TimberWest Announces 2007 Fourth Quarter Results And Sawmill Closure



    VANCOUVER, Feb. 7 /CNW/ - TimberWest generated distributable cash of
$55.4 million, or $0.71 per stapled unit, in Q4, 2007 and $90.3 million, or
$1.16 per unit, for the year overall. This compares to $27.5 million, or
$0.35 per unit, in Q4, 2006 and $103.8 million, or $1.34 per unit, in the year
2006. A large, $64.7 million conservation land sale this quarter helped to
offset a challenging year in our core forestry business.
    "Conditions in the fourth quarter continued to be difficult in both our
timberland and sawmill businesses," said President and CEO Paul McElligott.
"As in Q3, we faced weak markets in the US, oversupplied markets in Japan, a
strong Canadian dollar and escalating contractor costs." With both prices and
margins depressed this quarter, the Company scaled back its private land
harvest to 212,000 m(3). This represents approximately 30% of average historic
fourth quarter volumes at TimberWest. The private land harvest for the year
was 2.2 million m(3), which was approximately 500,000 m(3) lower than 2006.
Log sales revenue was also lower with sales volumes at 323,000 m(3) during the
quarter, half of the Q4, 2006 volume. For the year as a whole, sales volumes
were lower than 2006 by 446,000 m(3).
    Log sales realizations in the fourth quarter were $94 per m(3) compared
to $96 per m(3) in the fourth quarter of 2006. Strong cedar prices continued
to positively influence average sales realizations. However, fir prices
remained lower in all markets, while hemlock prices were steady. Average sales
realizations for the year were $93 per m(3) compared to $98 per m(3) in 2006.
Average export realizations were 14% lower for the year.
    The cost side of the timberland business was negatively affected in the
quarter by higher contractor costs and by the reduction in harvest, which is
reflected in the higher unit costs of production. We continue to work on
achieving reduced contractor costs and improved safety by sub-dividing our
larger, stump-to-dump contracts.
    "The safety of our own employees and contractor employees working on our
land base remains our top concern," said McElligott. "Very early in 2007,
TimberWest was the first major company on the BC coast to become SAFE
certified by the BC Forest Safety Council. In 2007 we required that all of our
contractors be registered for their safety certification and many went beyond
and actually achieved SAFE company status. We made great progress and expect
that all of our remaining contractors will achieve their safety certifications
in 2008. We also achieved our goal of a 30% Medical Incident Rate ("MIR")
improvement over 2006, a result that we are very proud of."
    Our Elk Falls sawmill struggled again in 2007, facing the same challenges
as our timberland operations with the dollar, pricing, and weak end markets.
The sawmill has been for sale for over two years without an offer. Due to the
lack of interested buyers, we ended the sale process, took an $18.4 million
write-down related to these assets and effective May 9, 2008, the sawmill will
be permanently closed.
    "This news has been very tough for our Company to deal with," said
McElligott. "257 jobs will be lost, creating hardship for the individuals and
their families. While these decisions are very difficult because of the people
involved, we have concluded that the mill is not viable and that closing it
permanently is the right decision. TimberWest will honour all of its legal
obligations to its employees as a result of this decision."
    In December, we closed on the sale of the Leech Creek property to the
Capital Regional District ("CRD") which includes the city of Victoria, for
$64.7 million. It represents 9,700 hectares of land, less than 3% of our land
base, and this transaction provides important insight into how our lands have
the potential to benefit both Vancouver Island communities and our
unitholders. The land is a critical part of the Leech Creek watershed and with
this purchase the CRD was able to double its water supply area. From
TimberWest's perspective, the Leech Creek lands had a higher and better use as
conservation land. This was clearly reflected in the per hectare pricing of
approximately $6,700/hectare or$2,700/acre.
    We were pleased to work with the CRD to help them achieve their watershed
goals while adding substantially to the region's park system. This transaction
stands as an excellent example of how we continue to work collaboratively with
local communities and stakeholders to enhance value for them and for our
unitholders.
    Our non-core, higher and better use ("HBU") real estate sales for the
quarter were lower than we had hoped. This was the result primarily of listing
delays, the extension of auction bid dates into the new year, and the ramping
up of our new real estate organization rather than any indication of weakness
in the Vancouver Island market.

    Real Estate Strategy

    John Hendry, our Vice President, Real Estate, added to his group's
in-house capabilities during the quarter with the addition of key personnel in
the areas of marketing and sales, zoning and entitlement, and public affairs
and communications. We also made tremendous progress in understanding the
potential highest and best use of TimberWest's land. We engaged EDAW, an
internationally recognized planning firm, to assist us with a strategic review
and to our knowledge, EDAW has completed the most comprehensive land analysis
ever conducted on Vancouver Island. The quality and depth of information they
have assembled will be invaluable as we move forward with discussions with
regional districts, municipalities and others on the Island.
    Vancouver Island is changing. Increasingly, it is being recognized
provincially, nationally - and even internationally - as a leading place to
live, work and play. Communities, for their part, are trying to adapt to, and
take advantage of, this change by diversifying their economies, something that
is all the more critical given the ongoing challenges of the coastal forest
industry.
    TimberWest is itself part of the changing landscape of Vancouver Island.
For decades, we have carefully managed our landholdings to create jobs and
economic benefits for communities.
    Now, in looking at how Vancouver Island is changing, TimberWest is
reflecting on the role we will play. We own more than 322,000 hectares (about
796,000 acres) on the Island, our landholdings are diverse and located where
the majority of the population currently lives.
    As a large landholder with concentrated landholdings and a proud history,
TimberWest feels a strong sense of responsibility to both current and future
generations on Vancouver Island. We want to - need to - play a significant
role in how the Island evolves.
    In 2006, the Colliers study identified 93,000 acres of land with real
estate potential and valued it "as is" in the range of $300 - $450 million.
The EDAW study has identified a further 41,000 acres of real estate land for a
total of 134,000 acres. This represents a significant lift in value from the
original Colliers study as the size of the portfolio has grown, the market
value of real estate on the Island has increased and the area identified for
core development has been expanded.
    Of the 134,000 acres, which represents approximately 17% of the Company's
landholdings, the land classification process has begun and we are focusing
our planning and zoning resources on the highest value portion of this land
which represents 39,000 acres. These 39,000 acres are what we call our core
development lands. This is the portion of the land base that we think has the
highest potential value which would be realized as a result of planning and
zoning changes. An initial classification of these lands shows that we have
core development lands suitable for residential development, commercial
development, mixed use development, resort development and public use.
    Additionally, there are 41,000 acres of land adjacent to these core
development lands. Their value should increase as the development lands are
entitled and they will be subject to further study and reclassification. In
addition to these core development lands, there are about 54,000 acres of
higher and better use properties that will likely be sold "as is" overtime.
    While the analysis done to date is a significant accomplishment, it is
really just the starting point. This land classification process is complex
and ongoing. Though we have been working on it for some time, we are really
just beginning to appreciate our land's potential.
    That's why in the months and years ahead, we will be working closely with
Vancouver Island communities to determine the best use of our lands. We want
to manage our lands in a way that helps meet the changing needs of communities
on Vancouver Island. Our landholdings can help us do that. Working together,
for example, we can:

    
    -   plan in creative and flexible ways to meet the particular needs of
        local communities;

    -   provide for new Island-wide linkages;

    -   unlock opportunities for conservation and preservation of
        special lands;

    -   use our landholdings in a way that helps communities achieve
        sustainable growth that brings with it jobs, homes, infrastructure
        and recreation for generations to come; and

    -   ensure that only high quality, sustainable, conservation-minded
        developments occur on our land base.
    

    By taking a thoughtful approach and working together, we can develop a
shared vision for the future of our land and local communities.
    As we move forward, we will continue to help diversify local economies,
support sustainable and growing communities, respect the environment and
enhance the quality of life that makes Vancouver Island such a special place
to live and visit.

    Outlook

    We fully expect to continue facing very difficult log and lumber market
conditions throughout 2008 with ongoing weakness in the US housing market,
lack of expansion and the oversupply situation in the Japanese market and the
continued strength of the Canadian dollar. As a result, we have started off
2008 maintaining low harvest levels and therefore expect in this first quarter
to harvest only about 30% of our historic volumes. Our trees will continue to
grow in size and value and, accordingly, we believe they will be worth
considerably more when harvested in the future than if we were to harvest them
today. With the combination of higher projected future log prices, the volume
growth of the trees and our expectation of lower harvesting costs, we believe
unitholder value is enhanced by leaving trees to grow today. By reducing
harvests when margins are low and increasing harvests when margins are high,
the net asset value of the company will increase.
    We are beginning the year with low log inventories of 462,000 m(3) and
anticipate ending the first quarter with even lower levels. We are planning
for and managing our harvest levels on a month-by-month basis with our usual
tight controls over costs, inventory and other working capital items.
    We are also starting the year with two of our long term, stump-to-dump
contractors in financial difficulty: one has filed for creditor protection
under the Companies' Creditors Arrangement Act ("CCAA") and is working on a
restructuring plan while the other has filed for bankruptcy and a trustee has
been appointed. Together these two contractors produce about 36% of
TimberWest's private land harvest. Wth respect to the employees who worked for
the company now in bankruptcy, we will work with the union to provide
employment opportunities for them with the new contractors who ultimately take
over these operations. Our plans are to award the harvesting work to mid-sized
contracting firms and reduce our reliance on large, stump-to-dump contractors.
With the reduced harvest levels this year, our remaining contractors should be
able to produce the desired level of production as we get new contractors
established.
    We believe that our strategy of reducing the harvest in these times of
extremely poor market conditions is a superior long term value creation
strategy for our unitholders. Looking beyond the immediate market challenges,
we expect to see demand and pricing for log and lumber products in our region
improve dramatically. This view is based upon our assessment of the positive
demographics in the US, which should result in the return to a strong housing
market, our expectations regarding continuing growth in demand for wood
products in Asia, the impact of inevitable future supply shortages caused by
the Mountain Pine Beetle infestation in the BC interior and further harvest
reductions in eastern Canada. When margins improve, we will go back and
harvest the trees that we left behind last year and those we will leave behind
in 2008.
    We also believe that our real estate strategy is the right long term one
for unitholders. Planning and zoning will enhance real estate values
dramatically on our core development lands. As a matter of corporate policy,
we will not divest of these core development properties before their time.
That is, not before the required consultations have occurred with communities
and regional districts and the follow up planning and entitlement changes have
occurred.
    In 2008, we do not expect to generate sufficient distributable cash to
cover our distribution obligations. We will assess our financial situation
carefully and update unitholders quarterly as we manage through this downturn.
The Company has a strong balance sheet and one of our goals will be to
preserve it as we manage through these challenging business conditions and
continue to focus on growing long-term unitholder value.


