40-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 40-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12

OF THE SECURITIES EXCHANGE ACT OF 1934

ý ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2007

Commission file number: 1-10928

INTERTAPE POLYMER GROUP INC.

(Exact name of Registrant as specified in its charter)

Canada

(Jurisdiction of incorporation or organization)

Not Applicable

(I.R.S. Employer Identification Number)

Primary Standard Industrial Classification Code Number: 2670

9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada H4M 2X5 (514) 731-7591

(Address and telephone number of Registrant’s principal executive offices)

Burgess H. Hildreth, 3647 Cortez Road West, Bradenton, Florida, 34219 (941) 739-7500

(Name, address and telephone number of Agent for service in the United States)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each Exchange on which registered:
Common Shares, without nominal or par value	New York Stock Exchange Toronto Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Not Applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable

For annual reports, indicate by check mark the information filed with this form:

ý Annual Information Form  ý Audited Annual Financial Statements

The number of outstanding shares of each of the issuer's classes of capital stock as of December 31, 2007 is:

58,966,348 Common Shares

 -0- Preferred Shares

Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).  If “Yes” is marked, indicate the file number assigned to the registrant in connection with such rule.

Yes ¨  No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý  No ¨

The information contained in this 40-F and the exhibits attached hereto are incorporated by reference into Registration Statement No. 333-109944.

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Controls and Procedures

Disclosure Controls and Procedures.  Intertape Polymer Group Inc. maintains disclosure controls and procedures designed to ensure not only that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, but also that information required to be disclosed by Intertape Polymer Group Inc. is accumulated and communicated to management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.  Based on the annual evaluation made by management as of December 31, 2007 of Intertape Polymer Group Inc.’s disclosure controls and procedures, with the participation of the principal executive officer and principal financial officer, the princi pal executive officer and principal financial officer have concluded that Intertape Polymer Group Inc.’s disclosure controls and procedures were adequate and effective to accomplish the purposes for which they were designed.

Management’s Annual Report on Internal Control Over Financial Reporting.  Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting as well as the preparation of financial statements for external reporting purposes in accordance with Canadian generally accepted accounting principles, including a reconciliation of accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and even when determined to be effective, can only provide reasonable assurance with respect to financial statements preparation and presentation. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of completeness with policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2007 based on the criteria etablished in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Management has concluded that the Company’s internal control over financial reporting was effective as at December 31, 2007 based on those criteria.

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The effectiveness of the Company’s internal control over financial reporting as at December 31, 2007 has been audited by Raymond Chabot Grant Thornton LLP, the Company’s independent auditors.

Independent Auditors’ Report on Internal Control over Financial Reporting.  The independent auditors’ report on internal control over financial reporting is included in the “Independent Auditors’ Report on Internal Control Over Financial Reporting” that accompanies the Company’s Audited Annual Consolidated Financial Statements for the fiscal year ended December 31, 2007, filed as a part of this Annual Report on Form 40-F.

Changes in Internal Control Over Financial Reporting.  There have been no changes in Intertape Polymer Group Inc.’s internal controls over financial reporting that occurred during 2007 that has materially affected, or is reasonably likely to materially affect, Intertape Polymer Group Inc.’s internal control over financial reporting.  

Blackout Period Notices

During 2007, Intertape Polymer Group Inc. was not required to send its directors and executive officers notices pursuant to Rule 104 of Regulation BTR concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.  Intertape Polymer Group Inc.’s blackout periods are regularly scheduled and a description of such periods, including their frequency and duration and plan transactions to be suspended or affected are included in the documents under which Intertape Polymer Group Inc.’s plans operate and is disclosed to employees before enrollment or within thirty (30) days thereafter.

Audit Committee Financial Expert

The Board of Directors of Intertape Polymer Group Inc. has determined that it has at least one audit committee financial expert serving on its audit committee.  Mr. George J. Bunze, having been the Chief Financial Officer of Kruger Inc., and having the attributes set forth in Paragraph 8(b) of General Instruction B to Form 40-F, has been determined to be an audit committee financial expert.  Further, Mr. Bunze is “independent” as that term is defined by the New York Stock Exchange’s corporate governance standards applicable to Intertape Polymer Group Inc.

The Securities and Exchange Commission has stated that the designation of Mr. Bunze as an audit committee financial expert does not make him an “expert” for any purpose, including, without limitation, for purposes of Section 11 of the Securities Act of 1933.  Further, such designation does not impose any duties, obligations or liability on Mr. Bunze greater than those imposed on members of the audit committee and Board of Directors not designated as an audit committee financial expert, nor does it affect the duties, obligations or liability of any other member of the audit committee or Board of Directors.

Code of Ethics

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Intertape Polymer Group Inc. has adopted a code of ethics entitled “Intertape Polymer Group Inc. Code of Business Conduct and Ethics”, which is applicable to all of its employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, and all persons performing similar functions.  During the 2007 fiscal year, Intertape Polymer Group Inc. did not amend its Code of Business Conduct and Ethics and did not grant a waiver from any provision of its Code of Business Conduct and Ethics.  Intertape Polymer Group Inc. will provide, without charge, to any person upon written or oral request, a copy of its Code of Business Conduct and Ethics.  Requests should be directed to Burgess H. Hildreth, Intertape Polymer Group Inc., 3647 Cortez Road West, Bradenton, Florida 34210.  Mr. Hildreth may be reached by telephone at (941) 739-7500.

Principal Accountant Fees and Services

A table setting forth the fees billed for professional services rendered by Raymond Chabot Grant Thornton LLP, Chartered Accountants, Intertape Polymer Group’s principal accountant, for the fiscal years ended December 31, 2007 and December 31, 2006, is set forth in Item 17.5 of Intertape Polymer Group’s Annual Information Form attached hereto as Exhibit 1.

Intertape Polymer Group Inc.’s Audit Committee pre-approves all audit engagement fees and terms of all significant permissible non-audit services provided by independent auditors. With respect to services other than audit, review or attest services set forth in the table referenced above, none were approved pursuant to the de minimus exception provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

Off-Balance Sheet Arrangements

Through June 2005, Intertape Polymer Group Inc. maintained no off-balance sheet arrangements, except for certain letters of credit issued and outstanding.  As of December 31, 2007 and 2006, the Company had $2.1 million and $2.5 million, respectively, of outstanding letters of credit, which decrease the available balance under the Company’s credit facility.  In June 2005, Intertape Polymer Group Inc. entered into an interest rate swap agreement for a notional principal amount of $50.0 million maturing in June 2010.  In July 2005, Intertape Polymer Group Inc. entered into a second interest rate swap agreement for a notional principal amount of $25.0 million maturing in July 2010.  Under the terms of these interest rate swap agreements, the Company received, on a quarterly basis, a variable interest rate and paid a fixed interest rate of 4.27% and 4.29%, respectively, plus the premium of 4.00% (4.25% from August 8, 2007 through September 30, 2007, 2.75% from November 8, 2006 through August 7, 2006, and 2.25% prior to November 8, 2006 and in 2005) applicable on its term loan.  The increase in the premium rate was as a result of the November, 2006 Amendment to the Company’s Credit Agreement dated as of July 28, 2004, as amended, among the Company and certain of its subsidiaries, the Lender referred to therein, Citigroup Global Markets Inc., as sole Lead Arranger and Sole Bookrunner, Citicorp North American, Inc., an Administrative Agent, the Toronto-Dominion Bank, as Syndication Agent, and Comerica Bank and HSBC Bank USA, National Association, as Co-Documentation Agents.  As of December 31, 2007, the effective interest rate on $75,000,000 was 8.28%, (7.03% in 2006), and the effective interest rate on the excess was 9.16% (8.04% in 2006).

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Intertape Polymer Group Inc., and certain of its subsidiaries refinanced its Senior Secured Credit Facility entering into a Loan and Security Agreement dated March 28, 2008 with certain financial institutions, as Lenders, Bank of America, N.A., as Agent, and Banc of America Securities LLC, as Sole Lead Arranger and Book Manager.  The initial funding under the new Senior Secured Credit Facility occurred on March 28, 2008.  The Company’s new Senior Secured Credit Facility is an asset-based revolving loan not to exceed $200,000,000.00 with interest thereon at the Canadian or U.S. prime rate announced by Bank of America from time to time, or at LIBOR, respectively, plus applicable margins, which are fixed at 1.75% through September 2008.  At closing Intertape Polymer Group had approximately $30 million of unused availability under the loan.  A complete description of the new Senior Secured Credit Faci lity is set forth in Section 3.2 of the Annual Information Form attached hereto as Exhibit 1.  In connection with the new Senior Secured Credit Facility, the interest rate swap agreements were terminated.  Intertape Polymer Group Inc. will not seek to enter into new interest rate swap agreements at this time but will continue to monitor the interest rate environment and may choose to enter into new interest rate swap agreements in the future as a means of hedging the interest rate risk on its floating rate debt.

Tabular Disclosure of Contractual Obligations

The information required by Paragraph (12) of General Instruction B to Form 40-F is located on Page 20 of Management’s Discussion and Analysis for 2007 attached hereto as Exhibit 2 and made a part hereof by this reference.

Identification of the Audit Committee

Intertape Polymer Group Inc. has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee is comprised of three of the six directors of Intertape Polymer Group Inc.:  George J. Bunze, Allan Cohen, Ph.D., and Torsten A. Schermer.  For additional information with respect to the Company’s Audit Committee, see Item 17 of the Company’s Annual Information Form attached hereto as Exhibit 1.

Undertaking

Intertape Polymer Group Inc. undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises.

[SIGNATURE ON FOLLOWING PAGE]

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Signature

Pursuant to the requirements of the Exchange Act, Intertape Polymer Group Inc. certifies that it meets all of the requirements for filing on Form 40-F, and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized.

INTERTAPE POLYMER GROUP INC.

(Registrant)

By:

/s/ Victor DiTommaso

(Signature)

Name:

Victor DiTommaso, CPA

Title:

Chief Financial Officer

Date: March 28, 2008

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EXHIBIT INDEX

Exhibit No.	Description	Page No.
1	Annual Information Form dated March 28, 2008	9
2	Management’s Discussion and Analysis for 2007 Audited Annual Consolidated Financial Statements	2
3	Consent of Independent Registered Chartered Accountants	62
4	Certifications pursuant to Rule 13a-14(a) or Rule 15d-14(a), pursuant to Section 302 of the U.S. Sarbanes-Oxley Act of 2002	63
5	Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002	67

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EXHIBIT 1

Item 1.

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

For the Year ended December 31, 2007

Dated: March 28, 2008

9

INTERTAPE POLYMER GROUP INC.

ANNUAL INFORMATION FORM

Table of Contents

Page

Item 1.

Cover Page

9

Item 2.

Corporate Structure

12

2.1

Name, Address and Incorporation

12

2.2

Intercorporate Relationships

12

Item 3.

General Development of the Business

13

3.1

General Three Year History

13

3.2

Credit/Debt Information

17

3.3

Significant Acquisitions

18

Item 4.

Narrative Description of the Business

20

4.1

General

20

4.2

Products, Markets and Distribution

21

4.2.1

Tapes and Films Division

21

4.2.2

Engineered Coated Products Division

25

4.3

Sales and Marketing

26

4.3.1

Tapes and Films Division

26

4.3.2

Engineered Coated Products Division

27

4.4

Manufacturing and Quality Control

27

4.4.1

Tapes and Films Division

27

4.4.2

Engineered Coated Products Division

28

4.5

Equipment and Raw Materials

28

4.5.1

Tapes and Films Division

28

4.5.2

Engineered Coated Products Division

28

4.6

Research and Development and New Products

29

4.6.1

Tapes and Films Division

29

4.6.2

Engineered Coated Products Division

30

4.7

Trademarks and Patents

30

4.8

Competition

31

4.9

Environmental Regulation

31

4.10

Employees

33

Item 5.

Cautionary Statements and Risk Factors

33

5.1

Forward-Looking Statements

33

10

5.2

Risk Factors

34

Item 6.

Dividends

43

Item 7.

General Description of Capital Structure

44

7.1

General Description of Capital Structure

44

7.2

Ratings

44

Item 8.

Market For Securities

45

8.1

Trading Prices and Volume on the Toronto Stock Exchange

45

8.2

Trading Prices and Volume on the New York Stock Exchange

45

Item 9.

Escrowed Securities

46

Item 10.

Directors and Officers

46

Item 11.

Legal Proceedings

48

Item 12.

Interest of Management and Others in Material Transactions

49

Item 13.

Transfer Agents and Registrars

49

Item 14.

Material Contracts

49

Item 15.

Experts

53

15.1

Name of Experts

53

15.2

Interests of Experts

53

Item 16.

Additional Information

53

Item 17.

Audit Committee

54

17.1

Audit Committee Charter

54

17.2

Composition of the Audit Committee

54

17.3

Relevant Education and Experience

54

17.4

Pre-Approved Policies and Procedures

54

17.5

External Auditor Services Fees

55

Exhibit A

Audit Committee Charter

56

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Item 2.

 Corporate Structure

2.1

Name, Address and Incorporation

The business of Intertape Polymer Group Inc. (“Intertape Polymer Group” or the “Company”) was established when Intertape Systems Inc., a predecessor of the Company, established a pressure-sensitive tape manufacturing facility in Montreal.  Intertape Polymer Group was incorporated under the Canada Business Corporations Act on December 22, 1989 under the name “171695 Canada Inc.”  On October 8, 1991, the Company filed a Certificate of Amendment changing its name to “Intertape Polymer Group Inc.”  A Certificate of Amalgamation was filed by the Company on August 31, 1993, at which time the Company was amalgamated with EBAC Holdings Inc.  The shareholders, at the Company’s June 11, 2003 annual and special meeting voted on the replacement of the Company’s By-Law No. 1 with a new General By-Law 2003-1. The intent of the replacement by-law was to conform the Company’s general by-laws with amendments that were made to the Canada Business Corporations Act since the adoption of the general by-laws and to simplify certain aspects of the governance of the Company.  On August 6, 2006, the Company filed a Certificate of Amendment to permit the Board of Directors of the Company to appoint one or more additional Directors to hold office for a term expiring not later than the close of the next annual meeting of the Company’s Shareholders, so long as the total number of Directors so appointed does not exceed one-third of the number of Directors elected at the previous annual meeting of the Shareholders of the Company.

Intertape Polymer Group’s corporate headquarters is located at 9999 Cavendish Blvd., Suite 200, Ville St. Laurent, Quebec, Canada  H4M 2X5 and the address of its registered office is 1250 René-Lévesque Blvd. West, Suite 2500, Montreal, Quebec, Canada  H3B 4Y1, c/o Heenan Blaikie LLP.

2.2

Intercorporate Relationships

Intertape Polymer Group is a holding company which owns various operating companies in the United States and Canada.  ECP L.P., an Ontario partnership, is one of the two principal operating companies for the Company’s Engineered Coated Products Division in Canada.  Intertape Polymer Inc., incorporated under the Canada Business Corporations Act, is the principal operating company for the Company’s Tape and Films Division in Canada and one of the two principal operating companies for the Company’s Engineered Coated Products Division in Canada.  Intertape Polymer Corp., a Delaware corporation, is the principal operating company for the Company’s United States and international operations.

The table below lists for each of the subsidiaries of the Company their respective place of incorporation or constitution, as the case may be, and the percentage of voting securities beneficially owned or over which control or direction is exercised directly or indirectly by Intertape Polymer Group.  Certain subsidiaries, each of which represents not more than ten percent of consolidated assets and not more than ten percent of consolidated sales and operating revenues of the Company, and all of which, in the aggregate, represent not more than twenty

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percent of total consolidated assets and total consolidated sales and operating revenues of the Company at December 31, 2007, have been omitted.

Corporation	Place of Incorporation or Constitution	Percentage of Ownership or Control
Intertape Polymer Group Inc.	Canada	Parent
Intertape Polymer Inc.	Canada	100%
ECP GP II Inc.	Canada	100%
ECP L.P.	Province of Ontario	100%
Spuntech Fabrics Inc.*	Canada	100%
IPG Financial Services Inc.	Delaware	100%
Intertape Polymer Corp.	Delaware	100%
Intertape Woven Products Services S.A. de C.V.	Mexico	100%
IPG Holdings LP*	Delaware	100%
Polymer International Corp.*	Virginia	100%
IPG (US) Inc.	Delaware	100%
IPG (US) Holdings Inc.	Delaware	100%
Intertape Polymer US Inc.	Delaware	100%
Fibope Portuguesa-Filmes Biorientados S.A.	Portugal	100%

* Dormant

Item 3.

 General Development of the Business

3.1

General Three Year History

Overview of prior periods

The Company commenced operations in 1981 and since has evolved into a recognized leader in North America in the development and manufacture of tapes, films and engineered coated and laminated products.  Intertape Polymer Group is the second largest tape manufacturer in North America, the leader in the markets for many engineered coated products, and a significant producer of films in the North American industry.  For several years, Intertape Polymer Group’s business strategy was primarily one of growth.  Commencing in the mid-1990’s, the Company made several strategically important acquisitions to further its business plan to either develop or acquire new products to complete the “basket of products” approach to the Company’s markets.

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Following this period of rapid expansion through acquisitions, the Company entered a period of integration, cost reduction, and facility consolidation. The Company focused on implementing improvements aimed both at realizing the benefits of past acquisitions and optimizing the Company’s cost base, the quality of its products and the cost and effectiveness of its supply chain operations.  

2004-2005

Beginning in 2004, the Company, along with the industry, experienced rising raw material costs. In 2005, not only was the Company, as well as the industry, faced again with rising raw material costs, certain key raw materials also became in short supply.  In the first half of 2005, the shortage was in synthetic rubber, an essential ingredient in the formulation of certain of the Company’s tape adhesives.  After two major hurricanes hit the Gulf Coast of Louisiana and Texas during the third quarter, prices for petroleum-based resins, which are key raw materials for several of the Company’s products, rose dramatically.  However, as a result of the creation of smaller business teams within the Company and a global sourcing group, the Company was able to manage the rising raw material costs through a series of timely sales price increases to its industrial and specialty distributors, and to a lesser e xtent, its retail customers, and was able to aggressively pursue and secure resin supplies from worldwide sources.  

In December, 2005, the Company announced it was investigating the possibility of selling a portion of its interest in the combined engineered coated products operations and FIBC business through an initial public offering of the combined business using a Canadian Income Trust.  On May 24, 2006 the Company announced that it had indefinitely deferred the decision to proceed with this offering.  

2006

On June 14, 2006, Mr. Melbourne F. Yull, the Company’s founder, Chairman and CEO retired.  Following Mr. Yull’s retirement, Mr. Michael Richards was elected as the non-executive Chairman of the Board and the Board of Director’s appointed Mr. Dale McSween as Interim CEO until such time as a successor to Mr. Yull was appointed.

During 2006, the Company was successful in reducing the amount of working capital required to run its business by $44 million as a result of reducing inventories and improving terms and collections in the area of accounts receivable. The Company also invested in manufacturing equipment and IT infrastructure to add capacity, improve productivity and to expand certain of its operations  The capital investment program for 2006 included adding three film lines for expanded production of heat shrinkable films and stretch wrap.  These lines were installed in the Danville, Virginia, Tremonton, Utah, and Porto, Portugal plants.  The Company also successfully improved inventory management through investment in third party inventory planning software.  

The Company’s business underwent significant change in 2006 necessitating, in management’s view, making several revisions to its business model.  In spring 2006, the

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Company began importing general purpose acrylic tape for sale to its distributors though it continues to manufacture more value-added acrylic tape products. In March 2006, the Company closed its FIBCs manufacturing facility in Piedras Negras, Mexico, substantially reducing its manufacturing capacity for this product group. The Company’s revised business model also includes its almost exclusive reliance on imported bags to meet customers’ demand except for a limited manufacturing capability in the Company’s Hawkesbury, Ontario facility where the Company manufactures specialty bags and provides customers with emergency product fulfillment.  

2006 was also marked by declining sales volumes and narrower gross margins as compared to 2005.  There were a variety of factors contributing to both the sales volume decline and the narrowing of gross margins, but one of the most significant factors was the Company’s customer account rationalization process, which accounted for approximately forty percent of the sales volume decline experienced by the Company in 2006.  The Company exited several unprofitable customer accounts and streamlined its product offering, particularly with respect to products sold to its consumer accounts.  

Throughout 2006, the Company continually sought ways to restructure its business and reduce costs to levels more commensurate with near term anticipated sales volumes and gross margins. The Company closed its Piedras Negras, Mexico, Brighton, Colorado, and Cap-de-la Madeleine, Quebec plants. The facility in Piedras Negras, Mexico was closed as the Company changed its FIBC business model, eliminating most domestic manufacturing and relying almost exclusively on import fulfillment.  Though the implementation of the import sourcing model resulted in a reduction in revenue, it permitted the Company to increase gross margins and improve profitability in its FIBC product line.

Production from the Company’s Brighton, Colorado plant was shifted late in 2006 to the Company’s Danville, Virginia, and Richmond, Kentucky facilities.  This consolidation was made possible by productivity increases at the Danville, Virginia facility. Additionally in 2006, the Company transferred the production at its Cap-de-la Madeleine facility to its Brantford, Ontario facility. The consolidation of a large percentage of the Company’s paper packaging products provided a base for the Company’s investment in a ten color printing press for its Brantford, Ontario facility.

During 2006, TD Securities Inc. was engaged to work with management in order to carry out a detailed financial and operational review of the Company. In October 2006, the Board of Directors decided to explore what strategic alternatives may be available to the Company to enhance shareholder value.  TD Securities Inc. was also engaged to work with the Board and management in this strategic alternatives review process.  

2007

As a result of the strategic review process commenced in 2006, the Board of Directors considered all available options and on May 2, 2007 announced that the Company had entered into an agreement for an indirect wholly-owned subsidiary of Littlejohn Fund III, L.P. to acquire all of Intertape Polymer Group’s outstanding common shares at a price of US$4.76 per share in

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cash (the “Arrangement”).  Including net debt outstanding, the total transaction value was approximately US$500 million.

A Dissident Proxy Circular dated June 18, 2007 was filed by 6789536 Canada Inc. and at the annual and special meeting of shareholders, the Arrangement was rejected by the shareholders of the Company by a vote of almost seventy percent.  In addition, the shareholders elected a new Board of Directors, which included the Company’s founder, Melbourne F. Yull, and a former director of the Company, Eric Baker, who was named Chairman.  Mr. Yull was named Executive Director.

On August 8, 2007, the Company successfully amended its Senior Secured Credit Facility to accommodate the costs of the strategic alternatives process in the calculation of its financial covenants.  The amendment reduced the maximum amount the Company could borrow under the Revolving Credit Facility from $75.0 million to $60.0 million and increased the loan margin under the entire Senior Secured Credit Facility, both the Term Loan B and the Revolving Credit Facility by 150 basis points to a range of 325 to 425 basis points determined by a pricing grid. Additionally, the Company paid an amendment fee to its lenders of approximately $2.3 million to be amortized over the remaining term of the related credit facilities.  

In furtherance of the new Board’s plan to strengthen the financial position of Intertape Polymer Group, the Company made a rights offering to its shareholders.  Each shareholder of record at the close of business on August 23, 2007 was entitled to one right for every common share then held.  1.6 rights entitled the holder to purchase one common share of the Company at a price of CDN$3.61, or for subscribers resident in the United States, US$3.44.  In connection with the rights offering, Intertape Polymer Group also entered into Standby Purchase Agreements with three of its principal shareholders and four of its senior officers and one former officer, pursuant to which each agreed to exercise all of their rights and to purchase certain of the shares that were not otherwise subscribed for in the rights offering.  The Company raised total proceeds of approximately US$62.9 million in its rights offeri ng and issued 17,969,388 common shares.  Intertape used the net proceeds of $60.9 million to reduce its Term Loan B bank debt.

On March 27, 2008 the Company successfully refinanced its existing Senior Secured Credit Facility (the “Facility”) with a $200.0 million Asset-Based Loan (“ABL”) entered into with a syndicate of financial institutions.  The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time.  The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and machinery and equipment.  At closing, after repaying the remaining balance of the Facility, the Company had cash and undrawn revolver of approximately $39.0 million.  The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases.  The pricing grid ranges from 1.50% to 2.25%. However, through September 2008, the applicable loan margin is fixed at 1.75%.   Unlike the Facility, the ABL contains only one financial covenant, a fixed charge coverage ratio, which becomes effective only when unused availability drops below $25.0 million.  Under the refinancing agreement, the Company has 120 days from closing to secure financing on all or a portion of its owned real estate.  After that time, the remaining unencumbered real estate is subject to a negative pledge in

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favour of the ABL lenders.  However, beyond the 120 days the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negative pledge of the ABL lenders subordinated to up to $35.0 million of real estate mortgage financing.  During the 120 day window in which the real estate is unencumbered, the Company is not subject to the fixed charge coverage ratio but also is prevented from accessing the last $15.0 million of unused availability under its borrowing base.  The Company expects to report a refinancing expense in the first quarter of 2008 for approximately $3.4 million comprised of the accelerated amortization of the debt issue expenses on the existing debt.  The Company also settled two interest rate swaps that the Company entered into in June and July 2005 hedging interest rates for its existing debt.  Among the advantages the Company expects from refinancing ar e lower interest costs and fewer financial covenants with which it must comply. The Company estimates that the lower loan margin on the ABL compared to the existing Senior Secured Credit Facility will reduce the Company’s interest expense by approximately $2.5 million annually.

The net loss for 2007 was $8.4 million compared to a net loss for 2006 of $166.7 million.  The net loss for 2007 includes $8.1 million of manufacturing facility closures, restructuring, strategic alternatives and other charges, compared to similar charges in 2006 of $76.1 million. The manufacturing facility closures, restructuring, strategic alternatives and other charges totalling $8.1 million including approximately $1.3 million in severance costs associated with the cost reduction initiatives announced by the Company in 2006 and $6.8 million in costs supporting the strategic alternatives process.

