##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 20-F
      o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
    12(g) OF THE SECURITIES EXCHANGE ACT OF 1934-OR-þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006-OR-o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to-OR-o

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this
    shell company
    report   Commission File Number:
    333-07346
      AINSWORTH LUMBER CO.
    LTD.
 (Exact name of Registrant as
    Specified in its Charter)
  British Columbia, Canada
 (Jurisdiction of Incorporation
    or Organization)
  3194 Bentall IV, P.O. Box 49307, 1055 Dunsmuir Street
 Vancouver, British Columbia, V7X 1L3
 Canada
    (604) 661-3200
 (Address of Principal Executive
    Offices)
      Securities registered pursuant to Section 12(b) of the
    Act: None
  Securities registered pursuant to Section 12(g) of the
    Act: None
  Securities for which there is a reporting obligation pursuant
    to Section 15(d) of the Act:
  6.75% Senior Notes Due 2014
 6.75% Senior Notes Due 2014
 7.25% Senior Notes Due 2012
 Senior Floating Rate Notes Due 2010
 Senior Floating Rate Notes Due 2013
      o þ
  o þ
    þ o
  Rule 12b-2
  o o þ
    o þ
  Rule 12b-2 o þ
    o o




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##### 



TABLE OF
    CONTENTS
  PART IITEM 1.


IDENTITY OF
    DIRECTORS, SENIOR MANAGEMENT, ADVISORS AND AUDITORS


3ITEM 2.


OFFER STATISTICS
    AND EXPECTED TIMETABLE


3ITEM 3.


KEY
    INFORMATION


3ITEM 4.


INFORMATION ON THE
    REGISTRANT


17ITEM 5.


OPERATING AND
    FINANCIAL REVIEW AND PROSPECTS


35ITEM 6.


DIRECTORS, SENIOR
    MANAGEMENT AND EMPLOYEES


49ITEM 7.


MAJOR SHAREHOLDERS
    AND RELATED PARTY TRANSACTIONS


56ITEM 8.


FINANCIAL
    INFORMATION


57ITEM 9.


THE OFFER AND
    LISTING


57ITEM 10.


ADDITIONAL
    INFORMATION


59ITEM 11.


QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


62ITEM 12.


DESCRIPTION OF
    SECURITIES OTHER THAN EQUITY SECURITIES


63PART IIITEM 13.


DEFAULTS, DIVIDEND
    ARREARAGES AND DELINQUENCIES


63ITEM 14.


MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS


63ITEM 15.


CONTROLS AND
    PROCEDURES


64ITEM 16.


AUDIT COMMITTEE
    FINANCIAL EXPERT; CODE OF ETHICS; PRINCIPAL ACCOUNTANTS FEES AND
    SERVICES


64PART IIIITEM 17.


FINANCIAL
    STATEMENTS


65ITEM 18.


FINANCIAL
    STATEMENTS


66ITEM 19.


EXHIBITS


67Section 302 C.E.O. & C.F.O. CertificationSection 906 C.E.O. & C.F.O. Certification   2




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##### 



PART I  ITEM 1.
    IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT, ADVISERS AND
    AUDITORS  A.
    Directors
    and Senior Management.    B.
    Advisers.    C.
    Auditors.    ITEM 2.
    OFFER
    STATISTICS AND EXPECTED TIMETABLE     ITEM 3.
    KEY
    INFORMATION  Cautionary
    Statement with regard to Forward-Looking Statements
    Certain
    Information
   3




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##### 



A.
    Selected
    Financial Data.  Selected
    Consolidated Financial Data and Other Data
    Fiscal Year Ended December 31,2006


2005


2004(1)


2003


2002(In millions except per share data and ratios)Statement of Operations
    DataCanadian GAAPSales

$
827.1


$
1,248.2


$
909.9


$
543.0


$
430.3Cost of products sold (exclusive
    of amortization)


750.0



855.9



498.2



322.8



338.2Selling and administration


41.1



30.8



31.0



18.2



21.9Amortization of capital assets


88.0



103.9



53.9



33.0



32.0Loss on disposal of capital assets


2.5















Write-down of capital assets(2)


55.3







0.8



13.7



1.0Production line closure


5.9















Write-down of timber deposits


4.5















Operating (loss) earnings


(120.2
)


257.6



326.0



155.3



37.2Interest(3)


68.9



64.9



40.7



51.2



57.2Amortization of finance charges


5.4



4.9



3.2



4.9



5.3Loss on repurchase of debt






1.5



106.2



0.1



Other (income) expense


(8.9
)


(2.2
)


3.4



0.5



(2.9
)Foreign exchange loss (gain) on
    long-term debt


7.9



(28.3
)


(73.8
)


(76.9
)


(4.3
)(Loss) income before income taxes


(193.6
)


216.8



246.3



175.6



(18.1
)Income tax (recovery) expense


(85.6
)


63.6



71.2



51.9



(0.3
)Net (loss) income

$
(108.0
)

$
153.2


$
175.1


$
123.7


$
(17.9
)Basic and diluted (loss) earnings
    per share

$
(7.37
)

$
10.45


$
11.98


$
8.49


$
(1.23
)Cash dividends per share

$
1.00


$
1.00


$
1.00







Weighted average common shares
    outstanding


14,649,140



14,649,140



14,612,506



14,558,707



14,544,800U.S. GAAPNet (loss) income

$
(103.2
)

$
154.9


$
176.1


$
124.3


$
(17.0
)Basic and diluted (loss) earnings
    per share

$
(7.05
)

$
10.58


$
12.05


$
8.54


$
(1.17
)Other Financial DataCanadian GAAPAdjusted working capital(4)

$
186.6


$
340.2


$
220.7


$
259.4


$
104.7Additions to capital assets


228.3



57.3



18.0



8.2



14.1Ratio of earnings to fixed
    charges(5)






4.1
x


6.6
x


4.1
x


   4




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##### 



Fiscal Year Ended December 31,2006


2005


2004


2003


2002Other Selected Operating
    DataOSB production volume (mmsf)


2,778



3,213



2,039



1,351



1,284Specialty plywood production
    volume (mmsf)


137



143



144



119



98Average OSB price realized
    ($ per msf (3/8))

$
263


$
353


$
393


$
335


$
253Average specialty plywood price
    realized
    ($ per msf (3/8))

$
666


$
655


$
677


$
601


$
663   As at December 31,2006


2005


2004


2003


2002(in millions)Balance Sheet DataCanadian GAAPCash and cash equivalents

$
74.3


$
209.2


$
206.1


$
194.1


$
80.2Total assets


1,504.2



1,516.0



1,432.7



627.7



555.1Total long-term debt, including
    current maturities(6)


1,038.1



859.5



916.9



352.5



440.4Capital stock


55.8



55.8



55.8



53.1



53.1Shareholders equity


294.1



415.2



300.3



171.8



48.4U.S. GAAPTotal assets

$
1,510.9


$
1,524.1


$
1,434.9


$
619.3


$
544.7Total long-term debt, including
    current maturities(6)


1,038.1



859.5



916.9



352.5



440.4Capital stock


55.8



55.8



55.8



53.1



53.1Shareholders equity


280.0



397.8



286.3



159.3



35.2     (1)
    
    Includes the results of operations of Ainsworth Engineered
    Corp., the successor of Voyageur, from May 19, 2004 to
    December 31, 2004, and the results of operations of
    Ainsworth Engineered (USA), LLC, the entity holding our
    Minnesota OSB facilities, from September 22, 2004.(2)
    
    In 2006, we permanently closed one of the production lines at
    the Bemidji, Minnesota OSB facility. A write-down of
    $55.3 million was recorded, representing the net book value
    of the capital assets attributable to the closed production line
    net of estimated salvage value. In 2003, the write-down of
    capital assets includes a $13.3 million write-down related
    to the previously planned expansion of the Grande Prairie OSB
    facility.(3)
    
    Interest includes interest expense for the period, excluding
    amortization of deferred financing costs, amortization of
    deferred debt discounts and amortization of consent and
    commitment fees.(4)
    
    Adjusted working capital is a non-GAAP measure comprised of
    current assets (excluding restricted cash, timber deposits and
    current portion of future income tax assets) less current
    liabilities (excluding current portion of future income tax
    liabilities). We have presented adjusted working capital as we
    believe that it provides investors with a basis to evaluate our
    ability to fund operations, and capital expenditures.  5




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##### 



As at December 31,2006


2005


2004


2003


2002(In millions)Current assets

$
322.3


$
467.5


$
363.6


$
310.9


$
159.1Current portion of future income
    tax assets


(1.7
)














Restricted cash


(62.2
)


(39.0
)


(6.6
)






Timber licence deposits






(6.0
)










Current liabilities


(82.5
)


(113.7
)


(136.3
)


(51.5
)


(54.4
)Current portion of future income
    tax liabilities


10.7



31.4











Adjusted working capital

$
186.6


$
340.2


$
220.7


$
259.4


$
104.7    (5)
    
    For purposes of calculating the ratio of earnings to fixed
    charges (i) earnings consist of income (loss) before income
    taxes, plus fixed charges during the period and (ii) fixed
    charges consist of interest expense on all debt, plus the
    portion of operating lease rental expense that is representative
    of the interest factor and amortization of finance charges. For
    the fiscal year ended December 31, 2006, pre-tax earnings
    from continuing operations before fixed charges were
    insufficient to cover fixed charges under Canadian GAAP and
    U.S. GAAP by $193.6 million and $188.8 million
    respectively. For the fiscal year ended December 31, 2002,
    pre-tax earnings from continuing operations before fixed charges
    were insufficient to cover fixed charges under Canadian GAAP and
    U.S. GAAP by $18.1 million and $17.2 million
    respectively. The following table sets forth the calculation of
    the ratio of earnings to fixed charges under Canadian GAAP:  Year Ended December 31,2006


2005


2004


2003


2002(In millions, except ratio of earnings to fixed charges)Income (loss) before income taxes

$
(193.6
)

$
216.8


$
246.3


$
175.6


$
(18.1
)Fixed chargesInterest


68.9



64.9



40.7



51.2



57.2Amortization of finance charges


5.4



4.9



3.2



4.9



5.3Interest capitalized


1.5















Interest factor associated with
    operating leases


0.4



0.4



0.4



0.3



0.576.2



70.2



44.3



56.4



63.0Income (loss) before income taxes
    and fixed charges

$
(117.4
)

$
287.0


$
290.6


$
232.0


$
44.9Ratio of earnings to fixed charges






4.1



6.6



4.1



Additional earnings required to
    cover fixed charges

$
(193.6
)













$
(18.1
)    (6)
    
    Net of unamortized deferred discount. 6




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##### 



Exchange
    Rate Information
    Annual Data

Average2006


0.88182005


0.82762004


0.77022003


0.71862002


0.6368   Monthly Data

High


LowMarch, 2007


0.8673



0.8467February, 2007


0.8631



0.8437January, 2007


0.8586



0.8457December, 2006


0.8760



0.8582November, 2006


0.8869



0.8715October, 2006


0.8965



0.8784     B.
    Capitalization
    and Indebtedness.    C.
    Reasons
    for the Offer and Use of Proceeds.    D.
    Risk
    Factors.  Risks
    Related to Our Senior Notes and Financing
  We
    have significant indebtedness, which could adversely affect our
    financial condition and limit our ability to fulfill our
    obligations related to our senior notes.
   7




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##### 




    make it more difficult for us to satisfy our obligations with
    respect to our senior notes and other indebtedness;
    increase our vulnerability to adverse economic and industry
    conditions;
    require us to dedicate a substantial portion of cash from
    operations to service our indebtedness, thereby reducing the
    availability of cash to fund working capital, capital
    expenditures and other general corporate purposes;
    limit our ability to obtain financing for working capital,
    capital expenditures, general corporate purposes or acquisitions;
    place us at a disadvantage compared to our competitors that have
    a lower degree of leverage; and
    limit our flexibility in planning for, or reacting to, changes
    in our business and in the forest products industry.  We may
    not generate cash flow sufficient to service all of our
    obligations, including our obligations related to our senior
    notes.
    
    our financial condition at the time;
    restrictions in our indentures and the agreement governing our
    credit facility; and
    other factors, including the condition of the financial markets
    or the forest products industry, particularly the OSB market.    Our
    senior notes are structurally subordinated to the indebtedness
    of our subsidiaries that are not guarantors of the
    notes.
    Our
    senior notes are unsecured and effectively subordinated to our
    future secured indebtedness.
     8




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##### 



The
    instruments governing our indebtedness contain significant
    restrictions that limit our operating and financial
    flexibility.
    
    incur additional indebtedness;
    pay dividends and make distributions;
    repurchase stock;
    make certain investments;
    transfer or sell assets;
    create liens;
    enter into transactions with affiliates;
    issue or sell stock of subsidiaries;
    create dividend or other payment restrictions affecting
    restricted subsidiaries; and
    merge, consolidate, amalgamate or sell all or substantially all
    of our assets to another person.    We may
    be unable to purchase senior notes in the event of a change of
    control.
    Certain
    bankruptcy and insolvency laws may impair the trustees
    ability to enforce remedies under our senior
    notes.
   9




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##### 



Your
    ability to enforce civil liabilities in Canada under
    U.S. securities laws may be limited.
    Federal
    and state statutes in the United States and federal and
    provincial statutes in Canada allow courts, under specific
    circumstances, to void the guarantees and require the holders of
    the notes to return payments received from the
    guarantors.
    
    such guarantor, at the time the debt evidenced by the guarantee
    was incurred, received less than reasonably equivalent value or
    fair consideration for the incurrence of such debt, or
    the guarantee (as the case may be) was incurred with the intent
    to hinder or delay any of such guarantors present or
    future creditors, and such guarantor:  
    intended to incur, or believed that it would incur, debts beyond
    its ability to pay such debts as they mature;
    was insolvent or rendered insolvent by reason of such
    incurrence; or
    was engaged in a business or transaction for which such
    guarantors remaining assets constituted unreasonably small
    capital.   10




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##### 




    the guarantee was incurred at a time when the guarantor was in
    insolvent circumstances, unable to pay its debts in full or knew
    itself to be on the eve of insolvency and with intent to defeat,
    hinder, delay, defraud or prejudice one or more creditors, with
    intent to prefer one creditor over other creditors or which has
    the effect of preferring one creditor over other creditors;
    the guarantee has the effect of preferring one creditor over
    other creditors and a proceeding is brought to set aside the
    guarantee, or the guarantor makes an assignment for the benefit
    of its creditors, within 60 days of the issuance of the
    guarantee;
    the guarantee was incurred with intent to defeat, hinder, delay
    or defraud creditors or others of their just and lawful actions,
    suits, debts, accounts, damages, penalties or
    forfeitures; or
    the guarantee was incurred with intent to prefer one creditor
    over other creditors and within three months of the happening of
    an initial bankruptcy event (the filing of an assignment, a
    proposal or a notice of proposal by the guarantor, or the filing
    of a petition for a receiving order against the guarantor).    
    the sum of its debts, including contingent liabilities, were
    greater than the fair saleable value of all of its assets;
    the present fair saleable value of its assets were less than the
    amount that would be required to pay its probable liability on
    its existing debts, including contingent liabilities, as they
    become absolute and mature; or
    it could not pay its debts as they become due.  Risks
    Related to Our Business and the Forest Products
    Industry
  Our
    business is of a cyclical nature and prices of, and demand for,
    our products and our results of operations may fluctuate
    significantly based on market factors.
   11




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##### 



Intense
    competition could reduce our market share and harm our financial
    performance.
    Increased
    OSB industry production capacity could harm our financial
    performance.
    Because
    of our product concentration, declines in demand or prices for
    OSB could have a significant impact on our revenues and
    profitability.
    We may
    incur unexpected costs or liabilities as a result of our
    acquisition of the Barwick and Minnesota OSB
    facilities.
    We may
    incur unexpected delays, costs or liabilities surrounding the
    expansion of the Grande Prairie OSB facility.
     12