    
    Distributable Cash
    -------------------------------------------------------------------------
    (in millions of dollars)         Three months ended   Twelve months ended
                                         December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Net earnings (loss)            $   (0.1)  $   14.8   $  (31.8)  $   17.1
    Interest on Series A
     Subordinate Notes owned by
     unitholders                       21.0       20.9       83.7       83.6
    -------------------------------------------------------------------------
    Earnings available
     for distribution                  20.9       35.7       51.9      100.7
    Write-down of property,
     plant and equipment               18.4          -       18.4          -
    Future income tax recovery        (23.7)     (13.2)     (27.1)     (38.2)
    -------------------------------------------------------------------------
    Earnings available
     for distribution before
     provision for future
     income taxes, and write-
     down of property, plant
     and equipment                     15.6       22.5       43.2       62.5
    Add (deduct):
      Depreciation, depletion
       and amortization                 1.7        2.0        8.7        8.8
      Proceeds from sale of
       property, plant and
       equipment                       65.1       13.9       71.9       33.0
      Gain on sale of property,
       plant and equipment            (22.3)     (10.9)     (28.5)     (14.9)
      Additions to property,
       plant and equipment             (1.2)      (0.6)      (3.4)      (4.3)
      Other non-cash items             (3.5)       0.6       (1.6)      18.7
    -------------------------------------------------------------------------
                                       39.8        5.0       47.1       41.3
    -------------------------------------------------------------------------
    Distributable cash             $   55.4   $   27.5   $   90.3   $  103.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per Stapled Unit amounts:
     (in dollars)
    Basic earnings
     available for distribution
     before provision for
     future income taxes and
     write-down of property,
     plant and equipment per
     weighted average Stapled
     Unit                          $   0.20   $   0.29   $   0.56   $   0.81
    Diluted earnings
     available for
     distribution before
     provision for future
     income taxes and
     write-down of property,
     plant and equipment
     per weighted average
     Stapled Unit                  $   0.20   $   0.29   $   0.55   $   0.81
    Basic and diluted
     distributable cash per
     weighted average
     Stapled Unit                  $   0.71   $   0.35   $   1.16   $   1.34
    Cash distributions paid
     per Stapled Unit              $   0.27   $   0.27   $   1.08   $   1.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The following table provides a reconciliation of cash flow from operations
to distributable cash:

    -------------------------------------------------------------------------
    (in millions of dollars)         Three months ended   Twelve months ended
                                         December 31           December 31
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash flow from operations      $  (23.3)  $  (15.4)  $  (70.2)  $   11.1
    Add (deduct):
      Change in non-cash working
       capital                         (5.9)       8.6        8.0      (19.6)
      Interest on Series A
       Subordinate Notes owned
       by unitholders                  21.0       20.9       83.7       83.6
      Proceeds from sale of
       property, plant and
       equipment                       65.1       13.9       71.9       33.0
      Additions to property,
       plant and equipment             (1.2)      (0.6)      (3.4)      (4.3)
      Other non-cash items             (0.3)       0.1        0.3          -
    -------------------------------------------------------------------------
                                       78.7       42.9      160.5       92.7
    -------------------------------------------------------------------------
    Distributable cash                 55.4       27.5       90.3   $  103.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributable cash includes consolidated net earnings (loss), plus
interest expensed on Series A Subordinate Notes owned by unitholders, plus
non-cash income taxes, plus depreciation, depletion and amortization, plus
proceeds from the sale of property, plant and equipment net of their gain
(loss) on sale, less additions to property, plant and equipment and, from time
to time, adjustments for other items deemed appropriate by the Board of
Directors. Earnings available for distribution is comprised of consolidated
net earnings (loss) plus interest expensed on Series A Subordinate Notes. The
Series A Subordinate Notes are owned by the unitholders and interest thereon
is paid to the unitholders, therefore, earnings available for distribution to
unitholders reflects earnings before this interest charge.
    Earnings available for distribution and distributable cash are measures
that do not have a standardized meaning prescribed by GAAP and may not be
comparable to similar measures presented by other companies. Management
believes that the presentation of these measures will enhance an investor's
understanding of the Company's operating performance. Reconciliations of net
earnings (loss) and cash flow from operations, as determined in accordance
with GAAP, and earnings available for distribution and distributable cash are
provided in the preceding tables.

    The following tables present a quarterly comparison of distributable cash
generated, in total and on a per Stapled Unit basis:

    -------------------------------------------------------------------------
                                2007    2006    2005    2004    2003    2002
    -------------------------------------------------------------------------
    Distributable Cash
    (in millions of dollars)
    First quarter             $ 26.9  $ 31.5  $ 23.9  $ 27.7  $ 25.7  $ 21.2
    Second quarter              13.6    35.5    15.4    43.5     4.7    10.6
    Third quarter               (5.6)    9.3    (1.7)   35.9    12.0    34.1
    Fourth quarter              55.4    27.5    29.7    18.1     9.0    24.2
    -------------------------------------------------------------------------
                              $ 90.3  $103.8  $ 67.3  $125.2  $ 51.4  $ 90.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributable Cash
     per Stapled Unit(1)
    (in dollars)
    First quarter             $ 0.35  $ 0.41  $ 0.31  $ 0.36  $ 0.34  $ 0.30
    Second quarter              0.17    0.46    0.20    0.57    0.06    0.14
    Third quarter              (0.07)   0.12   (0.02)   0.47    0.15    0.45
    Fourth quarter              0.71    0.35    0.38    0.24    0.12    0.32
    -------------------------------------------------------------------------
                              $ 1.16  $ 1.34  $ 0.87  $ 1.64  $ 0.67  $ 1.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    --------------------
    (1) Per Stapled Unit amounts by quarter do not necessarily add to the
        total of the year and year-to-date due to changes in the weighted
        average number of Stapled Units outstanding during the year.


    Financial Highlights
    -------------------------------------------------------------------------
    (in millions of dollars)         Three months ended   Twelve months ended
                                         December 31           December 31
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Sales                          $  119.6   $  110.6   $  409.0   $  478.1
    Operating earnings                  0.7       25.5       34.0       94.7
    Write-down of property, plant
     and equipment                     18.4          -       18.4          -
    Operating earnings before
     write-down of property,
     plant and equipment               19.1       25.5       52.4       94.7
    Operating earnings before
     write-down of property,
     plant and equipment
     - % of sales                     16.0%      23.1%      12.8%      19.8%
    Pension plan annuitization            -          -          -       17.7
    EBITDA(2)                           2.4       27.9       48.3       85.9
    EBITDA per basic and diluted
     weighted average Stapled Unit     0.03       0.36       0.62       1.11
    Income tax recovery                23.7       13.4       27.2       38.2
    Net earnings (loss)                (0.1)      14.8      (31.8)      17.1
    Earnings (loss) per common
     share:
      Basic                           (0.00)      0.19      (0.41)      0.22
      Diluted                         (0.00)      0.19      (0.41)      0.22
    Distributable cash             $   55.4   $   27.5   $   90.3   $  103.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ---------------
    (2) Earnings (loss) before interest, taxes, depreciation and amortization
        is a measure that does not have a standardized meaning prescribed by
        GAAP and may not be comparable to similar measures presented by other
        companies. Management believes that the presentation of this measure
        will enhance an investor's understanding of the Company's operating
        performance. A reconciliation of net earnings (loss) as determined in
        accordance with GAAP and Earnings (loss) before interest, taxes,
        depreciation and amortization is provided in the supplemental
        information appended to this interim report.
    

    Sales revenues for the three months ended December 31, 2007 were up
compared to the fourth quarter of 2006. However, the sales mix differed from
the fourth quarter of 2006 with significant decreases in log and lumber sales
which were more than offset by the Leech Creek conservation land sale.
Operating earnings before the write-down of property, plant and equipment as a
percentage of sales decreased compared to the fourth quarter of 2006 as a
result of significantly lower log and lumber sales volumes combined with lower
average sales realizations and higher operating costs for both logs and
lumber.
    The Canadian dollar continued to strengthen this year, which negatively
affected sales realizations. During the quarter and for the year 2007 overall,
the dollar appreciated significantly against the US dollar.

    Highlights and Significant Transactions

    Adoption of New Accounting Policies - Financial Instruments

    During the first quarter, the Company adopted new accounting policies
issued by the Canadian Institute of Chartered Accountants ("CICA") and changed
its policy of accounting for financial instruments. Prior to January 1, 2007,
TimberWest recognized financial liabilities at carrying value. Effective
January 1, 2007, the Company measures its debentures and Series A Subordinate
Notes owned by unitholders at amortized cost using the effective interest
method. The effective interest method establishes the rate which equates the
estimated future cash flows with the net carrying amount of the financial
liability. The embedded derivative arising from the option to extend the
Series A Subordinate Notes for a further 10 year period is measured at fair
value. TimberWest adopted the new accounting policies on a retroactive basis
but prior years have not been restated.
    The adoption of new accounting policies for financial instruments has not
resulted in any significant changes to TimberWest's financial statements.

