Tree Island Wire Income Fund
TSX : TIL.UN

Tree Island Wire Income Fund

March 25, 2008 21:20 ET

Tree Island Announces Fourth Quarter and Full Year 2007 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 25, 2008) - Tree Island Wire Income Fund (TSX:TIL.UN) will hold a conference call and webcast to discuss fourth quarter and full-year 2007 financial results on Wednesday, March 26th, 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 April 9, 2008 at: 1-800-408-3053 or 416-695-5800, Passcode: 3256515.

The live and archived webcast can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=127545.

Tree Island Wire Income Fund (the "Fund") today released fourth quarter and full-year 2007 financial results. 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.

Fourth Quarter 2007 Highlights

For the three months ended December 31, 2007

- Fourth quarter sales volumes increased 27.6% to 53,138 tons, from 41,648 tons in the fourth quarter of 2006

- Fourth quarter revenue increased 10.8% to $55.9 million, from $50.4 million in Q4 2006

- Fourth quarter normalized selling, general and administrative (SG&A) expenses(1) decreased to $4.4 million from $4.9 million in Q4 2006, an improvement of 8.9%

- Fourth quarter normalized EBITDA, including foreign exchange gains(2), increased 79%, to $2.7 million, from $1.5 million in Q4 2006

- Fourth quarter net income increased $0.2 million ($0.01 per unit), from a net loss of $1.0 million ($0.05 per unit) in Q4 2006

- Fourth quarter normalized distributable cash(3) increased 50% to $0.135 per unit, from $0.09 per unit in Q4 2006

(1) Normalized SG&A expenses exclude $0.9 million of management severance costs, as well as expenses related to the March 4, 2008 special unitholder meeting (the "special meeting") incurred in the Q4 2007 period.

(2) Normalized EBITDA, including foreign exchange gains, exclude $1.0 million of costs related to the consolidation of the company's Corona and Ferndale operations (plant consolidation), management severance of $0.5 million, and $0.4 million of expenses related to the special meeting in the Q4 2007 period.

(3) Normalized distributable cash per unit excludes $1.9 million of costs related to plant consolidation, management severance and the special meeting during the 2007 period and excludes a $3.2 million after-tax gain from the sale of a property option during the Q4 2006 period.

- EBITDA and distributable cash are non-GAAP measures. See "Non-GAAP Measures" below.

"We continued to see the benefits of our three-step strategy again this quarter," said Dan McAtee, President and CEO of Tree Island Industries and a trustee of the Fund. "Despite extremely challenging market conditions, we posted a 27.6% fourth quarter year-over-year increase in sales volumes and a 10.8% increase in revenue. We also recorded a 79% improvement in EBITDA, including foreign exchange gains, after normalizing for plant consolidation, management severance costs and initial expenses related to the special unitholder meeting. While we are encouraged to see our cost control efforts starting to benefit EBITDA, we recognize we have further to go in reducing costs and improving profitability."

"The top-line growth in our business is directly linked to our expanding product basket and market reach. Tree Island now offers a full range of domestic and imported wire products, and we are making these products available to customers worldwide. We are also marketing more effectively as we focus closely on customer needs in the five key markets we serve," added Mr. McAtee.

"These strategies helped us mitigate exceptionally weak market conditions to some extent during the period. Fourth quarter housing starts in our key Western US market declined by 34.8% compared to a year ago, raw material costs were dramatically higher, import competition continued to increase and the Canadian dollar surpassed the US dollar in value," said Mr. McAtee. "The fourth quarter brought the added challenge of the special meeting, which created a significant business distraction, increased expenses for the period and will add an estimated $1.3 million of additional costs in the first quarter of 2008. In addition, we incurred expected costs as we consolidated our operations and pursued synergies from our July acquisition of Baoan Trading and USA Wire. While we will continue to feel the impact of costs related to the special meeting in our first quarter results, the meeting is now concluded and our restructuring is complete. Going forward, we can focus on profit improvement," said Mr. McAtee.

"Implementation of the third step of our strategy, a 2008 full-year exercise, will be the key to this objective. Steps one and two, which involved reorganizing our business into one focused team and expanding our product and geographic reach to meet customer needs, were designed to drive top-line growth. These steps are now complete and generating strong sales momentum. Our third step is to better balance our product portfolio around our five key markets and fine tune the profitability that can be generated from each. This will be critical to improving our margins and offsetting the impact of ever higher raw material costs. Simultaneously, we will continue to employ aggressive cost control strategies and ensure we realize the $2.5 million in annual savings made possible by the acquisition and restructuring. While we expect to face continued market challenges in 2008, we believe we will approach these challenges as a stronger and ultimately more profitable company," said Mr. McAtee.



