Management's Discussion and Analysis of Financial Condition and Results of Operations.

These unaudited financial statements are those of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying Consolidated Financial Statements of Jewett-Cameron Trading Company Ltd., contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state its financial position as of November 30, 2008 and August 31, 2008 and its results of operations and cash flows for the three month periods ended November 30, 2008 and November 30, 2007 in accordance with U.S. GAAP. Operating results for the three month period ended November 30, 2008 are not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, 2009.

The Company's operations are classified into four reportable segments, which were determined based on the nature of the products offered along with the markets being served. The segments are as follows:

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Industrial wood products

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Lawn, garden, pet and other

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Seed processing and sales

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Industrial tools

The industrial wood products segment reflects the business conducted by Greenwood Products, Inc. (Greenwood), a wholly owned subsidiary of Jewett-Cameron Lumber Corporation (JCLC). Greenwood is a processor and distributor of industrial wood and other specialty building products. A major product category is treated plywood that is sold to boat manufacturers and the transportation industry.

The lawn, garden, pet and other segment reflects the business of Jewett-Cameron Lumber Corporation, which is a wholesaler of wood products and a manufacturer and distributor of specialty metal products. Wood products include fencing and landscape timbers, while metal products include dog kennels, a proprietary gate support system, perimeter fencing, and greenhouses. JCLC uses contract manufacturers to make the specialty metal products. Some of the products that JCLC distributes flow through the Company's distribution center located in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer. Primary customers are home centers and other large retailers.

The seed processing and sales segment reflects the business of Jewett-Cameron Seed Company (JCSC), a wholly owned subsidiary of JCLC. JCSC processes and distributes agricultural seed. Most of this segment's sales come from selling seed to distributors with a lesser amount of sales derived from cleaning seed.

The industrial tools segment reflects the business of MSI-PRO (MSI), a wholly owned subsidiary of JCLC. MSI imports and distributes products including pneumatic air tools, industrial clamps, and saw blades; that are primarily sold to retailers that in turn sell to contractors and end users. Some of these products carry the Avenger Products brand label.

RESULTS OF OPERATIONS

Three Months Ended November 30, 2008 and November 30, 2007

For the three months ended November 30, 2008, sales decreased $3,223,267 to $10,782,063 from $14,005,330 for the three months ended November 30, 2007.
Primarily this reflects a relatively large decrease in sales at Greenwood that was only partially offset by a significant increase in sales at JCLC.

Sales at Greenwood were $3,281,558 for the three months ended November 30, 2008, which was a decrease of $4,836,743 or 60% compared to sales of $8,118,301 for the three months ended November 30, 2007. Sales to boat manufacturers represented approximately 59% of Greenwood's total sales for the year ended August 31, 2008, and demand from these kinds of customers has been severely affected by weak economic conditions. Furthermore, Greenwood lost a major group of boat manufacturing customers, when a two year contract came up for renewal at June 30, 2008. Also contributing to the decline in sales was the departure of some traders earlier in calendar 2008. New traders have been hired, but the net effect has been a reduction in sales. Operating income was a negative $101,707 for the three months ended November 30, 2008 and was down $521,783 from the same period a year ago. This primarily reflects the effect of fixed costs at the relatively low level of sales during the period. In the near future depressed conditions in the overall economy and in the boating industry in particular will likely be a significant challenge for all suppliers in the industry including Greenwood.

Sales at JCLC were $5,526,956 for the three months ended November 30, 2008, which was an increase of $2,024,586 or 58% compared to sales of $3,502,370 for the three months ended November 30, 2007. This reflects higher sales for both specialty metal products and wood products in the current year vs. the prior year. Operating income was $513,329, which was up $368,079 from the same period a year ago. Going forward the sale of specialty metal products are likely to increase significantly compared to the prior year in spite of a depressed economy. Overall the operating results of JCLC are seasonal with the first two quarters of the fiscal year being much slower than the final two quarters of the fiscal year.

Sales at JCSC were $1,710,648 for the three months ended November 30, 2008, which was decrease of $407,060 or 19% compared to $2,117,708 for the three months ended November 30, 2006. However, operating income increased by $16,664.

Sales at MSI were $262,901 for the three months ended November 30, 2008, which was a decrease of $4,050 or 2% compared to $266,951 for the three months ended November 30, 2007, while operating income increased by $4,326.

Gross margin for the three month period ended November 30, 2008 was 20.6% compared with 17.8% for the three months ended November 30, 2007. This improvement primarily reflects the fact that metal products sold by JCLC, which have a higher margin than the Company's other products, were a bigger part of the sales mix in the current year vs. the prior year.

Operating expenses decreased by $133,092 from $1,828,502 for the three month period ended November 30, 2007 to $1,695,410 for the three month period ended November 30, 2008. Selling, general, and administrative expenses decreased by $76,950, depreciation and amortization increased by $395, and wages and benefits decreased by $56,537.

Income tax expense for the three month period ended November 30, 2008 was $202,000 compared to $243,750 for the three month period ended November 30, 2007. The Company estimates income tax expense for the quarter based on combined federal and state rates that are currently in effect.

