  Ratio of current assets to current liabilities shall not be less than
        1.05 to 1.00 on a consolidated basis;
    2.  Ratio of funded debt to EBITDA shall not exceed 2.50 to 1.00;
    3.  Ratio of EBITDA less capital expenditures and taxes to sum of
        interest, principal and distributions shall not be less than 1.00 to
        1.00; and
    4.  Ratio of funded debt to capitalization shall not exceed 0.50 to 1.00.

    In February 2008, the Fund accepted the terms and conditions of a
financing arrangement with HSBC Bank Canada. The financing arrangement
increased the Fund's credit facility from $128.1 million to $159.1 million.
The financing arrangement is comprised of $32 million for operating debt,
$30 million for letters of credit and the remainder for term debt. The
increased financing will be used to finance growth opportunities in 2008.

    Distributions

    The following table sets forth the record date, date of payment, per Trust
Unit amount of distributions paid and total cash distributed for 2007:

    -------------------------------------------------------------------------
    Record Date           Payment Date         Per Trust Unit    Total Cash
                                                                 Distributed
                                                                      (000's)
    -------------------------------------------------------------------------
    January 31, 2007      February 15, 2007           $0.0800         $3,699
    -------------------------------------------------------------------------
    February 28, 2007     March 15, 2007              $0.0800         $3,795
    -------------------------------------------------------------------------
    March 30, 2007        April 13, 2007              $0.0800         $3,797
    -------------------------------------------------------------------------
    April 30, 2007        May 15, 2007                $0.0800         $3,832
    -------------------------------------------------------------------------
    May 31, 2007          June 15, 2007               $0.0967         $4,675
    -------------------------------------------------------------------------
    June 29, 2007         July 13, 2007               $0.0967         $4,677
    -------------------------------------------------------------------------
    July 31, 2007         August 15, 2007             $0.0967         $4,678
    -------------------------------------------------------------------------
    August 31, 2007       September 14, 2007          $0.0967         $4,681
    -------------------------------------------------------------------------
    September 28, 2007    October 15, 2007            $0.0967         $4,686
    -------------------------------------------------------------------------
    October 31, 2007      November 15, 2007           $0.0967         $4,687
    -------------------------------------------------------------------------
    November 30, 2007     December 14, 2007           $0.0967         $4,688
    -------------------------------------------------------------------------
    December 31, 2007     January 15, 2008            $0.1050         $5,115
    -------------------------------------------------------------------------
    December 31, 2007     January 15, 2008            $0.3500(1)     $17,049
    -------------------------------------------------------------------------
    December 31, 2007     January 15, 2008            $0.4200(2)   $20,459(2)
    -------------------------------------------------------------------------
    Total distributions
     declared to Unitholders                          $1.8719        $90,518
    -------------------------------------------------------------------------
    Notes:
        (1) Represents the cash portion of a special distribution.
        (2) Represents the portion of the special distribution that was
            distributed to unitholders by way of Trust Units.


    On December 17, 2007, the Board of Directors met to review the results of
operations for 2007 and the cash balance on hand and declared a special
distribution of $0.77 per Fund unit. On January 7, 2008, the Board of
Directors decided to pay the special distribution in a combination of cash and
Fund units. The cash payments totalled $0.35 per Fund unit while the unit
payments totalled $0.42 per Fund unit. The number of Fund units was
established with reference to the 10 day weighted average trading price as at
date of record December 31, 2007 which was $16.05 per unit. Consequently, the
Fund unit portion of the special distribution was 0.02617 Fund units per Fund
unit owned on the date of record.


    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2007              $90,518
    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2006              $56,171
    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2005              $23,872
    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2004              $21,075
    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2003              $20,376
    -------------------------------------------------------------------------
    Total distributions declared to Unitholders in 2002              $13,208
    -------------------------------------------------------------------------



    Distributable Cash Flow

    -------------------------------------------------------------------------
                                                                     For the
                                                                        year
    $000's                              For the three months ended     ended
    -------------------------------------------------------------------------
                               March      June September  December  December
                                  31        30        30        31        31
    -------------------------------------------------------------------------
    Cash flows from
     operating activities     $4,252   $54,946   $22,837      $801   $82,836
    -------------------------------------------------------------------------
    Less: Total capital
     expenditures             (3,413)   (3,421)   (7,353)  (16,371)  (30,558)
                              -------   -------   -------  --------  --------
    -------------------------------------------------------------------------
    Standardized distrib-
     utable cash flow (1)        839    51,525    15,484   (15,570)   52,278
    -------------------------------------------------------------------------
    Add back
    -------------------------------------------------------------------------
      Growth capital
       expenditures              626     1,993     1,547    11,844    16,010
    -------------------------------------------------------------------------
      Proceeds on disposal
       of capital items          298       418       242       125     1,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Increase (decrease)
       in non-cash working
       capital                14,849   (18,374)   14,865    19,837    31,177
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Distributable cash flow  $16,612   $35,562   $32,138   $16,236  $100,548
                             -------   -------   -------   -------  --------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Distributable cash flow
     per unit
      - basic                  $0.36     $0.72     $0.65     $0.33     $2.05
      - diluted                $0.35     $0.71     $0.64     $0.32     $2.03
    -------------------------------------------------------------------------
    Distribution payout
     ratio (2)                   68%       37%       44%      320%(3)     90%
    -------------------------------------------------------------------------
    (1) Standardized distributable cash flow is a measure defined by the
        Canadian Institute of Chartered Accountants (CICA), see discussion
        below.
    (2) See Distributions Paid To Unitholders.
    (3) Includes year-end special distribution of $37.5 million.Distribution Reinvestment Plan
    ------------------------------

    Parkland Income Fund has established a Distribution Reinvestment Plan
administered by Valiant Trust Company. Details are available from the Fund or
from Valiant Trust Company.

    Fund Description
    ----------------

    Parkland Income Fund operates retail and wholesale fuels and convenience
store businesses under its Fas Gas Plus, Fas Gas, Race Trac Fuels and Short
Stop Food Stores brands and through independent branded dealers, and
transports fuel through its Petrohaul division. With over 550 locations,
Parkland has developed a strong market niche in western and northern Canadian
non-urban markets. Through Neufeld Petroleum and Propane the Fund markets
propane, gasoline, diesel, lubricants, industrial fluids, agricultural inputs
and delivery services to commercial and industrial customers in Northern
Alberta, Northeastern British Columbia and the Northwest Territories. To
maximize value for its unitholders, the Fund is focused on the continuous
refinement of its retail portfolio, increased revenue diversification through
growth in non-fuel revenues and active supply chain management. Parkland
operates the Bowden refinery near Red Deer, Alberta producing drilling fluids
on a contract basis.
    The Fund is an unincorporated open-ended limited purpose trust
established under the laws of the Province of Alberta. The Fund, together with
the limited partnership that issued the exchangeable LP Units, own,
indirectly, securities which collectively represent the right to receive cash
flow available for distribution from the business operated by Parkland
Industries Limited Partnership, after current taxes, debt service payments,
maintenance capital expenditures and other cash requirements.
    The Fund's units trade on the Toronto Stock Exchange (TSX) under the
symbol PKI.UN. For more information, visit www.parkland.ca.