Results from Operations

3 Months Ended Dec 31 12 Months Ended Dec 31
2007 2006 2007 2006
--------------------------------------------------------------------------
Sales Volumes - Tons 53,138 41,648 226,672 228,317
Revenue 55,858 50,435 264,164 271,488
Cost of Goods Sold (53,402) (45,011) (233,458) (225,784)
Depreciation (3,443) (4,081) (15,396) (18,683)
-------------------------------------------------
Gross Profit (987) 1,343 15,310 27,021
Gross Profit per Ton (19) 32 68 118
Selling, General
and Administrative
Expenses (5,316) (4,854) (20,020) (17,677)
-------------------------------------------------
Operating Profit (6,303) (3,511) (4,710) 9,344
Foreign Exchange Gain 3,588 925 12,253 6,212
Financing Expenses (1,314) (753) (5,059) (3,230)
Loss on Sale of Fixed
Asset (99) - (101) -
Amortization of
Intangible assets (306) (566) -
Amortization of
Deferred Gain 112 66 498 66
Recovery of Income
Taxes 4,479 2,245 8,103 3,626
--------------------------------------------------------------------------
Net Income (Loss) 157 (1,028) 10,418 16,018
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating Profit (6,303) (3,511) (4,710) 9,344
Addback Depreciation 3,443 4,081 15,396 18,683
-------------------------------------------------
EBITDA (2,861) 570 10,686 28,027
Foreign Exchange Gain 3,588 925 12,253 6,212
EBITDA Plus Foreign
Exchange Gains 727 1,495 22,939 34,239
Costs relating to plant
consolidation,
management severance
and the special
meeting (1) 1,948 - 2,051 -
Normalized EBITDA Plus
Foreign Exchange 2,675 1,495 24,990 34,239
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Normalized Selling
General and
Administrative
Expenses 4,423 4,854 19,127 17,677
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Distributable Cash
per Unit 0.0764 0.2337 0.9896 1.4735
Distributable Cash
Paid or Payable
per Unit 0.25 0.3750 1.0833 1.5000
Distribution
Payout % (2) 327% 160% 109% 102%
--------------------------------------------------------------------------
Normalized
Distributable Cash
per Unit 0.1345 0.0897 1.0508 1.3294
Normalized
Distribution
Payout % (2) 186% 418% 103% 113%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total Assets 241,611 240,791 241,611 240,791
Revolving Credit
(Net of Cash) 43,435 18,775 43,435 18,775
--------------------------------------------------------------------------
Long Term Debt 78 184 78 184
--------------------------------------------------------------------------

(1) For the three months ended December 31, 2007, costs included $1.0
million for plant consolidation, $0.5 million for management severance
and $0.4 million for the special meeting. For the 12 months ended
December 31, 2007, costs included $1.2 million for plant consolidation,
$0.5 million for management severance and $0.4 million for the special
meeting.
(2) Distribution Payout % is calculated as distributions paid or payable
per unit divided by distributable cash generated per unit. Normalized
Distribution payout ratio % is calculated as distributions paid or
payable per unit divided by normalized distributable cash generated
per unit.


Fourth Quarter Operating Results

For the three months ended December 31, 2007, Tree Island reported revenue of $55.8 million, up 10.8% from $50.4 million in the same period in 2006. This improvement reflects a 27.6% increase in sales volumes, partially offset by a 13% 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 some of the assets of Baoan International Investment Co. and 100% of the shares of Universal Metal New Material Co. (the "BII/UM acquisition"). It also reflects expansion into non-traditional markets and a reorganization of the sales force to align the sales effort with industry segments. Tree Island's success in increasing sales volumes was particularly significant given the sharp drop in residential housing starts during the period. According to the US Census Bureau, residential housing starts in the Western United States-a key market for Tree Island's stucco reinforcing products and collated nails-fell by 34.8% in the fourth quarter.

Fourth quarter raw material costs were higher year-over-year. Carbon rod costs (representing 41.1% of Q4 2007 cost of goods sold) increased by 11.5% per ton compared to Q4 2006, zinc costs (representing 3.7% of Q4 2007 cost of goods sold) increased by 11.7% and stainless steel rod costs (representing 7.8% of Q4 2007 cost of goods sold) increased by 28.4% as a result of nickel surcharges. The company was successful in passing the nickel surcharges on to customers and recovered a portion of the increased carbon rod and zinc costs through higher product selling prices.

The Canadian dollar strengthened significantly during the period with the average Canadian to US dollar exchange rate moving from an average of $1.05 in Q3 2007 to an average of $0.98 in Q4 2007. In the short term, a stronger Canadian dollar negatively influences Tree Island's EBITDA by reducing the value of cash inflows from Canadian-based US dollar sales. Over time, the benefit of raw materials purchased in US dollars mitigates some of this impact.