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##### 



We are
    exposed to currency exchange risk which could have a material
    adverse effect on us.
        We
    depend on timber tenures for access to fiber for our Canadian
    OSB and plywood operations. A reduction in our fiber supply or
    an increase in the related costs could have an adverse effect on
    us.
           13




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##### 



Our
    ability to harvest timber is subject to natural events that are
    beyond our control.
    Government
    regulations relating to forest management practices may
    adversely affect us and could increase our costs of doing
    business.
    Increased
    raw material costs may increase our cost of doing business and
    adversely affect our results of operations.
    Our
    manufacturing facilities rely on complex machinery which may
    break down and require periodic maintenance shut-downs, which
    may affect our sales and results of operations.
   14




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##### 



Environmental,
    health and safety laws and regulations could increase the cost
    of doing business or restrict our ability to conduct our
    business.
    Work
    stoppages or other labor disruptions at our facilities could
    have an adverse effect on our operations.
    Native
    land claims could have an adverse effect on our timber supply in
    the future.
       15




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##### 



We
    face risks related to our international sales.
    The
    co-ownership arrangement for High Level could force us to either
    sell our 50% ownership interest or to buy-out the
    co-owners 50% interest.
  day-to-day
  If the
    co-owner of the High Level OSB facility were to default on
    its obligations, we may be forced to fund the entire High Level
    operation.
    Members
    of the Ainsworth family control our business and their interests
    may conflict with the interests of our debtholders or
    shareholders.
   16




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##### 



The
    costs and risks associated with Sarbanes-Oxley regulatory
    compliance may have a material adverse effect on
    us.
    ITEM 4.
    INFORMATION
    ON THE REGISTRANT  A.
    History
    and Development of the Registrant        25-year
  20-year
   17




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##### 



20-year
  wound-up
               18




---



##### 



1 4 1 4
            1 4
     19




---



##### 



state-of-the-art
      Events
    Subsequent to our Fiscal 2006 Year-End
    B.
    Business
    overview  Markets
    in Which We Operate
  Oriented
    Strand Board Market   20




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##### 



Plywood
    and OSB Production Cost Comparison
  Plywood


OSBWood

$
140


$
52Labor


58



29Energy


16



9Glue & Wax


20



44Supplies


21



21Gross Variable Cost


255



156Residuals


(31
)


Total Variable Cost

$
224


$
156     Source:
    RISI, North American Wood Panels
    5-Year
    Forecast, December 19, 2006: 2006 Average Variable Costs
    for Western Canadian OSB and Southern Yellow Pine Plywood ($ per
    msf)     21




---



##### 



Export-Standard
    OSB Market
    Value-Added
    Industrial OSB Market
    Specialty
    Overlaid Plywood Market
   22




---



##### 



Our
    Business
  Overview      AinsworthEngineered(R)
            604-661-3200
 23




---



##### 



Competitive
    Strengths and Opportunities
    Established
    Modern OSB Facilities.
  state-of-the-art
  Proven
    OSB Operators.
    Leading
    Market Positions.
   24




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##### 



Growing
    Value-Added Product Mix.
  AinsworthEngineered(R)
  Strategically
    Located OSB Facilities.
    Timber
    Tenure Agreements
    Estimated Annual


Long-Term Supply


Percent ofRequirement (m3)(1)


Agreements (m3)


Requirement100 Mile House


650,000



660,000



102
%Grande Prairie(2)


944,000



791,000



83Barwick


737,000



551,000



75High Level(3)


1,323,000



1,261,000



95Total


3,689,000



3,263,000



88
%     (1)
    
    At the greater of design capacity or operating capacity.(2)
    
    Does not take into account the new second production line at
    Grande Prairie.(3)
    
    Assumes the High Level OSB facility is operated at or near
    its designed annual production capacity of 860 mmsf. At the
    current rate of production, the facilitys available fiber
    supply is over 100% of requirements.  British
    Columbia
  Forest
    License
   25




---



##### 



Pulpwood
    Agreement
      Alberta
  Grande
    Prairie Deciduous Timber Allocation
  20-year
     26




---



##### 



High
    Level Deciduous Timber Allocation and Forest Management
    Agreement
  co-ownership 20-year
    Ontario
    Timber
    Supply Agreement
    Private
    Wood
    Minnesota
   27




---



##### 



Timber
    Harvesting and Forest Management
    British
    Columbia
  Timber
    Harvesting
    Forest
    Management
    Alberta
  Timber
    Harvesting
      
    timber licenses, which create a five-year program of operations
    under the DTA; and
    annual operating plans, which authorize the harvesting of
    specific blocks of timber and impose operational requirements
    regarding such matters as riparian set-backs and cut-block
    boundaries.    cut-to-length
 28




---



##### 



100-day
  Forest
    Management
      Ontario
    Environmental
    Regulation
     29




---



##### 



Transportation
    and Distribution
        Marketing
    and Sales
      Year Ended December 31,2006


2005


2004(In millions)Geographic sales information(1)Canada

$
59.0


$
81.6


$
106.8United States


723.1



1,135.3



764.0Asia


33.9



20.9



29.5Europe


11.1



10.4



9.6Total

$
827.1


$
1,248.2


$
909.9     (1)
    
    Sales figures reported in this table include freight revenue.   30




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##### 



Competition
      AinsworthEngineered(R)
      Research
    and Development; Intellectual Property
  AinsworthEngineered(R)
 31




---



##### 



Legal
    Proceedings
      C.
    Organizational
    Structure    D.
    Property,
    plant and equipment  Overview
  Facilities
    EstimatedAnnualProductionCapacity(1)Oriented Strand Board (mmsf)Grande Prairie, Alberta(2)


665100 Mile House, British Columbia


425Barwick, Ontario


480High Level, Alberta (50%-owned by
    us)(3)


430Bemidji


315Cook


440Grand Rapids


380Total OSB annual production
    capacity


3,135Specialty Overlaid Plywood (mmsf)Savona, British Columbia (Plywood)


156     (1)
    
    As of December 31, 2006.(2)
    
    We are currently expanding the capacity at our Grande Prairie
    facility through the construction of a second production line.
    This new production line is expected to be in operation by June
    2008 with a designed annual production capacity of 600 mmsf of
    OSB, OSL or LSL. 32




---



##### 



(3)
    
    This facility is in its
    ramp-up
    phase. Its designed annual production capacity is 860 mmsf and
    50% of the production is ours. The mill is currently running at
    approximately 90% of designed annual production capacity with
    significant efforts being undertaken to achieve the full
    production capacity.  Oriented
    Strand Board
  Grande
    Prairie.
        100
    Mile House.
      Barwick.
   33




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##### 



High
    Level.
        The
    Minnesota OSB Facilities.
         34




---



##### 



Specialty
    Overlaid Plywood.
  Pourform(R) Pourform(R) AinsworthEngineered(R) Pourform-107(R),
    ITEM 5.
    OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS  A.
    Operating
    results   35




---



##### 



Overview
      Review of
    Operating Results
  th
          36




---



##### 



Year Ended December 31 ,2006


2005


2004(In millions)Sales:OSB

$
729.9


$
1,138.3


$
799.4Specialty plywood, and other
    products


97.2



109.9



110.5Total


827.1



1,248.2



909.9Cost of products sold (excluding
    amortization):OSB


661.8



755.0



399.6Specialty plywood, and other
    products


88.2



100.9



98.6Total


750.0



855.9



498.2Selling and administration


41.1



30.8



31.0Amortization of capital assets


88.0



103.9



53.9Loss on disposal of capital assets


2.5







Write-down of capital assets


55.3







0.8Production line closure


5.9







Write-down of timber deposits


4.5







Operating (loss) earnings


(120.2
)


257.6



326.0Finance expense


74.3



71.3



150.2Interest and other (income) expense


(8.9
)


(2.2
)


3.4Unrealized foreign exchange loss
    (gain) on long-term debt


7.9



(28.3
)


(73.8
)(Loss) income before income tax


(193.6
)


216.8



246.3Income tax (recovery) expense


(85.6
)


63.6



71.2Net (loss) income

$
(108.0
)

$
153.2


$
175.1     Year Ended December 312006


2005


2004All
    ProductsUnited States


87.5
%


91.0
%


84.0
%Canada


7.1



6.5



11.7Asia


4.1



1.7



3.2Europe


1.3



0.8



1.1100.0
%


100.0
%


100.0
%   Our
    Results of Operations
  Fiscal
    Year ended December 31, 2006 Compared to Fiscal Year ended
    December 31, 2005
    Net
    Loss
   37




---



##### 



Sales
    OSB.
    17-day
  Specialty Overlaid Plywood and Other
    Products.
    Costs of Products Sold (Exclusive of Amortization)
    OSB.
     38




---



##### 



Specialty Overlaid Plywood and Other
    Products.
    Selling
    and Administration
    Amortization
    of Capital Assets
  units-of-production
  Write-Down
    of Capital Assets and Production Line Closure
    60-days
  Write-Down
    of Timber Deposits
      Finance
    Expense
   39




---



##### 



Other
    Income (Expense)
    Foreign
    Exchange (Loss) Gain on Long-term Debt
      Income
    Taxes
      Fiscal
    Year ended December 31, 2005 Compared to Fiscal Year ended
    December 31, 2004
  Net
    Income
    Sales
   40




---



##### 



OSB.
  Specialty Overlaid Plywood and Other
    Products.
    Costs of
    Products Sold (Exclusive of Amortization)
  OSB.
  Specialty Overlaid Plywood and Other
    Products.
        Selling
    and Administration
    Amortization
    of Capital Assets
   41




---



##### 



Finance
    Expense
      Other
    Income (Expense)
    Income
    Taxes
    Market
    Risk
        Significant
    Accounting Estimates and Judgments
    Valuation of Inventory.
  Loss Contingencies.
 42




---



##### 



Valuation of Long-Lived Assets.
  Amortization.
  Goodwill.
  Employee Benefit Plans.
  Reforestation Obligation.
  Future Income Tax Assets and Liabilities.
 43




---



##### 



U.S. GAAP Reconciliation
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings as
    incurred.
    In 2006, we adopted the provisions of FASB Statement
    No. 158, Employers Accounting for Defined Benefit
    Pension and Other Postretirement Plans, under which we
    recognize the difference between the projected pension benefit
    obligation and the plan assets as a pension liability, which
    represents a higher liability than the accrued pension benefit
    asset and liability recognized under Canadian GAAP.
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    these amounts are presented as a separate component of
    shareholders equity.
    Under Canadian GAAP, we recorded a foreign exchange loss on the
    realization of a portion of the cumulative translation
    adjustment balance, related to the distribution of dividends
    from a self-sustaining foreign operation and the corresponding
    reduction in the net investment in the subsidiary. Under
    U.S. GAAP, this would only be done when there is a
    substantial reduction in the net investment.  Changes
    in Internal Control over Financial Reporting
    
    issued a Whistleblower Policy, which clearly defined the
    reporting responsibilities and independence of the Whistleblower
    Officer;
    reviewed the access rights for users of our information systems
    to ensure that users had the appropriate access to each
    system; and
    ensured that only authorized signatories could authorize the
    disbursement of funds to third parties.      Disclosure
    Controls and Procedures and Internal Controls over Financial
    Reporting
       44




---



##### 



B.
    Liquidity
    and Capital Resources    As at December 31,2006


2005


2004(In millions)Current assets

$
322.3


$
467.5


$
363.6Current portion of future income
    tax assets


(1.7
)






Restricted cash


(62.2
)


(39.0
)


(6.6
)Timber licence deposits






(6.0
)


Current liabilities


(82.5
)


(113.7
)


(136.3
)Current portion of future income
    tax liabilities


10.7



31.4



Adjusted working capital

$
186.6


$
340.2


$
220.7         As at December 31,2006


2005


2004(In millions)Cash provided by operating
    activities

$
8.0


$
161.8


$
364.4Cash (used in) provided by
    operating activities excluding the effects of changes in
    non-cash working capital(1)


(29.5
)


299.6



283.6Cash provided by (used in)
    financing activities


148.4



(45.6
)


503.6Cash used in investing activities


(291.4
)


(113.1
)


(856.1
)Additions to capital assets


228.3



57.3



18.0     (1)
    
    Cash (used in) provided by operating activities excluding the
    effects of changes in non-cash working capital consists of cash
    provided by operating activities less changes in non-cash
    working capital. 45




---



##### 



C.
    Research
    and Development, Patents and Licenses  AinsworthEngineered ®
   46




---



##### 



D.
    Trend
    Information    E.
    Off-Balance
    Sheet Arrangements    F.
    Contractual
    Obligations    Payment due by PeriodLess Than








AfterContractual Obligation(9)(10)(11)

1 Year


1-3 Years


3-5 Years


5 Years


Total(In thousands)6.75% Senior Unsecured
    Notes(1)


25,173



50,345



50,345



376,736



502,5997.25% Senior Unsecured
    Notes(2)


23,235



46,470



46,470



337,928



454,103LIBOR + 3.75% Floating Rate Senior
    Unsecured Notes(3)


6,806



13,612



184,213







204,631LIBOR + 4.00% Floating Rate Senior
    Unsecured Notes(4)


3,543



7,086



7,086



91,823



109,53812.50% Senior Unsecured
    Notes(5)


1,680















1,680Merrill Lynch Equipment Loan(6)


13,313



25,859



36,637







75,809Deutsche Bank Equipment Loan(7)


853



9,395



8,788



17,552



36,588Capital Lease Obligations(8)


1,128



2,255



2,255



15,128



20,766Operating Lease Obligations


3,267



3,869



551







7,687Purchase Commitments(9)


28,847



1,214



298



1,190



31,549Total


107,845



160,107



336,643



840,355



1,444,950     (1)
    
    Under the indentures governing our outstanding 6.75% Senior
    Notes, we are required to make interest payments in the amount
    of US$10.8 million each June 30 and December 30.
    Our 6.75% Senior Notes mature on March 15, 2014. 47




---



##### 



(2)
    
    Under the indenture governing our outstanding 7.25% Senior
    Notes, we are required to make interest payments in the amount
    of US$10.0 million each June 30 and December 30.
    Our 7.25% Senior Notes mature on October 1, 2012.(3)
    
    Under the indenture governing our outstanding LIBOR + 3.75%
    Floating Rate Senior Notes, we are required to pay interest at a
    rate per annum, reset quarterly, equal to LIBOR plus 3.75%.
    Interest on our LIBOR + 3.75% Floating Rate Senior Notes is
    payable each March 30, June 30, September 30 and
    December 30. For the purpose of the above table we have
    calculated the interest rate at the December 31,
    2006 year-end rate of 9.12%. Our LIBOR + 3.75% Floating
    Rate Senior Notes mature on October 1, 2010.(4)
    
    Under the indenture governing our outstanding LIBOR + 4.00%
    Floating Rate Senior Notes, we are required to pay interest at a
    rate per annum, reset quarterly, equal to LIBOR plus 4.00%.
    Interest on our LIBOR + 4.00% Floating Rate Senior Notes is
    payable each March 30, June 30, September 30 and
    December 30. For the purpose of the above table we have
    calculated the interest rate at the December 31,
    2006 year-end rate of 9.37%. Our LIBOR + 4.00% Floating
    Rate Senior Notes mature on April 1, 2013.(5)
    
    Our 12.50% Senior Notes mature on July 15, 2007.(6)
    
    Under the Merrill Lynch equipment loan agreement, we are
    required to pay interest at a rate per annum, reset monthly,
    equal to LIBOR plus 2.90%, payable monthly. For the purpose of
    the above table we have calculated the interest rate at the
    December 31, 2006 year-end rate of 8.27%. Principal
    payments are made monthly with the final monthly payment and a
    balloon payment due October 1, 2011.(7)
    
    Under the Deutsche Bank equipment loan agreement, we are
    required to pay interest at a rate per annum, reset
    semi-annually, equal to EURIBOR plus 0.65%, payable
    semi-annually in March and September. For the purpose of the
    above table we have calculated the interest rate at the
    December 31, 2006 year-end rate of 4.31%. The loan is
    repayable in 17 equal semi-annual installments starting at the
    earlier of six months after the pressing and forming equipment
    is ready for operation and June 20, 2008.(8)
    