    Certain information included herein is forward-looking. Forward-looking
statements include, without limitation, statements regarding the future
financial position, business strategy, budgets, projected costs, capital
expenditures, financial results, taxes and plans and objectives of or
involving Parkland. Many of these statements can be identified by looking for
words such as "believe", "expects", "expected", "will", "intends", "projects",
"anticipates", "estimates", "continues", or similar words. Parkland believes
the expectations reflected in such forward-looking statements are reasonable
but no assurance can be given that these expectations will prove to be correct
and such forward-looking statements should not be unduly relied upon.
Forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties some of which are described in the
Fund's annual report, annual information form and other continuous disclosure
documents. Such forward-looking statements necessarily involve known and
unknown risks and uncertainties and other factors, which may cause the Fund's
actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Such factors include, but are not
limited to: general economic, market and business conditions; industry
capacity; competitive action by other companies; refining and marketing
margins; the ability of suppliers to meet commitments; actions by governmental
authorities including increases in taxes; changes in environmental and other
regulations; and other factors, many of which are beyond the control of
Parkland. Any forward-looking statements are made as of the date hereof and
the Fund does not undertake any obligation, except as required under
applicable law, to publicly update or revise such statements to reflect new
information, subsequent or otherwise.Conference Call
    ---------------

    Parkland will hold a conference call for Analysts, Brokers and Investors
to discuss fourth quarter and annual results as follows:

    Tuesday, February 26, 2008, 9:00 a.m. (11:00 a.m. Eastern Time)
    Direct:      416-644-3418
    Toll-free:   800-732-6179

    The replay will be available as follows:

        From Tuesday February 26, 2008, 9:00 a.m. (11:00 a.m. Eastern Time)
        To Tuesday, March 11, 2008 at 9:59 p.m. (11:59 p.m. Eastern Time)
        Direct:     416-640-1917
        Toll-free:  877-289-8525

        Passcode: 21263614 followed by the number sign.

    Webcast
    -------

    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=
    2173820

    If you prefer to receive Company news releases via e-mail, please request
at corpinfo@parkland.ca.



                         Consolidated Balance Sheet

                                                                  (restated -
                                                                  see Note 2)
                                                    December 31, December 31,
    ($000's)                                               2007         2006
                                                     -----------  -----------

    Assets
      Current Assets
        Cash and cash equivalents                    $    6,296   $   36,462
        Accounts receivable                             102,360       40,294
        Inventories (Note 4)                             48,476       29,315
        Prepaid expenses and other                       10,401        3,874
                                                     -----------  -----------
                                                        167,533      109,945
      Capital assets (Note 5)                           179,952       68,541
      Intangible assets (Note 6)                         15,120            -
      Goodwill (Note 7)                                  11,594            -
      Other long term assets                              1,514        1,499
      Future income taxes                                     -        1,438
                                                     -----------  -----------
                                                     $  375,713   $  181,423
                                                     -----------  -----------
                                                     -----------  -----------

    Liabilities
      Current Liabilities
        Bank indebtedness (Note 8)                   $   22,250   $        -
        Accounts payable and accrued liabilities         85,311       62,124
        Distributions declared and payable               22,175       15,842
        Income tax payable                                1,716          459
        Deferred revenue                                  3,839            -
        Long-term debt - current portion (Note 9)         4,101       10,145
                                                     -----------  -----------
                                                        139,392       88,570
      Long-term debt (Note 9)                            14,392        1,651
      Refinery remediation accrual (Note 10)              5,713        3,038
      Asset retirement obligations (Note 11)              2,227        1,140
      Future income taxes (Note 17)                       5,284            -
                                                     -----------  -----------
                                                        167,008       94,399
                                                     -----------  -----------

    Unitholders' Capital (Note 12)
      Class B Limited Partners' Capital                  12,606       14,331
      Class C Limited Partners' Capital                  54,121            -
      Unitholders' Capital                              141,978       72,693
                                                     -----------  -----------
                                                        208,705       87,024
                                                     -----------  -----------
                                                     $  375,713   $  181,423
                                                     -----------  -----------
                                                     -----------  -----------



     Consolidated Statements of Earnings and Other Comprehensive Income,
        Accumulated Other Comprehensive Income and Retained Earnings

                                                                  (restated -
                                                                  see Note 2)
    For the years ended                             December 31, December 31,
    ($000's except unit and per unit amounts)              2007         2006
                                                     -----------  -----------

    Net sales and operating revenue                  $1,697,663   $1,199,866
    Cost of sales                                     1,465,155    1,061,824
                                                     -----------  -----------
    Gross profit                                        232,508      138,042
                                                     -----------  -----------
    Expenses
      Operating and direct costs                         77,668       47,342
      Marketing, general and administrative              39,846       20,044
      Amortization                                       21,627        8,453
      Refinery remediation                                2,677            -
      Interest on long-term debt                          1,676        1,044
      Loss on disposal of capital assets                    275          608
                                                     -----------  -----------
                                                        143,769       77,491
                                                     -----------  -----------
    Earnings before income taxes                         88,739       60,551

    Income tax expense (Note 17)
      Current                                             1,280          782
      Future                                              6,722          193
                                                     -----------  -----------
                                                          8,002          975
                                                     -----------  -----------
    Net earnings                                         80,737       59,576
    Other comprehensive income                                -            -
                                                     -----------  -----------
    Comprehensive income                             $   80,737   $   59,576
                                                     -----------  -----------
                                                     -----------  -----------

    Accumulated other comprehensive income,
     beginning of year                               $        -   $        -
    Comprehensive income                                      -            -
                                                     -----------  -----------
    Accumulated other comprehensive income,
     end of year                                     $        -   $        -
                                                     -----------  -----------
                                                     -----------  -----------

    Retained earnings, beginning of year             $        -   $        -
    Change in accounting policy for restatement
     of inventory to FIFO (Note 2)                            -        7,979
    Allocation to Class B Limited Partners (Note 12)    (14,339)     (15,602)
    Allocation to Class C Limited Partners (Note 12)     (8,624)           -
    Allocation to Unitholders (Note 12)                 (57,774)     (51,953)
                                                     -----------  -----------
    Retained earnings, end of year                   $        -   $        -
                                                     -----------  -----------
                                                     -----------  -----------
    Net earnings per unit (Note 3)
      - basic                                        $     1.66   $     1.50
      - diluted                                      $     1.64   $     1.48
    Units outstanding (Note 12)                          49,986       38,580
                                                     -----------  -----------
                                                     -----------  -----------



                    Consolidated Statement of Cash Flows

                                                                  (restated -
                                                                  see Note 2)
    For the years ended                             December 31, December 31,
    ($000's)                                               2007         2006
                                                     -----------  -----------

    Cash Provided By Operations
      Net earnings                                   $   80,737   $   59,576
        Add (deduct) non-cash items
          Amortization                                   21,627        8,453
          Loss on disposal of capital assets                275          608
          Unit incentive compensation (Note 12)           1,916          341
          Refinery remediation accrual (Note 10)          2,677            -
          Accretion expense                                  61           60
          Asset retirement obligation expenditures            -          (40)
          Refinery remediation expenditures                  (2)           -
          Future taxes                                    6,722          193
                                                     -----------  -----------
      Funds flow from operations                        114,013       69,191
      Net changes in non-cash working
       capital (Note 20)                                (31,177)       1,057
                                                     -----------  -----------
      Cash from operating activities                     82,836       70,248
                                                     -----------  -----------

    Financing Activities
      Long-term debt repayments                         (52,959)      (4,815)
      Distributions to Class B Limited
       Partners (Note 12)                               (15,998)     (12,934)
      Distributions to Class C Limited
       Partners (Note 12)                                (9,618)           -
      Distributions to Unitholders (Note 12)            (44,443)     (28,274)
      Fund units issued (Note 12)                        50,133        2,235
      Proceeds from long-term debt                       29,554            -
      Net changes in non-cash working
       capital (Note 20)                                 28,583       12,500
                                                     -----------  -----------
      Cash used for financing activities                (14,748)     (31,288)
                                                     -----------  -----------

    Investing Activities
      Acquisition of Neufeld Petroleum (Note 13)        (47,610)           -
      Acquisition of Joy Propane Ltd. (Note 14)          (9,872)           -
      Acquisition of United Petroleum
       Products (Note 15)                               (10,425)           -
      Acquisition of Roblyn Bulk Sales Ltd. (Note 16)    (2,491)           -
      Recovery in other assets                              (15)         360
      Purchase of capital assets                        (28,924)     (12,846)
      Proceeds on sale of capital assets                  1,083        1,698
                                                     -----------  -----------
      Cash used for investing activities                (98,254)     (10,788)
                                                     -----------  -----------

    (Decrease) increase in cash                         (30,166)      28,172
    Cash and cash equivalents, beginning of year         36,462        8,290
                                                     -----------  -----------
    Cash and cash equivalents, end of year           $    6,296   $   36,462
                                                     -----------  -----------
                                                     -----------  -----------


    Notes to Consolidated Financial Statements

    December 31, 2007
    Dollar and unit amounts presented in tables are in thousands, except per
    unit and text information.