After normalizing for management severance and special meeting costs, SG&A expenses declined to $4.4 million from $4.9 million in Q4 2006. The 8.9% improvement reflects a $1.1 million reduction in the cost of Tree Island's variable compensation plan relating to the decision to not pay short-term bonuses in 2007. It also reflects the benefit of the stronger Canadian dollar on the conversion of US division costs, partially offset by the inclusion of the results from the BII/UM acquisition.

Fourth quarter EBITDA, prior to normalizing for unusual expenses and before adding foreign exchange gains, was a loss of $2.9 million, $3.4 million below Q4 2006. The change in EBITDA reflects the impact of marginally lower sales volumes, a strengthening Canadian dollar, a decline in gross profit resulting from higher material costs and marginally higher SG&A expenses, as well as $1.9 million in costs relating to plant consolidation, management severance and the special meeting.

Fourth quarter normalized EBITDA, including foreign exchange gains, increased 79% to $2.7 million from $1.5 million in 2006. This increase reflects increased sales volumes and revenue and a higher gain on foreign exchange conversions, partially offset by higher raw material costs, lower SG&A expenses and the negative impact of the stronger Canadian dollar.

The Fund reported fourth quarter net income of $0.2 million ($0.01 per unit), compared to a net loss of $1.0 million ($0.05 per unit) during the same period in 2006. This improvement reflects the higher gain on foreign exchange conversions, partially offset by lower operating profit and higher financing costs.

For the three months ended December 31, 2007, the Fund generated normalized distributable cash of $0.135 per unit, and declared distributions of $0.25 per unit, for a payout ratio of 186%. By comparison, the Fund generated normalized distributable cash of $0.09 per unit, and declared distributions of $0.375 per unit for a payout ratio of 418% during the same period in 2006.

12 Month Operating Results

For the 12 months ended December 31, 2007, Tree Island generated revenue of $264.2 million, down 2.7% from $271.5 million in 2006. The decrease in revenue primarily reflects the negative impact of a stronger Canadian dollar and a 0.7% decline in sales volumes, partially offset by higher product selling prices.

The decline in sales volumes is viewed as modest given the 27.8% year-over-year drop (per the US Census Bureau) in residential housing starts in the Western United States, as well as the negative impact of imports on bright and galvanized wire. The BII/UM acquisition was largely responsible for this favourable performance, with the new operations contributing 11.1% of 2007 sales volumes. Tree Island's sales from imports also grew from approximately 0.5% of total sales in 2006 to 8.1% in 2007, largely as a result of the acquisition. Sales volumes further benefited from Tree Island's expansion into non-traditional markets and the reorganization of the sales force to better align with industry segments.

SG&A expenses totaled $20 million in 2007, compared to $17.7 million in 2006. Normalized SG&A expenses for 2007 were $19.1 million. The increase in SG&A expenses reflects strategic initiatives including the addition of operations from the BII/UM acquisition and restructuring-related severance costs, as well as initial costs related to the special meeting. These increases were partially offset by the benefit of the stronger Canadian dollar on the conversion of US division costs and a reduction in the cost of the variable compensation plan.

Full-year normalized EBITDA, including foreign exchange gains, was $25.0 million compared to $34.2 million in 2006. The change in EBITDA reflects the significant increase in raw material costs, higher SG&A costs, the unfavourable impact of the stronger Canadian dollar and slightly lower sales volumes for the 12 months, partially offset by a higher gain on foreign exchange conversions and higher prices for some products.

Net income for 2007 totaled $10.4 million, ($0.48 per unit), compared to $16.0 million ($0.73 per unit) in 2006. The decrease in net income reflects the net operating loss and higher financing charges, partially offset by higher gains on foreign exchange conversions and an increase in income tax recovery.

For the 12 months ended December 31, 2007, the Fund generated distributable cash of $0.990 per unit, and declared distributions of $1.08 per unit, for a payout ratio of 109%. On a normalized basis, the Fund generated distributable cash of $1.05 and declared distributions of $1.08 per unit for a payout ratio of 103%. Distributions declared during 2007 included two months of distributions at the previous rate of $0.125 per unit and 10 months at the current rate of $0.0833 per unit. Had distributions been set at the revised rate for the full 12 months, the year-to-date payout ratio would have been 101% (95% on a normalized basis). The Fund's payout ratio since inception is 83%, which is within the target range of 75% to 85%.

For the period between acquisition closing on July 6, 2007 and year end, the BII/UM acquisition was accretive to distributable cash per unit by $0.005 per unit, before consolidation synergies. Further synergies from this acquisition are expected to be realized in 2008.

