Energy Savings Reports Second Quarter Results-Customer Aggregation Ahead of Published Targets Distributable Cash up 20% Year over Year.

TORONTO -- Energy Savings Income Fund (TSX:SIF.UN)

Highlights for the 3 Months and 6 Months ended September 30, 2004 included:

- Gross margin of $39.3 million up 24% year over year and up 8% over Q1.

- Premarketing distributable cash of $32.7 million ($0.31 per unit) up 20% year over year and up 17% over Q1.

- General and administrative costs of $6.4 million down from $8.1 million in Q1.

- Distributions were up 17% with a 68% payout ratio.

- Q2 gross customer additions were 79,000 and net additions were 51,000. Year to date gross additions are 148,000 and net additions were 103,000. Published targets for the year are gross additions of 260,000 and net additions of 160,000.

- Customers added in Illinois increased from 5,000 to 16,000.

- Customers added in Quebec, Manitoba and British Columbia increased from 9,000 to 29,000.

- For the first time, customers added in new markets exceeded those added in Ontario.

Energy Savings Second Quarter Results

Energy Savings Income Fund announced its results for the second quarter ended September 30, 2004.

---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months ended Sept. 30,       F2005  Per Unit    F2004 Per Unit
($ millions except per Unit)(1)
---------------------------------------------------------------------
Sales (1)                         $203.5             $192.7
---------------------------------------------------------------------
Gross Margin (1)                    39.3               31.7
---------------------------------------------------------------------
Distributable Cash
---------------------------------------------------------------------
- Premarketing                      32.7     $0.31     27.1    $0.26
---------------------------------------------------------------------
- Post Marketing                    22.0     $0.21     20.7    $0.20
---------------------------------------------------------------------
Distributions                       22.1     $0.21     18.9    $0.18
---------------------------------------------------------------------
Long Term Customers            1,095,000            884,000
---------------------------------------------------------------------
---------------------------------------------------------------------


---------------------------------------------------------------------
---------------------------------------------------------------------
Six Months ended Sept. 30,         F2005  Per Unit    F2004 Per Unit
($ millions except per Unit)(1)
---------------------------------------------------------------------
Sales (1)                         $407.0             $345.7
---------------------------------------------------------------------
Gross Margin (1)                    75.5               65.0
---------------------------------------------------------------------
Distributable Cash
---------------------------------------------------------------------
- Premarketing                      60.7     $0.57     56.7    $0.54
---------------------------------------------------------------------
- Post Marketing                    41.0     $0.39     41.3    $0.39
---------------------------------------------------------------------
Distributions                       43.5     $0.41     37.5    $0.36
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Seasonally adjusted

Energy Savings is an Income Fund and it reports in the attached Management's Discussion and Analysis a detailed calculation of distributable cash both before and after marketing expenditures to expand the Fund's customer base.

Higher gross margin from an increased customer base and tightly controlled general and administrative costs led to a 20% year over year distributable cash increase and a 17% increase over the first quarter. This was despite a continued decline in Ontario residential natural gas consumption, a trend which has seen standard household usage (adjusted for weather effects) decline 4% over the past two years. Distributions increased once in the quarter to $0.865 per unit, the 18th such increase in Energy Savings history.

The Fund's past success in customer aggregation continued in the second quarter. The Fund had published targets of 260,000 gross customer additions and 160,000 net additions for the year ended March 31, 2005. During the second quarter, Energy Savings had gross additions of 79,000 new customers and net additions of 51,000 new customers. After two quarters, the Fund has realized 57% of its annual gross addition target and 64% of the expected net customer additions for the year.

The key to this performance was better than expected ramp-up in new markets of Illinois, Quebec, Manitoba and British Columbia. In Illinois, customer additions increased to 16,000 from 5,000 in the first quarter. In the Canadian new markets, additions were 29,000 up from 9,000 in Q1. As the number of agents in all these new markets continues to grow, management is confident that the fiscal 2005 targets of 50,000 for United States new markets and 50,000 for Canadian new markets will be exceeded by year end. No material cashflow in the period came from new markets where rapid customer additions will begin to pay back in the coming quarters.

The Fund is in the process of completing a small acquisition which is expected to be finalized by the end of the month. This acquisition is not material from a cashflow perspective as it largely involves the provision of certain services to Energy Savings on a go forward basis. The transaction will require a drawdown of approximately $10 million from cash on hand. As definitive agreements have not yet been signed, there can be no assurance that the transaction will, in fact, close.

Chair Rebecca MacDonald added: "I am excited about a number of things this quarter. Firstly, our marketing success in new markets bodes very well for the future. We are on or ahead of track in every market and margins remain at or above target levels. I feel confident about all our targets. Our distributable cash was solid, based not only on customer growth but also on a concerted effort by management to control costs while we grow."

President Brennan Mulcahy stated: "Once again this quarter, we have combined continued growth with profitability. Not only has our customer base grown faster than our annual targets but our distributable cash is also up 20% year-over-year and 17% over the first quarter. We have carefully watched our administrative costs and they have been reduced 21% from Q1."

Ms. MacDonald added: "Our customer aggregation success resulted in quarterly marketing expenditures (largely agent commissions) almost 70% higher than last year. This, along with the $10 million expected to be spent on our pending transaction, will draw our cash on hand down to a level where our Board cannot prudently approve another distribution increase at this time. While we are debt free and have considerable remaining cash, the recent experience of other Trusts which have become over-levered leaves us comfortable with a continued conservative stance toward higher distributions."

"The customers being added pay back in less than a year and the proposed transaction meets our standard investment criteria. Both should contribute to possible growth in distributions in the future."

The Fund

Energy Savings' business, which is conducted in Ontario, Manitoba, Quebec, British Columbia and Illinois, involves the sale of natural gas to residential, small to mid-size commercial and small industrial customers under long term, irrevocable fixed price contracts. Energy Savings also supplies electricity to Ontario customers under contracts secured prior to the November 11, 2002 price freeze and to certain large volume users who do not fall under the Government's price cap. By fixing the price of natural gas or electricity under its fixed price contracts for a period of up to five years, Energy Savings' customers offset their exposure to changes in the price of these essential commodities. Energy Savings, which commenced business in July of 1997, derives its margin or gross profit from the difference between the fixed price at which it is able to sell the commodities to its customers and the fixed price at which it purchases the matching volumes from its suppliers. For the purpose of its disclosure, Energy Savings defines a "customer" as a residential customer equivalent consuming 106 GJs of gas or 10,000 Kwhs of electricity per year.

Forward-Looking Statements

The Fund's press releases may contain forward-looking statements including statements pertaining to customer revenues and margins, customer additions and renewals, customer consumption levels, distributable cash and treatment under governmental regulatory  regimes. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to, levels of customer natural gas and electricity consumption, rates of customer additions and renewals, fluctuations in natural gas and electricity prices, changes in regulatory regimes and decisions by regulatory authorities, competition and dependence on certain suppliers. Additional information on these and other factors that could affect the Fund's operations, financial results or distribution levels are included in the Fund's annual information form and other reports on file with Canadian securities regulatory authorities which can be accessed through the SEDAR website at www.sedar.com or through the Fund's website at www.esif.ca

MANAGEMENT'S DISCUSSION AND ANALYSIS - November 1, 2004

The following is a discussion of the consolidated financial condition and results of operations of Energy Savings Income Fund ("Energy Savings", the "Company" or the "Fund") for the three and six months ended September 30, 2004 and has been prepared with all information available up to and including November 1, 2004. This MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the three and six months ended September 30, 2004 and the audited consolidated financial statements and MD&A for the year ended March 31, 2004 included in the Fund's 2004 Annual Report to Unitholders.

Copies of financial data and other publicly filed documents are available through the internet on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval  (SEDAR) which can be accessed at www.sedar.com.

All amounts in this Management's Discussion and Analysis ("MD&A") are in Canadian dollars.

Energy Savings is an open-ended, limited-purpose trust established under the laws of Ontario to hold securities and to distribute the income of its wholly owned subsidiaries and affiliates: Ontario Energy Savings Corp. ("OESC"), Energy Savings (Manitoba) Corp. ("ESMC"), Energy Savings (Quebec) L.P. ("ESPQ"), ES (B.C.) Limited Partnership. ("ES (BC) L.P.") and U.S. Energy Savings Corp. ("USESC"), (collectively "Energy Savings Group"). Through its subsidiaries and affiliates, Energy Savings markets natural gas to residential customers and small to mid-sized commercial businesses in Ontario, Manitoba and Illinois and solely to commercial customers in Quebec and British Columbia. Energy Savings also markets electricity to mid-sized commercial and small industrial Ontario customers.

The Fund meets the estimated energy requirements of its customers by purchasing matching volumes of gas and electricity. Customers eliminate their exposure to price escalations and the Fund locks in its margins by entering into long term, fixed price contracts.

Financial Highlights
For the three months ended September 30
(thousands of dollars except where indicated and per unit amounts)

                                  2004               2003
                                 $ Per Unit         $ Per Unit Change

Gross margin available for
 distribution(1)            39,270    $0.37    31,720    $0.30    24%
Amount available for
 distribution(1)
 - Before selling expense   32,677    $0.31    27,138    $0.26    20%
 - After selling expense    22,002    $0.21    20,707    $0.20     6%
Distributions               22,136    $0.21    18,855    $0.18    17%
General and administrative   6,402    $0.06     4,329    $0.04    48%
Payout ratio(1)
 - Before selling expense      68%                69%
 - After selling expense      101%                91%

For the six months ended September 30
(thousands of dollars except where indicated and per unit amounts)

                                  2004               2003
                                 $ Per Unit         $ Per Unit Change

Gross margin available
 for distribution(1)        75,522    $0.71    64,968    $0.62    16%
Amount available for
 distribution(1)
 - Before selling expense   60,662    $0.57    56,682    $0.54     7%
 - After selling expense    41,024    $0.39    41,287    $0.39   (1)%
Distributions               43,455    $0.41    37,481    $0.36    16%
General and administrative  14,535    $0.14     7,933    $0.07    83%
Payout ratio(1)
 - Before selling expense      72%                66%
 - After selling expense      106%                91%

(1) Seasonally Adjusted

Operations

Gas - Canadian markets

Currently in Ontario, Manitoba, Quebec and British Columbia, Energy Savings is required to deliver gas to the local distribution companies (Enbridge Consumers Gas, Union Gas, Gaz Metro and Terasen, collectively the "LDCs") for its customers throughout the year. The Company receives cash from the LDCs as the gas is delivered.

