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2010 and Prior

The following information is general in nature and is not meant to be an exhaustive discussion of all possible income tax considerations. This information should not be construed as legal or tax advice to any particular shareholder/unitholder. Holders, potential holders or previous holders of common shares/trust units of Vermilion should consult their own income tax advisors as to the particular income tax consequences of holding Vermilion common shares/trust units.

Effective September 1, 2010, Vermilion completed its conversion to a corporation from an income trust (the “Conversion”). Accordingly, there are different taxation considerations applicable to the 2010 tax year and prior.

Total 2010 Dividends Declared and Payable to Shareholders of Vermilion Energy Inc.

Ex-dividend Date RecordDate Payment Date DividendAmount Taxation Year
Sep 28, 2010 Sep 30, 2010 Oct 15, 2010 $0.19 2010
Oct 27, 2010 Oct 29, 2010 Nov 15, 2010 $0.19 2010
Nov 26, 2010 Nov 30, 2010 Dec 15, 2010 $0.19 2010

Total 2010 Distributions Declared and Payable to Unitholders of Vermilion Energy Trust

Ex-dividendDate RecordDate PaymentDate Dividend Amount Taxation Year
Jan 27, 2010 Jan 29, 2010 Feb 15, 2010 $0.19 2010
Feb 24, 2010 Feb 26, 2010 Mar 15, 2010 $0.19 2010
Mar 29, 2010 Mar 31, 2010 Apr 15, 2010 $0.19 2010
Apr 28, 2010 Apr 30, 2010 May 17, 2010 $0.19 2010
May 27, 2010 May 31,2010 Jun 15, 2010 $0.19 2010
Jun 28, 2010 Jun 30, 2010 Jul 15, 2010 $0.19 2010
Jul 28, 2010 Jul 30, 2010 Aug 16, 2010 $0.19 2010
Aug 27, 2010 Aug 31, 2010 Sep 15, 2010 $0.19 2010

Canadian Resident Individual Shareholders/Unitholders

All dividends declared and paid in 2010 to Canadian Resident Individual Shareholders following the Conversion have been designated as eligible dividends for purposes of the Canadian Income Tax Act ("Tax Act"). As such, Canadian Resident Individual Shareholders are entitled to the enhanced dividend tax credit normally applicable to eligible dividends received from a taxable Canadian corporation. Canadian Resident Individual Shareholders should include all 2010 dividends received on Vermilion common shares for purposes of reporting income on their 2010 income tax return. Canadian resident shareholders who held Vermilion common shares in a Registered Retirement Savings Plan, Registered Retirement Income Fund, Deferred Profit Sharing Plan, Registered Education Savings Plan or Tax Free Savings Account need not report any dividend income related to those shares on their 2010 income tax return. For purposes of the Tax Act, Vermilion Energy Trust (the “Trust”) was a mutual fund trust. Each year, an income tax return was filed by the Trust with the taxable income allocated to and taxable in the hands of unitholders. Distributions paid by the Trust could be designated as a return of capital (i.e. a repayment of a portion of the investment) or a return on capital (i.e. taxable income), or a combination thereof. For the 2010 taxation year, the treatment of distributions is 100% return on capital (taxable income). Canadian Resident Individual Unitholders who held their investment in a Registered Retirement Savings Plan, Registered Retirement Income Fund, Deferred Profit Sharing Plan, Registered Education Savings Plan or Tax Free Savings Account need not report any income related to trust unit distributions on their 2010 income tax return. The following table sets out the allocation of the Canadian 2010 monthly distributions:

PaymentDate RecordDate Total Distribution Tax Deferred Amount (Box 42) Taxable Amount (Income)
Feb 15, 2010 Jan 29, 2010 0.19000 0.00000 0.19000
Mar 15, 2010 Feb 26, 2010 0.19000 0.00000 0.19000
Apr 15, 2010 Mar 31, 2010 0.19000 0.00000 0.19000
May 17, 2010 Apr 30, 2010 0.19000 0.00000 0.19000
Jun 15, 2010 May 31, 2010 0.19000 0.00000 0.19000
Jul 15, 2010 Jun 30, 2010 0.19000 0.00000 0.19000
Aug 16, 2010 Jul 30, 2010 0.19000 0.00000 0.19000
Sep 15, 2010 Aug 31, 2010 0.19000 0.00000 0.19000
    1.52000   1.52000

Non-Canadian Resident Individual Shareholders/Unitholders

All 2010 dividends declared and paid by Vermilion are 100% taxable and are generally expected to be reflected in income as a Qualified Dividend for United States Federal tax purposes. Please note that there are certain individual circumstances where the dividends may not be a Qualified Dividend. With respect to pre-conversion distributions paid in 2010, we believe the Trust should be treated as a qualified corporation and the units as equity for United States tax purposes. The Trust has calculated that 84% of the distributions paid in 2010 are dividends that are “Qualified Dividends”. The remaining 16% of the 2010 distributions are a tax-deferred reduction to the cost of units for tax purposes. If the amount of “Non-Taxable Return of Capital” exceeds the cost of units, the excess should be reported as a capital gain. The taxability of distributions for U.S. purposes is calculated using U.S. tax rules. The taxable portion of the monthly distribution is determined annually by the Trust based upon 2010 current and accumulated earnings in accordance with U.S. tax law. Unitholders who are not residents of Canada for income tax purposes are strongly encouraged to seek advice from a qualified tax advisor in the country of residence for the tax treatment of distributions. Please note that there are certain individual circumstances where the distributions may not be a Qualified Dividend. Distributions payable and dividends paid to non-residents of Canada are normally subject to a withholding tax of 25% as prescribed by the Tax Act. This withholding tax may be reduced in accordance with reciprocal tax treaties, and in the case of the Tax Treaty between Canada and the United States, the withholding tax for residents of the United States entitled to the benefits of such treaty is reduced to 15%. U.S. taxpayers may be eligible for a foreign tax credit with respect to the Canadian withholding taxes paid. Information regarding the amount of Canadian tax withheld in 2010 should be available through your broker, investment dealer, financial institution, or other nominee or other intermediary and cannot be provided directly by Vermilion.

Vermilion Energy Inc.
3500, 520 3rd Avenue SW
Calgary, Alberta T2P 0R3
Phone: 1-403-269-4884
Fax: 1-403-476-8100
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