Outlook

The Fund's outlook for 2008 remains cautious. Housing starts in the US Western region continue to decline, reducing demand for traditional residential construction products. The US economy is also slowing with a potentially negative impact on a broader range of Tree Island products. More worrisome still is the significant escalation in raw material costs. Prices for carbon rod, Tree Island's primary raw material, have increased 35% since year-end for orders placed in the first quarter and are expected to continue to rise through the first half of 2008. Supply of carbon rod is also becoming constrained. Tree Island is working to keep pace with the raw material inflation via ongoing price increases on carbon-based products, however this process is proving difficult in the uncertain North American marketplace.

In addition to these challenges, import competition and customer migration to low-cost producing nations continue to place volume and pricing pressure on bright and galvanized wire, and foreign exchange fluctuations remain a concern. Tree Island's first quarter 2008 results will be further impacted by approximately $1.3 million in additional costs related to the special meeting, as well as by the distraction to management created by the special meeting.

On a positive note, Tree Island's sales momentum has continued to build in early 2008 as strategic initiatives gain further traction. In addition, the anti-dumping action initiated by the US Department of Commerce against nails imported from China and the United Arab Emirates is expected to stabilize and gradually restore lost margins on domestic nails. Tree Island's Chinese manufacturing operations do not produce nails and will not be affected by this action.

Moving into 2008, the consolidation and restructuring of Tree Island's North American operations is now complete and is beginning to generate operational savings. The company will continue to implement its three-step strategy of strengthening the core business, expanding market reach and diversifying its customer base with the purpose of enhancing longer-term results. As part of this strategy, management and the Board are actively reviewing a number of opportunities to enhance unitholder value.

Said Mr. McAtee, "We have demonstrated that we can achieve growth in a declining market. We are now focused on increasing our efforts to control costs, ensuring our pricing actions keep pace with rapidly rising raw material costs, and pursuing opportunities to secure maximum value for our unitholders."

The Fund continues to monitor distribution levels in light of current market and operating conditions. 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%.

Fund Profile

The Fund holds a 100% ownership interest in Tree Island Industries Ltd., one of North America's largest producers of wire and fabricated wire products. The Fund was launched on November 12, 2002 with the completion of an initial public offering. There are currently 21,960,447 units of the Fund outstanding. The Fund's performance depends entirely on the performance of Tree Island.

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, K-Lath, Halsteel, TI Wire, Industrial Alloys, USA-Wire 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 our products, supplies of and costs for our 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 our publicly filed materials.

Interim Consolidated Financial Statements of

TREE ISLAND WIRE INCOME FUND

December 31, 2007



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

--------------------------------------------------------------------------
As at As at
December 31 December 31
2007 2006
----------- -----------
Assets

Current
Cash $ 6,032 $ 1,055
Accounts receivable 22,641 20,367
Income and other taxes receivable 4,144 1,324
Inventories 88,499 93,912
Prepaid expenses 2,902 2,034
Future income taxes 2,467 2,248
----------- -----------
126,685 120,940
Property, plant and equipment 62,233 77,282
Intangible assets(note 3 and 4) 6,245 -
Deferred charges 14 468
Goodwill 46,434 42,101
----------- -----------
$ 241,611 $ 240,791
----------- -----------
----------- -----------

Liabilities

Current
Revolving credit $ 49,467 $ 19,830
Accounts payable and accrued liabilities 44,765 46,636
Interest payable 418 249
Current portion of long-term debt 78 92
----------- -----------
94,728 66,807
Long-term debt, net of current portion - 92
Deferred gain on sale of option (note 7) 4,066 5,335
Other non-current liabilities 421 439
Future income taxes 7,591 12,365
----------- -----------
106,806 85,038
----------- -----------

Contingent liabilities and commitments (note 9)

Unitholders' Equity 134,805 155,753
----------- -----------
$ 241,611 $ 240,791
----------- -----------
----------- -----------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Operations
For the three month and twelve month periods ended December 31, 2007 and
December 31, 2006
(In thousands of dollars, except units and per unit amounts)

--------------------------------------------------------------------------
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------------------- ---------------------------

Sales $ 55,858 $ 50,435 $ 264,164 $ 271,488
Cost of goods sold 53,402 45,011 233,458 225,784
Depreciation 3,443 4,081 15,396 18,683
------------------------- ---------------------------
Gross (loss) profit (987) 1,343 15,310 27,021
Selling, general and
administrative expenses
(note 5 and 10) 5,316 4,854 20,020 17,677
------------------------- ---------------------------
Operating (loss) profit (6,303) (3,511) (4,710) 9,344
Foreign exchange gain 3,588 925 12,253 6,212
Loss on sale of fixed
assets (99) - (101) -
Amortization of
intangible assets (306) - (566) -
Amortization of
deferred gain (note 7) 112 66 498 66
Financing expenses (1,314) (753) (5,059) (3,230)
------------------------- ---------------------------
(Loss) income before
provision for income
taxes (4,322) (3,273) 2,315 12,392
Recovery of income
taxes (note 6) 4,479 2,245 8,103 3,626
------------------------- ---------------------------