    1.  ACCOUNTING POLICIES

    Basis of Presentation

    Parkland Income Fund (the "Fund" or "Parkland") is an unincorporated,
    open-ended limited purpose mutual fund trust established under the laws
    of the Province of Alberta on April 30, 2002. The Fund was created to
    acquire the fuel marketing, convenience store and related ancillary
    businesses formerly owned by Parkland Industries Ltd. This acquisition
    was completed on June 28, 2002 through a Plan of Arrangement that
    resulted in the previous Parkland Industries Ltd. shareholders indirectly
    exchanging their shares for Units in the Fund or Class B Limited
    Partnership Units in Parkland Holdings Limited Partnership ("LP Units"),
    a limited partnership controlled by the Fund.

    Principles of Consolidation

    The consolidated financial statements include the accounts of all wholly
    owned subsidiaries, partnerships and trusts. All significant accounts and
    transactions between consolidated entities are eliminated.

    The LP units are, to the greatest extent possible, the economic
    equivalent to a unit in the Fund. The Class B LP units had a call feature
    which would have resulted in their conversion to trust units in June 2008
    resulting in an income tax obligation to the holders. At a meeting of
    Class B LP unitholders on June 22, 2007 this call feature was deferred to
    June 30, 2011. In certain circumstances the Fund may compel the exchange
    of the LP Units. As such, the LP units, including both Class B and Class
    C units, are treated as being equivalent to Fund Units.

    Use of Estimates

    The preparation of the financial statements necessarily involves the use
    of estimates and approximations. Should the underlying assumptions
    change, the actual amounts could differ from those estimated.

    Estimates are used when accounting for items such as allowance for
    doubtful accounts, asset retirement obligations, the refinery remediation
    accrual, amortization and income taxes. These estimates are subject to
    measurement uncertainty and the effect on the financial statements of
    future periods could be material.

    Inventories

    The Fund values its inventories at the lower of cost and market value.
    The Fund uses the first-in first-out (FIFO) method of determining the
    cost of inventory.

    Goodwill

    The Fund must record goodwill relating to a corporate acquisition when
    the total purchase price exceeds the fair value for accounting purposes
    of the net identifiable assets and liabilities of the acquired company.
    The goodwill balance is assessed for impairment annually at year-end or
    as events occur that could result in an impairment. Impairment is
    recognized based on the fair value of the reporting entity compared to
    the book value of the reporting entity. If the fair value of the Fund is
    less than the book value, impairment is measured by allocating the fair
    value of the Fund to the identifiable assets and liabilities as if the
    Fund has been acquired in a business combination for a purchase price
    equal to its fair value. Any excess of the book value of goodwill over
    the implied value of goodwill is the impairment amount. Impairment is
    charged to earnings and is not tax affected, in the year in which it
    occurs. Goodwill is stated at cost less impairment and is not amortized.

    Amortization

    Amortization is provided for on a straight line basis over the estimated
    useful lives of assets at the following annual rates:

    Land improvements                          4 percent
    Buildings                                  5 percent
    Equipment                            10 - 20 percent
    Assets under capital lease           10 - 20 percent

    Intangible Assets

    Customer relationships and tradenames acquired during acquisitions are
    recorded at estimated fair value and will be amortized using the
    straight-line method over their estimated useful lives of 5 years. The
    value of non-compete agreements acquired was recorded at estimated fair
    value and will be amortized using the straight-line method over the term
    of the agreement. Intangible assets are tested for impairment when
    conditions exist which may indicate that the estimated future net cash
    flows from the asset will be insufficient to cover its carrying value.

    Deferred Revenue

    Deferred revenue consists of deposits and prepayments by customers for
    the purchase of product not yet delivered and not recorded as revenue by
    the Fund.

    Income Taxes

    Income earned directly by the Limited Partnership is not subject to
    income taxes as its income is taxed directly to the Limited Partnership
    unitholders. Income earned in the Fund and distributed to the Fund
    unitholders is taxed directly to the Fund unitholders. Income taxes
    incurred by taxable entities controlled by the Fund are accounted for
    using the future method. Under this method, the Fund recognizes a future
    tax liability whenever recovery or settlement of the carrying amount of
    an asset or liability would result in future income tax outflow.
    Similarly, the Fund recognizes a future income tax asset whenever
    recovery or settlement of the carrying amount of an asset or liability
    would generate future income tax reductions.

    Asset Retirement Obligations

    The estimated future costs to remove underground fuel storage tanks at
    locations where the Fund has a legal obligation to remove these tanks are
    recorded as Asset Retirement Obligations at the time the tanks are
    installed. A corresponding increase to the carrying value of the fuel
    storage tanks is also recorded at installation. The Fund recognizes
    accretion expense in connection with the discounted retirement
    obligations and amortization in connection with the increase in carrying
    value over the estimated remaining life of the respective underground
    fuel storage tanks.

    Long-Term Debt

    Capital lease obligations, which relate to transactions which are similar
    in nature to a purchase, are capitalized and included in long-term debt.

    Earnings Per Unit

    Basic earnings per unit are calculated on the weighted average number of
    units outstanding for the period. Diluted earnings per unit are
    calculated by application of the Treasury Stock Method. Under this
    method, the diluted number of units are calculated based upon the
    weighted average number of units outstanding for the period plus the
    dilutive effect of the exercise of those employee options which were "in-
    the-money" during the period. Special distributions to unitholders in the
    form of additional units are recorded at the declaration date. The
    computation of earnings per unit for prior years are retroactively
    restated to reflect the change in units as a result of special
    distributions in the form of new units issued.

    Revenue

    The Fund recognizes revenue on its sale of goods when title passes to the
    purchaser or when services are rendered.

    Grants of Options and Restricted Units

    The Fund accounts for its grants of options and restricted units in
    accordance with the fair value based method of accounting for stock-based
    compensation.

    Cash and Cash Equivalents

    Cash and cash equivalents include short-term investments, such as money
    market deposits or similar type instruments, with a maturity of three
    months or less when purchased.

    Prior Year Numbers

    Certain prior year numbers have been restated to conform with current
    year presentation.

    2. CHANGES IN ACCOUNTING POLICIES

    On January 1, 2007, the Fund adopted the Canadian Institute of Chartered
    Accountants (CICA) handbook sections 1530 "Comprehensive Income", section
    3251 "Equity" and section 3855 "Financial Instruments - Recognition and
    Measurement". These standards result in changes in the accounting for
    financial instruments as well as introduction of accumulated other
    comprehensive income as a separate component of unitholders' capital. As
    required, these standards have been adopted prospectively and comparative
    amounts for the prior periods have not been restated.

    Comprehensive Income

    Comprehensive income is comprised of net earnings or loss and other
    comprehensive income ("OCI"). OCI represents the change in capital for a
    period that arises from, among other things, unrealized gains and losses
    on available for sale securities and changes in the fair value of
    derivative instruments designated as cash flow hedges. The Fund does not
    currently have any OCI.

    Equity

    This section establishes the standards for presentation of capital and
    changes in capital during the period. It requires separate presentation
    of changes in unitholders' capital for the period arising from net
    income, OCI, contributed surplus, retained earnings, unitholders' capital
    and reserves. Accumulated OCI would be included in the consolidated
    balance sheet as a separate component of unitholders' capital.

    Financial Instruments

    This section establishes standards for the recognition and measurement of
    financial instruments which is comprised of: financial assets, financial
    liabilities, derivatives and non-financial derivatives.

    A financial asset is cash or a contractual right to receive cash or
    another financial asset, including equity, from another party. A
    financial liability is the contractual obligation to deliver cash or
    another financial asset to another party.

    A derivative is a financial instrument whose value changes in response to
    a specified variable, requires little or no net investment and is settled
    at a future date. An embedded derivative is a derivative that is a part
    of a non-derivative contract and not directly related to that contract.
    Under this standard, embedded derivatives must be accounted for as a
    separate financial instrument. A non-financial derivative is a contract
    that can be settled net in cash or another financial instrument.

