Despite our harvesting programs having leaned heavily towards cedar in recent years, the profile of our wood harvested over our five year cut control will reflect the species profile of our TFL. We are slightly ahead on our cut control and accordingly have a lower volume of harvesting projected for the upcoming year. This is prudent in view of market conditions.

Compounding that issue are the general downturn in the global economy and the specific problems we have in disposing of our pulp wood. Early this year, the pulp mill in Bellingham, Washington that had been taking all the chips produced at Cache Creek was closed permanently because of its old technology, the energy crisis in the USA, and deteriorating prices for pulp. Our other market is the Castlegar mill that has been in receivership since 1999 and has only recently resumed some log buying but in amounts far less than historically.

The new government in Victoria is clearly committed to making changes that will strengthen the industry and streamline operations as well as take steps to remove any basis for the ongoing American complaints of subsidization. It will be a challenge for RCFC and all Interior Wetbelt operators to insure that the unique issues of the Wetbelt continue to be recognized and addressed at the Ministry level.

Your Corporation continues to attract attention and inquires from many sources. We established our web site - www.rcfc.bc.ca - in June of 2000 and there have been a total of 5000 visits to the site in the interim. This web site has saved much staff time in responding to inquiries. The site contains full details on all aspects of RCFC.

Management Plan #3 for TFL #56 was approved by the Chief Forester in April and we were pleased that our cut level (AAC) remains at 100,000 cubic meters per year for the next 5 years. This is particularly significant because of the many constraints we accommodate on our land base relative to old growth forest retention for wildlife and biodiversity considerations. Specialized harvesting techniques using helicopters and longline yarders allow us to access previously inoperable and uneconomic sites.

Your board and the Staff continue to pursue the matter of certification. This year we were pleased to accept an offer to be a Pilot Project for FSC certification using funding from the Pinchot Institute in the U.S. Catherine Mater of Mater Engineering in Corvallis, Oregon agreed to pursue that funding on our behalf but to date there has no been funding approval. Meanwhile, other certification standards such as ISO 14000 and CSA are being considered. The big problem is that there is no universally accepted certification standard.

RCFC continues to have a significant impact on Revelstoke's economy with some $6.0M worth of goods and services purchased locally last year. Your Corporation supports a variety of local initiatives, groups and projects (listed elsewhere in this report) and in particular has taken a leadership role in establishing the B.C. Interior Forestry Museum.

Once again, on behalf of our shareholders, the Citizens of Revelstoke, I want to thank our very dedicated Staff, my fellow Board Members, our valued Industry Partners, our contractors and our customers for their respective roles in the success of RCFC.

Respectfully Submitted,

Geoffrey S. Battersby,
Chairman