Westshore Terminals Income Fund Second Quarter Report



    For the six months ended June 30, 2008

    VANCOUVER, Aug. 7 /CNW/ - The earnings and distributable cash of
Westshore Terminals Income Fund (the "Fund") are wholly dependent on the
results of Westshore Terminals Limited Partnership ("Westshore"). Westshore's
results are determined largely by the volume of coal shipped by its coal mine
customers for sale in the export market, the U.S. dollar denominated price
received by Westshore's customers for coal, the Canadian-U.S. dollar exchange
rate and Westshore's costs. Westshore's throughput charges for approximately
45% of the coal it handles are calculated at present by reference to coal
prices (see particulars under "Outlook" section on page 7). Higher prices for
hard coking coal have resulted in Elk Valley Coal Partnership (the "Coal
Partnership"), which is Westshore's principal customer, achieving higher
average settlement prices for the 2008/09 coal year compared to the 2007/08
coal year. The weighted average price of 2008 calendar year coal sales by the
Coal Partnership is expected to be approximately US$200 per tonne, up over
100% from US$96 in 2007. As Westshore has some exposure to fluctuations in
exchange rates (as a result of pricing mechanisms under its customer
contracts), Westshore engages in periodic currency hedging arrangements to
provide partial shielding from material short-term swings in the CDN/US dollar
exchange rate.

    
    Westshore Terminals Income Fund
    -   Management's Discussion and Analysis of Financial Condition and
        Results of Operations
    

    This management's discussion and analysis refers to certain measures
other than those prescribed by Canadian Generally Accepted Accounting
Principles ("GAAP"). These measures do not have standardized meanings and may
not be comparable to similar measures presented by other trusts or
corporations. They are determined by reference to the Fund's financial
statements. These non-GAAP measures are discussed because the Fund believes
that they provide investors with information in understanding the results of
the Fund's operations and financial position. The unaudited financial results
along with management's discussion and analysis contained in this report
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Fund's Annual Report for the year
ended December 31, 2007. The date of this management's discussion and analysis
and results of operations is August 7, 2008.
    The following table sets out selected consolidated financial information
for the Fund for the quarter ended June 30, 2008. As at August 7, 2008, the
Fund has 74,250,016 issued and outstanding trust units.


    
    -------------------------------------------------------------------------
    (In thousands of dollars except              Three Months   Three Months
     per unit amounts)                               Ended          Ended
                                                    June 30,       June 30,
                                                      2008           2007
                                                        $              $
    -------------------------------------------------------------------------
    REVENUE
      Coal                                             62,762         45,790
      Other                                             1,083          2,370
    -------------------------------------------------------------------------
                                                       63,845         48,160
    EXPENSES
      Operating                                        19,213         17,906
      Administrative                                    6,982          1,583
    -------------------------------------------------------------------------
                                                       26,195         19,489
    -------------------------------------------------------------------------
    Earnings before depreciation and income taxes      37,650         28,671
    Depreciation                                        5,572          5,552
    -------------------------------------------------------------------------
    Earnings before income taxes                       32,078         23,119
    Provision for income taxes                            190          6,589
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings for the period                        31,888         16,530
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per trust unit                         0.429          0.223
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Standardized Distributable Cash(1)                 35,008         20,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions declared                             34,898         18,563
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributions declared per trust unit               0.470          0.250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The following tables set out selected consolidated financial information
for the Fund on a quarterly basis for the last eight quarters.


    -------------------------------------------------------------------------
    (In thousands of dollars except              Three Months Ended
     per unit amounts)                 --------------------------------------
                                       June 30,   Mar 31,   Dec 31,  Sept 30,
                                          2008      2008      2007      2007
                                            $         $         $         $
    -------------------------------------------------------------------------
    Revenue
      Coal                              62,762    35,145    37,437    36,937
      Other                              1,083     2,052     3,167     2,361
    -------------------------------------------------------------------------
                                        63,845    37,197    40,604    39,298
    Expenses
      Operating                         19,213    18,137    18,146    16,870
      Administration                     6,982     1,874     2,982     1,798
    -------------------------------------------------------------------------
                                        26,195    20,011    21,128    18,668
    -------------------------------------------------------------------------
    Earnings before depreciation
     and income taxes                   37,650    17,186    19,476    20,630
    Depreciation                         5,572     5,572     5,646     5,553
    -------------------------------------------------------------------------
    Earnings before income taxes        32,078    11,614    13,830    15,077
    Provision for (recovery of)
     income taxes                          190       281      (264)      413
    -------------------------------------------------------------------------
    Net earnings for the period         31,888    11,333    14,094    14,664
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per trust unit          0.429     0.153     0.190     0.197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions declared(1)      34,898    20,790    26,730    21,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions per unit          0.470     0.280     0.360     0.290
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 6 for a comparison of cash distributions to
        Standardized Distributable Cash.