    Refinancing of Credit Facilities

    During the third quarter, the Company finalized arrangements for new
credit facilities. On September 25, 2007, the Company completed and received
two credit facilities pursuant to unsecured revolving facilities underwritten
by a syndicate of Canadian chartered banks. The first facility, Tranche A, is
long-term financing in the amount of $200.0 million, due on September 24,
2012. The second facility, Tranche B, is short term financing in the amount of
$100.0 million, due on September 24, 2008. Under both facilities funds are
available to the Company in both Canadian and US dollars by way of adjusted
prime rate-based loans, bankers' acceptances, LIBOR plus 0.9% loans and
letters of credit or guarantee. At any time prior to maturity of the
facilities and provided no event of default has occurred, the Company may
request an increase to the credit facility apportioned proportionally between
Tranche A and Tranche B up to the aggregate amount of $350.0 million. On
October 19, 2007, the Company requested and received additional financing in
the amount of $25.0 million to the credit facility, apportioned proportionally
between Tranche A and Tranche B for a total aggregate amount of
$325.0 million.
    On completion of this financing, the Company's long-term financing in the
amount of $65.0 million pursuant to an unsecured revolving facility
underwritten by a Canadian chartered bank, due on July 7, 2010 and the
Company's long-term financing in the amount of $100.0 million pursuant to an
unsecured revolving facility underwritten by a syndicate of Canadian chartered
banks, due on July 27, 2010, were cancelled. The Company had an unsecured
demand facility of $10.0 million which was cancelled in November 2007.

    Cash Distribution

    On February 7, 2008, TimberWest announced a distribution of
$0.269 per Stapled Unit, payable April 15, 2008, to unitholders of record on
April 1, 2008. From inception to December 31, 2007, the Company has generated
distributable cash of $858.2 million while, including the January 15, 2008
distribution of $21.0 million, the Company has paid out $817.4 million to
unitholders.
    Due to the seasonal and cyclical nature of TimberWest's business, cash
flows may fluctuate from quarter to quarter and from year to year. One of the
objectives of TimberWest's cash distribution policy is to make even
distributions to unitholders, which may differ from actual cash generated
during the period.

    Redemption of Debentures

    On October 1, 2007, the Company used the Tranche A credit facility to pay
out the maturity of the $195.0 million of 7.0% debentures on October 1, 2007.

    Leech Creek Conservation Land Sale

    In December, 2007, the Company completed the sale of 9,700 hectares or
24,000 acres of forest land to the Capital Regional District, which includes
the city of Victoria, for proceeds of $64.7 million.

    Elk Falls Sawmill

    The Company commenced a sales process for the Elk Falls sawmill in late
2005. This sales process concluded at the end of 2007 without any bid from
prospective buyers. Management determined the value of the sawmill is impaired
and the Company recorded an impairment charge of $18.4 million, writing down
the sawmill assets to fair value of zero. On February 7, 2008, the Company
announced effective May 9, 2008, the sawmill will be permanently closed.

    Quarterly Conference Call

    TimberWest will hold a conference call at 9:00am PDT (12:00pm EDT) on
Friday, February 8, 2008, to discuss results of the fourth quarter. To access
the conference call, listeners should dial 1-800-954-1053. For those unable to
participate in the live call, a recording of the call will be available until
February 22, 2008, and can be accessed at 1-800-558-5253 using code 21372756.
The conference call will also be broadcast live over the internet via
TimberWest's website home page at http://www.timberwest.com. The webcast will
be archived and available for an additional 90 days.

    
    Operating Highlights
                                     Three months ended   Twelve months ended
                                         December 31           December 31
    Timberland Operations:             2007       2006       2007       2006
    -------------------------------------------------------------------------
    Log Sales Revenue
     (in millions of dollars)
      Domestic                     $   17.2   $   31.6   $  122.1   $  127.8
      Export - Asia                    11.8       25.5       82.4      127.6
      Export - US                       1.4        4.8       41.9       47.8
    -------------------------------------------------------------------------
                                   $   30.4   $   61.9   $  246.4   $  303.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Log Sales Realizations ($/m(3))
      Domestic                           92         83         86         79
      Export - Asia                      96        121        112        129
      Export - US                       108         91         85         97
    -------------------------------------------------------------------------
                                         94         96         93         98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Log Sales Volume (thousand m(3))
      Domestic                        187.5      381.3    1,417.8    1,609.5
      Export - Asia                   123.0      209.9      734.5      985.2
      Export - US                      12.5       53.0      488.9      492.5
    -------------------------------------------------------------------------
                                      323.0      644.2    2,641.2    3,087.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Log Sales Mix (thousand m(3))
      Fir                             151.8      308.7    1,697.7    1,893.7
      Hembal                           99.7      221.5      573.8      662.9
      Cedar                            44.8       61.5      204.9      283.3
      Other                            26.7       52.5      164.8      247.3
    -------------------------------------------------------------------------
                                      323.0      644.2    2,641.2    3,087.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Log Production Volume
     (thousand m(3))
      Public tenures                   75.9       76.3      452.4      711.2
      Private timberlands             212.4      742.3    2,226.6    2,723.9
    -------------------------------------------------------------------------
                                      288.3      818.6    2,679.0    3,435.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Log Production Costs ($/m3)       97.12      70.17      73.23      66.87
    Timberland operating margin
     (% of log sales)                  (3)%        23%        20%        30%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log sales revenues for the three months and year-to-date ended
December 31, 2007, were down compared to log sales revenues for the fourth
quarter of 2006 due to lower log sales volumes and lower average log
realizations as a result of weak log markets in the US and Japan, and the
higher Canadian dollar.
    Average domestic realizations for the fourth quarter of 2007 and
year-to-date were higher than the fourth quarter of 2006 as domestic prices
were firm in the fourth quarter due to tighter supply primarily of cedar as a
result of the prolonged United Steelworkers strike. Average export
realizations were lower in the fourth quarter of 2007 and year-to-date
compared to the fourth quarter of 2006 due to further weakening in log and
lumber markets in the US Pacific NW, and in Japan and the continued impact of
the strong Canadian dollar.
    Unit production costs for the fourth quarter of 2007 increased over the
fourth quarter of 2006 due to lower production volumes and higher contractor
costs. Unit production costs on a year-to-date basis were higher as a result
of the strike, higher contractor rates, and market related shutdowns.

                                     Three months ended   Twelve months ended
                                         December 31           December 31
    Elk Falls Sawmill:                 2007       2006       2007       2006
    -------------------------------------------------------------------------
    Sales Revenue by Product
    (in millions of dollars)
      Lumber                       $   20.1   $   29.5   $   76.0   $  117.3
      Wood chips and residuals          2.5        3.2       12.4       12.9
    -------------------------------------------------------------------------
    Sales Realizations
      Lumber ($/mfbm)                   582        666        606        635
      Wood chips ($/m(3))                49         38         49         36
    -------------------------------------------------------------------------

    Sales Volume
      Lumber (million fbm)             34.4       44.3      125.3      184.6
      Wood chips (thousand m(3))       51.7       82.8      254.3      361.7
    -------------------------------------------------------------------------
    Lumber Production Volume
     (million fbm)                     23.4       41.5      122.7      183.4
    -------------------------------------------------------------------------

    Sales realizations for the three months ended December 31, 2007, were
lower relative to sales realizations for the fourth quarter of 2006 due to the
strong Canadian dollar and weaker markets generally. During the quarter,
lumber markets experienced oversupply in all areas. The sawmill took six weeks
of market related downtime during the fourth quarter of 2007, compared to no
downtime during the same period in 2006. Year-to-date, the mill has taken
sixteen weeks of market-related downtime resulting in a sharp decline in
revenues.
    Wood chips and residuals sales for the three month period ended
December 31, 2007 were down for the comparative period in 2006, reflecting the
reduction in chips produced due to downtime during the fourth quarter of 2007.
    The sawmill had negative earnings and cash for the quarter and for this
year overall.

                                     Three months ended   Twelve months ended
                                         December 31           December 31
    Real Estate:                       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Real Estate Sales
     (in millions of dollars)      $   65.3   $   15.0   $   67.1   $   36.0
    Leech Creek Net Proceeds
     (in millions of dollars)          64.6          -       64.6          -
    Leech Creek Net Proceeds
     ($/acre)                         2,691          -      2,691          -
    Real Estate Net Proceeds,
     excluding Leech Creek
     (in millions of dollars)           0.4       13.9        1.9       32.9
    Real Estate Net Proceeds,
     excluding Leech Creek ($/acre)   4,160     11,936      3,636     10,314
    -------------------------------------------------------------------------

    Real estate sales for the fourth quarter of 2007 and the twelve months
ending December 31, 2007 were comprised of one significant conservation land
sale to the Capital Regional District, which includes the city of Victoria.
Proceeds from the sale of real estate for the twelve months ended December 31,
2006 included $9.5 million for the sale of waterfront property on Lake
Cowichan, which was previously a sawmill site.