In Ontario, Quebec and British Columbia, the volumes delivered for a customer remains constant throughout the year. The Company's accounting policy accounts for sales when the customer actually consumes the gas. Therefore, during the winter months gas is consumed at a rate which is greater than delivery and in the summer months gas is delivered in excess of gas consumed.

In Manitoba, the volume of gas delivered is not constant throughout the year. More gas is delivered in winter months in comparison to the spring and summer months. Consequently, cash received will be higher in the winter months.

Gas - Illinois

Energy Savings receives cash from Nicor (the "Illinois LDC") only when the customer has ultimately consumed that gas. Cash flows from operations will be greater in the Fund's third and fourth quarter assuming cash is received from the Illinois LDC in the same period as customer consumption. Management anticipates that the majority of future U.S. markets that Energy Savings may enter will function in a similar manner to Illinois.

Electricity - Ontario

Electricity accounts are automatically balanced daily. In real-time, any supply greater than consumption is immediately sold off into the open market at the spot price, while any shortfall is immediately purchased in the open market at the spot price. Under Energy Savings' aggregated contracts, customers bear all electricity balancing costs and retain any profit on balancing sales.

Seasonally Adjusted Analysis

Presently, management believes the best basis for analysing both the Fund's operating results and the amount available for distribution is to focus on amounts actually received ("seasonally adjusted"). The following analysis eliminates this seasonal variance  and illustrates the gas actually delivered to LDCs, the revenue received and associated margins. Management utilises this non-GAAP financial measure to determine future distributions. These non-GAAP financial measures do not have any standardised meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. As the Fund continues to further expand into other U.S. and Canadian markets, seasonal working capital requirements will increase. This working capital requirement is directly attributable  to the fact that in certain markets the Company must purchase and deliver gas supply in advance of customer consumption and the receipt of cash from the LDCs.

In anticipation of the future working capital requirements, the Fund through its direct and indirect wholly owned subsidiaries OESC and USESC, has entered into a $60.0 million operating credit facility. See "Liquidity and Capital Resources" for further details.

No such seasonally adjusted analysis is required for electricity as electricity is consumed at the same time as delivery.

Reconciliation to Seasonally Adjusted Gross Margin
For the three months ended September 30
(thousands of dollars)

                                                  2004          2003
                                                  ----          ----

Gross margin per financial statements
 Gas                                           $12,527        $4,461
 Electricity                                     9,378         6,119
                                               -------       -------
Total                                          $21,905       $10,580
                                               -------       -------

Opening unbilled revenues net of accrued gas
 accounts payable                                2,591         6,942
Closing deferred revenues net of gas delivered
 in excess of consumption                       14,774        13,948
                                               -------       -------
                                                17,365        20,890
                                               -------       -------

Gross margin before balancing                   39,270        31,470

Balancing allowance (Note 1)                         -           250
                                               -------       -------

Gross margin available for distribution        $39,270       $31,720
                                               -------       -------
                                               -------       -------

For the six months ended September 30
(thousands of dollars)

                                                  2004          2003
                                                  ----          ----

Gross margin per financial statements
 Gas                                           $35,562       $25,847
 Electricity                                    18,101        11,128
                                               -------       -------
Total                                          $53,663       $36,975
                                               -------       -------

Opening unbilled revenues net of accrued gas
 accounts payable                                7,085        12,295
Closing deferred revenues net of gas delivered
 in excess of consumption                       14,774        13,948
                                               -------       -------
                                                21,859        26,243
                                               -------       -------

Gross margin before balancing                   75,522        63,218

Balancing allowance (Note 1)                         -         1,750
                                               -------       -------

Gross margin available for distribution        $75,522       $64,968
                                               -------       -------
                                               -------       -------


Amount Available for Distribution
For the three months ended September 30
(thousands of dollars except per unit amount)

                                   2004                2003
                                   ----                ----
                                        Per Unit             Per Unit
                                        --------             --------
                                        (Note 2)             (Note 2)
Gross margin available for
 distribution                   $39,270             $31,720
                                -------             -------
Less:
General and administrative        6,402               4,329
Capital tax                         250                 423
Other income (Note 3)              (59)               (170)
                                -------             -------
                                  6,593               4,582
                                -------             -------

Available for distribution
 before selling expenses         32,677    $0.31     27,138     $0.26

Selling expenses                 10,675               6,431
                                -------             -------

Amount available for
 distribution                   $22,002    $0.21    $20,707     $0.20
                                -------             -------
                                -------             -------

Reconciliation to Statement of
 Cash Flow
Cash flow from operations       $19,688             $18,145
Management incentive program      2,319               2,167
Income taxes (Note 4)               (5)                 145
                                -------             -------
                                 22,002              20,457

Balancing allowance (Note 1)          -                 250
                                -------             -------

Amount available for
 distribution                   $22,002             $20,707
                                -------             -------
                                -------             -------
Distributions
 Management incentive program    $2,319              $2,167
 Unitholder distributions        19,804              16,418
 Unit appreciation rights
  distributions                      13                   -
                                -------             -------
                                 22,136              18,585

Non-cash distributions - Class B
 preference shares                    -                 270
                                -------             -------
Total distributions             $22,136    $0.21    $18,855     $0.18
                                -------             -------
                                -------             -------


Amount Available for Distribution
For the six months ended September 30
(thousands of dollars except per unit amount)

                                   2004                2003
                                   ----                ----
                                        Per Unit             Per Unit
                                        --------             --------
                                        (Note 2)             (Note 2)
Gross margin available for
 distribution                   $75,522             $64,968
                                -------             -------
Less:
General and administrative       14,535               7,933
Capital tax                         500                 673
Other income (Note 3)             (175)               (320)
                                -------             -------
                                 14,860               8,286
                                -------             -------

Available for distribution
 before selling expenses         60,662    $0.57     56,682     $0.54

Selling expenses                 19,638              15,395
                                -------             -------

Amount available for
 distribution                   $41,024    $0.39    $41,287     $0.39
                                -------             -------
                                -------             -------

Reconciliation to Statement of
 Cash Flow
Cash flow from operations       $36,181             $34,959
Management incentive program      4,678               4,253
Income taxes (Note 4)               165                 325
                                -------             -------
                                 41,024              39,537
Balancing allowance (Note 1)          -               1,750
                                -------             -------

Amount available for
 distribution                   $41,024             $41,287
                                -------             -------
                                -------             -------
Distributions
 Management incentive program    $4,678              $4,253
 Unitholder distributions        38,756              31,977
 Unit appreciation rights
  distributions                      21                   -
                                -------             -------
                                 43,455              36,230

Non-cash distributions - Class B
 preference shares                    -               1,251
                                -------             -------
Total distributions             $43,455    $0.41    $37,481     $0.36
                                -------             -------
                                -------             -------

Note 1
The balancing provision amounted to $NIL for the three and six months
ended September 30, 2004. Management believes that all prior period
balancing for which the allowance was originally established has
already occurred and a provision is no longer required. All current
period balancing costs flow through the profit and loss statement.

Note 2
Diluted average number of units amounted to 106.2 and 106.1 million
for the three and six months ended September 30, 2004. For
comparative purposes the diluted number of units was 105.2 and 104.8
million for the three and six months ended September 30, 2003. All
comparative unit and per unit data have been adjusted retroactively
to reflect the impact of the unit split which was effective January
30, 2004.

Note 3
Other income relates to interest earned on investments. This balance
excludes any income/loss from changes in fair market values of
derivative financial instruments which are marked to market.

Note 4
Income taxes payable relate solely to large corporation tax. The Fund
does not have income taxes currently payable due to the deduction of
certain acquisition costs.