3.2

Credit/Debt Information

Indebtedness

In 2005, the Company’s indebtedness increased by $10.0 million due to the Company’s borrowing in connection with its acquisition of Flexia Corporation and Fib-Pak Industries, Inc.  This was offset by a reduction in long-term debt of $3.0 million in accordance with the Company’s debt amortization schedule.  In 2006, the Company reduced its long-term debt by an additional $2.9 million and its revolving credit facility by $15.6 million.

During 2007, the Company reduced its long term debt by $76.5 million.  The payments in 2007 included a $60.9 million reduction as a result of the application of the net proceeds of the shareholder rights offering and a $15.6 million principal payment from “2006 excess cash flow” as required under the Senior Secured Credit Facility.  As of December 31, 2007, the Company had no outstanding draws under its Revolving Credit Facility.

Credit Agreements and Notes

On July 28, 2004, the Company entered into a senior secured credit facility consisting of a US$200.0 million seven-year delayed draw Term Loan B facility, a US$65.0 million five-year revolving credit facility, and a US$10.0 million five-year revolving credit facility to be issued in Canadian dollars.  Further, on July 28, 2004, the Company completed an offering of US$125.0 million 8-½% Senior Subordinated Notes due 2014.  

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The credit agreement governing the senior secured credit facility and the indenture governing the outstanding Senior Subordinated Notes each contain restrictive covenants that, among other things, limited the Company’s ability to incur additional indebtedness, make restricted payments, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or declare dividends. In addition, under its Senior Secured Credit Facility, the Company was required to maintain certain financial ratios, including a maximum total leverage ratio, a minimum interest coverage ratio and a minimum fixed charge ratio.  

During 2006, the Company amended its credit agreement on two occasions, the first being in the second quarter to obtain a waiver for certain non-recurring costs, and the second in the fourth quarter to amend the financial covenants in the agreements due to the changes in the Company’s business model.

In August, 2007, the Company amended its credit facilities to permit the add back of certain one-time charges incurred in connection with the proposed acquisition of all of the common shares of the Company by an indirectly wholly-owned subsidiary of Littlejohn Fund III, L.P., the strategic alternatives process.  The amendment also reduced the maximum amount the Company could borrow under the Revolving Credit Facility from $75 million to $60 million and increased the loan premium for both the Term B Loan and the Revolving Credit Facility by 150 basis points.

Intertape Polymer Group Inc. and certain of its subsidiaries refinanced its Senior Secured Credit Facility on March 28, 2008.  The Company’s new Senior Secured Credit Facility is an asset-based revolving loan not to exceed $200,000,000.00.  The credit facility is secured by a first priority security interest in substantially all of the tangible and intangible assets of, and is guaranteed by, the Company and substantially all of its U.S. and Canadian subsidiaries.  The proceeds from the refinancing were used to repay the Company’s existing bank credit facility, pay related make-whole premiums, accrued interest and transaction fees and provide cash for general working capital purposes.  The Company’s outstanding Senior Subordinated Notes remain outstanding.

For additional information regarding the Company’s new Senior Secured Credit Facility and Senior Subordinated Notes, see Item 14, “Material Contracts”.

3.3

Significant Acquisitions

While the Company made no acquisitions in 2007, historically acquisitions have played a significant role in the Company’s strategy for growth and entry into new product markets.  

The Company’s most recent acquisition was closed on October 5, 2005, when Intertape Polymer Group’s wholly owned subsidiary, Intertape Polymer Inc., for an aggregate consideration of approximately $30.0 million (after purchase price adjustments which occurred in 2006), acquired all of the issued and outstanding shares of Flexia Corporation Ltd., being the body corporate that resulted from the amalgamation of Flexia Corporation and Fib-Pak Industries, Inc. These companies produce a wide range of engineered coated and laminated

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products, and polypropylene fabrics, and this production was complementary to the Company’s existing coated products business based in Truro, Nova Scotia, as well as its FIBC business. The Company believes that this acquisition increased its market share in certain product groups and provided the Company with an enhanced geographic proximity to its customers and suppliers.

The Company has integrated Flexia and Fib-Pak and their operations are now organized and operated under a wholly-owned limited partnership, ECP L.P. The combination of ECP L.P. operations along with  the Company’s existing coated products business based in Truro, Nova Scotia, has resulted in certain synergies and cost savings to the Company as a result of head count reductions, purchasing cost reductions, manufacturing cost reductions and global sourcing opportunities.

The Flexia and Fib-Pak acquisition met the definition of a “significant acquisition”, as that term is understood with reference to Part 8 of the Canadian National Instrument 51-102-Continuous Disclosure Obligations.  A Business Acquisition Report on Form 51-102F4 was filed by the Company on December 20, 2005, and is incorporated herein by reference.

Item 4.

 Narrative Description of the Business

4.1

General

Intertape Polymer Group is a leader in the specialty packaging industry.  Management believes the Company is the second largest manufacturer of tape products in North America and is recognized for its development, manufacture and sale of adhesive tapes, specialty tapes, plastic packaging films, and engineered coated products for use in industrial and retail applications.  The Company’s products include carton sealing tapes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; Exlfilm® shrink film; Stretchflex® stretch wrap, and engineered coated fabric products.

The Company has approximately 2,100 employees with operations in 17 locations, including 14 manufacturing facilities in North America and one in Europe.

Intertape Polymer Group has assembled a broad range of products by leveraging its manufacturing technologies, its research and development capabilities, global sourcing expertise and its strategic acquisition program.  Since 1995, the Company has made a number of strategic acquisitions in order to offer a broader range of products to better serve its markets.  The Company’s extensive product line permits Intertape Polymer Group to offer tailored solutions to a wide range of end-markets including food and beverage, consumer, industrial, building and construction, oil and gas, water supply, automotive, medical, agriculture, aerospace and military applications.

The Company has two operating segments that are reportable segments as those terms are used in the Canadian Institute of Chartered Accountants Handbook, Tapes and Films and Engineered Coated Products.

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4.2

Products, Markets and Distribution

4.2.1

Tapes and Films Division

The Company manufactures a variety of specialized polyolefin plastic and paper based products, as well as complementary packaging systems for use in industrial and retail applications. These products include Intertape^® pressure sensitive and Central™ water-activated carton sealing tapes; industrial and performance specialty tapes including paper, duct, electrical and reinforced filament tapes; Exlfilm^® shrink film and StretchFLEX^® stretch wrap.  The Company’s products are manufactured and sold under the Intertape^® family of brands to industrial distributors, retailers and to third parties under private brands.  For the years ending December 31, 2007, and December 31, 2006, tapes and films accounted for 79% and 77%, respectively, of the Company’s sales.

The Company’s tape and film products are manufactured and sold under Intertape brands including Intertape®, Central™, Exlfilm® and StretchFLEX® to industrial distributors and retailers, and are manufactured for sale to third parties under private brands.

The Company’s tape and film products consist of four main product groups:  (A) Carton Sealing Tapes, (B) Industrial & Specialty Tapes, (C) Films and (D) Protective Packaging.

A.

Carton Sealing Tapes

Carton sealing tapes are sold primarily under the Intertape^® and Central™ brands to industrial distributors and leading retailers, as well as to third parties under private brands. Management believes Intertape is the only company worldwide that produces carton sealing tapes using all four adhesive technologies: hot melt, acrylic, natural rubber and water-activated. The Company also sells the application equipment required for the dispensing of its carton sealing tapes.

Hot Melt Tape

Hot melt carton sealing tape is a polypropylene film coated with a synthetic rubber adhesive which offers a wide range of application flexibility and is typically used in carton sealing applications.  Primary competitors are 3M Co., Shurtape Technologies LLC and Vibac Group.

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Acrylic Tape

Acrylic carton sealing tape is a polypropylene film coated with an aqueous, pressure sensitive acrylic adhesive which is best suited for applications where performance is required within a broad range of temperatures from less than 40^oF to greater than 120^oF.  Primary competitors are 3M Co. and Sekisui TA Industries Inc.

Natural Rubber Tape

Natural rubber carton sealing tape is a polypropylene film coated with natural rubber adhesive and is unique among the carton sealing tapes because of its aggressive adhesion properties.  This tape is ideally suited for conditions involving hot, dusty, humid or cold environments.  Typical uses include moving and storage industry applications, as well as packaging and shipping.  The primary competitor is Evotape SpA of Italy.

Water Activated Tape

Water-activated carton sealing tape is typically manufactured using a filament reinforced kraft paper substrate and a starch based adhesive that is activated by water. Water-activated tape is used primarily in applications where a strong mechanical bond or tamper evidence is required. Typical end-use markets include fulfillment centers, mail order operations, furniture manufacturers and the apparel industry.  Primary competitors are The Crowell Corp. and Holland Manufacturing Co. Inc.

B.

Industrial & Specialty Tapes

The Company produces seven primary industrial and specialty products: Paper Tape, Flatback Tape, Duct Tape, Filament Tape, Stencil Products, Electrical Tape, and Double-Coated Tape.

Paper Tape

Paper tape is manufactured from a crepe paper substrate coated with a natural rubber or a synthetic rubber adhesive. Paper tape is used for a variety of performance and general purpose end-use applications. Product applications include paint masking (consumer, contractor, automotive, aerospace and marine), splicing, bundling/packaging, and general light duty applications.  Primary competitors of the Company for this product are 3M Co., Shurtape Technologies, LLC, and tesa tape inc.

Flatback Tape

Flatback tape is manufactured using a smooth kraft paper substrate coated with a natural rubber/SIS blended adhesive. Flatback tape is designed with low elongation and is widely used in applications such as splicing where the tape should not be distorted.  Typical applications for flatback tape include printable identification tapes, label products and carton closure.  Primary competitors of the Company for this product are Shurtape Technologies, LLC, and 3M Co.

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Duct Tape

Duct tape is manufactured from a polyethylene film that has been reinforced with scrim and coated with natural/synthetic rubber blend adhesive or speciality polymer adhesives. Duct tape is primarily used by general consumers for a wide range of applications. Duct tapes are also used in maintenance, repair and operations, in the heating, ventilation and air conditioning  markets, construction and in the convention and entertainment industries.  Primary competitors of the Company for this product are Covalence Specialty Materials Corp., 3M Co. and Shurtape Technologies, LLC.

Filament Tape

Filament tape is a film or paper adhesive tape with fiberglass strands or polyester fibers embedded in the adhesive to provide high tensile strength. Primary applications for filament tape include appliance packing, bundling and unitizing, and agricultural applications.  Primary competitors of the Company for this product are 3M Co., TaraTape, Inc. and Shurtape Technologies, LLC.

Stencil Products

Stencil products are manufactured from a calendared natural/synthetic rubber blended substrate with an acrylic adhesive. Stencil products are used in applications within the sign and monument manufacturing markets to protect a surface where sandblasting is required.  The Company’s primary competitor for this product is 3M Co.

Electrical and Electronic Tapes

Electrical and electronic tapes are manufactured from a number of different substrates, including paper, polyester, glass cloth and a variety of adhesive systems that include rubber, acrylic and silicone adhesives. Electrical and electronic tapes are Underwriters Laboratories (UL) approved and engineered to meet stringent application specifications.  Primary competitors of the Company for this product are 3M Co., Permacel, and Saint-Gobain Performance Plastics.

Double-Coated Tapes

Double-coated tapes are manufactured from a paper, foam, or film substrate and are coated on both sides with a variety of adhesive systems. Double-coated tapes also use a release liner made from paper or film, that prevents the tape from sticking to itself. Double-coated tapes are typically used to join two dissimilar surfaces.  The Company’s double-coated tape products are used in the manufacture and regripping of golf clubs, with smaller sales to the carpet installation and the graphics industries.  Primary competitors of the Company for this product are 3M Co., Avery Dennison Corp., tesa tape, inc., and Scapa Group plc.

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C.

Films

The Company primarily produces two film product lines: Exlfilm® Shrink Film and StretchFLEX® Stretch Wrap.

Exlfilm® Shrink Film

Exlfilm® shrink film is a specialty plastic film which shrinks under controlled heat to conform to a package’s shape. The process permits the over-wrapping of a vast array of products of varying sizes and dimensions with a single packaging line. Exfilm® is used to package paper products, consumer products such as bottled water, toys, games, sporting goods, hardware and housewares and a variety of other products.  Primary competitors of the Company for this product are Sealed Air Corp. and Bemis Co. Inc.

StretchFLEX® Stretch Wrap

Stretch wrap is a single or multi-layer plastic film that can be stretched without application of heat. It is used industrially to wrap pallets of various products ensuring a solid load for shipping.

The Company uses state-of-the-art multi-layer technology for the manufacturing of  its StretchFLEX® stretch wrap. This technology has allowed the Company to focus on the introduction of a high performance product while reducing manufacturing costs. The Company introduced Genesys™ in 2005, which is a light gauge high performance film created for wrapping irregularly shaped packages.  Primary competitors of the Company for this product include Sigma Plastics Group, Covalence Specialty Materials Corp., Atlantis Plastics Inc., Pliant Corp. and AEP Industries, Inc.

Intertape Polymer Group entered the European shrink film market through its investment in Fibope in April 1995. The Company initially purchased a 50% equity interest in Fibope, acquiring the remaining 50% equity stake in July 2003 to serve as a platform to penetrate European and African markets with other Intertape products. Fibope operates as an autonomous unit within Intertape Polymer Group.

Fibope produces a full range of shrink film products for sale in the European community. Raw materials are primarily sourced within Europe, with multiple sources utilized to ensure stability of supply and a competitive price environment.

D.

Protective Packaging

Air Pillows

Air pillows are manufactured by the Company from polyethylene film and are inflated at the point of use with an air pillow machine. Air pillows are used as packaging material for void fill and cushioning applications.  Typical end-use markets for air pillows include fulfillment houses, contract packagers, and mail order pharmacies.  Primary competitors of the Company for

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this product are Pregis Corp., Sealed Air Corp., Storopack, Inc., Free-Flow Packaging International Inc. and Polyair Inter Pack Inc.

4.2.2

Engineered Coated Products Division

The Company is a North American leader in the development and manufacture of innovative industrial packaging, protective covering, barrier and liner products utilizing engineered coated polyolefin fabrics, paper and other laminated materials.  Its products are sold primarily direct to end-users in a wide number of industries including lumber, construction, food, paper, and agriculture.

On October 5, 2005, Intertape Polymer Inc., a subsidiary of the Company, acquired all of the issued and outstanding shares of Flexia Corporation Ltd., being the body corporate that resulted from the amalgamation of Flexia Corporation and Fib-Pak Industries, Inc.  The businesses of such companies are now operating under a wholly-owned limited partnership, ECP L.P.  ECP L.P. is a producer of a wide range of engineered coated and laminated products with facilities located in Langley, British Columbia, Brantford, Ontario, and Hawkesbury, Ontario.  

The Company’s engineered coated products are categorized in six markets:  (A) Building and Construction, (B) Agro-Environmental, (C) Consumer Packaging, (D) Specialty Fabrics, (E) Industrial Packaging, and (F) FIBCs.  For the years ended December 31, 2007 and December 31, 2006, engineered coated products accounted for 21% and 23%, respectively, of the Company’s sales.  

A.

Building and Construction Products

The Company’s building and construction product group includes protective wrap for kiln dried lumber and a variety of other membrane barrier products such as house wrap, window and door flashing and insulation facing, which are used directly in residential and commercial construction.  The Company also supplies packaging over-wrap sleeves for unitizing multiple bags of fiberglass insulation.    Intertape’s lumber wrap is used to package, unitize, protect and brand lumber during transportation and storage. The product is available in polyethylene or polypropylene coated fabrics and polyethylene films printed to customer specifications.  Lumber wrap is produced at the Company’s plants in Langley, British Columbia; Brantford, Ontario; and Truro, Nova Scotia.  Primary competitors of the Company for this product range include Interwrap, Inc., Fabrene Inc., Mai Weave LLC and, at the low end of the product range, producers from China and Korea.

B.

Agro-Environmental Products

The Company has developed a range of Agro-Environmental products, including membrane structure fabrics, bags for packaging processed cotton, fabrics designed for conversion into hay covers, grain covers, landfill covers, oil field membranes, and canal and pond liners. These fabrics are intended to provide protection during transit and storage and to line waterways and ponds to prevent loss of water and other liquids.

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NovaShield™ Membrane Structure Fabrics

NovaShield™ is a lightweight, wide-width, and durable polyolefin fabric used as the outer skin layer for flexible membrane structures.  The introduction and continuous improvement of the NovaShield™ fabric in the membrane structure market enabled membrane structure manufacturers to expand the use of this product beyond agricultural applications such as agriculture barns into larger structures for human occupancy such as amphitheaters, recreational facilities, trade show pavilions, aircraft hangers, and casinos.  Developments in the product line include the patented stacked weave, and AmorKote™ coatings. The Company sells the NovaShield™ fabrics to membrane structure manufacturers who design, fabricate, and install the structures.  The Company’s main competitor is Fabrene Inc. and a number of polyvinyl chloride producers.  The Company produces these products primarily at its plant in Truro, Nova Scotia.

AquaMaster® Geomembrane Fabrics

The Company’s AquaMaster® line of geomembrane fabrics is used as an irrigation canal liner, golf course and aquascape pond liners, and in aquaculture operations.  Primary competitors of the Company for this product include Gundle/SLT Environmental, Inc., Poly-America LP and Firestone Building Products.

Poultry Fabrics

Woven coated polyolefin fabrics are used in the construction of poultry houses in the southern United States.  Materials with high ultraviolet resistance are fabricated into side curtains that regulate ventilation and temperature in buildings. Other materials are used in ceiling construction.  Primary competitors of the Company for this product are Fabrene Inc. and Mai Weave LLC. These products are primarily produced at the Company’s plant in Truro, Nova Scotia.

C.

Consumer Packaging Products

The Company’s consumer packaging products include ream wrap, form, fill & seal packaging, deli wrap, and other coated and laminated products.

The Company competes with a number of local and multinational companies in this market. These products are primarily produced at the Company’s plants in Brantford, Ontario and Langley, British Columbia.

D.

Specialty Fabrics

The Company’s specialty fabric product category is comprised of a variety of specialty materials custom designed for unique applications or specific customers.  The Company’s ability to provide polyolefin fabrics in a variety of weights, widths, colors and styles, and to slit, print and perform various other conversion steps, allows it to provide an array of coated products designed to meet the specific needs of its customers.

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Products and applications in this segment include fabrics designed for conversion into pool covers, field covers, disaster relief materials, protective covers and construction sheeting, brattice cloth for mine ventilation, underground marking tapes, salt pile covers and industrial packaging.

Primary competitors of the Company for this product include Fabrene Inc., Mai Weave LLC and, at the low end of the product range, producers from China and Korea. The Company primarily produces these products at its Truro, Nova Scotia, plant.

E.

Industrial Packaging Products

The Company’s metal wrap is used to protect large coils of steel and aluminum during transit and storage.  Primary competitors of the Company for this product include Interwrap Inc. and Covalence Specialty Materials Corp.

The Company also manufactures paper mill roll wrap for newsprint, specialty, and fine papers and custom designed fabrics for dunnage bags, which are used to fill space in a shipping container or to position the contents in a container.  Dunnage bag fabrics are primarily produced at the Company’s Hawkesbury, Ontario, facility while paper packaging products are produced at the Company’s Brantford, Ontario and Langley, British Columbia, facilities.

F.

FIBC Products

FIBCs are flexible, semi-bulk containers generally designed to carry and discharge 1,500 to 3,500 pounds of dry flowable products such as chemicals, minerals and dry food ingredients. The market for FIBC’s is highly fragmented.  The Company has established proven supply lines with integrated bag manufacturers in India and China and maintains a small custom manufacturing presence in Hawkesbury, Ontario for domestic specialty bags and for customers wanting small quantities and quick delivery.

4.3

Sales and Marketing

4.3.1

Tapes and Films Division

As of December 31, 2007, the Company’s Tapes and Films Division had a sales force of 81 personnel.  The Company participates in industry trade shows and uses trade advertising as part of its marketing efforts.  The Company’s customer base for tapes and films is diverse, with no single customer accounting for more than 5% of total sales in 2007.  Sales of tapes and films from facilities located in the United States and Canada accounted for approximately 95% and 5% of total tapes and films sales, respectively, in 2007; 95% and 5% in 2006, and 95% and 5% in 2005.  Export sales of tapes and films represented 3% of the Company’s total tapes and film sales in 2007 and 2% in 2006 and 2005.

Distribution products go to market through a network of paper and packaging distributors throughout North America. Products sold into this segment include carton sealing, masking, duct and reinforced tapes, Exlfilm® and Stretchflex®. In order to enhance sales of the Company’s

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pressure-sensitive carton sealing tape, it also sells carton closing systems, including automatic and semi-automatic carton sealing equipment. The Company’s Exlfilm® and Stretchflex® products are sold through an existing industrial distribution base primarily to manufacturers of packaged goods and printing and paper products which package their products internally. The industrial electrical tapes are sold to the electronics and electrical industries.

4.3.2

Engineered Coated Products Division

As of December 31, 2007, the Company’s Engineered Coated Products Division had 17 sales personnel, including  manufacturer representatives.  The Company’s marketing strategy includes participation in industry trade shows and trade advertising.  The Company’s customer base for engineered coated products is diverse, with no single customer accounting for more than 7% of total sales in 2007.  Sales of engineered coated products from facilities located in the United States and Canada accounted for approximately 100% of total engineered coated products sales, in 2007, 94% in 2006, and 88% in 2005.  Export sales of engineered coated products represented 6% of total sales in 2006 and 12% of sales in 2005.

The Company’s engineered coated products are primarily sold directly to end-users. The Company offers a line of lumberwrap, FIBCs, and specialty fabrics manufactured from plastic resins. The Company’s engineered coated products are marketed throughout North America.

4.4

Manufacturing and Quality Control

Intertape Polymer Group’s philosophy is to manufacture those products that are efficient for it from a cost and customer-service perspective. In cases in which the Company manufactures its own products, the Company seeks to do so utilizing the lowest cost raw material and add value to such products by vertical integration.

The Company maintains at each of its manufacturing facilities in both segments a quality control laboratory and a process control program on a 24-hour basis to monitor the quality of all packaging and engineered fabric products it manufactures.  At the end of 2007, ten of the Company’s plants were certified under the ISO-9001:2000 quality standards program.

4.4.1

Tapes and Films Division

The majority of the Company’s products are manufactured through a process which starts with a variety of polyolefin resins which are extruded into film for further processing. Wide width biaxially oriented polypropylene film is extruded in the Company’s facilities and this film is then coated in high-speed equipment with in-house-produced or purchased adhesives and cut to various widths and lengths for carton sealing tape. The same basic process applies for reinforced filament tape, which also uses polypropylene film and adhesive but has fiberglass strands inserted between the layers. Specific markets demand different adhesives and the Company compounds natural rubber, “hot melt,” and water-activated adhesives to respond to its customer demands. Masking tapes utilize the same process with paper as the coating substrate. Duct tapes utilize a similar process with polyethylene coated cloth.

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The Company is the only North American manufacturer of all four technologies of carton sealing tape: hot melt, acrylic, water-activated and natural rubber. This broad family of carton sealing tapes is further enhanced by the Company’s tape application equipment which is based in Florida.

The Company has utilized its technology for basic film extrusion, essential to the low cost production of pressure-sensitive tape products, to expand its product line.  Extrusion of up to seven layers of various resins is done in four of the Company’s plants. These high value added films service the shrink and stretch wrap markets.

4.4.2

Engineered Coated Products Division

Coated fabrics are manufactured in a multi step operation comprised of slit filament extrusion, traditional scrim manufacturing, coating and laminating and finishing or converting processes. Conversion and value-added processes consist of slit tape extrusion, weaving extrusion coating, slitting, rewinding, printing and converting materials into finished products.

4.5

Equipment and Raw Materials

Intertape Polymer Group purchases mostly custom designed manufacturing equipment, including extruders, coaters, finishing equipment, looms, printers, bag manufacturing machines and injection molds, from manufacturers located in the United States and Western Europe, and participates in the design and upgrading of such equipment. The Company is not dependent on any one manufacturer for its equipment.  

4.5.1

Tapes and Films Division

The major raw materials purchased for our tape products are polypropylene resin, synthetic rubber, hydrocarbon resin, and paper (crepe and kraft).  The resins and synthetic rubber are generated from petrochemicals which are by products of crude oil and natural gas.  Almost all of these products are sourced from North American manufacturers. The paper products are produced by North American paper manufacturers and are derived from the North American pulp and paper industry.

There is a slight delay in passing price increases of these products on to our customers, but the costs are eventually passed through.  

The major raw material used in our film products is polyethylene resin.  Polyethylene is a derivative of crude oil and/or natural gas petrochemical by products.  Price increases in polyethylene are normally passed on to our stretch film customers within a month of implementation of a price increase.

4.5.2

Engineered Coated Products Division

The major raw materials used to produce our engineered coated products are polyethylene and polypropylene resins.  Both of these products are petrochemical based products

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derived from crude oil and/or natural gas.  There is normally a slight delay in passing on price increases in these raw materials to our ECP customers.  These products are predominantly sourced from North American petrochemical manufacturers.

4.6

Research and Development and New Products

Intertape Polymer Group’s strategy is to create growth opportunities through enhancements of existing products and the introduction of new products.  The Company’s research and development efforts continue to focus on new products, technology developments, new product processes and formulations.

4.6.1

Tapes and Films Division

In 2007, the research and development group for tape products focused on developing products targeting consumer markets.  Specifically, masking products for paint contractors and do-it-yourself (DIY) segments, and superior-strength duct tapes for hardware segments.