    Under this standard, all financial instruments are initially recorded at
    fair value and are subsequently accounted for based on one of four
    classifications: held for trading, held-to-maturity, loans and
    receivables and other financial liabilities or available-for-sale. The
    classification of a financial instrument depends on its characteristics
    and the purpose for which it was acquired. Fair values are based upon
    quoted market prices available from active markets or are otherwise
    determined using a variety of valuation techniques and models.

    i)  Held for trading

        Held for trading financial instruments are financial assets or
        financial liabilities that are purchased with the intention of
        selling or repurchasing in the near term. Any financial instrument
        can be designated as held for trading as long as its fair value can
        be reliably measured. A derivative is classified as held for trading,
        unless designated as and considered an effective hedge. Held for
        trading instruments are recorded at fair value with any subsequent
        gains or losses from changes in the fair value recorded directly into
        earnings.

        All of the Fund's cash and cash equivalents, accounts receivable,
        accounts payable and accrued liabilities and distributions declared
        and payable are designated as held for trading and are recorded at
        fair value.

    ii) Held-to-maturity

        Held-to-maturity investments are financial assets with fixed or
        determinable payments and a fixed maturity that the Fund has the
        intent and ability to hold to maturity. These financial assets are
        measured at amortized cost using the effective interest method. Any
        gains or losses arising from the sale of a held-to-maturity
        investment are recorded directly into earnings.

        The Fund has not designated any financial instruments as held-to-
        maturity.

    iii) Loans and receivables and other financial liabilities

        Loans and receivables and other financial liabilities are accounted
        for at amortized cost using the effective interest method of
        amortization.

        The fair value of other assets and long-term debt approximate their
        carrying values due to their floating interest rates.

    iv) Available-for-sale

        Available-for-sale assets are those assets that are not classified as
        held for trading, held-to-maturity or loans and receivables.
        Available-for-sale instruments are recorded at fair value. Any gains
        or losses arising from the change in fair value is recorded in OCI
        and upon the sale of the instrument or other-than-temporary
        impairment, the cumulative gain or loss is transferred into earnings.

        The Fund has not designated any financial instruments as available-
        for-sale.

    The methods used by the Fund in determining the fair value of financial
    instruments are unchanged as a result of implementing the new standard.

    Under this standard, all guarantees upon inception are required to be
    recognized on the balance sheet at their fair value. No subsequent re-
    measurement is required to fair value each guarantee at each subsequent
    balance sheet date unless the guarantee is considered a derivative.

    Inventories

    In June 2007, Canada's Accounting Standards Board (AcSB) issued CICA
    Handbook Section 3031, Inventories. This new standard provides
    considerable guidance when determining the cost of inventory. Where costs
    of inventory items cannot be specifically identified, costs must be
    assigned consistently on either a "first-in, first-out" (FIFO) or
    weighted average cost basis. A "last-in first-out" (LIFO) cost basis is
    no longer acceptable. The standard is effective for fiscal periods
    beginning on or after January 1, 2008. The Fund early adopted this
    standard effective January 1, 2007 and applied it retrospectively.

    As a result of the early adoption of CICA Handbook Section 3031
    Inventories and its retrospective application, the Fund recorded the
    following adjustments to the financial statements: Inventories increased
    $13.2 million (2006 - $9.0 million), Cost of Sales decreased $4.2 million
    (2006 - $1.0 million), Net Earnings increased $3.2 million (2006 -
    $0.8 million) and Unitholders' Capital increased $13.2 million (2006 -
    $9.0 million). Unitholders' Capital and Inventories at January 1, 2006
    were increased by $8.0 million to reflect the impact of this change in
    accounting policy in prior years. The change in accounting policy
    increased Net Earnings Per Unit - Basic and Net Earnings Per Unit -
    Diluted by $0.09 (2006 - $0.03 and $0.02 respectively).

    3. EARNINGS ANALYSIS AND EARNINGS PER UNIT

                                                                  (restated -
                                                                  see Note 2)
                                                        2007         2006
                                                     ------------------------

    Net earnings                                     $   80,737   $   59,576
                                                     ------------------------
    Earnings per unit
      - basic                                        $     1.66   $     1.50
      - diluted                                      $     1.64   $     1.48

    Equivalent units outstanding, beginning of year      39,858       39,456
    Weighted average of Class C units issued              4,960            -
    Weighted average of Fund units issued                 3,801            -
    Weighted average of equivalent units issued
     pursuant to restricted unit plan                        26            -
    Weighted average of equivalent units issued
     pursuant to distribution reinvestment plan              27           45
    Weighted average of equivalent units issued
     pursuant to exercise of unit options                   163          249
                                                     ------------------------
    Denominator utilized in basic earnings per unit      48,835       39,750
    Incremental equivalent units outstanding that
     were dilutive                                          460          415
                                                     ------------------------
    Denominator utilized in diluted earnings per unit    49,295       40,165
                                                     ------------------------

    Equivalent units outstanding at January 1, 2006 and January 1, 2007 have
    been restated for the retroactive change resulting from the special
    distribution of units on December 31, 2007 and December 31, 2006 as well
    as for the three-for-one split on May 25, 2007.

    4.  INVENTORIES

                                                                  (restated -
                                                                  see Note 2)
                                                        2007         2006
                                                     ------------------------
    Gas and diesel                                   $   33,241   $   25,358
    Agricultural inputs                                   4,624            -
    Convenience store merchandise                         4,448        3,855
    Lubricants                                            2,749            -
    Propane                                               2,297            -
    Other                                                 1,117          102
                                                     ------------------------
                                                     $   48,476  $    29,315
                                                     ------------------------
                                                     ------------------------

    5.  CAPITAL ASSETS

                                                    Accumulated     Net Book
    December 31, 2007                         Cost  Amortization       Value
                                        -------------------------------------
    Land                                $   26,035   $        -   $   26,035
    Land improvements                        9,572        2,666        6,906
    Buildings                               42,927       12,206       30,721
    Assets under capital lease              15,554        9,547        6,007
    Equipment                              156,207       45,924      110,283
                                        -------------------------------------
                                        $  250,295   $   70,343   $  179,952
                                        -------------------------------------
                                        -------------------------------------

                                                    Accumulated     Net Book
    December 31, 2006                         Cost  Amortization       Value
                                        -------------------------------------
    Land                                $   13,069   $        -   $   13,069
    Land improvements                        6,940        2,278        4,662
    Buildings                               24,738       10,530       14,208
    Assets under capital lease              14,038        7,996        6,042
    Equipment                               63,420       32,860       30,560
                                        -------------------------------------
                                        $  122,205   $   53,664   $   68,541
                                        -------------------------------------
                                        -------------------------------------

    6.  INTANGIBLE ASSETS

                                                    Accumulated     Net Book
    December 31, 2007                         Cost  Amortization       Value
                                        -------------------------------------
    Customer relationships              $   11,649   $    1,724   $    9,925
    Tradenames                               4,966          836        4,130
    Non-compete agreements                   1,146           81        1,065
                                        -------------------------------------
                                        $   17,761   $    2,641   $   15,120
                                        -------------------------------------
                                        -------------------------------------

    7.  GOODWILL

    Goodwill arose through acquisitions described in Notes 14 and 15.

    8.  BANK INDEBTEDNESS

    On August 1, 2007, the Fund entered into a credit agreement with a
    syndicate of banks which included a revolving operating facility for
    working capital requirements to a maximum of $32 million (2006 -
    $32 million) and subject to margin calculations. The operating facility
    bears interest at the Prime Rate Advance Rate, a rate determined as the
    Bank's prime rate plus a percentage according to the ratio of funded debt
    to Earnings Before Interest on Long-Term Debt, Income Tax Expense,
    Amortization of Capital Assets, Refinery Remediation Accrual and Loss on
    Disposal of Capital Assets. The effective rate of interest at
    December 31, 2007 was 6.0 percent.

