Tree Island Wire Income Fund
TSX : TIL.UN

Tree Island Wire Income Fund

August 12, 2008 20:12 ET

Tree Island Announces Second Quarter 2008 Results

Gross Profit of $230 per Ton Drives Strong EBITDA, Net Income and Distributable Cash Performance

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 12, 2008) - Tree Island Wire Income Fund (TSX:TIL.UN) will hold a conference call and webcast to discuss second quarter 2008 financial results on Wednesday, August 13, 2008 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern). The call can be accessed by dialing: 1-800-446-4472 or 416-695-6320.

A replay will be available through August 27, 2008 at: 1-800-408-3053 or 416-695-5800, Passcode: 3267215.

The live and archived webcast can be accessed at www.investorcalendar.com/IC/CEPage.asp?ID=132303

Tree Island Wire Income Fund (the "Fund") today released results for the second quarter and first half of 2008. The Fund's results are based on the performance of Tree Island Industries Ltd. ("Tree Island" or "the company")-one of North America's largest producers of wire and fabricated wire products.

Second Quarter 2008 Highlights

For the three months ended June 30, 2008

- Sales volumes increased 22.3% to 70,388 tons, from 57,547 tons in the second quarter of 2007. Import and international trading sales represented 18.1% of Q2 2008 sales volumes, compared to 4.5% a year ago.

- Revenue increased 36.3% to $95.0 million, from $69.7 million in Q2 2007.

- Gross profit increased 226.9% to $16.2 million (gross profit per ton of $230), from $5.0 million (gross profit per ton of $86) in Q2 2007.

- EBITDA, excluding foreign exchange gains, increased 205% to $12.0 million, from $3.9 million in Q2 2007.

- Net income increased 145.1% to $9 million ($0.41 per unit), from $3.7 million ($0.17 per unit) in Q2 2007.

- Distributable cash per unit increased 84% to $0.56, from $0.31 in Q2 2007, and distribution payout ratio improved to 44% from 82%.

- Subsequent to the end of the second quarter, on July 19, 2008, a new multi-year collective agreement was ratified by hourly employees at the Richmond, BC manufacturing facility. The new agreement is retroactive to July 1, 2008 and has a four-year term to June 30, 2012.

"We are pleased to report very strong results for the second quarter of 2008," said Daniel McAtee, President and CEO of Tree Island Industries and a Trustee of the Fund. "Despite continued weak conditions in the US residential housing market and dramatically higher carbon rod costs, our strategic initiatives, together with product pricing actions, helped us achieve significantly better year-over-year financial performance."

"On the top line, our sales volumes were up 22.3% and revenue was 36.3% higher as we continued to benefit from last year's acquisition of new Asian and US operations, as well as from a sharpened strategic focus in each of our five core markets," added Mr. McAtee.

"More importantly, we carried our top-line gains through to the bottom line. A series of successful product pricing actions helped us recover the margin lost to higher raw material costs in the first quarter, while keeping pace with continued carbon rod inflation through the second quarter. Our results were further supported by operating savings from the consolidation of our North American operations, and our initial success with efforts to balance our product mix and fine-tune profitability in our various markets. As an example of the latter, we grew sales of some of our higher-margin products during the quarter, including high carbon galvanized wire to the industrial/OEM market, and welded wire fabric to the commercial construction and residential construction markets," said Mr. McAtee.

"As a result of these various initiatives, we ended the quarter with very strong gross profit per ton of $230, which combined with our higher volumes, resulted in dramatic improvements in our gross profit, EBITDA, net income and distributable cash generation. We were particularly pleased to end the quarter with a payout ratio of 44% and a first-half payout ratio of 77%."

"While these results are encouraging, I want to emphasize that we continue to face numerous challenges. Carbon rod costs continue to rise, transportation costs are increasing and conditions in the residential construction market remain weak. In addition, with our product pricing now more closely aligned to raw material costs, we would expect our gross profit per ton to settle to a more sustainable level through the balance of 2008. Overall, however, we feel we are making good progress toward our strategic objectives. Our expanded range of products and markets has given us significantly more flexibility to respond to changing market conditions, and we are optimistic about what we can achieve as we continue to implement our Step Three strategic initiatives," said Mr. McAtee.



Results from Operations
(thousands of dollars except for tonnage and per unit figures)

3 Months Ended 6 Months Ended
June 30 June 30
2008 2007 2008 2007
--------------------------------------------------------------------------
Sales Volumes - Tons 70,388 57,547 137,696 109,681
Revenue 94,988 69,681 171,409 134,575
Cost of Goods Sold (76,209) (60,805) (145,606) (115,984)
Depreciation (2,596) (3,925) (5,226) (8,013)
------------------------------------------------
Gross Profit 16,183 4,951 20,577 10,578
Gross Profit per Ton 230 86 149 96
Selling, General and
Administrative Expenses (6,743) (4,931) (12,429) (9,229)
------------------------------------------------
Operating Profit 9,440 20 8,148 1,349
Foreign Exchange Gain 2,853 3,648 3,931 5,692
Financing Expenses (1,414) (1,026) (2,528) (2,237)
Loss on Sale of
Fixed Assets (44) (2) (40) (2)
Amortization of
Deferred Gain 118 127 234 263
Amortization of
Intangible Assets (282) - (563) -
(Provision for)/Recovery
of Income Taxes (1,666) 907 411 2,006
--------------------------------------------------------------------------
Net Income 9,005 3,674 9,539 7,071
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating Profit 9,440 20 8,148 1,349
Addback Depreciation 2,596 3,925 5,226 8,013
------------------------------------------------
EBITDA (1) 12,036 3,945 13,374 9,362
Foreign Exchange Gain 2,853 3,648 3,931 5,692
------------------------------------------------
EBITDA Plus Foreign
Exchange Gains 14,889 7,593 17,305 15,054
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Distributable
Cash per Unit (1) 0.5630 0.3059 0.6538 0.6065
Distributable Cash Paid
or Payable per Unit (1) 0.2500 0.2500 0.5000 0.5833
Distribution Payout % (2) 44% 82% 77% 96%
--------------------------------------------------------------------------
--------------------------------------------------------------------------

As at As at As at As at
June 30, December 31, June 30, December 31,
2008 2007 2008 2007
--------------------------------------------------------------------------
Total Assets 280,505 241,611 280,505 241,611
Revolving Credit
(Net of Cash) 35,092 43,435 35,092 43,435
--------------------------------------------------------------------------
Long Term Debt 38 78 38 78
--------------------------------------------------------------------------

1. See definition of EBITDA and Distributable Cash in the non-GAAP measures
section.
2. Distribution Payout % is calculated as distributions paid or payable
per unit divided by distributable cash generated per unit.