During 2007, the Company introduced Fortress™ film to the stretch film market, a new lightweight, high stiffness blown film hand wrap film that has shown excellent performance in the market.  Using unique raw material combinations, this new hand wrap film has shown superior load retention and pallet performance.  

In 2006, the Company finalized the introduction of Genesys™ high performance machine wrap stretch film.  It has been successful in replacing not only competitive films, but also as a high performance product that can be sold into difficult applications as well as in thinner gauges to provide yield savings to the customer.  The material has been very successful, and has become the Company’s premium performance film.  The formulation for Genesys™ Film forms the foundation for prestretch hand wrap, roll wrap, and metal coil wrap.

High Performance Exlfilm® Plus, a significantly improved version of the standard irradiated Exlfilm® Plus shrink film has been very successful in shoring up the Company’s position in the shrink film market.  After extensive resin construction, film formulation, and process development, the Exlfilm® plus was tested in all gauges and was commercialized from the Truro plant in 2006 and 2007.  The film displays significantly improved clarity and gloss, a water-white appearance and improved shrink force and shrink degree.

In 2008, tape R&D continues to focus on consumer markets by developing new paint masking tapes that effect crisp lines of demarcation for the paint contractor and DIY segments.  However, development work will also include products with superior, water-white color and clarity to serve packaging segments.

Additionally, tape R&D is developing foil protective products to support military maintenance programs, as well as filament reinforced products for spoolable, unbonded pipelines for the oil and gas industry.  Last, high-temperature, solvent-resistant, double-coated tapes are being developed for the electrical OEM segment, novel masking products are being developed

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for OEM boat manufacturers and new, light-weight stencil products are being developed for international monument carving accounts.

The Company’s research and development expenses for tapes and films in 2005, 2006, and 2007 totaled $4.0 million, $5.0 million, and $3.3 million, respectively.

4.6.2

Engineered Coated Products Division

In 2007, the research and development group for coated products developed, and received building code approvals for, a new woven, coated, printed and perforated house wrap product that is being sold to third parties under private brands and under the FlexGard® brand as well as a premium roofing underlayment also being sold under private label agreements and the NovaSeal® brand.  The Company has also developed and received code approval for an unperforated, non-woven product targeted at the premium segment of the house wrap market.  In addition, the Company has improved its NovaShield™ fabric, to expand its use and increase the ability of the material to further displace PVC fabrics in high end membrane structure applications.  

The division also expanded their successful AquaMaster® line of geomembrane products to include the first available polyester reinforced polyethylene geomembranes in the industry.  This material is showing early promise in displacing currently employed materials such as PVC and reinforced polypropylene in decorative pond lining, irrigation canals and animal waste lagoon markets.

The Company’s research and development expenses for engineered coated products in 2005, 2006 and 2007 totaled $0.7 million, $1.2 million, and $0.8 million, respectively.

4.7

Trademarks and Patents

Intertape Polymer Group markets its tape products under the trademarks Intertape® and Central™, and various private labels.  The Company’s shrink wrap is sold under the registered trademark Exlfilm®.  Its stretch films are sold under the registered trademark Stretchflex®.  

The Company markets its open mouth bags under the registered trademark Nova-Pac®.  The other key ECP products are sold under the registered trademarks Nova-Thene Haymaster®, AquaMaster®, NovaShield™, NovaSeal™, NovaWrap™, FlexGard®, and Flexgard®Aspire.  Its engineered fabric polyolefin fabrics are sold under the registered trademark Nova-Thene®.  FIBC's are sold under the registered trademark Cajun® bags.  The Company has approximately 145 active registered trademarks, 56 in the United States, 38 in Canada, and 51 foreign, which include trademarks acquired from American Tape, Anchor, Rexford Paper Company, Central Products Company, and Flexia.  The Company currently has 15 pending trademark applications in the United States, 6 in Canada, and 10 foreign.  

Intertape Polymer Group does not have, nor does management believe it important to the Company’s business to have, patent protection for its carton sealing tape products. However, the Company has pursued patents in select areas where unique products offer a competitive

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advantage in profitable markets, primarily in engineered coated products for which the Company has 7 patents and 4 patents pending, film for which it has 9 patents and no patents pending, tape products for which it has 2 patents and 2 patents pending, adhesive products for which it has 2 patents and 2 patents pending, container products for which it has 1 patent, and retail for which it has 1 patent pending.

4.8

Competition

The Company competes with other manufacturers of plastic packaging products as well as manufacturers of alternative packaging products, such as paper, cardboard and paper-plastic combinations. Some of these competitors are larger companies with greater financial resources than the Company.  Management believes that competition, while primarily based on price and quality, is also based on other factors, including product performance characteristics and service. No statistics, however, on the packaging market as a whole are currently publicly available.  Please refer to Section 4.2 above for a discussion of the Company’s main competitors by product.

The Company believes that significant barriers to entry exist in the packaging market. Management considers the principal barriers to be the high cost of vertical integration which is necessary to operate competitively, the significant number of patents which already have been issued in respect of various processes and equipment, and the difficulties and expense of developing an adequate distribution network.

4.9

Environmental Regulation

Intertape Polymer Group’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (federal, state and local) and Canadian (federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to (i) impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, (ii) prevent future soil and groundwater contamination; (iii) impose national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; (iv) govern the handling, management, treatment, storage and disposal of hazardous wastes and substances; and (v) regulate the discharge of pollutants into w aterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities, suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to the Company. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

Intertape Polymer Group obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it

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owns or leases at the time the Company either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on the Company. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s properties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of the Company’s properties. These developments and oth ers, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of the Company’s operations, may cause it to incur significant costs and liabilities that could have a material adverse effect on the Company.

Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations, and that the Company has obtained, and is in material compliance with, all material permits required under environmental laws and regulations.  

The Company is currently remediating contamination at its Columbia, South Carolina plant.  Intertape Polymer Group completed its remediation of its Montreal manufacturing facility during the third quarter of 2006, sold the property to a third party, and has no residual environmental liability related to the site.  As a result of the acquisition of all of the shares of Flexia, the Company inherited limited soil contamination resulting from historical activities at Flexia’s facility located in Trois-Rivières (formerly the city of Cap-de-la-Madeleine), Québec.  The Company received a letter from the Ministry of Sustainable Development, Environment and Parks confirming that the activities carried out at the Trois-Rivières facility at the time the Company closed the facility were not activities designated under the Land Protection and Rehabilitation Regulation, thus no remediation was necessa ry at the facility as a result of ceasing its activities.  The Trois-Rivières facility has been sold with no residual environmental liability to the Company.  The Company has completed remediation activities at its Marysville, Michigan facility and received final approval of the remediation from the State of Michigan.  In addition, although certain of the Company’s facilities emit regulated pollutants into the air, the emissions are within current permitted limitations, including applicable Maximum Achievable Control Technology (“MACT”) requirements.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.

Intertape Polymer Group and its operating subsidiaries are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental permits and governmental approvals that have been issued to the Company or its operating subsidiaries contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company or any of its operating subsidiaries fails to satisfy these conditions or to comply with these restrictions, it

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may become subject to enforcement action and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company or its operating subsidiaries may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of its facilities, as a result of which the operation of its facilities may be limited or suspended.

4.10

Employees

As of December 31, 2007, the Tapes and Films Division of Intertape Polymer Group employed approximately 1,560 people, 202 of whom held either sales-related or administrative positions and 1,315 of whom were employed in operations.  The Engineered Coated Products Division employed approximately 548 people, 52 of whom held either sales-related or administrative positions and 487 of whom were employed in operations. Approximately 158 hourly employees at the Company’s Marysville plant are unionized and subject to a collective bargaining agreement which expires on December 31, 2009. Approximately 168 hourly employees at the Company’s Menasha plant are unionized and subject to a collective bargaining agreement which expires on July 31, 2008. Approximately 27 employees at the Piedras Negras, Mexico facility were unionized and subject to a collective bargaining agreement dated January 1, 2007.  Approximately 3 9 hourly employees at the Company’s Carbondale plant are unionized and subject to a collective bargaining agreement which expires on March 4, 2009.  The Company’s fabric plant in Hawkesbury, Ontario, has 40 unionized employees whose agreement expires October 10, 2008.  The bag plant in Hawkesbury, Ontario, is also unionized, having 12 members whose collective bargaining agreement expires on May 16, 2008.  In Langley, British Columbia, 50 employees are unionized and their collective bargaining agreement expires on March 31, 2010.  The collective bargaining agreement which covers 93 employees at the Company’s Brantford, Ontario plant expired on February 28, 2008.  Negotiations are ongoing. The Company has never experienced a work stoppage and it considers its employee relations to be satisfactory.

Item 5. Cautionary Statements and Risk Factors

5.1

Forward-Looking Statements

This Annual Information Form, including the Management’s Discussion & Analysis incorporated herein by reference, contains certain "forward-looking statements" concerning, among other things, discussions of the business strategy of Intertape Polymer Group and expectations concerning the Company’s future operations, liquidity and capital resources.  When used in this Annual Information Form, the words "anticipate", "believe", "estimate", “intends”, "expect" and similar expressions are generally intended to identify forward-looking statements.  Such forward-looking statements, including statements regarding intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties.  All statements other than statements of historical fact made in this Annual Inform ation Form or in any document incorporated herein by reference are forward-looking statements.  In particular, the statements regarding industry prospects and the Company’s future results of operations or financial position are forward-looking statements.  

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Forward-looking statements reflect the Company’s current expectations and are inherently uncertain.  Actual results may differ materially from those in the forward-looking statements as a result of various factors, including those factors set forth below and other factors discussed elsewhere in this Annual Information Form and in the Management’s Discussion & Analysis for 2007.  In addition to the other information contained in this Annual Information Form, readers should carefully consider the above cautionary statements as well as the risk factors set forth below.  The Company undertakes no duty to update its forward-looking statements, including its earnings outlook.

Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company’s actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements.  These factors include, among other things, reliance on key personnel who may leave the Company due to general attrition; the Company’s significant indebtedness and ability to incur substantially more debt; restrictions and limitations contained in the agreements governing the Company’s debt; the Company’s substantial leverage and ability to generate sufficient cash to service its debt; fluctuations in the cost of the Company’s principal raw materials; availability of raw materials; the effects of acquisitions the Company might make; the timing and market acceptance of t he Company’s new products; the Company’s ability to achieve anticipated cost savings from its corporate initiatives; competition in the industry and markets in which the Company operates; the Company’s ability to comply with applicable environmental laws; potential litigation relating to the Company’s intellectual property rights; the loss of, or deterioration of the Company’s relationship with, any significant customers; changes in operating expenses or the need for additional capital expenditures; changes in the Company’s strategy; and general economic conditions.

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Annual Information Form and in the Management’s Discussion and Analysis will in fact transpire.

The Management’s Discussion and Analysis for 2007 incorporated herein by reference contain certain non-GAAP financial measures as defined under SEC rules, including adjusted net earnings, operating profit, free cash flow, EBITDA, and adjusted EBITDA.  The Company believes such non-GAAP financial measures improve the transparency of the Company's disclosure, provide a meaningful presentation of the Company's results from its core business operations, excluding the impact of items not related to the Company's ongoing core business operations, and improve the period-to-period comparability of the Company's results from its core business operations. As required by SEC rules, the Company has provided in its Management Discussion and Analysis for 2007 reconciliations of those measures to the most directly comparable GAAP measures.

In addition to the other information contained in this Annual Information Form, readers should carefully consider the above cautionary statements as well as the risk factors set forth below.

5.2

Risk Factors

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Fluctuations in the amount of available funds under the Company’s New Senior Secured Credit Facility would restrict the Company’s ability to borrow under its revolving loan.

The Company’s New Senior Secured Credit Facility is an asset-backed loan.  A reduction in the eligible assets and receivables included in the borrowing base or an increase in the required reserves will reduce the Company’s available credit under the Senior Secured Credit Facility.  A decline in the borrowing base could also require an unscheduled repayment of funds already advanced in excess of the available credit amount.

The Company’s New Senior Secured Credit Facility contains certain financial covenants which if not met, will result in an event of default.

The Company’s New Senior Secured Credit Facility requires a fixed charges financial ratio and meet other financial tests. The Company’s failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in the Company being required to repay these borrowings before their scheduled due date. If the Company were unable to make this repayment or otherwise refinance these borrowings, the lenders under the New Senior Secured Credit Facility could elect to declare all amounts borrowed under the Company’s New Senior Secured Credit Facility, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the indenture governing the Senior Subordinated Notes. In addition, these lenders could foreclose on the Company’s assets. If the Company was unable to refinance these borrowings on favorable terms, the Com pany’s results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of the Company’s New Senior Secured Credit Facility is likely to contain similar restrictive covenants and financial tests.

The Company may not be able to generate sufficient cash flow to meet its debt service obligations.

The Company’s ability to generate sufficient cash flows from operations to make scheduled payments on its debt obligations will depend on its future financial performance, which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are outside of the Company’s control. If the Company does not generate sufficient cash flows from operations to satisfy its debt obligations, the Company may have to undertake alternative financing plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. The Company cannot assure that any refinancing would be possible or that any assets could be sold on acceptable terms or otherwise. The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its obligations on commercially reasonab le terms, would have an adverse effect on the Company’s business, financial condition and results of operations. In addition, any refinancing of the Company’s debt could be at higher interest rates and may require the Company to comply with more onerous covenants, which could further restrict its business operations.

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The Company’s substantial debt could adversely affect its financial condition and prevent it from fulfilling its obligations under its New Senior Secured Credit Facility or Senior Subordinated Notes.

The Company has a significant amount of indebtedness.  As of December 31, 2007, the Company had outstanding debt of approximately $243.4 million, which represented 40% of its total capitalization.  Of such total debt, approximately $122.7 million, or all of the Company’s outstanding senior debt, was secured.  

The Company’s substantial indebtedness could adversely affect its financial condition and make it more difficult for the Company to satisfy its obligations with respect to the Senior Subordinated Notes, as well as its obligations under its New Senior Secured Credit Facility.  The Company’s substantial indebtedness could also increase its vulnerability to adverse general economic and industry conditions; require the Company to dedicate a substantial portion of its cash flows from operations to payments on its indebtedness, thereby reducing the availability of the Company’s cash flows to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; place the Company at a competitive disadvantage compared to its competitor s that have less debt; and limit the Company’s ability to borrow additional funds on terms that are satisfactory to it or at all.

Despite the Company’s level of indebtedness, it will be able to incur substantially more debt. Incurring such debt could further exacerbate the risks to the Company’s financial condition described above.

The Company will be able to incur significant additional indebtedness in the future. Although the indenture governing the Senior Subordinated Notes and the credit agreement governing the Senior Secured Credit Facility each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. The restrictions also do not prevent the Company from incurring obligations that do not constitute indebtedness. To the extent new debt is added to the Company’s currently anticipated debt levels, the substantial leverage risks described above would increase.

The Company’s Senior Subordinated Notes and New Senior Secured Credit Facility contain covenants that limit its flexibility and prevents the Company from taking certain actions.

The indenture governing the Company’s Senior Subordinated Notes and the credit agreement governing the Company’s Senior Secured Credit Facility include a number of significant restrictive covenants. These covenants could adversely limit the Company’s ability to plan for or react to market conditions, meet its capital needs and execute its business strategy. These covenants, among other things, limit the Company’s ability and the ability of its subsidiaries to incur additional debt; pay dividends and make other restricted payments; create or permit certain liens; issue or sell capital stock of restricted subsidiaries; use the proceeds from sales of assets; make certain investments; create or permit restrictions on the ability of the

36

guarantors to pay dividends or to make other distributions to the Company; enter into certain types of transactions with affiliates; engage in unrelated businesses; enter into sale and leaseback transactions; and consolidate or merge or sell the Company’s assets substantially as an entirety.

The Company’s New Senior Secured Credit Facility includes other and more restrictive covenants and prohibits the Company from prepaying its other debt, including the Senior Subordinated Notes, while borrowings under the Company’s Senior Secured Credit Facility are outstanding.  

Fluctuations in raw material costs or the unavailability of raw materials may adversely affect the Company’s profitability.

Intertape Polymer Group has historically been able to pass on significant raw material cost increases through price increases to its customers.  Nevertheless, the Company’s results of operations for individual quarters can and have been negatively impacted by raw material cost increases and decreases.  These fluctuations adversely affected the Company’s profitability.  As a result of raw material cost fluctuations, the Company has to either hold prices firm which results in a reduced market share or decrease prices which compresses the Company’s gross margins. The Company’s profitability in the future may be adversely affected due to continuing fluctuations in raw material prices.  Additionally, the Company relies on its suppliers for deliveries of raw materials.  If any of its suppliers were unable to deliver raw materials to the Company for an extended period of time, there i s no assurance that the Company’s raw material requirements would be met by other suppliers on acceptable terms, or at all, which could have a material adverse effect on the Company’s results of operations.

The Company’s ability to achieve its growth objectives depends in part on the timing and market acceptance of its new products.

Intertape Polymer Group’s business plan involves the introduction of new products, which are both developed internally and obtained through acquisitions. The Company’s ability to introduce these products successfully depends on the demand for the products, as well as their price and quality. In the event the market does not accept these products or competitors introduce similar products, the Company’s ability to expand its markets and generate organic growth could be negatively impacted which could have an adverse affect on its operating results.

The Company faces significant competition.

The markets for Intertape Polymer Group’s products are highly competitive. Competition in its markets is primarily based upon the quality, breadth and performance characteristics of its products, customer service and price. The Company’s ability to compete successfully depends upon a variety of factors, including its ability to maintain high plant efficiencies and operating rates and low manufacturing costs, as well as its access to quality, low-cost raw materials.

Some of the Company’s competitors outside of North America may, at times, have lower raw material, energy and labor costs and less restrictive environmental and governmental regulations to comply with than the Company does. Other competitors may be larger in size or

37

scope than is the Company, which may allow them to achieve greater economies of scale on a global basis or allow them to better withstand periods of declining prices and adverse operating conditions.

In addition, there has been an increasing trend among the Company’s customers towards consolidation. With fewer customers in the market for its products, the strength of the Company’s negotiating position with these customers could be weakened, which could have an adverse effect on its pricing, margins and profitability.

Intertape Polymer Group faces risks related to its international operations.

The Company has customers and operations located outside the United States and Canada. In 2007, sales to customers located outside the United States and Canada represented approximately 7% of its sales. The Company’s international operations present it with a number of risks and challenges, including the effective marketing of the Company’s products in other countries; tariffs and other trade barriers; and different regulatory schemes and political environments applicable to its operations in these areas, such as environmental and health and safety compliance.

In addition, the Company’s financial statements are reported in U.S. dollars while a portion of its sales is made in other currencies, primarily the Canadian dollar and the Euro. A portion of the Company’s debt is also denominated in currencies other than the U.S. dollar. As a result, fluctuations in exchange rates between the U.S. dollar and foreign currencies can have a negative impact on the Company’s reported operating results and financial condition. Moreover, in some cases, the currency of the Company’s sales does not match the currency in which it incurs costs, which can negatively affect its profitability. Fluctuations in exchange rates can also affect the relative competitive position of a particular facility where the facility faces competition from non-local producers, as well as the Company’s ability to successfully market its products in export markets.

The Company’s operations are subject to comprehensive environmental regulation and involve expenditures which may be material in relation to its operating cash flow.

The Company’s operations are subject to extensive environmental regulation in each of the countries in which it maintains facilities. For example, United States (Federal, state and local) and Canadian (Federal, provincial and local) environmental laws applicable to the Company include statutes and regulations intended to impose certain obligations with respect to site contamination and to allocate the cost of investigating, monitoring and remedying soil and groundwater contamination among specifically identified parties, as well as to prevent future soil and groundwater contamination; imposing national ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; governing the handling, management, treatment, storage and disposal of hazardous wastes and substances; and regulating the discharge of pollutants into waterways.

The Company’s use of hazardous substances in its manufacturing processes and the generation of hazardous wastes not only by the Company, but by prior occupants of its facilities

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suggest that hazardous substances may be present at or near certain of the Company’s facilities or may come to be located there in the future. Consequently, the Company is required to monitor closely its compliance under all the various environmental laws and regulations applicable to it. In addition, the Company arranges for the off-site disposal of hazardous substances generated in the ordinary course of its business.

The Company obtains Phase I or similar environmental site assessments, and Phase II environmental site assessments, if necessary, for most of the manufacturing facilities it owns or leases at the time it either acquires or leases such facilities. These assessments typically include general inspections and may involve soil sampling and/or ground water analysis. The assessments have not revealed any environmental liability that, based on current information, the Company believes will have a material adverse effect on it. Nevertheless, these assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities that the Company is not aware of. In addition, ongoing clean up and containment operations may not be adequate for purposes of future laws and regulations. The conditions of the Company’s proper ties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of its properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of its operations, may cause the Company to incur significant costs and liabilities that could have a material adverse effect on it.

Except as described below, the Company believes that all of its facilities are in material compliance with applicable environmental laws and regulations and that it has obtained, and is in material compliance with, all material permits required under environmental laws.  Although certain of the Company’s facilities emit toluene and other pollutants into the air, these emissions are within current permitted limitations.  The Company believes that these emissions from its U.S. facilities will meet the applicable future federal Maximum Available Control Technology ("MACT") requirements, although additional testing or modifications at the facilities may be required.  The Company believes that the ultimate resolution of these matters should not have a material adverse effect on its financial condition or results of operations.

The Company’s facilities are required to maintain numerous environmental permits and governmental approvals for its operations. Some of the environmental permits and governmental approvals that have been issued to the Company or to its facilities contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If the Company fails to satisfy these conditions or to comply with these restrictions, it may become subject to enforcement actions and the operation of the relevant facilities could be adversely affected. The Company may also be subject to fines, penalties or additional costs. The Company may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the facilities, as a result of which the operation of the facilities may b e limited or suspended.

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The Company may become involved in litigation relating to its intellectual property rights, which could have an adverse impact on its business.

Intertape Polymer Group relies on patent protection, as well as a combination of copyright, trade secret and trademark laws, nondisclosure and confidentiality agreements and other contractual restrictions to protect its proprietary technology. Litigation may be necessary to enforce these rights, which could result in substantial costs to the Company and a substantial diversion of management attention. If the Company does not adequately protect its intellectual property, its competitors or other parties could use the intellectual property that the Company has developed to enhance their products or make products similar to the Company’s and compete more efficiently with it, which could result in a decrease in the Company’s market share.

While the Company has attempted to ensure that its products and the operations of its business do not infringe other parties' patents and proprietary rights, its competitors or other parties may assert that the Company’s products and operations may be covered by patents held by them. In addition, because patent applications can take many years to issue, there may be applications now pending of which the Company is unaware, which may later result in issued patents which the Company’s products may infringe. If any of the Company’s products infringe a valid patent, it could be prevented from selling them unless the Company can obtain a license or redesign the products to avoid infringement. A license may not always be available or may require the Company to pay substantial royalties. The Company may not be successful in any attempt to redesign any of its products to avoid any infringement. Infringement or othe r intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from the Company’s core business.

The Company may become involved in labor disputes or employees could form or join unions increasing the Company’s costs to do business.

Some of Intertape Polymer Group's employees are subject to collective bargaining agreements. Other employees are not part of a union and there are no assurances that such employees will not form or joint a union. Any attempt by employees to form or join a union could result in increased labor costs and adversely affect the Company’s business, its financial condition and/or results of operations.

The Company has never experienced any work stoppages due to employee related disputes. Management believes that it has a good relationship with is employees. There can be no assurance that work stoppages, or other labor disturbances will not occur in the future. Such occurrences could adversely affect Intertape Polymer Group's business, financial condition and/or results of operations.

The Company may become involved in litigation which could have an adverse impact on its business.

Intertape Polymer Group, like other manufacturers and sellers, is subject to potential liabilities connected with its business operations, including potential liabilities and expenses associated with product defects, performance, reliability or delivery delays. Intertape Polymer

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Group is threatened from time to time with, or is named as a defendant in, legal proceedings, including lawsuits based upon product liability, personal injury, breach of contract and lost profits or other consequential damages claims, in the ordinary course of conducting its business. A significant judgment against Intertape Polymer Group, or the imposition of a significant fine or penalty, as a result of a finding that the Company failed to comply with laws or regulations, or being named as a defendant on multiple claims could adversely affect the Company's business, financial condition and/or results of operations.

Uninsured and underinsured losses and rising insurance costs could adversely affect the Company’s business.

Intertape Polymer Group maintains property, general liability and business interruption insurance and directors and officers liability insurance on such terms as it deems appropriate. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay for the full current market value or current replacement cost of the Company's lost investment.  Not all risks are covered by insurance.

Intertape Polymer Group's cost of maintaining property general liability and business interruption insurance and director and officer liability insurance is significant. The Company could experience higher insurance premiums as a result of adverse claims experience or because of general increases in premiums by insurance carriers for reasons unrelated to its own claims experience. Generally, the Company's insurance policies must be renewed annually. Intertape Polymer Group's ability to continue to obtain insurance at affordable premiums also depends upon its ability to continue to operate with an acceptable claims record. A significant increase in the number of claims against the Company, the assertion of one or more claims in excess of its policy limits or the inability to obtain adequate insurance coverage at acceptable rates, or at all, could adversely affect the Company's business, financial condition and/or results o f operations.

Product liability could adversely affect the Company’s business.

Difficulties in product design, performance and reliability could result in lost sales, delays in customer acceptance of Intertape Polymer Group's products and lawsuits and would be detrimental to the Company's market reputation. Intertape Polymer Group's products and the products supplied by third parties, on behalf of the Company, are not error free. Undetected errors or performance problems may be discovered in the future. The Company may not be able to successfully complete the development of planned or future products in a timely manner or to adequately address product defects, which could harm the Company's business and prospects. In addition, product defects may expose Intertape Polymer Group to product liability claims, for which it may not have sufficient product liability insurance. Difficulties in product design, performance and reliability or product liability claims could adversely affect Intertape Polymer Gr oup's business, financial condition and/or results of operations.

