HispanicBusiness

12. Financial instruments:

At March 31, 2013, the fair value of the Company's long-term debt and bank indebtedness approximated its carrying value of $213,835,000 (2012 - $135,046,000) measured based on Level 2 of the fair value hierarchy.

As at March 31, 2013, the Company has outstanding obligations to sell a maximum of US$11,400,000 at an average rate of CAD$1.0225 to the US$1.00, call option obligations to sell a maximum of US$3,000,000 at a rate of CAD$1.01 to the US$1.00 and put option obligations to buy a maximum of CAD$6,060,000 at a rate of CAD$1.01 to the US$1.00 during 2013. All foreign currency gains or losses to March 31, 2013 have been recognized in Other foreign exchange gain (loss) in Net earnings and the fair value of these foreign currency contracts, being an liability of $309,000 (measured based on Level 2 of the fair value hierarchy), has been recorded in Trade accounts payable and accrued liabilities (December 31, 2012 - $134,000 asset recorded in Trade accounts receivable and other measured based on Level 2 of the fair value hierarchy).

On August 25, 2011, the Company entered into two interest rate swaps, each with notional value of $25,000,000 and maturing July 28, 2015. Under the terms of the swaps the Company pays an amount based on a fixed annual interest rate of 1.56% and receives a 90 day BA CDOR which is recalculated at set interval dates. On March 25, 2013, the Company entered into two additional interest rate swaps, each with notional value of US$25,000,000 and maturing February 17, 2017. Under the terms of these additional swaps the Company pays an amount based on a fixed annual interest rate of 0.84% and receives a 90 day LIBOR which is recalculated at set interval dates.

The intent of these swaps is to convert floating-rate interest expense to fixed-rate interest expense. As these interest rate swaps have been designated as cash flow hedges the fair value of these interest rate swaps at March 31, 2013, being an liability of $507,000 (measured based on Level 2 of the fair value hierarchy), has been recorded in Trade accounts payable and accrued liabilities (December 31, 2012 - $133,000 liability recorded in Trade accounts payable and accrued liabilities measured based on Level 2 of the fair value hierarchy) and a loss of $375,000 (Quarter 1, 2012 - gain of $566,000) has been recognized in Other comprehensive income for the first quarter, 2013.

During the first quarter, 2013 the Company also traded lumber futures to manage price risk and which were designated as held for trading with changes in fair value recorded in Other income (expense) in net earnings. At March 31, 2013 the Company recognized $34,000 in Trade accounts receivable and other in respect of the fair value of the outstanding contracts measured based on Level 2 of the fair value hierarchy (December 31, 2012 - $nil) and a gain of $41,000 was recognized in Other income (expense) for the first quarter, 2013 (Quarter 1, 2012 - gain of $25,000).

13. Commitment:

On January 24, 2013, the Company obtained a financing commitment from a U.S. lender for a US$20,000,000 Operating Line ("U.S. Line"). The U.S. Line will be secured by accounts receivable and inventories of Interfor U.S. Inc., and have a term of two years. The agreement is expected to be finalized in the second quarter, 2013.

14. Subsequent event:

On May 1, 2013, the Company acquired timber tenures in the southern B.C. Interior owned by Springer Creek Management Ltd.



Contacts:
International Forest Products Limited
John Horning
Senior Vice-President and Chief Financial Officer
(604) 689-6800
(604) 688-0313 (FAX)
www.interfor.com