Second Quarter Operating Results

For the three months ended June 30, 2008, Tree Island reported revenue of $95.0 million, up 36.3% from $69.7 million in the same period in 2007. This improvement reflects higher selling prices and a 22.3% increase in sales volumes, partially offset by the negative impact of an 8.8% increase in the value of the Canadian dollar relative to the US dollar.

The increase in sales volumes reflects the ongoing implementation of Tree Island's strategic initiatives, including the July 2007 acquisition of the assets of Baoan International Investment Co. and 100% of the shares of Universe Metal New Materials Co. Ltd. (the "BII/UM acquisition"). The acquisition had a particularly positive impact on Tree Island's import and international trading sales, which combined, represented 18.1% of sales volumes in Q2 2008, compared to 4.5% a year earlier. Tree Island was also successful in growing volumes to the commercial construction and industrial/OEM markets during the second quarter.

The breakdown in sales volumes by market was as follows:



% of Total % of Total
Market Q2 2008 Sales Q2 2007 Sales
Tons (000's) Volumes Tons (000's) Volumes

Residential Construction 28 39.9% 30 51.7%
Commercial Construction 6 9.0% 4 6.1%
Industrial/OEM
(Original Equipment Manufacturers) 20 27.7% 17 30.4%
Agricultural 6 8.7% 6 9.8%
Specialty 1 1.8% 1 2.0%
International Trading(i) 9 12.9% 0 0.0%
Total 70 100.0% 57 100.0%

(i) International trading includes direct trading company sales only, and
excludes import sales, which are reflected in sales volumes to other
markets.


With the US housing market remaining volatile, Tree Island continues to face challenges in the residential construction market. According to the US Census Bureau, second quarter residential housing starts in the Western United States-a key market for Tree Island's stucco reinforcing products and collated nails-fell by 38.6% compared to Q2 2007. The 6.7% decline in Tree Island's sales volumes to the residential construction market is viewed as modest by comparison, and reflects declines in demand for collated nails, partially offset by growth in welded wire fabric products.

As anticipated, raw material costs continued to escalate during the second quarter. Carbon rod costs (representing 59.3% of Q2 2008 cost of goods sold) increased by 51.0% per ton compared to Q2 2007 and stainless steel rod costs (representing 7.4% of Q2 2008 cost of goods sold) increased by 6.0% per ton as a result of nickel surcharges. By contrast, zinc costs (representing 3.0% of cost of goods sold) decreased by 40.4% per pound. The company implemented a series of pricing actions in the first and second quarters. These actions were successful, on most products and in most markets, in recouping the higher carbon rod and stainless steel costs.

Selling general and administrative ("SG&A") expenses increased to $6.7 million in the second quarter of 2008, a year-over-year increase of $1.8 million. This was primarily driven by $0.7 million of bonus-related costs, increased selling expenses (mainly sales commissions), $0.5 million of increased costs relating to the addition of the BII/UM operations, and a carryover of $0.3 million of costs relating to the Special Meeting of Unitholders ("special meeting"), partially offset by the benefit of a stronger Canadian dollar on the conversion of costs at Tree Island's US operations.

Second quarter EBITDA, before adding foreign exchange gains, was $12.0 million, 205% higher than in Q2 2007. The increase in EBITDA reflects the positive impact of higher selling prices and increased volumes, partially offset by higher raw material costs and increased SG&A expenses. Second quarter EBITDA, including foreign exchange gains, was $14.9 million compared to $7.6 million in 2007, reflecting a lower gain on foreign exchange conversions in the most recent quarter.

The Fund reported second quarter net income of $9.0 million ($0.41 per unit), up 145.1% from $3.7 million ($0.17 per unit) in 2007. The increase in net income reflects significantly higher operating profit, partially offset by a lower gain on foreign exchange conversions, higher interest costs and a higher income tax expense.

For the three months ended June 30, 2008, the Fund generated distributable cash of $0.56 per unit, and declared distributions of $0.25 per unit, for a payout ratio of 44%. By comparison, the Fund generated distributable cash of $0.31 per unit, and declared distributions of $0.25 per unit for a payout ratio of 82% during the same period in 2007.

First-Half Operating Results

For the six months ended June 30, 2008, Tree Island generated revenue of $171.4 million, up 27.4% from $134.6 million in the first half of 2007. The increase in revenue primarily reflects higher product selling prices and a 25.5% increase in sales volumes. These gains were partially offset by the negative impact of an 11.3% year-over-year increase in the value of the Canadian dollar relative to the US dollar.

The increase in sales volumes is viewed as significant given the 36.7% year-over-year drop (per the US Census Bureau) in residential housing starts in the Western United States. The company increased sales volumes in all markets during the first half, with higher sales of high carbon galvanized wire to the industrial/OEM market, increased sales of welded wire fabric to the commercial construction and residential construction markets and significantly higher international sales.

The improvement in sales volumes was achieved as follows:



---------------------------------------------------------------------------
% of % of
YTD 2008 YTD 2008 YTD 2007 YTD 2007
Tons Sales Tons Sales
Market (000's) Volumes (000's) Volumes
---------------------------------------------------------------------------
Residential Construction 55 39.9% 53 48.3%
---------------------------------------------------------------------------
Commercial Construction 12 8.7% 7 6.0%
---------------------------------------------------------------------------
Industrial/OEM 39 28.0% 36 32.9%
---------------------------------------------------------------------------
Agricultural 13 9.5% 12 10.6%
---------------------------------------------------------------------------
Specialty 3 2.0% 2 2.2%
---------------------------------------------------------------------------
International Trading(i) 16 11.9% 0 0.0%
---------------------------------------------------------------------------
Total 138 100.0% 110 100.0%
---------------------------------------------------------------------------

(i) International trading includes direct trading company sales only and
excludes import sales, which are reflected in sales volumes to other
markets.