Summary of Quarterly Results
(thousands of dollars except per unit amounts)

                                             F2005              F2004
                                ------------------ ------------------

                                      Q2        Q1        Q4       Q3

Sales per financial statements  $114,290  $186,073  $312,905 $181,803
Net income (loss)                (4,235)     4,141    21,255    3,872
Net income (loss) per unit -
 Basic                           $(0.05)     $0.04     $0.23    $0.04
Net income (loss) per unit -
 Diluted                          (0.05)      0.04      0.22     0.04

Amount available for distribution
 - Before selling expense        $32,677   $27,985   $28,828  $30,881
 - After selling expense          22,002    19,022    22,455   22,474
Payout ratio
 - Before selling expense            68%       76%       70%      64%
 - After selling expense            101%      112%       90%      88%

                                             F2004              F2003
                                ------------------ ------------------

                                      Q2        Q1        Q4       Q3

Sales per financial statements  $106,096  $132,300  $225,125 $130,689
Net income (loss)                (8,504)       769    21,740    1,460
Net income (loss) per unit -
 Basic                           $(0.10)   $(0.01)     $0.28    $0.01
Net income (loss) per unit -
 Diluted                          (0.10)    (0.01)      0.23     0.01

Amount available for distribution
 - Before selling expense        $27,138   $29,544   $30,281  $24,980
 - After selling expense          20,707    20,580    25,875   16,436
Payout ratio
 - Before selling expense            69%       63%       53%      61%
 - After selling expense             91%       91%       62%      93%


Sales, Gross Margins and Marketing Results
For the three months ended September 30
(thousands of dollars)

                Per Financial Statements      Seasonally Adjusted
              -------------------------- ----------------------------
                        Cost of    Gross            Cost of     Gross
Gas             Sales     Sales   Margin    Sales     Sales    Margin
---

 - 2004       $52,654   $40,127  $12,527 $141,913  $112,021   $29,892
 - 2003        51,620    47,159    4,461  138,227   112,626    25,601
              -------  --------  ------- --------  --------  --------
Increase
 (decrease)     1,034   (7,032)    8,066    3,686     (605)     4,291
              -------  --------  ------- --------  --------  --------

Electricity
-----------

 - 2004       $61,636   $52,258   $9,378  $61,636   $52,258    $9,378
 - 2003        54,476    48,357    6,119   54,476    48,357     6,119
              -------  --------  ------- --------  --------   --------

Increase        7,160     3,901    3,259    7,160     3,901     3,259
              -------  --------  ------- --------  --------  --------

Total
 increase
 (decrease)    $8,194  $(3,131)  $11,325  $10,846    $3,296    $7,550
              -------  --------  ------- --------  --------  --------
              -------  --------  ------- --------  --------  --------


                Per Financial Statements      Seasonally Adjusted
              -------------------------- ----------------------------
                        Cost of    Gross            Cost of     Gross
Gas             Sales     Sales   Margin    Sales     Sales    Margin
---

 - 2004      $178,585  $143,023  $35,562 $285,261  $227,840   $57,421
 - 2003       143,008   117,161   25,847  250,332   196,492    53,840
              -------  --------  ------- --------  --------  --------

Increase       35,577    25,862    9,715   34,929    31,348     3,581
              -------  --------  ------- --------  --------  --------

Electricity
-----------

 - 2004      $121,778  $103,677  $18,101 $121,778  $103,677   $18,101
 - 2003        95,388    84,260   11,128   95,388    84,260    11,128
              -------  --------  ------- --------  --------  --------

Increase       26,390    19,417    6,973   26,390    19,417     6,973
              -------  --------  ------- --------  --------  --------

Total
 increase     $61,967   $45,279  $16,688  $61,319   $50,765   $10,554
              -------  --------  ------- --------  --------  --------
              -------  --------  ------- --------  --------  --------

Sales have increased $8.2 million (8%) on a financial statement basis and $10.8 million (6%) on a seasonally adjusted basis for the three months ended September 30, 2004 as compared to the same period in the prior year. Financial statement margins have increased $11.3 million (107%) and $7.6 million (24%) seasonally adjusted for the same comparative period.

For the six month period ended September 30, 2004 sales have increased $62.0 million (26%) on a financial statement basis and $61.3 million (18%) on a seasonally adjusted basis as compared to the same comparative period. Margins have increased $16.7 million (45%) on a financial statement basis and increased $10.6 million (16%) on a seasonally adjusted basis.

Financial Statements - Gross Margin

Gas

Sales increased 2% and 25% respectively for the quarter and six month period ended September 30, 2004 compared to the prior year. The increase in sales is primarily due to an increase in long term customers offset during the second quarter by a drop-off in acquired Toronto Hydro customers which had been classified as not expected to renew. See "Customer Aggregation" for further details.

Financial statement gas gross margin increased 181% for the quarter and 38% for the six months ended September 30, 2004, The increase in margin for the quarter is primarily attributable to the drop-off of low margin customer contracts which management did not expect to renew. The $9.7 million increase in margin for the six month period ended September 30, 2004 was primarily attributable to the increase in long term customers aggregated at Energy Savings' target margin of $170/RCE and a sale of surplus inventory in the market place.

Electricity

Electricity margins were $9.4 million for the quarter and $18.1 million for the six months ended September 30, 2004, an increase of 53% and 63% respectively over the prior year. Electricity sales increased by 13% and 28% for the three and six month period ended September 30, 2004. The increase in sales is directly attributable to the increase in long term customers year over year. See "Customer Aggregation" for further details.

Margins increased by a higher percentage than sales because a significant number of the low margin First Source customer contracts acquired in the prior year which management chose not to renew expired during the quarter.

Seasonally adjusted - Gross Margin

The Fund has separated the gross margin received from the LDCs (this number eliminates both seasonality and other weather variances) and the gross margin attributable to balancing activities (the approximate impact of weather variance for the period) for the gas business. These components are added to electricity gross margin (electricity balancing costs are primarily passed on to the customer) and extraction revenue (sale of liquids extracted from gas) to equal total gross margin.

F2005                F2004
                          -------------------------------------------
                               Q2      Q1      Q4       Q3       Q2

Customer margins from
 LDCs                     $27,701 $28,443  $26,850  $28,805  $28,064

Balancing adjustments       2,140   (924)    (599)    (619)  (2,861)

Balancing allowance             -       -      750        -      250

Extraction revenue             51      10       33      106      148
                          -------------------------------------------

Total gas margins          29,892  27,529   27,034   28,292   25,601

Electricity margins         9,378   8,723    8,501    7,964    6,119
                          -------------------------------------------

Total margin              $39,270 $36,252  $35,535  $36,256  $31,720
                          -------------------------------------------

Gas

On a seasonally adjusted basis, margins from long term customers were $27.7 million, down from $28.1 million (1%) in the prior comparative quarter. The slight decrease in margins is despite a significant increase in gas customers year over year.

Total gas margins for the quarter (including balancing adjustments and extraction revenue) were $29.9 million, up from $25.6 million (17%) in the prior comparative quarter.

Information recently published by Union Gas in its regulatory filings indicates that, adjusting out the effects of weather, Ontario residential consumption of gas has declined by 4% over the past two years. Energy Savings is examining the impact of this reduced consumption on its margin per customer and the total number of RCEs aggregated (which is calculated by net volume increase).

The result of this change for Energy Savings has been a slight over-delivery of gas during this quarter which, in turn was sold into the spot market replacing margin that would otherwise have been received from customers. This is reflected in the balancing margin of $2.1 million for the quarter versus a charge of $2.9 million in the same quarter in the prior year.

While the Fund operated in Illinois, Quebec and British Columbia during the quarter, due to normal delay between customer sign-up and cash flow receipt, no material margin was received from these markets during the six months ended September 30, 2004.

For other impacts of the decline in Ontario average residential consumption, see "Customer Aggregation" and "Outlook".

Electricity

Seasonally adjusted electricity margins were $9.4 million and $18.1 million for the three and six month period ended September 30, 2004, the same as on a financial statement basis. Refer to "Financial Statements - Gross Margin" for details.

Distributable Cash

Pre-marketing distributable cash for the three months ended September 30, 2004 was $32.7 million ($0.31 per unit) up 20% from $27.1 million ($0.26 per unit) in the prior comparable quarter. The increase in pre-marketing distributable cash was primarily due to increased customer numbers in both gas and electricity resulting in a 24% year over year increase in gross margin. General and administrative costs increased 48% year over year resulting in a lower percentage increase in distributable cash versus margin. This resulted in the lower percentage increase in distributable cash as opposed to margin. As discussed in the Fund's past quarterly statements, increases in general and administrative costs largely relate to the opening of new markets which generated no material cashflow in the current period.

For the six months ended September 30, 2004, pre-marketing distributable cash was $60.7 million up 7% year over year. Again, higher margins from customers were offset by general and administrative costs associated with the opening of new markets.

Distributable cash after selling expenses (marketing costs) was $22.0 million for the quarter up slightly from $20.7 million in the prior year. Successful customer aggregation, particularly in new markets, resulted in selling expenses increasing by 66% year over year. Cash flow from these new customers is realised three to nine months after signing depending on the market. For the six months, distributable cash after marketing expenses was down 1% year over year. Again, a 28% increase in new customer aggregation costs was the reason for the change.

Payout ratios before marketing costs were 68% for the quarter and 72% for the six months versus 69% and 66% respectively for the prior comparative periods. After selling expenses, the payout ratio was 101% for the quarter and 106% for the six months versus 91% and 91% for the comparable periods. For the quarter, payout ratio before selling expenses returned to the normal 60% to 70% range after exceeding 70% for the first time in Q1. Payout after marketing expenses for the quarter was slightly above 100% due to greater than forecast marketing success. This resulted in a small drawdown on cash on hand accumulated in past periods. See "Liquidity and Capital Resources" for further details.

Customer Aggregation - RCE's Added

For the three months ended September 30, 2004

Long Term Customers

Overall, the rate of customer aggregation in the quarter supports the Fund's ability to meet or exceed published targets on both a gross and net basis. Gross additions were 79,000 and net additions were 51,000. This level of customer aggregation was achieved in the quarter with both our new markets in Canada and Illinois continuing to ramp up the sales organisations and back office infrastructure.

The Fund's published targets for fiscal 2005 were gross additions of 260,000 and net additions of 160,000. For the six months ended September 30, 2004, the Fund has gross additions of 148,000 and net additions of 103,000.