Acquisitions have been a substantial part of the Company’s growth strategy, which could expose it to significant business risks.

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An important aspect of Intertape Polymer Group’s business strategy was to make strategic acquisitions that would complement its existing products, expand its customer base and markets, improve distribution efficiencies and enhance its technological capabilities. Financial risks from these acquisitions include the use of the Company’s cash resources and incurring additional debt and liabilities. Further, there are possible operational risks including difficulties in assimilating and integrating the operations, products, technology, information systems and personnel of acquired companies; the loss of key personnel of acquired entities; the entry into markets in which the Company has no or limited prior experience; and difficulties honoring commitments made to customers of the acquired companies prior to the acquisition. The failure to adequately address these risks could adversely affect the Company’s busines s.

Although the Company performs due diligence investigations of the businesses or assets that it acquires, and anticipates continuing to do so for future acquisitions, there may be liabilities related to the acquired business or assets that the Company fails to, or is unable to, uncover during its due diligence investigation and for which the Company, as a successor owner, may be responsible. When feasible, the Company seeks to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, the financial resources of the indemnitor or warrantor or other reasons.

Because Intertape Polymer Group is a Canadian company, it may be difficult to enforce rights under U.S. bankruptcy laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada and a substantial amount of its assets are located outside of the United States. Under bankruptcy laws in the United States, courts typically assert jurisdiction over a debtor's property, wherever located, including property situated in other countries. However, courts outside of the United States may not recognize the United States bankruptcy court's jurisdiction over property located outside of the territorial limits of the United States. Accordingly, difficulties may arise in administering a United States bankruptcy case involving a Canadian debtor with property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable outside the territorial limits of the United States.

It may be difficult for investors to enforce civil liabilities against Intertape Polymer Group under U.S. federal and state securities laws.

Intertape Polymer Group and certain of its subsidiaries are incorporated under the laws of Canada.  Certain of their directors and executive officers are residents of Canada and a portion of their assets are located outside of the United States. In addition, certain subsidiaries are located in other foreign jurisdictions.  As a result, it may be difficult or impossible for U.S. investors to effect service of process within the United States upon Intertape Polymer Group, its Canadian subsidiaries, or its other foreign subsidiaries, or those directors and officers or to realize against them upon judgments of courts of the United States predicated upon the civil liability provisions of U.S. federal securities laws or securities or blue sky laws of any state within the United States.  

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The Company believes that a judgment of a U.S. court predicated solely upon the civil liability provisions of the Securities Act and/or the Exchange Act would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. The Company cannot assure that this will be the case.  There is substantial doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

Anti-takeover provisions in the Company’s Shareholder Protection Rights Plan may prevent an acquisition.  

Intertape Polymer Group has a Shareholder Protection Rights Plan (the “Plan”) which will remain in effect through the date immediately following the date of the Company’s 2009 annual shareholders’ meeting.  The effect of the Plan is to currently require anyone who seeks to acquire 20% or more of Intertape Polymer Group’s voting shares to make a bid complying with specific provisions of the Plan.  Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price of the Company’s common shares.

The Company’s exemptions under the Securities Exchange Act of 1934 (“Exchange Act”) as a foreign private issuer limits the protections and information afforded investors.  

Intertape Polymer Group is a foreign private issuer within the meaning of the rules promulgated under the Exchange Act.  As such, it is exempt from certain provisions applicable to United States companies with securities registered under the Exchange Act, including: the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing" trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer's equity securities within a period of less than six months).  Because of these exemptions, purchasers of Intertape Polymer Group's securities are not afforded the same protections or information generally available to investors in public companies organized in the United States.  Intertape Polymer Group previously filed its annual reports on Form 20-F.  Commencing with the year ended December 31, 2000, the Company files its annual report on Form 40-F.  Intertape Polymer Group reports on Form 6-K with the Commission and publicly releases quarterly financial reports.

Item 6.

 Dividends

The Company has no written policy for the payment of dividends.  So long as the payment would not result in a violation of the Company’s covenants with its lenders and noteholders, there are no other restrictions that would prevent the Company from paying dividends.  However, the Company has not paid dividends in the past three years.  For details regarding the Company’s covenants with its lenders and noteholders please refer to the

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Registration Statement filed on www.sedar.com in Canada and www.sec.gov in the U.S. on October 26, 2004 as Registration No. 333-119982, as amended.

Item 7.

 General Description of Capital Structure

7.1

General Description of Capital Structure

Intertape Polymer Group has authorized an unlimited number of voting common shares without par value.  The Company also has authorized an unlimited number of non-voting Class A preferred shares issuable in a series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution.  The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series of Class A preferred shares.  As of December 31, 2007, there were 58,956,348 issued and outstanding common shares and no issued and outstanding preferred shares of the Company. As of March 27, 2008, there were 58,956,348 issued and outstanding common shares of the Company.  No preferred shares of the Company are issued and outstanding.

7.2

Ratings

Intertape Polymer US Inc., a finance subsidiary of Intertape Polymer Group, has issued, in the aggregate, $125 million Senior Subordinate Notes that bear interest at 8-½% per annum and that will mature August 1, 2014.

Moody Investor Service, Inc. (“Moody”) last rated the Senior Subordinate Notes on December 6, 2007, and rated them Caa1.  Standard & Poor’s (“S&P”) last rated the Senior Subordinated Notes on December 20, 2007 and rated them CCC+.

The credit ratings provided by S&P and Moody’s (collectively “Rating Agencies”) are not recommendations to buy, hold or sell the securities, as such ratings do not comment on the market price or suitability of the securities for a particular investor.  There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a Rating Agency in the future if in its judgment circumstances so warrant.

Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities.  Ratings for debt instruments are presented in ranges by each of the Rating Agencies.  The highest quality of securities are rated AAA, in the case of S&P and Aaa, in the case of Moody’s.  The lowest quality of securities are rated D, in the case of S&P and C, in the case of Moody’s.

Pursuant to Moody’s rating system, notes which are rated Caa are considered to be of poor standing and are subject to a very high credit risk.  Moody appends numerical modifiers from 1 to 3 on its long-term debt ratings which indicate where the obligation ranks in its rating category, with 1 being the highest.  Moody’s outlook is its assessment regarding the likely direction of the ratings over the medium term, 18 to 36 months.  Moody’s rating action reflects the Company’s financial performance in 2007 and concern over its ability to meaningfully

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improve credit metrics over the intermediate term.  The negative outlook reflects the limited room under financial covenants in the Company’s previous secured facilities and the lack of definitive information with respect to the CEO succession plan.

According to the S&P rating system, debt securities rated CCC are judged to be vulnerable to nonpayment, and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.  In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.  The “plus” means a rating may be raised.

Item 8.

 Market for Securities

8.1

Trading Prices and Volume on the Toronto Stock Exchange

The Company’s common shares are traded on the Toronto Stock Exchange under the symbol “ITP”.  Set forth below is the price range and volume traded on the Toronto Stock Exchange for each month of 2007.

Month	Price Range (CDN$)	Total Volume Traded
January	5.54 - 6.40	285,000
February	5.36 - 6.08	358,000
March	4.58 - 5.95	305,900
April	4.67 - 5.65	303,400
May	4.96 - 5.44	2,451,200
June	4.76 - 5.08	353,400
July	2.75 - 4.90	406,500
August	2.50 - 3.61	672,700
September	3.08 - 3.42	592,800
October	3.11 - 3.39	421,500
November	2.49 - 3.32	765,100
December	2.62 - 3.27	1,303,800

8.2

Trading Prices and Volume on the New York Stock Exchange

The Company’s common shares are also traded on the New York Stock Exchange under the symbol “ITP”.  Set forth below is the price range and volume traded on the New York Stock Exchange for each month of 2007:

Month	Price Range (US$)	Total Volume Traded
January	4.74 - 5.01	1,388,200
February	4.55 - 5.12	1,052,200

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March	4.12 - 4.97	1,286,800
April	4.03 - 5.00	943,600
May	4.61 - 4.73	4,380,000
June	4.50 - 4.76	1,910,700
July	3.10 - 4.50	1,658,300
August	2.38 - 3.15	1,498,900
September	3.09 - 3.40	884,800
October	3.20 - 3.52	1,692,900
November	2.60 - 3.49	1,158,525
December	2.68 - 3.14	882,200

Item 9.

 Escrowed Securities

None of the Company’s common shares are currently held in escrow.

Item 10. Directors and Officers

The following table sets forth the name, residence, position, and principal occupations for the last five (5) years of each Director of the Company as of the date hereof, as well as the date upon which each Director was first elected.  Each Director is elected for a term of one year and may be nominated for re-election at the Company’s following annual shareholders’ meeting.  The next annual shareholders’ meeting is scheduled to be held on June 5, 2008, at which time the current term of each Director will expire.  It is contemplated that each Director will be nominated for re-election at the upcoming annual meeting, except for John Richardson who is not standing for re-election.

Name and City of Residence	Position and Occupation	First Year as Director
Melbourne F. Yull Sarasota, Florida	Executive Director June, 2006 – June, 2007 – Retired Prior thereto he was Chairman of the Board and CEO of the Company	1989-2006 2007
Eric E. Baker Long Sault, Ontario, Canada	Director President, Altacap Investors Inc., a private equity manager	1989-2000 2007
Allan Cohen Glenview, Illinois	Director Managing Director, First Analysis Corp., investment manager and securities dealer	2007
George J. Bunze Ile Bizard, Quebec, Canada	Director Vice-Chairman, Kruger Inc., pulp and paper company	2007

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Torsten A. Schermer Charlotte, North Carolina	Director President, MESC Corporation, franchise development company; May 2005 to December 2006, pursued investment opportunities in the tape industry, manufacturing and franchise; July 2004 to May 2005 was the General Manager, Eastern Europe, of Tesa Tape Kft; and prior to that was the President and Chief Executive Officer of Tesa Tape Inc.	2007
Robert Beil Phoenix, Arizona	Director September 2006 – Retired Sales, Marketing, Business and Executive Management, the Dow Chemical Company, 1975 to September 2006	2007

The following table sets forth the name, residence and position of each executive officer of the Company as of the date hereof, as well as the date upon which each executive officer was first elected:

Name and City of Residence	Position and Occupation	First Elected To Office
Melbourne F. Yull Sarasota, Florida	Executive Director	2007
	Chief Executive Officer	1989
Victor DiTommaso, CPA Sarasota, Florida	Chief Financial Officer	2007
	Vice President Finance	2003
	Treasurer	2005
Burgess H. Hildreth Sarasota, Florida	Vice President, Human Resources	1998
Gregory A. Yull Sarasota, Florida	President, Distribution Products	2005
Jim Bob Carpenter Sarasota, Florida	Executive Vice President, Global Sourcing	2004

The principal occupations of each executive officer for the last five (5) years is as follows:

Melbourne F. Yull was appointed Executive Director in June 2007.  From June 14, 2006 to June 28, 2007 he was retired, and prior thereto he was Chairman of the Board of Directors and Chief Executive Officer of the Company.

Victor DiTommaso was appointed Chief Financial Officer on November 12, 2007.  He was the Vice President, Finance since April 24, 2003.  He was appointed Treasurer on May 25, 2005.  Prior to that he had served as the Senior Vice President of Information Technology of Walls Industries, Inc. since July, 2000, and Senior Vice President of Finance since July, 1998.

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Burgess H. Hildreth has been Vice President, Human Resources, since October, 1998.  Prior to that he had been the Vice President Administration of Anchor Continental, Inc. since June, 1996.

Gregory A. Yull was appointed President, Distribution Products (Tapes & Films), in October, 2005.  Prior to that he served as Executive Vice President, Industrial Business Unit (for tapes and films) since November 2004, and prior to that was President, Film Products, since June, 1999.  Prior to that he was Products Manager - Films since 1995.

Jim Bob Carpenter was appointed Executive Vice President, Global Sourcing in January, 2005.  Prior to that he served as the President, Woven Products (now ECP), since 1998 and prior to that, he was the General Manager of Polypropylene Resin Division of Fina Oil & Chemical Co.

As of March 28, 2008, the directors and executive officers of the Company as a group owned beneficially, directly or indirectly, or exercised control or direction over, 1,454,831 common shares, representing approximately 2.5% of all common shares outstanding.  In addition, the directors and executive officers as a group have 2,562,796 options to purchase common shares of the Company.

The Board of Directors has established three committees, the Audit Committee, the Compensation Committee, and the Nominating & Governance Committee to facilitate the carrying out of its duties and responsibilities and to meet applicable statutory requirements.  Canadian Multilateral Instrument 52-110-Audit Committees, requires, inter alia, that all members of the Audit Committee be directors of the Company, be independent of the Company, be financially literate, and that the Audit Committee be comprised of at least three members.  The Company’s Audit Committee complies with Canadian Multilateral Instrument 52-110-Audit Committees as it is composed of three independent, financially literate directors, namely George J. Bunze, Allan Cohen, Ph.D., and Torsten A. Schermer.  Further details regarding the Company’s Audit Committee are provided in Item 17 hereof.  

The Compensation Committee, as presently constituted, has two unrelated directors (as such terms are defined in the Toronto Stock Exchange Company Manual), namely Robert Beil and Torsten A. Schermer.  

The Nominating & Governance Committee is composed of all of the members of the Board, the majority of whom are unrelated directors (as such term is defined in the Toronto Stock Exchange Company Manual).

Item 11. Legal Proceedings

The Company and its subsidiaries are not currently party to any proceedings or legal claim, nor does it have any knowledge of any potential proceeding or legal claim, that involves or would involve a claim for damages that exceeds ten percent of the current assets of the Company on a consolidated basis.  While the Company or its subsidiaries are parties to various

48

legal actions, the Company is of the view that such actions are ordinary in nature and incidental to the operation of its business and that the outcome of these actions are not likely to have a material adverse effect upon the Company.

Item 12. Interest of Management and Others in Material Transactions

The Company is unaware of any material interest of any of its directors or officers or of any person who beneficially owns or exercises control or direction over shares carrying more than ten percent of the voting rights attached to the Company’s shares, or any associate or affiliate of any such person, in any transaction since the beginning of the last completed financial year or in any proposed transactions that has materially affected or will materially affect the Company or any of its affiliates.

Prior to July 31, 2002, the Company made certain interest-free loans payable on demand to certain of its directors and officers.  The balances of such loans as of March 27, 2008, are set forth in the table below:

Name and Principal Position	Loan Balance as of March 28, 2008
G. A. Yull President - Distribution Products	US$107,500.00

Item 13. Transfer Agents and Registrars

Set forth below are the Company’s transfer agents and registrars with respect to its common shares, who also maintain the registers of the transfers of the stock of the Company:

In Canada:

CIBC Mellon Trust Company

2001 University Street, 16^th Floor

Montreal, Quebec, Canada  H3A 4L8

In the U.S.:

Mellon Investor Services L.L.C.

85 Challenger Road, 2^nd Floor

Ridgefield Park, New Jersey

U.S.A.  07660

Wilmington Trust Company, Corporate Capital Markets, 1100 North Market Street, Wilmington, DE 19890-1626, is the Trustee under the Indenture with respect to the Company’s registered 8-½ % Senior Subordinated Notes due 2014.

Item 14. Material Contracts

The following is a description of the material contracts that are currently in effect regardless of when they were initially entered into by Intertape Polymer Group, either directly or

49

through one of its subsidiaries, and that are not in the ordinary course of the Company’s business:

·

a Loan and Security Agreement dated March 28, 2008, among certain subsidiaries of the Company, the Lenders referred to therein, Bank of America, N.A., as Agent, and Banc of America Securities LLC, as Sole Lead Arranger and Book Manager.  The Loan and Security Agreement represents the Senior Secured Credit Facility entered into by the Company and its subsidiaries.  The initial funding under the new Senior Secured Credit Facility occurred on March 28, 2008.  The new Senior Secured Credit Facility is an asset-based loan in the amount of $200.0 million with an interest rate at Libor plus a loan premium of 1.75% through September, 2008.  Thereafter, the loan premium decreases as unused availability under the Facility increases.  The premium ranges from 1.50% to 2.25%.  The new Senior Secured Credit Facility contains one financial covenant, a fixed charge ratio, which becomes effective only when unused availability falls below $25 million.  The Company and all of its U.S. and Canadian subsidiaries guaranteed the Senior Secured Credit Facility.  Further, the Senior Secured Credit Facility is secured by a first priority perfected security interest in substantially all tangible and intangible assets of the Company and its U.S. and Canadian subsidiaries.

·

an Advisory Services Agreement dated August 1, 2007 between Intertape Polymer Corp. and Sammana Group, Inc., to provide business planning and corporate finance activities, the principal terms of which are:  a monthly fee of $50,000.00 commencing January 1, 2008; a $300,000.00 fee in connection with the Rights Offering; a performance fee after one year of service in an amount equal to the amount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the ten trading days prior to July 1, 2010 exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Company’s Rights Offering made in September, 2007, multiplied by 500,000, unless the Agreement is terminated prior to its termination date of December 31, 2009, in which event the performance fee shall equal the amount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the last ten trading days during the thirty day termination notice period exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Rights Offering multiplied by 166,667 for each full year of services.

·

an Advisory Services Agreement dated August 1, 2007 between Intertape Polymer Corp. and Archibald Global Enterprises, Inc., to provide business planning and corporate finance activities, the principal terms of which are:  a monthly fee of $25,000.00 commencing January 1, 2008; a $150,000.00 fee in connection with the Rights Offering; a performance fee after one year of service in an amount equal to the amount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the ten trading days prior to July 1, 2010 exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Company’s Rights Offering made in September, 2007, multiplied by 200,000, unless the Agreement is terminated prior to its termination date of December 31, 2009, in which event the performance fee shall equal the amount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the last ten trading

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days during the thirty day termination notice period exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Rights Offering multiplied by 66,667 for each full year of services.

·

an Advisory Services Agreement dated August 1, 2007 between Intertape Polymer Group Inc. and Altacap II Inc., to provide business planning and corporate finance activities, the principal terms of which are:  a monthly fee of CDN$100,000.00 commencing January 1, 2008; a CDN$600,000.00 fee in connection with the Rights Offering; a performance fee after one year of service in an amount equal to the amount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the ten trading days prior to July 1, 2010 exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Company’s Rights Offering made in September, 2007, multiplied by 1,500,000, unless the Agreement is terminated prior to its termination date of December 31, 2009, in which event the performance fee shall equal the a mount, if any, by which the simple average closing price of the Company’s common shares on the Toronto Stock Exchange for the last ten trading days during the thirty day termination notice period exceeds the subscription price of the Company’s shares (in Canadian funds) pursuant to the Rights Offering multiplied by 500,000 for each full year of services.

·

an Employment Agreement dated August 2, 2006, between Intertape Polymer Corp. (successor by merger to Intertape Polymer Management Corp.), subsidiaries of Intertape Polymer Group, and Gregory A. Yull, the principal terms of which are:  an annual salary of $340,000; upon termination employee shall continue to receive his annual salary for twenty-four months plus an amount not to be less than his average bonus percentage for the years 2005 and 2006, but in no event, when combined with the salary payments, more than $952,000 in the aggregate.

·

an Amended and Restated Shareholder Protection Rights Plan Agreement adopted by the shareholders of the Company on June 11, 2003, amending and restating the Shareholder Protection Rights Plan originally entered into on August 24, 1993, as first amended on May 21, 1998.  The 2003 Amended and Restated Plan, among other things, extended the Plan through the date immediately following the date of the Company’s 2006 annual Shareholders’ meeting.  The 2006 Amended and Restated Plan extended the Plan through the date immediately following the date of the Company’s 2009 annual shareholders’ meeting.  At a special meeting of the shareholders held on September 5, 2007, a resolution was adopted waiving the application of the Plan as it related to the purchase by three shareholders of common shares pursuant to the Company’s Rights Offering.

The effect of the Plan is to require anyone who seeks to acquire 20% or more of Intertape Polymer Group’s voting shares to make a bid complying with specific provisions of the Plan.  Thus, the provisions of the Plan could prevent or delay the acquisition of the Company by means of a tender offer, a proxy contest, or otherwise, in which shareholders might receive a premium over the then current market price of the Company’s common shares.

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·

an Amended Executive Stock Option Plan as amended and consolidated to June 2, 2004.  The Plan was established by Intertape Polymer Group in 1992 and has been amended from time to time, the last amendment being on September 5, 2007, when the shareholders set the maximum number of common shares that may be issued under the Plan at a number equal to 10% of the issued and outstanding common shares of Intertape Polymer Group from time to time.  The Plan is administered by the Board of Directors.  The shares offered under the Plan are common shares of the Company.

The purpose of the Plan is to promote a proprietary interest in the Company among the executives, the key employees and the non-management directors of the Company and its subsidiaries, in order to both encourage such persons to further the development of the Company and to assist the Company in attracting and retaining key personnel necessary for the Company’s long term success. The Board of Directors designates from time to time from the eligible executives those executives to whom options are to be granted and determines the number of shares covered by such options. Generally, participation in the Plan is limited to persons holding positions that can have an impact on the Company’s long-term results.

The number of common shares to which the options relate are determined by taking into account, among other things, the market price of the common shares and each optionee's base salary. The exercise price payable for each common share covered by an option is determined by the Board of Directors but will not be less than the market value of the underlying common shares on the day preceding the effective date of the grant. The Plan provides that options issued thereunder shall vest 25% per year over four years. Currently the maximum number of common shares that may be issued under the Plan is 4,094,538.

·

a Purchase Agreement, Registration Rights Agreement and Indenture each dated as of July 28, 2004, in connection with the issuance by Intertape Polymer US Inc., a finance subsidiary of Intertape Polymer Group, of the aggregate principal amount of US$125.0 million of 8-½% Senior Subordinated Notes due 2014.  The Notes were offered to institutional investors and are guaranteed on a senior subordinated basis by the Company and substantially all of its subsidiaries.  Interest will accrue and be payable on the Notes semi-annually in arrears on February 1 and August 1.  For a copy of the Purchase Agreement, Registration Rights Agreement, and Indenture, as well as details of the terms of the Senior Subordinated Notes, see the Registration Statement filed on October 26, 2004 as Registration No. 333-119982 as amended on www.sec.gov in the United States.

A copy of all of the foregoing contracts, except as otherwise noted, are available on www.sedar.com and on www.sec.gov.

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Item 15. Experts

15.1

Name of Experts

The following are the names of each person or company who has prepared or certified a statement, report or valuation described or included in a filing, or referred to in a filing made by Intertape Polymer Group during 2007:

Raymond Chabot Grant Thornton LLP; Montreal, Quebec

Ernst & Young; Montreal, Quebec

Avalon Actuarial Consulting Inc.; Toronto, Ontario

15.2

Interests of Experts

None of the experts set forth in Item 15.1 above directly or indirectly, held at the time their statement, report or valuation was prepared; received after their statement, report or valuation was prepared; or shall receive, any registered or beneficial interest in any securities or other property of Intertape Polymer Group or any of its subsidiaries.

Item 16. Additional Information

Additional information with respect to the Company, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans is contained in the Company’s information circular for its most recent annual meeting of security holders that involved the election of directors.  Additional financial information is provided in the Company’s Consolidated Financial Statements and Management’s Discussion and Analysis for the fiscal year ended December 31, 2007.  All of this information, as well as additional information, may be found on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

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Item 17. Audit Committee  (The following information is required to be included herein pursuant to Canadian Form 52-110F1.)

17.1

Audit Committee Charter

The text of the Audit Committee’s Charter is attached hereto as Exhibit “A”.

17.2

Composition of the Audit Committee

The members of the Audit Committee of Intertape Polymer Group are George J. Bunze, Allan Cohen, Ph.D., and Torsten Schermer.  Each of the Audit Committee members are independent and financially literate as such terms are defined by Canadian Multilateral Instrument 52-110-Audit Committees.

17.3

Relevant Education and Experience

Mr. Bunze graduated from the commerce certification CMA program at McGill University, Montreal, Quebec, and is a professional accountant and Certified Management Accountant.  Mr. Bunze is the Vice-Chairman and Director and a member of the Executive Committee of Kruger Inc., one of the largest private pulp and paper companies in North America.  He also served as the Chief Financial Officer of Kruger Inc. and its various subsidiaries from 1982 to 2003.  Mr. Bunze is a Director of Stella-Jones Inc. and Chairman of its Audit Committee.  He was previously a Director of B2B Trust Inc. and Chairman of its Audit Committee.

Dr. Cohen earned a Ph.D. in physical chemistry from Northwestern University of Evanston, Illinois, an MBA from the University of Chicago, and a Bachelor’s Degree in chemistry from the State University of New York at Buffalo.  Until August 2007, Dr. Cohen was a Managing Director with First Analysis Corporation, a research driven investment organization, where he was employed for fifteen years.  He continues as a co-manager of the general partner of The First Analysis Private Equity Fund IV, L.P. and on the Boards of two First Analysis private equity portfolio companies, MCubed Technologies, Inc. and Kelatron Corporation.  He is also a Director of Doe and Ingalls Management LLC, Hercules Incorporated and IGI Holding Corporation.

Mr. Schermer earned a Bachelor of Arts Degree and an MBA from the University of Hamburg.  Mr. Schermer was the General Manager, Eastern Europe, of Tesa Tape Kft. of Budapest, Hungary.  Prior to that he was the President and Chief Executive Officer of Tesa Tape, Inc.  In 2006 Mr. Schermer founded a franchise development company.

17.4

Pre-Approval Policies and Procedures

Intertape Polymer Group’s Audit Committee pre-approves all audit engagement fees and the terms of all significant permissible non-audit services provided by independent auditors.