                                     Three months ended   Twelve months ended
                                         December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Earnings (loss) Before Interest,
     Taxes, Depreciation and
     Amortization (EBITDA)(2)
    (in millions of dollars)
      Net earnings (loss)          $   (0.1)  $   14.8   $  (31.8)  $   17.1
      Add (deduct):
        Interest on Series A
         Subordinate Notes paid
         to unitholders                21.0       20.9       83.7       83.6
        Interest on long-term debt      2.5        0.2        3.7       11.2
        Interest on short-term debt     1.0        3.4       11.2        3.4
        Income tax recovery           (23.7)     (13.4)     (27.2)     (38.2)
        Depreciation, depletion
         and amortization               1.6        1.8        7.8        8.2
        Amortization of deferred
         financing costs                0.1        0.2        0.9        0.6
    -------------------------------------------------------------------------
      EBITDA                            2.4       27.9       48.3       85.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Financial Position
    -------------------------------------------------------------------------
    Summary of Financial Position                         As at        As at
    (in millions of dollars)                        December 31, December 31,
                                                           2007         2006
    -------------------------------------------------------------------------
    Cash and cash equivalents                          $    1.2     $    9.3
    Current assets                                         64.4         83.1
    Current liabilities                                    40.4        253.8
    Current liabilities (excluding credit facility
     and debentures)                                       40.4         58.8
    Long-term debt                                        187.5            -
    Long-term liabilities                                 159.6        189.2
    Series A Subordinate notes owned by unitholders       698.1        697.0
    Unitholder's equity                                   210.8        241.6
    -------------------------------------------------------------------------

    Cash and cash equivalents decreased to $1.2 million as at December 31,
2007, reflecting an increase in non-cash working capital. Trade accounts
receivable decreased to $13.4 million at December 31, 2007, compared to
$16.9 million at the end of 2006, reflecting the effect of decreased log and
lumber sales revenue due to weaker pricing and lower sales volumes.
Inventories were $41.1 million at December 31, 2007, compared to $49.0 million
at the end of 2006. Prepaid expenses and other current assets were
$6.6 million at December 31, 2007, compared to $5.6 million at the end of
2006, reflecting increased balances in non-trade receivables.
    Property, plant and equipment were $1,230.0 million as at December 31,
2007, $66.3 million less than as at December 31, 2006. This decrease primarily
reflects the sale of Leech Creek conservation land (See "Highlights &
Significant Transactions - Leech Creek Conservation Land Sale.") with a net
book value of $42.6 million, the impairment charge of $18.4 million to
write-down the Elk Falls sawmill to fair value (See "Highlights & Significant
Transactions - Elk Falls Sawmill."), the sale of other property, plant and
equipment with a net book value of $0.9 million and the provision for
depreciation of capital assets of $7.8 million recorded during this period.
These items were offset in part by capital additions of $3.4 million,
comprised primarily of new information technology and logging roads.
    Current liabilities as at December 31, 2007 were $40.4 million compared to
$253.8 million as at December 31, 2006, which included the $195.0 million
aggregate net carrying value ($195.0 million principal amount) of 7.0%
unsecured senior debentures. The debentures were reclassified from long-term
to current liabilities in the fourth quarter of 2006. The Company used the
Tranche A long-term unsecured revolving credit facility to pay out the
maturity of the $195.0 million principal amount of 7.0% unsecured senior
debentures on October 1, 2007. The year over year variance in current
liabilities (excluding credit facility and debentures) can be attributed to an
$18.4 million decrease in accounts payable and accrued liabilities which is
primarily attributed to lower harvest levels in the fourth quarter of 2007 and
reduced compensation-related accruals at the end of 2007 compared to December
2006.
    As at December 31, 2007, the Company had borrowings of $187.5 million on
its Tranche A $216.7 million long-term unsecured revolving facility. In
addition, the Company had commitments of $17.5 million relating to outstanding
letters of credit, including $16.1 million issued under its demand bank
guarantee facility and $1.4 million issued under its Tranche A $216.7 million
long-term unsecured revolving facility.
    The $195.0 million aggregate net carrying value ($195.0 million principal
amount) of the 7.0% unsecured senior debentures matured on October 1, 2007,
and the Company used the Tranche A $216.7 million long-term unsecured
revolving credit facility to pay out the maturity.
    Other long-term liabilities as at December 31, 2007, included a
silviculture liability of $3.2 million, a $37.2 million liability relating to
employee future benefits and a future income tax liability of $119.2 million.
The silviculture liability and the liability relating to employee future
benefits are comparable to balances as at December 31, 2006. The decrease in
the liability for future income taxes from the balance of $146.4 million at
December 31, 2006, is primarily attributable to a $16.9 million future income
tax recovery to reflect the effects of changes in Canadian federal income tax
rates that were substantively enacted during 2007.
    The Series A Subordinate Note component of the Company's Stapled Unit is
presented as a liability on the Company's consolidated balance sheets.
Effective January 1, 2007, the Series A Subordinate Note liability is recorded
at amortized cost using the effective interest method from adoption of new
accounting policies. (See "Highlights and Significant Transactions - Adoption
of New Accounting Policies - Financial Instruments") As at December 31, 2007,
the carrying value of the Series A Subordinate Note liability was
$698.1 million.
    During the quarter ended December 31, 2007, 300 Stapled Unit options were
granted and options to purchase 11,910 Stapled Units were exercised for
proceeds of $0.2 million. During the twelve months ended December 31, 2007,
339,670 Stapled Unit options were granted, options to purchase 114,889 Stapled
Units were exercised for proceeds of $1.7 million and 8,160 options were
cancelled. As at February 7, 2008, the Company had 1,150,655 granted and
outstanding Stapled Unit option awards and 77,750,143 issued and outstanding
Stapled Units.

    Cash Flow and Liquidity          Three months ended  Twelve months ended
    Selected Cash Flow Items             December 31           December 31
    (in millions of dollars)           2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash provided by (used in):

    Operating activities:
     Cash provided by (used in)
      operations before changes in
      non-cash working capital        (29.2)      (6.8)     (62.2)      (8.5)
     Changes in non-cash
      working capital                   5.9       (8.6)      (8.0)      19.6
    -------------------------------------------------------------------------
                                      (23.3)     (15.4)     (70.2)      11.1
    -------------------------------------------------------------------------
    Financing activities:
      Issuance of Stapled Units on
       exercise of options              0.2        0.7        1.7        1.9
      Credit facilities               154.5          -      187.5      (37.0)
      Debentures                     (195.0)         -     (195.0)         -
    -------------------------------------------------------------------------
                                      (40.3)       0.7       (5.8)     (35.1)
    -------------------------------------------------------------------------

    Investing activities:
      Proceeds from sale of
       other assets                    65.1       13.9       71.9       33.0
      Additions to property,
       plant and equipment             (1.2)      (0.6)      (3.4)      (4.3)
      Other assets                     (0.1)       0.4       (0.6)       1.6
    -------------------------------------------------------------------------
                                       63.8       13.7       67.9       30.3
    -------------------------------------------------------------------------
    Increase (decrease) in cash and
     cash equivalents               $   0.2    $  (1.0)   $  (8.1)   $   6.3
    -------------------------------------------------------------------------
    

    During the three months ended December 31, 2007, the Company issued
11,910 Stapled Units on the exercise of Stapled Unit options for net proceeds
of $0.2 million, compared to the issuance of 52,166 Stapled Units on the
exercise of Stapled Unit options for net proceeds of $0.7 million in the
comparative quarter in 2006. During the fourth quarter of 2007, $40.5 million
was applied to reduce amounts borrowed on available credit facilities,
compared to no change in borrowings on available credit facilities during the
same period in 2006.
    For the twelve months ended December 31, 2007, the Company issued 114,889
Stapled Units for net proceeds of $1.7 million on the exercise of Stapled Unit
options, compared to the issuance of 147,683 Stapled Units for net proceeds of
$1.9 million on the exercise of Stapled Unit options in comparative period in
2006. In 2007, $7.5 million was applied to reduce amounts borrowed on
available credit facilities compared to a $37.0 million decrease in amounts
borrowed on available credit facilities during the same period in 2006.
    In the fourth quarter of 2007, the Company received net proceeds of
$65.1 million from the sale of other assets, primarily from the sale of the
Leech Creek conservation land (See "Highlights & Significant Transactions -
Leech Creek Conservation Land Sale."), and incurred $1.2 million for capital
expenditures primarily for new information technology. For the twelve months
ended December 31, 2007, the Company received net proceeds of $71.9 million
from the sale of other assets. In addition to the gross proceeds of
$64.7 million from the sale of the Leech Creek conservation land, proceeds
include $5.0 million from the disposition of a subsidiary trust and $1.9
million from the sale of higher and better use properties. The Company
incurred $3.4 million for capital expenditures primarily for the construction
of logging roads and new information technology.
    As at December 31, 2007, the principal amount of TimberWest's total
debt(3) outstanding was $187.5 million compared to total principal amount of
debt outstanding of $195.0 million as at December 31, 2006. The Company's
consolidated debt-to-total capitalization ratio(3) as at December 31, 2007 was
17:83, the same as at December 31, 2006.
    As at December 31, 2007, the Company had combined borrowings of
$187.5 million on its two available unsecured revolving facilities, including
borrowing of $187.5 million on its $216.7 Tranche A and borrowing of nil on
its $108.3 million Tranche B facility. In addition, the Company had
commitments of $1.4 million relating to outstanding letters of credit issued
under its Tranche A credit facility, and $16.1 million relating to outstanding
letters of credit issued under its $16.3 million demand bank guarantee
facility.

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

    (3) Total debt and the debt-to-total capitalization ratio are measures
        that do not have a standardized meaning prescribed by GAAP and may
        not be comparable to similar measures presented by other companies.
        As the Company's Series A Subordinate Notes trade only as part of the
        Company's equity instrument, the Stapled Unit, they are not included
        in the Company's definition of debt. Management believes that the
        presentation of these measures will enhance an investor's
        understanding of the Company's financial resources and capital
        structure.
    

    Quarterly Financial Information

    The following table presents selected unaudited quarterly financial
information for each of the Company's last eight quarters. This data has been
derived from unaudited interim consolidated financial statements that have
been prepared on the same basis as the 2006 annual audited consolidated
financial statements. In the Company's opinion, the amounts include all normal
recurring adjustments necessary for the fair presentation of such information.
These financial results are not necessarily indicative of results for any
future period and should not be relied upon to predict future performance.