Net income (loss)
for the period $ 157 $ (1,028) $ 10,418 $ 16,018
------------------------- ---------------------------
------------------------- ---------------------------

Net income (loss)
per unit - basic $ 0.01 $ (0.05) $ 0.48 $ 0.73
------------------------- ---------------------------
------------------------- ---------------------------

Net income (loss)
per unit - diluted $ 0.01 $ (0.05) $ 0.47 $ 0.73
------------------------- ---------------------------
------------------------- ---------------------------

Weighted-average
number of units
- basic 21,918,400 21,918,400 21,918,400 21,918,400
------------------------- ---------------------------
------------------------- ---------------------------

Weighted-average
number of units
- diluted 22,061,265 21,918,400 21,997,732 21,918,400
------------------------- ---------------------------
------------------------- ---------------------------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Comprehensive Income
For the three month and twelve month periods ended December 31, 2007 and
December 31, 2006
(In thousands of dollars)

--------------------------------------------------------------------------
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------------------- ---------------------------

Net income (loss) $ 157 $ (1,028) $ 10,418 $ 16,018

Other comprehensive
(loss) income
Unrealized (loss)
income on translating
financial statements
of self-sustaining
operations (560) 3,293 (8,857) (269)

Related income tax
(recovery) expense (179) (247) 694 (2)

------------------------- ---------------------------
Other comprehensive
(loss) income (739) 3,046 (8,163) (271)
------------------------- ---------------------------

Comprehensive (loss)
income $ (582) $ 2,018 $ 2,255 $ 15,747
------------------------- ---------------------------
------------------------- ---------------------------

See accompanying Notes to the Interim Consolidated Financial Statements




TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Unitholders' Equity
For the three month and twelve month periods ended December 31, 2007 and
December 31, 2006
(In thousands of dollars)

--------------------------------------------------------------------------
Total Total
for for
Accumu- twelve twelve
lated months months
Accumu- Other ended ended
Unit- Contri- lated Compreh- December December
holders' buted Earn- Distrib- ensive 31, 31,
Capital Surplus ings utions Loss 2007 2006
-------- ------- ------- --------- -------- -------- --------
Balance,
beginning
of period $209,857 $ - $83,639 $(115,125) $(22,618) $155,753 $172,884
Activity
for the
three
months
ended
March 31 - - 3,397 (7,307) (548) (4,458) (2,861)
-------- ------- ------- --------- -------- -------- --------
209,857 - 87,036 (122,432) (23,166) 151,295 170,023
Activity
for the
three
months
ended
June 30 - 295 3,674 (5,484) (3,963) (5,478) (4,676)
-------- ------- ------- --------- -------- -------- --------
209,857 295 90,710 (127,916) (27,129) 145,817 165,347
Activity
for the
three
months
ended
September
30 - 182 3,190 (5,500) (2,913) (5,041) (3,394)
-------- ------- ------- --------- -------- -------- --------
209,857 477 93,900 (133,416) (30,042) 140,776 161,953
Activity
for the
three
months
ended
December
31 - 112 157 (5,501) (739) (5,971) (6,200)
-------- ------- ------- --------- -------- -------- --------
Balance,
end of
period $209,857 $ 589 $94,057 $(138,917) $(30,781) $134,805 $155,753
-------- ------- ------- --------- -------- -------- --------
-------- ------- ------- --------- -------- -------- --------

See accompanying Notes to the Interim Consolidated Financial Statements


TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Cash Flows
For the three month and twelve month periods ended December 31, 2007 and
December 31, 2006
(In thousands of dollars)

--------------------------------------------------------------------------
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------------------- ---------------------------

Cash flows from
operating activities
Net income (loss)
for the period $ 157 $ (1,028) $ 10,418 $ 16,018
Items not
involving cash
Depreciation 3,443 4,081 15,396 18,683
Loss on disposal of
long-lived assets 99 - 101 -
Amortization of
deferred charges 92 129 430 521
Amortization of
intangible assets 306 - 566 -
Deferred financing
fees written off 39 - 178 -
Amortization of
deferred gain (112) (66) (498) (66)
Future income taxes (2,232) (2,728) (4,495) (6,236)
Unit-based
compensation 90 - 542 -
------------------------- ---------------------------
1,882 388 22,638 28,920

