Exhibit 19

Dear TreeSource Shareholders:

         For the second  quarter of Fiscal  1999,  TreeSource(R)  incurred a net
loss of  $324,000,  compared  to a net loss of  $198,000  for the same period in
1997. The net loss applicable to common  shareholders was $.08 per share for the
quarter ended October 31, 1998 compared to $.07 per share in the second  quarter
last year.  Second  quarter net sales were $51.2  million,  down 24 percent from
$67.4 million in the comparable period last year.

         For the six months ended October 31, 1998,  the Company  reported a net
loss of $943,000  compared to net income of $1,746,000  for the same period last
year. The net loss applicable to common  shareholders was $.19 per share for the
six months ended  October 31, 1998  compared to net income  applicable to common
shareholders  of $.05 per share for the same  period  last year.  Net sales were
$98.9 million for the six months  compared to $136.3  million in the prior year,
down 27 percent.

         The second fiscal  quarter  started off  profitably,  but lumber prices
slid as the quarter  progressed.  During the quarter some product prices fell as
much as 30%,  and  compared  to last  year,  product  prices  overall  were  off
significantly.  Despite the low lumber prices,  the Company's  operating results
were slightly better than the same quarter last year.

          In spite of strong domestic  demand,  weak export markets  resulted in
too much of the  industry's  output to be  directed  to the US market.  The chip
market is also weak because of the negative  impact of the Asian flu on pulp and
paper  producers.  Although  the lumber and chip  market  softness  has caused a
decline in log costs, the reductions at this point have not been enough to allow
consistently profitable operations.

         Short  term,  we  are  running  our  most   efficient   facilities  and
concentrating  on improving our lumber business by more tightly  integrating log
acquisition,  mill operations,  and sales activities with rigorous financial and
operational  analyses  to  maximize  results.  We also  intend  to sell  certain
non-strategic assets.

         The delisting  proceedings with Nasdaq are still pending and a decision
is expected this month.

         During our Annual  Meeting of  Shareholders  held on October 26,  1998,
Directors  Richard W.  Detweiler and William H. Wright were  re-elected to three
year terms and Moss Adams LLP was re-appointed as the Company's  auditors.  Also
during the  meeting,  proposals  to change  the  Company  name to  TreeSource(R)
Industries, Inc. and to amend the Company's Stock Option Plan were approved.

                                       Jess R. Drake
                                       President


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