Financial Report | Page 2

Results of Operations

Total sales of $284.1 million for F’2007 were down slightly from prior year sales of $290.0 million. Apple concentrate fell to a level of about one-half of the sales volume in F’2006. Last year, sales of apple concentrate were at an unusually high level, resulting from carry-over of concentrate stocks from F’2005’s record fruit processing volumes. However, Northwest Naturals continued to provide strong growth with a 24% increase in sales.

The reduction in processing volume described above resulted in sub-optimal throughputs at the Cooperative’s processing facilities. Plant staff also worked to utilize lower grade fruit in producing higher value products. The resulting inefficiencies contributed to increased production costs on a per unit basis over that of the prior year. Tree Top also experienced a drop in custom pack processing volume in F’2007, reducing the coverage of plant overhead costs. F’2007 was also the first year of operations for the new Fresh Slice facility. The operation of this facility improved throughout the year, but production costs exceeded expectations.

Financing the Cooperative

With lower fruit receiving and processing volume, the Company’s inventory was reduced by $6.7 million to $60.4 million during F’2007.

After having made significant capital investments of $16.5 million in F’2006, spending on property, plant, and equipment was reduced to $5.7 million in F’2007. This includes $1 million spent to-date on the implementation of a new ERP system, as well as several improvement projects on packaging lines.

The Cooperative replaced private placement notes due and payable in F’2006, with new private placement notes. Funds from the new private placement notes also were used to pay the balance of the revolving line of credit outstanding at the end of the last year. The new notes bear interest rates significantly less than that of the notes replaced.

Tree Top members’ equity decreased by $4.1 million in F’2007 to $54.3 million with a loss reported on non-member business, and increased retirements. In addition, members’ equity was further impacted by the required adoption of Statement of Financial Accounting Standard (SFAS)No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” Under this new standard, certain pension related amounts previously reported as “Other Assets” are now shown as “Accumulated Other Comprehensive Income” as part of members’ equity. Application of SFAS No. 158 resulted in a reduction in reported members’ equity of $4.4 million in F’2007.

The key elements of the change in equity were as follows:

	2007	2006
Non-member earnings	$(3,838,000)	$829,000
Other equity additions	$581,000	$573,000
Members' equity retired	$(796,000)	$(605,000)
Other Comprehensive Income	$(4,408,000)
Total equity change	$(8,461,000)	$797,000

Non-member earnings/(loss) included profits or losses earned on sales of products not containing apples or pears, such as other fruit concentrates, custom packaging, and Fresh Slice products. Non-member earnings/(loss) also included profits earned on apple and pear tons delivered without market rights. Such tonnage decreased from 137,000 tons for F’2006 to 46,000 tons for F’2007.

Equity additions include member purchases of market rights required to maintain minimum member funding levels and market rights acquired by members under the Cooperative’s equity subscription plan. Equity retirements include amounts paid to retiring members under the seven-year retirement provisions of Tree Top’s equity program.

Management believes the overall level of equity is sufficient to support the near-term financial needs of the Cooperative. Additional liquidity and financial flexibility are provided by debt financing utilized by the Cooperative and a line of bank credit that provides the ability to borrow up to $60 million on an unsecured basis. At July 31, 2007, there were no borrowings outstanding under that credit line.

The 2007 Story Continues..