Tree Island Wire Income Fund
TSX : TIL.UN

Tree Island Wire Income Fund

November 13, 2006 16:00 ET

Tree Island Reports 2006 Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 13, 2006) - Tree Island Wire Income Fund (TSX:TIL.UN) will hold a conference call and webcast to discuss third quarter 2006 financial results on Tuesday, November 14, 2006 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern). The call can be accessed by dialing: 1-877-888-3490 or 416-695-6622.

A replay will be available through November 21, 2006 at: 1-888-509-0081 or 416-695-5275, Passcode: 633884.

The live and archived webcast can be accessed at www.vcall.com/IC/CEPage.asp?ID=110398.

Tree Island Wire Income Fund (the "Fund") today announced financial results for the third quarter and first nine months of 2006. The Fund's results are based on the performance of Tree Island Industries Ltd. and its subsidiaries ("Tree Island" or "the company")-one of North America's largest producers of wire and fabricated wire products.

Third Quarter Highlights

- Generated distributable cash per unit of $0.3758 per unit for the third quarter of 2006, resulting in a payout ratio of 99.8% for the quarter, 90.7% for the first nine months of 2006 and 75% since inception

- Increased third quarter 2006 gross profit per ton by 14.8% to $124/ton, from $108/ton in Q3 2005

- Increased third quarter 2006 EBITDA by 11% to $7.7 million, from $7.0 million in Q3 2005

"Our year-over-year operating profits improved in the third quarter of 2006, despite very challenging business conditions," said Daniel McAtee, newly appointed President and CEO of Tree Island and a trustee of the Fund. "The sharp downturn in Western U.S. housing starts had a negative impact on our volumes and sales, as did continued import competition in some of our product lines. Our revenue was also negatively affected by the strengthening of the Canadian dollar relative to the US dollar."

"Despite these conditions, we achieved higher gross profit per ton than in the third quarter of 2005, while increasing EBITDA from operations by 11% and achieving a slight increase in distributable cash from operations," said McAtee. "These are important achievements given our lower volumes and increased zinc costs, and they reflect the success of our profit-enhancing projects and efficient manufacturing programs, lower rod costs, and the absence of unusual items that had a negative impact on our results in the third quarter of 2005."

"As we see no near-term rebound in U.S. housing starts or relief in import competition, and we anticipate continued inflationary pressure on key raw materials such as zinc, we expect the upcoming quarter will be a challenging one," added McAtee. "On a longer term basis, however, we see significant opportunities for Tree Island."

"In my first weeks as CEO, I have been impressed with the company's operational efficiency, product quality, customer service and conservative balance sheet. These core strengths have enabled us to maintain a solid level of financial performance even through difficult market conditions."

"As we move forward, we intend to keep building upon our operational strengths as we develop an effective market-driven response to current business challenges. Key elements of our strategy will include focusing our existing organization on more profitable sectors of the markets we serve through product rationalization and targeted efficiency programs; leveraging our operating strengths and replicating them for growth across broader geographic markets; and expanding into new segments that provide balance to our product mix and reduce our dependence on the residential construction industry. Our intent is to augment the strong operational base of the company with a more market-driven focus. Our goal? To respond effectively to a changing market while we continue to grow value for our unitholders," said McAtee.