Import products continued to play an important role in the volume gains in all markets, with combined import and trading company sales accounting for 17.2% of sales volumes in the first half of 2008, up from 3.4% during the same period in 2007.

First-half SG&A expenses totalled $12.4 million, compared to $9.2 million during the same period in 2007. The increase reflects $1.6 million in costs relating to the special meeting, $0.9 million in costs relating to the addition of operations from the BII/UM acquisition, and increased bonus and sales commission costs. These increases were partially offset by the benefit of the stronger Canadian dollar on the conversion of US division costs.

First-half EBITDA, before foreign exchange gains, increased to $13.4 million, from $9.4 million in 2007, a gain of 42.9% The increase in EBITDA primarily reflects higher selling prices and the 25.5% increase in sales volumes, partially offset by higher SG&A costs. First-half gains from foreign exchange conversions decreased to $3.9 million, from $5.7 million in the same period in 2007.

Net income for the first half of 2008 increased to $9.5 million, ($0.43 per unit), from $7.1 million ($0.32 per unit) in 2007. The increase in net income reflects the higher operating profit, partially offset by higher financing costs, a lower foreign exchange gain and a lower tax recovery.

For the six months ended June 30, 2008, the Fund generated distributable cash of $0.65 per unit, and declared distributions of $0.50 per unit, for a payout ratio of 77%. By comparison, the Fund generated distributable cash of $0.61 per unit, and declared distributions of $0.58 per unit for a payout ratio of 96% during the same period in 2007. The Fund's payout ratio since inception is 82%, which is within the target range of 75% to 85%.

Outlook

The Fund's outlook remains cautious in light of continuing weakness in the residential construction market, the slowdown affecting the broader North American economy and continued escalation in carbon rod and transportation costs.

Management does not anticipate a recovery in the US housing market in 2008 and will continue to focus on building sales in stronger markets such as commercial construction, agricultural, industrial/OEM and specialty alloys. The company will also continuing to pursue opportunities in international markets as it responds to offshore demand for high carbon wire, increases its focus on tire bead wire products used in tire manufacturing, and pursues new opportunities for the wire rope products used in road barriers and earthen stabilization.

Prices for carbon rod remain a significant challenge, with steel prices continuing to climb sharply and supply constraints existing for certain grades. Higher transportation costs and limited availability of bulk shipping have added to the challenges. Tree Island has been proactive in managing its raw material inventory in this environment and continues to implement pricing actions to recover cost increases. While gross profit per ton is not expected to remain at the higher-than-normal levels achieved in the second quarter, the company's goal is to keep driving favourable profitability through an aggressive focus on product mix and pricing.

"Although we are pleased with the positive impact our strategic initiatives and actions have had on our financial results, we recognize that we are still operating within an extremely challenging market environment," said Mr. McAtee, "The third step of our strategy, which we began implementing earlier this year, focuses on fine tuning our business so that we have the flexibility to operate effectively in this environment and can achieve more predictable growth and profitability. We expect it will take the remainder of 2008 and most of 2009 to achieve the consistent, optimal performance we are seeking. Until that time, we expect to see variations in our performance given the inherent cyclicality of the market."

Management and the Board continue to pursue other opportunities to enhance unitholder value, including the sale of the surplus land located adjacent to Tree Island's Richmond facility in BC.

Based on the current outlook, the Fund believes its annualized cash distributions of $1.00 per unit are set at an appropriate level. Given the cyclical nature of the industry, the Fund does not set short-term payout ratio targets, but rather seeks to maintain a cumulative average payout ratio since inception of 75% to 85%.

Tree Island Profile

Headquartered in Richmond, British Columbia, Tree Island Industries produces wire products for a diverse range of construction, agricultural, manufacturing and industrial applications. Its products include bright wire, stainless steel wire and galvanized wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products, engineered structural mesh, fencing and other fabricated wire products. The company markets these products under the Tree Island, TI Imports and HK Universe brand names. Tree Island also owns and operates a Hong Kong-based trading company that provides internationally sourced products to Tree Island and its customers worldwide.

Non-GAAP Measures

References in this news release to "EBITDA" are to operating profit plus depreciation. EBITDA is a measure used by many investors to compare issuers on the basis of ability to generate cash flows from operations. EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Management believes that EBITDA is an important supplemental measure in evaluating the Fund's performance. You are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with GAAP as indicators of performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Tree Island's method of calculating EBITDA may differ from methods used by other issuers and, accordingly, Tree Island's EBITDA may not be comparable to similar measures presented by other issuers.

"Distributable cash" is also not a recognized measure under GAAP and does not have a standardized meaning prescribed by GAAP. Canadian open-ended income trusts, such as this Fund, use distributable cash as an indicator of financial performance and ability to fund distributions. We define distributable cash as net cash from operating activities less all capital expenditures, plus the change in non-cash operating assets and liabilities, plus non-maintenance capital expenditures, plus the 2006 pre-tax proceeds on the sale of a property option (the tax provision for these proceeds on sale is included in the net cash provided from operating activities). Changes in non-cash operating assets and liabilities and non-maintenance capital expenditures are added back in the calculation of distributable cash because they are funded through the Fund's committed credit facilities. Tree Island's distributable cash may differ from similar computations as reported by other entities and, accordingly, may not be comparable to distributable cash as reported by such entities. The Fund believes that distributable cash is a useful supplemental measure that may assist investors in assessing the return on their investment in units.

The Fund defines maintenance capital expenditures as cash outlays required to maintain our plant and equipment at current operating capacity and efficiency levels. Non-maintenance capital expenditures are defined as cash outlays required to increase business operating capacity or improve operating efficiency, and are also referred to as profit improvement capital.

Forward-Looking Statements

This press release includes forward-looking information with respect to the Fund and the company, including their business, operations and strategies, as well as financial performance and conditions. The use of forward-looking words such as, "may", "will", "expect" or similar variations generally identify such statements. Any statements that are contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements speak only to the conditions in existence as of the date of this press release, and the Fund maintains no obligation to update such statements. Although management believes that expectations reflected in forward-looking statements are reasonable, such statements involve risks and uncertainties including the risks and uncertainties discussed in the Fund's annual information form dated March 26, 2008 and management's discussion and analysis for the fiscal year ended December 31, 2007.

Forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Such risks and uncertainties include, but are not limited to, risks associated with operations such as competition, dependence on the construction industry, market conditions for products, supplies of and costs for raw materials, dependence on key personnel, labour relations, regulatory matters, environmental risks, the successful execution of acquisition and integration strategies, foreign exchange fluctuations, the effect of leverage and restrictive covenants in financing arrangements, product liability, the ability to obtain insurance, energy cost increases, the ability to fund necessary future capital investments, changes in tax legislation, other legislation and governmental regulation, changes in accounting policies and practices, operations in a foreign country, and other risks and uncertainties set forth in publicly filed materials.

Interim Consolidated Financial Statements of

TREE ISLAND WIRE INCOME FUND

June 30, 2008



TREE ISLAND WIRE INCOME FUND
Interim Consolidated Balance Sheets (Unaudited)
(In thousands of dollars)

As at As at
June 30 December 31
2008 2007
--------------- ---------------

Assets

Current
Cash $ 3,525 $ 6,032
Accounts receivable 44,006 22,641
Income and other taxes receivable 4,575 4,144
Inventories 112,968 88,499
Prepaid expenses 2,995 2,902
Future income taxes 1,687 2,467
--------------- ---------------
169,756 126,685
Property, plant and equipment 57,897 62,233
Intangible assets 5,845 6,245
Deferred charges 13 14
Goodwill 46,994 46,434
--------------- ---------------
$ 280,505 $ 241,611
--------------- ---------------
--------------- ---------------

Liabilities

Current
Revolving credit $ 38,617 $ 49,467
Accounts payable and accrued liabilities 95,299 44,765
Income taxes payable 114 -
Interest payable 278 418
Current portion of long-term debt 38 78
--------------- ---------------
134,346 94,728
Deferred gain on sale of option (note 9) 3,955 4,066
Other non-current liabilities 181 421
Future income taxes 6,566 7,591
--------------- ---------------
145,048 106,806
--------------- ---------------

Contingent liabilities and commitments
(note 11)

Unitholders' Equity 135,457 134,805
--------------- ---------------
$ 280,505 $ 241,611
--------------- ---------------
--------------- ---------------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Operations (Unaudited)
(In thousands of dollars, except units and per unit amounts)

--------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
------------------------- ------------------------
Sales $ 94,988 $ 69,681 $ 171,409 $ 134,575
Cost of goods sold 76,209 60,805 145,606 115,984
Depreciation 2,596 3,925 5,226 8,013
------------------------- ------------------------
Gross profit 16,183 4,951 20,577 10,578
Selling, general
and administrative
expenses 6,743 4,931 12,429 9,229
------------------------- ------------------------
Operating profit 9,440 20 8,148 1,349
Foreign exchange gain 2,853 3,648 3,931 5,692
Loss on sale of
fixed assets (44) (2) (40) (2)
Amortization of
intangible assets (282) - (563) -
Amortization of
deferred gain (note 9) 118 127 234 263
Financing expenses (1,414) (1,026) (2,582) (2,237)
------------------------- ------------------------
Income before
income taxes 10,671 2,767 9,128 5,065
(Expense) recovery of
income taxes (note 8) (1,666) 907 411 2,006
------------------------- ------------------------

Net income for
the period $ 9,005 $ 3,674 $ 9,539 $ 7,071
------------------------- ------------------------
------------------------- ------------------------

Net income per
unit - basic $ 0.41 $ 0.17 $ 0.43 $ 0.32
------------------------- ------------------------
------------------------- ------------------------

Net income per
unit - diluted $ 0.41 $ 0.17 $ 0.43 $ 0.32
------------------------- ------------------------
------------------------- ------------------------

Weighted-average
number of
units - basic 21,960,447 21,918,400 21,947,047 21,918,400
------------------------- ------------------------
------------------------- ------------------------

Weighted-average
number of
units - diluted 22,090,684 21,969,061 22,047,091 21,943,870
------------------------- ------------------------
------------------------- ------------------------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands of dollars)

--------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
------------------------- ------------------------

Net income for
the period $ 9,005 $ 3,674 $ 9,539 $ 7,071

Other comprehensive
(loss) income
Unrealized (loss)
income on translating
financial statements
of self-sustaining
operations (162) (4,426) 1,979 (5,038)

Related income tax
(recovery) expense 35 463 (115) 527

------------------------- ------------------------
Other comprehensive
(loss) income (127) (3,963) 1,864 (4,511)
------------------------- ------------------------

Comprehensive income
(loss) for the period $ 8,878 $ (289) $ 11,403 $ 2,560
------------------------- ------------------------
------------------------- ------------------------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Unitholders' Equity (Unaudited)
(In thousands of dollars)

--------------------------------------------------------------------------
Total Total
Accumu- for for
lated six six
Other months months
Unithold- Contrib- Accumu- Compre- ended ended
ers' uted lated Distrib- hensive June 30, June 30,
Capital Surplus Earnings utions Loss 2008 2007
-------- -------- -------- --------- -------- -------- --------

Balance,
beginning
of
period $209,857 $ 589 $ 94,057 $(138,917) $(30,781) $134,805 $155,753

Activity
for the
three
months
ended
March 31 317 (205) 534 (5,510) 1,991 (2,873) (4,458)

-------- -------- -------- --------- -------- -------- --------
210,174 384 94,591 (144,427) (28,790) 131,932 151,295

Activity
for the
three
months
ended
June 30 - 189 9,005 (5,542) (127) 3,525 (5,478)

-------- -------- -------- --------- -------- -------- --------
Balance,
end of
period $210,174 $ 573 $103,596 $(149,969) $(28,917) $135,457 $145,817
-------- -------- -------- --------- -------- -------- --------
-------- -------- -------- --------- -------- -------- --------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Cash Flows (Unaudited)
(In thousands of dollars)

--------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
------------------------- ------------------------