    -------------------------------------------------------------------------
    (In thousands of dollars except               Three Months Ended
     per unit amounts)                 --------------------------------------
                                       June 30,   Mar 31,   Dec 31,   Sep 30,
                                          2007      2007      2006      2006
                                            $         $         $         $
    -------------------------------------------------------------------------
    Revenue
      Coal                              45,790    36,553    41,067    36,741
      Other                              2,370     1,058    (1,212)    1,184
    -------------------------------------------------------------------------
                                        48,160    37,611    39,855    37,925
    Expenses
      Operating                         17,906    17,113    16,287    17,980
      Administration                     1,583     1,947     2,700     1,857
    -------------------------------------------------------------------------
                                        19,489    19,060    18,987    19,837
    -------------------------------------------------------------------------
    Earnings before depreciation
     and income taxes                   28,671    18,551    20,868    18,088
    Depreciation                         5,552     5,553     5,470     5,405
    -------------------------------------------------------------------------
    Earnings before income taxes        23,119    12,998    15,398    12,683
    Provision for (recovery of)
     income taxes                        6,589         -         -        (9)
    -------------------------------------------------------------------------
    Net earnings for the period         16,530    12,998    15,398    12,692
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per trust unit          0.223     0.182     0.219     0.180
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions declared (1)     18,563  19,305(2)   23,578    21,818
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash Distributions per unit          0.250   0.260(2)    0.335     0.310
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in lieu of
     cash                                    -         -     6,194         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distribution of units in lieu of
     cash per unit                           -         -     0.088         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 6 for a comparison of cash distributions to
        Standardized Distributable Cash.
    (2) Includes an extraordinary distribution of $0.035. Refer to page 6.
    


    Results of Operations

    In the second quarter of 2008, Westshore shipped 5.4 million tonnes of
coal, compared with 5.7 million tonnes shipped during the same period in 2007.
Based on information currently available, for 2008 Westshore is anticipating
shipping throughput volumes between 21 and 22 million tonnes at higher average
loading rates than 2007 rates.
    Coal loading revenue increased by 37% to $62.8 million in the second
quarter of 2008 from $45.8 million in the second quarter of 2007. The increase
in revenue was due to higher throughput rates, partially offset by lower
volumes. Higher rates in Q2 2008 reflect the higher coal prices for the
2008/09 coal contract year compared to the 2007/08 coal year. Other revenue
was $1.1 million in the second quarter of 2008 compared to $2.4 million in the
second quarter of 2007. Foreign exchange gains, which includes both realized
gains and changes in the mark-to-market adjustment for unrealized gains,
decreased to a $0.1 million loss in the three months ended June 30, 2008 from
a $0.4 million gain in the second quarter of 2007. Interest income for the
quarter decreased by approximately $0.3 million because the Fund has spent
some of the funds on hand from the equity financings undertaken in 2007 to
fund the equipment upgrade project (See "Equipment Upgrade Project").
Demurrage and train detention costs decreased by $0.1 million from the same
period in 2007.
    Operating expenses in the second quarter of 2008 increased by
approximately $1.3 million from 2007. This increase was due to higher
maintenance costs. Administrative expenses increased from $1.6 million in 2007
to $7.0 million in 2008. This increase is due to the Fund accruing
$5.7 million in the second quarter of 2008 for incentive fees.
    As a result of the foregoing, Westshore's earnings before depreciation
and income taxes increased to $37.7 million for the second quarter of 2008
compared to $28.7 million for the same period in 2007.