Change in non-cash
operating assets
and liabilities
Accounts receivable 4,338 5,207 4,647 5,390
Inventories (8,811) (12,637) 9,914 (858)
Accounts payable
and accrued
liabilities 6,737 (4,584) (9,092) (3,378)
Income and other
taxes (2,331) (1,258) (2,946) 792
Other (469) 1,614 (3,128) 450
------------------------- ---------------------------
Total change in
non-cash operating
assets and
liabilities (536) (11,658) (605) 2,396

------------------------- ---------------------------
Net cash provided by
(used in) operating
activities 1,346 (11,270) 22,033 31,316
------------------------- ---------------------------

Cash flows from
investing activities
Acquisition of
subsidiaries, net
of cash acquired (188) - (20,502) -
Proceeds on sale of
property option - 5,264 - 5,264
Proceeds on disposal
of long-lived assets 337 - 345 -
Purchase of property,
plant and equipment (212) (622) (2,194) (5,304)
------------------------- ---------------------------
Net cash (used in)
provided by investing
activities (63) 4,642 (22,351) (40)
------------------------- ---------------------------
Cash flows from
financing activities
Repayment of
long-term debt (22) (14) (106) (84)
Deferred financing
costs 134 - (1,697) -
Drawdown (repayment)
of revolving credit 6,337 5,335 31,168 1,024
Distributions to
unitholders (5,479) (8,220) (23,745) (32,878)
------------------------- ---------------------------
Net cash provided by
(used in) financing
activities 970 (2,899) 5,620 (31,938)
------------------------- ---------------------------

Effect of exchange
rate changes on cash
and cash equivalents (15) 72 (325) (1)
------------------------- ---------------------------

Increase (decrease)
in cash 2,238 (9,455) 4,977 (663)
Cash, beginning
of period 3,794 10,510 1,055 1,718
------------------------- ---------------------------
Cash, end of period $ 6,032 $ 1,055 $ 6,032 $ 1,055
------------------------- ---------------------------
------------------------- ---------------------------

Supplemental Cashflow
Information:

Interest paid $ 766 $ 713 $ 4,282 $ 2,655
------------------------- ---------------------------
------------------------- ---------------------------

Income taxes (refund)
paid $ 84 $ 1,742 $ (647) $ 1,818
------------------------- ---------------------------
------------------------- ---------------------------

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 twelve month periods ended December 31, 2007 and December 31, 2006

(In thousands of dollars, except per unit amounts)

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 3. 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, 2007. 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. ADOPTION OF NEW ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

(a) Financial Instruments

Effective January 1, 2007 the Fund adopted the new recommendation of the Canadian Institute of Chartered Accountants (CICA) under CICA Handbook Section 1530, Comprehensive Income, Section 3251, Equity, Section 3855, Financial Instruments - Recognition and Measurement, Section 3861, Financial Instruments - Disclosure and Presentation and Section 3865, Hedges. These new Handbook sections, which apply to fiscal years beginning on or after October 1, 2006, provide requirements for the recognition and measurement of financial instruments.

Section 1530 establishes standards for reporting and presenting comprehensive income which is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income but are excluded from net income calculated in accordance with GAAP.

Under Section 3855, 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.

As a result of the adoption of these new standards, 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.

The adoption of these new standards has not had a material impact on the Fund's financial position as at January 1, 2007.

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



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

Held-for-trading 6,032 6,032
Loans and receivables 22,641 22,641
Held-to-maturity - -
Available-for-sale - -
Other liabilities 94,728 94,728


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.

(b) Phantom Unit Equity Plan

On May 11, 2007, unitholders approved the Tree Island Wire Income Fund Long Term Incentive Plan (the "Plan"), which provides for the allotment of Phantom Units to designated employees of Tree Island Industries. The Fund accounts for the Phantom Units issued under the Plan in accordance with CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments.

Phantom Units are settled with trust units and are valued using the grant date market price of the underlying units. This valuation is not subsequently adjusted for changes in the market price of the units prior to settlement of the award. Compensation expense is recognized on a straight-line basis over the vesting period. All Phantom Units have been classified as equity instruments based on the settlement provisions of the Plan. Distributions reinvested in additional Phantom Units are recorded as non-cash distributions.

(c) Intangible assets

Finite life intangible assets are recorded at cost less accumulated amortization. Amortization is calculated over the estimated useful life of the assets at the following rates:



Customer relationships 7 years straight-line basis
Non compete agreement 5 years straight-line basis


(d) New Accounting Standard - Inventories

In May 2007, the Accounting Standards Board issued CICA Handbook Section 3031, Inventories, which supersedes CICA Handbook Section 3030 and converges with the International Accounting Standard Board's recently amended standard IAS 2, Inventories.

The standard 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 new standard will come into effect January 1, 2008. The adoption of the new standard is not expected to have a material impact on the Fund's financial position.