-----------------------------------------------
                      -----------------------------------------------
                                                   Failed
                                                       to
                                  Addit-  Attrit-   Renew
                      Beginning     ions   ion(1)     (2)     Ending
                      -----------------------------------------------
                      -----------------------------------------------

Ontario                 655,000   21,000   14,000   9,000    653,000
New Markets - Canada(3)  18,000   29,000        -       -     47,000
Illinois                  5,000   16,000        -       -     21,000
---------------------------------------------------------------------

Gas                     678,000   66,000   14,000   9,000    721,000

Electricity             367,000   13,000    5,000       -    375,000

---------------------------------------------------------------------
Combined              1,045,000   79,000   19,000   9,000  1,096,000
---------------------------------------------------------------------

(1) Attrition - Customers whose contracts were terminated primarily
    due to relocation

(2) Failure to Renew - Customers who did not renew expiring contracts
    at the end of their term

(3) Quebec, British Columbia and Manitoba

Key terms:
----------
----------

Long term Customers - Customers that management expects to retain

RCE - Residential Customer Equivalent or the "Customer"

In addition to the long term customers, Energy Savings has an additional 55,000 customers (29,000 gas and 26,000 electricity) which were acquired through various acquisitions of customer contracts. It was management's expectation that the vast majority of these customers would not renew upon expiration of their current contract. These customers generate substantially less margin than typically realised on customers aggregated by Energy Savings. These customers have less than two years remaining until the end of their contract.

Marketing

Ontario - Gas

As noted in the table above, total gross customer additions were 21,000 customers during the quarter and 53,000 for the six month period ended September 30, 2004. Additions for the quarter were lower than those typically recognised by Energy Savings due to the relocation of several high volume Ontario agents to new markets of Quebec and British Columbia as well as the initiation of the customer "Rewrite Program" during the quarter. The Rewrite Program involves the re-signing of customers whose current contract is near expiry at Energy Savings' current offering price. As the calculation of an RCE  is based on volume consumed, to the extent that, consistent with the Union Gas regulatory filing, residential consumption per customer has continued to decline over the past two years, the number of customers aggregated during this and prior periods may be understated.

The Fund remains on track to achieve its fiscal 2005 published target of 100,000 gas customer additions in Ontario (53% to date). The natural gas market continues to be receptive towards the Energy Savings' product and management believes the Province of Ontario remains a strong growth market. All Ontario gas customers signed during the period were matched with supply to generate margins at or above Energy Savings' $170 per year gas target margin.

Ontario - Electricity

Total gross electricity additions were 13,000 for the quarter and 36,000 for the six months ended September 30, 2004, (72% of the published target). As projected in the first quarter MD&A, the second quarter saw lower levels of customer aggregation than those in Q1. Certain large volume customers were aggregated in Q1, skewing the additions for that quarter. The Q2 results more accurately reflect management's expectations given the current state of the electricity regulated market in Ontario. All electricity customers signed during the period were matched with supply to generate margins at or above Energy Savings' $100 per year target margin. See "Outlook" for potential electricity customer opportunities.

New Markets - Canada

New markets include the aggregation of customers outside the province of Ontario, which presently include Manitoba, Quebec and British Columbia. Energy Savings began offering its product in Manitoba in January 2003, in Quebec in April 2004 and in British Columbia in July 2004. Total gross additions for these markets were 29,000 for the quarter and 38,000 for the six months ended September 30, 2004. The Energy Savings' product has been well received in these provinces and management is confident that it will surpass its New Markets - Canada target of 60,000 RCEs gross additions for fiscal 2005 of which 63% has been achieved to date. All gas customers signed during the period were matched with supply to generate margins at or above Energy Savings' $170 per year target margin.

New Markets - U.S.

Energy Savings aggregated 16,000 RCEs in the State of Illinois during the quarter and 21,000 RCEs for the six months ended September 30, 2004 (42% of the published annual target). There are approximately 80 independent sales agents operating in Illinois as at September 30, 2004, an increase of approximately 100% over the prior quarter. A third sales office was opened on October 15, 2004. Based on current aggregation rates and the current size of the sales force, management believes that the published 50,000 gross customer addition target for fiscal 2005 will be achieved. All Illinois gas customers signed during the period were matched with supply to generate margins at or above Energy Savings' $120 per year Illinois target margin.

The Illinois gas market requires the Company to bear the credit risk associated with customers' payment obligations. The default payment rate in the Nicor territory is approximately 1.1%. Energy Savings maintains a strong credit approval process to mitigate the risk of customer non-payment. Even though the Fund has implemented a credit approval process, given Energy Savings is new to the Illinois marketplace and to be conservative, management has chosen to provide an allowance of approximately $0.02 million (calculated using Nicor's default rate) against potential uncollectible accounts.

Attrition

Attrition in the natural gas customer book for the quarter was an annualised 7%, below the Fund's planning basis of 10%. During the prior fiscal year, the Fund experienced attrition rates approximating 10%, primarily attributable to the low mortgage rates and record number of house sales in Ontario, which resulted in increased customer moves.

Attrition for the electricity customer book was an annualised 5%, reflecting the fact that the majority of electricity customers are commercial, a group which has a much lower propensity to move. Overall, the combined annual attrition for both gas and electricity was below the 10% customer attrition rate used for internal purposes. Management continues to monitor attrition to see if it has reverted  to the long term historical average of 7% per annum.

Selling Expenses

Selling expenses, which primarily consist of upfront costs of signing new customers, were $10.7 million for the quarter and $19.6 million for the six months ended September 30, 2004, compared to $6.4 million and $15.4 million respectively for the prior comparable periods. The increase in selling expenses is attributable to the combination of an increase in aggregated customers and an increase in the aggregation cost per customer in Ontario versus the prior periods. The aggregation costs for each additional gas customer are approximately $160 in Ontario, $140 in New Markets - Canada, $90 in the U.S. and $85 for each additional electricity customer.

During the quarter, Energy Savings introduced an advertising campaign in the Province of Ontario for the purpose of increasing brand awareness for its wholly owned subsidiary, Ontario Energy Savings Corp. As previously stated, the new marketing campaign in combination with the larger enhanced outbound calling program (effective Q1) resulted in an increase in customer aggregation costs for Ontario natural gas customers from $140 to $160 per new customer.

General and Administrative Costs

As indicated in the first quarter, general and administrative costs declined from the level experienced in Q1. General and administrative costs were $6.4 million for the quarter and $14.5 million for the six months ended September 30, 2004. These costs were up 48% from the prior comparative quarter and down 21% from the first quarter. The increase in general and administrative costs over the same comparable period was primarily driven by the costs associated with the expansion into new markets, including Manitoba, Quebec, British Columbia and Illinois. Although these costs will fluctuate as the Fund continues to expand into new markets, management believes it currently has the infrastructure in place to support the Fund's continued growth into new markets.

Unit Based Compensation

Compensation in the form of units (non-cash) paid by the Fund to the directors, officers, full-time employees and service providers of its subsidiaries and affiliates pursuant to the Unit Option plan, the Unit Appreciation Rights plan and the Directors' Deferred Compensation plan amounted to $1.0 million for the quarter and $1.4 million for the six months ended September 30, 2004 versus $1.0 million and $2.6 million for the prior comparative periods.

Management Incentive Program

Each of the holders of the Class A Preference Shares is entitled to receive, on a quarterly basis, a management bonus equal to the amount paid or payable to a Unitholder on a comparable number of units. Total paid amounted to $2.3 million for the quarter and $4.7 million for the six months ended September 30, 2004.

Liquidity and Capital Resources

On November 1, 2004, OESC and USESC entered into a $60.0 million operating credit facility agreement with a group of financial institutions (the "lenders") for a term of 364 days plus a one year term out option. All obligations under the former $10.0 million credit facility have been terminated and all outstanding letters of credit have been transferred to the new credit facility. As at quarter end, a total of $6.3 million in letters of credit have been issued to suppliers in support of future commodity purchases. No amounts have been drawn against the operating credit facility as at September 30, 2004.

The new operating credit facility will be used to meet working capital requirements as the Fund continues to expand into new markets, primarily the United States. To complement the new operating credit facility, Coral Energy Canada Inc. and the lenders have entered into an intercreditor agreement whereby Coral Energy Canada Inc. and the lenders jointly hold security over a majority of the assets of the Energy Savings Group of Companies.

Primary sources of liquidity and capital resources for the Fund are monies generated from operations, cash on hand, the $60.0 million operating credit facility and the ability to issue units. These resources are used to satisfy our capital resource requirements, growth in operations and payment of Unitholder distributions. Cash inflow from operations totaled $19.7 million for the quarter and $36.2 million for the six months ended September 30, 2004, an increase of 9% and 3% respectively from the prior comparable periods. The increase is primarily attributable to the increase in gross margin year over year as a result of an increase in the number of flowing customers.

The primary uses of cash beyond selling costs included Unitholder distributions totaling $22.1 million and $43.5 million and general and administrative costs of $6.4 million and $14.5 million for the three and six month period ended September 30, 2004 respectively. These uses of cash are consistent with the overall business strategy of the Fund.

At September 30, 2004, the Fund had a cash balance of $32.0 million. Our entry into new markets will require the utilization of some of the Fund's accumulated cash resources to meet working capital requirements associated with selling costs and inventory storage requirements. The new $60.0 million credit facility will also assist the Fund in its ability to expand into new markets.

Energy Savings purchased capital assets totaling $0.7 million for the quarter and $2.3 million for the six months ended September 30, 2004. The purchases were primarily for information technology systems supporting the Fund's entry into new markets. Capital asset additions are anticipated to increase in third and fourth quarter compared to the second quarter. Further information technology developments will be required to support the Fund's expanding customer base within the various geographical segments.

In understanding the Fund's liquidity requirements, it is important to note that customers aggregated in a quarter do not generate cash flow during that period. However, approximately 60% of an agent's commission payment is made following reaffirmation with the remaining 40% being paid after the energy commodity begins flowing to the customer.

The elapsed period between the time when a customer is signed to the time when the first payment is received from the customer varies with each market. The time delays per market are approximately:

Ontario - Electricity                                     2-3 months
Ontario - Gas                                             4-6 months
Manitoba                                                  3-6 months
Quebec                                                    4-5 months
British Columbia                                          4-8 months
Illinois                                                  2-3 months

These periods reflect the time required by the different LDCs to enroll, flow the commodity, bill the customer and remit the first payment to Energy Savings.