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

--------------------------------------------------------------------------
3 Months Ended 9 Months Ended
Sept. 30 Sept. 30
--------------------------------------------------------------------------
2006 2005 2006 2005
--------------------------------------------------------------------------
Sales Volumes - Tons 55,178 68,015 186,724 206,390
Revenue 65,317 85,193 221,053 265,622
Cost of Goods Sold (53,613) (72,897) (180,773) (224,226)
Depreciation (4,844) (4,970) (14,602) (15,383)
-------------------------------------
Gross Profit 6,860 7,326 25,678 26,013
Gross Profit per Ton 124 108 138 126
Selling, General and
Administrative Expenses (3,966) (5,340) (12,823) (14,977)
-------------------------------------
Operating Profit 2,894 1,986 12,855 11,036
Foreign Exchange Gain 1,511 4,898 5,287 10,166
Financing Expenses (715) (1,101) (2,477) (3,220)
Recovery of (Provision for)
Income Taxes 1,094 492 1,381 (50)
--------------------------------------------------------------------------
Net Income 4,784 6,275 17,046 17,932
--------------------------------------------------------------------------
Operating Profit 2,894 1,986 12,855 11,036
Addback Depreciation 4,844 4,970 14,602 15,383
-------------------------------------
EBITDA 7,738 6,956 27,457 26,419
Foreign Exchange Gain 1,511 4,898 5,287 10,166
-------------------------------------
EBITDA Plus Foreign Exchange Gains 9,249 11,854 32,744 36,585
--------------------------------------------------------------------------
Distributable Cash per Unit (1) 0.3758 0.4676 1.2398 1.3042
Distributable Cash Paid or
Payable per Unit (1) 0.3750 0.3750 1.1250 1.1250
Distribution Payout % (2) 99.8% 80% 90.7% 86%
--------------------------------------------------------------------------
Total Assets 244,403 281,166 244,403 281,166
Revolving Credit (Net of Cash) 3,985 21,096 3,985 21,096
--------------------------------------------------------------------------
Long Term Debt 198 287 198 287
--------------------------------------------------------------------------


Operating Results

For the three months ended September 30, 2006, the Fund generated distributable cash of $0.3758 per unit, and declared distributions of $0.375 per unit, for a payout ratio of 99.8%. By comparison, the Fund generated distributable cash of $0.4676 per unit, and declared distributions of $0.375 per unit during the same period in 2005, for a payout ratio of 80%.

Of the $0.3758 per unit of distributable cash generated in the third quarter of 2006, $0.3303 per unit was generated by operations, up from $0.3268 per unit in Q3 2005. However, gains from foreign exchange conversion activities were lower during the 2006 period, contributing $0.0455 per unit, net of taxes, compared to $0.1408 per unit in the third quarter of last year.

Third quarter revenue was $65.3 million, down 23.3% from the same period in 2005. The change in revenue reflects an 18.9% decline in sales volume, the $3.9 million negative impact of a stronger Canadian dollar on U.S.-based sales and a decrease in average product prices of 1.5% in Canada and 1.0% in the U.S.

The decline in sales volumes primarily reflects the impact of a 26% drop from Q3 2005 to Q3 2006 in residential housing starts in the Western United States (per the US Census Bureau)--a key market for Tree Island's stucco reinforcing products and collated nails. The dramatic decline in housing starts, combined with a move by customers to reduce inventories in response to the reduced demand, resulted in a 35% decline in sales volumes for these two product groups, and accounted for two-thirds of the total decline in volume between Q3 2005 and Q3 2006.

The balance of the volume decrease occurred in the upholstery spring wire and bright low carbon wire segments, which continued to be negatively affected by increased imports of the finished products that this wire is a key component of. In addition, sales of baling wire to the pulp industry were lower again this quarter as a result of Canadian mill closures and the loss of a major customer in China earlier in the year. Helping to offset these declines were higher sales of welded mesh for concrete reinforcement and the mining industry, reflecting a focused effort to expand market share in these segments. Sales to chain link fence manufacturers also increased compared to the same quarter in 2005.

Although prices for several of Tree Island's products came under pressure from the difficult market conditions, significant price reductions did not occur until late in the third quarter. Accordingly, third quarter average prices declined only slightly, and the recent price changes will carry forward and have a more significant negative impact on average prices in the fourth quarter.

The negative foreign exchange impact reflects a 7.4% increase in the value of the Canadian dollar compared to the U.S. dollar between the third quarters of 2005 and 2006. Had exchange rates remained consistent with Q3 2005 levels, third quarter revenue would have been $3.9 million higher at $69.2 million, rather than the $65.3 million recorded.

Selling, general and administration expenses were $4.0 million, down 26% from $5.3 million in the third quarter of 2005. This reduction was due to the impact of the stronger Canadian dollar on the conversion of the SG&A expenses at Tree Island's U.S. operations and a reduced accrual for the company's variable compensation plan, which is based on EBITDA plus foreign exchange gains.

Gross profit was $6.9 million, down 5.5% from $7.3 million in the third quarter of 2005, reflecting the lower sales volumes and increased zinc costs, partially offset by higher gross profit per ton. On a per-ton basis, gross profit of $124 per ton was 14.8% higher than the $108 per ton achieved in Q3 2005, again reflecting the positive impact of Tree Island's operating efficiency programs.