    Contract Rate Review

    Westshore announced on April 15, 2008 that it had received a decision
from the Court of Appeal for British Columbia concerning the appeal by Elk
Valley Coal Partnership of the arbitrator's decision covering the contract for
coal shipped from the Elkview Mine. The Court of Appeal ruled that no appeal
lies from the arbitrator's decision. The arbitrator's decision was rendered in
July 2006 in favour of Westshore. The arbitrator determined that there was no
basis on which to order a revision in the rates. Accordingly, the formula for
determining the loading rate which has been in force under the contract since
2000 continues for the remaining term of the contract to 2010. The Elk Valley
Coal Partnership has sought leave to appeal to the Supreme Court of Canada. A
decision on the leave application is anticipated during Q4 2008.
    In late August 2006, the Coal Partnership sent notice to Westshore
requesting a review of the charges under the Port Services Contract that
governs coal from the Fording River, Greenhills and Coal Mountain mines. No
progress has been made to date on this matter.

    Equipment Upgrade Project

    Westshore is proceeding with the upgrade to its existing equipment
previously announced. The cost of the upgrade is still expected to be on
budget at approximately $49 million. The project consists of new conveyors, an
upgrade to the tandem rotary rail car dumper and a fourth stacker reclaimer.
The conveyors and rail car dumper upgrade have been completed and the stacker
reclaimer is due to be operational by the end of 2009. Funding for the upgrade
has been provided principally through $40 million in equity financing, which
was completed in March 2007. The balance of the funds required will be sourced
from Westshore's cash on hand.

    Taxation on Trusts in Canada

    Bill C-52 Budget Implementations Act, 2007 which contains legislative
provisions to implement the proposals to tax publicly traded income trusts in
Canada became law on June 22, 2007. Under these rules, distributions declared
by the Fund after January 1, 2011 will be taxed at a rate of 29.5% (2012 -
28%) and the distributions will be treated as taxable dividends in the hands
of unitholders. Unitholders will be entitled to a dividend tax credit which
will give credit for the level of taxation incurred by the Fund.
    The Fund has not provided for current income taxes in 2008 as the income
of the Fund is distributed to and taxed in the hands of unitholders. The
future taxation of distributions makes relevant for accounting purposes the
timing differences between the recognition of certain assets and liabilities
for tax and accounting purposes. For the quarter ended June 30, 2007, the Fund
provided for a future income tax expense of $6.6 million. This was a non-cash
item and was a one time charge to set up the provision for future taxes. A
non-cash provision of $0.2 million has been recorded in the quarter ended
June 30, 2008 to reflect changes in assets and liabilities and their expected
recognition for tax purposes. This future income tax expense does not affect
current distributions.
    In July 2008, the Ministry of Finance published draft legislation which
allows income trusts to convert to corporations on a tax-deferred basis.
Management and its tax advisors are reviewing these rules to determine the
most appropriate course of action for the Fund.

    Distribution Reinvestment Plan

    On April 5, 2007 the Fund announced a distribution reinvestment plan (the
"Plan"). Under the Plan, Canadian resident Unitholders will be able to
designate that all or a portion of the quarterly distributions payable on
their Fund Units be applied towards the purchase of existing Fund Units
through the facilities of the Toronto Stock Exchange at prevailing market
prices. No additional units will be issued from treasury under the Plan.
Unitholders should contact their brokers or Computershare Investor Services
Inc. if they wish to participate in the Plan. Additional information on the
Plan is also available on the Fund's website at www.westshore.com.

    Currency Fluctuations

    Since April 1, 2003, the loading rates under most of Westshore's
long-term handling contracts have depended in whole or in part on the Canadian
dollar price realized for coal handled by Westshore. Since the contract price
for coal is set in U.S. dollars, the exchange rate affects the Canadian dollar
price and Westshore's loading rate. To mitigate the resulting risk, Westshore
has engaged in hedging activities and under Westshore's formal hedging policy
it will hedge, by April 30 of each year, not less than 50% of its anticipated
US dollar related revenues for the ensuing coal year, based on the annual
budget.
    In the financial statements, the effect of currency fluctuations is shown
as affecting coal loading revenues before taking into account the effect of
hedging activities, the financial effect of which is accounted for as other
revenue. As stated in the audited Financial Statements of the Fund for the
year ending December 31, 2007, because Westshore's hedging transactions do not
qualify for "hedge accounting", the value of Westshore's forward exchange
contracts must be "marked to market" at each period end. Westshore is party to
a Euro forward contract to hedge one of the purchase contracts for the
equipment upgrade project in addition to its US dollar forward contracts. For
the six months ended June 30, 2008, other income included $0.8 million of
unrealized gains on forward exchange contracts, compared to a $1.0 million
reduction in unrealized gains for the first six months of 2007. Unrealized
gains and losses are non-cash items.