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17.5

External Auditor Service Fees

The following table sets forth the fees billed for professional services rendered by Raymond Chabot Grant Thornton LLP, Chartered Accountants, Intertape Polymer Group’s principal auditor, for the fiscal years ended December 31, 2007 and December 31, 2006:

	Year ended December 31,
	2007	2006
Audit Fees	US$1,011,917	US$1,615,392
Audit-Related Fees	$   425,913	$     64,559
Tax Fees	$   120,042	$   227,059
All Other Fees
Total Fees	$1,557,872	$1,907,010

Audit Fees.  Audit fees were for professional services rendered for the audits of Intertape Polymer Group’s consolidated financial statements, assisting its Audit Committee in discharging its responsibilities for the review of the Company’s interim consolidated financial statements and services that generally only the independent auditor can reasonably provide, such as comfort letters, consents and assistance and review of documents filed with the Securities and Exchange Commission and Canadian securities regulatory authorities.  The audit fees for 2006 also include professional services rendered in connection with the proposed Canadian Income Trust of US$768,830.00.

Audit-Related Fees.  Audit-related fees were for assurance and related services that are reasonably related to the performance of the audit or review of Intertape Polymer Group’s consolidated financial statements and are not reported under Audit Fees above.  These services included consultations concerning financial accounting and reporting standards, as well as due diligence services and fees in relation to reviewing the Company’s documentation for internal control over financial reporting.

Tax Fees.  Tax fees were for tax compliance, tax advice and tax planning.  These services included the preparation of the Canadian subsidiaries’ income tax returns, the preparation of information returns for foreign affiliates, assistance with questions regarding tax audits and tax planning relating to common forms of domestic and international taxation (i.e. income tax, capital tax and excise tax) and advisory services regarding restructurings.

All Other Fees.  All other fees were for services provided other than the audit fees, audit-related fees and tax fees described above.  These services consisted mainly of miscellaneous corporate reporting and advisory services.

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EXHIBIT “A” to AIF

INTERTAPE POLYMER GROUP INC.

AUDIT COMMITTEE CHARTER

CHARTER

The Audit Committee of the Board of Directors (the "Board") of Intertape Polymer Group Inc. (the "Corporation") will be responsible for assisting the Board in carrying out its duties and responsibilities relating to corporate accounting policies, financial reporting and procedures, and the quality and integrity of the financial reports of the Corporation.  The external auditors are ultimately accountable to the Board and the Audit Committee, as representatives of the shareholders.  The Audit Committee, subject to any action that may be taken by the Board, shall have the ultimate authority and responsibility to select and nominate for shareholder approval, evaluate and, as deemed appropriate, recommend to the shareholders the removal of the external auditors.  The Audit Committee shall be responsible for overseeing the independence of the external auditors.

In discharging its role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Corporation.  The Audit Committee shall have the authority to retain special legal, accounting or other consultants to advise the Audit Committee for this purpose.

COMMITTEE MEMBERSHIP

The Audit Committee shall consist of no fewer than three directors.  The members of the Audit Committee shall meet the independence and experience requirements of the Sarbanes-Oxley Act, the New York Stock Exchange, and The Toronto Stock Exchange.

The members of the Audit Committee shall be appointed annually by the Board on the recommendation of the Nominating & Governance Committee.  Audit Committee members may be replaced by the Board.

COMMITTEE AUTHORITY AND RESPONSIBILITIES

The Audit Committee shall have the sole authority to recommend to the shareholders the appointment or replacement of the external auditors, and shall approve all audit engagement fees and terms and all significant non-audit engagements with the external auditors. The Audit Committee shall consult with management but shall not delegate these responsibilities.

The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Audit Committee may form and delegate authority to subcommittees when appropriate.

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The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Committee. The Audit Committee may request any officer or employee of the Corporation or the Corporation's legal counsel or external auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Audit Committee shall meet with management and the external auditors in separate executive sessions at least quarterly.

The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review the Audit Committee's own performance.

The Audit Committee, to the extent it deems necessary or appropriate, shall:

Financial Statement and Disclosure Matters

1.

Review and discuss with management and the external auditors the annual audited financial statements, including disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Corporation's Form 40-F and Annual Report to Shareholders.

2.

Review and discuss with management and the external auditors the Corporation's quarterly financial statements prior to their filing and publication, including the results of the external auditors' reviews of the quarterly financial statements.

3.

Discuss with management and the external auditors significant financial reporting issues and judgments made in connection with the preparation of the Corporation's financial statements, including any significant changes in the Corporation's selection or application of accounting principles, any major issues as to the adequacy of the Corporation's internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Corporation's financial statements.

4.

Discuss with management the Corporation's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.

5.

Discuss with management and the external auditors the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Corporation's financial statements.

6.

Discuss with management the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation's risk assessment and risk management policies.

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7.

Discuss with the external auditors the matters required to be discussed by auditing standards relating to the conduct of the audit.  In particular, discuss:

(a)

The adoption of, or changes to, the Corporation's significant auditing and accounting principles and practices as suggested by the external auditors or management.

(b)

The management letter provided by the external auditors and the Corporation's response to that letter.

(c)

Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant disagreements with management

Oversight of the Corporation's Relationship with the External Auditors

8.

Review the experience and qualifications of the senior members of the external auditors’ team.

9.

Obtain and review a report from the external auditors at least annually regarding (a) the auditors' internal quality-control procedures, (b) any material issues raised by the most recent quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the external auditors and the Corporation. Evaluate the qualifications, performance and independence of the external auditors, including considering whether the auditor's quality controls are adequate and the provision of non-audit services is compatible with maintaining the auditors' independence, and taking into account the opinions of management. The Audit Committee shall present its conclusions to the Board and, if so determ ined by the Audit Committee, recommend that the Board take additional action to satisfy itself of the qualifications, performance and independence of the auditors.

10.

Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the lead audit partner or even the external auditing firm itself on a regular basis.

11.

Recommend to the Board policies for the Corporation's hiring of employees or former employees of the external auditors who were engaged on the Corporation's account.

12.

Determine from the audit team of the external auditors any professional matters dealt with at the national office level of the external auditors.

13.

Meet with the external auditors prior to the audit to discuss the planning and staffing of the audit.

58

Oversight of the Corporation's Internal Audit Function

14.

Review and discuss with management and the external auditors the appropriateness of having a senior internal auditing executive.

15.

If a senior internal auditing executive is appointed, review the significant reports to management prepared by the internal auditing department and management's responses.

Compliance Oversight Responsibilities

17.

Obtain from the external auditors assurance that Section 10A of the Securities Exchange Act of 1934 has been complied with.

18.

Obtain reports from management, the Corporation's senior internal auditing executive if one is appointed and the external auditors that the Corporation and its subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Corporation's Code of Business Conduct and Ethics. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Corporation's policies and procedures regarding compliance with applicable laws and regulations and with the Corporation's Code of Business Conduct and Ethics.

19.

Discuss with management and the external auditors any correspondence with regulators or governmental agencies and any employee complaints or published reports, which raise material issues regarding the Corporation's financial statements or accounting policies.

20.

Discuss with the Corporation's legal counsel matters that may have a material impact on the financial statements or the Corporation's compliance policies.

LIMITATION OF AUDIT COMMITTEE'S ROLE

While the Audit Committee has the responsibilities and powers set forth herein, it is not the duty of the Committee to prepare the Corporation's financial statements, to plan or conduct audits of those financial statements, or to determine that those financial statements are complete and accurate and in accordance with generally accepted accounting principles in Canada or any other country.  This is the responsibility of the Corporation's management and the external auditors.  Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the external auditors or to assure compliance with applicable laws and regulations.

59

Exhibit 2

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR 2007 AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

(SEE SEPARATE DOCUMENT)

60

Exhibit 3

CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

We have issued our report dated March 28, 2008, on the consolidated financial statements and Intertape Polymer Group Inc.’s (the “Company”) internal control over financial reporting included in the Annual Report of the Company on Form 40-F for the year ended December 31, 2007.  We consent to the use of the aforementioned reports in the Form 40-F, and to the use of our name as it appears under the caption “Experts.”

/s/ Raymond Chabot Grant Thornton LLP

Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montréal, Canada

March 28, 2008

61

Exhibit 4

CERTIFICATIONS

I, Melbourne F. Yull, of Intertape Polymer Group Inc., certify that:

1.

I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b.

Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d.

Disclosed in this annual report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

62

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  March 28, 2008

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

63

I, Victor DiTommaso of Intertape Polymer Group Inc., certify that:

1.

I have reviewed this annual report on Form 40-F of Intertape Polymer Group Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)] for the Registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b.

Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d.

Disclosed in this annual report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

64

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:  March 28, 2008

/s/ Victor DiTommaso

Victor DiTommaso,

Chief Financial Officer

65

Exhibit 5

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT

TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

The undersigned, Melbourne F. Yull, Executive Director, and Victor DiTommaso, Chief Financial Officer, hereby certify that this report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents in all material respects the financial condition and results of operations of Intertape Polymer Group Inc. as of and for the periods presented in this report.

Date:  March 28, 2008

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

Date:  March 28, 2008

/s/ Victor DiTommaso

Victor DiTommaso,

Chief Financial Officer

66

CERTIFIED EXTRACT OF RESOLUTIONS OF THE BOARD OF DIRECTORS

OF

INTERTAPE POLYMER GROUP INC.

ADOPTED ON MARCH 27, 2008

"APPROVAL OF ANNUAL INFORMATION FORM

WHEREAS the Chairman presented to the meeting a draft of an annual information form of the Corporation to be dated March 28, 2008.

WHEREAS the Chairman informed the meeting that the Corporation proposes to file the annual information form with the securities commissions and other appropriate regulatory authorities in each of the provinces and territories of Canada.

WHEREAS the Chairman informed the meeting that the Corporation proposes to file with the United States Securities and Exchange Commission an Annual Report on Form 40-F.

BE IT RESOLVED THAT:

1.

the annual information form ("AIF") of the Corporation to be dated March 28, 2008, substantially in the form of the document presented to this meeting, be and the same is hereby approved, subject to such additions, deletions and changes therein as may be consented to by any one director or officer of the Corporation;

2.

the Corporation be and it is hereby authorized to file the English and French (when and if available) language versions of the AIF, as the same may be amended from time to time, with the securities commissions and appropriate regulatory authorities in each of the provinces and territories of Canada;

3.

any one director or officer of the Corporation be, and he is, hereby authorized and directed, for and on behalf of the Corporation, to file or cause to be filed the English and French (when and if available) language versions of the AIF under the securities legislation of any of the provinces and territories of Canada and to file such other documents and to do such other things as he may, in his sole discretion, consider necessary, appropriate or useful in connection with, or to carry out the provisions of this resolution;

4.

the Corporation be and it is hereby authorized to file with the United States Securities and Exchange Commission an Annual Report on Form 40-F (the "Form 40-F") covering the Corporation's fiscal year ended December 31, 2007, such Form 40-F to be substantially in the form of the draft presented to the Board of Directors, and which includes the AIF as an exhibit thereto, together with such changes or modifications as may be deemed necessary or appropriate by any director or officer of the Corporation with and upon the advice of counsel, and any director or officer of the Corporation be, and he is, hereby authorized, empowered and directed to execute in the name and on behalf of the

67

Corporation, to procure all other necessary signatures to, and to file with the United States Securities and Exchange Commission, the Form 40-F and any all amendments or supplements thereto;

5.

any director or officer of the Corporation be, and he is, hereby authorized and directed for and on behalf of the Corporation, to execute, whether under the corporate seal of the Corporation or otherwise, and to deliver all such certificates, undertakings and other documents and to do all such other acts and things as he may, in his sole discretion, consider necessary or advisable in connection with or to carry out the provisions of this resolution."

I, the undersigned, Melbourne F. Yull, Executive Director of Intertape Polymer Group Inc., hereby certifies that the foregoing resolutions were duly adopted by the Board of Directors of Intertape Polymer Group Inc. on March 27, 2008 and that the said resolutions are, as of the date hereof, in full force and effect and have not been amended.

IN WITNESS WHEREOF, I HAVE SIGNED in, Bradenton, Florida, this 28^th day of March 2008.

/s/ Melbourne F. Yull

Melbourne F. Yull,

Executive Director

ORLDOCS 11149618 5

68

EX-1

Intertape Polymer Group Inc.

Consolidated Financial Statements

December 31^st, 2007, 2006 and 2005

Including Management’s Discussion and Analysis

March 28, 2008

This Management’s Discussion and Analysis (“MD&A”) supplements the consolidated financial statements and related notes for the year ended December 31, 2007. Except where otherwise indicated, all financial information reflected herein is prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and is expressed in US dollars.

FINANCIAL HIGHLIGHTS

(In thousands of US dollars except per share data, selected ratios, stock and trading volume information.)

	2007	2006	2005
Operations	$	$	$
Consolidated sales	767,272	812,285	776,015
Net earnings (loss) Cdn GAAP	(8,393)	(166,693)	27,791
Net earnings (loss) US GAAP	(8,393)	(166,693)	28,056
Cash flows from operations before changes in non-cash working capital items	43,205	9,366	57,688

	2007	2006	2005
Per Common Share
Net earnings (loss) Cdn GAAP – basic	(0.19)	(4.07)	0.67
Net earnings (loss) US GAAP – basic	(0.19)	(4.07)	0.68
Net earnings (loss) Cdn GAAP – diluted	(0.19)	(4.07)	0.67
Net earnings (loss) US GAAP – diluted	(0.19)	(4.07)	0.68
Cash flows from operations before changes in non-cash working capital items	0.95	0.23	1.41
Book value Cdn GAAP	6.11	6.68	10.61
Book value US GAAP	5.99	6.48	10.40

	2007	2006	2005
Financial Position
Working capital	145,577	121,485	166,993
Total assets Cdn GAAP	702,799	692,386	889,316
Total assets US GAAP	704,764	692,127	897,382
Total long-term debt Cdn GAAP	243,359	330,477	330,897
Total long-term debt US GAAP	250,180	330,477	330,897
Shareholders’ equity Cdn GAAP	360,010	273,718	434,415
Shareholders’ equity US GAAP	352,992	265,558	425,968

2

	2007	2006	2005
Selected Ratios
Working capital	2.58	2.22	2.37
Debt/capital employed Cdn GAAP	0.40	0.55	0.44
Debt/capital employed US GAAP	0.41	0.55	0.45
Return on equity Cdn GAAP	na	na	6.4%
Return on equity US GAAP	na	na	6.6%

	2007	2006	2005
Stock Information
Weighted average shares outstanding (Cdn GAAP) - basic +	45,287	40,981	41,174
Weighted average shares outstanding (US GAAP) -  basic +	45,287	40,981	41,174
Weighted average shares outstanding (Cdn GAAP) - diluted +	45,287	40,981	41,309
Weighted average shares outstanding (US GAAP) - diluted +	45,287	40,981	41,309
Shares outstanding as at December 31 +	58,956	40,987	40,958

	2007	2006	2005
The Toronto Stock Exchange (CA$)
Market price as at December 31	3.07	6.19	10.37
High: 52 weeks	6.40	10.44	13.68
Low: 52 weeks	2.49	4.63	7.57
Volume: 52 weeks+	8,219	17,252	18,208

	2007	2006	2005
New York Stock Exchange
Market price as at December 31	3.14	5.28	8.97
High: 52 weeks	5.34	9.20	11.17
Low: 52 weeks	2.36	4.01	6.37
Volume: 52 weeks+	18,737	21,860	18,354

3

	High	Low	Close	ADV*
The Toronto Stock Exchange(CA$)
Q1	6.40	4.58	4.75	14,827
Q2	5.65	4.67	4.78	49,333
Q3	4.90	2.50	3.37	26,125
Q4	3.39	2.49	3.07	39,530

	High	Low	Close	ADV*
New York Stock Exchange
Q1	5.34	3.97	4.12	61,102
Q2	5.07	4.03	4.50	116,698
Q3	4.65	2.36	3.40	64,159
Q4	3.53	2.60	3.14	58,322

* Average daily volume

+In thousands

4

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

(In thousands of US dollars, except as otherwise noted)

(Unaudited)

	1st Quarter			2nd Quarter
	2007	2006	2005	2007	2006	2005
	$	$	$	$	$	$
Sales	186,835	212,108	182,255	187,109	217,687	184,168
Cost of sales	159,370	178,122	148,574	158,742	182,534	150,895
Gross Profit	27,465	33,986	33,681	28,367	35,153	33,273
Selling, general and administrative expenses	18,321	23,250	18,475	16,676	21,525	18,730
Stock-based compensation expense	454	525	455	533	590	483
Research and development	1,025	1,680	1,011	1,161	1,662	1,224
Financial expenses	6,294	6,717	5,649	5,892	6,396	5,918
Refinancing expense
Manufacturing facility closures, restructuring, strategic alternatives and other charges	2,369	17,502	719	4,415	32,423	1,087
Impairment of goodwill
	28,463	49,674	26,309	28,677	62,596	27,442
Earnings (loss) before income taxes	(998)	(15,688)	7,372	(310)	(27,443)	5,831
Income taxes (recovery)	(428)	(5,699)	1,339	7,768	(9,260)	399
Net earnings (loss)	(570)	(9,989)	6,033	(8,078)	(18,183)	5,432
Earnings (loss) per share
Cdn GAAP - Basic - US $	(0.01)	(0.24)	0.15	(0.20)	(0.44)	0.13
Cdn GAAP - Diluted - US $	(0.01)	(0.24)	0.15	(0.20)	(0.44)	0.13
US GAAP - Basic - US $	(0.01)	(0.24)	0.15	(0.20)	(0.44)	0.13
US GAAP - Diluted - US $	(0.01)	(0.24)	0.15	(0.20)	(0.44)	0.13
Weighted average number of common shares outstanding
Cdn GAAP - Basic	40,986,940	40,964,630	41,237,461	40,986,940	40,985,440	41,214,969
Cdn GAAP - Diluted	40,986,940	40,964,630	41,444,870	40,986,940	40,985,440	41,550,160
US GAAP - Basic	40,986,940	40,964,630	41,237,461	40,986,940	40,985,440	41,214,969
US GAAP - Diluted	40,986,940	40,964,630	41,444,870	40,986,940	40,985,440	41,550,160

5

Management’s Discussion and Analysis

CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS

(In thousands of US dollars, except as otherwise noted)

(Unaudited)

	3rd Quarter			4th  Quarter
	2007	2006	2005	2007	2006	2005
	$	$	$	$	$	$
Sales	201,875	195,120	194,480	191,453	187,370	215,112
Cost of Sales	171,083	169,433	159,449	163,670	164,604	176,927
Gross Profit	30,792	25,687	35,031	27,783	22,766	38,185
Selling, general and administrative expenses	17,508	21,399	19,273	18,664	18,729	22,507
Stock-based compensations expense	504	453	485	289	454	488
Research and Development	1,002	1,523	1,233	947	1,406	1,257
Financial expenses	7,848	6,762	5,577	5,251	5,871	6,655
Manufacturing facility closures, restructuring, strategic alternatives and other charges	1,330	16,037	385		10,095	(760)
Impairment of goodwill		120,000
	28,192	166,174	26,953	25,151	36,555	30,147
Earnings (loss) before income taxes	2,600	(140,487)	8,078	2,632	(13,789)	8,038
Income taxes (recovery)	1,628	(17,154)	1,479	3,349	1,399	(1,689)
Net earnings (loss)	972	(123,333)	6,599	(717)	(15,188)	9,727
Earnings (loss) per share
Cdn GAAP – Basic – S$	0.02	(3.01)	0.16	(0.01)	(0.37)	0.24
Cdn GAAP – Diluted-US$	0.02	(3.01)	0.16	(0.01)	(0.37)	0.24
US GAAP – Basic- US$	0.02	(3.01)	0.16	(0.01)	(0.37)	0.24
US GAAP – Diluted-US$	0.02	(3.01)	0.16	(0.01)	(0.37)	0.24
Weighted average number of common shares outstanding
Cdn GAAP – Basic	40,986,940	40,986,057	41,205,555	58,185,756	40,986,057	41,039,278
Cdn GAAP – Diluted	40,986,940	40,986,057	41,337,378	58,185,756	40,986,057	41,157,568
US GAAP – Basic	40,986,940	40,986,057	41,205,555	58,185,756	40,986,057	41,039,278
US GAAP - Diluted	40,986,940	40,986,057	41,337,378	58,185,756	40,986,057	41,157,568

6

Management’s Discussion and Analysis

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for impairment of goodwill, manufacturing facility closures, restructuring, strategic alternatives and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

As Reported	2007	2006	2005
	$	$	$
Sales	767.3	812.3	776.0
Cost of sales	652.9	694.7	635.8
Gross profit	114.4	117.6	140.2
Selling, general and administrative expenses	71.2	84.9	79.0
Stock-based compensation expense	1.8	2.0	1.9
Research and development	4.1	6.3	4.8
Financial expenses	25.3	25.7	23.8
Manufacturing facility closures, restructuring, strategic alternatives and other charges	8.1	76.1	1.4
Impairment of goodwill		120.0
	110.5	315.0	110.9
Earnings (loss) before income taxes	3.9	(197.4)	29.3
Income taxes (recovery)	12.3	(30.7)	1.5
Net earnings (loss)	(8.4)	(166.7)	27.8

Earnings (loss) per share – As Reported	2007	2006	2005
Basic	(0.19)	(4.07)	0.67
Diluted	(0.19)	(4.07)	0.67

Adjustments	2007	2006	2005
Impairment of goodwill		120.0

Adjustments for Manufacturing Facility Closures, Restructuring, Strategic Alternatives and Other Charges	2007	2006	2005
	8.1	76.1	1.4

7

ADJUSTED CONSOLIDATED EARNINGS

Adjustments for impairment of goodwill and manufacturing facility closures, strategic alternatives and other charges.

Years Ended December 31,

(In millions of US dollars, except per share amounts)

As Adjusted	2007	2006	2005
	$	$	$
Sales	767.3	812.3	776.0
Cost of sales	652.9	694.7	635.8
Gross profit	114.4	117.6	140.2
Selling, general and administrative expenses	71.2	84.9	79.0
Stock-based compensation expense	1.8	2.0	1.9
Research and development	4.1	6.3	4.8
Financial expenses	25.3	25.7	23.8
	102.4	118.9	109.5
Earnings (loss) before income taxes	12.0	(1.3)	30.7
Income taxes	14.2	5.6	2.0
Net earnings (loss)	(2.2)	(6.9)	28.7
Earnings (loss) per Share - As Adjusted
Basic	(0.05)	(0.17)	0.70
Diluted	(0.05)	(0.17)	0.69

Note: These tables reconcile consolidated earnings (loss) as reported in the accompanying consolidated financial statements to adjusted consolidated earnings (loss) after the elimination of non-recurring items and manufacturing facility closures, strategic alternatives and other charges. The Company has included these non-GAAP financial measures because it believes the measures permit more meaningful comparisons of its performance between the periods presented.

8

MANAGEMENT'S DISCUSSION & ANALYSIS

Business Overview

Intertape Polymer Group Inc. (“IPG” or the “Company”) was founded in 1981 and is a recognized leader in the specialty packaging industry in North America. In the fourth quarter of 2007, the Company changed its business structure by establishing two operating divisions, Tapes and Films (“T&F Division”) and  Engineered Coated Products (“ECP Division”).  The T&F Division develops, manufactures and sells a variety of specialized polyolefin films, paper and film pressure sensitive tapes and complementary packaging systems for use in industrial and retail applications. The T&F Division designs its specialty products for aerospace, automotive and industrial applications. The T&F Division products are sold to a broad range of industrial and specialty distributors, consumer outlets and large end-users in diverse markets. T&F Division products include carton sealing ta pes, including Intertape® pressure-sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; ExIFilm® shrink film; and Stretchflex® stretch wrap. The ECP Division manufactures engineered coated fabrics and flexible intermediate bulk containers (“FIBCs”). ECP Division products are sold though a variety of industrial and specialty distributors with a focus on sales to the construction and agricultural markets as well as the flexible packaging market.

During 2006, the Company made several revisions to its business model and also took measures to substantially reduce its cost structure.  These actions resulted in improved operating results for 2007 compared to 2006.  During the second half of 2007 and continuing in 2008, the Company has made improvements to its capital structure, raising equity to reduce debt levels and refinancing a portion of its remaining debt.  The Company believes that these recent actions have strengthened its financial position by reducing the risk inherent in its capital structure, including the lower level of financial leverage in place and the increased flexibility allowed under its financial covenants.

During 2007, the Company engaged in a strategic alternatives process that had commenced in 2006.  On May 1, 2007, the Company entered into a definitive agreement with a third party, providing for the sale of all of the Company’s outstanding common shares at a price of $4.76 per share.  At the annual and special meeting of shareholders held on June 28, 2007, shareholders rejected the sale, by a vote of approximately 70%.  At that same meeting, shareholders also elected the Company’s Board of Directors for the coming year, appointing Eric Baker, former IPG director, as Chairman of the Board and appointing Melbourne F. Yull (“Mr. Yull”), the founder of the Company, as an Executive Director.  Several new directors were also elected at that meeting and at a subsequent special shareholder meeting in September 2007, resulting in a new Board of Directors guiding the Company.

On August 8, 2007, the Company successfully amended its Senior Secured Credit Facility to accommodate the costs of the strategic alternatives process in the calculation of its financial covenants.  The amendment reduced the maximum amount the Company could borrow under the Revolving Credit Facility from $75.0 million to $60.0 million and increased the loan margin under the entire Senior Secured Credit Facility, both the Term Loan B and the Revolving Credit Facility by 150 basis points to a range of 325 to 425 basis points determined by a pricing grid. Additionally, the Company paid an amendment fee to its lenders of approximately $2.3 million to be amortized over the remaining term of the related credit facilities.  