    
    -------------------------------------------------------------------------
    (in millions of dollars,
    except per common share                             2006
    and per Stapled Unit               --------------------------------------
    amounts)                                Q1        Q2        Q3        Q4
    -------------------------------------------------------------------------
    Sales                              $ 125.7   $ 145.0   $  96.8   $ 110.6
    Operating earnings (loss)          $  25.3   $  32.6   $  11.3   $  25.5
    Net earnings (loss)                $   2.9   $  12.2   $ (12.8)  $  14.8
    Earnings (loss) available
     for distribution                  $  23.8   $  33.1   $   8.1   $  35.7
    Earnings (loss) available
     for distribution before
     provision for future
     income taxes, and write-
     down of property, plant
     and equipment                     $  21.2   $  11.5   $   7.3   $  22.5
    Distributable cash                 $  31.5   $  35.5   $   9.3   $  27.5
    Distributions paid                 $  20.9   $  20.9   $  20.9   $  20.9
    $ per common share(4)
    Basic net earnings (loss)          $  0.04   $  0.16   $ (0.17)  $  0.19
    Diluted net earnings (loss)        $  0.04   $  0.16   $ (0.16)  $  0.19
    $ per Stapled Unit(4)
    Basic and diluted earnings
     (loss) available for
     distribution                      $  0.31   $  0.43   $  0.10   $  0.46
    Basic and diluted earnings
     (loss) available for
     distribution before
     provision for future
     income taxes, and write-
     down of property, plant
     and equipment                     $  0.27   $  0.15   $  0.09   $  0.29
    Basic and diluted
     distributable cash                $  0.41   $  0.46   $  0.12   $  0.35
    Distributions paid                 $  0.27   $  0.27   $  0.27   $  0.27
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    (in millions of dollars,
    except per common share                             2007
    and per Stapled Unit               --------------------------------------
    amounts)                                Q1        Q2        Q3        Q4
    -------------------------------------------------------------------------
    Sales                              $ 112.3   $ 104.0   $  73.1   $ 119.6
    Operating earnings (loss)          $  27.2   $   9.8   $  (3.7)  $   0.7
    Net earnings (loss)                $   3.7   $  (7.3)  $ (28.1)  $  (0.1)
    Earnings (loss) available
     for distribution                  $  24.6   $  13.6   $  (7.2)  $  20.9
    Earnings (loss) available
     for distribution before
     provision for future
     income taxes, and write-
     down of property, plant
     and equipment                     $  24.3   $  11.3   $  (8.0)  $  15.6
    Distributable cash                 $  26.9   $  13.6   $  (5.6)  $  55.4
    Distributions paid                 $  20.9   $  20.9   $  20.9   $  20.9
    $ per common share(4)
    Basic net earnings (loss)          $  0.05   $ (0.09)  $ (0.36)  $ (0.00)
    Diluted net earnings (loss)        $  0.05   $ (0.09)  $ (0.36)  $ (0.00)
    $ per Stapled Unit(4)
    Basic and diluted earnings
     (loss) available for
     distribution                      $  0.32   $  0.17   $ (0.09)  $  0.27
    Basic and diluted earnings
     (loss) available for
     distribution before
     provision for future
     income taxes, and write-
     down of property, plant
     and equipment                     $  0.31   $  0.15   $ (0.10)  $  0.20
    Basic and diluted
     distributable cash                $  0.35   $  0.17   $ (0.07)  $  0.71
    Distributions paid                 $  0.27   $  0.27   $  0.27   $  0.27
    -------------------------------------------------------------------------

    --------------------
    (4) Per common share and per Stapled Unit amounts presented for each
        quarter have been determined based on the weighted average number of
        common shares or weighted average number of Stapled Units outstanding
        during the quarter. Per common share and per Stapled Unit amounts by
        quarter do not necessarily add to the total of the year due to
        changes in the weighted average number of common shares and Stapled
        Units outstanding during the year.

    Internal Controls over Financial Reporting

    During the quarter ended December 31, 2007, the Company did not make any
changes to its internal controls over financial reporting that would have
materially affected, or would reasonably likely materially affect, such
controls.

    Forward Looking Statements

    The statements which are not historical facts contained in this release
are forward-looking statements that involve risks and uncertainties.
TimberWest's actual results could differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, general
economic conditions, variations in TimberWest's product prices and changes in
commodity prices generally, changes in market conditions, actions of
competitors, interest rate and foreign currency fluctuations, regulatory,
harvesting fee and trade policy changes and other actions by governmental
authorities, the ability to implement business strategies and pursue business
opportunities, labour relations, weather conditions, forest fires, insect
infestation, disease and other natural phenomena and other risks and
uncertainties described in TimberWest's public filings with securities
regulatory authorities.

                                   Notice

    The accompanying unaudited interim consolidated financial statements of
TimberWest Forest Corp. (the "Company") have not been reviewed by the
Company's auditors.



    TIMBERWEST FOREST CORP.

    Consolidated Statements of Operations and Comprehensive Income

    (in millions of dollars)        Three months ended   Twelve months ended
    Unaudited                            December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Sales                         $   119.6  $   110.6  $   409.0  $   478.1

    Operating costs and expenses:
      Cost of sales                    95.1       82.8      331.8      364.1
      Selling, administrative
       and other                        3.8        3.5       17.0       14.1
      Depreciation, depletion and
       amortization                     1.6        1.8        7.8        8.2
      Write-down of property, plant
       and equipment (note 3)          18.4          -       18.4          -
      Countervailing and antidumping
       duty refund (note 4)               -       (3.0)         -       (3.0)
    -------------------------------------------------------------------------
                                      118.9       85.1      375.0      383.4
    -------------------------------------------------------------------------
    Operating earnings                  0.7       25.5       34.0       94.7

    Interest expense:
      Series A Subordinate Notes
       owned by unitholders            21.0       20.9       83.7       83.6
      Long-term debt                    2.5        0.2        3.7       11.2
      Short-term debt                   1.0        3.4       11.2        3.4
    -------------------------------------------------------------------------
                                       24.5       24.5       98.6       98.2
    Amortization of deferred
     financing costs (note 2(a))        0.1        0.2        0.9        0.6
    Other income                       (0.1)      (0.6)      (6.5)      (0.7)
    Pension plan annuitization
     (note 5)                             -          -          -       17.7
    -------------------------------------------------------------------------
                                       24.5       24.1       93.0      115.8
    -------------------------------------------------------------------------
    Earnings (loss) before income
     taxes                            (23.8)       1.4      (59.0)     (21.1)

    Income tax recovery (note 6)      (23.7)     (13.4)     (27.2)     (38.2)
    -------------------------------------------------------------------------
    Net earnings (loss) and
     comprehensive income (loss)  $    (0.1) $    14.8  $   (31.8) $    17.1
    -------------------------------------------------------------------------

    Earnings (loss) per common share
     (note 7)

      Basic                       $   (0.00) $    0.19  $   (0.41) $    0.22

      Diluted                     $   (0.00) $    0.19  $   (0.41) $    0.22



    Consolidated Statements of Retained Earnings

    (in millions of dollars)        Three months ended   Twelve months ended
    Unaudited                            December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Retained earnings, beginning
     of period, as previously
     reported                     $    18.4  $    35.5  $    50.1  $    33.2

    Change in accounting policy
     for stock-based compensation
     (note 2(c))                          -       (0.2)         -       (0.2)
    -------------------------------------------------------------------------
    Retained earnings, beginning
     of period, as restated            18.4       35.3       50.1       33.0
    -------------------------------------------------------------------------
    Net earnings (loss) for
     the period                        (0.1)      14.8      (31.8)      17.1
    -------------------------------------------------------------------------
    Retained earnings, end of
     period                       $    18.3  $    50.1  $    18.3  $    50.1
    -------------------------------------------------------------------------
    See accompanying notes to unaudited interim consolidated financial
    statements.




    Consolidated Balance Sheets
    (in millions of dollars)

                                                            As at      As at
                                                         December   December
                                                         31, 2007   31, 2006
                                                        Unaudited
    -------------------------------------------------------------------------
    Assets
      Current assets:
        Cash                                            $     1.2  $     9.3
        Accounts receivable                                  13.4       16.9
        Inventories                                          41.1       49.0
        Prepaid expenses and
         other current assets                                 6.6        5.6
        Future income taxes                                   2.1        2.3
    -------------------------------------------------------------------------
                                                             64.4       83.1
    Property, plant and equipment, net (note 8)           1,230.0    1,296.3
    Other assets (note 9)                                     2.0        2.2
    -------------------------------------------------------------------------
                                                          1,296.4    1,381.6
    -------------------------------------------------------------------------
    Liabilities and Unitholders' Equity
      Current liabilities:
        Debentures (note 10)                            $       -  $   195.0
        Accounts payable and accrued liabilities             19.4       37.9
        Distribution payable                                 21.0       20.9
    -------------------------------------------------------------------------
                                                             40.4      253.8
      Revolving credit facilities (note 11)                 187.5          -
      Long-term silviculture liability                        3.2        3.6
      Employee future benefits (note 12)                     37.2       39.2
      Future income taxes                                   119.2      146.4
    -------------------------------------------------------------------------
                                                            387.5      443.0
      Series A Subordinate Notes owned by
       unitholders (note 2 and 13)                          698.1      697.0
    -------------------------------------------------------------------------
                                                          1,085.6    1,140.0
    -------------------------------------------------------------------------

      Unitholders' equity:
        Share capital, consisting of common and
         preferred shares (note 13)                         191.0      190.4
        Contributed surplus                                   1.5        1.1
        Retained earnings                                    18.3       50.1
    -------------------------------------------------------------------------
                                                            210.8      241.6
    -------------------------------------------------------------------------
                                                        $ 1,296.4  $ 1,381.6
    -------------------------------------------------------------------------

    See accompanying notes to unaudited interim consolidated financial
    statements.

