[Our Investors]

TimberWest's investors range from the small individual retail investor to large yield-oriented institutional investors, and also include the value investor looking for undervalued assets.

[TimberWest units offer an attractive investment because:]

• Over time, an investment in timberland is an effective inflation hedge.
• An investment in our Stapled Units is also a way to invest in Vancouver Island real estate.

[Stapled Units]

A Stapled Unit is a unique form of security that combines the attributes of common shares and debt in a single security. TimberWest Forest Corp. Stapled Units consist of one common share and approximately $8.98 face amount of Series A Subordinate Notes. These are "stapled" together as a single unit trading on the Toronto Stock Exchange under the symbol TWF.UN. Holders of TimberWest Forest Corp. Stapled Units accrue annual interest of between 2% - 12% per Stapled Unit on the Series A Subordinate Notes.

[Cash Distributions]

TimberWest's distributions to unitholders represent interest on the Series A Subordinate Note component of the Company's Stapled Unit. As noted above, the Series A Subordinate Notes have a face value of approximately $8.98. These notes are entitled to annual interest of between 2% and 12%, or $0.179576131 and $1.077456788 per annum.  The Company accrues the interest on a quarterly basis  at between 2-12% per Stapled Unit on January 1, April 1, July 1 and October 1 in each year. Distribution payments may be deferred for up to 18 months. The Company may also elect to pay interest on the Series A Subordinate Notes by delivering stapled units. The amounts of such distributions are subject to TimberWest's overall financial condition.

Due to the nature of TimberWest's business, quarterly cash flows will fluctuate during the year for seasonal reasons. Cash flows will also fluctuate from year to year due to the cyclical nature of the business and currency fluctuations. One of the objectives of TimberWest's cash distribution policy is to make even distributions to unitholders. This means that cash distributions may vary from the actual cash generated during certain periods. Any difference will be added to or subtracted from either cash reserves or available credit facilities.

[Cash Distribution Deferral]

On November 13, 2008, TimberWest announced the Company will defer the January 15, 2009 distribution for up to 27 months.
On December 19, 2008, the Company announced that amendments to the terms of the Series A Subordinate Notes forming part of the Company’s Stapled Units were approved by holders of the Stapled Units  at a special meeting held on the same day.  The Company also announced that the note amendments were approved by the lenders under its credit facilities and accordingly became effective as of December 31, 2008.
The note amendments:

• changed the rate of interest on the notes from a fixed rate of 12% per annum to a variable rate of between 2% and 12% per annum to be set from time to time based on the Company’s distributable cash;
• reduced the period over which the Company can defer payments of interest on the notes from 27 months to 18 months, and provide that the Company may only exercise this deferral right in respect of interest payments for periods where the applicable interest rate on the notes is 2%; and
• replaced the Company’s current right to elect to pay interest on the notes by delivering common shares or preferred shares of the Company with the right to elect to pay interest on the notes by delivering Stapled Units.

The note amendments have been implemented to enable the Company to better align its distributions with the underlying cash flows of its timberlands and real estate businesses. 
The Company has set the interest rate on the notes at 2% per annum (corresponding to annual cash distributions of $0.18 per Stapled Unit) for 2009.  However, given the challenging business conditions it continues to face, the Company will defer distributions for the foreseeable future, including the distribution payable on January 15, 2009.

The Company will resume making cash distributions as business conditions improve and the Company’s liquidity strengthens.  Once the Company is able to do so, the objective will be to provide the market with a high level of certainty around the level of distributions to be paid in any one year.  TimberWest will endeavour not to cause unnecessary uncertainty by making frequent changes to its distribution policy.
The key advantage of the variable interest rate structure for unitholders is that setting the distribution level at 2% or $0.18 per unit while deferring distributions, unitholders will incur materially less taxable interest income per annum than at the higher 12%  or $1.08 per unit level. 

[Distributable Cash]

Distributable cash includes consolidated net earnings (loss), plus interest expensed on Series A Subordinate Notes owned by unitholders, plus non-cash income taxes, plus depreciation, depletion and amortization, plus proceeds from the sale of property, plant and equipment net of their gain (loss) on sale, less additions to property, plant and equipment, less financing fees, and, from time-to-time, adjustments for other items deemed appropriate by the Board of Directors.

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