4. BAOAN ACQUISITIONS

(a) Baoan International Investment Co.

On July 6, 2007, Tree Island Wire (USA), Inc. acquired the assets of Baoan International Investment Co. ("BII") The vendor in the acquisition was China Baoan Group Company Ltd. ("China Baoan"). The assets acquired from BII include its corporate offices in Covina, California and the assets of its wholly owned subsidiary Universal Sourcing of America Industries Inc. ("USA Wire"), a wire products business with a manufacturing facility located in Corona, California. The acquisition was accounted for using the purchase method whereby assets acquired and liabilities assumed were recorded at their fair market value as of the date of the acquisition.

The following sets forth the final purchase price and its allocation to the tangible and intangible assets acquired translated at the currency exchange rates prevailing on the day of acquisition.

Of the total amount of goodwill and intangibles assets of $8,185 allocated to Tree Island Wire (USA) Inc. (TIW) $7,559 is expected to be deductible for income tax purposes.



Fair value of net assets acquired
Current assets $ 9,367
Property, plant and equipment 1,419
Non compete agreement 1,177
Goodwill 1,833
Customer relationships 5,175
Current liabilities (6,118)
---------
$ 12,853
---------
---------
Consideration
Cash $ 10,480
Consolidation Costs 626
Direct acquisition costs 1,747
---------
$ 12,853
---------
---------


An allowance of $626 had been made for the consolidation of the Southern California plant and offices in the purchase price allocation. There was a remaining balance of $560 at December 31, 2007. The consolidation was substantially completed at December 31, 2007.

(b) Universal Metal New Material Co.

On July 6, 2007, Tree Island Industries Ltd. acquired 100% of the shares of Universal Metal New Material Co., Ltd. ("UM"), a self-sustaining subsidiary. The vendor in the acquisition was China Baoan. UM, a Hong Kong based company, owns and operates two wire products manufacturing facilities in the Binhai New Development Zone in Tianjin, China and a branch office in Beijing, China. The acquisition was accounted for using the purchase method whereby assets acquired and liabilities assumed were recorded at their fair market value as of the date of the acquisition.

The following sets forth the final purchase price and its allocation to the tangible and intangible assets acquired translated at the currency exchange rates prevailing on the day of acquisition.



Fair value of net assets acquired
Cash $ 151
Current assets 2,593
Property, plant and equipment 338
Non compete agreement 814
Future income taxes on non compete agreement (238)
Goodwill 5,513
Current liabilities (746)
--------
$ 8,425
--------
--------
Consideration
Cash $ 8,025
Direct acquisition costs 400
--------
$ 8,425
--------
--------


Of the total amount of goodwill and intangibles assets of $6,327 allocated to HK Universe no amount is expected to be deductible for income tax purposes.

BII and UM's results of operations have been consolidated with those of the Fund since July 6, 2007.

5. PHANTOM UNIT EQUITY PLAN

On May 11, 2007, unitholders approved the Tree Island Wire Income Fund Long Term 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.

Phantom Units vest one-third on the date of the grant and one-third on each of the first and second anniversary date of the grant. However, the Board, at its discretion, may attach certain terms or conditions to the vesting and may accelerate the vesting period. 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 are measured based on the market price of the Fund's units on the date of the grant of the Phantom Units.

On May 16, 2007 the Fund granted 100,000 Phantom Units at a grant value of $800. Another grant was made on August 13, 2007 of 37,500 Phantom Units at a grant value of $269. One-third of these vested at the time of the grant and this has been recognized as unit based compensation at that time. The balance of the Phantom Units are unvested and are recognized in compensation costs on a straight-line basis over the 24 month period vesting period. Compensation expense related to Phantom Units for the three month period ended December 31, 2007 was $89 ($Nil for three month period ended December 31, 2006) and for the twelve month period ended December 31, 2007 was $542 ($Nil for twelve months ended December 31, 2006) and is included in selling, general and administrative expense. Non-cash distributions for the three month period ended December 31, 2007 were $23 ($Nil for three months period ended December 31, 2006) and the twelve month period ended December 31, 2007 were $47 ($Nil for twelve months ended December 2006).