    On behalf of the Board of Directors:

         (signed)                       (signed)
    Paul J. McElligott             V. Edward Daughney
    Director                       Director



    Consolidated Statements of Cash Flows

    (in millions of dollars)        Three months ended   Twelve months ended
    Unaudited                            December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities:
      Net earnings (loss)         $    (0.1) $    14.8  $   (31.8) $    17.1
      Items not involving cash:
        Depreciation, depletion
         and amortization               1.7        2.0        8.7        8.8
        Write-down of property,
         plant and equipment           18.4          -       18.4          -
        Gain on sale of property,
         plant and equipment          (22.3)     (10.9)     (28.5)     (14.9)
        Future income tax recovery    (23.7)     (13.2)     (27.1)     (38.2)
        Other non-cash items           (3.2)       0.5       (1.9)      18.7
    -------------------------------------------------------------------------
                                      (29.2)      (6.8)     (62.2)      (8.5)
    Changes in non-cash working
     capital:
      Accounts receivable              (1.3)      (3.8)       3.5        7.0
      Inventories                       8.9       (6.6)       7.9       (0.8)
      Prepaid expenses and other
       working capital                  4.6        3.1       (1.0)       5.6
      Accounts payable and accrued
       liabilities                     (6.4)      (1.3)     (18.5)       7.8
      Interest payable                  0.1          -        0.1          -
    -------------------------------------------------------------------------
                                      (23.3)     (15.4)     (70.2)      11.1
    -------------------------------------------------------------------------
    Financing activities:
      Issuance of Stapled Units on
       exercise of options:
        Series A Subordinate Notes      0.1        0.4        1.1        1.3
        Share capital                   0.1        0.3        0.6        0.6
    -------------------------------------------------------------------------
                                        0.2        0.7        1.7        1.9
      Revolving credit facilities     154.5          -      187.5      (37.0)
      Debentures                     (195.0)         -     (195.0)         -
    -------------------------------------------------------------------------
                                      (40.3)       0.7       (5.8)     (35.1)
    -------------------------------------------------------------------------
    Investing activities:
      Proceeds from sale of
       property, plant and equipment   65.1       13.9       71.9       33.0
      Additions to property, plant
       and equipment                   (1.2)      (0.6)      (3.4)      (4.3)
      Other assets                     (0.1)       0.4       (0.6)       1.6
    -------------------------------------------------------------------------
                                       63.8       13.7       67.9       30.3
    -------------------------------------------------------------------------
    Increase (decrease) in cash and
     cash equivalents                   0.2       (1.0)      (8.1)       6.3
    Cash and cash equivalents,
     beginning of period                1.0       10.3        9.3        3.0
    -------------------------------------------------------------------------
    Cash and cash equivalents, end
     of period                    $     1.2  $     9.3  $     1.2  $     9.3
    -------------------------------------------------------------------------
    Supplemental information:
      Interest on Series A
       Subordinate Notes paid to
       unitholders                $    20.9  $    20.9  $    83.6  $    83.6
      Other interest paid         $    10.7  $     7.1  $    18.8  $    14.6
      Income taxes paid           $       -  $    (0.2) $       -  $       -

    See accompanying notes to unaudited interim consolidated financial
    statements.



    Notes to Unaudited Interim Consolidated Financial Statements
    For the three and twelve months ended December 31, 2007 and 2006

    Financial figures presented in the tables that follow are in millions of
    dollars, except per common share amounts.

    1.  Significant Accounting Policies

        The accompanying unaudited interim consolidated financial statements
        include the accounts of TimberWest Forest Corp. and its subsidiaries
        ("the Company"), have been prepared in accordance with Canadian
        generally accepted accounting principles and are expressed in
        Canadian dollars. Not all disclosures required by Canadian generally
        accepted accounting principles ("GAAP") for annual financial
        statements are presented and, accordingly, these interim consolidated
        financial statements should be read in conjunction with the Company's
        most recent annual consolidated financial statements. These interim
        consolidated financial statements follow the same accounting policies
        and methods of application used in the Company's audited annual
        consolidated financial statements of December 31, 2006, except for
        the adoption of new accounting policies as described in note 2.

    2.  Adoption of New Accounting Policies

        (a)   Financial Instruments

        Effective January 1, 2007, the Company adopted the following new
        accounting standards and related amendments to other standards on
        financial instruments issued by The Canadian Institute of Chartered
        Accountants ("CICA") that are applicable for annual or interim
        periods beginning on or after October 1, 2006. Prior periods have not
        been restated.

        Section 3855, Financial Instruments - Recognition and Measurement;

        Section 3861, Financial Instruments: Disclosure and Presentation;

        Section 3865, Hedges; and

        Section 1530, Comprehensive Income.

        Sections 3855 and 3861 require all financial assets, financial
        liabilities and non-financial derivatives to be recognized on the
        balance sheet at the appropriate measurement and properly disclosed
        in the notes to the consolidated financial statements. All financial
        instruments and derivatives are measured at fair value on initial
        recognition; subsequent measurement depends on the classification of
        the instrument. Section 3865 sets out hedge accounting prerequisites
        and rules and builds on existing Canadian GAAP guidance by specifying
        how hedge accounting is applied and disclosed. Section 1530
        introduces new standards for the presentation and disclosure of
        components of comprehensive income. Comprehensive income is defined
        as the change in net assets of an enterprise during a reporting
        period from transactions and other events and circumstances from
        non-owner sources.

        As a result of adopting the new financial instruments standards, the
        Company has classified its cash and cash equivalents as
        held-for-trading and recorded them at fair value. Accounts
        receivable, and receivables on the sale of property, plant and
        equipment, are classified as loans and receivables and measured at
        amortized cost. The Company's drawings on available credit
        facilities, accounts payable and accrued liabilities, distribution
        payable, including interest payable, are classified as other
        liabilities, all of which are measured at amortized cost.

        Section 3855 also provides guidance on accounting for transaction
        costs incurred upon the issuance of debt instruments or modification
        of a financial liability. Transaction costs are now deducted from the
        financial liability and are amortized using the effective interest
        method over the expected life of the related liability.

        As a result of adopting Section 3855, the Company measured its
        Series A Subordinate Notes owned by unitholders at amortized cost
        using the effective interest method. The effective interest method
        establishes the rate which equates the estimated future cash flows
        with the net carrying amount of the financial liability. The embedded
        derivative arising from the option to extend the Series A Subordinate
        Notes for a further 10 year period is measured at fair value.

        The adoption of new accounting policies for financial instruments has
        not resulted in any significant changes to TimberWest's consolidated
        financial statements.

        (b)   Accounting Changes, Section 1506

        Effective January 1, 2007, the Company adopted the revised CICA
        Section 1506, Accounting Changes, which requires that: (i) a
        voluntary change in accounting principles can be made if, and only
        if, the changes result in more reliable and relevant information,
        (ii) changes in accounting policies are accompanied with disclosures
        of prior period amounts and justification for the change, and (iii)
        for changes in estimates, the nature and amount of the change should
        be disclosed.

        The Company has not made any voluntary change in accounting
        principles since the adoption of the revised standard.

        (c)   Compensation Cost for Stock-based Compensation Awards

        Prior to October 1, 2006, the Company recognized compensation cost
        for stock-based compensation awards to all employees over the vesting
        period of the awards. Effective October 1, 2006, the Company changed
        its policy of accounting for awards and now recognizes the
        compensation cost for employees eligible to retire at the grant date
        rather than over the vesting period. For employees who become
        eligible for retirement during the vesting period, compensation cost
        is recognized over the period from the grant date to the date of
        eligibility for retirement.

        The Company made this change in accounting policy on a retroactive
        basis but prior years have not been restated. The cumulative
        adjustment to the opening balance of retained earnings is a decrease
        of $0.2 million. In 2006, the effect on compensation was nil,
        deferred stock based compensation costs decreased $0.1 million and
        contributed surplus increased $0.1 million.

    3.  Write-down of property, plant and equipment and Subsequent Event -
        Elk Falls sawmill


        In the fourth quarter of 2007, the Company wrote down the fixed
        assets of Elk Falls sawmill to fair value, as the carrying value of
        the assets is not expected to be recoverable from future cashflows.
        This resulted in a pre-tax impairment charge of $18.4 million. On
        February 7, 2008, the Company announced effective May 9, 2008, the
        sawmill will be permanently closed.

    4.  Countervailing and Antidumping Duty Refund

        In 2006, the Company received a net refund of $3.4 million. The
        refund consisted of Countervailing and Antidumping duty refunds in
        the amount of $3.0 million and accrued interest in the amount of
        $0.4 million. Pursuant to the Softwood Lumber Products Export Charge
        Act, a charge of 18.06% in the amount of $0.8 million was imposed on
        the total refunds of $4.2 million.

    5.  Pension Plan Annuitization

        In 2006, the Company entered into an agreement with a financial
        institution to purchase annuities for all retirees in the Company's
        salaried employee defined benefit pension plans. As a result of this
        transaction, the Company recorded a $17.2 million non-cash pension
        expense in the second quarter of 2006, representing the unamortized
        net actuarial loss associated with retiree pension obligations at the
        transaction date that would have otherwise been amortized over the
        expected life of the pension plan.

        In 2006, the Company entered into an agreement with a financial
        institution to purchase annuities for members of one of the Company's
        remaining small defined benefit pension plans. As a result of this
        transaction, approximately $1.0 million of pension obligations and
        $1.4 million of pension assets were transferred to the financial
        institution. As this pension plan was in a surplus position at the
        time of this transaction there was no cash cost to the Company,
        however, the Company recorded a $0.5 million non-cash pension expense
        in the third quarter of 2006, representing the settlement loss on
        finalization of this transaction.

