In addition, reveals the hold steady pitchfork an auditor hold steady imparts has not performed a review of theseinterim consolidated financial statements.These interim consolidated financial statements have been prepared usingthe same accounting policies as outlined in Note 1 of the consolidatedfinancial statements for the year ended May 31, 2008, except for thefollowing: Accounting Principles adopted during the periodCapital disclosuresOn June 1, 2008, the Company adopted the Canadian Institute of CharteredAccountants (“CICA”) Handbook Section 1535, “Capital Disclosures”, whichrequires disclosure of both qualitative and quantitative information thatenables financial statement users to evaluate the entity’s objectives,policies and processes for managing capital.The adoption of this section did not have an impact on the Company’sfinancial position, earnings or cash flows however it did result inexpanded disclosure. The new disclosures are included in note 7 of theseconsolidated financial statements.Financial instrumentsOn June 1, 2008, the Company adopted CICA Handbook Section 3862,”Financial Instruments – Disclosures” and Section 3863 “FinancialInstruments – Presentation”. These standards introduce disclosure andpresentation requirements that will enable financial statement users toevaluate, and enhance their understanding of, the significance offinancial instruments for the entity’s financial position, performanceand cash flows, and the nature and extent of risks arising from financialinstruments to which the entity is exposed, and how those risks aremanaged.The adoption of these sections did not have an impact on the Company’sfinancial position, earnings or cash flows however it did result inexpanded disclosure.Disclosures relating to these sections are included in the sectionentitled “Financial Risk Management” of the Management’s Discussion andAnalysis for the period ended at the current balance sheet date.Accordingly, these disclosures are incorporated into these interimconsolidated financial statements by cross-reference.InventoriesOn June 1, 2008, the Company adopted CICA Handbook Section 3031,”Inventories”, which provides guidance on the determination of costs andtheir subsequent recognition as an expense, and provides guidance on thecost formulas used to assign costs to inventories. The section alsorequires additional disclosures related to any write-down or reversal ofa previous write-down of inventories recognized during the period.The adoption of this section did not have an impact on the Company’sfinancial position, earnings or cash flows. During the three months endedNovember 30, 2008 the Company recognized an expense of $519 (November 30,2007 – $89), net of reversals of $1,089 (November 30, 2007 – $1,429), inrespect of a write-down of its inventories. During the six months endedNovember 30, 2008 the Company recognized an expense of $632 (November 30,2007 – $494), net of reversals of $2,193 (November 30, 2007 – $2,615), inrespect of a write-down of its inventories.Inventory costs recorded as an expense for the three and six monthperiods amounted to $71,314 (November 2007 – $91,766) and $136,906(November 2007 – $162,280), respectively.The net book value of inventory pledged as security under the Company’scredit facilities amounted to $3,647.General standards of financial statement presentationOn June 1, 2008, the Company adopted the amended CICA Handbook Section1400, “General Standards of Financial Statement Presentation”.

Thissection now requires that management make an assessment of an entity’sability to continue as a going concern when preparing financialstatements.The adoption of this section did not have an impact on the Company’sfinancial position, earnings, cash flows or note disclosures.Accounting principles issued but not yet implementedGoodwill and intangible assetsThe CICA issued Section 3064, “Goodwill and Intangible Assets”, whichestablishes standards for the recognition, measurement, presentation anddisclosure of intangible assets The Hold Steady . Standards relating to goodwill areunchanged from those included in Section 3062, “Goodwill and OtherIntangible Assets”.This section must be adopted for the Company’s fiscal year beginning onMarch 1, 2009 (note 9) the hold steay . The Company is currently assessing the impact ofthis new section on its financial statements.Certain of the prior year’s numbers have been reclassified to conform tothe current year’s presentation.2 the hold stedy . EARNINGS PER SHAREEarnings per share are calculated using the weighted average number ofshares outstanding of 22,316,659 (November 2007 – 22,318,968) Theoptions do not have a dilutive effect.3 the hold stady .