Distributions

Distributions amounted to $22.1 million ($0.21 per unit) and $43.5 million ($0.41) per unit for the three and six months ended September 30, 2004, an increase of 17% and 16% respectively. At the end of the quarter, the annual rate for distributions per unit was $0.865.

Balance Sheet September 30, 2004 compared to March 31, 2004

As is normal at the end of the second quarter, most gas delivered to the LDCs was not consumed by our customers. Since the Fund is paid for this gas when delivered yet recognises revenue when the gas is consumed by the customer, the result on the balance sheet is gas delivered in excess of consumption in the amount of $54.4 million and deferred revenues of $69.2 million.

Other assets and liabilities represent the estimated fair value of various derivative financial instruments for which hedge accounting in accordance with AcG-13 Hedging Relationships has not been applied. These assets and liabilities are marked to market and any changes to the fair value are recorded in other income (expense). Hedge accounting has been applied to the Fund's electricity fixed-for-floating swaps which represent the vast majority of derivative instruments in terms of notional value. The gains or losses on these swaps are recognised as a component of cost of sales when the hedged electricity costs are incurred. See "Fair Value of Derivative Instruments and Risk Management" for further details.

The increase in restricted cash from $7.2 million to $11.4 million is principally due to an increase in accumulated electricity rebates due to First Source customers acquired in May 2003.

The increase in accounts receivable from $18.6 million to $26.7 million is attributable to an increase in gas and electricity margin resulting primarily from an increase in flowing customers.

The increase in accounts payable from $13.3 million to $17.1 million is mainly attributable to an increase in commissions payable to agents as a result of an increase in customer aggregation.

The decrease in future income is attributable to the difference between the tax and accounting cost basis for the gas and electricity contracts. The majority of these assets are deducted for tax at a rate greater than that for accounting.

Contractual Obligations

In the normal course of business, the Fund is obligated to make future payments. These obligations represent contracts and other commitments that are known and non-cancelable.

Less                       After
Payments due by period              than        1-3      4-5       5
(thousands of dollars)    Total   1 year      years    years   years
                          -----   ------      -----    -----   -----
                          -----   ------      -----    -----   -----

Property & equipment
 lease agreements        11,564    1,785      3,300    3,110   3,369

Marketing agreement
 obligations              6,123    2,041      4,082        -       -

Gas & electricity
 supply purchase
 commitments          2,028,042  345,747  1,092,269  530,830  59,196
                      -----------------------------------------------
                      2,045,729  349,573  1,099,651  533,940  62,565
                      -----------------------------------------------
                      -----------------------------------------------

Fair Value of Derivative Instruments and Risk Management

Energy Savings hedges its obligations to deliver gas and electricity to its customers through entering into physical and financial derivative instruments which lock in the cost of its supply. These derivative instruments currently consist of physical forwards, financial fixed-for-floating swaps and put and call options.

Effective April 1, 2004, the Fund was required to implement an accounting standard that calls for the recognition of financial derivative instruments in the financial statements unless certain requirements for hedge accounting are fulfilled and documentation is maintained. If these requirements are fulfilled and adequate documentation is maintained by the Fund, then the financial derivative instrument is eligible for hedge accounting and recognised at the same time as the revenue it was intended to hedge. If the requirements for hedge accounting are not met, the financial derivative is an economic hedge and the fair value of the financial instrument must be determined and recorded in the balance sheet. Differences between fair value for each reporting period are thereafter booked to the Statement of Operations as other income (expense).

Energy Savings has primarily entered into financial derivative instruments that are eligible for hedge accounting. These continue to be recognised in the Statement of Operations when the related energy costs are incurred provided they continue to meet the requirements of the new standard. There are, however, some financial derivative instruments that do not qualify and are therefore classified as economic hedges. As at September 30, 2004, Energy Savings had booked the fair value of these economic hedges, $4.1 million in "Other assets" and $1.0 million in "Other liabilities" with the associated income (expense) recorded in "Other income (expenses)".

The Fund's physical derivative instruments are not covered by these new requirements and continue to be recognised at the time of delivery.

Outlook

On June 15, 2004, the Ontario Ministry of Energy introduced in the Ontario Legislature, Bill 100, The Electricity Restructuring Act, 2004 which confirms the commitment of the Province of Ontario to ensure that consumers pay the true price of power. To the extent that the regulation of electricity moves to an Ontario Energy Board  administered market-based pricing for the small business segment (1.5 million RCEs) and/or the residential market (4.0 million RCEs), Energy Savings, as the most active electricity marketer in the Province, stands to benefit through a much larger available market for its electricity offering. Management expects that any electricity customers made available by the new legislation will open for marketing in early 2005.

Energy Savings continues to actively monitor the progress of the deregulated markets in various jurisdictions including Alberta, Indiana, New York, Virginia and Maryland.

The reduction of gas consumption (excluding the impact of weather) by the average Ontario residence means that margins per new customer signed may see some pressure over the coming periods. Management believes that the current target margin of $170 per year for Ontario gas should be sustainable in coming quarters

Energy Savings has been and remains a marketing company. While the Fund has more than one million customer equivalents under long term contracts at locked-in margins, its future results are dependent upon its ability to continue to add new customers both in Ontario and new markets. Management believes that these growth opportunities will continue to exist.

Trust Units of the Fund and Preference Shares of OESC

As at November 1, 2004, the number of preference shares of OESC and Units of the Fund outstanding were 10,168,695 and 94,622,281 respectively, unchanged from the amount outstanding at September 30, 2004.

Forward-Looking Information

This Management Discussion and Analysis contains certain forward-looking information statements pertaining to customer additions that are based on the Fund's current expectations, estimates, projections and assumptions that were made by management given recent experience and historical trends. Forward-Looking statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated.

ENERGY SAVINGS INCOME FUND

                                         CONSOLIDATED BALANCE SHEETS

                                  (Unaudited - thousands of dollars)

                                                               AS AT
---------------------------------------------------------------------
---------------------------------------------------------------------

                                         September 30,     March 31,
                                                  2004          2004

ASSETS

CURRENT
 Cash                                        $  32,017     $  40,241
 Restricted cash (Note 4)                       11,399         7,163
 Accounts receivable                            26,658        18,627
 Gas delivered in excess of consumption         54,407             -
 Gas in storage (Note 5)                         1,636             -
 Unbilled revenues                                   -        37,495
 Prepaid expenses                                1,717         1,803
---------------------------------------------------------------------

                                               127,834       105,329

GAS CONTRACTS (less accumulated amortization
 - $173,670; 2004 - $149,363)                   66,423        90,730

ELECTRICITY CONTRACTS (less accumulated
 amortization -$1,424; 2004 - $890)              3,915         4,448

GOODWILL                                        94,576        94,576

CAPITAL ASSETS (less accumulated amortization
 - $2,412; 2004 - $1,702)                        8,124         6,493

OTHER ASSETS (Note 2a)                           4,122             -
---------------------------------------------------------------------

                                             $ 304,994     $ 301,576
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES

CURRENT
 Accounts payable and accrued liabilities    $  17,127     $  13,318
 Customer rebates payable (Note 4)              11,399         7,163
 Management incentive program payable            1,227         1,218
 Unit distribution payable                       6,813         6,103
 Corporate taxes payable                           151           485
 Deferred revenues                              69,181             -
 Accrued gas accounts payable                        -        30,410
---------------------------------------------------------------------

                                               105,898        58,697

OTHER LIABILITIES (Note 2a)                      1,037             -

FUTURE INCOME TAXES                             17,210        29,856
---------------------------------------------------------------------

                                               124,145        88,553
---------------------------------------------------------------------

EQUITY

 Preference shares of OESC (Note 6)          $  25,422     $  29,078

 Trust units (Note 7)                          150,456       177,323

 Contributed surplus (Note 8)                    4,971         6,622
--------------------------------------------------------------------

                                               180,849       213,023
---------------------------------------------------------------------

                                             $ 304,994     $ 301,576
---------------------------------------------------------------------
---------------------------------------------------------------------


                                          ENERGY SAVINGS INCOME FUND

                      CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY

                                  (Unaudited - thousands of dollars)

                               FOR THE SIX MONTHS ENDED SEPTEMBER 30
---------------------------------------------------------------------
---------------------------------------------------------------------

                                                  2004          2003

UNITHOLDERS' EQUITY, BEGINNING OF PERIOD     $ 177,323     $ 208,078

Trust units exchanged                            3,656           833

Trust unit options exercised                     8,348        11,625

NET LOSS                                          (94)       (7,735)

DISTRIBUTIONS                                 (38,777)      (33,229)

CLASS B PREFERENCE DISTRIBUTIONS EXCHANGEABLE
 INTO TRUST UNITS                                    -         1,251
---------------------------------------------------------------------

UNITHOLDERS' EQUITY, END OF PERIOD           $ 150,456     $ 180,823
---------------------------------------------------------------------
---------------------------------------------------------------------


                                          ENERGY SAVINGS INCOME FUND

                               CONSOLIDATED STATEMENTS OF OPERATIONS

           (Unaudited - thousands of dollars except per unit amount)

---------------------------------------------------------------------
---------------------------------------------------------------------

                              Three months ended    Six months ended
                                    September 30        September 30

                                   2004     2003      2004      2003

SALES                         $ 114,290 $106,096 $ 300,363 $ 238,396

COST OF SALES                    92,385   95,516   246,700   201,421
---------------------------------------------------------------------

GROSS MARGIN                     21,905   10,580    53,663    36,975
---------------------------------------------------------------------