    Liquidity and Capital Resources

    The Fund is obliged to distribute to Unitholders its cash inflows less
administrative costs of the Fund (and amounts, if any, which may be paid in
connection with any cash redemption of units). The Fund has no fixed
distribution requirements, distributions being solely a function of amounts
received by the Fund. Because the Fund's investment in Westshore is of a
passive nature, it is not anticipated that the Fund will require significant
capital resources to maintain its investment in Westshore on an ongoing basis.
The cost of ongoing maintenance and refurbishment of the equipment is well
within Westshore's financial capacity based solely on revenues less expenses
without any need for financing. The current equipment addition and upgrade is
being funded almost entirely from equity, which will avoid any liquidity
concerns with debt service. As a result, the Fund does not anticipate any
liquidity concerns with the ongoing operations of Westshore.
    Westshore has in place with a Canadian chartered bank a $1 million
secured operating facility which, if required, can be utilized to meet working
capital requirements. This facility was not used during the second quarter and
remained undrawn at June 30, 2008. Westshore's distribution policy involves
leaving sufficient earnings before depreciation and unrealized gains or losses
on forward exchange contracts to cover cash requirements such as capital
expenditures and pension contributions.

    Quarterly Distributions

    On July 15, 2008, the Fund distributed $34,897,508 (representing $0.47
per unit) in cash for the second quarter of 2008 to Unitholders of record on
June 30, 2008 as compared with $18,562,504 ($0.25 per unit) in cash for the
second quarter of 2007.

    Standardized Distributable Cash

    References to "Standardized Distributable Cash" are to cash from
operating activities less capital expenditures, both measures recognized under
GAAP. Standardized Distributable Cash is a financial measure that indicates
the Fund's ability to make distributions. It is a measure that has been
recommended by the CICA's Canadian Performance Reporting Board for use by
income funds in Canada as an indicator of financial performance. As one of the
factors that may be considered relevant by investors is the cash available to
be distributed by the Fund relative to the price of the Units, the Fund
believes that Standardized Distributable Cash is a useful supplemental measure
that may assist investors to assess an investment in the Units.
    The Standardized Distributable Cash of the Fund is substantially
comprised of distributions from Westshore which are impacted by the operating
results of Westshore. The following table sets out the Standardized
Distributable Cash calculation for the six month periods ended June 30, 2008
and 2007 respectively.


    
                                            3 months            6 months
                                              ended               ended
                                             June 30             June 30
                                      ---------------------------------------
                                          2008      2007      2008      2007
                                      ---------------------------------------
    Cash flows from operating
     activities                         35,349    24,040    51,778    42,343
    Less: Capital expenditures            (341)   (3,790)   (2,255)   (4,738)
                                      ---------------------------------------
    Standardized Distributable Cash     35,008    20,250    49,523    37,605
                                      ---------------------------------------
                                      ---------------------------------------
    Cash Distributions declared         34,898    18,563    55,688    37,868
                                      ---------------------------------------
                                      ---------------------------------------
    Basic and diluted Standardized
     Distributable Cash per unit         0.471     0.273     0.667     0.506
                                      ---------------------------------------
                                      ---------------------------------------
    Cash Distributions per unit          0.470     0.250     0.750   0.510(1)
                                      ---------------------------------------
                                      ---------------------------------------
    (1) Includes special distribution of $0.035 per unit related to prior
        year-end adjustments.
    


    The Fund plans distributions based on its annual results and expects that
any particular quarterly distribution may vary from Standardized Distributable
Cash for that quarter.
    Until the fourth quarter of 2005, the Fund could easily predict its exact
taxable income for each period, as it was determined solely by the interest on
the subordinated debt of Westshore Terminals that was then held by the Fund
and any dividends paid by Westshore Terminals. Because the Fund's investments
now consist of substantially all the limited partnership units of Westshore
Terminals Limited Partnership, virtually all of the taxable income of
Westshore for any year is automatically allocated to the Fund. While the Fund
attempts both to estimate its taxable income for the year and to make
distributions for the year as close as possible to that taxable income, it is
normal for there to be some discrepancy between the taxable income of the Fund
and cash distributions by the Fund. In order to deal with the situation where
the taxable income of the Fund exceeds cash distributions, the Declaration of
Trust provides that an amount equal to the excess will be distributed to
unitholders in the form of additional trust units, which are then
consolidated.

