Changes in accounting policy 1. Organization and basis of presentation On January 1, 2002, the Fund adopted the new recommendations of the Canadian Institute of Chartered Accountants dealing with accounting for goodwill. Under the new recommendations, goodwill is no longer amortized. Annually, or more frequently as circumstances require, the Fund reviews and evaluates the carrying value of its investment in Westshore. In the event there has been a loss in value of the investment that is other than a temporary decline, the investment is written down to recognize the loss. The Fund is an open-ended, single purpose trust created under the laws of the Province of British Columbia by a Declaration of Trust made as of December 2, 1996. The Fund was created to acquire 100% of the issued and outstanding common shares and $470 million of unsecured subordinated notes (the Notes) of Westshore Terminals Ltd. (Westshore) from Westar Group Ltd. (Westar) (note 3). The acquisition of common shares and Notes was financed by the public issue of trust units of the Fund (note 4). For comparative purposes: While the Fund owns all of Westshore’s issued common shares, Westar is entitled to designate three of Westshore’s five directors. Accordingly, Westshore does not meet the definition of a subsidiary for accounting purposes and the Fund accounts for its investment from the effective date of the acquisition of January 1, 1997 using the equity method. Under this method, the cost of the investment is increased (decreased) by Westshore’s income (loss) and reduced by the amortization of the purchase price discrepancy, any dividends paid to the Fund by Westshore, and repurchases of Westshore’s common shares held by the Fund. As a result of this change, net earnings have increased by $18,277,000 over what they would have been if the old accounting policies had been applied in 2002. The change has no impact on distributable cash. These financial statements have been prepared in accordance with accounting policies generally accepted in Canada. The Fund is a Unit Trust for income tax purposes. As such, the Fund is only taxable on any taxable income not allocated to the unitholders. During 2002 and 2001, all taxable income of the Fund has been allocated to the unitholders. Income tax obligations relating to distributions from the Fund are the obligations of the unitholders. Cash and cash equivalents consist of cash on deposit with banks and highly liquid short-term interest-bearing secutities with maturities at their purchase date of three months or less. Westshore accounts for income taxes using the liability method. Under this method, current income taxes are recognized for the estimated income taxes payable or recoverable for the current period. Future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in income in the period in which the change occuts. The excess of the Fund’s cost of its investment in Westshore’s common shares and Notes over the net book value at the date of acquisition has been allocated to plant and equipment, future income taxes and goodwill. Plant and equipment are depreciated using the unit-of-production method over the estimated useful production life of the assets. The estimated useful lives of plant and equipment range from 3 to 30 years. 13 2. Significant accounting policies Cash and cash equivalents Amortization of purchase price discrepancy Income ‘Taxes Mh. Westshore Terminals Income Fund Notes to Financial Statements December 31, 2002 and 2001 (Figures in tables are expressed in thousands of dollars, except unit amounts) 2002 2001 $ $ Net earnings for the year 38,337 33,137 Add: Amortization relating to goodwill in investment - 18,277 Adjusted net earnings 38,337 51,414 Adjusted net earnings per trust unit 0.545 0.731