Cash flows from
operating activities
Net income for
the period $ 9,005 $ 3,674 $ 9,539 $ 7,071
Items not
involving cash
Depreciation 2,596 3,925 5,226 8,013
Loss on disposal
of fixed assets 44 2 40 2
Amortization of
deferred charges 87 128 173 261
Amortization of
intangible assets 282 - 563 -
Amortization of
deferred gain (118) (127) (234) (263)
Future income taxes 531 (841) (746) (1,545)
Unit-based
compensation 137 290 226 290
------------------------- ------------------------
12,564 7,051 14,787 13,829

Change in non-cash
operating assets
and liabilities
Accounts receivable (7,471) (344) (21,365) (7,303)
Inventories (22,676) 4,573 (24,469) 13,802
Accounts payable and
accrued liabilities 26,512 8,036 50,243 (1,923)
Income and
other taxes 1,076 (132) 192 (1,169)
Other 665 (2,941) 424 (2,717)
------------------------- ------------------------
Total change in
non-cash operating
assets and
liabilities (1,894) 9,192 5,025 690

------------------------- ------------------------
Net cash provided by
operating activities 10,670 16,243 19,812 14,519
------------------------- ------------------------

Cash flows from
investing activities
Proceeds on disposal
of long-lived assets 17 8 23 8
Purchase of property,
plant and equipment (208) (834) (446) (1,241)
------------------------- ------------------------
Net cash used in
investing activities (191) (826) (423) (1,233)
------------------------- ------------------------

Cash flows from
financing activities
Repayment of
long-term debt (22) (34) (43) (58)
Repayment of
revolving credit (1,435) (9,846) (11,023) (760)
Distributions to
unitholders (5,490) (5,479) (10,977) (12,786)
------------------------- ------------------------
Net cash used in
financing activities (6,947) (15,359) (22,043) (13,604)
------------------------- ------------------------

Effect of exchange
rate changes on cash
and cash equivalents (45) (164) 147 (187)
------------------------- ------------------------
Increase (decrease)
in cash 3,487 (106) (2,507) (505)
Cash, beginning
of period 38 656 6,032 1,055
------------------------- ------------------------
Cash, end of period $ 3,525 $ 550 $ 3,525 $ 550
------------------------- ------------------------
------------------------- ------------------------

Supplemental Cashflow
Information:
Interest paid $ 1,362 $ 965 $ 2,549 $ 1,951
------------------------- ------------------------
------------------------- ------------------------

Income taxes paid $ 61 $ 82 $ 144 $ 724
------------------------- ------------------------
------------------------- ------------------------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND

Notes to the Interim Consolidated Financial Statements

For the three month and six month periods ended June 30, 2008 and June 30, 2007

(In thousands of dollars, except per unit amounts)

(Unaudited)

1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Interim Consolidated Financial Statements of Tree Island Wire Income Fund (the "Fund") have been prepared by management in accordance with Canadian generally accepted accounting principles ("GAAP") on a basis consistent with those followed in the most recent audited annual consolidated financial statements except as described in note 4. These Interim Consolidated Financial Statements do not include all the information and note disclosures required by GAAP for annual consolidated financial statements and therefore should be read in conjunction with the December 31, 2007 audited consolidated financial statements of the Fund and the notes below.

Operating results for the interim periods are not necessarily indicative of the result that may be expected for the full fiscal year ending December 31, 2008. Our operations are impacted by the seasonal nature of the various industries we serve, primarily the Canadian construction and agriculture industries. Accordingly, fourth quarter results are traditionally lower than other quarters due to the onset of Winter and the corresponding reduction in consumer activities.

2. FORMATION OF THE FUND

The Fund is an unincorporated open-ended, limited purpose trust established under the laws of the Province of British Columbia pursuant to a Declaration of Trust dated September 30, 2002.

Each unitholder participates pro rata in distributions of net earnings and, in the event of termination of the Fund, participates pro rata in the net assets remaining after satisfaction of all liabilities.

The Fund owns 100% of the common shares of Tree Island Industries Ltd. ("TIL").

3. CHANGE IN MEASUREMENT CURRENCY

Universe Metal New Materials Co. (UM) had previously used the Hong Kong dollar as its measurement currency and had been considered self-sustaining foreign operation. This entity had been accounted for using the current rate method. Under this method assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenue and expense items including depreciation and amortization are translated at the exchange rate in effect on the dates on which such items are recognized in income during the period.

Following the lending of funds to UM, the Fund decided that UM is an integrated foreign operation. UM is now accounted for using the temporal method. Under this method monetary items are translated using the exchange rates in effect at the balance sheet date; non monetary items are translated using historical exchange rates. Revenue and expense items are translated at approximate exchange rates prevailing at the time the transactions occurred; and depreciation and amortization of assets are translated at historical exchange rates using the same exchange rate as the assets to which they relate.

The change in measurement currencies has been applied starting April 1, 2008.

4. ADOPTION OF NEW ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING POLICIES

Effective January 1, 2008 the Fund adopted the following new recommendations of the Canadian Institute of Chartered Accountants (CICA).

(a) Capital

CICA Handbook Section 1535, Capital Disclosures establishes standards for disclosing information about an entity's capital and how it is managed to enable users of financial statements to evaluate the entity's objectives, policies and procedures for managing capital. This new disclosure is provided in note 5.

(b) Financial Instruments

CICA Handbook Section 3862, Financial Instruments - Disclosures requires entities to provide disclosures in their financial statements that enable users to evaluate:

(i) the significance of financial instruments for the entity's financial position and performance;

(ii) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks.

CICA Handbook Section 3863, Financial Instruments - Presentation establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equity, the classification of related interest, dividends, losses and gains, and the circumstances in which financial assets and financial liabilities are offset. The adoption of CICA Handbook Section 3863 did not impact the Fund's financial statements.