EBITDA increased by 10% to $7.7 million, up from $7.0 million in the third quarter of 2005, reflecting reduced SG&A expenses, partially offset by the lower gross profit. Gains on foreign exchange conversions were $1.5 million, down from $4.9 million in Q3 2005. Net income for the period was $4.8 million ($0.22 per unit), compared to $6.3 million ($0.29 per unit) in the third quarter of 2005, reflecting the decrease in gains on foreign exchange conversions.

Year-to-Date Results

For the nine months ended June 30, 2006, the Fund generated distributable cash of $1.2398 per unit, and declared distributions of $1.1250 per unit, for a payout ratio of 90.7%. During the same period in 2005, the Fund generated distributable cash of $1.3042 per unit, and declared distributions of $1.1250 for a payout ratio of 86%.

Year-to-date revenue was $221.1 million, compared to $265.6 million during the first nine months of 2005, reflecting the 18.9% decrease in sales volumes, a $14.0 million unfavourable exchange impact on US dollar-based sales and decreases in average selling prices of 3.7% in Canada and 2.7% in the United States.

SG&A expenses were $12.8 million, down $2.2 million, or 14.6%, from the first nine months of 2005. This improvement reflects the benefit of a stronger Canadian dollar on the conversion of U.S. division costs, and a lower accrual for Tree Island's variable compensation plan which is based on EBITDA plus foreign exchange gains.

EBITDA increased by 3.9% to $27.5 million, from $26.4 million in the first nine months of 2005. The improvement in EBITDA reflects the year-over-year decline in rod costs, gains in operational efficiency, reduced SG&A costs and the absence of two unusual items that reduced EIBITDA by $4.4 million in the first nine months of 2005, partially offset by lower sales volumes and increased zinc costs. Gains from foreign exchange conversions during the first nine months of 2006 were $5.3 million, compared to $10.2 million for the same period in 2005.

Net income for the first nine months of 2006 was $17.0 million ($0.78 per unit), compared to $17.9 million ($0.82 per unit) in 2005. The decrease in net income reflects the lower foreign exchange conversion gains, partially offset by higher operating profits, lower financing expenses and lower tax expenses.

Corporate Developments

On October 30, 2006, the Fund announced the retirement of Tree Island's President and CEO, Ted Leja, following a distinguished 45-year career which included 14 years at the helm of Tree Island. Mr. Leja will continue to advise the company in his new role as Vice-Chair of the Board of Trustees.

Daniel McAtee has succeeded Mr. Leja as President and CEO, and has also been appointed as a Trustee of the Board. Mr. McAtee comes to Tree Island from Tyco, where he served as President of the A&E Products Group, a plastic products company with operations in over 30 countries. Prior to joining Tyco, he held progressively senior management positions across five different GE businesses including GE Corporate R&D, GE Superabrasives, GE Quartz, GE Lighting and GE Industrial Systems. Mr. McAtee holds a degree in Chemical Engineering from the University of Colorado.

The Fund also announced that Keith Purchase has been appointed Chair of the Board of Trustees. A member of the Board since 2003, Mr. Purchase is the former CEO of TimberWest and former COO of MacMillan Bloedel. He succeeds Rod Senft, who is stepping down as Chair in order to respond to increasing demands within his own business. Mr. Senft will continue to serve on the Board.

Outlook

Moving into the seasonally slower fourth quarter, Tree Island's outlook remains cautious. Lower residential housing starts, particularly in the company's key Western U.S. market area, are expected to have a continued negative impact on sales volumes and pricing for collated nails and stucco reinforcing products. Import competition is also expected to place volume and pricing pressure on the fastener, bright low carbon wire and upholstery spring wire segments. These influences should be partially offset by continuing strong demand from the renovation and non-residential construction markets and by sales of products, such as wire fencing and welded wire mesh, which continue to perform well.

While prices for wire rod, the company's primary raw material, are expected to increase slightly in the fourth quarter before easing again in the first quarter of 2007, zinc prices continue to climb to record highs. Used in the manufacture of galvanized nails, galvanized fencing and galvanized wire, zinc normally represents a small proportion of Tree Island's raw material costs, but at current prices, will have a much greater negative impact on overall costs.