    Change in Accounting Policies

    Inventories

    On January 1, 2008, the Fund adopted the new requirements of CICA
Handbook Section 3031 for inventories. The standard provides more
comprehensive guidance on the determination of costs and the cost formulas
that are used to assign costs to inventories. Inventories are required to be
valued at the lower of cost and net realizable value.
    The adoption of this standard did not have a material impact on the
consolidated financial statements of the Fund.

    Financial Instruments

    On January 1, 2008, the Fund adopted the new requirements of the CICA
Handbook Section 3862 for financial instruments. The Standard requires
additional disclosure on the Fund's risks with respect to financial
instruments and how the Fund manages these risks. This information is
presented in Note 4 to the accompanying financial statements.

    Capital Disclosures

    On January 1, 2008, the Fund adopted the new requirements of CICA
Handbook Section 1535 for capital disclosures. The standard requires
additional disclosure about the Fund's capital and how it is managed along
with any external requirements or restrictions imposed on that capital. This
information is provided in Note 5 to the accompanying consolidated financial
statements.

    Outlook

    The Fund's cash inflows are entirely dependent on Westshore's operating
results and are significantly influenced by four variables: the volume of coal
shipped through the Terminal; the US dollar denominated price received by
Westshore's customers for that coal; the Canadian-US dollar exchange rate; and
Westshore's operating and administrative costs. Since the average US dollar
denominated coal price for the 2008 calendar year has been announced by
Fording, the major variables affecting distributions will be the volume loaded
and the Canadian/US dollar exchange rate. In view of the difference in loading
rates between the various contracts, Westshore cannot provide a reliable
indication of the effect of changes in tonnage on distributions, because that
will depend on which mines ship the tonnage. Accordingly, Westshore does not
intend to provide a discussion of sensitivities.
    Critical to Westshore's ongoing success will be the ability of its
customers, including the Coal Partnership in particular, to maintain and
increase their coal export volumes while competing with other suppliers for
sales worldwide. Based on information currently available, Westshore
anticipates throughput volumes between 21 to 22 million tonnes, but at a
higher average loading rate than in 2007. To date, Westshore has experienced
no material impact to throughput volumes from the equipment upgrade.
    As announced in a Fording news release on July 23, 2008, the Coal
Partnership has achieved settlements for the 2008/09 coal year of US$275 per
tonne, which reflects the average for all ranges of coal products, including
thermal and PCI coals. This represents an increase of approximately 200% from
the US dollar prices realized by the Coal Partnership for the 2007/08 coal
year. These prices represent sales for all products, not only those exported
through Westshore. The higher prices for coal over the prior years reflect
extreme tightness in the metallurgical coal market. Changes in global economic
conditions could change prices for the 2009 coal year.
    For 2008 and based on current tonnage estimates as of the date of this
report, tonnages shipped at fixed rates are expected to account for
approximately 25% of the Terminal's throughput; tonnages shipped at variable
rates but subject to a cap, in effect for this year, are expected to account
for approximately 30% of throughput; and finally, tonnages shipped at full
variable rates are expected to account for approximately 45% of throughput at
the Terminal.
    The second quarter distribution of 2008 was $0.47 per unit and
distributions for each of Q3 and Q4 are currently anticipated to be modestly
higher. Results in subsequent quarters will determine the level of
distributions, either positively or negatively. If distributions for the
calendar year 2008 exceed $1.035 per unit, incentive fees will be payable by
Westshore to the Manager under the Management Agreement, as was the case in
2007. As a result of the higher coal prices, it is anticipated that the 2008
incentive fee payable to the Manager will be materially higher than in 2007.
Those fees are computed on the following basis: 15% of Fund distributable cash
between $1.035 - $1.125 per unit; 25% of Fund distributable cash between
$1.125 - $1.260 per unit; and 35% of Fund distributable cash above $1.260 per
unit.

    Forward-looking Statements

    The foregoing statements concerning tonnages, coal prices, exchange
rates, loading rates and variability of distributions are forward-looking
statements but reflect the current expectations of the Fund and Westshore with
respect to future events and performance. Wherever used, the words "may,"
"will," "anticipate," "intend," "expect," "plan," "believe," and similar
expressions identify forward-looking statements. Forward-looking statements
should not be read as guarantees of future performance or results, and will
not necessarily be accurate indications of whether, or the times at which,
such performance or results will be achieved.
    Forward-looking statements are based on information available at the time
they are made, assumptions made by management, and management's good faith
belief with respect to future events, and are subject to the risks and
uncertainties outlined in the Fund's Annual Information Form that could cause
actual performance or results to differ materially from those reflected in the
forward-looking statements, historical results or current expectations.
    All forward-looking statements will be impacted by and are subject to the
risks set out under Risk Factors in the Fund's Annual Information Form.