(c) Inventories

CICA Handbook Section 3031, Inventories introduces significant changes to the measurement and disclosure of inventory. The measurement changes include; the elimination of LIFO, the requirement to measure inventories at the lower of cost and net realizable value, the allocation of overhead based on normal capacity, the use of the specific cost method for inventories that are not ordinarily interchangeable or goods and services produced for specific purposes, the requirement for an entity to use a consistent cost formula for inventory of a similar nature and use, and the reversal of previous write-downs to net realizable value when there is a subsequent increase in the value of inventories. Disclosures of inventories have also been enhanced. Inventory policies, carrying amounts, amounts recognized as an expense, write-downs and the reversals of write-downs are required to be disclosed. The adoption of CICA Handbook Section 3031 did not impact the Fund's financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

The CICA has recently issued a new accounting standard, Section 3064 - "Goodwill and Intangible Assets", which establishes standards for the recognition, measurement, presentation and disclosure by profit-oriented enterprises for goodwill, subsequent to initial recognition, and for intangible assets, subject to certain exceptions. Section 1000 - "Financial Statement Concepts" was also amended to provide consistency with this new standard. These standards are effective for the Fund beginning January 1, 2009. The Fund is currently assessing the impact of these standards on its consolidated financial statements.

5. CAPITAL DISCLOSURES

The capital structure of the Fund consists of its unitholders' equity, long-term debt, and short-term borrowing.

The Fund's objectives when managing its capital are:

- To maintain a strong capital base so as to preserve and enhance investor, creditor, and market confidence and to sustain future development of the business;

- To manage capital in a manner that will comply with its external financial covenants and distribution requirements.

The Fund manages its capital structure in accordance with these objectives, as well as considerations given to changes in economic conditions and the risk characteristics of the underlying assets.

Under the revolving credit facility, the Fund is required to comply with a minimum ratio of free cash flow to interest expense. To date, the Fund has complied with this externally imposed financial covenant. The Fund's loan agreement has a threshold for distributions. In the event that distributions exceed the threshold they require the consent of our lender. For the months of January, February, March and April of 2008, distributions exceeded this threshold, and consent from our lender was provided. During April 2008 the credit agreement was amended to allow distributions to exceed distributable cash generated for January, February and March of each year. This excess may not exceed $300 and distributable cash generated must at least equal distributions by June of the same year.

The Fund will become subject to Canadian corporate income taxes beginning in 2011. This may result in changes to the capital structure of the Fund or the nature of the Fund itself.

6. FINANCIAL INSTRUMENTS

The Fund's financial instruments include cash, accounts receivable and payable, revolving credit, accrued liabilities, interest payable, and long-term debt. All financial instruments are classified into one of five categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments are measured in the balance sheet either at fair value except for loans and receivables, held-to-maturity investments and other financial liabilities which are measured at amortized cost. Transaction costs are included in the carrying value of financial instruments. Subsequent measurement and changes in fair value will depend on their initial classification, as follows: held-for-trading financial assets are measured at fair value and changes in fair value are recognized in net income. Available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the instrument is derecognized or impaired.

The Fund has classified its cash as held-for-trading. Accounts receivable are classified as loans and receivables. Revolving credit, accounts payable, accrued liabilities, interest payable and long-term debt are classified as other liabilities, all of which are measured at amortized cost.

Carrying value and fair value of financial assets and liabilities are summarized as follows:



Carrying value Fair value
Classification $ '000 $ '000
--------------------------------------------------------------------------

Held-for-trading 3,525 3,525
Loans and receivables 44,006 44,006
Other liabilities 134,232 134,232


The carrying values of cash, accounts receivable, amounts payable under the revolving lines of credit, accounts payable, interest payable and long-term debt approximate their fair values due to the immediate or short-term maturity of these financial instruments.

Under Section 3855, certain of the Fund's non-financial contracts for forward purchases of zinc and natural gas meet the definition of a derivative but qualify for an expected usage exemption as they are settled through physical delivery for use in the normal course of business.

Financial instruments risk exposure and management

The Fund is exposed to various risks associated with its financial instruments. These risks are categorized as credit risk, liquidity risk and market risk.

Credit Risk

The Fund is exposed to credit losses in the event of non-payment of accounts receivable by Tree Island Industries Ltd. and its subsidiary Universal Metal New Material Co. ("UM"), and Tree Island Wire (USA) Inc. customer accounts. However Tree Island Industries Ltd., and Tree Island Wire (USA) Inc. normally sell to well established customers of high credit quality. The credit worthiness of customers is assessed using credit scores supplied by a third party, and through direct monitoring of their financial well-being on a continual basis. The Fund establishes guidelines for customer credit limits and should thresholds in these areas be reached, appropriate precautions are taken to improve collectability. The trade accounts receivable are aged as follows at June 30, 2008:



Up to date $ 33,840
Under 30 days past due 10,233
30-60 days past due 1,779
61-90 days past due 603
Over 91 days past due 733
Reserves and Other (3,182)
---------
$ 44,006
---------
---------


The maximum credit risk that the Fund is exposed to by way of its accounts receivable is equal to the carrying amount of $44,006 at June 30, 2008. The Fund believes that it has no significant concentrations of credit risk related to its accounts receivable.

Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations associated with its financial liabilities. The table below summarizes the future undiscounted cash flow requirements for financial liabilities at June 30, 2008:



less less less
than than than
$ '000 1 month 1 year 5 years Total
--------------------------------------------------------------------------
Revolving credit $ - $ - $ 38,617 $ 38,617
Accounts payable and
accrued liabilities 68,478 26,821 - 95,299
Interest payable 278 - - 278
Long-term debt 7 31 - 38
------------------------------------------
$ 68,763 $ 26,852 $ 38,617 $ 134,232
------------------------------------------
------------------------------------------


The Fund monitors and manages its liquidity risk within the constraints of its available credit facilities. The operating requirements of the Canadian operations and its subsidiary UM are funded by a secured CDN $ 44.5 million revolving credit facility. The operating requirements of the US operations are funded by a secured US $44.0 million revolving credit facility. These credit facilities will expire in July 2012. The amounts available from these facilities are limited to the amount of the calculated borrowing base. The borrowing base is calculated as 85% of eligible receivables, plus 85% of the net orderly liquidation of inventory plus a percentage of fixed assets to a maximum of CDN $4.5 million for the Canadian facility and US $4.0 million for the US facility.

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 which are explained as follows:

Foreign currency exchange rates

The Fund's U.S. dollar-denominated accounts receivable, accounts payable and accrued liabilities, interest payable and long-term debt are exposed to foreign currency exchange rate risk because the value of these financial instruments will fluctuate with changes in the U.S./Canadian dollar exchange rate. For each US$0.01 decrease in the U.S./Canadian dollar exchange rate (i.e. the US dollar strengthening against the Canadian dollar), the net value of the Fund's financial instruments outstanding as of June 30, 2008 would increase by approximately $762 (holding all variables constant excluding foreign exchange), which would be charged to net income.