    9.  LONG-TERM DEBT

                                                         2007         2006
                                                     ------------------------
    Bank loans                                       $      310   $        -
    Term loan                                            14,167            -
    Mortgage payable                                        248          272
    Capital lease obligations                             3,768        4,529
    Mortgages repaid during the year                          -        2,959
    Bank loans repaid during the year                         -        4,036
                                                     ------------------------
                                                         18,493       11,796
    Less current portion                                  4,101       10,145
                                                     ------------------------
                                                     $   14,392   $    1,651
                                                     ------------------------
                                                     ------------------------

    Estimated repayments for the next
     5 years are:                                   Obligations   Other Loans
                                                          under
                                                        capital
                                                         leases
                                                     ------------------------
                 2008                                $    1,486   $    2,615
                 2009                                       450        2,583
                 2010                                       388        2,565
                 2011                                       265        2,543
                 2012                                       265        2,504
      Thereafter                                          2,376        1,915
                                                     ------------------------
                                                          5,230       14,725
      Interest expense included in minimum
       lease payments                                     1,462            -
                                                     ------------------------
                                                     $    3,768   $   14,725
                                                     ------------------------
                                                     ------------------------

    Bank Loans

    Bank loans are payable in monthly instalments of $13,189 (2006 -
    $103,768) plus interest ranging from nil to six percent (2006 -
    6.35 percent). The bank loans are secured by vehicles with a net book
    value of $346,233.

    Term Loan

    The term loan is repayable in monthly payments of $208,333 plus interest
    at the Prime Rate Advance Rate. The effective rate of interest at
    December 31, 2007 was 6.0 percent (2006 - 6.5 percent). The loan is due
    in August 2013. The obligations under the credit agreement are secured by
    a mortgage over the Fund's real property, assignment of insurance and
    an unlimited guarantee from the secured entities.

    Mortgage Payable

    The mortgage payable is repayable in monthly instalments of $3,368
    (2006 - $122,346) including interest at 6.25 percent (2006 - 6.7 to
    6.8 percent). The mortgage is secured by real property with a net book
    value of $1,122,452 (2006 - $8,907,000) and matures in October 2008.

    Capital Lease Obligations

    Capital lease obligations are payable in monthly instalments totalling
    $197,305 including interest varying from 0 percent to 16.34 percent and
    prime plus 0.35 percent per annum. The effective rate of interest at year
    end for the prime based lease was 6.35 percent (2006 - 6.35 percent). The
    capital lease obligations are for land, buildings and equipment with a
    net book value of $5,826,677 and mature at various dates ending September
    2022.

    See Note 24 - Subsequent Events.

    10. REFINERY REMEDIATION ACCRUAL

    In December 2004, the Fund eliminated the carrying value of its Bowden
    refinery and recorded a net liability of $3.4 million for future
    estimated costs of remediation of the site, net of salvage value, based
    on the uncertainty of creating an alternative to the refinery being
    dismantled, remediated and sold for salvage values. The Refinery
    Remediation Accrual represents the present value estimate of the Fund's
    cost to remediate the site. $0.4 million of remediation costs incurred
    in 2006 were charged against the accrual.

    During 2006, the Fund entered into a custom processing agreement to toll
    produce fluids used in the oilfields. The commercial agreement utilized a
    portion of the processing units at the refinery. The Fund is continuing
    to pursue other economically viable uses for the remaining processing
    units at the refinery and therefore any decision to dismantle, remediate
    and sell the refinery site has been deferred indefinitely. The Fund
    renewed its refinery operating license in 2007 and fully intends to
    maximize the revenue generating potential of this facility. The
    obligations relating to future environmental remediation, however,
    continue to exist.

    Assuming the Fund continues operations at the refinery, remediation for
    any potential environmental liabilities associated with a complete
    dismantling of the site would be delayed indefinitely. The Fund has
    estimated the discounted cost of remediation on the basis that operations
    continue and that remediation would be part of a multi year management
    plan. Remediation costs have been estimated from independent engineering
    studies conducted in December 2007. The total undiscounted estimated
    future cash flows, to be incurred over an extended period after
    operations cease, are approximately $13.8 million net of salvage value of
    equipment and will be accreted. Discounting these incremental cash flows
    resulted in a $2.7 million increase in the refinery remediation accrual
    at December 31, 2007. The costs are expected to be incurred between 2018
    and 2027. The discount rate used to determine the present value of the
    future costs is 6.9 percent (2006 - 6.9 percent).

    11. ASSET RETIREMENT OBLIGATIONS

    A reconciliation of the Fund's estimated liability for the removal of its
    underground storage tanks is as follows:

                                                         2007         2006
                                                     ------------------------
    Asset retirement obligations, beginning of year  $    1,140   $    1,120
    Additions during the year                                70            -
    Expenditures during the year                              -          (40)
    Change in estimates                                     956            -
    Accretion expense                                        61           60
                                                     ------------------------
    Asset retirement obligations, end of year        $    2,227   $    1,140
                                                     ------------------------
                                                     ------------------------

    The Fund is liable for the environmental obligations related to the
    removal of its underground storage tanks at properties that it leases.
    The Asset Retirement Obligation represents the present value estimate of
    the Fund's cost to remove these tanks. The total undiscounted estimated
    future cash flows required to settle the Fund's obligation increased to
    $3.2 million (2006 - $1.5 million), which primarily reflects the Fund's
    estimate of increased costs and inflation. Discounting these incremental
    cash flows resulted in a $1.0 million increase in the asset retirement
    obligation at December 31, 2007. The costs are expected to be incurred
    between 2007 and 2019. The discount rate used to determine the present
    value of the future costs is 6.9 percent (2006 - 6.9 percent).

    12. UNITHOLDERS' CAPITAL

    An unlimited number of Fund Units and LP Units may be created and issued,
    pursuant to the Fund Declaration of Trust and the Amended and Restated
    Limited Partnership Agreement, respectively, as outlined in the Plan of
    Arrangement.

    Fund Units represent an undivided interest in the Fund. LP Units
    represent a partnership interest in Parkland Holdings Limited Partnership
    and are exchangeable on a one-for-one basis into Fund Units. Both Fund
    Unitholders and LP Unitholders are entitled to vote at meetings of the
    Fund and are entitled to distributions from time to time as determined by
    the Board of Directors.

                                         2007         (restated - see Note 2)
                                  Number                 Number
                                 of Units     Amount    of Units     Amount
                                ---------------------------------------------
    Class B Limited Partnership
     Units
      Balance, beginning of year    8,566   $  14,331      8,724   $  13,055
      Adjustment to beginning
       retained earnings                -           -          -       1,793
                                ---------------------------------------------
      Adjusted balance,
       beginning of year            8,566      14,331      8,724      14,848
      Allocation of retained
       earnings                         -      14,339          -      13,581
      Additional allocation of
       retained earnings                -           -          -         228
      Distribution to partners          -     (15,998)         -     (12,934)
      Exchanged for Fund units        (32)        (66)      (158)     (1,392)
                                ---------------------------------------------
      Balance, end of year          8,534   $  12,606      8,566   $  14,331
                                ---------------------------------------------
    Class C Limited Partnership
     Units
      Balance, beginning of
       period                           -   $       -          -   $       -
      Adjustment to beginning
       retained earnings                -           -          -           -
                                ---------------------------------------------
      Adjusted balance,
       beginning of year                -           -          -           -
      Issued on capital
       acquisition, net of
       issue costs                  5,519      58,954          -           -
      Allocation of retained
       earnings                         -       8,624          -           -
      Additional allocation of
       retained earnings                -           -          -           -
      Exchanged for fund units       (354)     (3,839)         -           -
      Distribution to partners          -      (9,618)         -           -
                                ---------------------------------------------
      Balance, end of period        5,165   $  54,121          -   $       -
                                ---------------------------------------------
    Fund Units
      Balance, beginning of year   30,014   $  72,693     28,288   $  45,046
      Adjustment to beginning
       retained earnings                -           -          -       6,186
                                ---------------------------------------------
      Adjusted balance,
       beginning of year           30,014      72,693     28,288      51,232
      Allocation of retained
       earnings                         -      57,774          -      45,010
      Additional allocation of
       retained earnings                -           -          -         757
      Issued on vesting of
       restricted units                26           -          -           -
      Unit incentive compensation       -       1,916          -         341
      Issued for cash, net of
       issue costs                  4,080      47,037          -           -
      Issued under distribution
       reinvestment plan               44         636         63         491
      Issued under unit option
       plan                           462       2,460        339       1,744
      To be issued to unitholders
       pursuant to special
       distribution                 1,275      20,459      1,165      14,963
      Distribution to unitholders       -     (64,902)         -     (43,237)
      Exchange of Limited
       Partnership units              386       3,905        159       1,392
                                ---------------------------------------------
      Balance, end of year         36,287   $ 141,978     30,014   $  72,693
                                ---------------------------------------------

                                   49,986   $ 208,705     38,580   $  87,024
                                ---------------------------------------------
                                ---------------------------------------------

    On May 4, 2007 the Directors passed a resolution authorizing the Fund to
    provide for a division of its units on a three-for-one unit basis. The
    unit split did not change the rights of the holders of units and each
    unit outstanding after the split is entitled to one vote. These financial
    statements have been adjusted retroactively for the three-for-one split.