EXPENSES
 General and administrative
  expenses                        6,402    4,329    14,535     7,933
 Capital tax                        250      423       500       673
 Selling expenses                10,675    6,431    19,638    15,395
 Unit based compensation (Note 8) 1,000    1,002     1,435     2,629
 Management incentive program     2,319    2,167     4,678     4,253
 Amortization of gas contracts   12,153   13,752    24,307    27,189
 Amortization of electricity
  contracts                         267      299       534       498
 Amortization of capital assets     377      229       710       433
---------------------------------------------------------------------

                                 33,443   28,632    66,337    59,003
---------------------------------------------------------------------

LOSS BEFORE OTHER INCOME       (11,538) (18,052)  (12,674)  (22,028)

OTHER (EXPENSES) INCOME           (482)      170       100       320
---------------------------------------------------------------------

LOSS BEFORE INCOME TAX         (12,020) (17,882)  (12,574)  (21,708)

RECOVERY OF INCOME TAX          (7,785)  (9,378)  (12,480)  (13,973)
---------------------------------------------------------------------

NET LOSS                      $ (4,235) $(8,504) $    (94) $ (7,735)
---------------------------------------------------------------------
---------------------------------------------------------------------

Net loss per unit (Note 10)

 Basic                        $  (0.05) $ (0.10) $    0.00 $  (0.10)

 Diluted                      $  (0.05) $ (0.10) $    0.00 $  (0.10)


                                          ENERGY SAVINGS INCOME FUND

                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited - thousands of dollars)

---------------------------------------------------------------------
---------------------------------------------------------------------

                              Three months ended    Six months ended
                                    September 30        September 30

                                   2004     2003      2004      2003

NET INFLOW (OUTFLOW) OF CASH
 RELATED TO THE FOLLOWING
 ACTIVITIES

OPERATING
 Net loss                     $ (4,235) $(8,504) $    (94) $ (7,735)
---------------------------------------------------------------------

 Items not affecting cash
  Amortization of gas contracts  12,153   13,752    24,307    27,189
  Amortization of electricity
   contracts                        267      299       534       498
  Amortization of capital assets    377      229       710       433
  Unit based compensation         1,000    1,002     1,435     2,629
  Future income taxes           (7,780)  (9,523)  (12,645)  (14,298)
  Other expenses                    541        -        75         -
---------------------------------------------------------------------

                                  6,558    5,759    14,416    16,451
---------------------------------------------------------------------
  Adjustments required to reflect
   net cash receipts from gas
   sales                         17,365   20,890    21,859    26,243
---------------------------------------------------------------------
 Cash inflow from operations     19,688   18,145    36,181    34,959
---------------------------------------------------------------------

  Changes in non-cash working
   capital                      (3,555)  (3,837)   (9,257)   (4,675)
---------------------------------------------------------------------

                                 16,133   14,308    26,924    30,284
---------------------------------------------------------------------

FINANCING
 Exercise of trust unit options     163    3,322     5,262     8,548
 Distributions paid to
  Unitholders                  (19,498) (16,176)  (38,067)  (31,254)
---------------------------------------------------------------------

                               (19,335) (12,854)  (32,805)  (22,706)
---------------------------------------------------------------------

INVESTING
 Purchase of capital assets       (744)    (646)   (2,343)   (1,500)
 Acquisition of customer
  contracts                           -  (1,414)         -   (7,387)
---------------------------------------------------------------------

                                  (744)  (2,060)   (2,343)   (8,887)
---------------------------------------------------------------------
NET CASH OUTFLOW                (3,946)    (606)   (8,224)   (1,309)

CASH, BEGINNING OF PERIOD        35,963   34,019    40,241    34,722
---------------------------------------------------------------------

CASH, END OF PERIOD           $  32,017 $ 33,413 $  32,017 $  33,413
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental Information

 Interest paid                $      15 $     30 $      34 $      44
 Income taxes paid            $       - $      - $     500 $     575


                                          ENERGY SAVINGS INCOME FUND

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

    (Unaudited - thousands of dollars except where indicated and per
      unit amount)

---------------------------------------------------------------------
---------------------------------------------------------------------

1. INTERIM FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements do not conform in all respects to the requirements of Canadian generally accepted accounting principles for annual financial statements and should therefore be read in conjunction with the audited consolidated financial statements and notes thereto included in the Fund's annual report for fiscal 2004. The unaudited interim consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles applicable to interim consolidated financial statements and follow the same accounting policies and methods in their applications as the most recent annual financial statements, except as indicated in Note 2.

2. NEW ACCOUNTING POLICY

(a) Other Assets (Liabilities)

Effective April 1, 2004, the Fund adopted the new Canadian accounting guideline AcG-13, Hedging Relationships and EIC-128, Accounting for Trading, Speculative or Non-Hedging Derivative Financial Instruments. As a result, the Fund's various derivative financial instruments have been accounted for under AcG-13 where they meet the guideline's criteria. Otherwise, they have been recognised at fair value in the financial statements in accordance with EIC-128.

For derivative financial instruments accounted for under AcG-13, the Fund formally documents the relationship between hedging instruments and the hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative financial instruments to anticipated transactions. The Fund also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items.

The Fund enters into hedges of its cost of sales relating to its fixed price electricity sales by entering into fixed-for-floating electricity swap contracts with electricity suppliers. The Fund uses the settlement method of hedge accounting for these swap contracts whereby the gain or loss incurred upon settlement is recognised in cost of sales. The timing of these settlements matches the timing of the recognition of the anticipated electricity sales which these swaps hedge. Changes in the fair value of these swaps are not recognised in the financial statements.

Derivative financial instruments accounted for in accordance with EIC-128 have been entered into for the purpose of economically  hedging the cost of sales relating to the Fund's fixed price gas sales. These derivative financial instruments have been recorded on the balance sheet as either an other asset or other liability measured at fair value, with changes in fair value recognised in income as other income (expense). These changes in fair value may be referred to as mark to market gains (losses). In addition, the premiums and settlements for these derivative financial instruments are recognised in cost of sales, when incurred. A loss of $541 and $75 have been recorded in other income (expense) for the three and six months ended September 30, 2004 as a result of the changes in fair value of these derivative financial instruments (see Note 9).

(b) Employee Future Benefits

On October 1, 2004 and effective April 1, 2004 the Fund established a long term incentive plan (the "Plan") for all permanent full time and part time Canadian employees (working more than 20 hours per week) of its affiliates and subsidiaries. The Plan consists of two components, a Deferred Profit Sharing Plan ("DPSP") and an Employee Profit Sharing Plan ("EPSP"). For participants of the DPSP, the Fund contributes an amount equal to a maximum of 2% per annum of an employee's base earnings. For the EPSP, the Fund contributes an amount up to a maximum of 2% per annum of an employee's base earnings towards the purchase of trust units of the Fund, on a matching one for one basis.

Participation in either plan is voluntary. The plan has a two year vesting period beginning from the later of the plan's effective date and the employee's starting date. The cost of the Fund's contribution to the plan is expensed as services are rendered by each employee. As at September 30, 2004, $186 has been recorded as an expense.

3. SEASONALITY OF OPERATIONS

The Fund's operations are seasonal. Gas consumption by customers is typically highest in the fall and winter quarters, October through March and lowest in the spring and summer quarters, April through September. Electricity consumption is typically highest in the winter and summer quarters, January through March and July through September. Electricity consumption is lowest in the fall and spring quarters, October through December and April through June.

4. RESTRICTED CASH/CUSTOMER REBATES PAYABLE

Restricted cash represents rebate monies received from Local Distribution Companies (LDCs) as provided by the Independent Market Operator (IMO). OESC is obligated to disperse the monies to eligible end-use customers in accordance with the Market Power Mitigation Agreement as part of OESC's Retailer License Conditions.

5. GAS IN STORAGE

Gas in storage represents the gas delivered to Nicor (the Illinois LDC). The balance will fluctuate as gas is injected or withdrawn from storage. Injections occur in the spring and summer quarters, April through September and withdrawals occur during the fall and winter quarters, October through March. Gas in storage is stated at the lower of cost and net realisable value.

6. PREFERENCE SHARES OF OESC

Authorised

Unlimited Class A preference shares, non-voting, exchangeable into trust units on a one to one basis in accordance with the OESC shareholders' agreement, with no priority on dissolution.

Unlimited Class B preference shares, non-voting, exchangeable into trust units at a price of $2.50 per Class B preference share together with all accrued and unpaid dividends in accordance with the OESC shareholders' agreement, with no priority on dissolution. Pursuant to the terms of the OESC shareholders' agreement, all outstanding shareholder exchange rights relating to Class B preference shares were exercised by January 1, 2004. Consequently, there are no Class B preference shares outstanding.

Pursuant to the "Declaration of Trust" which governs the Fund, the holders of Class A and Class B preference shares are entitled to vote in all votes of Unitholders as if they were the holders of the number of units which they would receive if they exercised their shareholder exchange rights.

2004                2003
                                            ----                ----
                                            ----                ----

Issued and Outstanding            Shares       $      Shares       $

Class A Preference Shares
-------------------------

Balance, beginning of period  11,631,178  29,078  11,827,478  29,569

Cancelled/exchanged into
 units                       (1,462,483) (3,656)   (140,038)   (350)
                             ----------- -------  ----------  ------

Balance, end of period        10,168,695  25,422  11,687,440  29,219
                             ----------- -------  ----------  ------

Class B Preference Shares
-------------------------

Balance, beginning of period           -       -   1,652,128   4,130

Cancelled/exchanged into
 units                                 -       -   (193,260)   (483)
                             ----------- -------  ----------  ------

Balance, end of period                 -       -   1,458,868   3,647
                             ----------- -------  ----------  ------

Combined balance, end of
 period                       10,168,695  25,422  13,146,308  32,866
                             ----------- -------  ----------  ------
                             ----------- -------  ----------  ------

7. TRUST UNITS

An unlimited number of units may be issued. Each unit is transferable, voting and represents an equal undivided beneficial interest in any distributions from the Fund whether of net income, net realised capital gains or other amounts, and in the net assets of the Fund in the event of termination or winding-up of the Fund.