The Company completed a shareholder rights offering on September 13, 2007, providing approximately $60.9 million in additional equity funding, net of related expenses of approximately $1.9 million.  The proceeds included commitments from several major shareholders, directors and senior officers, and one former senior officer.  The Company used the proceeds from the rights offering to reduce borrowings outstanding under its Term Loan B by $60.9 million.  The Company recorded a non-cash charge of approximately $1.5 million in the third quarter of 2007, representing the accelerated amortization of a portion of the deferred debt issue expenses relating to debt repayment with the proceeds of the rights offering and the reduction in the maximum borrowings the Company can make under its Revolving Credit Facility.

On March 27, 2008 the Company successfully refinanced its existing Senior Secured Credit Facility (the “Facility”) with a $200.0 million Asset-Based Loan (“ABL”) entered into with a syndicate of financial institutions.  The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time.  The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and machinery and equipment.  At closing, after repaying the remaining balance of the Facility, the Company had cash and undrawn revolver of approximately $39.0 million.  The ABL is priced at libor plus a loan margin determined from a pricing grid. The loan margin declines as unused availability increases.  The pricing grid ranges from 1.50% to 2.25%. However, through September 2008, the applicable loan margin is fixed at 1.75%.   Unlike the Facility, the ABL contains only one financial covenant, a fixed charge coverage ratio, which becomes effective only when unused availability drops below $25.0 million.  Under the refinancing agreement, the Company has 120 days from closing to secure financing on all or a portion of its owned real estate.  After that time, the remaining unencumbered real estate is subject to a negative pledge in favour of the ABL lenders.  However, beyond the 120 days the Company retains the ability to secure financing on all or a portion of its owned real estate and have the negative pledge of the ABL lenders subordinated to up to $35.0 million of real estate mortgage financing.  During the 120 day window in which the real estate is unencumbered, the Company is not subject to the fixed charge coverage ratio but also is prevented from accessing the last $15.0 million of unused availability under its

9

borrowing base.  The Company expects to report a refinancing expense in the first quarter of 2008 for approximately $3.4 million comprised of the accelerated amortization of the debt issue expenses on the existing debt.  The Company also settled two interest rate swaps that the Company entered into in June and July 2005 hedging interest rates for its existing debt.  Among the advantages the Company expects from refinancing are lower interest costs and fewer financial covenants with which it must comply. The Company estimates that the lower loan margin on the ABL compared to the existing Senior Secured Credit Facility will reduce the Company’s interest expense by approximately $2.5 million annually.

The net loss for 2007 was $8.4 million compared to a net loss for 2006 of $166.7 million.  The net loss for 2007 includes $8.1 million of manufacturing facility closures, restructuring, strategic alternatives and other charges, compared to similar charges in 2006 of $76.1 million. The Company recorded a $120.0 million impairment of goodwill in 2006.  The Company’s net loss for 2007 is primarily as a result of $12.3 million of income tax expense, including $11.4 million of non-cash deferred income tax charges.  In 2007, the Company reported $3.9 million of earnings before income taxes, $12.0 million exclusive of manufacturing facility closures, restructuring, strategic alternatives and other charges.  In 2006, the Company reported a loss before income taxes of $197.4 million, $1.3 million exclusive of manufacturing facility closures, restructuring, strategic alternatives and other charges.  

During 2007, the Company recorded manufacturing facility closures, restructuring, strategic alternatives and other charges totalling $8.1 million including approximately $1.3 million in severance costs associated with the cost reduction initiatives announced by the Company in 2006 and $6.8 million in costs supporting the strategic alternatives process.

During 2006, the Company recorded manufacturing facility closures, restructuring, strategic alternatives and other charges of $76.1 million of which $36.7 million related to plant closures including, (i) $30.2 million for the closure of the Brighton, Colorado facility, (ii)$9.9 million related to the retirement of Mr. Yull, (iii) $9.8 million related to cost reductions initiatives, (iv) $8.0 million related to the impairment of certain manufacturing equipment, (v) $3.9 million related to a Canadian Income Trust project that was cancelled, (vi) $2.9 million in legal costs related to certain patent and trademark disputes, (vii) $2.4 million related to real estate remediation and disposals,  (viii) $1.9 million for a loan amendment fee and (ix) $0.6 million related to the strategic alternatives process.

As at September 30, 2006, the Company conducted a review for possible impairment of goodwill.  As a result of the review, the Company recorded an impairment of goodwill in the amount of $120.0 million.  The Company conducted a review for possible impairment of goodwill as at December 31, 2006 and at December 31, 2007 and concluded that no additional impairment was required.

Results of Operations

The following discussion and analysis of operating results includes adjusted financial results for the three years ended December 31, 2007. A reconciliation from the operating results found in the consolidated financial statements to the adjusted operating results discussed herein, a non-GAAP financial measure, can be found in the tables appearing on pages 7 and 8 hereof.

Included in this MD&A are references to events and circumstances which have influenced the Company’s quarterly operating results presented in the table of Consolidated Quarterly Statements of Earnings appearing on pages 5 and 6 hereof.

Sales

IPG’s consolidated annual sales for 2007 were $767.3 million, a decrease of 5.5% compared to $812.3 million for 2006.  Consolidated annual sales for 2006 were $812.3 million, an increase of 4.7% compared to $776.0 million in 2005. The sales increase for 2006 is attributable to the sales associated with the October 2005 acquisition of Flexia Corporation Ltd., the successor corporation to Flexia Corporation and Fib-Pak Industries, Inc. (collectively “Flexia”).  Excluding revenues related to the Flexia acquisition, sales decreased by about 3.9% from $754.2 million in 2005 to approximately $724.9 million in 2006.  In 2007, the Company had a sales volume (unit) decrease of 5.4%. In 2006, the Company had a sales volume (units) decrease of approximately 8.1% excluding the sales volume associated with the Flexia acquisition.  Fluctuating foreign exchange rates did not have a significant impact on the Company’s 2007, 2006 or 2005 sales.

Sales for the fourth quarter of 2007 totalled $191.5 million, a 2.2% increase compared to $187.4 million for the fourth quarter of 2006.  Sales volumes (units) increased 0.7% for the fourth quarter of 2007 compared to the fourth quarter of 2006.  The balance of the sales increase was attributable to selling price increases and product mix.

Gross Profit and Gross Margin

10

Gross profit totalled $114.4 million in 2007, a decrease of 2.7% from 2006. Gross profit totalled $117.6 million in 2006, a decrease of 16.1% from $140.2 million in 2005. Gross margin represented 14.9% of sales in 2007, 14.5% in 2006 and 18.1% in 2005.  While margins improved slightly in 2007 compared to 2006, there was a substantial change in the business in the second half of 2006, as described below, that resulted in gross margins for the second half of 2006 of 12.7% and annualized gross profits of $96.9 million.  The improvement in 2007 in both gross profits and gross margins compared to the second half of 2006 levels was primarily the result of the cost reductions implemented by the Company in late 2006 and early 2007. While sales volumes declined 5.5% for 2007, manufacturing expenses for 2007 declined 8.9%.

Gross profits for the fourth quarter of 2007 totalled $27.8 million at a gross margin of 14.5% compared to $22.8 million at a gross margin of 12.2% for the fourth quarter of 2006.  Results for the fourth quarter of 2007 also reflect the Company’s improved ability to recover raw material cost increases in the fourth quarter of 2007 compared to 2006.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2007 totalled $71.2 million, a decrease of $13.7 million from the $84.9 million incurred for the year ended December 31, 2006. The 2006 SG&A expenses were up $5.9 million from $79.0 million in 2005. As a percentage of sales, SG&A expenses were 9.3%, 10.5% and 10.2% for 2007, 2006 and 2005, respectively.

The Company benefited in 2007 from significant staffing reductions and the exiting of the aircraft lease in 2006.  While SG&A expenses increased in 2006 compared to 2005 levels, the Company was able to reduce the SG&A quarterly run rate so that the fourth quarter 2006 SG&A was $3.8 million lower than SG&A for the fourth quarter of 2005.  The Flexia acquisition in the fourth quarter of 2005 resulted in increased SG&A of approximately $3.5 million in 2006 compared to 2005.

Included in SG&A expenses are the costs the Company incurred as a consequence of being a public company.  These costs totalled $2.4 million, $3.6 million and $2.5 million for the three years ended December 31, 2007.  The increase in public company costs for 2006 compared to 2005 and 2007 is due to high initial cost in 2006 of complying with Section 404 of the Sarbanes-Oxley Act of 2002, which included the documentation and certification of internal control over financial reporting by management.

Stock-Based Compensation

For 2007, 2006 and 2005, the Company recorded approximately $1.8 million, $2.0 million and $1.9 million, respectively, in stock-based compensation expense related to options granted to employees.

Operating Profit

This discussion presents the Company’s operating profit for 2007, 2006 and 2005. “Operating profit” does not have a standardized meaning prescribed by GAAP in Canada or the United States but is included herein as the Company’s management uses “operating profit” to measure and evaluate the profit contributions of the Company’s product offerings as well as the contribution by channel of distribution.

Because “operating profit” is a non-GAAP financial measure, other companies may present similar titled items determined with differing adjustments.  Presented below is a table reconciling this non-GAAP financial measure with gross profit being the most comparable GAAP measurement.  The reader is encouraged to review this reconciliation. Operating profit is defined by the Company as gross profit less SG&A and stock-based compensation expense.

OPERATING PROFIT RECONCILIATION

(In millions of US dollars)

	Three months ended December 31, (Unaudited)		Year ended December 31,
	2007	2006	2007	2006	2005
	$	$	$	$	$
Gross Profit	27.8	22.8	114.4	117.6	140.2
Less: SG&A Expenses	18.7	18.7	71.2	84.9	79.0

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Less: Stock-Based Compensation	0.3	0.5	1.8	2.0	1.9
Operating Profit	8.8	3.6	41.4	30.7	59.3

Operating profit for 2007 amounted to $41.4 million compared to $30.7 million for 2006 and $59.3 million for 2005.  Operating profits increased in 2007 compared to 2006 by $10.7 million due to a $13.7 million reduction in SG&A expenses, offset in part by lower gross profit in the ECP Division. Operating profits decreased by $28.6 million in 2006 compared to 2005 due to the decline in gross profits for both the T&F Division and the ECP Division and the increase in SG&A expenses.

The Company’s operating profit for the fourth quarter of 2007 was $8.8 million compared to $3.6 million for the fourth quarter of 2006. The improvement in operating profit for the fourth quarter of 2007 compared to the fourth quarter of 2006 is due to the increase in gross profit of the T&F Division.

Impairment of Goodwill

In accordance with the requirements of the Canadian Institute of Chartered Accountants (“CICA”), which are substantively equivalent to the applicable US standards, the Company normally performs an annual goodwill impairment test as at December 31.

The Company performed its annual impairment test at December 31, 2007 and concluded that no impairment charge was necessary. The Company conducted a goodwill impairment test at the interim date of September 30, 2006 due to the underlying changes in its business, resulting in a $120.0 million goodwill impairment charge. The Company subsequently performed its annual impairment test at December 31, 2006 and concluded that no additional impairment charge was necessary. No goodwill impairment charge was required by IPG for 2005.

As a result of the business structure changes made by the Company, for purposes of the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it has two reporting units, the T&F Division and the ECP Division. Previously, the Company had a single reporting unit.  The Company allocated the recorded goodwill between the two reporting units based on their relative fair values at December 31, 2007. The Company calculated the fair value of these reporting units using the discounted cash flow method, and compared it with other methods including multiples of sales and earnings before interest, income taxes, depreciation and amortization, and with historical transactions where appropriate.

Research and Development

Research and development (“R&D”) remains an important function within the Company. Taken as a percentage of sales, R&D was 0.5% for 2007, 0.8% for 2006 and 0.6% for 2005.  The Company continues to focus its R&D efforts on new products, new technology developments, new processes and formulations for existing products.  

EBITDA

A reconciliation of the Company’s EBITDA, a non-GAAP financial measure, to GAAP net earnings is set out in the EBITDA reconciliation table below.  EBITDA should not be construed as earnings before income taxes, net earnings or cash from operating activities as determined by GAAP.  The Company defines EBITDA as net earnings (loss) before (i) income taxes; (ii) financial expenses, net of amortization; (iii) amortization of other intangibles and capitalized software costs; and (iv) depreciation.  Adjusted EBITDA is defined as EBITDA before manufacturing facility closures, restructuring, strategic alternatives and other charges and impairment of goodwill charges. The terms “EBITDA” and “Adjusted EBITDA” do not have any standardized meanings prescribed by GAAP in Canada or the United States and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA and A djusted EBITDA are not measurements of financial performance under GAAP and should not be considered as alternatives to cash flows from operating activities or as alternatives to net earnings as indicators of IPG’s operating performance or any other measures of performance derived in accordance with GAAP. The Company has included these non-GAAP financial measures because it believes that it permits investors to make a more meaningful comparison of IPG’s performance between periods presented. In addition, EBITDA and Adjusted EBITDA are used by Management and the Company’s lenders in evaluating the Company’s performance.

EBITDA RECONCILIATION TO NET EARNINGS

(In millions of US dollars)  

Three months ended December 31, (Unaudited)		Year ended December 31,
2007	2006	2007	2006	2005

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	$	$	$	$	$
Net Earnings (loss) – As Reported	(0.7)	(15.2)	(8.4)	(166.7)	27.8
Add Back:
Financial Expenses, net of amortization	4.5	5.5	21.9	24.4	22.4
Income Taxes (recovery)	3.4	1.4	12.3	(30.7)	1.5
Depreciation & Amortization	10.2	9.4	39.0	36.6	31.1
EBITDA	17.4	1.1	64.8	(136.4)	82.8
Manufacturing facility closures, restructuring, strategic alternatives and other charges		10.1	8.1	76.1	1.4
Impairment of Goodwill				120.0
Adjusted EBITDA	17.4	11.2	72.9	59.7	84.2

EBITDA was $64.8 million for 2007, ($136.4) million for 2006, and $82.8 million for 2005.  Adjusted EBITDA was $72.9 million, $59.7 million, and $84.2 million for the years 2007, 2006 and 2005 respectively.  The Company’s EBITDA for the fourth quarter of 2007 was $17.4 million compared to $1.1 million for the fourth quarter of 2006. The Adjusted EBITDA was $17.4 million in the fourth quarter of 2007 as compared to $11.2 million in the fourth quarter of 2006. The improved EBITDA in the fourth quarter of 2007 compared to the fourth quarter of 2006 is the result of improved gross profits in the T&F Division.

Financial Expenses

Financial expense decreased 1.6% to $25.3 million from $25.7 million for 2006.  Financial expense increased 8.0% to $25.7 million for 2006 as compared to $23.8 million for 2005.

The decrease in financial expense in 2007 was as a result of the Term Loan B debt repayments made by the Company during the year, including the $15.6 million excess cash flow payment in March 2007 and the application of the proceeds of the shareholders rights offering during the period September through November 2007 reducing the principal balance by $60.9 million. The decrease in financial expense resulting from the debt payments was offset by higher interest rates on the Term Loan B due to increased loan margins imposed by the November 8, 2006 and August 8, 2007 loan amendments and higher libor rates impacting the unhedged portion of the Term Loan B.

The increased financial expense in 2006 compared to 2005 was the result of the September 2005 borrowings to fund the Flexia acquisition and higher interest rates on the floating rate debt as compared to the interest rate levels experienced in 2005.  Finally, as part of the loan amendment process completed on November 8, 2006, the interest rate margin on the floating rate term debt was increased by 50 basis points.

Financial expenses for the fourth quarter of 2007 totalled $5.3 million, a 10.6% decrease from financial expenses in the fourth quarter of 2006. The decrease was due to the principal payments on the Term Loan B as set forth above.  

Income Taxes

In the past three years, the Company’s statutory income tax rate has been influenced primarily by a lower rate on foreign-based income, manufacturing and processing deductions, transactions that resulted in permanent differences and changes in the valuation allowance.  

As at December 31, 2007, the Company had approximately $85.6 million in Canadian operating loss carry-forwards for tax purposes expiring from 2008 through 2027, and $204.7 million in US federal and state operating losses for tax purposes expiring from 2018 through 2025. In assessing the valuation of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized.  Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets to be realized, net of the valuation allowance at December 31, 2007 as a result of the reversal of existing taxable temporary differences. Based on management’s assessment, a $14.3 million valuation allowance was established as at December 31, 2007, an i ncrease from the December 31, 2006 valuation allowance of $12.4 million.  Included in deferred income tax expense for 2007 is $2.6 million of increases to the valuation allowance, including a $6.3 million charge in

13

the second quarter of 2007 due to the expectation that certain Canadian operating loss carry-forwards will expire unused and a $3.7 million decrease recorded in the fourth quarter of 2007 primarliy related to the expected realization of certain US operating loss carry-forwards previously reserved .  The increase in the valuation allowance is based on the Company’s expectation that certain Canadian net operating losses scheduled to expire in future years will likely not be utilized, mitigated in part by the expected utilization of certain net operating losses in the US that had previously been provided for.  

In December 2007, the Canadian Federal government reduced future Federal income tax rates. As a result of the tax rate reductions, the Company recorded $4.3 million of deferred income tax expense in the fourth quarter to reflect the decreased value of the Company’s deferred tax assets.

Net Earnings – Canadian and US GAAP

For 2007, the Company posted a net loss of $8.4 million as compared to a net loss of $166.7 million in 2006 and $27.8 million in 2005.  

The Company reported a net loss of $0.7 million for the fourth quarter of 2007 as compared to a net loss of $15.2 million for the fourth quarter of 2006.  Excluding manufacturing facility closure, restructuring, strategic alternatives and other charges, the pretax earnings for the fourth quarter of 2007 were $2.6 million.  This compares to a pretax loss for the fourth quarter of 2006 on a comparable basis of $3.7 million.  The pretax profit improvement is due to do improved gross profits in the T&F Division in the fourth quarter of 2007.

Adjusted net earnings, a non-GAAP financial measure (see table on pages 7 and 8) amounted to a net loss of $2.2 million for 2007, a net loss of $6.9 million for 2006, and net earnings of $28.7 million for 2005. The Company is including adjusted net earnings here because it believes it provides a better comparison of results for the periods presented since it does not take into account non-recurring items, manufacturing facility closure, restructuring, strategic alternatives and other costs in each period.

Adjusted net earnings does not have any standardized meaning prescribed by GAAP in Canada or the United States and is therefore unlikely to be comparable to similar measures presented by other issuers. A reconciliation of adjusted net earnings to net earnings, being the most comparable measurement under GAAP, is set forth on pages 7 and 8. The reader is encouraged to review this reconciliation.

Net earnings reported in accordance with Canadian GAAP conforms in all material respects to amounts that would have to be reported had the financial statements been prepared under US GAAP, except for the effect of variable accounting for stock options, which would result in an increase in net earnings of approximately $0.3 million in 2005 (nil for 2007 and 2006).. Consequently, in accordance with US GAAP, net earnings in 2007 would be a net loss of approximately $8.4 million, a net loss of $166.7 million in 2006 and net earnings of $28.0 million in 2005.  For further details, see Note 23 to the consolidated financial statements.

In the case of IPG, net earnings are equal to earnings from continuing operations, as the Company had no discontinued operations, extraordinary items, or changes in accounting principles that resulted in a charge against earnings for these periods.

Earnings Per Share – Canadian and US GAAP

Basic and diluted net earnings per share reported in accordance with Canadian GAAP conforms in all material respects to amounts that would have been reported had the financial statements been prepared under US GAAP, except for the impact of variable accounting for stock options previously discussed under the caption “Net earnings – Canadian and US GAAP”. Consequently, in accordance with US GAAP, basic and diluted loss per share would be $0.19 in 2007 compared to basic and diluted loss per share of $4.07 in 2006 and $0.68 in 2005.

The Company reported a loss per share of $0.19 both basic and diluted for 2007 as compared to a loss per share of $4.07 both basic and diluted for 2006. The 2006 loss per share compares to earnings per share of $0.67 both basic and diluted for 2005. The weighted-average number of common shares outstanding for the purpose of the basic and diluted EPS calculation was 45.3 million for 2007 (45.3 million diluted), 41.2 million (41.0 million diluted) for 2006 and 41.2 million (41.3 million diluted) for 2005.

The adjusted EPS (see table on pages 7 and 8) for 2007 was a loss per share of $0.05 both basic and diluted compared to a loss per share of $0.17 both basic and diluted for 2006 and to earnings per share of $0.70 basic and $0.69 diluted for 2005.  

Comprehensive Income

14

Comprehensive income is comprised of net earnings and other comprehensive income.  For years ended December 31, 2007, 2006 and 2005, comprehensive income was $21.8 million, a loss of $164.4 million and income of $30.4 million, respectively.  Comprehensive income for the fourth quarter of 2007 and the fourth quarter of 2006 was income of $3.2 million and a loss of $13.4 million, respectively.  The favourable change in accumulated currency translation adjustments is attributable to the strengthening of the Canadian dollar relative to the U.S. dollar in 2007.  The decline in the fair market value of the interest rate swap agreements for the three months and year ended December 31, 2007 reflects the actual and expected decline in short-term interest rates during the year.

Results of Operations-Tapes and Films Division

Sales for the T&F Division for 2007 were $605.7 million, a decrease of 3.3% compared to $626.5 million for 2006.  Sales for 2006 were $626.5 million, a decrease of 2.6% compared to $643.4 million for 2005. The Division had a sales volume (unit) decrease of 2.7% for 2007 and 7.0% for 2006. The sales volume decline in 2007 was not limited to particular products lines or channels of distribution. By comparison, the sales volume decline experienced in 2006 compared to 2005 was due to two primary factors, (i) customer account rationalization, particularly in the Division’s consumer business as well as (ii) broader declines in sales of the Division’s products. The Company made changes to its consumer business model, including a significant rationalization of unprofitable or marginally profitable accounts.  To a lesser extent, there was a similar rationalization performed within the industrial tapes and films p roducts. Approximately 40% of the sales volume decline in 2006 was related to the rationalization of unprofitable or marginally profitable business.  A significant portion of the rationalized business was serviced with resale items that the Company purchased from third parties.  The balance of the sales volume decline in 2006 compared to 2005 was in the tapes and films products. A portion of the decline was due to customer buying patterns in 2006 compared to 2005.  A rapid increase in raw material costs, particularly for polyethylene occurred in late 2005 due to damage to Gulf Coast refineries from Hurricanes Katrina and Rita.  The rising cost environment, coupled with limited supplies of polyethylene in North America triggered an unusually high demand in late 2005 as customers built up inventories.  Using its global sourcing capabilities, the Company was able to acquire and secure resin supplies and satisfy much of its customer demand.  In the first quarter of 2006, as Gulf Coa st refinery production came back on line, raw material costs began to decline significantly.  In this declining cost environment, customers worked their inventories down to low levels and maintained them at lower than normal levels.  A similar buying pattern occurred in the fourth quarter of 2006 as declining polyethylene prices again caused customers to reduce inventories.  

In response to rising raw material costs, the T&F Division instituted substantial selling price increases for 2005 and 2006.  Average selling prices for the T&F Division declined less than 1.0% in 2007, with selling prices increasing in the fourth quarter as noted above.

Sales for the T&F Division for the fourth quarter of 2007 totalled $151.0 million, a 3.6% increase compared to $145.8 million for the fourth quarter of 2006.  Sales volumes (units) increased 2.0% for the fourth quarter of 2007 compared to the fourth quarter of 2006.  The balance of the sales increase was attributable to selling price increases and product mix.  

Gross profit for the T&F Division totalled $97.4 million in 2007, an increase of 6.7% from 2006. Gross profit totalled $91.4 million in 2006, a decrease of 23.3% from $119.4 million in 2005. Gross margin represented 16.1% of sales in 2007, 14.6% in 2006 and 18.5% in 2005.  For 2007, gross profit and gross margins both improved over 2006 performance but particularly when compared to the levels in the second half of 2006. The improved results were attributable to the cost reductions implemented by the Division in late 2006 and early 2007.  In 2005, raw material costs began increasing in the first quarter and then, after a pause, began to rise again in the fall of 2005 and continued throughout the rest of the year.  Due to a series of timely selling price increases, the Division was able to increase its gross profit dollars and gross margins.  Contributing to the gross margins improvement in 2005 were raw m aterial shortages, in part as a result of the fall of 2005 Gulf Coast hurricanes, that provided pricing power in the marketplace that has since disappeared.

T&F Division gross profits for the fourth quarter of 2007 totalled $23.9 million at a gross margin of 15.8% compared to $18.7 million at a gross margin of 12.8% for the fourth quarter of 2006.  Results for the fourth quarter of 2007 reflect an improved ability to recover raw material cost increases in the fourth quarter of 2007 compared to 2006.  Tapes and film products experienced their highest raw material costs of 2006 in the products sold during the fourth quarter. Selling price increases were achieved in some markets but competitive conditions limited the Division’s ability to recover the higher material costs on a timely basis.  

EBITDA for the T&F Division for 2007, 2006 and 2005 was $67.6 million, $49.7 million and $75.9 million, respectively.  The improvement in EBITDA in 2007 compared to 2006 is due to the improved gross profits for the Division and reductions in SG&A expenses.  The EBITDA decline in 2006 compared to 2005 is due to the decrease in gross profits in 2006 compared to 2005 and the increased SG&A expenses in 2006. The T&F Division’s EBITDA for the fourth quarter of 2007 was $16.3 million compared to

15

$10.3 million for the fourth quarter of 2006. The improved EBITDA in the fourth quarter of 2007 compared to the fourth quarter of 2006 is the result of improved gross profits.