    Additional Information

    Additional information relating to the Fund, including the Fund's latest
Annual Report and Annual Information Form, are available on SEDAR at
www.sedar.com and on Westshore's website at www.westshore.com.

    On behalf of the Trustees,

    William W. Stinson
    Chairman
    August 7, 2008



    The enclosed financial statements have not been reviewed by the Fund's or
Westshore's auditors.

    
    Consolidated Statements of Earnings, Comprehensive Earnings and
    Cumulative Earnings

    (in thousands of dollars,    Three months ended       Six months ended
     except per unit amounts)          June 30                 June 30
                                          $                       $
                                   2008        2007        2008        2007
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)
    REVENUE
    Coal                         62,762      45,790      97,907      82,343
    Other                         1,083       2,370       3,135       3,428
    -------------------------------------------------------------------------
                                 63,845      48,160     101,042      85,771
    EXPENSES
    Operating                    19,213      17,906      37,350      35,019
    Administrative                6,982       1,583       8,856       3,530
    -------------------------------------------------------------------------
                                 26,195      19,489      46,206      38,549
    -------------------------------------------------------------------------

    Earnings before depreciation
     and income taxes            37,650      28,671      54,836      47,222
    Depreciation                  5,572       5,552      11,144      11,105
    -------------------------------------------------------------------------

    Earnings before income
     taxes                       32,078      23,119      43,692      36,117
    Provision for income taxes      190       6,589         471       6,589
    -------------------------------------------------------------------------

    Net and comprehensive
     earnings for the period     31,888      16,530      43,221      29,528
    Cumulative earnings -
     Beginning of period        505,718     449,097     494,385     436,099
    -------------------------------------------------------------------------

    Cumulative earnings -
     End of period              537,606     465,627     537,606     465,627
    -------------------------------------------------------------------------

    Basic and diluted earnings
     per trust unit               0.429       0.223       0.582       0.408
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of trust units
     outstanding             74,250,016  74,250,016  74,250,016  72,315,113
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Cash Flows

    (in thousands of dollars)    Three months ended       Six months ended
                                       June 30                 June 30
                                          $                       $
                                   2008        2007        2008        2007
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)

    Cash flows from operating
     activities
    Net earnings for the
     period                      31,888      16,530      43,221      29,528
      Items not affecting cash
        Unrealized losses
         (gains) on forward
         exchange contracts          67        (356)       (791)        973
        Depreciation              5,572       5,552      11,144      11,105
        Future income tax expense   190       6,589         471       6,589
        Decrease in deferred
         employee future benefits
         costs                     (714)        (46)       (530)       (185)
    -------------------------------------------------------------------------
                                 37,003      28,269      53,515      48,010

    Increase in non-cash working
     capital                     (1,654)     (4,229)     (1,737)     (5,667)
    -------------------------------------------------------------------------
                                 35,349      24,040      51,778      42,343
    -------------------------------------------------------------------------

    Cash flows from financing
     activities
    Distributions paid to
     unitholders                (20,790)    (19,305)    (47,520)    (42,883)
    Issuance of units, net of
     share issuance costs             -           -           -      40,430
    -------------------------------------------------------------------------
                                (20,790)    (19,305)    (47,520)     (2,453)
    -------------------------------------------------------------------------

    Cash flows from investing
     activities
    Additions to plant and
     equipment                     (341)     (3,790)     (2,255)     (4,738)
    -------------------------------------------------------------------------
                                   (341)     (3,790)     (2,255)     (4,738)
    -------------------------------------------------------------------------

    Increase in cash and cash
     equivalents                 14,218         945       2,003      35,152
    Cash and cash equivalents -
     Beginning of period         60,527      68,762      72,742      34,555
    -------------------------------------------------------------------------

    Cash and cash equivalents -
     End of period               74,745      69,707      74,745      69,707
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information
    Cash received for interest      434         710       1,044       1,090
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Balance Sheets