The Fund's RMB denominated accounts receivable, accounts payable and accrued liabilities, interest payable and long-term debt are exposed to foreign currency exchange rate risk, however this amount is not significant.

Interest rates

The Fund is exposed to interest rate risk on its Canadian and U.S. revolving loan facilities. The Fund's Canadian revolving loan bears interest at the Canadian prime rate plus 0.50% per annum for current asset revolving credit advances and at the Canadian prime rate plus 1.00% per annum for fixed asset revolving credit advances or at the election of the Fund, the Bankers' Acceptance rate plus 1.75% per annum for current asset revolving credit advances or at the Bankers' Acceptance rate plus 2.25% for fixed asset revolving credit advances.

The Fund's U.S. revolving loan bears interest at the U.S. index rate plus 0.50% per annum for current asset revolving credit advances and at the U.S. Index rate plus 1.00% per annum for fixed asset revolving credit advances or at the election of the Fund, the LIBOR rate plus 1.75% per annum for current asset revolving credit advances or the LIBOR rate plus 2.25% per annum for fixed asset revolving credit advances.

A 1% (i.e. 100 basis point) increase in the interest rate would cause interest expense to increase by approximately $400 per annum based on the revolver balances as at June 30, 2008 and assuming these balances represent average balances per annum.

7. LONG-TERM UNIT INCENTIVE PLAN

On May 11, 2007, unitholders approved the Tree Island Wire Income Fund Long-Term Unit Incentive Plan. This plan provides for the allotment of up to 500,000 Phantom Units to designated employees of Tree Island Industries Ltd. (each a "Member") at the discretion of the Board of Trustees. The value of the Phantom Units will appreciate or depreciate with increases or decreases in the market price of the Fund's units.

The Board, at its discretion, may attach certain terms or conditions to the vesting and may accelerate the vesting period. The Phantom Units granted in 2007 vest one-third on the date of the grant and one-third on each of the first and second anniversary date of the grant. The Phantom Units granted in 2008 do not vest at the time of the grant but will vest one-third on each of the first, second and third anniversary dates of the grant. Vested Phantom Units may be converted to regular units at any time after vesting. Conversion to regular units will be satisfied by the Fund issuing to the member that number of units equal to the number of vested Phantom Units then credited to the Member. All of the Phantom Units issued to date will be converted by March 15, 2010.

The unvested Phantom Units earn additional Phantom Units for the distributions that would otherwise have been paid on the Phantom Units if they were regular units. These additional Phantom Units vest immediately. The number of additional Phantom Units is calculated based on dividing the value of the distribution by the weighted average market price of the Fund units in the 20 days immediately preceding each distribution.

Phantom Units granted are considered to be in respect of future services and are recognized in unit-based compensation costs over the vesting period. Compensation costs is measured based on the market price of the Fund's units on the date of the grant of the Phantom Units.

On March 28, 2008 the Fund granted 123,750 Phantom Units at a grant value of $574 and on June 27, 2008 12,500 units at a grant value of $73. None of these units vested at the time of the grant. These unvested Phantom Units are recognized in compensation costs on a straight-line basis over the 36 month period vesting period. Compensation expense related to Phantom Units for the three month period ended June 30, 2008 was $137 ($290 for three month period ended June 30, 2007) and for the six month period ended June 30, 2008 was $226 ($290 for three month period ended June 30, 2007) and is included in selling, general and administrative expense. Non-cash distributions for the three-month period ended June 30, 2008 was $52 ($6 for three month period ended June 30, 2007) and for the six month period ended June 30, 2008 was $75 ($6 for the six month period ended June 30, 2007).

On February 28, 2008, 42,047 Phantom Units were converted to regular units resulting in a reclassification of $317 from contributed surplus to unitholders' capital.

The Fund's obligation to issue units on the vesting of Phantom Units is an unfunded and unsecured obligation of the Fund.



Six Months Six Months
Ended Ended
June 30, 2008 June 30, 2008
------------- -------------

Vested Unvested

Balance, beginning of period 53,643 91,667

Phantom Units converted to regular units on
February 28, 2008 (42,047) -

Phantom Units granted on March 28, 2008 - 123,750

Additional Phantom Units earned in respect
of distributions on Phantom Units - Q1 2008 4,962 -

Phantom Units vested on May 16, 2008 33,333 (33,333)

Additional Phantom Units earned in respect
of distributions on Phantom Units - Q2 2008 11,574 -

Phantom Units granted on June 27, 2008 - 12,500

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

Balance, end of period 61,465 194,584
----------------------------
----------------------------


8. INCOME TAXES

Income tax obligations relating to distributions from the Fund are the obligations of the unitholders and, accordingly, no provision for income taxes on the income of the Fund has been made. A provision for income taxes is recognized for TIL and its wholly-owned subsidiaries, as TIL and its wholly-owned subsidiaries are subject to tax. The provision for the period is divided between current and future taxes as follows:



Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- -------- -------- --------

Current tax (expense) recovery $ (1,135) $ 66 $ (335) $ 461
Future tax (expense) recovery (531) 841 746 1,545
--------- -------- -------- --------
$ (1,666) $ 907 $ 411 $ 2,006
--------- -------- -------- --------
--------- -------- -------- --------


The recovery of income taxes varies from the amount that would be expected if computed by applying the Canadian federal and provincial and US federal and state statutory income tax rates to the income before income taxes as shown in the following table:



Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------

Income before provision for
income taxes $ 10,671 $ 2,767 $ 9,128 $ 5,065
Income of the Fund subject to
tax in the hands of the
recipient (5,574) (5,424) (10,213) (11,330)
--------- --------- --------- ---------

Income (loss) of wholly-owned
subsidiary companies
before income taxes 5,097 (2,657) (1,085) (6,265)

Tax Rate 31.0% 34.1% 31.0% 34.1%

Expected (expense) recovery
of income taxes $ (1,580) $ 907 $ 336 $ 2,138
Increased (Reduced) by:
Revisions of prior period
estimates (95) (39) (98) (39)
Expenses not deductible for
tax (28) (16) (16) (45)
Differential tax rates on U.S.
and Chinese subsidiaries (76) 80 55 155
Reduction in statutory future
income tax rate 68 84 141 61
Other 45 (109) (7) (264)
--------- --------- --------- ---------
Income tax (expense) recovery $ (1,666) $ 907 $ 411 $ 2,006
--------- --------- --------- ---------
--------- --------- --------- ---------


On October 31, 2006, the Canadian federal government announced proposed legislation to tax distributions made by income trusts. This legislation has now received royal assent and as a result income trusts will be subject to tax at corporate rates on the taxable portion of their distributions and unitholders will be taxed as if they have received a dividend equal to the taxable portion of their distributions. There will be a transitional period so that the Fund will not be subject to the tax until 2011. The legislation has had no material effect on the Fund's financial position, result of operations or cash flows.