    Of the 5.519 million Class C Limited Partnership units issued,
    4.697 million units are subject to escrow provisions under which one
    third will be released in each of the three years from January 25, 2007.

    Unit Option Plan

    The Fund has a Unit Option Plan under which the Fund may grant up to
    3,600,000 unit options to directors, officers, employees and consultants.
    The maximum number of options is reduced by the number of units allocated
    to the Restricted Unit Plan. The unit options have a 10 year term and,
    with limited exceptions, vest proportionally over the first three
    anniversary dates following the grant.

    The table below represents the status of the Fund's Unit Option Plan as
    at December 31, 2007 and 2006 and the changes therein for the years then
    ended:

                                         2007                   2006
                                             Weighted               Weighted
                                   Number     Average     Number     Average
                                  of Unit    Exercise    of Unit    Exercise
                                  Options      Price     Options      Price
                                ---------------------------------------------
    Option units,
     beginning of year              1,228   $    6.20      1,650   $    6.03
    Cancelled                           -           -        (84)       7.01
    Exercised                        (449)       5.50       (338)       5.18
                                ---------------------------------------------
    Option units, end of year         779   $    6.60      1,228   $    6.20
                                ---------------------------------------------
                                ---------------------------------------------
    Exercisable options,
     end of year                      589   $    6.43        813   $    5.58
                                ---------------------------------------------
                                ---------------------------------------------

    Exercise prices for outstanding options at December 31, 2007 have the
    following ranges: 97,875 from $4.15 - $5.87, 196,908 from $6.32 - $6.68
    and 484,019 from $6.73 - $7.27. These issue prices represent the market
    value at the time of issue. The corresponding remaining contractual life
    for these options range from 5-8 years.

    The Fund accounts for its grants of options using the fair value based
    method of accounting for stock based compensation. The total cost to be
    reported is $0.4 million (2006 - $0.5 million). The compensation cost
    that has been included in marketing, general and administrative expenses
    is $0.2 million (2006 - $0.2 million).

    The fair value of the options granted is estimated using the
    Black-Scholes options pricing model on the basis of the following
    assumptions:

    Expected average annual distribution                           $    1.80
    Expected average volatility                                   20 percent
    Weighted average risk-free interest rate                    3.25 percent
    Expected life                                                    3 years

    Restricted Unit Plan

    Effective January 1, 2006, the Fund adopted a Restricted Unit Plan to
    complement the Unit Option Plan. Under the Plan the units granted in 2006
    vest over a five year period and the units issued in 2007 vest over a
    three year period. The units are subject to entity performance criteria.

    The table below represents the status of the Fund's Restricted Unit Plan
    as at December 31, 2007 and the changes therein for the year then ended:

                                         2007                   2006
                                  Number    Weighted     Number    Weighted
                                 of Units    Average    of Units    Average
                                  (000's)  Unit Price    (000's)  Unit Price
                                ---------------------------------------------
    Restricted units,
     beginning of year                131   $    6.60          -   $       -
    Granted                           191       12.83        137        6.60
    Issued                            (26)       6.60          -           -
    Cancelled                          (2)      12.38         (6)       6.55
                                ---------------------------------------------
    Restricted units,
     end of year                      294   $   10.62        131   $    6.60
                                ---------------------------------------------
                                ---------------------------------------------

    The Fund accounts for its grants of restricted units over the graded
    vesting schedule of each grant. Each grant of restricted units is treated
    as if the grant were a series of awards rather than a single award. The
    fair value of the award is determined based on the different expected
    lives for the restricted units that vest each year. The total cost to be
    reported for 2007 is $2.4 million (2006 - $0.8 million). The compensation
    cost that has been included in marketing, general and administrative
    expenses for 2007 grants is $1.8 million ($0.2 million for 2006).

    13. ACQUISITION OF NEUFELD PETROLEUM AND PROPANE LTD. AND NEUFELD
        HOLDINGS LTD.

    On January 24, 2007, the Fund acquired all of the outstanding shares of
    Neufeld Petroleum & Propane Ltd. and Neufeld Holdings Ltd. ("Neufeld
    Petroleum"). The transaction was accounted for using the purchase method
    with the allocation of the purchase price as follows:

    Estimated fair value of net assets acquired:
      Capital assets                                             $  87,905.2
      Working capital, net (excluding bank indebtedness)            24,750.0
      Intangible asset - customer relationships                      6,264.1
      Intangible asset - tradenames                                  4,581.2
      Intangible asset - non compete agreement                         561.0
                                                                 ------------
                                                                 $ 124,061.5
                                                                 ------------
                                                                 ------------
    Consideration:
      Cash paid to vendor                                        $  23,468.0
      Class C Limited Partnership Units                             47,620.1
      Acquisition costs                                              1,982.5
      Bank indebtedness assumed                                      2,137.8
      Shareholder loans paid out                                    17,828.0
      Management bonus paid out                                      4,331.1
      Long-term debt assumed                                        26,694.0
                                                                 ------------
                                                                 $ 124,061.5
                                                                 ------------
                                                                 ------------

    The effective date of the transaction was November 1, 2006. The interim
    period net earnings after tax to January 24, 2007 of $3 million have been
    credited to the purchase price.

    14. ACQUISITION OF JOY PROPANE LTD.

    On April 24, 2007, the Fund acquired all of the outstanding shares of Joy
    Propane Ltd. The transaction was accounted for using the purchase method
    with the allocation of the purchase price as follows:

    Estimated fair value of net assets acquired:
      Capital assets                                             $   9,716.7
      Working capital, other                                         1,056.0
      Cash                                                           1,414.0
      Goodwill                                                       4,488.9
                                                                 ------------
                                                                    16,675.6
                                                                 ------------
                                                                 ------------
    Consideration:
      Cash paid to vendor                                           11,201.5
      Acquisition costs                                                 84.6
      Class C Limited Partnership Units                              5,389.5
                                                                 ------------
                                                                 $  16,675.6
                                                                 ------------
                                                                 ------------

    The effective date of the transaction was February 28, 2007. The interim
    period net earnings after tax to April 24, 2007 of $168,500 have been
    credited to the purchase price. There is no tax basis on the goodwill.
    Goodwill relates to the Fuel Marketing segment.

    15. ACQUISITION OF UNITED PETROLEUM PRODUCTS INC.

    On May 28, 2007, the Fund acquired all of the outstanding shares of
    United Petroleum Products Inc. The transaction was accounted for using
    the purchase method with the allocation of the purchase price as follows:

    Estimated fair value of net assets acquired:
      Capital assets                                             $   2,538.4
      Working capital, net                                           2,240.6
      Intangible asset - customer relationships                      5,000.0
      Intangible asset - non compete agreement                         200.0
      Goodwill                                                       7,105.4
                                                                 ------------
                                                                 $  17,084.4
                                                                 ------------
                                                                 ------------
    Consideration:
      Cash paid to vendor                                        $  10,382.9
      Acquisition costs                                                 41.7
      Class C Limited Partnership Units                              5,944.7
      Bank debt assumed                                                715.1
                                                                 ------------
                                                                 $  17,084.4
                                                                 ------------
                                                                 ------------

    The effective date of the transaction was May 1, 2007. The interim period
    net earnings after tax to May 28, 2007 of $247,000 have been credited to
    the purchase price. There is no tax basis on the goodwill. Goodwill
    relates to the Fuel Marketing segment.