    (in thousands of dollars)                           June 30,   December
                                                           2008    31, 2007
                                                              $           $
                                                     (Unaudited)   (Audited)
    ASSETS
    Current assets
    Cash and cash equivalents                            74,745      72,742
    Accounts receivable                                  16,808      11,181
    Inventories                                           6,422       6,162
    Prepaid expenses                                      6,828         972
    Other assets                                            830          38
    -------------------------------------------------------------------------
                                                        105,633      91,095
    -------------------------------------------------------------------------

    Plant and equipment
    At cost                                             495,143     492,889
    Accumulated depreciation                           (375,344)   (364,200)
    -------------------------------------------------------------------------
                                                        119,799     128,689
    -------------------------------------------------------------------------

    Employee future benefits                             22,775      20,975
    Goodwill                                            365,541     365,541
    -------------------------------------------------------------------------
                                                        613,748     606,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES & UNITHOLDERS' EQUITY
    Current liabilities
    Accounts payable and accrued liabilities             37,832      27,826
    Distribution payable to unitholders                  34,898      26,730
    -------------------------------------------------------------------------
                                                         72,730      54,556

    Employee future benefits                             20,634      19,364
    Future income taxes                                   7,209       6,738
    -------------------------------------------------------------------------
                                                        100,573      80,658
    -------------------------------------------------------------------------

    Unitholders' Equity
    Capital contributions                               704,032     704,032
    Cumulative earnings                                 537,606     494,385
    Cumulative distributions declared                  (728,463)   (672,775)
    -------------------------------------------------------------------------
                                                        513,175     525,642
    -------------------------------------------------------------------------
                                                        613,748     606,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Notes to Financial Statements

    1.  Basis of presentation

        These interim financial statements do not contain all the information
        required for annual financial statements and should be read in
        conjunction with the financial statements and notes included in the
        Fund's Annual Report for the year ended December 31, 2007. These
        interim financial statements have not been audited or reviewed by
        external auditors.

    2.  Significant accounting policies

        These interim financial statements have been prepared in accordance
        with Canadian generally accepted accounting principles and follow the
        same accounting principles and methods of application as set out in
        Note 2 of the Fund's annual financial statements for the year ended
        December 31, 2007.

    3.  Inventories

        Effective January 1, 2008, the Fund adopted the new requirements of
        CICA Handbook Section 3031 for inventories. The adoption of this
        standard did not have a material impact on the consolidated financial
        statements of the Fund.

    4.  Financial Instruments

        The Fund's financial instruments include cash and cash equivalents,
        accounts receivable, accounts payable and distributions payable to
        unitholders. The carrying amounts of these financial instruments
        recorded on the consolidated balance sheet are reasonable estimates
        of their fair values due to the relatively short periods to maturity
        and commercial terms of these instruments.

        Cash and cash equivalents are classified as financial assets held for
        trading and are recorded at fair value on the consolidated balance
        sheet. Accounts receivable are classified as loans and receivables
        and are recorded at amortized cost. Accounts payable and
        distributions payable to unitholders are classified as other
        financial liabilities and are recorded at amortized cost.

        The Fund's financial instruments also include foreign exchange
        forward contracts, which are derivative financial instruments that
        are classified as held-for-trading and are recorded at fair value.
        Fair value is measured using the quoted market rate for forward
        contracts of a similar maturity date.

        Financial risk management and exposure

        The Fund is exposed to various risks associated with its financial
        instruments, which include credit risk, liquidity risk and market
        risk.

        Credit Risk

        Credit risk is the risk of financial loss to the Company if a
        customer or counterparty to a financial instrument fails to meet its
        contractual obligations. Credit risk arises primarily from accounts
        receivable and cash and cash equivalents.

        The Company's exposure to credit risk is influenced by the
        profitability of coal mining companies, which is heavily impacted by
        the price of the coal. The accounts receivable are concentrated with
        one customer, The Coal Partnership, as this customer represented
        approximately 89% of Westshore's revenues in 2007. Westshore does
        not have any collateral or security over receivables. Westshore
        monitors the financial health of its customers and regularly reviews
        its accounts receivable for impairment. As at June 30, 2008, there
        were no trade accounts receivable past due which were considered
        uncollectible and no reserve in respect of doubtful accounts was set
        up.

        The Fund limits its exposure to credit risk arising from cash
        equivalents by only investing in money market funds with a major
        Canadian financial institution. The Fund does not expect any credit
        losses in the event of non-performance by counter parties to its
        foreign exchange forward contracts as the counter parties are the
        Fund's bankers, a major Canadian financial institution.