    Capital lease obligations are payable monthly.(9)
    
    Purchase commitments include agreements to purchase machinery,
    equipment, engineering and management support services in
    relation to the Grande Prairie expansion project and
    US$1.7 million related to the purchase of Chatham Forest
    Products, Inc.(10)
    
    Contractual obligations denominated in US$ are converted to
    Canadian dollars at the December 31, 2006 exchange rate
    posted by the Bank of Canada of US$0.8581 = $1.00.(11)
    
    Contractual obligations denominated in  are converted to
    Canadian dollars at the December 31, 2006 exchange rate
    posted by the Bank of Canada of 0.6507 = $1.00.  G.
    Contingencies       48




---



##### 



H.
    Quarterly
    Comparative Financial Information  2006


Q4-06


Q3-06


Q2-06(3)


Q1-06


2005


Q4-05


Q3-05


Q2-05


Q1-05


2004(In millions, except per share data, unless otherwise
    noted)Sales and earningsSales

$
827.1


$
119.2


$
181.1


$
234.3


$
292.6


$
1,248.2


$
302.1


$
270.7


$
329.9


$
345.6


$
909.9Operating (loss) earnings


(120.2
)


(53.8
)


(106.7
)


(6.0
)


46.3



257.6



45.1



26.1



77.6



108.8



326.0Foreign exchange (loss) gain on
    long-term debt


(7.9
)


(43.5
)


(1.2
)


40.6



(3.8
)


28.3



(0.2
)


47.0



(12.6
)


(5.9
)


73.8Net (loss) income


(108.0
)


(78.1
)


(77.5
)


24.9



22.7



153.1



19.9



46.8



31.3



55.1



175.1(Loss) earnings per share


(7.37
)


(5.33
)


(5.29
)


1.71



1.54



10.45



1.36



3.19



2.14



3.76



11.98Balance sheetTotal assets


1,504.2



1,504.2



1,532.0



1,561.8



1,558.5



1,513.0



1,513.0



1,499.8



1,505.7



1,509.1



1,432.7Total long-term debt


1,038.1



1,038.1



984.4



908.9



863.7



859.5



859.5



858.9



905.6



923.1



916.9Common shares(1)


55.8



55.8



55.8



55.8



55.8



55.8



55.8



55.8



55.8



55.8



55.8Retained earnings


295.0



295.0



373.1



450.6



440.4



417.7



417.7



397.3



350.5



333.9



278.7Cash dividends declared: $ per
    share


1.00











1.00







1.00











1.00







1.00Cash provided by (used in)
    operating activities(2)


8.0



(63.9
)


16.6



25.1



30.2



161.8



30.3



43.3



73.1



15.1



364.4Key statisticsOSB shipments (mmsf 3/8)


2,774.9



480.1



732.8



754.7



807.4



3,229.3



782.2



804.0



837.5



805.6



2,037.1Average OSB price ($/msf)


263.1



205.1



211.5



277.9



330.4



352.5



349.2



303.0



361.4



395.4



392.5     (1)
    
    At March 30, 2007, the Company had 14,649,140 issued common
    shares.(2)
    
    Cash provided by operating activities in Q1-06 and Q2-06 has
    been restated by $10.6 million and $4.7 million
    respectively to reflect the reclassification of non-cash capital
    asset additions.(3)
    
    Net income, earnings per share and retained earnings in Q2-06
    have been restated to reflect the reclassification of
    $2.4 million foreign exchange loss on long-term items from
    the cumulative translation adjustment account to other income.      ITEM 6.
    Directors,
    Senior Management and Employees  A.
    Directors
    and Senior Management   49




---



##### 



Name

Age

TitleBrian E. Ainsworth


64


Chairman, Chief Executive Officer
    and Director since May 1993.D. Allen Ainsworth


65


President and Director since May
    1993.Catherine E. Ainsworth


48


Chief Operating Officer, Secretary
    since November 2001 and Director since May 1993.Robert Allen


49


Chief Financial Officer since
    November 2003.David Ainsworth


86


Director since May 1993 and
    co-founder of Ainsworth.Susan Ainsworth


85


Director since May 1993 and
    co-founder of Ainsworth.D. Michael Ainsworth


44


Executive Vice-President, since
    May 2002.Kevin Ainsworth


41


Senior Vice-President, B. C.
    Timberlands and Solid Wood Group.Douglas I. Ainsworth


42


Senior Vice-President, Marketing,
    Sales and Transportation.Doug B. Buchanan(1)(2)(3)(4)


54


Director since May 26, 2005.
    He is Managing Director and CEO of BC Biomedical Laboratories
    Ltd.Robert A. Fairweather(1)(3)(4)


63


Director since May 25, 2006.
    He is President of the International Financial Centre BC.K. Gordon Green(1)(2)(3)(4)


72


Director since May 1993. Until
    October 1993 he was a Vice President and Director, RBC Dominion
    Securities Inc.Morley Koffman(3)


77


Director since May 1993. He is a
    lawyer with the law firm Koffman Kalef.W. Gordon Lancaster(1)(2)(3)(4)


63


Director since May 1993. He is
    Chief Financial Officer of Ivanhoe Energy Inc.     (1)
    
    Member of the audit committee.(2)
    
    Member of the compensation committee.(3)
    
    Member of the corporate governance committee.(4)
    
    Member of the nominating committee.  Brian E. Ainsworth
  D. Allen Ainsworth
  Catherine E. Ainsworth
  Robert Allen
 50




---



##### 



David Ainsworth
  Susan Ainsworth
  D. Michael Ainsworth
  Kevin Ainsworth
  Douglas I. Ainsworth start-up
  Doug B. Buchanan
  Robert A. Fairweather
  K. Gordon Green
  Morley Koffman
  W. Gordon Lancaster
   51




---



##### 



B.
    Compensation    Summary
    Compensation Table
  Long-Term CompensationAwardsSecurities


Restricted


PayoutsAnnual Compensation


Under


Shares or


Long-TermOther Annual


Options/SARs


Restricted


IncentiveSalary


Bonus


Compensation


Granted


Share Units


Plan Payouts


All OtherName and Principal Position

Year


($)


($)


($)


($)


($)


($)


CompensationBrian E. Ainsworth


2006














$
564,833(2
)










Chairman and Chief Executive OfficerD. Allen Ainsworth


2006


$
488,925







(1
)














PresidentCatherine E. Ainsworth


2006


$
453,050







(1
)














Chief Operating Officer and
    SecretaryD. Michael Ainsworth


2006


$
281,875







(1
)














Executive Vice-PresidentDouglas I Ainsworth


2006


$
281,875







(1
)














Senior Vice-President, Marketing     (1)
    
    The aggregate amount of all perquisites or other personal
    benefits paid to each of the executive officers named in the
    table in 2006 did not exceed 10% of his or her total base salary
    or compensation and bonus for the year.(2)
    
    Represents management fees in the amount of $532,500 plus an
    automobile allowance of $32,333. See Employment
    Agreements.  Compensation
    of Directors
  out-of-pocket
  Pension
    Benefits
   52




---



##### 



Credited Years of


Estimated AnnualService to


Benefit at


Years of Credited


Estimated AnnualName

12/31/2006


12/31/2006


Service to Age 65


Benefit at Age 65Brian E. Ainsworth


47


$
99,222



48


$
106,852D. Allen Ainsworth


47


$
98,167



47


$
98,167Catherine E. Ainsworth


27


$
56,120



43


$
96,111D. Michael Ainsworth


18


$
38,000



39


$
87,407Douglas I. Ainsworth


18


$
38,000



41


$
90,741   C.
    Board
    Practices    Employment
    Agreements
      Committees
    of the Board Of Directors
    Audit
    Committee
   53




---



##### 



Compensation
    Committee
    Corporate
    Governance Committee
    Nominating
    Committee
    D.
    Employees      E.
    Share
    Ownership  Share
    Capital Structure
    
    100,000,000 Common Shares without par value;
    1,500,000 Class B Common Shares without par value, of which
    350,000 are designated as Series 1 Class B Common
    Shares, 180,000 are designated Series 2 Class B Common
    Shares and 187,500 are designated Series 3 Class B Common
    Shares; and
    100,000,000 preferred shares without par value, of which 300,000
    are designated as Series 1 Preferred Shares, 4,000,000 are
    designated as Series 2 Preferred Shares, and 5,000,000 are
    designated as Series 3 Preferred Shares. 54




---



##### 



,
    Common SharesBeneficially OwnedName and positions

or Controlled


% of Class(1)BRIAN E. AINSWORTH


2,507,186
(2)


17.11
%Chairman, Chief Executive Officer
    and DirectorD. ALLEN AINSWORTH


2,757,186
(3)


18.82
%President and DirectorCATHERINE E. AINSWORTH


61,013
(4)


0.42
%Chief Operating Officer, Secretary
    and DirectorD. MICHAEL AINSWORTH






Executive Vice PresidentDOUGLAS I. AINSWORTH






Senior Vice President, MarketingDAVID AINSWORTH


3,129,188
(5)


21.36
%DirectorSUSAN AINSWORTH


13,636



0.09
%DirectorDOUG B. BUCHANAN


500



0.00
%(6)DirectorROBERT A. FAIRWEATHER


3,000



0.02
%DirectorK. GORDON GREEN


8,888



0.06
%DirectorMORLEY KOFFMAN


7,888



0.05
%DirectorW. GORDON LANCASTER


2,000



0.01
%DirectorGRANT FOREST PRODUCTS CORP.(7)


5,001,160



34.14
%     (1)
    
    Based on a total of 14,649,140 currently issued and outstanding
    common shares as of March 30, 2007.(2)
    
    These shares are controlled through 2468 Holdings Ltd.(3)
    
    These shares are controlled through 5678 Enterprises Ltd. 98% of
    the outstanding voting shares of 5678 Enterprises Ltd. are owned
    by D. Allen Ainsworth and the remainder are owned by D. Michael
    Ainsworth and Douglas I. Ainsworth.(4)
    
    Catherine E. Ainsworth also owns 4% of the outstanding voting
    shares of 1234 Holdings Ltd., which owns 3,108,188 common
    shares. The common shares owned by 1234 Holdings Ltd. are to be
    voted by Catherine E. Ainsworth as that companys
    representative.(5)
    
    3,108,188 of these shares are beneficially owned through 1234
    Holdings Ltd. and are to be voted by
    Catherine E. Ainsworth as that companys
    representative.(6)
    
    The actual percentage is 0.003%.(7)
    
    Based on a report dated March 30, 2007 generated using the
    Canadian Depository for Securities Ltd.s System for
    Electronic Disclosure by Insiders (SEDI). 55




---



##### 



Stock
    Options
    Employee
    Participation Share Plan
        ITEM 7.
    MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  A.
    Major
    Shareholders      Percentage ofName

Number of Shares


Outstanding SharesGrant Forest Products Corp.


5,001,160



34.14
%1234 Holdings Ltd.(1)


3,108,188



21.22
%5678 Enterprises Ltd.(2)


2,757,186



18.82
%2468 Holdings Ltd.(3)


2,507,186



17.11
%     (1)
    
    96% of the outstanding voting shares of 1234 Holdings Ltd. are
    owned by David Ainsworth and the remainder are owned by
    Catherine Ainsworth. The Common Shares owned by 1234 Holdings
    Ltd. are voted by 56




---



##### 



Catherine Ainsworth as that companys representative
    in relation to proceedings of the Companys shareholders.(2)
    
    98% of the outstanding voting shares of 5678 Enterprises Ltd.
    are owned by D. Allen Ainsworth and the remainder are owned by
    his two sons.(3)
    
    95% of the outstanding voting shares of 2468 Holdings Ltd. are
    owned by Brian E. Ainsworth and the remainder are owned by his
    son and a family trust.  B.
    Related
    Party Transactions      C.
    Interests
    of experts and counsel    ITEM 8.
    FINANCIAL
    INFORMATION  A.
    Consolidated
    Financial Statements and Other Financial Information    B.
    Significant
    Changes    ITEM 9.
    THE
    OFFER AND LISTING  A.
    Offer and
    Listing Details  Senior
    Notes
     57




---



##### 



Common
    Shares
    Annual
    Share Price Information
  For the Year Ended

High


LowDecember 31, 2006

$
27.25


$
7.75December 31, 2005

$
36.49


$
22.50December 31, 2004

$
36.00


$
11.88December 31, 2003

$
12.66


$
3.00December 31, 2002

$
6.00


$
3.00   Quarterly
    Share Price Information
  For the Quarter Ended

High


LowMarch 31, 2007

$
10.60


$
7.15December 31, 2006

$
13.71


$
7.75September 30, 2006

$
22.74


$
11.50June 30, 2006

$
26.95


$
22.55March 31, 2006

$
27.25


$
22.25December 31, 2005

$
30.25


$
22.50September 30, 2005

$
31.00


$
22.75June 30, 2005

$
33.45


$
32.40March 31, 2005

$
36.49


$
24.10   Monthly
    Share Price Information
  For the Month Ended

High


LowMarch 31, 2007

$
9.00


$
7.15February 28, 2007

$
10.60


$
9.00January 31, 2007

$
10.46


$
8.98December 31, 2006

$
9.50


$
7.75November 30, 2006

$
10.69


$
9.09October 31, 2006

$
13.71


$
10.90   B.
    Plan of
    Distribution    C.
    Markets    D.
    Selling
    Shareholders   58




---



##### 



E.
    Dilution    F.
    Expenses
    of the issue    ITEM 10.
    ADDITIONAL
    INFORMATION  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Association  Form 20-F
  C.
    Material
    contracts  Contract No.


Description1.


Credit Agreement, dated as
    of December 14, 2005, among Ainsworth Engineered Canada
    Limited Partnership, Ainsworth Corp. and Ainsworth Engineered
    (USA), LLC, as borrowers and cross-guarantors, these companies
    and Ainsworth Engineered Corp., as guarantors, the lenders party
    thereto, JPMorgan Chase Bank, N.A., as administrative agent, and
    GE Canada Finance Holding Company, as syndication
    agent.On December 14, 2005 we
    entered a credit agreement for a senior secured revolving credit
    facility. The credit facility is a five-year revolving credit
    facility permitting maximum aggregate borrowings of
    $100.0 million. The credit facility is subject to a
    borrowing base consisting of up to 85% of eligible accounts
    receivable plus the lesser of 65% of the average cost or market
    value of eligible inventory and 85% of the net orderly
    liquidation value of eligible inventory plus the lesser of 20%
    of the average cost or market value of eligible stores inventory
    and 85% of the net orderly liquidation value of eligible stores
    inventory minus reserves.This credit facility is guaranteed
    by us and all of our wholly-owned subsidiaries (other than
    excluded subsidiaries). This credit facility is secured by all
    of our and any guarantors presently owned and hereafter
    acquired accounts receivable and inventory. Liens
    and/or
    security interests on our and any guarantors accounts
    receivable and inventory are prohibited.2.


Fifth Supplemental
    Indenture, dated as of February 27, 2006, to the Indenture
    dated March 3, 2004, among the Company and The Bank of New
    York, as trustee.On February 27, 2006, we
    amended the Indenture, dated March 3, 2004, related to our
    US$210,000,000 aggregate principal amount of 6.750% Senior
    Notes due March 15, 2014, among the Company, as issuer, and
    The Bank of New York, as trustee, to conform the limitation on
    liens covenant in the Indenture with the covenant in the
    indenture relating to our
    71/4% Senior
    Notes due October 1, 2012 and Senior Floating Rate Notes
    due October 1, 2010.3.


Fifth Supplemental
    Indenture, dated as of February 27, 2006, to the Indenture
    dated May 19, 2004, among the Company and The Bank of New
    York, as trustee.On February 27, 2006, we
    amended the Indenture, dated March 3, 2004, related to our
    US$110,000,000 aggregate principal amount of 6.750% Senior
    Notes due March 15, 2014, among the Company, as issuer, and
    The Bank of New York, as trustee, to conform the limitation on
    liens covenant in the Indenture with the covenant in the
    indenture relating to our
    71/4% Senior
    Notes due October 1, 2012 and Senior Floating Rate Notes
    due October 1, 2010. 59




---



##### 



Contract No.