As the company moves forward, operating efficiency remains favourable. Management expects to keep building on Tree Island's operational strengths while implementing new market-driven strategies designed to deliver mid and long-term benefits for the company. In the shorter term, however, the rapid change in Western U.S. housing starts, combined with unprecedented inflationary pressure on key raw materials such as zinc, is expected to have a negative impact on operating results. While it is the Board's intention to maintain cash distributions at the current level through the balance of 2006, the Fund will closely monitor business conditions and operating performance to ensure its cash distribution payout ratio is appropriate and that the company has the resources available to pursue its strategic objectives.

On October 31, 2006, the federal government announced a proposal to tax the cash distributions made by income trusts. If the proposal is implemented, 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 existing income trusts will not be subject to the proposed tax until 2011.

Any change to the rules relating to the taxation of income trusts could have a material adverse effect on the Fund and the market value of its units. The Fund will monitor developments in connection with the proposed changes.

Fund Profile

The Fund was launched on November 12, 2002, with the completion of an Initial Public Offering. There are 21,918,400 units of the Fund outstanding, representing a 100% ownership interest in Tree Island.

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 and Industrial Alloys brand names. Tree Island Wire Income Fund owns a 100% ownership interest in Tree Island Industries.

Forward-Looking Statements

This press release contains forward-looking statements based on assumptions considered reasonable at the time they were prepared. 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.

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, supplies of 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, and changes in tax legislation.

Unaudited Interim Consolidated Financial Statements of

TREE ISLAND WIRE INCOME FUND

September 30, 2006



TREE ISLAND WIRE INCOME FUND
Interim Consolidated Balance Sheets (Unaudited)
(In thousands of dollars)
--------------------------------------------------------------------------
As at As at
September 30 December 31
2006 2005
--------- ---------
Assets

Current
Cash $ 10,510 $ 1,718
Accounts receivable 25,574 25,757
Income and other taxes receivable 748 2,132
Inventories 81,275 93,054
Prepaid expenses 2,140 2,476
Future income taxes 2,607 2,280
--------- ---------
122,854 127,417
Property, plant and equipment 79,685 90,885
Deferred charges 590 1,008
Goodwill 41,274 42,111
--------- ---------
$ 244,403 $ 261,421
--------- ---------
--------- ---------
Liabilities

Current
Revolving credit $ 14,495 $ 18,806
Accounts payable and accrued liabilities 51,220 50,014
Income taxes payable 675 -
Interest payable 338 195
Current portion of long-term debt 86 83
--------- ---------
66,814 69,098
Long-term debt, net of current portion 112 185
Other non-current liabilities 444 551
Future income taxes 15,080 18,703
--------- ---------
82,450 88,537
--------- ---------

Unitholders' Equity 161,953 172,884
--------- ---------
$ 244,403 $ 261,421
--------- ---------
--------- ---------

See accompanying Notes to Unaudited Interim Consolidated Financial
Statements.



TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Operations (Unaudited)
For the three month and nine month periods ended September 30, 2006
and September 30, 2005
(In thousands of dollars, except units and per unit amounts)

--------------------------------------------------------------------------
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2006 30, 2005 30, 2006 30, 2005
--------------------- ---------------------
Sales $ 65,317 $ 85,193 $ 221,053 $ 265,622
Cost of goods sold 53,613 72,897 180,773 224,226
Depreciation 4,844 4,970 14,602 15,383
--------------------- ---------------------
Gross profit 6,860 7,326 25,678 26,013
Selling, general and
administrative expenses 3,966 5,340 12,823 14,977
--------------------- ---------------------
Operating profit 2,894 1,986 12,855 11,036
Foreign exchange gain 1,511 4,898 5,287 10,166
Financing expenses (715) (1,101) (2,477) (3,220)
--------------------- ---------------------
Income before provision
for income taxes 3,690 5,783 15,665 17,982
Recovery of /(provision for)
income taxes (note 3) 1,094 492 1,381 (50)
--------------------- ---------------------
Net income for the period $ 4,784 $ 6,275 $ 17,046 $ 17,932
--------------------- ---------------------
--------------------- ---------------------

Net income per unit $ 0.22 $ 0.29 $ 0.78 $ 0.82
--------------------- ---------------------
--------------------- ---------------------
Weighted-average number
of units
(Basic and diluted) 21,918,400 21,918,400 21,918,400 21,918,400
--------------------- ---------------------
--------------------- ---------------------

See accompanying Notes to Unaudited Interim Consolidated Financial
Statements.



TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Unitholders' Equity (Unaudited)
For the three month and nine month periods ended September 30, 2006
and September 30, 2005
(In thousands of dollars)

--------------------------------------------------------------------------
Total Total
Cumul- for for
ative nine nine
Trans- months months
Unit- Accumu- lation ended ended
holders' lated Distri- Adjust- September September
Capital Earnings butions ment 30, 2006 30, 2005
--------- -------- --------- --------- --------- ---------
Balance,
beginning
of period $ 209,857 $ 67,621 $ (82,247) $ (22,347) $ 172,884 $ 188,875
Activity for
the three
months
ended
March 31 - 5,271 (8,219) 87 (2,861) (1,219)

--------- -------- --------- --------- --------- ---------
209,857 72,892 (90,466) (22,260) 170,023 187,656
Activity for
the three
months
ended
June 30 - 6,991 (8,219) (3,448) (4,676) (2,126)

--------- -------- --------- --------- --------- ---------
209,857 79,883 (98,685) (25,708) 165,347 185,530
Activity for
the three
months
ended
September 30 - 4,784 (8,220) 42 (3,394) (6,210)

--------- -------- --------- --------- --------- ---------
Balance, end
of period $ 209,857 $ 84,667 $(106,905) $ (25,666) $ 161,953 $ 179,320
--------- -------- --------- --------- --------- ---------
--------- -------- --------- --------- --------- ---------

See accompanying Notes to Unaudited Interim Consolidated Financial
Statements.



TREE ISLAND WIRE INCOME FUND
Interim Consolidated Statements of Cash Flows (Unaudited)
For the three month and nine month periods ended September 30, 2006
and September 30, 2005
(In thousands of dollars)
--------------------------------------------------------------------------
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2006 30, 2005 30, 2006 30, 2005
-------------------- --------------------
Cash flows from
operating activities
Net income for the period $ 4,784 $ 6,275 $ 17,046 $ 17,932
Items not involving cash
Depreciation 4,844 4,970 14,602 15,383
Amortization of
deferred charges 131 133 392 404
Future income taxes (1,223) (719) (3,508) (3,866)
-------------------- --------------------
8,536 10,659 28,532 29,853
Change in non-cash operating
assets and liabilities
Accounts receivable 7,309 1,882 183 (6,752)
Inventories (3,658) 4,182 11,779 23,816
Accounts payable and
accrued liabilities 2,148 2,393 1,206 (518)
Income and other taxes 2,333 (806) 2,050 (3,973)
Other 288 (2,275) (1,164) (1,828)
-------------------- --------------------
Total change in non-cash
operating assets
and liabilities 8,420 5,376 14,054 10,745
-------------------- --------------------
Net cash provided by
operating activities 16,956 16,035 42,586 40,598
-------------------- --------------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (711) (1,004) (4,682) (2,316)
-------------------- --------------------
Net cash used in investing
activities (711) (1,004) (4,682) (2,316)
-------------------- --------------------
Cash flows from financing
activities
Repayment of long-term debt (20) (2,185) (70) (2,225)
Repayment of revolving credit (6,040) (4,332) (4,311) (11,032)
Distributions to unitholders (8,220) (8,220) (24,658) (24,658)
-------------------- --------------------
Net cash used in financing
activities (14,280) (14,737) (29,039) (37,915)
-------------------- --------------------
Effect of exchange rate changes
on cash and cash equivalents - (165) (73) (109)
-------------------- --------------------
Increase in cash 1,965 129 8,792 258
Cash, beginning of period 8,545 2,315 1,718 2,186
-------------------- --------------------
Cash, end of period $ 10,510 $ 2,444 $ 10,510 $ 2,444
-------------------- --------------------
-------------------- --------------------
Supplemental Cashflow Information:

Interest paid $ 461 $ 960 $ 1,942 $ 2,871
-------------------- --------------------
-------------------- --------------------
Income taxes (received) paid $ (2,287) $ 1,064 $ 76 $ 7,881
-------------------- --------------------
-------------------- --------------------

See accompanying Notes to the Unaudited Interim Consolidated Financial
Statements.