    16. ACQUISITION OF ROBLYN BULK SALES LTD.

    On December 3, 2007, the Fund acquired all of the outstanding shares of
    Roblyn Bulk Sales Ltd., a distributor of bulk fuels located in Edson,
    Alberta. The transaction was accounted for using the purchase method with
    the allocation of the purchase price as follows:

    Estimated fair value of net assets acquired:
      Capital assets                                             $   1,645.0
      Working capital                                                  246.3
      Intangible asset - customer relationships                        385.0
      Intangible asset - tradenames                                    385.0
      Intangible asset - non compete agreement                         385.0
                                                                 ------------
                                                                     3,046.3
                                                                 ------------
                                                                 ------------
    Consideration:
      Cash paid to vendor                                            2,491.0
      Long term debt assumed                                           555.3
                                                                 ------------
                                                                 $   3,046.3
                                                                 ------------
                                                                 ------------

    17. INCOME TAXES

    Income tax expense varies from the amounts that would be computed by
    applying the Canadian Federal and Provincial income tax rates to earnings
    before provision for income taxes as shown in the following table:

                                         2007                   2006
                                                  %                      %
                                ---------------------------------------------
    Provision for income taxes
     at statutory rates          $ 28,876       32.54   $ 19,673       32.49
    Add (deduct) the
     tax effect of:
      Income earned in limited
       partnership                (29,228)     (32.94)   (18,560)     (30.65)
      Effect of taxation of
       Trusts in 2011               7,717        8.69          -           -
      Large corporation/capital
       taxes                           50        0.06         89        0.15
      Other                           587        0.66       (227)      (0.37)
                                ---------------------------------------------
                                 $  8,002        9.01   $    975        1.62
                                ---------------------------------------------
                                ---------------------------------------------

    The net future income tax liability is comprised of:

                                                          2007        2006
                                                       ----------------------
    Future income tax liabilities
      Capital assets carrying value in excess of
       tax values                                      $     248   $       -
      Effect of taxation of Trusts in 2011                 7,252           -
      Effect of LIFO to FIFO inventory adjustment          2,017           -
    Future income tax assets
      Capital assets tax values in excess of
       carrying values                                    (2,805)          -
      Refinery remediation                                (1,428)     (1,438)
                                                       ----------------------
    Net future income tax liability (asset)            $   5,284   $  (1,438)
                                                       ----------------------
                                                       ----------------------

    On June 12, 2007, the new Trust taxation rules previously announced by
    the government on October 31, 2006 became substantively enacted. As a
    result, the future income tax payable and corresponding future income tax
    expense on the Trust's temporary differences between the accounting basis
    and the tax basis of its assets and liabilities was recorded in the
    second quarter of 2007, which totalled $7.5 million. During 2007, the
    federal government substantively enacted various tax rate reductions,
    which lowered the corporate tax rates for the years 2008 to 2012 and
    beyond. The corporate tax rates were reduced from 20.5% in 2008 to an
    ultimate rate of 15% in 2012 and future years. These federal rate
    reductions also reduce the taxation rate applicable to trusts from 31.5%
    to 29.5% starting in 2011 and to 28% in 2012 and beyond. The Fund applied
    these rate reductions to its future income tax calculations in 2007,
    resulting in a total future income tax expense of approximately
    $7.3 million after adjusting for final changes in the third quarter to
    the purchase price allocation of the acquired companies.

    18. COMMITMENTS

    The Fund has contracted obligations under various debt agreements as well
    as under operating and capital leases for land, building and equipment.
    Minimum operating lease payments under the existing terms for each of the
    five succeeding years are as follows:

    2008                                                           $   2,404
    2009                                                           $   1,586
    2010                                                           $     955
    2011                                                           $     490
    2012                                                           $     315
    Thereafter                                                     $     577

    The Fund has outstanding letters of credit totalling $25.1 million
    (2006 - $24.7 million) which mature at various dates to October 31, 2008.
    The Fund's credit facility provides for letters of credit to a maximum
    of $30.0 million, subject to margin calculations.

    The Fund also has purchase commitments under its fuel supply contracts
    that require the purchase of approximately 1.9 billion litres of fuel
    products at variable costs over the next year.

    19. FINANCIAL INSTRUMENTS

    The fair value of cash and cash equivalents, accounts receivable, tax
    payable, distributions payable, bank indebtedness, deferred revenue and
    accounts payable and accrued liabilities are equal to their carrying
    values due to their short term maturities. The fair value of the term
    loan and operating line of credit equal their carrying values as their
    interest rates fluctuate with the prime lending rate. The carrying values
    and fair values of mortgages payable, bank loans, capital lease
    obligations and mortgages and loans receivable are as follows:

                                        2007                   2006
                                Carrying      Fair      Carrying      Fair
                                  Value      Value        Value      Value
                               ----------------------------------------------
    Mortgages payable          $     248   $     250   $   3,238   $   3,228
    Bank loans                 $     310   $     307   $       -   $       -
    Capital lease obligations  $   3,768   $   4,197   $   4,529   $   4,575
    Mortgages and loans
     receivable                $   1,119   $   1,170   $   1,393   $   1,495


    Fair value of mortgages payable, bank loans, mortgages and loans
    receivable and capital lease obligations are estimated using discounted
    cash flow analysis based upon incremental borrowing rates for similar
    borrowing arrangements.

    The Fund does not have a significant credit exposure to any individual
    customer. The Fund reviews a new customer's credit history before
    extending credit and conducts regular reviews of its existing customers'
    credit performance.

    Mortgages and loans receivable are receivable in monthly instalments of
    $38,310 (2006 - $38,787), bear interest at rates ranging between nil and
    11 percent (2006 - nil and 13 percent) and are secured by specific assets
    of the mortgage.

    20. NET CHANGES IN NON-CASH WORKING CAPITAL

                                                                  (restated -
                                                                  see Note 2)
                                                          2007        2006
                                                       ----------------------
    Accounts receivable                                $ (18,646)  $  (6,041)
    Inventories                                           (7,926)     (2,374)
    Prepaid expenses and other                            (6,376)     (2,304)
    Accounts payable                                         (55)     12,455
    Income taxes payable                                  (1,871)       (679)
    Deferred revenue                                       3,697           -
                                                       ----------------------
      Subtotal for operating activities                $ (31,177)  $   1,057
                                                       ----------------------
                                                       ----------------------

    Operating line of credit                           $  22,250   $       -
    Distributions declared and payable                     6,333      12,500
                                                       ----------------------
      Subtotal for financing activities                $  28,583   $  12,500
                                                       ----------------------
                                                       ----------------------

    Other cash flow information
      Cash taxes paid                                  $   2,802   $   1,461
                                                       ----------------------
                                                       ----------------------
      Cash interest paid                               $   1,676   $   1,044
                                                       ----------------------
                                                       ----------------------

    21. SEGMENTED INFORMATION

    The Fund's operations have been predominantly in fuel marketing and
    convenience store sales in western Canada. With the acquisitions in 2007,
    the Fund now sells propane, fertilizer, lubes, other agricultural inputs
    and industrial products and services. The Fund's operating segments have
    been adjusted to reflect these changes.

    Fuel Marketing includes sales of gasoline, diesel, heating oil, propane
    fuel and variable rents derived from service station sites. Convenience
    Store Merchandise continues to include the operations of the Fund owned
    and operated convenience stores that are integrated into fuel marketing
    sites and bear common operating costs. Commercial includes primarily the
    non-fuel components of the acquired businesses as noted in the previous
    paragraph.