9. DEFERRED GAIN ON SALE OF PURCHASE OPTION

During 2006 the Fund sold a purchase option on its leased property in Pomona, California. The net pre-tax cash proceeds received on the sale was $5,264. The sale was treated as a sale and lease back and the gain totaling $5,264 has been deferred and amortized over the ten year life of the new lease entered into with the new owners of the property. During the three month period ended June 30, 2008 an amount of $118 ($127 for three month period ended June 30, 2007) and during the six month period ended June 30, 2008 an amount of $234 ($263 for the six month period ended June 30, 2007) of the deferred gain was amortized and included in income.

10. POST-RETIREMENT BENEFITS

(a) The Fund has three defined contribution pension plans. Contributions made by the Fund amounted to $442 for the three months ended June 30, 2008 ($424 for the three months ended June 30, 2007) and $864 for the six months ended June 30, 2008 ($833 for the six months ended June 30, 2007). Funding obligations are satisfied upon making contributions.

(b) The Fund had one multi employer defined benefit pension plan. Contributions made by the Fund amounted to $nil for the three months ended June 30, 2008 and June 30, 2007 and $nil for the six months ended June 30, 2008 ($3 for the six months ended June 30, 2007). Effective July 15, 2007, the Fund withdrew from the multi-employer defined benefit pension plan.

11. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Litigation and claims

The Fund is party to certain legal actions and claims, none of which individually, or in the aggregate, is expected to have a material adverse effect on the Fund's financial position, results of operations or cash flows.

(b) Commitments

The Fund and its wholly-owned subsidiaries have committed to rod purchases totaling $36,906 (US$28,437 and RMB53,430), finished goods purchases totaling $1,221 (US$1,199), zinc purchases totaling $2,502 (US$2456) and gas purchases totaling $213 (US$209) at June 30, 2008.

The Fund has two exclusive Supply, Production and Distributorship Agreements. For the first agreement the Fund has committed to pay processing fees of between $4,800 (RMB32,742) and $7,000 (RMB47,749) over a two-year period from January 1, 2008 to December 31, 2009. Of the amount committed, $1,286 (RMB8,657) has been paid in the first six months ended June 30, 2008. For the second agreement the Fund has committed to pay $297 (RMB2,000,000) for purchase of raw material and processing fee and a refundable deposit of $104 (RMB700,000). The second agreement runs over a two year period from April 22, 2008 to April 21, 2010.

The Fund and its subsidiaries also have various operating lease agreements with remaining terms of up to ten years with varying renewal options. Annual lease rental payments due under non-cancelable operating leases are as follows:



July - December 2008 $ 1,486
2009 2,870
2010 2,708
2011 2,334
2012 1,448
Thereafter 2,934
---------
$ 13,780
---------
---------


12. SEGMENTED INFORMATION

(a) General information

The Fund operates primarily within one industry, the steel wire and fabricated wire products industry with no separately reportable business segments. The products are sold primarily to customers in the United States, Canada and China.

(b) Geographic information


Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
SALES (i)
Canada $ 28,258 $ 21,033 $ 51,177 $ 40,522
United States 62,546 48,469 112,645 92,891
China 2,609 - 4,374 -
Other 1,575 179 3,213 1,162
--------- --------- --------- ---------
$ 94,988 $ 69,681 $ 171,409 $ 134,575
--------- --------- --------- ---------
--------- --------- --------- ---------


As at
As at December
June 30 31
2008 2007
--------- ---------
PROPERTY, PLANT AND
EQUIPMENT (ii)
Canada $ 45,018 $ 47,696
United States 12,562 14,254
China 317 283
--------- ---------
$ 57,897 $ 62,233
--------- ---------
--------- ---------

GOODWILL (ii), (iii)
Canada $ 23,463 $ 23,463
United States 17,993 17,435
China 5,538 5,536
--------- ---------
$ 46,994 $ 46,434
--------- ---------
--------- ---------

(i) Sales are attributed to geographic areas based on the location of
customers.

(ii) Property, plant and equipment and goodwill are attributed to
geographic areas based on the location of the subsidiary company
owning the assets.

(iii) The change in goodwill arises from changes in exchange rates used
to translate goodwill denominated in a foreign currency.


13. RESTRUCTURING COSTS

In September 2007 the Fund announced that it would consolidate operations at its US plants and offices in order to realize efficiencies resulting from its acquisition of USA Wire and Baoan International. In November 2007 the Fund announced additional restructuring measures by reducing the number of employees in order to reduce costs.

The portion of the costs incurred that related to restructuring an acquired company were allocated to the purchase price of Baoan International.

The following table provides a summary of the costs included in the consolidated statements of operations and cash payments made:



Total Total Total Grand
Q2 2008 Q1 2008 2007 Total
--------- --------- --------- ---------

Employee termination
benefits $ - $ - $ 250 $ 250
Costs of relocation of
equipment 198 34 658 890
Lease costs 413 81 250 744
--------- --------- --------- ---------
Total costs expensed in the
period $ 610 $ 115 $ 1,158 $ 1,883
--------- --------- --------- ---------

--------- --------- --------- ---------
Paid $ 61 $ 511 $ 577 $ 1,149
--------- --------- --------- ---------


As at
As at As at December
June 30, March 31, 31,
2008 2008 2007
--------- --------- ---------

Net liability, end of period $ 735 $ 186 $ 581


Contact Information