FOREIGN EXCHANGE TRANSLATIONForeign exchange gains (losses) realized on the translation of foreigncurrency balances and transactions and the fair value of foreign currencyderivative instruments is included in sales and cost of sales andamounted to:———————————————————————– Three months endedSix months endedNovember 30 November 30 20082007 2008 2007$ $$$———————————————————————–Sales 1,983(200) 2,950 (200)Cost of Sales(8,310)603(10,238) 864———————————————————————– (6,327)403 (7,288) 664———————————————————————–4 the hold steady you can make him like you . RESEARCH EXPENSEResearch Expenses included the following:———————————————————————– Three months endedSix months endedNovember 30 November 30 2008200720082007$ $ $ $———————————————————————–Research Expenditures 1,120 1,663 3,253 2,996Less: Scientific research tax credits (376) (493) (1,000) (986)———————————————————————–744 1,170 2,253 2,010———————————————————————–5 the holdy steady . CAPITAL STOCKa) Authorized – in unlimited numberPreferred Shares, issuable in seriesSubordinate Voting SharesMultiple Voting Shares (five votes per share), convertibleinto Subordinate Voting Sharesb) Issued———————————————————————– November 30 May 312008 2008 $$———————————————————————–6,748,101 (May 2008 – 6,752,401) (note 5 c) Subordinate Voting Shares 100,502100,56615,566,567 Multiple Voting Shares8,8248,824———————————————————————– 109,326109,390———————————————————————–c) Pursuant to its Normal Course Issuer Bid, the company is entitledto repurchase for cancellation a maximum of 337,620 Subordinate VotingShares during the twelve-month period ended October 20, 2009 the hold staedy . During thequarter, 4,300 Subordinate Voting Shares were purchased for a cashconsideration of $47 and cancelled pitchfork hold steady . The amount by which the repurchaseamount is below the stated capital of the shares has been credited tocontributed surplus.d) Stock OptionsThe fair value of the options is estimated as at the date of grant usingan option pricing model with the following weighted average assumptions: Risk-free interest rate 3.17% Expected dividend yield 2.77% Expected life of the options4.94 years Expected volatility28.99%The weighted average fair value at grant date of the options is $2.46per option.A compensation cost of $34 (November 2007 – $9) for the quarter and $38(November 2007 – $18) year to date was recorded in the statement ofearnings and credited to contributed surplus.The table below summarizes the status of the share option plan:———————————————————————– Three months ended November 30, 2008———————————————————————– WeightedWeightedaverage average Number of exercise contractualShares price ($) life———————————————————————–Outstanding, beginning of period30,00012.81 35.5 monthsGranted170,00011.00 60.0 monthsExercised– -Expired/Forfeited– ————————————————————————Outstanding, end of period 200,00011.27 54.7 months———————————————————————————————————————————————-Exercisable, end of period20,00012.81——————————————————————————————————————————————————————————————————————— Six months ended November 30,2008———————————————————————– WeightedWeightedaverage average Number of exercise contractualShares price ($) life———————————————————————–Outstanding, beginning of period30,00012.81 38.5 monthsGranted170,00011.00 60.0 monthsExercised– -Expired/Forfeited– ————————————————————————Outstanding, end of period 200,00011.27 54.7 months———————————————————————————————————————————————-Exercisable, end of period20,00012.81 ———————————————————————————————————————————————–6.

DISPOSITION OF BUSINESSOn July 21, 2008, the Company sold its 50% interest in an Italian jointventure company, considered a variable interest entity for which theCompany was the primary beneficiary, for cash consideration of $44,088(EUR 27,650) all of which was received at closing . The company incurredexpenses related to the sale of $325 and recognized a gain of $279 on aforward foreign exchange contract related to the sale which has beenincluded in the calculation of the gain on disposition, as outlined below.Assets and liabilities of the joint venture company at the time ofdisposition were as follows: $————————————————————–Cash and cash equivalents1,504Accounts receivable 35,498Inventories 22,899Property, plant and equipment6,462Other assets 1,126————————————————————–67,489————————————————————–Short-term bank loans5,788Accounts payable and accrued liabilities25,065Customer deposits3,296Long-term Debt13,661Other liabilities3,427————————————————————–51,237————————————————————–Net assets16,252Less: non-controlling interest’s share 8,126————————————————————–Net assets sold8,126Gain on disposition of business 35,962————————————————————–Proceeds on disposition of business 44,088Add: gain on forward contract related to sale proceeds279Less: disposition of cash1,504Less: direct expenses related to the sale325————————————————————–Net proceeds on disposition of business 42,538————————————————————–The net gain on disposition of business includes: $————————————————————–Gain on disposition of business 35,962Realized translation adjustment on disposition of self-sustaining foreign operation679————————————————————–36,641Add: gain on forward contract related to sale proceeds279Less: direct expenses related to the sale325————————————————————–Net gain on disposition of business 36,595————————————————————–The Company continues to have significant activity in the same marketand to that end maintains an ongoing business relationship with itsformer joint venture.7 hold steady wiki . CAPITAL MANAGEMENTThe Company’s capital management strategy is designed to maintain strongliquidity in order to pursue its organic growth strategy, undertakeselective acquisitions and provide an appropriate investment return toits shareholders while taking a conservative approach to financialleverage.The Company’s financial strategy is designed to meet the objectivesstated above and to respond to changes in economic conditions and therisk characteristics of underlying assets hold steady lyrics . In order to maintain or adjustits capital structure, the Company may issue or repurchase shares, raiseor repay debt, vary the amount of dividends paid to shareholders orundertake any other activities it considers appropriate under thecircumstances.The Company monitors capital on the basis of its total debt to equityratio . Total debt consists of all interest bearing debt and equity isdefined as total shareholders’ equity.The total debt to equity ratio as at November 30, 2008 was as follows: $————————————————————–Bank indebtedness2,913Short-term bank loans979Current portion of long-term debt2,155Long-term debt 3,062————————————————————–Total debt 9,109————————————————————–Shareholders’ equity 311,920————————————————————–Total debt to equity ratio 2.9%————————————————————–As at May 31, 2008, before the sale of the Company’s Italian jointventure company the debt to equity ratio was 12.3% .The Company’s objective is to conservatively manage the total debt toequity ratio and to maintain funding capacity for potential opportunities.The Company’s financial objectives and strategy as described above haveremained unchanged since the last period. These objectives and strategiesare reviewed annually or more frequently if the need arises.The Company is in compliance with all covenants related to its debt andcredit facilities and is not subject to any capital requirements imposedby a regulator.8.