[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, preferred shares and debt in a single security. TimberWest Forest Corp. Stapled Units consist of one common share, 100 preferred shares 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 approximately $1.08 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 12%, or $1.08. The Company accrues the interest on a quarterly basis of $0.27 per Stapled Unit to unitholders of record on January 1, April 1, July 1 and October 1 in each year (Record Date) on the 15th day of the month of each Record Date. The Company may also make distributions as a return of capital upon the redemption of the preferred shares, or as dividends on the common shares or preferred shares. 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.

Setting aside the $64.7 million Leech Creek conservation land sale in the fourth quarter of 2007, TimberWest has generated $12.2 million of distributable cash since the beginning of 2007, as market conditions have been exceptionally challenging. During this period we distributed $168 million, including the distribution the Company made on October 15, 2008. In order to make these distributions, the Company has had to rely on extraordinary sources of cash, including the Leech Creek sale, reductions in working capital and borrowings under its credit lines.  This clearly cannot continue.  We have distributed over $880 million to unitholders since our inception in 1997 and have demonstrated our commitment to unitholders by distributing everything we have generated beyond reasonable reserves to operate the business.  However, our pay-out ratio since inception now exceeds 100% and since we see no near term recovery in our business and there is no responsible method to generate sufficient cash to continue to pay distributions at the $1.08 per unit level, we need an alternative distribution approach.

The Company is therefore seeking unitholder approval in December for a modification to the Series A Subordinate Note component of its stapled units. Specifically, we are proposing the implementation of a variable interest rate structure for the notes.  Instead of the 12% fixed rate on the subordinated notes, which is what has generated the $1.08 per unit per year in annual distributions, we are proposing to move to a variable rate of 2% to 12%, with the interest rate being set from time to time by the Company based on the Company’s distributable cash and debt levels.  We also plan to set the annual distribution level at 2%, or $0.18 per unit, for the year 2009.  However, given the very challenging business conditions, the Company intends to defer distributions for the foreseeable future.

The Company will resume making cash distributions as business conditions improve and the Company’s liquidity strengthens.  Once we are able to do so, our 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.  We will endeavour not to cause unnecessary uncertainty by making frequent changes to our distribution policy.

The key advantage of the proposed variable rate structure for unitholders is that by permitting the Company to set the distribution level at $0.18 per unit, unitholders will incur materially less taxable interest income than at the current $1.08 per unit level.  Similarly, the lowering of the distribution level and corresponding reduction in the accrued interest on the subordinated notes would reduce the liability recorded by the Company on its balance sheet.  In contrast, if the amendments are not adopted, unitholders will continue to accrue taxable interest income at the $1.08 per unit level despite not receiving cash distributions at that level.  In addition, the Company will be required to record this higher level of accrued interest liability on its balance sheet until such amounts are paid.

Under the terms of the loan agreement governing its credit facilities, TimberWest must obtain the approval of its lenders in connection with any amendment to the Note Indenture, including the Note Amendments.  The Company expects to obtain such approval in conjunction with its negotiation of new credit terms with its lenders.  As it has previously reported, the Company does not expect to remain in compliance with certain of its debt covenants under its loan agreement after the preparation and approval of its financial statements for the end of the 2008 calendar year, and has been actively working with its lenders to implement satisfactory credit amendments. The Company expects to reach agreement with its lenders regarding a credit amendment package that provides the Company with sufficient flexibility to operate through the current market downturn. In accordance with the current terms of the note indenture, the distribution in respect of the fourth quarter of 2008, payable on January 15, 2009, will be deferred for 27 months while distributions for subsequent periods will be deferred for up to 18 months, assuming the note amendments are adopted. Following such deferral periods, these distributions could be paid in cash or in stapled units.

The Company expects to have lender approval of the note amendments in place prior to the date of the unitholder vote or shortly thereafter. If the Company is unable to obtain lender approval for the note amendments, the note amendments will not be implemented and the Company will defer future distributions, including its January 15, 2009 distribution, for up to 27 months pursuant to the current terms of the note indenture until such time as it is able to resume making cash distributions.

[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 propery, plant and equipment net of their gain (loss) on sale, less additions to property, plant and equipment, 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, actions of competitors, interest rate and foreign currency fluctuations, regulatory and harvesting fee changes and other actions by governmental authorities, 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.