Description4.


Contract for General
    Contracting Services related to the Grande Prairie expansion,
    dated July 6, 2005, between the Company and DEMAC
    Management Ltd.On July 6, 2005, we entered
    into a contract with DEMAC Management Ltd. for general
    contracting services related to the creation of a second
    production line at our Grande Prairie facility. Pursuant to the
    agreement, DEMAC is to fulfill certain work requirements
    commencing on or before August 2, 2005, and terminating on
    or about February 27, 2007. The estimated contract sum is
    $90 million.5.


Indenture dated as of
    April 18, 2006, among the Company, as issuer, the
    guarantors named therein, as guarantors, and The Bank of New
    York, as trustee.On April 18, 2006 we issued
    in a private placement US$75,000,000 aggregate principal amount
    of Senior Floating Rate Notes due 2013 under an Indenture, dated
    as of April 18, 2006, among the Company, as issuer, the
    guarantors named therein, as guarantors, and the Bank of New
    York, as trustee (the Indenture). The
    Indenture restricts our ability and the ability of certain of
    our subsidiaries to:a) incur additional indebtedness;b) pay dividends or make other
    distributions;c) repurchase stock;d) enter into transactions with
    affiliates;e) transfer or sell assets;f) make certain investments;g) create liens;h) issue or sell stock of
    subsidiaries;i) create dividend or other
    payment restrictions affecting Restricted Subsidiaries (as
    defined in the Indenture); andj) merge, consolidate, amalgamate
    or sell all or substantially all of our assets to another person.5.


Exchange and Registration
    Rights Agreement dated as of April 18, 2006 among the
    Company and Deutsche Bank Securities Inc..Pursuant to an Exchange and
    Registration Rights Agreement dated April 18, 2006, among
    the Company and Deutsche Bank Securities Inc. (the
    Registration Rights Agreement), the Company
    agreed that holders of the Original Notes would be entitled to
    exchange the Original Notes for registered notes (the
    Exchange Notes) with substantially identical
    terms. The Exchange Notes are governed by the Indenture. The
    Registration Rights Agreement provided that the Company would:
    (i) file a registration statement by July 3, 2006
    regarding the exchange of the Original Notes for Exchange Notes;
    (ii) use its reasonable best efforts to have the
    registration statement declared effective by October 5,
    2006; and (iii) complete the exchange offer within
    45 days after the registration statement is declared
    effective.   D.
    Exchange
    Controls     60




---



##### 




    an acquisition of common shares of the Company by a person in
    the ordinary course of that persons business as a trader
    or dealer in securities;
    an acquisition of control of the Company in connection with the
    realization of a security interest granted for a loan or other
    financial assistance and not for any purpose related to the
    provision of the Investment Canada Act; and
    an acquisition of control of the Company by reason of an
    amalgamation, merger, consolidation or corporate reorganization
    following which the ultimate direct or indirect control in fact
    of the Company, though the ownership of voting interests,
    remains unchanged.    E.
    Taxation  Income Tax Act
    This discussion is of a general nature only, and is not
    intended to be, nor should it be interpreted as, legal or tax
    advice to any particular Holder and no representation is made
    with respect to the Canadian federal income tax consequences to
    any particular person acquiring, holding or disposing of Senior
    Notes. Holders should therefore consult their own tax advisors
    with respect to their particular circumstances.
     61




---



##### 



F.
    Dividends
    and Paying Agents    G.
    Statements
    by Experts    H.
    Documents
    on Display  1-800-SEC-0330
  I.
    Subsidiary
    Information    ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  A.
    Quantitative
    Information About Market Risk    B.
    Qualitative
    Information About Market Risk    Foreign
    Currency Rate Sensitivity
     62




---



##### 



Interest
    Rate Sensitivity
  $
    Commodity
    Price Sensitivity
     ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES    PART II   ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES  A.
    Indebtedness  Form 20-F.
  B.
    Dividends  Form 20-F.
   ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS  A. Form 20-F.
  B.
  C.
  D.
  E.
 63




---



##### 



ITEM 15.
    CONTROLS
    AND PROCEDURES  A.
      B
  C.
  D.
  
    issued a Whistleblower Policy, which clearly defined the
    reporting responsibilities and independence of the Whistleblower
    Officer;
    reviewed the access rights for users of the Companys
    information systems to ensure that users had the appropriate
    access to each system; and
    ensured that only authorized signatories could authorize
    disbursement of funds to third parties.    ITEM 16.
    AUDIT
    COMMITTEE FINANCIAL EXPERT; CODE OF ETHICS; ACCOUNTANT FEES AND
    SERVICES  A.
    Audit
    Committee Financial Expert  Regulation S-K
  B.
    Code of
    Ethics   64




---



##### 



C.
    Principal
    Accountant Fees and Services  Fees Relating to the Fiscal Year Ended December 31

2006


2005Audit Fees

$
1,090,000



93
%

$
700,000



77
%Audit-Related Fees














Tax Fees(1)


82,000



7



206,505



23Other Fees














Total

$
1,172,000



100
%

$
906,505



100
%     (1)
    
    Tax fees relate to compliance services with respect to transfer
    pricing and tax assistance with respect to filing positions.          D.
    Exemptions
    From Listing Standards for Audit Committees    E.
    Purchases
    of Equity Securities by the Issuer and its Affiliates   PART III  ITEM 17.
    FINANCIAL
    STATEMENTS   65




---



##### 



ITEM 18.
    FINANCIAL
    STATEMENTS    
  Page No.Report of Independent
    Registered Chartered Accountants and Consolidated Financial
    Statements of Ainsworth Lumber Co. Ltd.Audited Consolidated Financial
    StatementsReport of
    Independent Registered Chartered Accountants


F-2Consolidated
    Balance Sheets as at December 31, 2006 and 2005


F-3Consolidated
    Statements of Operations and Retained Earnings for the years
    ended December 31, 2006, 2005 and 2004


F-4Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


F-5Notes to the
    Consolidated Financial Statements


F-6   66




---



##### 



Report of
    Independent Registered Chartered Accountants and Consolidated
    Financial Statements of
  AINSWORTH
    LUMBER CO. LTD.
  December 31, 2006 and 2005
 F-1




---



##### 



Report of
    Independent Registered Chartered Accountants                  Comments
    by Independent Registered Chartered Accountants on
    Canada-United
    States of America Reporting Difference
        F-2




---



##### 



AINSWORTH
    LUMBER CO. LTD.
 Consolidated
    Balance Sheets  December 31


December 31(In thousands of Canadian dollars)

2006


2005ASSETSCurrent AssetsCash and cash equivalents
    (Note 4)

$
74,312


$
209,201Short-term investments


35,864



Accounts receivable, net of
    allowance for doubtful accounts of $Nil (2005:$Nil)


38,848



61,579Inventories (Note 5)


95,515



108,530Income taxes receivable






28,409Prepaid expenses


13,869



14,762Restricted cash (Note 10)


62,184



39,016Timber licence deposits
    (Note 15)






5,998Current portion of future income
    tax assets (Note 17)


1,697



322,289



467,495Capital Assets, Net
    (Note 6)


968,539



875,896Intangible Assets
    (Note 8)


14,243



14,209Other Assets
    (Note 9)


53,810



55,463Future Income Tax Assets
    (Note 17)


42,348



Goodwill
    (Note 2)


102,970



102,970$
1,504,199


$
1,516,033LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued
    liabilities

$
58,763


$
82,327Income taxes payable


2,552



Current portion of future income
    tax liabilities (Note 17)


10,708



31,362Current portion of long-term debt
    (Note 12)


10,523



82,546



113,689Accrued Pension Benefit
    Liability (Note 20)


6,034



3,031Reforestation Obligation
    (Note 11)


4,621



4,348Long-term Debt
    (Note 12)


1,027,595



859,540Future Income Tax Liabilities
    (Note 17)


89,293



120,2561,210,089



1,100,864Commitments and Guarantees
    (Note 19)Contingencies
    (Note 21)SHAREHOLDERS
    EQUITYCapital stock
    (Note 13)


55,827



55,827Cumulative translation
    adjustment (Note 1(b))


(56,722
)


(58,343
)Retained earnings


295,005



417,685294,110



415,169$
1,504,199


$
1,516,033       /s/  Catherine
    Ainsworth

/s/  Allen
    AinsworthCatherine Ainsworth

Allen AinsworthDIRECTOR

DIRECTOR  F-3




---



##### 



AINSWORTH
    LUMBER CO. LTD.
 Consolidated
    Statements of Operations and Retained Earnings
    Years ended December 31  (In thousands of Canadian dollars, except per share data)

2006


2005


2004Sales

$
827,118


$
1,248,231


$
909,922Costs and ExpensesCosts of products sold (exclusive
    of amortization)


749,980



855,949



498,246Selling and administration


41,124



30,777



31,014Amortization of capital assets
    (Note 6)


88,004



103,907



53,852Loss on disposal of capital assets


2,549







Write-down of capital assets
    (Note 14)


55,290







793Production line closure
    (Note 14)


5,915







Write-down of timber deposits
    (Note 15)


4,502







947,364



990,633



583,905Operating (Loss)
    Earnings


(120,246
)


257,598



326,017Finance Expense
    (Note 16)Interest


68,913



64,914



40,723Amortization of financing costs
    and fees


5,399



4,888



3,234Loss on repurchase of long-term
    debt






1,485



106,19874,312



71,287



150,155Other Income
    (Expense)


8,886



2,197



(3,351
)Foreign Exchange (Loss) Gain on
    Long-term Debt


(7,936
)


28,313



73,815(Loss) Income Before Income
    Taxes


(193,608
)


216,821



246,326Income Tax (Recovery) Expense
    (Note 17)


(85,577
)


63,667



71,244Net (Loss) Income


(108,031
)


153,154



175,082Retained Earnings, Beginning of
    Year


417,685



278,742



118,563Refundable Dividend Tax
    Recovery






438



Dividends Paid
    (Note 18)


(14,649
)


(14,649
)


(14,660
)Excess of Amount Paid on
    Purchase of Capital Stock over Stated Capital










(243
)Retained Earnings, End of
    Year

$
295,005


$
417,685


$
278,742Basic and diluted (loss) earnings
    per common share

$
(7.37
)

$
10.45


$
11.98Weighted average number of common
    shares outstanding


14,649,140



14,649,140



14,612,506    F-4




---



##### 



AINSWORTH
    LUMBER CO. LTD.
 Consolidated
    Statements of Cash Flows
    Years ended December 31  (In thousands of Canadian dollars)

2006


2005


2004CASH FLOWS FROM OPERATING
    ACTIVITIESNet (loss) income

$
(108,031
)

$
153,154


$
175,082Items not affecting cash
    Amortization of capital assets (Note 6)


88,004



103,907



53,852Amortization of financing costs
    and fees (Note 16)


5,399



4,888



3,234Foreign exchange loss (gain) on
    long-term debt


7,936



(28,313
)


(73,815
)Loss on repurchase of long-term
    debt






1,485



106,198Write-down of capital assets
    (Note 14)


55,290







793Loss on disposal of capital assets


2,549



245



25Write-down of timber deposits
    (Note 15)


4,502







Change in non-current
    reforestation obligation


273



(122
)


(332
)Future income taxes


(93,512
)


71,600



(14,353
)Non-cash stock-based compensation










2,640Adjustment to net accrued pension
    benefit asset


3,734



(7,278
)


215Utilization of investment tax
    credits










30,060Realized currency translation
    adjustments (Note 1(b))


4,400







Change in non-cash operating
    working capital (Note 24)


37,420



(137,718
)


80,829Cash provided by operating
    activities


7,964



161,848



364,428CASH FLOWS FROM FINANCING
    ACTIVITIESProceeds from issue of long-term
    debt (Note 12)


171,588







996,387Repayment of long-term debt


(2,321
)






Repayment of capital lease
    obligations


(174
)


(274
)


(275
)Repurchase of long-term debt






(31,067
)


(451,305
)Dividends paid (Note 18)


(14,649
)


(14,649
)


(14,660
)Refundable dividend tax recovery






438



Financing costs and fees


(6,011
)






(26,214
)Repurchase of capital stock










(284
)Cash provided by (used in)
    financing activities


148,433



(45,552
)


503,649CASH FLOWS FROM INVESTING
    ACTIVITIESShort-term investments


(35,864
)






Restricted cash


(23,168
)


(32,455
)


(6,561
)Additions to capital assets


(228,255
)


(57,275
)


(17,987
)Increase in other assets


(4,255
)


(9,883
)


(1,555
)Proceeds on disposal of capital
    assets


154



27



40Acquisition of intangible assets
    (Note 8)






(7,546
)


Timber licence deposits
    (Note 15)






(5,998
)


Investment in Minnesota OSB
    Facilities (Note 3)










(584,847
)Investment in Voyageur Panel
    Limited, net of cash acquired (Note 2)










(245,158
)Cash used in investing activities


(291,388
)


(113,130
)


(856,068
)Effect of foreign exchange rate
    changes on cash and cash equivalents


102



(28
)


NET CASH (OUTFLOW)
    INFLOW


(134,889
)


3,138



12,009CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR


209,201



206,063



194,054CASH AND CASH EQUIVALENTS, END
    OF YEAR

$
74,312


$
209,201


$
206,063SUPPLEMENTAL
    INFORMATIONTaxes paid

$
4,142


$
61,484


$
16,443Interest paid

$
70,482


$
64,986


$
138,351    F-5




---



##### 



AINSWORTH
    LUMBER CO. LTD.
  Notes to the Consolidated Financial
    Statements
 Years ended December 31
 (Figures in tables are in thousands of Canadian dollars
    unless indicated otherwise)
   1.
    SIGNIFICANT
    ACCOUNTING POLICIES      (a)
    Basis
    of consolidation      (b)
    Foreign
    currency translation      (c)
    Use of
    estimates      (d)
    Cash
    and cash equivalents   F-6




---



##### 



(e)
    Short-term
    investments    (f)
    Inventories    (g)
    Capital
    assets  start-up units-of-production
  Asset

RateBuildings


5
%Machinery and equipment


12%-20
%Office equipment


15
%     (h)
    Intangible
    assets    (i)
    Goodwill    (j)
    Financing
    and debt discount costs   F-7




---



##### 



(k)
    Reforestation
    obligation    (l)
    Revenue
    recognition    (m)
    Income
    taxes      (n)
    Earnings
    per share    (o)
    Employee
    Benefit Plans    (p)
    Canadian
    GAAP developments  Comprehensive Income.
  (ii) Accounting Changes.
 F-8




---



##### 



2.
    ACQUISITION
    OF VOYAGEUR PANEL LIMITED      Current assets (including cash of
    $51,142)

$
76,937Other assets


1,170Capital assets


166,084Total identifiable assets acquired


244,191Current liabilities


9,470Future income taxes


41,905Other long-term liabilities


32Total liabilities acquired


51,407Net identifiable assets acquired


192,784Goodwill


103,516Total purchase price

$
296,300   Pro
    forma financial summary (unaudited)
    Year EndedDecember 31,2004Total revenues

$
1,416,153Net income


297,321Basic and diluted earnings per
    common share


20.35   3.
    ACQUISITION
    OF THE MINNESOTA OSB FACILITIES      F-9




---



##### 



Current assets

$
48,127Capital assets


536,720Total identifiable assets acquired


584,847Total liabilities acquired


Total purchase price

$
584,847   4.
    CASH AND
    CASH EQUIVALENTS  2006


2005Cash

$
64,226


$
130,209Commercial paper


10,086



78,992$
74,312


$
209,201   5.
    INVENTORIES  2006


2005Logs

$
36,120


$
52,001Panel products


23,493



20,652Materials and supplies


35,902



35,877$
95,515


$
108,530   6.
    CAPITAL
    ASSETS  2006Accumulated


Net BookCost


Amortization


ValueProperty, plant and
    equipmentPanel product mills

$
1,163,165


$
476,092


$
687,073Land


10,146







10,146Asset under capital lease
    (Note 12)