    Due to the amount of common operating and property costs it is not
    practical to report these segments below their respective gross profits.
    The segregation of capital expenditures and total assets is not practical
    as the reportable segments represent product sales that are generated
    from common locations.

                                        Convenience
                               Fuel        Store
                            Marketing   Merchandise   Commercial     Total
                          ---------------------------------------------------
    Year ended
     December 31, 2007
    Net sales and
     operating revenue    $ 1,558,220  $    64,538  $    74,905  $ 1,697,663
    Cost of sales           1,370,257       48,154       46,744    1,465,155
                          ---------------------------------------------------
    Gross profit          $   187,963  $    16,384  $    28,161  $   232,508
                          ---------------------------------------------------
                          ---------------------------------------------------
    Year ended
     December 31, 2006
     (restated - see
     Note 2)
    Net sales and
     operating revenue    $ 1,140,242  $    59,624  $         -  $ 1,199,866
    Cost of sales           1,017,707       44,117            -    1,061,824
                          ---------------------------------------------------
    Gross profit          $   122,535  $    15,507  $         -  $   138,042
                          ---------------------------------------------------
                          ---------------------------------------------------

    22. RELATED PARTY TRANSACTIONS

    During 2007, Parkland paid $0.7 million (2006 - $0.4 million) for legal
    services to Bennett Jones LLP where David Spencer, a Parkland director,
    is a partner. The majority of services received related to documentation
    for the acquisitions and a new credit facility.

    Parkland provides management, labor, accounting and delivery services to
    Neufeld Petroleum and Propane (High Level) Ltd. (NPPHL). NPPHL is owned
    by Abe Neufeld, Parkland's Vice President, Commercial Business
    Development and consists of a small scale Petro-Canada bulk fuel agency
    in High Level, Alberta. The services are provided by Parkland on a cost
    recovery basis and totaled $0.5 million during the year.

    Parkland also sells fuel and related products to NPPHL. The total amount
    of sales during 2007 was $0.3 million. In addition, Parkland received
    rental income totaling $0.4 million from NPPHL.

    The above transactions are all in the normal course of operations and are
    measured at the exchange amount, which is the amount of consideration
    established and agreed to by the related parties. The exchange amounts
    represent normal commercial terms.

    23. RECENT ACCOUNTING PRONOUNCEMENTS

    Capital Disclosures and Financial Instruments - Presentation and
    Disclosure

    The CICA issued three new accounting standards: section 1535 "Capital
    Disclosures", section 3862 "Financial Instruments - Disclosures" and
    section 3863 "Financial Instruments - Presentation". Section 1535
    establishes disclosure requirements about an entity's capital and how it
    is managed. The purpose will be to enable users of the financial
    statements to evaluate objectives, policies and processes for managing
    capital. Sections 3862 and 3863 will replace section 3861 "Financial
    Instruments - Disclosure and Presentation", revising and enhancing
    disclosure requirements while carrying forward its presentation
    requirements. These new sections will place increased emphasis on
    disclosure about the nature and extent of risks arising from financial
    instruments and how the entity manages those risks. The mandatory
    effective date is for annual and interim periods in fiscal years
    beginning on or after October 1, 2007. The Fund will begin application of
    these sections effective January 1, 2008.

    International Financial Reporting Standards ("IFRS")

    The Canadian Accounting Standards Board ("AcSB") has adopted a strategy
    to apply IFRSs to publicly accountable enterprises in the future. In
    May 2007, the AcSB published an updated version of its "Implementation
    Plan for Incorporating International Financial Reporting Standards into
    Canadian GAAP". This plan includes an outline of the key decisions that
    the AcSB will need to make as it implements the Strategic Plan for
    publicly accountable enterprises. One step in the implementation plan is
    for the AcSB to conduct a Progress Review to determine if the changeover
    date to IFRSs for fiscal years beginning on or after January 1, 2011
    continues to be appropriate. The AcSB has commenced these activities and
    published its initial plan "Progress Review - Steps to IFRS Incorporation
    into Canadian GAAP" in July 2007.

    On February 13, 2008, the AcSB confirmed the transition date of
    January 1, 2011. The transition date of January 1, 2011, will require the
    Fund to restate for comparative purposes amounts reported for the year
    ended December 31, 2010. The Fund is still investigating the impact of
    the adoption of IFRSs on its financial statements.

    24. SUBSEQUENT EVENTS

    Long-Term Debt

    On February 13, 2008, the Fund accepted the terms and conditions of a
    financing arrangement with HSBC Bank Canada. The financing arrangement
    increases the Fund's credit facility from $128.1 million to
    $159.1 million. The financing arrangement is comprised of $32 million for
    operating debt, $30 million for letters of credit and the remainder for
    term debt. The increased financing will be used to finance growth
    opportunities in 2008.


    Parkland Income Fund
    Supplementary Information

                                              Three months ended December 31
    ($000's except volume)                    2007         2006         2005
    -------------------------------------------------------------------------

    Volume (millions of litres)
      Retail gas and diesel                    139          137          124
      Wholesale gas and diesel                 358          249          173
      Propane                                   44            -            -
    -------------------------------------------------------------------------
    Total fuel volume                          541          386          297
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net sales and operating revenue
      Retail gas and diesel            $   119,231  $   102,311  $    67,774
      Wholesale gas and diesel             266,540      161,386      152,066
      Propane                               28,397            -            -
    -------------------------------------------------------------------------
      Fuel sales                           414,168      263,697      219,840
      Convenience store merchandise
       sales                                15,617       15,179       11,540
      Commercial sales                      26,349            -            -
    -------------------------------------------------------------------------
    Total net sales and operating
     revenue                               456,134      278,876      231,380
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit                       $    61,841  $    29,099  $    23,941

    Less:
      Convenience store merchandise
       gross profit                    $     3,802  $     3,833  $     3,023
      Gross profit on commercial sales       8,398            -            -
      Other revenue included in gross
       profit                                2,297        3,118        1,738
    -------------------------------------------------------------------------
    Fuel gross profit                  $    47,344  $    22,148  $    19,180
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cents per litre                    $    0.0875  $    0.0574  $    0.0646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                  Year ended December 31
    ($000's except volume)                    2007         2006         2005
    -------------------------------------------------------------------------

    Volume (millions of litres)
      Retail gas and diesel                    550          527          497
      Wholesale gas and diesel               1,366          974          680
      Propane                                  114            -            -
    -------------------------------------------------------------------------
    Total fuel volume                        2,030        1,501        1,177
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net sales and operating revenue
      Retail gas and diesel            $   469,966  $   433,495  $   353,786
      Wholesale gas and diesel           1,025,281      706,747      476,783
      Propane                               62,973            -            -
    -------------------------------------------------------------------------
      Fuel sales                         1,558,220    1,140,242      830,569
      Convenience store merchandise
       sales                                64,538       59,624       44,970
      Commercial sales                      74,905            -            -
    -------------------------------------------------------------------------
    Total net sales and operating
     revenue                             1,697,663    1,199,866      875,539
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Gross profit                       $   232,508  $   138,042  $    96,447

    Less:
      Convenience store merchandise
       gross profit                    $    16,384  $    15,507  $    11,856
      Gross profit on commercial sales      28,161            -            -
      Other revenue included in gross
       profit                                9,429        8,824        7,014
    -------------------------------------------------------------------------
    Fuel gross profit                  $   178,534  $   113,711  $    77,577
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cents per litre                    $    0.0879  $    0.0758  $    0.0659
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Station counts:
    Retail
      Fas Gas                                   36           94          111
      Fas Gas Plus                              92           91           95
      Race Trac                                  2
      Esso                                      11            6          115
    -------------------------------------------------------------------------
                                               141          191          321
    -------------------------------------------------------------------------

    Wholesale
      Race Trac Fuels                          153          188          215
      Fas Gas Plus                              26           16            -
      Fas Gas                                   32
      Esso                                     179          170            -
    -------------------------------------------------------------------------
                                               390          374          215
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total stations                             531          565          536
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
For further information: Red Deer: Mike W. Chorlton, President and CEO,
(403) 357-6400; John G. Schroeder, Vice President and CFO, (403) 357-6400