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



Vested Unvested
Phantom Units granted on May 16, 2007 33,333 66,667

Additional Phantom Units earned in respect
of distributions on Phantom Units 675 -
----------------------

Balance at June 30, 2007 34,008 66,667

Phantom Units granted on August 13, 2007 12,500 25,000

Additional Phantom Units earned in respect
of distributions on Phantom Units 2,564 -
----------------------

Balance at September 30, 2007 49,072 91,667

Additional Phantom Units earned in respect
of distributions on Phantom Units 4,571 -
----------------------

Balance at December 31, 2007 53,643 91,667
----------------------
----------------------


6. 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 Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------ ------------ ------------- -------------

Current tax recovery
(expense) $ 2,247 $ (483) $ 3,608 $ (2,610)
Future tax recovery 2,232 2,728 4,495 6,236
------------ ------------ ------------- -------------
$ 4,479 $ 2,245 $ 8,103 $ 3,626
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------


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 Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------ ------------ ------------- -------------

Loss (income) before
provision for income
taxes $ (4,322) $ (3,273) $ 2,315 $ 12,392
Income of the Fund
subject to tax in the
hands of the recipient (5,558) (5,846) (22,706) (23,765)
------------ ------------ ------------- -------------

Loss of wholly-owned
subsidiary companies
before income taxes (9,880) (9,119) (20,391) (11,373)

Tax Rate 34.1% 34.1% 34.1% 34.1%

Expected recovery of
income taxes $ 3,371 $ 3,111 $ 6,957 $ 3,880
Increased (Reduced)
by:
Revisions of prior
period estimates - 60 241 1,064
Recovery not
deductible for tax 168 87 109 26
Foreign dividend
withholding tax - (1,154) - (1,154)
Differential tax
rates on U.S.
subsidiaries 309 140 574 (35)
Reduction in
statutory future
income tax rate 407 298 511 298
Other 224 (297) (289) (453)
------------ ------------ ------------- -------------
Income tax recovery $ 4,479 $ 2,245 $ 8,103 $ 3,626
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------


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.

7. 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 December 31, 2007 an amount of $112 ($66 for the three month period ended December 31, 2006) and during the twelve month period ended December 31, 2007 an amount of $498 ($66 for the twelve month period ended December 31, 2006) of the deferred gain was amortized and included in income.

8. POST-RETIREMENT BENEFITS

(a) The Fund has three defined contribution pension plans. Contributions made by the Fund amounted to $380 for the three months ended December 31, 2007 ($355 for the three months ended December 31, 2006) and $1,660 for the year ended December 31, 2007 ($1,597 for the year ended December 31, 2006). 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 December 31, 2007 ($5 for the three months ended December 31, 2006) and $3 for the year ended December 31, 2007 ($23 for the year ended December 31, 2006). Effective July 15, 2007, the Fund withdrew from the multi-employer defined benefit pension plan.

(c) The senior executive retirement plan was paid out in full in 2006. There was no cost expensed in the three months and year ended December 31, 2007 ($284 for the three months and $140 for the year ended December 31, 2006).

9. 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 $6,102 (US$6,114), finished goods purchases totaling $920 (US$931) and gas purchases totaling $552 (US$558) at December 31, 2007.

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:



2008 $ 3,920
2009 2,883
2010 2,748
2011 2,435
2012 1,042
Thereafter 2,950
--------
$ 15,978
--------
--------


10. RELATED PARTY TRANSACTIONS



Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
----------- ----------- ----------- -----------
Consulting services
provided to the Fund's
subsidiary by the
previous President and
CEO of TIL who is also
a Trustee, pursuant to
a consulting agreement
with a fourteen month
term for $136. The
expense was included
in selling,general and
administrative
expenses. These
related party services
were recorded at the
exchange amount as
agreed to by both
parties $ 24 $ 21 $ 107 $ 21
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


At December 31, 2007 $16 is included in accounts payable and accrued liabilities relating to this agreement.

11. 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 and Canada. Geographic information has been provided for China since the acquisition of UM from China Baoan (note 4).

(b) Geographic information



Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
----------- ----------- ----------- -----------
SALES (i)
Canada $ 16,050 $ 13,786 $ 76,341 $ 72,697
United States 38,521 35,746 183,994 196,466
China 526 - 1,003 -
Other 761 903 2,826 2,325
----------- ----------- ----------- -----------
$ 55,858 $ 50,435 $ 264,164 $ 271,488
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

As at As at
December 31 December 31
2007 2006
----------- -----------

PROPERTY, PLANT
AND EQUIPMENT (ii)
Canada $ 47,696 $ 53,502
United States 14,254 23,780
China 283 -
----------- -----------
$ 62,233 $ 77,282
----------- -----------
----------- -----------

GOODWILL (ii),(iii)
Canada $ 23,463 $ 23,463
United States 17,435 18,638
China 5,536 -
----------- -----------
$ 46,434 $ 42,101
----------- -----------
----------- -----------

(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 the Baoan acquisitions (note 4)
and changes in exchange rates used to translate goodwill denominated
in a foreign currency.


12. 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 BII (note 4).

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



Employee termination benefits $ 250
Costs of relocation of equipment 658
Lease costs 250
-------
Total costs 1,158

Paid to December 31, 2007 577

-------
Net liability at December 31, 2007 $ 581
-------
-------


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