11,499



153



11,346Other


26,652



20,490



6,162Construction in progress


232,926







232,9261,444,388



496,735



947,653Timber and logging
    roadsTimber rights and development costs


27,155



10,671



16,484Logging roads


15,623



11,221



4,40242,778



21,892



20,886$
1,487,166


$
518,627


$
968,539   F-10




---



##### 



2005Accumulated


Net BookCost


Amortization


ValueProperty, plant and
    equipmentPanel product mills

$
1,209,193


$
414,059


$
795,134Land


10,130







10,130Other


23,336



18,751



4,585Construction in progress


44,285







44,2851,286,944



432,810



854,134Timber and logging
    roadsTimber rights and development costs


27,643



9,626



18,017Logging roads


14,090



10,345



3,74541,733



19,971



21,762$
1,328,677


$
452,781


$
875,896   2006


2005


2004Amortization expense for the yearProperty, plant and equipment

$
85,554


$
100,364


$
51,853Asset under capital lease


153







Timber and logging roads


2,297



3,543



1,729$
88,004


$
103,907


$
53,582       7.
    THE HIGH
    LEVEL PROJECT     F-11




---



##### 



2006


2005AssetsAccounts receivable

$
3,766


$
3,600Inventories


10,062



11,117Prepaid expenses


605



341Capital assets


110,795



118,529LiabilitiesExcess of cheques issued over cash
    in bank


1,657



3,655Accounts payable and accrued
    liabilities


3,956



1,228     8.
    INTANGIBLE
    ASSETS      2006


2005Intangible assets

$
14,243


$
14,209Future income taxes


5,184



5,150Purchase price

$
9,059


$
9,059   9.
    OTHER
    ASSETS  2006


2005Advances and deposits

$
16,661


$
19,572Accrued pension benefit asset
    (Note 20)


13,398



14,250Financing costs


23,751



21,641$
53,810


$
55,463   10.
    CREDIT
    FACILITIES AND RESTRICTED CASH     F-12




---



##### 



11.
    REFORESTATION
    OBLIGATION  2006


2005Balance, beginning of year

$
5,506


$
5,628Expense


1,993



1,6397,499



7,267Paid during the year


(1,473
)


(1,761
)Balance, end of year

$
6,026


$
5,506Current portion, included in
    accounts payable and accrued liabilities

$
1,405


$
1,158Long-term

$
4,621


$
4,348  F-13




---



##### 



12.
    LONG-TERM
    DEBT    2006


2005U.S.$275,000 (2005: U.S.$275,000)
    Senior Unsecured Notes due October 1, 2012 with interest
    payable semi-annually at 7.25% per annum

$
320,485


$
319,825U.S.$210,000 (2005: U.S.$210,000)
    Senior Unsecured Notes due March 15, 2014 with interest
    payable semi-annually at 6.75% per annum


244,734



244,230U.S.$153,540 (2005: U.S.$153,540)
    Senior Unsecured Notes due October 1, 2010 with interest
    payable quarterly at LIBOR plus 3.75% per annum


178,936



178,567U.S.$110,000 (2005: U.S.$110,000)
    Senior Unsecured Notes due March 15, 2014 with interest
    payable semi-annually at 6.75% per annum


128,194



127,930U.S.$75,000 (2005: U.S.$Nil)
    Senior Unsecured Notes due April 1, 2013 with interest
    payable quarterly at LIBOR plus 4.00% per annum


87,405



U.S.$51,750 (2005: U.S.$Nil)
    equipment financing loan due October 1, 2011 with principal
    and interest payable monthly at LIBOR plus 2.90% per annum


60,309



10,215 (2005: Nil)
    equipment financing loan due December 20, 2016 with
    interest payable semi-annually at EURIBOR plus 0.65% per
    annum


15,700



U.S.$10,208 (2005: U.S.$Nil)
    capital lease obligation maturing May 29, 2025 with
    interest at 6.81% per annum (Note 19)


11,816



U.S.$1,351 (2005: U.S.$1,351)
    Senior Unsecured Notes due July 15, 2007 with interest
    payable semi-annually at 12.5% per annum


1,574



1,5711,049,153



872,123Unamortized deferred debt discount


(11,035
)


(12,583
)1,038,118



859,540Current portion


(10,523
)


$
1,027,595


$
859,540   1 4
     F-14




---



##### 



2007

$
10,5232008


11,6022009


11,6272010


190,5902011


25,781   13.
    CAPITAL
    STOCK         F-15




---



##### 



Common SharesShares


AmountBalance at December 31, 2005


14,649,140


$
55,827Balance at December 31, 2006


14,649,140


$
55,827     14.
    PRODUCTION
    LINE CLOSURE    60-days
  Severance pay

$
2,530Pension


1,469Pay in lieu of notice


1,203Write off of capital spare parts


698Other


15$
5,915     Amount


Cash


December 31,Expensed


Paid


2006Severance

$
2,530


$
(2,100
)

$
430Pension


1,469







1,469Pay in lieu


1,203



(1,203
)


Other


15



(15
)


$
5,217


$
(3,318
)

$
1,899     15.
    TIMBER
    LICENCE DEPOSITS     F-16




---



##### 



16.
    FINANCE
    EXPENSE  2006


2005


2004Current debt

$



$



$
746Loss on repurchase of long-term
    debt






1,485



106,198Long-term debt


74,312



69,802



43,211$
74,312


$
71,287


$
150,155     2006


2005


2004Amortization of financing costs

$
3,531


$
3,329


$
1,869Amortization of debt discounts


1,549



1,549



1,108Amortization of consent and
    commitment fees


319



10



257$
5,399


$
4,888


$
3,234   17.
    INCOME
    TAXES    2006


%


2005


%


2004


%Income tax (recovery) expense at
    statutory rate

$
(65,053
)


33.6


$
75,605



34.9


$
86,953



35.3Large corporation tax


722



(0.4
)


1,572



0.7







Non-taxable foreign exchange loss
    (gain) on long-term debt


1,730



(0.9
)


(4,936
)


(2.3
)


(12,996
)


(5.3
)Reduction in statutory income tax
    rates


(9,615
)


5.0



(2,652
)


(1.2
)


(700
)


(0.3
)Rate differentials between
    jurisdictions


(3,130
)


1.6



1,361



0.6



(3,033
)


(1.3
)Subsidiary income not taxable


(10,394
)


5.4



(13,213
)


(6.1
)






Other non deductible items


163



(0.1
)


5,930



2.7



1,020



0.4Tax (recovery) expense

$
(85,577
)


44.2


$
63,667



29.3


$
71,244



28.8Comprised of:Current taxes

$
6,394






$
(10,788
)





$
85,597Future income taxes


(91,971
)






74,455







(14,353
)$
(85,577
)





$
63,667






$
71,244  F-17




---



##### 



2006


2005Future income tax assets
    (liabilities)Eligible capital expenditures

$
2,603


$
2,995Accruals not currently deductible


3,430



2,060Loss on repurchase of long-term
    debt


4,540



13,193Investment tax credits


2,879



1,671Tax loss carryforwards


55,816



56,938Depreciable capital assets


(83,529
)


(110,051
)Deferred pension costs


(3,663
)


(4,837
)Foreign exchange gain on long-term
    debt


(14,665
)


(18,237
)Financing costs


(1,924
)


(1,706
)Research and development costs


(5,168
)


(5,171
)Income currently not subject to tax


(16,275
)


(88,473
)Future income tax liability, net

$
(55,956
)

$
(151,618
)Distributed as follows::Current portion of future income
    tax assets

$
1,697


$
Current portion of future income
    tax liabilities


(10,708
)


(31,362
)Long-term portion of future income
    tax assets


42,348



Long-term portion of future income
    tax liabilities


(89,293
)


(120,256
)$
(55,956
)

$
(151,618
)     Canada


United States2012

$
2,763



2025






31,0522026






116,823$
2,763


$
147,875   18.
    DIVIDENDS
    PAID   F-18




---



##### 



19.
    COMMITMENTS
    AND GUARANTEES    Operating


CapitalLeases


Lease2007

$
2,764


$
1,1282008


1,964



1,1282009


898



1,1282010


191



1,1272011


24



1,127Total minimum lease payments

$
5,841


$
5,638Imputed interest (6.81%)






(3,721
)Capital lease obligation





$
1,917           20.
    PENSION
    PLANS          2006


2005


2004PLAN ASSETSFair value at beginning of year

$
42,587


$
30,175


$
26,900Return on plan assets


2,955



2,353



1,926Employer contributions


5,006



12,987



3,357Benefits paid


(2,358
)


(4,330
)


(2,130
)Experience gain


1,994



1,402



122Fair value at end of year


50,184



42,587



30,175 F-19




---



##### 



2006


2005


2004ACCRUED BENEFIT OBLIGATIONBalance at beginning of year


66,173



50,102



33,659Current service cost


5,315



4,015



2,221Interest cost


3,379



2,948



2,549Benefits paid


(2,358
)


(4,330
)


(2,130
)Plan improvement cost










2,057Minnesota OSB facilities plan
    acquisition


353



3,861



7,329Plan curtailment


(1,747
)






Adjustment to discount rate and
    foreign exchange


36



7,261



2,967Actuarial (gain) loss


(336
)


2,316



1,450Balance at end of year


70,815



66,173



50,102NET DEFICIT, END OF YEAR

$
(20,631
)

$
(23,586
)

$
(19,927
)ACCRUED PENSION BENEFIT ASSET IS
    COMPRISED OF:Funded status  plan
    deficit

$
(20,631
)

$
(23,586
)

$
(19,927
)Unamortized net actuarial loss


18,907



23,939



16,186Unamortized transitional obligation


(1,552
)


(1,725
)


(1,897
)Unamortized past service cost


10,640



12,591



9,579Net accrued pension benefit asset

$
7,364


$
11,219


$
3,941Comprised of:Accrued pension benefit asset
    (Note 9)

$
13,398


$
14,250


$
4,862Accrued pension benefit liability


(6,034
)


(3,031
)


(921
)$
7,364


$
11,219


$
3,941PENSION EXPENSE IS COMPRISED OF:Accrual for current services

$
5,315


$
4,015


$
2,221Interest on accrued benefits


3,379



2,948



2,549Interest on pension fund assets


(3,038
)


(2,362
)


(1,926
)Amortization amounts:Unfunded surplus


(173
)


(173
)


(173
)Past service costs


856



617



318Gain on settlement


1,044



695



584$
7,383


$
5,740


$
3,573 F-20




---



##### 



2006


2005


2004PLAN ASSETSCash

$
59


$
1,177


$
64Canadian short term investments


1,519



2,015



Canadian bonds and debentures


15,338



14,712



15,352Canadian common shares


15,032



13,080



8,728Canadian pooled equity funds


911



827



Global bonds and debentures


224



224



Global pooled equity funds


7,259



4,680



3,349US common shares


6,139



4,964



2,682US pooled equity funds


3,703



908



$
50,184


$
42,587


$
30,175     2006


2005


2004Discount rate on accrued benefit
    obligation


5.0%



5.0%



6.0%Discount rate on benefit costs


5.0%



6.0%



6.5%Expected long-term rate of return
    on plan assets


7.0%



7.0%



7.0%Rate of compensation increase


4.0%



4.0%



4.0%     Plan
    Investment Strategies and Policies
    Risk management:
  Allowable and prohibited investment
    types:
  Diversification:
 F-21




---



##### 



Asset allocations:
  AllowableRange


ActualCanadian equities


15-50
%


32
%U.S. equities


5-35
%


13
%International equities


0-30
%


14
%Bonds


30-50
%


31
%Short-term and cash


0-20
%


10
%     21.
    CONTINGENCIES      22.
    RELATED
    PARTY TRANSACTIONS    2006


2005


2004Rental charges for mobile forestry
    and transportation equipment at normal commercial terms and
    prices

$
120


$
120


$
120Amounts due from officers and
    companies with directors in common, included in other assets










490     23.
    SEGMENTED
    INFORMATION   F-22




---



##### 



2006


2005


2004United States

$
723,111


$
1,135,373


$
763,952Canada


59,023



81,602



106,837Asia


33,899



20,943



29,492Europe


11,085



10,373



9,641Total

$
827,118


$
1,248,231


$
909,922     2006


2005Canada

$
612,324


$
437,768United States


356,215



438,128Total

$
968,539


$
875,896     24.
    CHANGE IN
    NON-CASH OPERATING WORKING CAPITAL  2006


2005


2004Accounts receivable

$
20,449


$
(10,204
)

$
14,236Inventories


12,673



(22,137
)


(4,358
)Income taxes receivable/payable


30,748



(69,140
)


37,687Prepaid expenses


348



(7,165
)


(4,168
)Accounts payable and accrued
    liabilities


(26,798
)


(29,072
)


37,432$
37,420


$
(137,718
)

$
80,829   25.
    FINANCIAL
    INSTRUMENTS  (a)
    Financial
    and credit risk      (b)
    Fair
    values     F-23




---



##### 



2006


2005Carrying


Fair


Carrying


FairValue


Value


Value


ValueSenior notes

$
961,328


$
760,207


$
859,540


$
781,751Equipment financing


76,009



76,009







Capital leases


11,816



11,816







$
1,049,153


$
848,032


$
859,540


$
781,751   26.
    U.S. GAAP RECONCILIATION    (a)
    Adjustments
    to assets, liabilities and shareholders
    equity  2006


2005Total assets in accordance with
    Canadian GAAP

$
1,504,199


$
1,516,002Write-off of capitalized
    start-up
    costs(1)


(3,895
)


(4,507
)Intangible asset, arising from
    employee benefit plans(2)


10,640



12,590Total assets in accordance with
    U.S. GAAP

$
1,510,944


$
1,524,116Total liabilities in accordance
    with Canadian GAAP

$
1,210,089


$
1,100,864Deferred income taxes relating to
    write-off of capitalized
    start-up
    costs(1)


(1,305
)


(1,530
)Change in pension liability(2)


27,996



34,805Deferred income taxes from pension
    liability(2)


(5,813
)


(7,775
)Total liabilities in accordance
    with U.S. GAAP

$
1,230,967


$
1,126,364Total shareholders equity in
    accordance with Canadian GAAP

$
294,110


$
415,169Cumulative translation
    adjustment(3)


56,722



58,343Change in cumulative translation
    adjustment due to reduction of net investment in subsidiary(4)


4,400



Change in retained earnings
    relating to:Write-off of capitalized
    start-up
    costs(1)


(2,591
)


(2,977
)Accumulated other comprehensive
    loss (Note 26(d))


(72,664
)


(72,783
)Total shareholders equity in
    accordance with U.S. GAAP

$
279,977


$
397,752     1.
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings as
    incurred.2.
    
    Under U.S. GAAP, the Company would recognize the difference
    between the projected pension benefit obligation and the plan
    assets (Note 20) as an additional pension liability,
    and an equal amount as an intangible asset in accordance with
    FAS 158. In 2005 and 2004, under U.S. GAAP, the
    Company would recognize the difference between the accumulated
    pension benefit obligation and the accrued benefit asset as an
    additional minimum pension liability, and an equal amount as an
    intangible asset.3.
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    these amounts are presented as a separate component of
    shareholders equity.4.
    