        The carrying amount of financial assets represents the maximum credit
        exposure. The maximum exposure to credit risk is:

                                                                       2008

        Cash and cash equivalents                                    74,745
        Accounts receivable                                          16,808
        Forward exchange contracts used for hedging                     830
    -------------------------------------------------------------------------
                                                                     92,383
    -------------------------------------------------------------------------

        Liquidity Risk

        Liquidity risk is the risk that the Fund will not be able to meet its
        obligations as they fall due. The Fund continually monitors its
        financial position to ensure that it has sufficient liquidity to
        discharge its obligations when due. The Fund's distribution
        obligation to unitholders is funded from operating income and the
        current equipment upgrade has been funded with additional equity
        which will avoid liquidity concerns with debt service.

        The financial liabilities of the Fund, which include accounts payable
        and accrued liabilities, have a contractual maturity of less than 1
        year.

        Westshore also maintains a $1 million operating facility that can be
        drawn down to meet short term financing needs. No amounts were
        outstanding on this facility at June 30, 2008.

        Market Risk

        The significant market risk exposures affecting the financial
        instruments held by the Fund are those related to foreign currency
        exchange rates and interest rates.

        Foreign currency exchange rates

        The Fund is exposed to foreign currency exchange rate risk on its
        foreign currency forward contracts. The value of these financial
        instruments fluctuates with changes in the CDN/US dollar exchange
        rate and the CDN/Euro exchange rate. The Fund is unable to estimate
        the effect of these exchange rates on the value of the forward
        contracts existing at June 30, 2008. From the beginning of the year
        to June 30, 2008, the Euro has strengthened by approximately 8%
        against the Canadian dollar and the US dollar has strengthened by
        approximately 2% against the Canadian dollar. The fair market value
        of the Fund's foreign currency forward contracts has increased by
        $791,000.

        Interest rates

        The Fund has limited exposure to interest rate risk on the cash
        equivalents (short-term investments). Money market fund returns are
        correlated with Canadian T-bills and Bankers' Acceptances of major
        Canadian financial institutions. A change in interest rates would not
        have a material impact on the financial statements of the Fund.

    5.  Capital Disclosures

        The capital of the Fund consists solely of unitholders' equity which
        includes issued trust units and cumulative earnings less cumulative
        distributions.

        The objective of the Fund is to maintain a stable capital base and
        ensure that the capital structure does not interfere with the Fund's
        ability to meet its distribution requirements on the trust units. In
        2008, the Fund expects that its quarterly distributions to
        unitholders will be funded by earnings and operating cash flows.

        The trust units are governed by the Second Amended and Restated
        Declaration of Trust dated September 29, 2005, which provides that
        non-residents of Canada may not own more than 49% of the trust units
        at any time. The Fund continually monitors the non-resident ownership
        levels to the best of its ability given the practical limitations
        regarding beneficial ownership interest. The Fund believes that it
        has always had substantially less than 49% non-Canadian ownership.

        The Fund's trust units are not subject to externally imposed capital
        requirements. There have been no changes in how the Fund manages its
        capital during the period ended June 30, 2008.

    6.  Other Income

        Other income includes the following gains and losses on financial
        instruments:

                                 Three months ended       Six months ended
                                       June 30                 June 30
                                          $                       $
                                   2008        2007        2008        2007
        ---------------------------------------------------------------------
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)

        Interest income on
         cash and cash
         equivalents                434         710     $ 1,044     $ 1,090
        Change in fair value
         of forward exchange
         contracts                  (67)        356         791        (973)
        Realized foreign
         exchange gains               -         632           -       2,085
        ---------------------------------------------------------------------
                                $   367     $ 1,698     $ 1,835     $ 2,202
        ---------------------------------------------------------------------

    7.  Employee future benefits

                                 Three months ended       Six months ended
                                       June 30                 June 30
                                          $                       $
                                   2008        2007        2008        2007
        ---------------------------------------------------------------------
                              (Unaudited) (Unaudited) (Unaudited) (Unaudited)

        Pension plan benefits   $(1,533)    $  (587)    $(1,800)    $(1,173)
        Other retirement and
         post-employment benefits   819         541       1,270         988
        ---------------------------------------------------------------------

        Employee future benefits
         recovery                  (714)        (46)       (530)       (185)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
    





For further information:

For further information: Nick Desmarais, Secretary, (604) 488-5214


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