Results of Operations-ECP Division

Sales for the ECP Division for 2007 were $161.6 million, a decrease of 13.0% compared to $185.8 million for 2006. Division sales for 2006 were $185.8 million, an increase of 40.1% compared to $132.6 million for 2005. Excluding the acquired Flexia accounts, ECP Division sales volumes declined 33.3% in 2006 compared to 2005.  The largest market for ECP products is North American residential construction, which experienced a slowdown starting in the summer of 2006 and has continued throughout 2007. The sale of ECP products into agriculture related markets declined in 2006 but rebounded in 2007. The Company’s decision to close its Piedras Negras, Mexico FIBCs manufacturing operation in March 2006, resulted in lost sales from certain accounts that required North American sourcing.  For 2007, the decline in sales was mitigated by the introduction of several new residential construction market products that allowed the Company to participate in segments of the residential construction market that it previously had either not participated in or participated only on a small scale.

In response to rising raw material costs, the ECP Division instituted substantial selling price increases for 2005 and 2006. Average selling prices for the ECP Division increased slightly in excess of 1.0% during 2007.

Sales for the ECP Division for the fourth quarter of 2007 totalled $40.5 million, a 2.6% decrease compared to $41.6 million for the fourth quarter of 2006.  Sales volumes (units) decreased 3.6% for the fourth quarter of 2007 compared to the fourth quarter of 2006.  The unit decline was mitigated by selling price increases and product mix.  The sales volume decrease for the quarter was primarily due to declines in the sale of products into the residential construction market.

Gross profit for the ECP Division totalled $17.1 million in 2007, a decrease of 34.7% from 2006. Gross profit totalled $26.2 million in 2006, an increase of 26.6% from $20.7 million in 2005. Gross margin represented 10.6% of sales in 2007, 14.1% in 2006 and 15.6% in 2005.  The decline in 2007 in both gross profit and gross margin compared to all of 2006 is due to the strong performance of the Division in the first half of 2006, before the impact of the slowdown in residential construction and the continued deterioration of that market in 2007.  The gross profit and gross margin for 2006 include the full year benefit of the October 2005 acquisition of Flexia.  The lower gross margins for 2006 compared to 2005 reflect the lower gross margin of the Flexia product mix.

ECP Division gross profits for the fourth quarter of 2007 totalled $3.9 million at a gross margin of 9.6% compared to $4.1 million at a gross margin of 9.9% for the fourth quarter of 2006.  Results for the fourth quarter of 2007 reflect the continued softness in the residential construction market.

EBITDA for the ECP Division for 2007, 2006 and 2005 was $9.5 million, $17.0 million and $13.7 million, respectively.  The decline in EBITDA for 2007 compared to 2006 is due to the lower gross profits for the Division mitigated by a reduction in SG&A expenses.  The EBITDA improvement in 2006 compared to 2005 is due to the acquisition of Flexia in October 2005.  The ECP Division’s EBITDA for the fourth quarter of 2007 was $2.1 million compared to $2.2 million for the fourth quarter of 2006.

Results of Operations-Corporate

The Company does not allocate the manufacturing facilities closure, restructuring, strategic alternatives or other charges to the two Divisions.  These expenses are retained at the corporate level as are stock-based compensation and the cost of being a public company. The Company also did not allocate the costs of the corporate aircraft lease that was terminated in October 2006. The unallocated corporate expenses for the three years ended December 31, 2007 totalled $4.2 million, $7.1 million and $5.3 million, respectively.

Off-Balance Sheet Arrangements

The Company maintains no off-balance sheet arrangements except for the interest rate swap agreements and letters of credit issued and outstanding discussed in the section entitled “Bank Indebtedness and Credit Facilities” and in Notes 13 and 14 to the consolidated financial statements.

Related Party Transactions

During the third quarter of 2007, the Company entered into three advisory services agreements, two with affiliates of two current members of the Board of Directors and one with an affiliate of a former senior officer of the Company.  The advisory services include business planning and corporate finance activities.  The agreements are effective through December 31, 2009 but can be

16

unilaterally terminated by the affiliates of the Board members and the former senior officer, respectively, with 30 days written notice.  The agreements provide for aggregate monthly compensation beginning January 2008 in the amount of US$75,000 and Cdn$100,000 per month for a minimum of at least three months.  Thereafter, the Company has a firm financial commitment relating to the services of two of the three affiliates of US$50,000 and Cdn$100,000 per month through December 31, 2009.  The Company has the option to continue the services of the other affiliate on a month-to-month basis at a monthly compensation commensurate with the services required as determined by the Company, which is currently set at US$25,000.

In addition to the monthly advisory services described above, the agreements provide for a fee to each of the affiliates in connection with the Company’s shareholder rights offering.  The aggregate fee paid to the affiliates in connection with the rights offering was $1,050,000 and has been recorded in the Company’s 2007 consolidated financial statements as a reduction in the net proceeds raised from the rights offering.

The advisory services agreements provide for an aggregate performance fee payable July 1, 2010 based on the difference between the then-market price of the Company’s common stock listed on the Toronto Stock Exchange and Canadian rights offering price of Cdn$3.61 per share multiplied by 2.2 million.  The advisory services agreements provide for a reduction in the performance fees in the event of an early termination of the agreement.

Liquidity and Capital Resources

Cash Flow

In 2007, the Company generated cash flows from operating activities of $37.8 million compared to cash flows from operating activities of $53.6 million in 2006. In 2005, the Company generated cash flows from operating activities of $32.4 million.  The Company generated cash flows from operating activities in the fourth quarter of 2007 of $16.1 million compared to $15.6 million for the fourth quarter of 2006.

Cash from operations before changes in non-cash working capital items increased in 2007 by $33.8 million to $43.2 million from $9.4 million in 2006. Cash from operations before changes in non-cash working capital items decreased in 2006 to $9.4 million from $57.7 million in 2005. The increase in 2007 was due to improved profitability and $12.8 million less in cash charges for facility closures, restructuring, strategic alternatives and other charges paid in 2006.  The decrease in 2006 was due to lower earnings including approximately $19.5 million in cash charges for facility closures, restructuring, strategic alternatives and other charges. Cash from operations before changes in non-cash working capital for the fourth quarter of 2007 was $13.2 million compared to cash used in operations before changes in non-cash working capital of $2.0 million in the fourth quarter of 2006.  The increase is due to improved profitabi lity including the absence of any cash charges for facility closures, restructuring, strategic alternatives and other charges in 2007.

In 2007, non-cash working capital items used $5.4 million in net cash flow.  A total of $18.7 million of cash was used in the building of inventories, including $9.0 million in the fourth quarter.  During the fourth quarter, the Company pre-bought raw material inventories in advance of announced raw material cost increases.  The Company increased finished goods inventory levels during the fourth quarter to prepare for planned first quarter production equipment upgrades that would temporarily shut down selected production lines as well as build inventories in anticipation of a customer demand spike late in quarter that did not materialize.  Trade accounts receivable provided $9.5 million in net cash flow for the 2007, primarily due to improved customer agings. There are changes in non-cash working capital items between the balance sheet dates that are not reflected in the cash flows.  These changes are t he impact of foreign currency translation adjustments between balance sheets’ dates and do not have an impact on changes in working capital presented in the consolidated cash flows statements.

In 2006, non-cash working capital items provided $44.2 million in net cash flow, including $17.5 million provided in the fourth quarter.  The decrease in working capital both for the year and the fourth quarter was driven by declines in trade accounts receivables and inventories and partially offset with declines in accounts payable and accrued liabilities.  The lower trade accounts receivable was the result of improved collection efforts, a change in payment terms for a large segment of the Company’s customer base and lower sales. A portion of the inventory reduction was due to declining raw material costs but most of the decline was in on-hand quantities of all classes of inventory.  The finished goods inventory decline was achieved through a substantial reduction in production levels.  

In 2005, non-cash working capital items used $25.3 million in net cash flow, including $0.1 million used in the fourth quarter.  Most of the increase in working capital was in trade and other receivables of $10.2 million and accounts payable and accrued liabilities of $12.5 million.  Due to the two major Gulf Coast hurricanes late in the third quarter of 2005, resin prices increased substantially, resulting in higher working capital investments in the fourth quarter for both inventories and trade receivables.   The increased

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inventories investment resulting from higher material costs was substantially offset by the Company’s ability to substantially reduce inventory units, particularly in raw materials.  The decrease in accounts payable and accrued liabilities was due to lack of inventory pre-buying at December 31, 2005 compared to the prior year and the fact that the Company was taking increased advantage of prompt pay discounts offered by suppliers at the end of 2005.

Cash flows used in investing activities was $18.7 million for 2007 as compared to $29.6 million for 2006 and $55.8 million for 2005.  These investing activities include an increase in property, plant and equipment of $18.5 million for 2007, $27.1 million for 2006 and $24.0 million for 2005.  In the fourth quarter of 2005, the Company used cash of $28.1 million to acquire Flexia.  Other assets increased $1.3 million during 2007, $5.4 million during 2006 and $3.9 million in 2005. Cash flows used in investing activities was $5.1 million for the fourth quarter of 2007 compared to $3.4 million for the fourth quarter of 2006, an increase of $1.7 million.  

Cash flows used in financing activities amounted to $22.1 million in 2007 compared to $17.0 million in 2006.  Cash flows provided by financing activities totalled $11.7 million in 2005. The Company raised $60.9 million net of expense from the September 2007 shareholders rights offering.  These funds were used to reduce long-term debt in the third and fourth quarters of 2007 by $60.9 million.  The Company also made a $15.6 million principal payment in March 2007 in satisfaction of its 2006 “excess cash flow payment” obligation under its Senior Secured Credit Facility. On the last business day of the third quarter of 2005, the Company borrowed $23.5 million under its revolving credit facilities to fund the Flexia acquisition which closed on October 5, 2005.  This increased IPG’s total outstanding balance under its revolving credit facilities to $28.5 million.  During the fourth quarter of 2 005, the Company was able to reduce its revolving credit facilities by a total of $13.5 million to $15.0 million at December 31, 2005. The Company was able to repay the $15.0 million during 2006, including $10.0 million in the fourth quarter.

Free cash flow, a non-GAAP measurement that is defined by the Company as cash flows from operating activities less property, plant and equipment expenditures was $19.3 million in 2007, a decline of $7.2 million from $26.5 million in 2006. The decline was due to non-cash working capital consuming $5.4 million in cash for 2007, after generating $44.2 million in cash for 2006. During 2006, the Company’s free cash flow improved $18.1 million from the 2005 level of $8.4 million.  The improvement was due to the substantial decrease in non-cash working capital items for 2006. The Company is including free cash flow because it is used by Management and the Company’s investors in evaluating the Company’s performance and liquidity.  Free cash flow does not have any standardized meaning prescribed by GAAP in Canada or the United States and is therefore, unlikely to be comparable to similar measures presented by ot her issuers. A reconciliation of free cash flow to cash flow from operating activities, the most directly comparable GAAP measure, is set forth below. The reader is encouraged to review this reconciliation.

FREE CASH FLOW RECONCILIATION

(In millions of US dollars)

	2007	2006	2005
	$	$	$
Cash Flows From Operating Activities	37.8	53.6	32.4
Less: Capital Expenditures	18.5	27.1	24.0
Free Cash Flow	19.3	26.5	8.4

Liquidity

As at December 31, 2007, working capital stood at $145.6 million as compared to $121.5 million as at December 31, 2006. The increase of $24.1 million was due to increased inventories. The Company believes that it has sufficient working capital and access to credit facilities to meet the requirements of its day-to-day operations, given its operating margins and projected budgets.

Quick assets, which are the Company’s total current assets excluding prepaid expenses and future income taxes, increased by $18.9 million during 2007 to a level of $222.8 million, and decreased by $60.6 million during 2006 to a level of $203.9 million. The increase during 2007 was due to the increase in inventories. The 2006 decrease was primarily due to the decline in trade accounts receivables, inventories and other receivables.

The Company’s cash liquidity is influenced by several factors, the most significant of which are the Company’s profitability and its level of inventory investment. Historically, the Company has periodically increased its inventory levels when business conditions suggest that it is in the Company’s interest to do so, such as the buying opportunities the Company took advantage of in the fourth quarter of 2007 to mitigate the impact of rising raw material costs. The Company expects to continue this practice when circumstances suggest that it is appropriate and when the Company believes it has adequate cash and credit availability to support such strategies.

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Days outstanding in trade receivables were 43.5 days at the end of 2007 as compared to 43.7 days at the end of 2006. Inventory turnover (cost of sales divided by inventories) slowed to 6.6 times in 2007 compared to 9.2 times in 2006.

Currency Risk

The Company is subject to currency risks through its Canadian and European operations. Changes in the exchange rates may result in decreases or increases in the Company’s foreign exchange gains or losses. The Company does not use derivative instruments to reduce its exposure to foreign currency risk, as historically these risks have not been significant.

Capital Expenditures

Total property, plant and equipment expenditures were $18.5 million, $27.1 million and $24.0 million for the years 2007, 2006 and 2005, respectively.

Based on current volume and anticipated market demand, the Company believes it has sufficient capacity available to accommodate increases in volumes in most products without additional capital expenditure.  In addition, Management believes the Company is positioned to take advantage of opportunities that may arise to grow its market share in existing products, expand its product offerings or expand its markets.

Bank Indebtedness and Credit Facilities

During 2007, the Company had a US$52.0 million five-year revolving credit facility and a US$8.0 million five-year revolving credit facility available in Canadian dollars.  The facilities were part of the $260.0 million Facility described in more detail below. Prior to an amendment to the Facility, the revolving credit facilities totalled $75.0 million and the entire Facility totalled $275.0 million. As at December 31, 2007, the Company had no outstanding draws under these facilities and $2.1 million in outstanding letters of credit. As at the end of 2006, the Company had no outstanding draws under these facilities and $2.5 million in outstanding letters of credit.  When combined with on-hand cash and cash equivalents and temporary investments, the Company had total cash and credit availability of $73.4 million as at December 31, 2007 and $41.3 million as at December 31, 2006.  The increase in total cash and credi t availability between December 31, 2006 and December 31, 2007 was due to restrictions placed at December 31, 2006 on the Company’s credit availability under its financial ratios, specifically its maximum total leverage ratio discussed below.  As described below, the Company’s Revolving Credit Facility was refinanced on March 27, 2008 as part of the refinancing of the entire Facility.

Long-Term Debt

The Company had a $260.0 million Facility, consisting of a $200.0 million term loan and a total of $60.0 million in revolving credit facilities along with $125.0 million of Senior Subordinated Notes due 2014.

The Facility was guaranteed by the Company and substantially all of its subsidiaries and was secured by a priority lien on substantially all tangible and intangible assets owned by the Company and substantially all of its subsidiaries, subject to certain customary exceptions.

In 2007 and 2006, the Company reduced its indebtedness associated with its long-term debt instruments by $80.7 million and $2.9 million, respectively. The payments in 2007 included a $15.6 million principal payment from 2006 “excess cash flow” as defined under the Company’s Facility.  Also included in the 2007 payments was a $60.9 million reduction in the Facility representing the net proceeds received in the September 17, 2007 shareholder rights offering.  The balance of principal payments for 2007 and 2006 were in accordance with the Company’s debt amortization schedules.

At December 31, 2007, the current installments on long-term debt were $3.1 million. The decrease in current installments over December 31, 2006 levels reflects a $15.6 million principal payment made March 30, 2007 under the Company’s Facility arising from the “excess cash flow” provision described above.  The Company had to amend its credit facilities in August 2007 to accommodate the strategic alternatives process costs in the calculation of its financial covenants.  The cost of the amendment was $2.3 million and was recorded as debt issue expenses to be amortized over the remaining term of the Facility. Twice during 2006, the Company amended its credit facilities. The first amendment was in the second quarter and was to accommodate many of the one-time costs discussed previously.  The second amendment completed on November 8, 2006 was to accommodate the changes in the Company’s business incl uding the $120.0 million goodwill impairment charge recorded as at September 30, 2006.  The amendment provided accommodation for additional one-time costs related to restructuring activities in the fourth quarter of 2006 and the first quarter of 2007 and for adjustments to the covenant target ratios for September 30, 2006 and for up to two years thereafter.  

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On March 27, 2008 the Company successfully refinanced its Facility with a $200.0 million ABL entered into with a syndicate of financial institutions.  The amount of borrowings available to the Company under the ABL is determined by its applicable borrowing base from time to time.  The borrowing base is determined by calculating a percentage of eligible trade accounts receivable, inventories and machinery and equipment.  At closing, after repaying the remaining balance of the Facility, the Company had unused availability in excess of $30.0 million.  

Tabular Disclosure of Contractual Obligations

The Company’s principal contractual obligations and commercial commitments relate to its outstanding debt and its operating lease obligations. The following table summarizes these obligations as of December 31, 2007:

	Payments Due by Period
Contractual Obligations  (in millions of US dollars)	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
	$	$	$	$	$
Long-Term Debt	242.6	2.1	97.7	17.8	125.0
Capital (Finance) Lease Obligations	10.7	1.3	1.5	1.2	6.7
Operating Lease Obligations	10.2	3.4	4.0	1.6	1.2
Purchase Obligations
Other Long-Term Liabilities Reflected on Balance Sheet under GAAP of the primary financial statements
Total	263.5	6.8	103.2	20.6	132.9

IPG anticipates that funds generated by its operations and funds available to it under its new ABL will be sufficient to meet working capital requirements and anticipated obligations under its ABL and the Senior Subordinated Notes and to finance capital expenditures for the foreseeable future. The Company has experienced, and expects to continue to experience in the future, fluctuations in its quarterly results of operations. IPG’s ability to make scheduled payments of principal or interest on, or to make other payments on and refinance, its indebtedness, or to fund planned capital expenditures and existing capital commitments, will depend on IPG’s future performance, which is subject to general economic conditions, the competitive environment and other factors, a number of which are outside of the Company’s control.

The credit agreement governing the ABL and the indenture governing the outstanding Senior Subordinated Notes each contain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness, make restricted payments, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or declare dividends. Under its Facility in place in 2007, the Company was required to maintain certain financial ratios, including a maximum total leverage ratio, a minimum interest coverage ratio and a minimum fixed charge ratio.  The Company was in compliance with its financial covenants as at December 31, 2007.

Capital Stock

As at March 26, 2008 there were 58,956,348 common shares of the Company outstanding.

In 2006 and 2005 employees exercised stock options worth $0.1 million and $0.1 million respectively. No options were exercised in 2007.

In the fourth quarter of 2005, the Company reacquired and cancelled 250,587 common shares of the Company as part of a settlement with the former owner of a business the Company had previously acquired.

On March 13, 2006, the Company announced the effectiveness of a new Normal Course Issuer Bid (“NCIB”) in Canada, pursuant to which the Company could, over a 12-month period, repurchase at prevailing market prices, up to a maximum of 2,047,903 of its common shares.  The bid commenced on March 16, 2006 and the bid remained in effect until March 15, 2007. No shares were

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purchased under the NCIB. The Company believes that the purchase of its own common shares may, in appropriate circumstances, be a responsible investment of available funds on hand.

During November 2004, the Company announced that it had registered an NCIB in Canada, under which the Company was authorized to repurchase up to 5.0% of its outstanding common shares. In the second quarter of 2005, there were 46,300 shares purchased for cancellation at a cost to the Company of $0.3 million. The NCIB expired on November 8, 2005.  

Business Acquisitions

In October 2005, the Company, through a wholly-owned Canadian subsidiary, acquired all of the outstanding capital stock of Flexia Corporation Ltd., being the successor entity to Flexia Corporation and Fib-Pak Industries Inc. for an aggregate consideration of approximately $30.0 million after purchase price adjustments. Flexia produces a wide range of engineered coated products, polyethylene scrims and polypropylene fabrics.

Pension and Post-Retirement Benefit Plans

IPG’s pension benefit plans are currently showing an unfunded deficit of $10.4 million at the end of 2007 as compared to $16.2 million at the end of 2006. For 2007 and 2006, the Company contributed $7.1 million and $8.7 million, respectively to its funded pension plans and to beneficiaries for its unfunded other benefit plans. The Company may need to divert some of its resources in the future in order to resolve this funding deficit but expects to meet its pension benefit plan funding obligations in 2008 through cash flows from operations.

Dividend on Common Shares

No dividends were declared on the Company’s stock in 2007, 2006 or 2005.

Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian GAAP requires Management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues and expenses during the reporting period. On an on-going basis Management reviews its estimates, including those relating to the allowance for doubtful accounts, reserve for slow moving and unmarketable inventories, future and current income taxes and impairment of long-lived assets and goodwill based on currently available information. Actual results may differ from those estimates.

The allowance for doubtful accounts is based on reserves for specific accounts which Management believes may not be fully recoverable combined with an overall reserve reflective of the Company’s historical bad debt experience and current economic conditions.

Establishing and updating the reserve for slow moving and unmarketable inventories starts with an evaluation of the inventory on hand as compared to historical and expected future sales of the products. For items identified as slow-moving or unmarketable; the cost of products is compared with their estimated net realizable values and a valuation reserve is established when the cost exceeds the estimated net realizable value.

The Company assesses the recoverability of its fixed assets using projected future undiscounted cash flows and comparing those cash flows to the net book value of the fixed assets when changes in events and circumstances indicate a possible impairment of certain assets or group of assets.  

In accordance with the requirements of the Canadian Institute of Chartered Accountants (“CICA”), which are substantively equivalent to the applicable US standards, the Company performs an annual goodwill impairment test as at December 31. For purposes of the impairment test, based on the specific requirements of the accounting pronouncements, the Company determined that it was two reporting units, Tapes and Films and Engineered Coated Products. The Company calculates the fair value of this reporting units using the discounted cash flow method. As occurred in 2006, the Company performs goodwill impairment tests at interim dates when changes in the underlying business of the Company suggest that a possible impairment has occurred.

In assessing the realizability of future income tax assets, Management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

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Changes in Accounting Policies

Accounting Changes

On January 1, 2007, in accordance with the applicable transitional provisions, the Company applied the recommendations of new Section 1506, “Accounting Changes”, of the Canadian Institute of Chartered Accountants’ (“CICA”) Handbook. This new section, effective for the years beginning on or after January 1, 2007, prescribes the criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. Furthermore, the new standard requires the communication of the new primary sources of GAAP that are issued but not yet effective or not yet adopted by the Company. The new standard has no impact on the Company’s financial results.

Financial Instruments, Hedges and Equity

On January 1, 2007, in accordance with the applicable transitional provisions, the Company adopted the new recommendations in Sections 3855, "Financial Instruments – Recognition and Measurement", 1530, "Comprehensive Income", 3861, "Financial Instruments – Disclosure and Presentation", 3865, "Hedges", and 3251, "Equity", of the CICA Handbook.

Sections 3855 and 3861 deal with the recognition, measurement, presentation and disclosure of financial instruments and non-financial derivatives in the financial statements. The transitional provisions of these sections require that the Company remeasure the financial assets and liabilities as appropriate at the beginning of its fiscal year. Any adjustment of the previous carrying amount is recognized as an adjustment of the balance of retained earnings at the beginning of the fiscal year of initial application or as an adjustment of the opening balance of a separate component of accumulated other comprehensive income, as appropriate. The financial statements of prior fiscal years are not restated.

Section 1530 requires the presentation of comprehensive income and its components in a new financial statement and establishes standards for reporting and display of comprehensive income. Comprehensive income is the change in the Company’s net assets that result from transactions, events and circumstances from sources other than the Company’s shareholders. It also includes revenues, expenses, gains and losses that, in accordance with primary sources of GAAP are recognized in comprehensive income, but excluded from net earnings. Section 3251 establishes standards for the presentation of equity and changes in equity during the reporting fiscal year. Pursuant to the transitional provisions of these sections, the Company's financial statements of prior fiscal years are not restated, except for the accumulated currency translation adjustments.

Adoption of these new recommendations resulted in the following impacts on the classification and measurement of the Company's financial instruments, which were previously recognized at cost:

–

Cash is classified as financial assets held for trading. They are measured at fair value and the gains or losses resulting from their subsequent measurements, at the end of each period, are recognized in net earnings;

–

Temporary investments included with cash equivalents are classified as held-to-maturity financial assets. They are recognized at amortized cost using the effective interest method, including any impairment. Interest calculated using the effective interest method is recognized in earnings;

–

Trade receivables, other receivables, excluding income, sales and other taxes, and loans to officers and directors are classified as loans and receivables. They are recorded at amortized cost, which upon their initial measurement is equal to their fair value. Subsequent measurement of trade receivables are recorded at amortized cost, which usually corresponds to the amount initially recorded less any allowance for doubtful accounts. Subsequent measurements of other receivables are recorded at amortized cost using the effective interest method, including any impairment;

–

Bank indebtedness and accounts payable and accrued liabilities are classified as other financial liabilities. They are measured at amortized cost using the effective interest method and the gains and losses resulting from their subsequent measurement, at the end of each period, are recognized in net earnings;

–

Long-term debt is classified as other financial liabilities. It is measured at amortized cost using the effective interest method, which is the amount on initial recognition net of the accumulated amortization of the related debt issue expenses incurred at the time the long-term debt was issued. The amount upon initial recognition corresponds to the notional amount of the long-term debt less the related debt issue expenses. Previously, the long-term debt was measured at cost and the debt issue expenses were included in the Company’s consolidated balance sheet under the caption “Other assets” and were amortized on a straight-line basis over the term of the related long-term debt;

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–

The Company recognizes as separate assets and liabilities derivatives embedded in hybrid instruments issued, acquired or substantially modified by the Company as of January 1, 2003, when the hybrid instruments are not recognized as held for trading and are still in effect as at January 1, 2007. Embedded derivatives that are not closely related to the host contract must be separated and classified as held-for-trading financial instruments; they are then measured at fair value and changes in fair value are recognized in net earnings. The Company has not identified any embedded derivatives that should be separated from the host contracts as at January 1, 2007.