    Under Canadian GAAP, a gain or loss equivalent to a
    proportionate amount of the exchange gains and losses
    accumulated in the cumulative translation adjustment would be
    recognized in net income when there has been a F-24




---



##### 



reduction in the net investment in a self-sustaining foreign
    subsidiary. Under U.S. GAAP, this would only be done when
    there is a substantial reduction in the net investment.  (b)
    Adjustments
    to earnings  2006


2005


2004Net (loss) income in accordance
    with Canadian GAAP

$
(108,031
)

$
153,154


$
175,082Reversal of amortization of
    capitalized
    start-up
    costs(1)


1,598



2,854



1,605Reversal of capitalized
    start-up
    costs(1)


(986
)






Deferred income taxes relating to
    capitalized
    start-up
    costs(1)


(225
)


(1,092
)


(572
)Foreign exchange loss on reduction
    of net investment in subsidiary(4)


4,440







Net (loss) income in accordance
    with U.S. GAAP


(103,244
)


154,916



176,115Minimum pension liability(2)


21,714



(7,926
)


(3,883
)Deferred income tax (payable)
    receivable relating to minimum pension liability(2)


(7,607
)


2,774



1,359Cumulative translation
    adjustment(3)


1,621



(24,106
)


(34,237
)Foreign exchange loss on reduction
    of net investment in subsidiary(4)


(4,400
)






Comprehensive (loss) income in
    accordance with U.S. GAAP

$
(91,916
)

$
125,658


$
139,354Basic and diluted net (loss)
    income per share in accordance with U.S. GAAP

$
(7.05
)

$
10.58


$
12.05Weighted average number of common
    shares outstanding


14,649,140



14,649,140



14,612,506     1.
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings as
    incurred.2.
    
    Under U.S. GAAP, the Company would recognize the difference
    between the accumulated pension benefit obligation and the
    accrued benefit asset (Note 20) as an additional
    minimum pension liability, and an equal amount as an intangible
    asset. As of December 31, 2006, the Company adopted
    FAS 158 for the purpose of the U.S. GAAP
    reconciliation, whereby the Company would recognize the
    difference between the projected benefit obligation and the plan
    assets as an additional pension liability. The adjustment on
    adoption of FAS 158 was recorded as an adjustment to
    accumulated other comprehensive loss (Note 26(d)).3.
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    these amounts are presented as a separate component of
    shareholders equity.4.
    
    Under Canadian GAAP, a gain or loss equivalent to a
    proportionate amount of the exchange gains and losses
    accumulated in the cumulative translation adjustment would be
    recognized in net income when there has been a reduction in the
    net investment in a self-sustaining foreign subsidiary. Under
    U.S. GAAP, this would only be done when there is a
    substantial reduction in the net investment.  (c)
    Adjustments
    to statement of cash flows  start-up
  (d)
    Other
    information regarding U.S. GAAP  Reporting Comprehensive Income
 F-25




---



##### 



Employers Accounting for Defined Benefit Pension and Other
    Postretirement Plans  an amendment of FASB Statement
    No. 87, 88, 106, and 132(R)
    2006


2005


2004Minimum pension liability

$
(21,714
)

$
7,926


$
3,883Deferred income tax


7,607



(2,774
)


(1,359
)Cumulative translation adjustment


(1,621
)


24,106



34,237Foreign exchange loss on reduction
    of net investment in subsidiary


4,400







Comprehensive (income) loss


(11,328
)


29,258



36,761Cumulative effect of adjustment on
    adoption of FAS 158, net of tax


11,209







(119
)


29,258



36,761Accumulated other comprehensive
    loss, beginning of year


72,783



43,525



6,764Accumulated other comprehensive
    loss, end of year

$
72,664


$
72,783


$
43,525   (e)
    U.S. GAAP
    developments    Accounting for certain hybrid financial
    instruments. Accounting for Certain
    Hybrid Instruments  an amendment of FASB Statement
    No. 133 and 140 Accounting for Derivative Instruments & Hedging
    Activities.
  (ii) Accounting for servicing financial
    assets. Accounting for Servicing of Financial
    Assets  an amendment of FASB Statement No. 140
  (iii) Framework on fair value
    measurement. Fair Value Measurements
 F-26




---



##### 



(iv) Guidance on accounting for income
    taxes. Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109
  Guidance for quantifying financial statement
    misstatements. Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  27.
    SEPARATE
    FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS OF
    INDEBTEDNESS      2006


2005U.S.$275,000 (2005: U.S.$275,000)
    Senior Unsecured Notes due October 1, 2012 with interest
    payable semi-annually at 7.25% per annum

$
320,485


$
319,825U.S.$210,000 (2005: U.S.$210,000)
    Senior Unsecured Notes due March 15, 2014 with interest
    payable semi-annually at 6.75% per annum


244,734



244,230U.S.$153,540 (2005: U.S.$153,540)
    Senior Unsecured Notes due October 1, 2010 with interest
    payable quarterly at LIBOR plus 3.75% per annum


178,936



178,567U.S.$110,000 (2005: U.S.$110,000)
    Senior Unsecured Notes due March 15, 2014 with interest
    payable semi-annually at 6.75% per annum


128,194



127,930U.S.$75,000 (2005: U.S.$Nil)
    Senior Unsecured Notes due April 1, 2013 with interest
    payable quarterly at LIBOR plus 4.00% per annum


87,405



$
959,754


$
870,552  F-27




---



##### 



Condensed
    Consolidated Balance Sheet
    as at December 31, 2006
 AinsworthAinsworth











EngineeredLumber


Ainsworth


Ainsworth





CanadaCo Ltd.


Engineered


Engineered


Ainsworth


LimitedNon-


(USA) LLC


Corp.


Corp.


Partnership





AinsworthConsolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Lumber Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedASSETSCash

$
51,640


$
6,445


$



$
16,227


$



$



$
74,312Other Current Assets


109,961



25,157







(21,056
)


133,933



(18
)


247,977Capital Assets


612,332



356,207



















968,539Other Assets


47,479



6,331















14,243



68,053Future Income Tax Assets






41,648







700











42,348Goodwill










102,970















102,970Due from Parent Company






2



78,339



2,571



300,370



(381,282
)


Investment in Subsidiary


1,160,950



14,242



141,106











(1,316,298
)


$
1,982,362


$
450,032


$
322,415


$
(1,558
)

$
434,303


$
(1,683,355
)

$
1,504,199LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent Liabilities

$
20,538


$
9,735


$
4,121


$
(17
)

$
48,172


$
(3
)

$
82,546Accrued Pension Benefit Liability






6,034



















6,034Reforestation Obligation


4,621























4,621Due to Related Company


381,298



















(381,298
)


Long-Term Debt


1,027,595























1,027,595Future Income Taxes


89,293























89,2931,523,345



15,769



4,121



(17
)


48,172



(381,301
)


1,210,089Preferred Shares










25,999











(25,999
)


SHAREHOLDERS
    EQUITYCapital Stock


173,613







55,419











(173,205
)


55,827Cumulative Translation Adjustment


(56,722
)


(56,722
)














56,722



(56,722
)Contributed Surplus






585,294



148,495











(733,789
)


Partners Capital


















67,029



(67,029
)


Retained earnings


342,126



(94,309
)


88,381



(1,541
)


319,102



(358,754
)


295,005459,017



434,263



292,295



(1,541
)


386,131



(1,276,055
)


294,110$
1,982,362


$
450,032


$
322,415


$
(1,558
)

$
434,303


$
(1,683,355
)

$
1,504,199Total assets in accordance with
    Canadian GAAP

$
1,982,362


$
450,032


$
322,415


$
(1,558
)

$
434,303


$
(1,683,355
)

$
1,504,199Write-off of capitalized
    start-up
    costs(1)


(3,895
)






















(3,895
)Intangible asset, arising from
    employee benefit plans(2)


2,087



8,553



















10,640Total assets in accordance with
    U.S. GAAP

$
1,980,554


$
458,585


$
322,415


$
(1,558
)

$
434,303


$
(1,683,355
)

$
1,510,944Total liabilities in accordance
    with Canadian GAAP


1,523,345



15,769



30,120



(17
)


48,172



(407,300
)


1,210,089Deferred income taxes relating to
    write-off of capitalized
    start-up
    costs(1)


(1,305
)






















(1,305
)Change in pension liability, net of
    tax effect(2)


12,831



9,352



















22,183Total liabilities in accordance
    with U.S. GAAP

$
1,534,871



25,121



30,120



(17
)


48,172



(407,300
)

$
1,230,967Total shareholders equity in
    accordance with Canadian GAAP

$
459,017


$
434,263


$
292,295


$
(1,541
)

$
386,131


$
(1,276,055
)

$
294,110Cumulative translation adjustment(3)


56,722



56,722















(56,722
)


56,722Change in CTA due to subsidiary(4)


4,400



4,400















(4,400
)


4,400Change in retained earnings
    relating to:Write-off of capitalized
    start-up
    costs(1)


(2,591
)






















(2,591
)Accumulated other comprehensive
    gain (loss) (Note 26(d))


(71,865
)


(61,921
)














61,122



(72,664
)Total shareholders equity in
    accordance with U.S. GAAP

$
445,683


$
433,464


$
292,295


$
(1,541
)

$
386,131


$
(1,276,055
)

$
279,977  F-28




---



##### 



(1)
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings as
    incurred.(2)
    
    Under U.S. GAAP, the Company would recognize the difference
    between the projected pension benefit obligation and the plan
    assets (Note 20) as an additional pension liability,
    and an equal amount as an intangible asset in accordance with
    FAS 158. In 2005 and 2004, under U.S. GAAP, the
    Company would recognize the difference between the accumulated
    pension benefit obligation and the accrued benefit asset as an
    additional minimum pension liability, and an equal amount as an
    intangible asset.(3)
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    these amounts are presented as a separate component of
    shareholders equity.(4)
    
    Under Canadian GAAP, a gain or loss equivalent to a
    proportionate amount of the exchange gains and losses
    accumulated in the cumulative translation adjustment would be
    recognized in net income when there has been a reduction in the
    net investment in a self-sustaining foreign subsidiary. Under
    U.S. GAAP, this would only be done when there is a
    substantial reduction in the net investment. F-29




---



##### 



Condensed
    Consolidated Statement of Operations
    For the year ended December 31, 2006
  AinsworthEngineeredAinsworth


Ainsworth





CanadaAinsworth


Engineered


Engineered


Ainsworth


LimitedLumber Co Ltd.


(USA), LLC


Corp.


Corp.


Partnership





AinsworthNon-Consolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Lumber Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedSALES

$



$
226,107


$



$
712,894


$
503,424


$
(615,307
)

$
827,118COSTS AND EXPENSESCosts of products sold






232,480







715,724



417,083



(615,307
)


749,980Selling and administration


3,453















37,671







41,124Amortization of capital assets


46,050



41,954



















88,004Loss on disposal of capital assets


1,032



1,517



















2,549Write-down of capital assets






55,290



















55,290Closure of production line






5,915



















5,915Write-down of timber deposits


4,502























4,50255,037



337,156







715,724



454,754



(615,307
)


947,364OPERATING (LOSS)
    EARNINGS


(55,037
)


(111,049
)






(2,830
)


48,670







(120,246
)FINANCE EXPENSEInterest


68,913























68,913Amortization of finance costs


5,399























5,39974,312























74,312EQUITY IN EARNINGS OF
    SUBSIDIARY


(13,101
)






2,431











10,670



OTHER INCOME (EXPENSE)


12,721



(4,365
)






578



(48
)






8,886FOREIGN EXCHANGE LOSS ON LONG
    TERM DEBT


(7,936
)






















(7,936
)(LOSS) INCOME BEFORE INCOME
    TAXES


(137,665
)


(115,414
)


2,431



(2,252
)


48,622



10,670



(193,608
)INCOME TAX EXPENSE
    (RECOVERY)


(29,634
)


(56,878
)


976



(41
)










(85,577
)NET (LOSS) INCOME

$
(108,031
)

$
(58,536
)

$
1,455


$
(2,211
)

$
48,622


$
10,670


$
(108,031
)Net (loss) income in accordance
    with Canadian GAAP

$
(108,031
)

$
(58,536
)

$
1,455


$
(2,211
)

$
48,622


$
10,670


$
(108,031
)Reversal of amortization of
    capitalized
    start-up
    costs, net of deferred income taxes(1)


387























387Foreign exchange loss on reduction
    of net investment in subsidiary(4)


4,400



4,440















(4,400
)


4,400Net (loss) income in accordance
    with U.S. GAAP


(103,244
)


(54,136
)


1,455



(2,211
)


48,622



6,270



(103,244
)Minimum pension liability, net of
    tax(2)


6,231



7,876



















14,107Cumulative translation adjustment(3)


1,621



1,621















(1,621
)


1,621Foreign exchange loss on reduction
    of net investment in subsidiary(4)


(4,400
)


(4,400
)














4,400



(4,400
)Comprehensive (loss) income

$
(99,762
)

$
(49,039
)

$
1,455


$
(2,211
)

$
48,622


$
9,049


$
(91,916
)     (1)
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings as
    incurred.(2)
    
    Under U.S. GAAP, the Company would recognize the difference
    between the accumulated pension benefit obligation and the
    accrued benefit asset (Note 20) as an additional minimum
    pension liability, and an equal amount as an intangible asset.
    As of December 31, 2006, the Company adopted FAS 158
    for the purpose of the F-30




---



##### 



U.S. GAAP reconciliation, whereby the Company would
    recognize the difference between the projected benefit
    obligation and the plan assets as an additional pension
    liability. The adjustment on adoption of FAS 158 was
    recorded as an adjustment to accumulated other comprehensive
    loss (Note 26(d)).(3)
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    these amounts are presented as a separate component of
    shareholders equity.(4)
    
    Under Canadian GAAP, a gain or loss equivalent to a
    proportionate amount of the exchange gains and losses
    accumulated in the cumulative translation adjustment would be
    recognized in net income when there has been a reduction in the
    net investment in a self-sustaining foreign subsidiary. Under
    U.S. GAAP, this would only be done when there is a
    substantial reduction in the net investment. F-31




---



##### 



Condensed
    Consolidated Statement of Cash Flows
    For the year ended December 31, 2006
  AinsworthEngineeredAinsworth


Ainsworth





CanadaAinsworth


Engineered


Engineered


Ainsworth


Limited





AinsworthLumber Co Ltd.


(USA), LLC


Corp.


Corp.


Partnership





LumberNon-Consolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedCASH FLOWS FROM OPERATING
    ACTIVITIESNet income (loss)

$
(108,031
)

$
(58,536
)

$
1,455


$
(2,211
)

$
48,622


$
10,670


$
(108,031
)Items not affecting cash
    Amortization of capital assets


46,050



41,954



















88,004Amortization of financing costs and
    fees


5,399























5,399Foreign exchange loss on long-term
    debt


7,936























7,936Write-down of capital assets






55,290



















55,290Loss on disposal of capital assets


1,032



1,517



















2,549Write-down of timber deposits


4,502























4,502Change in non-current reforestation
    obligation


273























273Equity in earnings of subsidiary


13,101







(2,431
)










(10,670
)


Future income taxes


(33,813
)


(56,050
)


(3,612
)


(37
)










(93,512
)Adjustment to net accrued pension
    benefit asset


852



2,882



















3,734Realized currency translation
    adjustments






4,400



















4,400Change in non-cash operating
    working capital


90,427



145,160



3,245



(186,785
)


(14,644
)


17



37,420Cash provided by (used in)
    operating activities


27,728



136,617



(1,343
)


(189,033
)


33,978



17



7,694CASH FLOWS FROM FINANCING
    ACTIVITIESProceeds from issue of long-term
    debt


171,588























171,588Repayment of long-term debt


(2,321
)






















(2,321
)Repayment of capital lease
    obligations


(174
)






















(174
)Dividends paid


(14,649
)






















(14,649
)Financing costs and fees


(6,011
)






















(6,011
)Advances to related company






(118,160
)


(3,207
)






(215,789
)


337,156



Advances from related company


135,366











201,807







(337,173
)


Cash provided by (used in)
    financing activities


283,799



(118,160
)


(3,207
)


201,807



(215,789
)


(17
)


148,433CASH FLOWS FROM INVESTING
    ACTIVITIESShort-term investments


(35,864
)






















(35,864
)Restricted cash


(23,168
)






















(23,168
)Additions to capital assets


(214,488
)


(13,767
)


















(228,255
)Decrease (increase) in other assets


(2,069
)


(2,286
)


100















(4,255
)Proceeds on disposal of capital
    assets


136



18



















154Cash provided by (used in)
    investing activities


(275,453
)


(16,035
)


100















(291,388
)Effect of foreign exchange rage
    changes on cash and cash equivalents






102



















102NET CASH INFLOW
    (OUTFLOW)


36,074



2,524



(4,450
)


12,774



(181,811
)






(134,889
)CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR


15,566



3,921



4,450



3,453



181,811







209,201CASH AND CASH EQUIVALENTS, END
    OF YEAR

$
51,640


$
6,445


$



$
16,227


$



$



$
74,312  F-32




---



##### 



Condensed
    Consolidated Balance Sheet
    as at December 31, 2005
  AinsworthAinsworth











EngineeredLumber


Ainsworth


Ainsworth





CanadaCo Ltd.