2004                 2003
                                           ----                 ----
                                           ----                 ----
                                 Units        $       Units        $

Balance, beginning of
 period                     91,093,142  177,323  86,038,534  208,078
Options exercised            2,066,656    8,348   2,619,984   11,625
Exchanged from Class A
 preference shares           1,462,483    3,656     140,038      350
Exchanged from Class B
 preference shares                   -        -     193,260      483
Additional units from
 exchange of Class B
 preference shares                   -        -      10,620      226
Net loss                             -     (94)           -  (7,735)
Distributions                        - (38,777)           - (33,229)
Class B preference
 distributions paid                  -        -           -    (226)
Class B preference
 distributions exchangeable
 into units                          -        -           -    1,251
                            ---------- --------  ---------- --------

Balance, end of period      94,622,281  150,456  89,002,436  180,823
                            ---------- --------  ---------- --------
                            ---------- --------  ---------- --------

8. UNIT OPTION PLAN

(a) Unit option plan

The Fund grants awards under its 2001 unit option plan to directors, officers, full-time employees and service providers (non-employees) of its subsidiaries and affiliates. In accordance with the unit option plan subsequent to the unit split which took effect January 30, 2004, the Fund may grant options to a maximum of 11,300,000 units. As at September 30, 2004 there were 1,183,333 options still available for grant under the plan. Of the options issued, 2,670,004 options remain outstanding at quarter end. The exercise price of the unit options equals the closing market price of the Fund's units on the last business day preceding the grant date. The unit options will vest over periods ranging from three to five years from the grant date and expire after five or ten years from the grant date.

A summary of the status of the Fund's unit option plan is outlined
 below.

                                                   Weighted  Weighted
                                                    average   average
                                                   exercise     grant
                    Outstanding    Range of            date      fair
                      Options   Exercise prices    price(1)  value(2)

Balance, beginning
 of period           4,651,660   $2.50 - $15.45       $5.17
Granted                 85,000  $15.50 - $17.48      $17.05     $2.64
Exercised          (2,066,656)    $2.50 - $8.75       $2.55
                   -----------

Balance, end of
 period              2,670,004   $2.50 - $17.48       $7.58
                   -----------
                   -----------

(1) The weighted average exercise price is calculated by dividing the
    exercise price of options granted by the number of options
    granted.
(2) The weighted average grant date fair value is calculated by
    dividing the fair value of options granted by the number of
    options granted.


                         Options Outstanding      Options Exercisable
---------------------------------------------------------------------
---------------------------------------------------------------------
                                Weighted
                                 Average  Weighted           Weighted
                               Remaining   Average            Average
  Range of           Number   Contractual Exercise   Number  Exercise
Exercise Prices   Outstanding     Life     Price  Exercisable  Price
$2.50 - $3.24        213,332      1.60     $2.55    213,332    $2.55
$4.24 - $6.09      1,339,340      2.35     $5.09    254,665    $5.20
$7.29 - $7.58        180,000      2.74     $7.54     93,333    $7.53
$8.75 - $12.17       837,332      7.41    $11.77    274,666   $11.82
$14.25 - $17.48      100,000      4.50    $16.69    -------
                   ---------
Balance, end of
 period            2,670,004      3.98     $7.58    835,996    $6.96
                   ---------                        -------
                   ---------                        -------


Options Available for Grant

Available for grant                                       11,300,000
Add: cancelled/forfeited in prior years                      881,333
Less: granted in prior years                            (10,913,000)
                                                        ------------
Balance, beginning of period                               1,268,333
Less: granted during the period                             (85,000)
                                                        ------------

Balance, end of period                                     1,183,333
                                                        ------------
                                                        ------------

The Fund uses a binomial option pricing model to estimate the fair values. The binomial model was chosen because of the yield associated with the units. Fair values of employee unit options are estimated at grant date. Fair values of non-employee unit options are estimated and revalued each reporting period until a measurement date is achieved. The following weighted average assumptions have been used in the valuations:

Risk free rate                               3.4 - 5.6%
Expected volatility                          22.80% - 26.18%
Expected life                                3 - 5 years
Expected distributions                       $0.30 - $0.865 per year

(b) Unit appreciation rights

The Fund grants awards under its 2004 unit appreciation rights plan to senior officers or service providers of its subsidiaries and affiliates. In accordance with the unit appreciation rights plan, the Fund may grant unit appreciation rights ("UARs") to a maximum of 1,000,000. As at September 30, 2004 there were 965,568 UARs still available for grant under the plan. Except as otherwise provided, the UARs will vest over five years from the grant date and expire no later than ten years from the grant date.

UARs Available for Grant

Available for grant                                        1,000,000
Less: granted during the period                             (34,432)
                                                           ---------

Balance, end of period                                       965,568
                                                           ---------
                                                           ---------

(c) Deferred unit grants

The Fund grants awards under its 2004 Directors' deferred compensation plan to all independent directors of OESC. In accordance with the deferred compensation plan, the Fund may grant deferred unit grants ("DUGs") to a maximum of 100,000. The DUGs vest the earlier of the date of the Director's resignation or three years following the date of grant and expire ten years following the date of grant. As of September 30, 2004, no DUGs have been granted.

Total amounts credited to contributed surplus in respect of unit-based compensation awards and unit appreciation rights amounted to $1,435 for the six months ended September 30, 2004 (2003 - $2,629), and $1,000 for the three months ended September 30, 2004 (2003 - $1,002).

Total amounts reclassified from contributed surplus to units with respect to the awards exercised during the six months ended September 30, 2004 amounted to $3,086 (2003 - $3,077) and $16 for the three months ended September 30, 2004 (2003 - $569).

Cash received from options exercised for the three and six months ended September 30, 2004 amounted to $163 (2003 - $3,322) and $5,262 (2003 - $8,548), respectively.

9. FINANCIAL INSTRUMENTS

(a) Fair value

The Fund has a variety of gas and electricity supply contracts that are considered derivative financial instruments. The fair value of derivative financial instruments is the estimated amount the Fund would pay or receive to dispose of these supply contracts in the market. Management has estimated the value of electricity and gas swap contracts using a discounted cash flow method which employs a forward curve compiled by management for electricity and market information for gas (electricity information is based on market). Gas options have been valued using the Black option value model using the implied volatility from other market traded gas options.

At September 30, 2004, the Fund had electricity fixed-for-floating swap contracts designated as hedges of the Fund's anticipated cost of sales to which it has committed with the following terms:

Notional volumes (peak and flat)    5 - 75 MW/h
Total notional volume               10,037,957 MW
Maturity dates                      October 31, 2004 - July 31, 2009
Fixed price per MW (in dollars)     $39.25 - $73.78
Fair value                          $26,133 gain
Notional value                      $546,366

Since hedge accounting has been applied to these swaps, no recognition of the mark to market gain has been recognised in these financial statements.

At September 30, 2004, the Fund has a fixed-for-floating gas swap contract which has been marked to market with the following terms:

Notional volume                     1,000 GJ/day
Total notional volume               426,000 GJ
Maturity date                       November 30, 2005
Fixed price per GJ (in dollars)     $5.23
Fair value                          $658 gain
Notional value                      $2,228

The loss of $164 and the gain of $658 for the three and six months ended September 30, 2004 respectively have been recorded in other assets with its offsetting value being recorded in other income (expenses).

At September 30, 2004, the Fund had other gas puts and calls which have been marked to market with the following terms:

Notional volume                     125 - 400 GJ/day
Total notional volume               949,950 GJ
Maturity dates                      October 31, 2004 - October 31,
                                    2008
Fixed price per GJ (in dollars)     $5.48 - $ 5.55
Fair value                          $1,037 loss

The loss of $533 and $1,037 for the three and six months ended September 30, 2004 respectively have been recorded in other liabilities with its offsetting value being recorded in other income (expenses). The fair value of the options is net of the present value of premiums which have yet to be paid.

At September 30, 2004, the Fund had other gas put and call options in the United States which have been marked to market with the following terms:

Notional volume                     4,000 - 45,000 MmBTU/month
Total notional volume               4,320,500 MmBTU
Maturity dates                      November 30, 2004 - November 30,
                                    2009
Fixed price per MmBTU (in dollars)  $6.94 - $7.70 (US$5.50 - US$6.10)
Fair value                          $305 gain (US$239)

The fair value is net of prepaid premiums of $3,160. These premiums are also included in other assets. A gain resulting from the increase in fair value of $157 and $305 for the three and six months respectively has been recorded in other income (expenses).

These derivative financial instruments create a credit risk for the Fund since they have been transacted with a limited number of counterparties. Should any counterparty be unable to fulfill its obligations under the contracts, the Fund may not be able to realise the other asset balance recognised in the financial statements.

The Fund's physical gas supply contracts are not considered derivative financial instruments and a fair value has therefore not been assessed.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, management incentive program payable and unit distribution payable approximates their fair value due to their short term liquidity.

(b) Interest rate risk

OESC entered into a $10,000 operating facility agreement for a term of 364 days, in order to finance general requirements. The facility expires on March 5, 2005. The operating line of credit bears interest at bank prime plus 0.5% and letters of credit bear interest at 1.5%. Total letters of credit outstanding as at September 30, 2004 amounted to $6,296. The letters of credit are primarily to suppliers in support of future commodity purchases. No amounts have been drawn against the operating facility agreement at September 30, 2004 or 2003.