    6.  Income Taxes

    -------------------------------------------------------------------------
                                    Three months ended   Twelve months ended
                                         December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Current income tax expense
     - large corporation tax              -    $  (0.2)   $  (0.1)         -
    Future income tax recovery      $ (23.7)   $ (13.2)   $ (27.1)   $ (38.2)
    -------------------------------------------------------------------------
                                    $ (23.7)   $ (13.4)   $ (27.2)   $ (38.2)
    -------------------------------------------------------------------------

        In the fourth quarter of 2007, federal tax legislation was
        substantively enacted, resulting in the reduction of the federal
        general corporate income tax rate to 19.5% for 2008, 19% for 2009,
        18% for 2010, 16.5% for 2011 and 15% for 2012 and subsequent years.
        These rate changes resulted in a future income tax recovery of
        $16.9 million for the twelve months ended December 31, 2007.

        In the second quarter of 2006, a number of changes to Canadian
        federal income tax rates were substantively enacted, including:
        elimination of the Large Corporations Tax (LCT) effective
        January 1, 2006; elimination of the 4% surtax effective January 1,
        2008; and the reduction of the federal general corporate income tax
        rate to 20.5% for 2008, 20% for 2009, and 19% for 2010 and subsequent
        years. These rate changes resulted in a future income tax recovery of
        $14.8 million for the twelve months ended December 31, 2006.

        The Company's future income tax liability was reduced by $5.8 million
        for the twelve months ended December 31, 2006 as a result of the
        Company entering into an agreement with a financial institution to
        purchase annuities for all retirees in the Company's salaried
        employee defined benefit pension plans in the second quarter of 2006.

    7.  Earnings (loss) per Share

    -------------------------------------------------------------------------
                                    Three months ended   Twelve months ended
                                       December 31             December 31
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net earnings (loss)          $  (0.1)    $  14.8     $ (31.8)    $  17.1
    -------------------------------------------------------------------------
    Basic weighted average
     number of common shares  77,744,554  77,605,496  77,720,298  77,544,968
    Incremental common shares
     from potential exercise
     of options                   79,755      79,041     127,585      73,526
    -------------------------------------------------------------------------
    Diluted weighted average
     number of common shares  77,824,309  77,684,537  77,847,883  77,618,494
    -------------------------------------------------------------------------
    Basic net earnings (loss)
     per common share            $ (0.00)    $  0.19     $ (0.41)     $ 0.22
    -------------------------------------------------------------------------
    Diluted net earnings
     (loss) per common share     $ (0.00)    $  0.19     $ (0.41)     $ 0.22
    -------------------------------------------------------------------------

    8.  Property, Plant and Equipment

        Property, plant and equipment at December 31, 2007, includes private
        timberlands with a carrying value of $1,172.3 million. This amount
        includes a valuation increase adjustment of $376.4 million recorded
        resulting from the adoption of Section 3465 - Income Taxes of the
        CICA Handbook, which was mandatory for fiscal years ending on or
        after January 1, 2000.

    9.  Other Assets

    -------------------------------------------------------------------------
                                            As at                As at
                                      December 31, 2007    December 31, 2006
    -------------------------------------------------------------------------
    Deferred debt issue costs
     (note 2)                                   $   0.5              $   0.8
    Receivable on sale of property,
     plant and equipment                            0.5                  0.5
    Other                                           1.0                  0.9
    -------------------------------------------------------------------------
                                                $   2.0              $   2.2
    -------------------------------------------------------------------------

    10. Debentures

        On October 1, 2007, the Company used the Tranche A credit facility to
        pay out the maturity of the $195.0 million of 7.0% debentures.

        The Company's $195.0 million aggregate principal amount of debentures
        bore interest at 7% per annum, were unsecured and unsubordinated, and
        ranked senior in priority to the Series A Subordinate Notes held by
        unitholders and equally with indebtedness of the Company under its
        credit facilities.

    11. Revolving credit facilities

        On September 25, 2007, the Company completed and received two credit
        facilities pursuant to unsecured revolving facilities underwritten by
        a syndicate of Canadian chartered banks. The first facility,
        Tranche A, is long-term financing in the amount of $200.0 million,
        due on September 24, 2012. The second facility, Tranche B, is short
        term financing in the amount of $100.0 million, due on September 24,
        2008. Under both facilities, funds are available to the Company in
        both Canadian and US dollars by way of adjusted prime rate-based
        loans, bankers' acceptances, LIBOR plus 0.9% loans and letters of
        credit or guarantee. At any time prior to maturity of the facilities
        and provided no event of default has occurred, the Company may
        request an increase to the credit facility apportioned proportionally
        between Tranche A and Tranche B up to the aggregate amount of
        $350.0 million. On October 19, 2007, the Company requested and
        received additional financing in the amount of $25.0 million to the
        credit facility, apportioned proportionally between Tranche A and
        Tranche B for a total aggregate amount of $325.0 million.

        On completion of this financing, the Company's long-term financing in
        the amount of $65.0 million pursuant to an unsecured revolving
        facility underwritten by a Canadian chartered bank, due on
        July 7, 2010 and the Company's long-term financing in the amount of
        $100.0 million pursuant to an unsecured revolving facility
        underwritten by a syndicate of Canadian chartered banks, due on
        July 27, 2010, were cancelled. The Company had an unsecured demand
        operating facility of $10.0 million which was cancelled in November
        2007.

        As at December 31, 2007, the Company had combined borrowings of
        $187.5 million on its two available unsecured revolving facilities,
        including borrowing of $187.5 million on its $216.7 Tranche A and
        borrowing of nil on its $108.3 million Tranche B facility. In
        addition, the Company had commitments of $1.4 million relating to
        outstanding letters of credit issued under its Tranche A credit
        facility, and $16.1 million relating to outstanding letters of credit
        issued under its $16.3 million demand bank guarantee facility.

    12. Employee Benefits

    ------------------------------------------------------------------------
                                            As at                As at
                                      December 31, 2007    December 31, 2006
    -------------------------------------------------------------------------
    Pension benefits                            $   8.8              $   8.4
    Non-pension benefits                           28.4                 30.8
    -------------------------------------------------------------------------
                                                $  37.2              $  39.2
    -------------------------------------------------------------------------

        The Company, through its subsidiaries, maintains pension plans that
        include defined benefit and defined contribution segments available
        to all salaried employees and a small number of hourly retirees not
        covered by union pension plans. For the three months ended December
        31, 2007, the Company recorded an expense of $0.7 million for pension
        benefit costs (2006 - $0.5 million) and made cash payments of
        $0.4 million to fund current service costs (2006 - $0.1 million). For
        the twelve months ended December 31, 2007, the Company recorded an
        expense of $2.2 million for pension benefit costs
        (2006 - $19.8 million including $17.7 million representing the
        non-cash cost related to the annuitization transactions completed
        during 2006 (see note 5)) and made cash payments of $1.8 million to
        fund current service costs (2006 - $3.2 million).

        The Company also provides non-pension benefits consisting of group
        life insurance and medical benefits to eligible retired employees,
        which the Company funds on an as-incurred basis. For the three months
        ended December 31, 2007, the Company recorded a net gain of
        $3.4 million for non-pension benefit costs (2006 -$1.0 million
        expense) and made cash payments of $0.5 million to fund current
        benefit costs (2006 - $0.4 million). For the twelve months ended
        December 31, 2007, the Company recorded a net gain of $0.3 million
        for non-pension benefit costs (2006 - $4.0 million expense) and made
        cash payments of $2.1 million to fund current benefit costs
        (2006 - $1.8 million).

    13. Stapled Units

    -------------------------------------------------------------------------
                                            Stapled Unit Components
                                    -----------------------------------------
                                                          Share Capital
                                                         (consisting of
                                                 Series A   common and
                                                Subordinate  preferred
                                        Number     Notes     shares)   Total
    -------------------------------------------------------------------------
    Twelve months ended
     December 31, 2006:
    Balance, December 31, 2005      77,487,571    $695.7     $189.8   $885.5
    Issuance of Stapled Units
     on exercise of options            147,683       1.3        0.6      1.9
    -------------------------------------------------------------------------
    Balance, December 31, 2006      77,635,254    $697.0     $190.4   $887.4
    -------------------------------------------------------------------------
    Twelve months ended
     December 31, 2007:
    Balance, December 31, 2006      77,635,254    $697.0     $190.4   $887.4
    Issuance of Stapled Units
     on exercise of options            114,889       1.1        0.6      1.7
    -------------------------------------------------------------------------
    Balance, December 31, 2007      77,750,143     698.1      191.0    889.1
    -------------------------------------------------------------------------

        The Company issues equity by way of Stapled Units, each Stapled Unit
        consisting of approximately $8.98 face amount of Series A Subordinate
        Notes, 100 preferred shares and one common share. The securities
        comprising a Stapled Unit trade together as Stapled Units and cannot
        be transferred except with each other as part of a Stapled Unit until
        the date of maturity of the Series A Subordinate Notes or the payment
        of the principal amount of the Series A Subordinate Notes following
        an event of default and expiration of a remedies blockage period.

        Each Series A Subordinate Note has been issued with a face amount of
        $8.978806569, entitling the holder to an interest payment per unit of
        $1.077456788 per annum (12%). The Series A Subordinate Notes are
        unsecured and subordinate to all credit facilities and debentures.
        The principal amount of the Series A Subordinate Notes plus accrued
        and unpaid interest thereon are due on August 31, 2038, unless such
        date is extended by the Company at the time of the issuance of
        additional Subordinate Notes to a date not later than the earlier of:
        (i) the date of maturity of such additional Subordinate Notes; and
        (ii) August 31, 2048, and will be payable by cash or, at the option
        of the Company, by delivery of common shares to the Subordinate Note
        Trustee for the benefit of the holders of the Subordinate Notes.