TREE ISLAND WIRE INCOME FUND

Notes to the Unaudited Interim Consolidated Financial Statements

For the three month and nine month periods ended September 30, 2006 and September 30, 2005

(In thousands of dollars, except per unit amounts)

1. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Unaudited 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. These Unaudited 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, 2005 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, 2006. 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.

Certain of the comparative figures have been reclassified to conform to the current interim period's presentation.

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. 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 subsidiaries, as TIL and its subsidiaries are subject to tax, including large corporation taxes. The provision for the period is divided between current and future taxes as follows:



Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Current tax expense $ (129) $ (227) $ (2,127) $ (3,916)
Future tax recovery 1,223 719 3,508 3,866
------------ ------------ ------------ ------------
$ 1,094 $ 492 $ 1,381 $ (50)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------


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



Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Income before
provision for
income taxes $ 3,690 $ 5,783 $ 15,665 $ 17,982
Income of the Fund
subject to tax in
the hands of the
recipient (6,109) (6,060) (17,919) (17,954)
------------ ------------ ------------ ------------

(Loss) income of
subsidiary
companies before
income taxes (2,419) (277) (2,254) 28

Tax Rate 34.1% 37.8% 34.1% 37.8%

Expected recovery/
(provision) for
income taxes $ 825 $ 105 $ 769 $ (11)
Increased (Reduced)
by:
Revisions of prior
period estimates 315 481 1,004 379
Expenses not deductible
for tax 12 (12) (61) (31)
Differential tax
rates on U.S.
subsidiaries 6 5 (175) (71)
Differential in
current income tax
rate 193 - - -
Other (257) (87) (156) (316)
------------ ------------ ------------ ------------
Income tax recovery/
(provision) $ 1,094 $ 492 $ 1,381 $ (50)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------


4. POST-RETIREMENT BENEFITS

(a) The Fund has four defined contribution pension plans. Contributions made by the Fund amounted to $420 for the three months ended September 30, 2006 ($384 for the three months ended September 30, 2005) and $1,242 for the nine months ended September 30, 2006 ($1,241 for the nine months ended September 30, 2005). Funding obligations are satisfied upon making contributions.

(b) The Fund has one multi employer defined benefit pension plan. Contributions made by the Fund amounted to $6 for the three months ended September 30, 2006 ($7 for the three months ended September 30, 2005) and $18 for the nine months ended September 30, 2006 ($20 for the nine months ended September 30, 2005).

(c) The Fund has one senior executive retirement plan which is unfunded. The cost expensed in the three months ended September 30, 2006 is $47 ($51 in the three months ended September 30, 2005) and $143 in the nine months ended September 30, 2006 ($154 in the nine months ended September 30, 2005). At September 30, 2006, the estimated amount payable under the plan of $2,381 ($2,342 as at December 31, 2005) is included in accounts payable.

5. SUBSEQUENT EVENTS

On October 31, 2006, the Canadian federal government announced a proposal to tax distributions made by income trusts. If the proposal is implemented, 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. Under the proposed legislation there will be a transitional period so that the Fund will not be subject to the proposed tax until 2011.

6. 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.

(b) Geographic information



Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
SALES (i)
Canada $ 16,909 $ 19,364 $ 58,764 $ 65,423
United States 48,098 65,503 161,136 199,144
Other 310 326 1,153 1,055
------------ ------------ ------------ ------------
$ 65,317 $ 85,193 $ 221,053 $ 265,622
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------


As at As at
September 30 December 31
2006 2005
------------ ------------
PROPERTY, PLANT AND
EQUIPMENT (ii)
Canada $ 55,174 $ 59,373
United States 24,511 31,512
------------ ------------
$ 79,685 $ 90,885
------------ ------------
------------ ------------

GOODWILL (ii)
Canada $ 23,463 $ 23,463
United States 17,811 18,648
------------ ------------
$ 41,274 $ 42,111
------------ ------------
------------ ------------

(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.



Contact Information