Engineered


Engineered


Ainsworth


Limited





AinsworthNon-


(USA) LLC


Corp.


Corp.


Partnership





LumberConsolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedASSETSCash

$
15,566


$
3,921


$
4,450


$
3,453


$
181,811


$



$
209,201Other Current Assets


72,436



281,486



(67
)


(166,022
)


108,861



(38,400
)


258,294Capital Assets


437,768



438,128



















875,896Other Assets


49,518



5,841



100











14,213



69,672Goodwill










102,970















102,970Due from Parent Company










75,132



204,378



84,581



(364,091
)


Investment in Subsidiary


1,212,147



14,213



138,186











(1,364,546
)


$
1,787,435


$
743,589


$
320,771


$
41,809


$
375,253


$
(1,752,824
)

$
1,516,033LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent Liabilities

$
38,972


$
17,862


$
4,422


$
43,291


$
47,542


$
(38,400
)

$
113,689Accrued Pension Benefit Liability






3,031



















3,031Reforestation Obligation


4,348























4,348Due to Related Company


245,932



118,158















(364,090
)


Long-Term Debt


859,540























859,540Future Income Taxes


105,688



15,231







(663
)










120,2561,254,480



154,282



4,422



42,628



47,542



(402,490
)


1,100,864Preferred Shares










25,999











(25,999
)


SHAREHOLDERS
    EQUITYCapital Stock


173,613







55,419











(173,205
)


55,827Cumulative Translation Adjustment


(58,343
)


(58,427
)






84







58,343



(58,343
)Contributed Surplus






585,294



148,495











(733,789
)


Partners Capital


















67,029



(67,029
)


Retained earnings


417,685



62,440



86,436



(903
)


260,682



(408,655
)


417,685532,955



589,307



290,350



(819
)


327,711



(1,324,335
)


415,169$
1,787,435


$
743,589


$
320,771


$
41,809


$
375,253


$
(1,752,824
)

$
1,516,033Total assets in accordance with
    Canadian GAAP

$
1,787,435


$
743,589


$
320,771


$
41,809


$
375,253


$
(1,752,824
)

$
1,516,033Write-off of capitalized
    start-up
    costs(1)


(4,507
)






















(4,507
)Intangible asset, arising from
    minimum pension liability calculation(2)


2,247



10,343



















12,590Total assets in accordance with
    U.S. GAAP

$
1,785,175


$
753,932


$
320,771


$
41,809


$
375,253


$
(1,752,824
)

$
1,524,116Total liabilities in accordance
    with Canadian GAAP


1,254,480



154,282



30,421



42,628



47,542



(428,489
)


1,100,864Deferred income taxes relating to
    write-off of capitalized
    start-up
    costs(1)


(1,530
)






















(1,530
)Minimum pension liability, net of
    tax effect(2)


14,575



12,455



















27,030Total liabilities in accordance
    with U.S. GAAP

$
1,267,525



166,737



30,421



42,628



47,542



(428,489
)

$
1,126,364Total shareholders equity in
    accordance with Canadian GAAP

$
532,955


$
589,307


$
290,350


$
(819
)

$
327,711


$
(1,324,335
)

$
415,169Cumulative translation adjustment


58,343



58,427







(84
)






(58,343
)


58,343Change in retained earnings
    relating to:Write-off of capitalized
    start-up
    costs(1)


(2,977
)






















(2,977
)Accumulated other comprehensive
    gain (loss) (Note 26(c)(i))


(70,671
)


(60,539
)






84







58,343



(72,783
)Total shareholders equity in
    accordance with U.S. GAAP

$
517,650


$
587,195


$
290,350


$
(819
)

$
327,711


$
(1,324,335
)

$
397,752  F-33




---



##### 



(1)
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings.(2)
    
    Under U.S. GAAP the Company would recognize the difference
    between the unfunded accumulated pension benefit obligation and
    the accrued benefit obligation as an additional minimum pension
    liability, and an equal amount as an intangible asset, subject
    to the following. If the additional liability exceeded
    unrecognized past service cost the excess would be recognized as
    other comprehensive loss, net of any resulting tax benefits.(3)
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    such amounts are presented as a separate component of
    shareholders equity. F-34




---



##### 



Condensed
    Consolidated Statement of Operations
    For the year ended December 31, 2005
  AinsworthEngineeredAinsworth


Ainsworth


Ainsworth





CanadaLumber


Engineered


Engineered


Ainsworth


Limited





AinsworthCo Ltd.


(USA), LLC


Corp.


Corp.


Partnership





LumberNon-Consolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedSALES

$



$
452,054


$



$
454,822


$
797,087


$
(455,732
)

$
1,248,231COSTS AND EXPENSESCosts of products sold






331,064







455,732



524,885



(455,732
)


855,949Selling and administration


12,436



6,928







55



11,358







30,777Amortization of capital assets


51,534



52,373



















103,90763,970



390,365







455,787



536,243



(455,732
)


990,633OPERATING EARNINGS


(63,970
)


61,689







(965
)


260,844







257,598FINANCE EXPENSEInterest


64,914























64,914Amortization of finance costs


4,888























4,888Loss on repurchase of long term debt


1,485























1,48571,287























71,287EQUITY IN EARNINGS OF
    SUBSIDIARY


310,947







13,034











(323,981
)


OTHER INCOME (EXPENSE)


7,024



(3,936
)


(91
)


(638
)


(162
)






2,197FOREIGN EXCHANGE GAIN ON LONG
    TERM DEBT


28,313























28,313INCOME BEFORE INCOME
    TAXES


211,027



57,753



12,943



(1,603
)


260,682



(323,981
)


216,821INCOME TAX EXPENSE
    (RECOVERY)


57,873



7,011



(517
)


(700
)










63,667NET INCOME

$
153,154


$
50,742


$
13,460


$
(903
)

$
260,682


$
(323,981
)

$
153,154Net income in accordance with
    Canadian GAAP

$
153,154


$
50,742


$
13,460


$
(903
)

$
260,682


$
(323,981
)

$
153,154Reversal of amortization of
    capitalized
    start-up
    costs, net of deferred income taxes(1)


1,762























1,762Net income in accordance with
    U.S. GAAP


154,916



50,742



13,460



(903
)


260,682



(323,981
)


154,916Minimum pension liability, net of
    tax(2)


(3,661
)


(1,491
)


















(5,152
)Cumulative translation adjustment(3)


(24,106
)


(24,190
)






84







24,106



(24,106
)Comprehensive income

$
127,149


$
25,061


$
13,460


$
(819
)

$
260,682


$
(299,875
)

$
125,658     (1)
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings.(2)
    
    Under U.S. GAAP the Company would recognize the difference
    between the unfunded accumulated pension benefit obligation and
    the accrued benefit obligation as an additional minimum pension
    liability, and an equal amount as an intangible asset, subject
    to the following. If the additional liability exceeded
    unrecognized past service cost the excess would be recognized as
    other comprehensive loss, net of any resulting tax benefits.(3)
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    such amounts are presented as a separate component of
    shareholders equity. F-35




---



##### 



Condensed
    Consolidated Statement of Cash Flows
    For the year ended December 31, 2005
  AinsworthAinsworth











EngineeredLumber


Ainsworth


Ainsworth





CanadaCo Ltd.


Engineered


Engineered


Ainsworth


Limited





AinsworthNon-


(USA), LLC


Corp.


Corp.


Partnership





LumberConsolidated


Subsidiary


Subsidiary


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Guarantor


Guarantor


Eliminations


ConsolidatedCASH FLOWS FROM OPERATING
    ACTIVITIESNet income (loss)

$
153,154


$
50,742


$
13,460


$
(903
)

$
260,682


$
(323,981
)

$
153,154Items not affecting cash
    Amortization of capital assets


51,534



52,373



















103,907Amortization of financing costs and
    fees


4,888























4,888Foreign exchange gain on long-term
    debt


(28,313
)






















(28,313
)Loss on repurchase of long-term debt


1,485























1,485Loss on disposal of capital assets


245























245Change in non-current reforestation
    obligation


(122
)






















(122
)Equity in earnings of subsidiary


(310,947
)






(13,034
)










323,981



Future income taxes


97,299



10,761



(35,797
)


(663
)










71,600Adjustment to accrued pension
    benefit asset


(7,278
)






















(7,278
)Change in non-cash operating
    working capital


(113,608
)


(270,088
)


30,865



209,397



5,710







(137,718
)Cash provided by (used in)
    operating activities


(151,657
)


(156,212
)


(4,506
)


207,831



266,392







161,848CASH FLOWS FROM FINANCING
    ACTIVITIESDecrease in capital lease
    obligations


(274
)






















(274
)Repurchase of long-term debt


(31,067
)






















(31,067
)Dividends paid


(14,649
)






















(14,649
)Refundable tax recovery


438























438Advances to related company






166,124



5,595



(204,378
)


(84,581
)


117,240



Advances from related company


117,240



















(117,240
)


Cash provided by (used in)
    financing activities


71,688



166,124



5,595



(204,378
)


(84,581
)






(45,552
)CASH FLOWS FROM INVESTING
    ACTIVITIESRestricted cash


(32,455
)






















(32,455
)Additions to capital assets


(45,499
)


(11,776
)


















(57,275
)Decrease (increase) in other assets


(7,499
)


(3,184
)


800















(9,883
)Proceeds on disposal of capital
    assets


27























27Investment in Chatham Forest
    Products, Inc.






(7,546
)


















(7,546
)Timber licence deposits


(5,998
)






















(5,998
)Cash provided by (used in)
    investing activities


(91,424
)


(22,506
)


800















(113,130
)Effect of foreign exchange rage
    changes on cash and cash equivalents






(28
)


















(28
)NET CASH INFLOW
    (OUTFLOW)


(171,393
)


(12,622
)


1,889



3,453



181,811







3,138CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR


186,959



16,543



2,561















206,063CASH AND CASH EQUIVALENTS, END
    OF YEAR

$
15,566


$
3,921


$
4,450


$
3,453


$
181,811


$



$
209,201  F-36




---



##### 



Condensed
    Consolidated Statement of Operations
    For the year ended December 31, 2004
  AinsworthLumber


Ainsworth


AinsworthCo Ltd.


Engineered


Engineered





AinsworthNon-


(USA), LLC


Corp.





LumberConsolidated


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Eliminations


ConsolidatedSALES

$
698,762


$
109,096


$
102,065


$



$
909,922COSTS AND EXPENSESCosts of products sold


361,425



79,545



58,854



(1,579
)


498,245Selling and administration


28,550



1,613



15,351



(14,500
)


31,014Amortization of capital assets


32,269



12,560



9,023







53,852Write-down of capital assets


793















793423,037



93,718



83,228



(16,079
)


583,905OPERATING EARNINGS


275,725



15,378



18,836



16,079



326,017FINANCE EXPENSEInterest


40,723















40,723Amortization of finance costs


3,234















3,234Loss on repurchase of long term
    debt


106,198















106,198150,155















150,155EQUITY IN EARNINGS OF
    SUBSIDIARY


18,287











(18,287
)


OTHER INCOME
    (EXPENSE)


11,878



709



141



(16,079
)


(3,351
)FOREIGN EXCHANGE GAIN ON LONG
    TERM DEBT


73,815















73,815INCOME BEFORE INCOME
    TAXES


229,549



16,087



18,977



(18,287
)


246,326INCOME TAX EXPENSE
    (RECOVERY)


54,467



4,389



12,388







71,244NET INCOME

$
175,082


$
11,698


$
6,589


$
(18,287
)

$
175,082Net income in accordance with
    Canadian GAAP

$
175,082


$
11,698


$
6,589


$
(18,287
)

$
175,082Reversal of amortization of
    capitalized
    start-up
    costs, net of deferred income taxes(1)


1,033















1,033Net income in accordance with
    U.S. GAAP


176,115



11,698



6,589



(18,287
)


176,115Minimum pension liability, net of
    tax(2)


(2,524
)














(2,524
)Cumulative translation
    adjustment(3)


(34,237
)


(34,237
)






34,237



(34,237
)Comprehensive income

$
139,354


$
(22,540
)

$
6,589


$
15,951


$
139,354     (1)
    
    Under U.S. GAAP, the direct operating losses arising during
    the start-up
    phase of the oriented strand board facilities, which were
    capitalized under Canadian GAAP, are charged against earnings.(2)
    
    Under U.S. GAAP the Company would recognize the difference
    between the unfunded accumulated pension benefit obligation and
    the accrued benefit obligation as an additional minimum pension
    liability, and an equal amount as an intangible asset, subject
    to the following. If the additional liability exceeded
    unrecognized past service cost the excess would be recognized as
    other comprehensive loss, net of any resulting tax benefits.(3)
    
    Under U.S. GAAP, foreign currency translation losses are
    recorded as comprehensive income whereas under Canadian GAAP
    such amounts are presented as a separate component of
    shareholders equity. F-37




---



##### 



Condensed
    Consolidated Statement of Cash Flows
    For the year ended December 31, 2004
  AinsworthLumber


Ainsworth


AinsworthCo Ltd.


Engineered


Engineered





AinsworthNon-


(USA), LLC


Corp.





