Financial Report

Introduction

Tree Top’s condensed financial statements are presented in this section of the report. Complete audited financial statements and footnotes are available to any Tree Top member and can be found on the internet at http://enter.treetop.com/web/CtlDocument?destination=annualReport2007. Access to the audited financial statements requires the same member password used to access Tree Top member accounts. If you need a password, or if you would like a printed copy of this report, you may request either from Mr. Dick Childers in Grower Accounting by email at dchilders@treetop.com or by telephone at 509.697.7251 or 800.367.6571.

Tree Top’s fiscal year ends July 31^st. Reference to F’2007 identifies the fiscal year ended July 31, 2007, which includes its members’ 2006 harvest.

Returns to Members and Results of Operations

Net proceeds for F’2007 of $12.7 million were 34% lower than F’2006 net proceeds. The 369 thousand tons of apples and pears received is down 19% from the F’2006 volume of 454 thousand tons. With our growers experiencing significant hail damage and russeting on Goldens in their 2006 crop, the Cooperative planned for an increase in volumes over F’2006. Accordingly, production plans and sales commitments were made in anticipation of that larger crop. However, a strong retail market reduced the amount of processing fruit delivered to Tree Top.

In spite of the lower volume, on a per ton basis, net proceeds paid to members for apples were up from the prior year, 21% for juice apples and 11% for peelers. The per ton juice apple return of $44.28 was $7.67 higher than the prior year. Peeler grade apple returns were up $6.53 per ton from the prior year to $67.55 in F’2007. With lower pear market prices, the proceeds for pears were down from the prior year, decreasing by $10.63 per ton to $30.37 in F’2007.

The F’2006 profit per ton was $0.32, compared with the prior year amount of $11.05. A summary of Tree Top returns for juice and peeler grade apples for the last four years follows:

	2007	2006	2005	2004
Juice Apples
Fruit Payment	$43.96	$25.56	$32.94	$63.17
Profit per ton	$ 0.32	$11.05	$13.62	$7.65
Total juice apple return	$44.28	$36.61	$46.56	$70.82
Peeler Apples
Fruit Payment	$67.23	$49.97	$72.22	$128.42
Profit per ton	$ 0.32	$11.05	$13.62	$7.65
Total peeler apple return	$67.55	$61.02	$85.84	$136.07

As has been the practice for many years, profits for F’2007 were paid 100 percent in cash to members who owned market rights to cover their fruit deliveries. Profits on deliveries not covered by market rights were classified as non-member earnings and added to the Cooperative’s retained earnings.

Because of Tree Top’s cooperative structure, qualified distributions of member proceeds are tax-deductible to the Cooperative. Non-member income is subject to taxation at regular corporate rates.