        The Company may elect to pay the interest on the Series A Subordinate
        Notes held by unitholders in common or preferred shares of the
        Company, and may elect to pay the principal amount of the Series A
        Subordinate Notes held by unitholders in common shares of the
        Company.

    14. Stock-based Compensation Plans

        Under the Company's Stapled Unit Option Plan, the Company may grant
        options for the purchase of Stapled Units to directors, officers or
        employees who are in active service or employment of the Company or
        of any of its subsidiaries. During the quarter ended December 31,
        2007, 300 Stapled Unit options were granted at an average price of
        $14.71 (2006 - nil). For the twelve months ended December 31, 2007,
        339,670 Stapled Unit options were granted at an average price of
        $16.46 (2006 - 245,238 Stapled Unit options were granted at an
        average exercise price of $13.94).

        The Company has applied the fair value method of accounting for
        Stapled Unit option grants awarded on or after January 1, 2003. The
        fair value of each option granted was estimated on the date of grant
        using the Black-Scholes option pricing model using the following
        weighted average assumptions:

    -------------------------------------------------------------------------
                                                               2007     2006
    -------------------------------------------------------------------------
    Risk-free interest rate                                     4.1%     4.1%
    Expected life (years)                                       5.0      5.0
    Expected volatility                                        21.6%    20.3%
    Dividend yield                                              6.5%     8.0%
    Number of options granted                               339,670  245,238
    Fair value of each option granted                         $1.85    $0.92
    -------------------------------------------------------------------------

        The compensation cost for the 339,670 Stapled Unit options granted
        between January 1, 2007 and December 31, 2007 is $628,000
        (2006 - 245,238 Stapled Unit options were granted with a compensation
        cost of $226,000). The compensation cost of Stapled Unit option
        awards is amortized against earnings over the three-year vesting
        period of the underlying options and an expense of $92,000 and
        $551,000 has been recognized in net earnings for the three and twelve
        months ended December 31, 2007 (2006 - $53,000 and $277,000,
        respectively) with a corresponding credit to contributed surplus.

        Under the Company's Distribution Equivalent Plan, the Company awards
        Stapled Unit option holders an amount equal to actual distributions
        paid on the Company's Stapled Units. Awards granted under the
        Distribution Equivalent Plan vest under the same terms that apply to
        the corresponding options and can only be exercised at the time of
        exercise of the corresponding options. The Company applies the
        principles of the fair value-based method of accounting for
        stock-based compensation to awards granted under this plan.

        Awards are accrued on a basis equal to actual distributions paid on
        the Company's issued and outstanding Stapled Units and are charged to
        earnings as the underlying Stapled Unit options vest. For the three
        months ended December 31, 2007, $0.3 million has been accrued for
        awards granted under this plan (2006 - $0.2 million) and $0.3 million
        has been amortized against earnings for the quarter
        (2006 - $0.3 million). For the twelve months ended December 31, 2007,
        $1.1 million has been accrued for awards granted under the plan
        (2006 - $1.0 million) and $1.2 million has been amortized against
        earnings for this period (2006 - $1.0 million).

        During the three months ended December 31, 2007, a total of 11,910
        Stapled Unit options with an average exercise price of $12.04 were
        exercised and no Stapled Unit options were cancelled (2006 - 52,166
        Stapled Unit options with an average exercise price of $12.40 were
        exercised and 11,863 Stapled Unit options with an average exercise
        price of $14.52 were cancelled). For the twelve months ended December
        31, 2007, a total of 114,889 Stapled Unit options with an average
        exercise price of $13.55 were exercised and 8,160 Stapled Unit
        options with an average exercise price of $15.41 were cancelled (2006
        - 147,683 Stapled Unit options with an average exercise price of
        $12.52 were exercised and 17,500 Stapled Unit options with an average
        exercise price of $14.93 were cancelled).

    15. Comparative figures

        Certain comparative figures have been reclassified to conform to the
        current year presentation.

    Supplemental Information
    Unaudited
    -------------------------------------------------------------------------
                                    Three months ended   Twelve months ended
                                         December 31           December 31
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Sales Revenue by Product
    (in millions of dollars)
      Log sales
        Domestic                    $  17.2    $  31.6   $  122.1   $  127.8
        Export-Asia                    11.8       25.5       82.4      127.6
        Export-US                       1.4        4.8       41.9       47.8
    -------------------------------------------------------------------------
        Total log sales                30.4       61.9      246.4      303.2
      Lumber                           20.1       29.5       76.0      117.3
      Wood chips and other              3.8        4.2       19.5       21.6
      Real estate                      65.3       15.0       67.1       36.0
    -------------------------------------------------------------------------
                                      119.6      110.6      409.0      478.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sales Volume
      Logs (thousand m(3))
        Domestic                      187.5      381.3    1,417.8    1,609.5
        Export-Asia                   123.0      209.9      734.5      985.2
        Export-US                      12.5       53.0      488.9      492.5
    -------------------------------------------------------------------------
                                      323.0      644.2    2,641.2    3,087.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Lumber (million fbm)             34.4       44.3      125.3      184.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Sales Mix (thousand m(3))
      Fir                             151.8      308.7    1,697.7    1,893.7
      Hembal                           99.7      221.5      573.8      662.9
      Cedar                            44.8       61.5      204.9      283.3
      Other                            26.7       52.5      164.8      247.3
    -------------------------------------------------------------------------
                                      323.0      644.2    2,641.2    3,087.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Production Volume
      Logs (thousand m(3))
        Public tenures                 75.9       76.3      452.4      711.2
        Private timberlands           212.4      742.3    2,226.6    2,723.9
    -------------------------------------------------------------------------
                                      288.3      818.6    2,679.0    3,435.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Lumber (million fbm)               23.4       41.5      122.7      183.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings Before Interest, Taxes,
     Depreciation and Amortization(*)
    (in millions of dollars)
      Net earnings (loss)           $  (0.1)   $  14.8   $  (31.8)  $   17.1
      Add (deduct):
        Interest on Series A
         Subordinate Notes paid
         to unitholders                21.0       20.9       83.7       83.6
        Interest on long-term debt      2.5        0.2        3.7       11.2
        Interest on short-term debt     1.0        3.4       11.2        3.4
        Income tax recovery           (23.7)     (13.4)     (27.2)     (38.2)
        Depreciation, depletion
         and amortization               1.6        1.8        7.8        8.2
        Amortization of deferred
         financing costs                0.1        0.2        0.9        0.6
    -------------------------------------------------------------------------
    Earnings before interest,
     taxes, depreciation and
     amortization                   $   2.4    $   27.9  $   48.3   $   85.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ((*)) Earnings (loss) before interest, taxes, depreciation and
          amortization is a measure that does not have a standardized meaning
          prescribed by Canadian generally accepted accounting principles and
          may not be comparable to similar measures presented by other
          companies. Management believes that the presentation of this
          measure will enhance an investor's understanding of the Company's
          operating performance.


    About TimberWest

    TimberWest Forest Corp. is uniquely positioned as Western Canada's largest
private land management company. The Company owns in fee simple approximately
322,000 hectares or 796,000 acres of private land, including 75 kilometres of
waterfront, that over the previous five years, have provided an annual average
timber harvest of 2.565 million m3 of logs and have an approximate annual
growth rate of 8.0 m3 per hectare per year on the productive land base. These
lands are located on Vancouver Island and the majority of the land base
supports the growth of Douglas fir, a premium tree species sought after for
structural purposes. TimberWest runs fully-contracted harvesting operations.
With almost 80% of the Company's annual private land logging now being done in
second-growth stands, TimberWest leads the Coastal industry in the growing and
harvesting of second-growth timber.
    TimberWest also owns renewable Crown harvest rights to 0.7 million m3 of
logs per year and operates a sawmill located near Campbell River, BC.
    The Company's independent auditor, KPMG Performance Registrar Inc.,
periodically certifies that the forest management practices on both the
Company's private and public timberlands continue to meet all Sustainable
Forestry Initiative (SFI(R)) requirements. SFI requirements specify that
forest harvesting is integrated with environmental and conservation goals for
soil, wildlife, water quality protection, conservation of biodiversity,
protection of special sites and aesthetics in a manner that ensures a
sustainable harvest over the long-term.
    In addition, approximately 54,000 hectares, or 134,000 acres
(approximately 17% of the Company's landholdings) of the Company's lands have
been identified as having greater value as real estate properties and will
progressively be made available for higher uses over the next ten to fifteen
years. Five land classifications have been developed for the Company's 39,000
acres of core development lands. An additional 41,000 acres adjacent to our
core development lands have yet to be classified for specific development
opportunities, and some 54,000 acres of non-core higher and better use lands
will be sold "as is" overtime with no additional planning or zoning work
undertaken. The Company reviews its land base on a periodic basis to update
the size of its portfolio of higher use properties.


    Stapled Units of TimberWest Forest Corp. are traded on the Toronto Stock
    Exchange under the symbol: TWF.UN

    Visit us at our web site: www.timberwest.com

    

    %SEDAR: 00009326E




For further information:

For further information: TimberWest Forest Corp., Suite 2300, 1055 West
Georgia Street, PO Box 11101, Vancouver, BC, V6E 3P3, Telephone: (604)
654-4600, Facsimile: (604) 654-4571; Investor Relations Contacts: For
Investors and Media: Bev Park, Executive Vice President and Chief Financial
Officer, Telephone: (604) 654-4600, Facsimile: (604) 654-4662, Email:
invest@timberwest.com; For Real Estate - Media only: Stephen Bruyneel,
Director, Communications and Government Affairs, Real Estate, Telephone: (604)
654-4667, Facsimile: (604) 654-4662, Email: bruyneels@timberwest.com

Organization Profile

TIMBERWEST FOREST CORP.

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