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 February 28, 2009 and August 31, 2008 and its results of operations and cash flows for the three and six month periods ended February 28, 2009 and February 29, 2008 in accordance with U.S. GAAP.
Operating results for the three and six month periods ended February 28, 2009 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 February 28, 2009 and February 29, 2008

For the three months ended February 28, 2009, sales decreased $5,728,270 to $9,354,961 from $15,083,231 for the three months ended February 29, 2008. The decrease is largely due to a decline in sales at Greenwood.

Sales at Greenwood were $2,855,840 for the three months ended February 28, 2009, which was a decrease of $4,394,629 or 60% compared to sales of $7,250,469 for the three months ended February 29, 2008. 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 loss of ($144,989) for the three months ended February 28, 2009, which was a decline of ($413,808) from the $268,819 profit recorded in the same period a year ago. This primarily reflects the effect of fixed costs at the relatively low level of sales during the period. For the remainder of the fiscal year, 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 $5,260,294 for the three months ended February 28, 2009, which was an decrease of $278,896, or 5%, compared to sales of $5,539,191 for the three months ended February 29, 2008. Operating income was $601,876, which was an increase of $48,550 compared to the income of $553,326 from the year-ago quarter. Even though sales were lower, the higher income for the current quarter was due to greater sales of higher margin specialty metal products compared to the prior year's quarter. 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 $1,003,794 for the three months ended February 28, 2009, which was decrease of $1,271,007 or 56% compared to $2,274,801 for the three months ended February 29, 2008. Operating income for the current quarter was $11,291, a decrease of $44,313 from the operating income of $55,604 recorded by JCSC in the prior year's quarter. Grass seed demand has fallen due to the overall economy and substantially lower new home construction rates in North America.

Sales at MSI were $235,033 for the three months ended February 28, 2009, which was a decrease of $41,566 or 15% compared to $276,599 for the three months ended February 29, 2008. Operating income was $3,822, a decrease of $841 compared to the operating income of $4,663 recorded in the comparative quarter in the prior fiscal year.

Gross margin for the three month period ended February 28, 2009 was 21.9% compared with 18.1% for the three months ended February 29, 2008. 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 $247,033 from $1,846,359 for the three month period ended February 29, 2008 to $1,599,326 for the three month period ended February 28, 2009. The decrease was largely due to lower Selling, General, and Administrative expenses, which were $509,457, a decrease of $221,725, or 30.3%, from the quarter ended February 29, 2008. Wages and Benefits decreased by $26,255, and Depreciation and Amortization increased by $897.

Income tax expense for the three month period ended February 28, 2009 was $180,022 compared to $335,750 for the three month period ended February 29, 2008. 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 February 28, 2009 was $256,114 or $.11 per basic and diluted share compared to $335,750 or $.21 per basic and diluted share for the three month period ended February 29, 2008.

Six Months Ended February 28, 2009 and February 29, 2008

For the six months ended February 28, 2009, sales decreased $9,209,366 or 31.4% to $20,137,024 from $29,346,390 for the six months ended February 29, 2008.
Primarily this reflects a relatively large decrease in sales at Greenwood and Jewett Cameron Seed Company that was only partially offset by an increase in sales at Jewett Cameron Lumber Company.

Sales at Greenwood were $6,137,398 for the six months ended February 28, 2009, which was a decrease of $9,612,182 or 62.5% compared to sales of $15,368,770 for the six months ended February 29, 2008. A slowdown in the boat manufacturing industry, where much of Greenwood's sales are targeted was a significant factor contributing to the decline in sales. For the six months ended February 28, 2009, Greenwood reported an operating loss of ($265,338) compared to an operating profit of $568,045 for the six months ended February 29, 2008. Going forward this fiscal year depressed economic conditions, particularly in the boating industry, will likely continue to be a challenge for Greenwood.

Sales at JCLC were $10,787,250 for the six months ended February 28, 2009, which was an increase of $1,745,689 or 19.3% compared to sales of $9,041,561 for the six months ended February 29, 2008. The increase primarily reflects a significant increase in the sales of specialty metal products. Operating income increased $324,301, or 39.7%, from $816,259 to $1,141,560. 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 $2,714,442 for the six months ended February 28, 2009, which was a decrease of $1,678,067, or 38.2% compared to sales of $4,392,509 for the six months ended February 29, 2008. The lower sales were largely due to decreased demand for grass seed from new home construction in North America. Operating income for the current six month period was $108,802, a decrease of $23,461 from the prior year's six month period.

Sales at MSI were $497,934 for the six months ended February 28, 2009, which was a decrease of $45,616 or 8.4% compared to $543,550 for the six months ended February 29, 2008. Operating loss for the current six month period was ($63,457) compared to an operating loss of (454,948) in the prior year's six month period.

Gross margin for the six month period ended February 28, 2009 was 21.2% compared with 17.9% for the six months ended February 28, 2007 The improvement in gross margin percentage reflects the increased sales of specialty metal products at JCLC, which have higher margins than wood products sales.

Operating expenses decreased by $415,773, or 11.2%, to $3294,737 for the six month period ended February 28, 2008 from $3,710,510 for the six month period ended February 29, 2008. Selling, general, and administrative expenses decreased by $377,546, or 26.2%, depreciation and amortization increased by $1,292, and wages and benefits decreased by $39,520.

Income tax expense for the six month period ended February 28, 2009 was $382,022 compared to $579,500 for the six month period ended February 29, 2008. 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 six month period ended February 28, 2009 was $549,590, or $0.23 per basic and diluted share, compared to $887,113 or $.37 per basic and diluted share, for the six month period ended February 29, 2008.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2009 the Company had working capital of $14,916,251, which represented an decrease of $1,270,278 compared to working capital of $16,186,529 as of August 31, 2008. The largest changes effecting this change in working capital were a $1,750,663 decrease in cash, a $1,545,242 decrease in accounts receivable, a $458,813 decrease in accounts payable and accrued liabilities, and a $188,166 decrease in accrued liabilities. The decrease in cash was primarily due to paying in full a promissory note and note payable from its cash balance, which resulted in a decrease in the current liabilities of $367,807 and long-term liabilities of $1,951,004.

As of February 28, 2009, accounts receivable and inventory represented 73% of current assets and 63% of total assets. For the three months ended February 28, 2009, the accounts receivable collection period or DSO was 34.4 compared with 37.1 for the three months ended February 29, 2008. For the six months ended February 28, 2009 the DSO was 41.6 days compared with 36.6 days for the six months ended February 29, 2008. Inventory turnover for the three months ended February 28, 2009 was 103.1 days compared with 70.1 days for the three months ended February 29, 2008. For the six month period, inventory turnover was 93.9 compared with 73.9 days for the six month period ended February 29, 2008.

External sources of liquidity include a line of credit from the United States National Bank of Oregon of $5,000,000. At February 28, 2009, none of the line was outstanding and the entire amount of $5,000,000 was 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 six month period ended February 28, 2009 was 1,150 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 six months ended February 28, 2009, 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 home improvement, marine, 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 the entire amount 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. 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.

Item 3.