Net income for the three month period ended November 30, 2008 was $293,475 or $.12 per diluted share compared to $373,915 or $.16 per diluted share for the three month period ended November 30, 2007.

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2008 the Company had working capital of $16,517,668, which represented an increase of $331,139 compared to working capital of $16,186,529 as of August 31, 2007. The largest changes effecting this change in working capital were a $1,519,053 increase in cash, a $2,112,327 decrease in accounts receivable, and a $917,688 decrease in accounts payable and accrued liabilities.

As of November 30, 2008 accounts receivable and inventory represented 61% of current assets and 53% of total assets. For the three months ended November 30, 2008 the accounts receivable collection period or DSO was 36.7 days compared with 36.7 days for the three months ended November 30, 2007. Inventory turnover for the three months ended November 30, 2008 was 87.1 days compared with 79.4 days for the three months ended November 30, 2007.

External sources of liquidity include a line of credit from the United States National Bank of Oregon of $5,000,000 of which $300,000 is presently dedicated to standby letters of credit to support international transactions. At November 30, 2008 the Company did not have a balance outstanding leaving $4,700,000 available. Also, as of August 31, 2008 the Company had no borrowing against this line of credit. Borrowing under the line of credit is secured by an assignment of accounts receivable and inventory. Prior to January 31, 2008 interest was calculated at either prime or the one month LIBOR rate plus 190 basis points. However, starting on January 31, 2008 the borrowing mechanism was simplified, and the interest rate is calculated solely on the one month LIBOR rate plus 190 basis points.

Business Risks

This quarterly report includes "forward-looking statements" as that term is defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "anticipates," or "hopeful," or the negative of those terms or other comparable terminology, or by discussions of strategy, plans or intentions. For example, this section contains numerous forward-looking statements. All forward-looking statements in this report are made based on management's current expectations and estimates, which involve risks and uncertainties, including those described in the following paragraphs.

Risks Related to Our Common Stock

We may decide to acquire assets or enter into business combinations, which could be paid for, either wholly or partially with our common stock and if we decide to do this our current shareholders would experience dilution in their percentage of ownership.

Our Articles of Incorporation give our Board of Directors the right to enter into any contract without the approval of our shareholders. Therefore, our management could decide to make an investment (buy shares, loan money, etc.) without shareholder approval. If we acquire an asset or enter into a business combination, this could include exchanging a large amount of our common stock, which could dilute the ownership interest of present stockholders.

Future stock distributions could be structured in such a way as to be 1) diluting to our current shareholders or 2) could cause a change in control to new investors.

If we raise additional funds by selling more of our stock, the new stock may have rights, preferences or privileges senior to those of the rights of our existing stock. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. The result of this would be a lessening of each present stockholder's relative percentage interest in our company.

Our shareholders could experience significant dilution if we issue our authorized 10,000,000 preferred shares.

The Company's common shares currently trade within the NASDAQ Capital Market in the United States and on the Toronto Stock Exchange in Canada. On NASDAQ the average daily trading volume for the three month period ended November 30, 2008 was 1,444 shares. Trading volume on the Toronto Stock Exchange was significantly less than on NASDAQ. With this limited trading volume, investors could find it difficult to purchase or sell the Company's common stock.

Risks Related to Our Business

We could experience a decrease in the demand for our products resulting in lower sales volumes, which would give us less capital with which to operate.

In the past at times we have at times experienced decreasing products sales with certain customers. The reasons for this can be generally attributed to factors such as competition, wood products prices, and interest rates. If economic conditions deteriorate or if consumer preferences change, we could experience a significant decrease in profitability.

If our top customers were lost and could not be replaced.

For the three months ended November 30, 2008 our top ten customers represented 60% of our total sales. We would experience a significant decrease in sales and profitability and would have to cut back our operations, if these customers were lost and could not be replaced. Our top ten customers are in the U.S. and are primarily in the marine, home improvement, and agricultural industries.

We could experience delays in the delivery of our products to our customers causing us to lose business.

We purchase our products from other vendors and a delay in shipment from these vendors to us could cause significant delays in our delivery to our customers.
This could result in a decrease in sales orders to us and we would experience a loss in profitability.

We could lose our credit agreement and could result in our not being able to pay our creditors.

We have a line of credit with U.S. Bank in the amount of $5 million of which $300,000 is dedicated to standby letters of credit to support international transactions, and $4,700,000 is available. We are currently in compliance with the requirements of our existing line of credit. If we lost this credit it could become impossible to pay some of our creditors on a timely basis.

If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our financial results accurately, which could harm our business and we could be subject to regulatory scrutiny.

We have completed a management assessment of internal controls as prescribed by
Section 404 of the Sarbanes-Oxley Act, which we were required to do in connection with our year ended August 31, 2008. Based on this process we did not identify any material weaknesses. Although we believe our internal controls are operating effectively, we cannot guarantee that in the future we will not identify any material weaknesses in connection with this ongoing process.

Furthermore, for the year ending August 31, 2010 our external auditors need to attest to the state of our Section 404 compliance. If our independent registered public accounting firm cannot timely attest to our evaluation, we could be subject to regulatory scrutiny and a loss of public confidence in our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

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