LumberConsolidated


Subsidiary


Subsidiary





Co. Ltd.Parent Issuer


Guarantor


Guarantor


Eliminations


ConsolidatedCASH FLOWS FROM OPERATING
    ACTIVITIESNet income (loss)

$
175,082


$
11,698


$
6,589


$
(18,287
)

$
175,082Items not affecting cashAmortization of capital assets


32,269



12,560



9,023







53,852Amortization of financing costs
    and fees


3,234















3,234Foreign exchange gain on long-term
    debt


(73,815
)














(73,815
)Loss on repurchase of long-term
    debt


106,198















106,198Loss on disposal of capital assets


25















25Change in non-current
    reforestation obligation


(332
)














(332
)Equity in earnings of subsidiary


(18,287
)










18,287



Future income taxes


(14,353
)














(14,353
)Non-cash stock-based compensation


2,640















2,640Write-down of capital assets


793















793Adjustment to accrued pension
    benefit asset


215















215Utilization of investment tax
    credit


30,060















30,060Change in non-cash operating
    working capital


68,355



40,642



(28,168
)






80,829Cash provided by (used in)
    operating activities


312,085



64,900



(12,556
)






364,428CASH FLOWS FROM FINANCING
    ACTIVITIESDecrease in capital lease
    obligations


(275
)














(275
)Repurchase of long-term debt


(451,305
)














(451,305
)Dividends paid


(14,660
)














(14,660
)Proceeds from issue of long-term
    debt


996,387















996,387Financing costs and fees


(26,214
)














(26,214
)Repurchase of capital stock


(284
)














(284
)Advances to related company






(48,357
)


(36,025
)


84,382



Advances from related company


84,382











(84,382
)


Cash provided by (used in)
    financing activities


588,031



(48,357
)


(36,025
)






503,649CASH FLOWS FROM INVESTING
    ACTIVITIESRestricted cash


(6,561
)














(6,561
)Additions to capital assets


(17,987
)














(17,987
)Decrease (increase) in other assets


(1,555
)














(1,555
)Proceeds on disposal of capital
    assets


40















40Investment in Minnesota OSB
    Facilities


(584,847
)














(584,847
)Investment in Voyageur Panel
    Limited


(296,300
)














(296,300
)Acquisition of cash of Voyageur
    Panel Limited


51,142















51,142Cash provided by (used in)
    investing activities


(856,068
)














(856,068
)NET CASH INFLOW (OUTFLOW
    )


44,048



16,543



(48,581
)






12,009CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR


142,912







51,142







194,054CASH AND CASH EQUIVALENTS, END
    OF YEAR

$
186,960


$
16,543


$
2,561


$



$
206,063  F-38




---



##### 



ITEM 19.  EXHIBITS  1
.1

Notice of Articles of Ainsworth
    Lumber Co. Ltd.(9)1
.2

Articles of Ainsworth Lumber Co.
    Ltd.(9)1
.3

Certificate of Amalgamation of
    Ainsworth Engineered Corp.(7)1
.4

Articles of Association of
    Ainsworth Engineered Corp.(7)1
.5

Certificate of Formation of
    Ainsworth Engineered (USA), LLC(8)1
.6

Limited Liability Company
    Agreement of Ainsworth Engineered (USA), LLC(8)1
.7

Articles of Incorporation of
    Ainsworth Corp.(11)1
.8

Bylaws of Ainsworth Corp.(11)1
.9

Certificate of Limited Partnership
    of Ainsworth Engineered Canada Limited Partnership(11)1
.10

Limited Partnership Agreement of
    Ainsworth Engineered Canada Limited Partnership(11)2
.1

Indenture, dated as of
    July 10, 1997, among Ainsworth Lumber Co. Ltd., Ainsworth
    Lumber Inc. and Bank of Montreal Trust Company (the July
    Indenture)(1)2
.2

First Supplemental Indenture,
    dated as of February 14, 2000, to the July Indenture(3)2
.3

Second Supplemental Indenture,
    dated as of December 20, 2001, to the July Indenture(6)2
.4

Third Supplemental Indenture,
    dated as of February 27, 2004, to the July Indenture(6)2
.5

Fourth Supplemental Indenture
    dated as of May 19, 2004, to the July Indenture(6)2
.6

Fifth Supplemental Indenture,
    dated as of September 22, 2004, to the July Indenture(8)2
.7

Sixth Supplemental Indenture,
    dated as of January 10, 2005, to the July Indenture(11)2
.8

Seventh Supplemental Indenture,
    dated as of January 31, 2006, to the July Indenture(11)2
.9

Indenture, dated as of
    March 3, 2004, between Ainsworth Lumber Co. Ltd. and The
    Bank of New York (the March Indenture)(6)2
.10

First Supplemental Indenture,
    dated as of May 19, 2004, to the March Indenture(6)2
.11

Second Supplemental Indenture,
    dated as of September 22, 2004, to the March Indenture(8)2
.12

Third Supplemental Indenture,
    dated as of January 10, 2005, to the March Indenture(11)2
.13

Fourth Supplemental Indenture,
    dated as of January 31, 2006, to the March Indenture(11)2
.14

Fifth Supplemental Indenture,
    dated as of February 27, 2006, to the March Indenture(9)2
.15

Indenture, dated as of
    May 19, 2004, between Ainsworth Lumber Co. Ltd. and The
    Bank of New York (the May Indenture)(6)2
.16

First Supplemental Indenture,
    dated as of May 19, 2004, to the May Indenture(6)2
.17

Second Supplemental Indenture,
    dated as of September 22, 2004, to the May Indenture(8)2
.18

Third Supplemental Indenture,
    dated as of January 10, 2005, to the May Indenture(11)2
.19

Fourth Supplemental Indenture,
    dated as of January 31, 2006, to the May Indenture(11)2
.20

Fifth Supplemental Indenture,
    dated as of February 27, 2006, to the May Indenture(9)2
.21

Indenture, dated as of
    September 22, 2004, between Ainsworth Lumber Co. Ltd. and
    The Bank of New York (the September
    Indenture)(8)2
.22

First Supplemental Indenture,
    dated as of September 22, 2004, to the September
    Indenture(8)2
.23

Second Supplemental Indenture,
    dated as of January 10, 2005, to the September Indenture(11)2
.24

Third Supplemental Indenture,
    dated as of January 31, 2006, to the September Indenture(11)2
.25

Indenture, dated as of
    April 18, 2006, among Ainsworth Lumber Co. Ltd., Ainsworth
    Engineered Corp., Ainsworth Engineered Canada Limited
    Partnership, Ainsworth (USA), LLC, Ainsworth Corp. and The Bank
    of New York(10)2
.26

Exchange and Registration Rights
    Agreement, dated as of April 18, 2006, among Ainsworth
    Lumber Co. Ltd., Ainsworth Engineered Corp., Ainsworth
    Engineered Canada Limited Partnership, Ainsworth (USA), LLC,
    Ainsworth Corp. and Deutsche Bank Securities Inc.(10)4
.1

Memorandum of Agreement, dated
    December 9, 1999, between Ainsworth Lumber Co. Ltd. and
    Grant Forest Products Corp.(2)4
.2

Management and Consulting
    Agreement, dated April 25, 1999, between Ainsworth Lumber
    Co. Ltd. and 2468 Holdings Ltd.(4) 67




---



##### 



4
.3

Pulpwood Agreement No. 16,
    dated April 26, 1990, between the Minister of Forests of
    British Columbia, on behalf of Her Majesty the Queen in Right of
    the Province of British Columbia, and Ainsworth Lumber Co. Ltd.,
    as amended(1)4
.4

Forest License A18700, dated
    March 24, 1998, between The Regional Manager, on behalf of
    Her Majesty the Queen in the Right of the Province of British
    Columbia, and Ainsworth Lumber Co. Ltd.(2)4
.5

Letter Agreement with the Province
    of Alberta, dated July 16, 1999, with respect to High
    Level Timber Allocation(4)4
.6

Deciduous Timber Allocation
    No. DTAF 510001 with respect to High Level(4)4
.7

Deciduous Timber Allocation
    No. DTAF 110001 with respect to High Level(6)4
.8

Deciduous Timber Allocation
    No. DTAF 110002 with respect to High Level(6)4
.9

Forest Management Agreement, dated
    June 25, 2002, among Her Majesty the Queen in the Right of
    the Province of Alberta, Tolko Industries Ltd. and Footner
    Forest Products Ltd.(6)4
.10

Amended Deciduous Timber
    Allocation No. DTAC 910001 with respect to Grande Prairie(2)4
.11

Deciduous Timber Permit DTPG
    910001 with respect to Grande Prairie(4)4
.12

Credit Agreement, dated as of
    December 14, 2005(9)4
.13

Contract for General Contracting
    Services related to the Grande Prairie expansion, dated
    July 6, 2005, between Ainsworth Lumber Co. Ltd. and DEMAC
    Management Ltd.(9)8
.1

List of Significant
    Subsidiaries(11)11
.1

Code of Ethics(5)15
.1

Audit Committee Charter(9)31
.1

Certification of CEO and CFO
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of CEO and CFO
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd.
    (No. 333-07346),
    filed with the Commission on July 30, 1997.(2)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 1999, filed with the Commission on
    May 19, 2000.(3)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2000, filed with the Commission on
    June 8, 2001.(4)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd. and Steen River Forest
    Products Ltd. (No.
    333-83230),
    filed with the Commission on February 19, 2002.(5)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2003, filed with the Commission on
    May 26, 2004.(6)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd.
    (No. 333-116068),
    filed with the Commission on June 2, 2004.(7)
    
    Incorporated by reference to Amendment No. 1 to the
    Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd. and Ainsworth Engineered Corp.
    (No. 333-116068),
    filed with the Commission on July 15, 2004.(8)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd., Ainsworth Engineered Corp. and
    Ainsworth Engineered (USA), LLC
    (No. 333-119812),
    filed with the Commission on October 18, 2004.(9)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2005, filed with the Commission on
    March 31, 2006.(10)
    
    Incorporated by reference to the
    Form 6-K
    of Ainsworth Lumber Co. Ltd., furnished to the Commission on
    April 21, 2006.(11)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd., Ainsworth Engineered Corp.,
    Ainsworth Engineered Limited Partnership, Ainsworth Engineered
    (USA), LLC and Ainsworth Corp. (No. 333 
    134708), filed with the Commission on June 2, 2006. 68




---



##### 



SIGNATURES
  Form 20-F Form 20-F
    By:
    /s/  Robert
    Allen       69




---



##### 



INDEX TO
    EXHIBITS
  1
.1

Notice of Articles of Ainsworth
    Lumber Co. Ltd.(9)1
.2

Articles of Ainsworth Lumber Co.
    Ltd.(9)1
.3

Certificate of Amalgamation of
    Ainsworth Engineered Corp.(7)1
.4

Articles of Association of
    Ainsworth Engineered Corp.(7)1
.5

Certificate of Formation of
    Ainsworth Engineered (USA), LLC(8)1
.6

Limited Liability Company
    Agreement of Ainsworth Engineered (USA), LLC(8)1
.7

Articles of Incorporation of
    Ainsworth Corp.(11)1
.8

Bylaws of Ainsworth Corp.(11)1
.9

Certificate of Limited Partnership
    of Ainsworth Engineered Canada Limited Partnership(11)1
.10

Limited Partnership Agreement of
    Ainsworth Engineered Canada Limited Partnership(11)2
.1

Indenture, dated as of
    July 10, 1997, among Ainsworth Lumber Co. Ltd., Ainsworth
    Lumber Inc. and Bank of Montreal Trust Company (the
    July Indenture)(1)2
.2

First Supplemental Indenture,
    dated as of February 14, 2000, to the July Indenture(3)2
.3

Second Supplemental Indenture,
    dated as of December 20, 2001, to the July Indenture(6)2
.4

Third Supplemental Indenture,
    dated as of February 27, 2004, to the July Indenture(6)2
.5

Fourth Supplemental Indenture
    dated as of May 19, 2004, to the July Indenture(6)2
.6

Fifth Supplemental Indenture,
    dated as of September 22, 2004, to the July Indenture(8)2
.7

Sixth Supplemental Indenture,
    dated as of January 10, 2005, to the July Indenture(11)2
.8

Seventh Supplemental Indenture,
    dated as of January 31, 2006, to the July Indenture(11)2
.9

Indenture, dated as of
    March 3, 2004, between Ainsworth Lumber Co. Ltd. and The
    Bank of New York (the March Indenture)(6)2
.10

First Supplemental Indenture,
    dated as of May 19, 2004, to the March Indenture(6)2
.11

Second Supplemental Indenture,
    dated as of September 22, 2004, to the March Indenture(8)2
.12

Third Supplemental Indenture,
    dated as of January 10, 2005, to the March Indenture(11)2
.13

Fourth Supplemental Indenture,
    dated as of January 31, 2006, to the March Indenture(11)2
.14

Fifth Supplemental Indenture,
    dated as of February 27, 2006, to the March Indenture(9)2
.15

Indenture, dated as of
    May 19, 2004, between Ainsworth Lumber Co. Ltd. and The
    Bank of New York (the May Indenture)(6)2
.16

First Supplemental Indenture,
    dated as of May 19, 2004, to the May Indenture(6)2
.17

Second Supplemental Indenture,
    dated as of September 22, 2004, to the May Indenture(8)2
.18

Third Supplemental Indenture,
    dated as of January 10, 2005, to the May Indenture(11)2
.19

Fourth Supplemental Indenture,
    dated as of January 31, 2006, to the May Indenture(11)2
.20

Fifth Supplemental Indenture,
    dated as of February 27, 2006, to the May Indenture(9)2
.21

Indenture, dated as of
    September 22, 2004, between Ainsworth Lumber Co. Ltd. and
    The Bank of New York (the September
    Indenture)(8)2
.22

First Supplemental Indenture,
    dated as of September 22, 2004, to the September
    Indenture(8)2
.23

Second Supplemental Indenture,
    dated as of January 10, 2005, to the September Indenture(11)2
.24

Third Supplemental Indenture,
    dated as of January 31, 2006, to the September Indenture(11)2
.25

Indenture, dated as of
    April 18, 2006, among Ainsworth Lumber Co. Ltd., Ainsworth
    Engineered Corp., Ainsworth Engineered Canada Limited
    Partnership, Ainsworth (USA), LLC, Ainsworth Corp. and The Bank
    of New York(10)2
.26

Exchange and Registration Rights
    Agreement, dated as of April 18, 2006, among Ainsworth
    Lumber Co. Ltd., Ainsworth Engineered Corp., Ainsworth
    Engineered Canada Limited Partnership, Ainsworth (USA), LLC,
    Ainsworth Corp. and Deutsche Bank Securities Inc.(10)4
.1

Memorandum of Agreement, dated
    December 9, 1999, between Ainsworth Lumber Co. Ltd. and
    Grant Forest Products Corp.(2)4
.2

Management and Consulting
    Agreement, dated April 25, 1999, between Ainsworth Lumber
    Co. Ltd. and 2468 Holdings Ltd.(4) 70




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##### 



4
.3

Pulpwood Agreement No. 16,
    dated April 26, 1990, between the Minister of Forests of
    British Columbia, on behalf of Her Majesty the Queen in Right of
    the Province of British Columbia, and Ainsworth Lumber Co. Ltd.,
    as amended(1)4
.4

Forest License A18700, dated
    March 24, 1998, between The Regional Manager, on behalf of
    Her Majesty the Queen in the Right of the Province of British
    Columbia, and Ainsworth Lumber Co. Ltd.(2)4
.5

Letter Agreement with the Province
    of Alberta, dated July 16, 1999, with respect to High Level
    Timber Allocation(4)4
.6

Deciduous Timber Allocation No.
    DTAF 510001 with respect to High Level(4)4
.7

Deciduous Timber Allocation No.
    DTAF 110001 with respect to High Level(6)4
.8

Deciduous Timber Allocation No.
    DTAF 110002 with respect to High Level(6)4
.9

Forest Management Agreement, dated
    June 25, 2002, among Her Majesty the Queen in the Right of
    the Province of Alberta, Tolko Industries Ltd. and Footner
    Forest Products Ltd.(6)4
.10

Amended Deciduous Timber
    Allocation No. DTAC 910001 with respect to Grande Prairie(2)4
.11

Deciduous Timber Permit DTPG
    910001 with respect to Grande Prairie(4)4
.12

Credit Agreement, dated as of
    December 14, 2005(9)4
.13

Contract for General Contracting
    Services related to the Grande Prairie expansion, dated
    July 6, 2005, between Ainsworth Lumber Co. Ltd. and DEMAC
    Management Ltd.(9)8
.1

List of Significant
    Subsidiaries(11)11
.1

Code of Ethics(5)15
.1

Audit Committee Charter(9)31
.1

Certification of CEO and CFO
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of CEO and CFO
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd.
    (No. 333-07346),
    filed with the Commission on July 30, 1997.(2)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 1999, filed with the Commission on
    May 19, 2000.(3)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2000, filed with the Commission on
    June 8, 2001.(4)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd. and Steen River Forest
    Products Ltd. (No.
    333-83230),
    filed with the Commission on February 19, 2002.(5)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2003, filed with the Commission on
    May 26, 2004.(6)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd.
    (No. 333-116068),
    filed with the Commission on June 2, 2004.(7)
    
    Incorporated by reference to Amendment No. 1 to the
    Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd. and Ainsworth Engineered Corp.
    (No. 333-116068),
    filed with the Commission on July 15, 2004.(8)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd., Ainsworth Engineered Corp. and
    Ainsworth Engineered (USA), LLC
    (No. 333-119812),
    filed with the Commission on October 18, 2004.(9)
    
    Incorporated by reference to the Annual Report on
    Form 20-F
    of Ainsworth Lumber Co. Ltd. for the fiscal year ended
    December 31, 2005, filed with the Commission on
    March 31, 2006.(10)
    
    Incorporated by reference to the
    Form 6-K
    of Ainsworth Lumber Co. Ltd., furnished to the Commission on
    April 21, 2006.(11)
    
    Incorporated by reference to the Registration Statement on
    Form F-4
    of Ainsworth Lumber Co. Ltd., Ainsworth Engineered Corp.,
    Ainsworth Engineered Limited Partnership, Ainsworth Engineered
    (USA), LLC and Ainsworth Corp.
    (No. 333-
    134708), filed with the Commission on June 2, 2006. 71