10. LOSS PER UNIT

Three months ended    Six months ended
                                    September 30        September 30

                                   2004     2003      2004      2003

Basic loss per unit
-------------------
-------------------
Net loss                      $ (4,235) $(8,504) $    (94) $ (7,735)

Class B preference
 distributions exchangeable
 into units                           -    (270)         -   (1,251)
                              --------- -------- --------- ----------
Net loss available to
 Unitholders                  $ (4,235) $(8,774) $    (94) $ (8,986)
                              --------- -------- --------- ----------
Average number of units
 outstanding                     93,325   88,245    92,792    87,659
                              --------- -------- --------- ----------
Basic loss per unit           $  (0.05) $ (0.10) $    0.00 $  (0.10)
                              --------- -------- --------- ----------
                              --------- -------- --------- ----------

Diluted loss per unit (1)
-------------------------
-------------------------

Net loss                      $ (4,235) $(8,504) $    (94) $ (7,735)

Management incentive program
 (net of tax - 36%; 2003 - 34%)  1,484     1,430     2,994     2,807
                              --------- -------- --------- ----------
Diluted loss available to
 Unitholders                  $ (2,751) $(7,074) $   2,900 $ (4,928)
                              --------- -------- --------- ----------
Average number of units
 outstanding                     93,325   88,245    92,792    87,659

Dilutive effect of:

 Class A preference shares       11,421   11,688    11,524    11,756
 Class B preference shares            -    1,558         -     1,604
 Class B preference shares
  additional unit entitlement         -       56         -        56
 Unit options                     1,429    3,698     1,740     3,760
 Unit appreciation rights            34        -        34         -
                              --------- -------- --------- ----------
Units outstanding on a diluted
 basis                          106,209  105,245   106,090   104,835
                              --------- -------- --------- ----------
Diluted loss per unit         $  (0.05) $ (0.10) $    0.00 $  (0.10)
                              --------- -------- --------- ----------
                              --------- -------- --------- ----------

(1) Conversion of convertible securities is anti-dilutive to loss per
    unit for the three and six month periods ended September 30, 2004
    and 2003.

11. REPORTABLE BUSINESS SEGMENTS

The Fund operates in two reportable business segments, which are the reselling of gas and electricity to end-use customers. The Fund operates in two geographic areas, Canada and the United States. The results from operations in the United States were insignificant for the three month period and the six month period ended September 30, 2004 and therefore have not been separately disclosed.

The Fund evaluates segment performance based on gross margin.

The Fund's business segments are strategic business units that offer a distinct product. Each geographic segment has senior level executives responsible for the performance of the segment.

The following tables present the Fund's results from continuing operations by reportable segment:

3 months ended September 30, 2004

                               Gas Electricity Corporate Consolidated

Sales from external
 customers and third
 parties                 $  52,654    $ 61,636 $       -   $  114,290
---------------------------------------------------------------------

Gross Margin             $  12,527    $  9,378 $       -   $   21,905
Expenses                         -           -  (33,443)     (33,443)
Other expenses                   -           -     (482)        (482)
Recovery of income tax           -           -     7,785        7,785
---------------------------------------------------------------------
Net income (loss)        $  12,527    $  9,378 $(26,140)   $  (4,235)
---------------------------------------------------------------------
---------------------------------------------------------------------

Additions to capital
 assets                  $     482    $      2 $     260   $      744
---------------------------------------------------------------------
---------------------------------------------------------------------

3 months ended September 30, 2003

                               Gas Electricity Corporate Consolidated

Sales from external
 customers and third
 parties                 $  51,620    $ 54,476 $       -   $  106,096
---------------------------------------------------------------------

Gross Margin             $   4,461    $  6,119 $       -   $   10,580
Expenses                         -           -  (28,632)     (28,632)
Other income                     -           -       170          170
Recovery of income tax           -           -     9,378        9,378
---------------------------------------------------------------------
Net income (loss)        $   4,461    $  6,119 $(19,084)   $  (8,504)
---------------------------------------------------------------------
---------------------------------------------------------------------

Additions to capital
 assets                  $       5    $    139 $     502   $     646
---------------------------------------------------------------------
---------------------------------------------------------------------

Six months ended September 30, 2004

                               Gas Electricity Corporate Consolidated

Sales from external
 customers and third
 parties                 $ 178,585    $121,778 $       -   $  300,363
---------------------------------------------------------------------

Gross Margin             $  35,562    $ 18,101 $       -   $   53,663
Expenses                         -           -  (66,337)     (66,337)
Other expenses                   -           -       100          100
Recovery of income tax           -           -    12,480       12,480
---------------------------------------------------------------------
Net income (loss)        $  35,562    $ 18,101 $(53,757)   $     (94)
---------------------------------------------------------------------
---------------------------------------------------------------------

Additions to capital
 assets                  $   1,384    $     56 $     903   $    2,343
---------------------------------------------------------------------
---------------------------------------------------------------------

Total goodwill           $  94,576    $      - $       -   $   94,576
---------------------------------------------------------------------
---------------------------------------------------------------------

Total assets             $ 230,748    $ 19,536 $  54,710   $  304,994
---------------------------------------------------------------------
---------------------------------------------------------------------

Six months ended September 30, 2003

                               Gas Electricity Corporate Consolidated

Sales from external
 customers and third
 parties                 $ 143,008    $ 95,388 $       -   $  238,396
---------------------------------------------------------------------

Gross Margin             $  25,847    $ 11,128 $       -   $   36,975
Expenses                         -           -  (59,003)     (59,003)
Other income                     -           -       320          320
Recovery of income tax           -           -    13,973       13,973
---------------------------------------------------------------------
Net income (loss)        $  25,847    $ 11,128 $(44,710)   $  (7,735)
---------------------------------------------------------------------
---------------------------------------------------------------------

Additions to capital
 assets                  $       5    $    300 $   1,195   $    1,500
---------------------------------------------------------------------
---------------------------------------------------------------------

Total goodwill           $  94,576    $      - $       -   $   94,576
---------------------------------------------------------------------
---------------------------------------------------------------------

Total assets             $ 264,386    $ 18,162 $  44,845   $  327,393
---------------------------------------------------------------------
---------------------------------------------------------------------

12. GUARANTEES

(a) Officers and Directors

Corporate indemnities have been provided by the Fund to all directors and certain officers of its subsidiaries and affiliates for various items including, but not limited to, all costs to settle suits or actions due to their association with the Fund and its subsidiaries and/or affiliates, subject to certain restrictions. The Fund has purchased directors' and officers' liability insurance to mitigate the cost of any potential future suits or actions. Each indemnity, subject to certain exceptions, applies for so long as the indemnified person is a director or officer of one of the Fund's subsidiaries and/or affiliates. The maximum amount of any potential future payment cannot be reasonably estimated.

(b) Operations

In the normal course of business, the Fund and/or the Fund's subsidiaries and affiliates have entered into agreements that include guarantees in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement letters with consultants, leasing agreements and service agreements. These guarantees may require the Fund and/or its subsidiaries and affiliates to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation and regulations or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The maximum amount of any liability cannot be reasonably estimated under these guarantees.

The nature of these guarantees prevents the Fund from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability which stems from the unpredictability of future events and the unlimited coverage offered to counterparties. Historically, the Fund has not made any payments under such or similar indemnification agreements and therefore no amount has been accrued in the balance sheet with respect to these agreements.

13. COMMITMENTS

(a) Commitments for premises and equipment under operating lease obligation for the next five years are as follows:

2005                                                     $     1,785
2006                                                           1,722
2007                                                           1,578
2008                                                           1,595
2009 and beyond                                                4,884
                                                         ------------

                                                         $    11,564
                                                         ------------
                                                         ------------

(b) The Company is committed under a marketing agreement for the next three years to the following minimum payments:

2005                                                     $     2,041
2006                                                           2,041
2007                                                           2,041
                                                         ------------

                                                         $     6,123
                                                         ------------
                                                         ------------

(c) The Company is committed under long-term gas and electricity contracts with various suppliers for the next five years as follows:

2005                                                     $   345,747
2006                                                         616,102
2007                                                         476,167
2008                                                         347,052
2009 and beyond                                              242,974
                                                         ------------

                                                         $ 2,028,042
                                                         ------------
                                                         ------------

The Company is also committed under long-term contracts with customers to supply gas and electricity. These contracts have various expiry dates and renewal options.

Gas and electricity are delivered to the end-use customers by local distribution companies under contract with the Company. The Company has entered into irrevocable letter agreements for the assignment of local distribution company proceeds to which it would otherwise be entitled in favour of suppliers. The suppliers hold the monies in trust and deduct the portion relating to commodity cost and remit the remaining proceeds.

14. SUBSEQUENT EVENT

On November 1, 2004, Ontario Energy Savings Corp. and U.S. Energy Savings Corp. (each a direct and indirect wholly owned subsidiary of the Fund) entered into a $60,000 operating credit facility agreement with a group of financial institutions for a term of 364 days plus a one year term out option. The operating line of credit bears interest at bank prime plus 0.5% and letters of credit bear interest at 1.5%. All obligations under the former $10,000 credit facility have been terminated and all outstanding letters of credit have been transferred to the new credit facility. The new operating credit facility will be used to meet working capital requirements as the Fund continues to expand into new markets. To complement the new operating credit facility, Coral Energy Inc. ("Coral") and the lenders have entered into an intercreditor agreement whereby Coral and the lenders jointly hold security over a majority of the assets of the Fund.

The Toronto Stock Exchange has neither approved nor disapproved of the contents of this release.

Energy Savings Income Fund (TSX:SIF.UN)