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Dear Unitholder: 

For the twelve months ending December 31, 2002 the Westshore Terminals Income Fund (the “Fund”) declared distributions to Unitholders of $43.4 million ($0.616 per unit). The distributions for unitholder income tax purposes were comprised of interest income of $0.61572 per unit, and a return of capital of $0.0003 per unit. 

The Fund’s distributions were achieved as a result of Westshore Terminals Ltd. (“Westshore”) loading 19.4 million tonnes of coal in 2002 as compared to 23.3 million tonnes shipped in 2001. Lower tonnage levels tesulted principally from lower sales levels achieved by Fording Inc. In addition, the contract for the Line Creek mine expired in Match 2002 and was renewed for reduced tonnage. The balance of the coal from this mine was handled by Neptune Terminals Ltd., a terminal owned in part by the owners of the Line Creek mine. Westshore’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 2002 were $53.4 million as compared to $58.9 million tn 2001. 

Prior to the January 2, 2003 windstorm incident, previously reported, 2003 tonnage levels were expected to be somewhat higher than 2002 levels. ‘The windstorm incident resulted in damage to two cranes at Berth 2, rendering it incapable of loading coal. Repairs are underway and it is anticipated that the operations at this berth will resume in the summer of 2003. In the interim, Westshore has been working closely with its customers and the railways to maximize volume through the larger Berth 1. As a result, tonnage throughput for 2003 is anticipated to be approximately the same as or slightly lower than 2002 levels. Westshore carries insurance which is expected to be adequate to cover both the costs of repair and most of the lost profits from reduction in shipments, net of applicable deductibles. Based on current information, the impact of the incident is not expected to have a material adverse effect (after collection of insurance proceeds) on the financial performance of the Fund. 

All three-year labour agreements with International Longshore and Warehouse Union (the longshoremen, the foremen and the clerical workers) expired on January 31, 2003. Negotiations with Local 502, the Longshoremen, are underway. It is anticipated that negotiations with all three locals will be more difficult than in prior years. 

A number of customer contracts expired in 2002 and reviewing them was a primary focus of Westshore. ‘The most significant of the contracts involved Westshore’s largest customer, Fording Inc. (“Fording”). Two of the three contracts with Fording expired in 2002 and those contracts represented approximately 13 million tonnes of coal handled annually by Westshore in recent years. Negotiations with Fording were ongoing throughout the year and by year’s end a long term agreement was reached with Fording (expiring February 29, 2012) which covers all three of Fording’s mines. This agreement was part of an overall arrangement with Fording, Teck Cominco Limited, Ontatio Teachers’ Pension Plan Board and Sherritt International Corporation. Under this arrangement, which closed on February 28, 2003, Westshore invested $150 million for approximately 9.1% of the units of the Fording Canadian Coal ‘Trust (“ording Trust’). 

The completion of this transaction and the long-term handling contract covering the three mines previously owned by Fording will increase the impact on the Fund's financial results of the Canadian dollar price realized for coal handled by Westshore. While Westshore is not a vendor of coal, in the past the Fund's financial results were indirectly affected by the Canadian dollar price realized, because that price affects the competitiveness of Westshore's customers in world markets. 

As aresult of Westshote’s arrangements with the Coal Partnership covering the former Fording mines and the Elkview mine, the loading rate for a majority of the coal loaded by Westshore in future years will be a function of the Canadian dollar price realized by the Coal Partnership for that coal. Accordingly that portion of Westshore's revenues will be directly affected by changes in the US dollar denominated coal price achieved by the Coal Partnership and by the US-Canadian dollar exchange rate. In addition the distributions that the Fund will receive from the Fording Trust will be substantially dependent on the profitability of the Coal Partnership. 

Audited financial statements for both the Fund and Westshore are attached. 

For the Board of Trustees, 

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