Section 3865 describes when and how hedge accounting may be applied. The adoption of hedge accounting is optional. It offers entities the possibility of applying different reporting options than those set out in Section 3855, to qualifying transactions that they elect to designate as hedges for accounting purposes. Following the adoption of Section 3865, the Company continued applying hedge accounting to its cash flow hedge relationship related to its interest rate risk of its interest payments using interest rate swap agreements. These derivatives are measured at fair value at the end of each period and the gains or losses resulting from subsequent measurements are recognized in other comprehensive income when the hedge relationship is deemed effective. Any ineffective portion is recognized in net earnings.

The adoption of these new standards translated into the following changes as at January 1, 2007: a $1.1 million increase in accumulated other comprehensive income, a $1.8 million increase in derivative financial instruments reported within “Other assets”, a $0.9 million decrease in future income tax assets, a $0.6 million decrease in long-term debt and a $0.4 million decrease in deficit. The adoption of these new standards has no impact on the Company’s cash flows. For the year ended December 31, 2007, the Company recognized an unrealized loss of $2.6 million ($1.6, net of related future income taxes), under other comprehensive income representing the effective portion of the change in fair value of the interest rate swap agreements, with an amount of $0.8 million being recognized as derivative financial instruments on the balance sheet and an increase in future income tax assets of $0.3 million. In add ition, the adoption of these new standards resulted in a decrease in financial expenses of $0.3 million, an increase in net earnings of $0.2 million and an inconsequential impact on both basic and diluted earnings per share.

Impact of Accounting Pronouncements Not Yet Implemented

Canadian GAAP

Financial Instruments – Disclosures

In December 2006, the CICA published Section 3862, “Financial Instruments – Disclosures”, which is effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2007. This section describes the required disclosures for the assessment of the significance of financial instruments for an entity’s financial position and performance and of the nature and extent of risks arising from financial instruments to which the entity is exposed and how the entity manages those risks. This section and Section 3863, “Financial Instruments – Presentation” will replace Section 3861, “Financial Instruments – Disclosure and Presentation”. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

Financial Instruments – Presentation

In December 2006, the CICA also published Section 3863, “Financial Instruments – Presentation”, which is effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2007. This section establishes standards for presentation of financial instruments and non-financial derivatives. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

Capital Disclosures

In December 2006, the CICA published new Section 1535, “Capital Disclosures”, which is effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. This section establishes standards for disclosing information about an entity’s capital and how it is managed. It describes the disclosure requirements of the entity’s objectives, policies and processes for managing capital, the quantitative data relating to what the entity regards as capital, whether the entity has complied with capital requirements, and, if it has not complied, the consequences of such non-compliance. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

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Inventories

In June 2007, the CICA published Section 3031, "Inventories", which replaces Section 3030 of the same title. The new section provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.

The changes to this section affect the following, in particular:

–

Certain costs, such as storage costs and general and administrative expenses that do not contribute to bringing the inventories to their present location and condition, are precisely excluded from the cost of inventories and expensed during the year in which they are incurred;

–

The reversal of the write-down to net realization value amounts when there is a subsequent increase in the value of the inventories is now required;

–

The valuation of inventory at the lower of cost and replacement cost is no longer allowed;

–

The new standard also requires additional disclosures.

This new standard is effective for interim and annual financial statements for fiscal years beginning on or after January 1, 2008 and the Company will implement it as of January 1, 2008. The Company's management has determined that the impact of the application of this new standard will have no significant impact on the Company’s financial results upon adoption.

Goodwill and intangible assets

In February 2008, the CICA published new Section 3064, “Goodwill and Intangible Assets”. This section replaces Goodwill and Other Intangible Assets, Section 3062, and Research and Development Costs, Section 3450, and establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. In addition, Section 1000, “Financial Statement Concepts” was amended to clarify the criteria for recognition of an asset. Finally, once a company adopts this new section it may no longer apply the guidance in EIC Abstract 27, “Revenues and Expenditures during the Pre-Operating Period”.

This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008 and the Company will implement it as of January 1, 2009. The Company does not anticipate that the application of this new standard will have an impact on the Company’s financial results.

US GAAP

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 replaces the different definitions of fair value in accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for fair value measurements already required or permitted by other standards for financial statements issued for fiscal years after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact SFAS 157 will have on its consolidated financial statements.

Fair Value Option for Financial Assets and Financial Liabilities

In April 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities.  This statement's objective is to improve financial reporting by allowing entities to mitigate volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting provisions.  Under SFAS No. 159, entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date.  The new statement establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity's election on its earnings.  SFAS No. 159 is effective for the Company as of the beginning of the 2008 fiscal year.  The Company is currently evaluating the impact resulting from the adoption of SFAS No. 159.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations.  This Statement replaces SFAS No. 141, Business Combinations.  This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 labels as the “purchase method”) be used for all business combinations and for an acquirer to be

24

identified for each business combination.  This Statement also establishes principles and requirements for how the acquirer:  a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after the Company's fiscal year beginning January 1, 2009.  While the Company has not yet evaluated this statement for the impact, if any, which SFAS No. 141(R) will have on its consolidated financial statements, under SFAS No. 141(R), the Company will be requir ed to expense costs related to any acquisitions after January 1, 2009.

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements.  This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company's fiscal year beginning January 1, 2008. The Company is currently evaluating the impact, if any, that SFAS No. 160 will have on its consolidated financial statements.

Disclosure Controls and Internal Control over Financing Reporting

The Executive Director and Chief Financial Officer of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of December 31, 2007. They concluded based on such evaluation that, as at December 31, 2007, the Company maintained in all material respects, effective disclosure controls and procedures and internal control over financial reporting to ensure that material information regarding this MD&A and other required filings were made known to them on a timely basis.

The Executive Director and Chief Financial Officer have also reviewed whether any change in the Company’s internal control over financial reporting occurred during 2007 that materially affected, or was reasonably likely to materially affect, the Company’s internal controls over financial reporting and concluded that there was none.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Disclosure Required by the NYSE

A summary of the significant ways that the corporate governance practices of the Company differs from that of a US Company is available on the Company’s website: www.intertapepolymer.com under “Investor Relations”.

Additional Information

Additional information relating to IPG, including its Annual Information Form, is filed on SEDAR at www.sedar.com in Canada and on EDGAR at www.sec.gov in the US.

ORLDOCS 11158852 1

25

EX-2

Intertape Polymer Group Inc. Consolidated Financial statements December 31, 2007 and 2006
Management’s Responsibility for Financial Statements	2 – 3
Management’s Report on Internal Control over Financial Reporting	4 – 5
Independent Auditors’ Report	6 – 7
Comments by Independent Auditors for U.S. Readers on Canada – U.S. Reporting Difference	8
Independent Auditors’ Report on Internal Control over Financial Reporting	9 – 10
Financial Statements
Consolidated Earnings	11
Consolidated Comprehensive Income (Loss)	12
Consolidated Shareholders’ Equity	13
Consolidated Cash Flows	14
Consolidated Balance Sheets	15
Notes to Consolidated Financial Statements	16 – 71

Management’s Responsibility for Financial Statements

The consolidated financial statements of Intertape Polymer Group Inc. and the other financial information are the responsibility of the Company’s management and have been examined and approved by its Board of Directors. These consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles and include some amounts that are based on management’s best estimates and judgments. The selection of accounting principles and methods is management’s responsibility.

Management is responsible for the design, establishment and maintenance of appropriate internal controls and procedures over financial reporting, to ensure that financial statements for external purposes are fairly presented in conformity with generally accepted accounting principles. Pursuant to these internal controls and procedures, processes have been designed to ensure that the Company’s transactions are properly authorized, the Company’s assets are safeguarded against unauthorized or improper use, and the Company’s transactions are properly recorded and reported to permit the preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles.

Management recognizes its responsibility for conducting the Company’s affairs in a manner to comply with the requirements of applicable laws and established financial standards and principles, and for maintaining proper standards of conduct in its activities.

The Board of Directors assigns its responsibility for the consolidated financial statements and other financial information to the Audit Committee, all of whom are non-management and unrelated directors.

3

The Audit Committee’s role is to examine the consolidated financial statements and annual report and recommend that the Board of Directors approve them, to examine the internal control and information protection systems and all other matters relating to the Company’s accounting and finances. In order to do so, the Audit Committee meets periodically with the external auditors to review their audit plans and discuss the results of their examination. The Audit Committee is also responsible for recommending the appointment of the external auditors or the renewal of their engagement.

The Company’s external independent auditors, Raymond Chabot Grant Thornton LLP were appointed by the shareholders at the Annual and Special Meeting of Shareholders on June 28, 2007, to conduct the integrated audit of the Company’s consolidated financial statements and the Company’s internal control over financial reporting. Their reports indicating the scope of their audit and their opinion on the consolidated financial statements and the Company’s internal control over financial reporting follow.

/S/ Melbourne F. Yull

Melbourne F. Yull
Executive Director

/S/ Victor DiTommaso

Victor DiTommaso
Chief Financial Officer

Sarasota/Bradenton, Florida and Montreal, Canada
March 28, 2008

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting as well as the preparation of financial statements for external reporting purposes in accordance with Canadian generally accepted accounting principles, including a reconciliation of accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective can only provide reasonable assurance with respect to financial statements preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of completeness with policies or procedures may deteriorate.

5

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2007 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that the Company’s internal control over financial reporting was effective as at December 31, 2007 based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as at December 31, 2007 has been audited by Raymond Chabot Grant Thornton LLP, the Company’s independent auditors, as stated in their report which follows.

/S/ Melbourne F. Yull

Melbourne F. Yull
Executive Director

/S/ Victor DiTommaso

Victor DiTommaso
Chief Financial Officer

Sarasota/Bradenton, Florida and Montreal, Canada
March 28, 2008

Raymond Chabot Grant Thornton LLP Chartered Accountants Raymond Chabot Grant Thornton

Independent Auditors’ Report

To the Shareholders of

We have audited the consolidated balance sheets of Intertape Polymer Group Inc. as at December 31, 2007 and 2006 and the consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

With respect to the financial statements for the year ended December 31, 2007, we conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). With respect to the financial statements for the years ended December 31, 2006 and 2005, we conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles.

www.rcgt.com

Member of Grant Thornton International

7

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as at December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 28, 2008 expressed an unqualified opinion thereon.

/S/ Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montreal, Canada
March 28, 2008

Raymond Chabot Grant Thornton LLP Chartered Accountants Raymond Chabot Grant Thornton

Comments by Independent Auditors for U.S. Readers on Canada - U.S. Reporting Difference

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there are changes in accounting principles that have a material effect on the comparability of the Company’s financial statements, such as the changes described in Note 2 to the consolidated financial statements. Our report to the shareholders on the consolidated financial statements of the Company dated March 28, 2008 is expressed in accordance with Canadian reporting standards, which do not require a reference to such change in accounting principles in the auditors’ report when the change is properly accounted for and adequately disclosed in the consolidated financial statements.

/S/ Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montreal, Canada
March 28, 2008

www.rcgt.com

Member of Grant Thornton International

Raymond Chabot Grant Thornton LLP Chartered Accountants Raymond Chabot Grant Thornton

Independent Auditors’ Report on Internal Control over Financial Reporting

To the Shareholders of

We have audited Intertape Polymer Group Inc.’s (the “Company”) internal control over financial reporting as at December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on assessed risk and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally

www.rcgt.com

Member of Grant Thornton International

10

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at December 31, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with Canadian generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as at December 31, 2007 and the consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for the year then ended and audited, in accordance with Canadian generally accepted auditing standards, the consolidated balance sheet of the Company as at December 31, 2006 and the consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2006 and our report dated March 28, 2008 expressed an unqualified opinion on those financial statements and included a separate report entitled “Comments by Independent Auditors for U.S. Readers on Canada
50; U.S. Reporting Difference” referring to a change in accounting principle.

/S/ Raymond Chabot Grant Thornton LLP

Chartered Accountants

Montreal, Canada
March 28, 2008

11

Consolidated Earnings

Years ended December 31, 2007, 2006 and 2005

(In thousands of US dollars, except per share amounts)

	2007	2006	2005
	$	$	$
Sales	767,272	812,285	776,015
Cost of sales	652,865	694,693	635,845
Gross profit	114,407	117,592	140,170
Selling, general and administrative expenses	71,169	84,903	78,985
Stock-based compensation expense	1,780	2,022	1,911
Research and development expenses	4,135	6,271	4,725
Financial expenses	25,285	25,746	23,799
Manufacturing facility closures, restructuring, strategic  alternatives, and other charges (Note 4)	8,114	76,057	1,431
Impairment of goodwill		120,000
	110,483	314,999	110,851
Earnings (loss) before income taxes	3,924	(197,407)	29,319
Income taxes (recovery) (Note 5)	12,317	(30,714)	1,528
Net earnings (loss)	(8,393)	(166,693)	27,791
Earnings (loss) per share (Note 6)
Basic	(0.19)	(4.07)	0.67
Diluted	(0.19)	(4.07)	0.67

The accompanying notes are an integral part of the consolidated financial statements and Note 3 provides additional information on consolidated earnings.

12

Consolidated Comprehensive Income (Loss)

Years ended December 31, 2007, 2006 and 2005

(In thousands of US dollars)

	2007	2006	2005
	$	$	$
Net earnings (loss)	(8,393)	(166,693)	27,791
Other comprehensive income
Change in fair value of interest rate swap agreements,  designated as cash flow hedges (net of future  income taxes of $964)	(1,641)
Changes in accumulated currency translation  adjustments	31,824	2,311	2,645
Other comprehensive income	30,183	2,311	2,645
Comprehensive income (loss) for the year	21,790	(164,382)	30,436

The accompanying notes are an integral part of the consolidated financial statements.

13

Consolidated Shareholders’ Equity

Years ended December 31, 2007, 2006 and 2005

(In thousands of US dollars, except for number of common shares)

	Common shares			Contributed surplus	Retained earnings (deficit)			Accumulated other  comprehensive income	Total shareholders’ equity
	Number	Amount
		$		$	$			$	$
Balance as at December 31, 2004	41,236,961		289,180	4,326		79,609	31,185		404,300
Escrowed shares reacquired (Note 7)	(250,587)		(1,757)			(223)			(1,980)
Shares purchased for cancellation	(46,300)		(324)						(324)
Shares issued for cash upon exercise of stock options	17,500		88						88
Stock-based compensation expense				1,911					1,911
Net earnings						27,791			27,791
Premium on purchase for cancellation of common  shares						(16)			(16)
Changes in accumulated currency translation  adjustments							2,645		2,645
Balance as at December 31, 2005	40,957,574		287,187	6,237		107,161	33,830		434,415
Shares issued for cash upon exercise of stock options	29,366		136						136
Stock-based compensation expense				2,022					2,022
Accelerated vesting of stock options (Note 4)				1,527					1,527
Net loss						(166,693)			(166,693)
Changes in accumulated currency translation adjustments							2,311		2,311
Balance as at December 31, 2006	40,986,940		287,323	9,786		(59,532)	36,141		273,718
Cumulative impact of accounting changes relating to  financial instruments and hedges (Note 2)						443	1,138		1,581
Balance as at December 31, 2006, as restated	40,986,940		287,323	9,786		(59,089)	37,279		275,299
Shares issued pursuant to shareholders’ rights offering  (Note 15)	17,969,408		60,851						60,851
Stock-based compensation expense				1,780					1,780
Accelerated vesting of stock options (Note 4)				290					290
Net loss						(8,393)			(8,393)
Change in fair value of interest rate swap agreements,  designated as cash flows hedges  (net of future  income taxes of $964)							(1,641)		(1,641)
Changes in accumulated currency translation  adjustments							31,824		31,824
Balance as at December 31, 2007	58,956,348		348,174	11,856		(67,482)	67,462		360,010

The accompanying notes are an integral part of the consolidated financial statements.

14

Consolidated Cash Flows

Years ended December 31, 2007, 2006 and 2005

(In thousands of US dollars)

	2007	2006	2005
OPERATING ACTIVITIES	$	$	$
Net earnings (loss)	(8,393)	(166,693)	27,791
Non-cash items
Depreciation and amortization	38,902	36,622	31,131
Impairment of goodwill		120,000
Loss on disposal of property, plant and equipment	460	925
Property, plant and equipment impairment and other charges in connection  with manufacturing facility closures, restructuring, strategic alternatives and  other charges	1,373	49,382	299
Future income taxes	11,439	(32,262)	714
Insurance claim			(3,679)
Stock-based compensation expense	1,780	2,022	1,911
Pension and post-retirement benefits funding in excess of amounts expensed	(2,356)	(195)	(479)
Other non-cash items		(435)
Cash flows from operations before changes in non-cash working capital items	43,205	9,366	57,688
Changes in non-cash working capital items
Trade receivables	9,545	27,725	(10,750)
Other assets and receivables	(791)	7,667	535
Inventories	(18,736)	27,783	(1,366)
Parts and supplies	(817)	(770)	(1,145)
Prepaid expenses	515	4,514	(95)
Accounts payable and accrued liabilities	4,835	(22,676)	(12,500)
	(5,449)	44,243	(25,321)
Cash flows from operating activities	37,756	53,609	32,367
INVESTING ACTIVITIES
Temporary investment			489
Property, plant and equipment	(18,470)	(27,090)	(24,026)
Proceeds on the disposal of property, plant and equipment	1,376	3,447
Business acquisitions (Note 7)		(167)	(28,118)
Other assets	(1,308)	(5,448)	(3,852)
Goodwill	(300)	(298)	(300)
Cash flows from investing activities	(18,702)	(29,556)	(55,807)
FINANCING ACTIVITIES
Net change in bank indebtedness		(15,000)	15,000
Long-term debt	73	792
Debt issue expenses	(2,269)
Repayment of long-term debt	(80,738)	(2,920)	(3,032)
Issue of common shares		136	88
Proceeds from shareholders’ rights offering	62,753
Shareholders’ rights offering costs	(1,902)
Common shares purchased for cancellation			(340)
Cash flows from financing activities	(22,083)	(16,992)	11,716
Net increase (decrease) in cash and cash equivalents	(3,029)	7,061	(11,724)
Effect of foreign currency translation adjustments	1,259	104	(24)
Cash and cash equivalents, beginning of year	17,299	10,134	21,882
Cash and cash equivalents, end of year	15,529	17,299	10,134
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Interest paid	25,513	26,209	22,510
Income taxes paid	378	1,877	1,446

The accompanying notes are an integral part of the consolidated financial statements.

15

Consolidated Balance Sheets

December 31, 2007 and 2006

(In thousands of US dollars)

	2007	2006
	$	$
ASSETS
Current assets
Cash and cash equivalents	15,529	17,299
Trade receivables	91,427	97,199
Other receivables (Note 8)	2,970	1,900
Inventories (Note 9)	99,482	75,379
Parts and supplies	13,356	12,090
Prepaid expenses	3,522	3,912
Future income taxes (Note 5)	11,231	13,689
	237,517	221,468
Property, plant and equipment (Note 10)	317,866	322,867
Other assets (Note 11)	23,176	26,901
Future income taxes (Note 5)	53,990	57,404
Goodwill (Note 12)	70,250	63,746
	702,799	692,386
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	88,866	80,240
Instalments on long-term debt	3,074	19,743
	91,940	99,983
Long-term debt (Note 14)	240,285	310,734
Pension and post-retirement benefits (Note 17)	9,765	7,951
Derivative financial instruments	799
	342,789	418,668
SHAREHOLDERS’ EQUITY
Capital stock	348,174	287,323
Contributed surplus	11,856	9,786
Deficit	(67,482)	(59,532)
Accumulated other comprehensive income (Note 16)	67,462	36,141
	(20)	(23,391)
	360,010	273,718
	702,799	692,386

The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board,
/S/ George Bunze	/S/ Allan Cohen
George Bunze, Director	Allan Cohen, Director

16

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

1 - GOVERNING STATUTES AND NATURE OF OPERATIONS

Intertape Polymer Group Inc., (the “Company”) incorporated under the Canada Business Corporations Act, is based in Montréal, Canada and in Sarasota/Bradenton, Florida and develops, manufactures and sells a variety of specialized polyolefin films, paper and film pressure sensitive tapes and complimentary packaging systems for use in industrial and retail applications.

The common shares of the Company are listed on the New York Stock Exchange in the United States of America (“United States” or “US”) and on the Toronto Stock Exchange in Canada.

2 - ACCOUNTING POLICIES

The consolidated financial statements are expressed in US dollars and were prepared in accordance with Canadian generally accepted accounting principles (“GAAP”), which, in certain respects, differ from the accounting principles generally accepted in the United States, as shown in Note 23.

Reclassification

Certain amounts have been reclassified from prior years to conform to the current year presentation.

Accounting changes

Year ended December 31, 2007

Accounting Changes

On January 1, 2007, in accordance with the applicable transitional provisions, the Company applied the recommendations of new Section 1506, “Accounting Changes”, of the Canadian Institute of Chartered Accountants’ (“CICA”) Handbook. This new section, effective for the years beginning on or after January 1, 2007, prescribes the criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. Furthermore, the new standard requires the communication of the new primary sources of GAAP that are issued but not yet effective or not yet adopted by the Company. The adoption of the new standard had no impact on the Company’s financial results.

Financial Instruments, Hedges and Equity

On January 1, 2007, in accordance with the applicable transitional provisions, the Company adopted the new recommendations in Sections 3855, "Financial Instruments – Recognition and Measurement", 1530, "Comprehensive Income", 3861, "Financial Instruments – Disclosure and Presentation", 3865, "Hedges", and 3251, "Equity", of the CICA Handbook.

17

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 – ACCOUNTING POLICIES (Continued)

Sections 3855 and 3861 deal with the recognition, measurement, presentation and disclosure of financial instruments and non-financial derivatives in the financial statements. The transitional provisions of these sections require that the Company remeasure the financial assets and liabilities as appropriate at the beginning of its fiscal year. Any adjustment of the previous carrying amount is recognized as an adjustment of the balance of retained earnings at the beginning of the fiscal year of initial application or as an adjustment of the opening balance of a separate component of accumulated other comprehensive income, as appropriate. The financial statements of prior fiscal years are not restated.

Section 1530 requires the presentation of comprehensive income and its components in a new financial statement and establishes standards for reporting and display of comprehensive income. Comprehensive income is the change in the Company’s net assets that result from transactions, events and circumstances from sources other than the Company’s shareholders. It also includes revenues, expenses, gains and losses that, in accordance with primary sources of GAAP are recognized in comprehensive income, but excluded from net earnings. Section 3251 establishes standards for the presentation of equity and changes in equity during the reporting fiscal year. Pursuant to the transitional provisions of these sections, the Company's financial statements of prior fiscal years are not restated, except for the accumulated currency translation adjustments.

Adoption of these new recommendations resulted in the following impacts on the classification and measurement of the Company's financial instruments, which were previously recognized at cost:

–

Cash is classified as financial assets held for trading. It is measured at fair value and the gains or losses resulting from its subsequent measurements, at the end of each period, are recognized in net earnings;

–

Temporary investments included with cash equivalents are classified as held-to-maturity financial assets. They are recognized at amortized cost using the effective interest method, including any impairment. Interest calculated using the effective interest method is recognized in earnings;

–

Trade receivables, other receivables, excluding income, sales and other taxes, and loans to officers and directors are classified as loans and receivables. They are recorded at amortized cost, which upon their initial measurement is equal to their fair value. Subsequent measurement of trade receivables are recorded at amortized cost, which usually corresponds to the amount initially recorded less any allowance for doubtful accounts. Subsequent measurements of other receivables are recorded at amortized cost using the effective interest method, including any impairment;

–

Bank indebtedness and accounts payable and accrued liabilities are classified as other financial liabilities. They are measured at amortized cost using the effective interest method and the gains and losses resulting from their subsequent measurement, at the end of each period, are recognized in net earnings;

18

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 – ACCOUNTING POLICIES (Continued)

–

Long-term debt is classified as other financial liabilities. It is measured at amortized cost using the effective interest method, which is the amount on initial recognition net of the accumulated amortization of the related debt issue expenses incurred at the time the long-term debt was issued. The amount recorded upon initial recognition corresponds to the notional amount of the long-term debt less the related debt issue expenses. Previously, the long-term debt was measured at cost and the debt issue expenses were included in the Company’s consolidated balance sheet under the caption “Other assets” and were amortized on a straight-line basis over the term of the related long-term debt;

–

The Company recognizes as separate assets and liabilities derivatives embedded in hybrid instruments issued, acquired or substantially modified by the Company as of January 1, 2003, when the hybrid instruments are not recognized as held for trading and are still in effect as at January 1, 2007. Embedded derivatives that are not closely related to the host contract must be separated and classified as held-for-trading financial instruments; they are then measured at fair value and changes in fair value are recognized in net earnings. The Company has not identified any embedded derivatives that should be separated from the host contracts as at January 1, 2007.

Section 3865 describes when and how hedge accounting may be applied. The adoption of hedge accounting is optional. It offers entities the possibility of applying different reporting options than those set out in Section 3855, to qualifying transactions that they elect to designate as hedges for accounting purposes. Following the adoption of Section 3865, the Company continued applying hedge accounting to its cash flow hedge relationship related to its interest rate risk of its interest payments using interest rate swap agreements. These derivatives are measured at fair value at the end of each period and the gains or losses resulting from subsequent measurements are recognized in other comprehensive income when the hedge relationship is deemed effective. Any ineffective portion is recognized in net earnings.

The adoption of these new standards resulted in the following changes as at January 1, 2007: a $1.1 million increase in accumulated other comprehensive income, a $1.8 million increase in derivative financial instruments reported within “Other assets”, a $0.9 million decrease in future income tax assets, a $0.6 million decrease in long-term debt and a $0.4 million decrease in deficit. The adoption of these new standards has no impact on the Company’s cash flows. For the year ended December 31, 2007, the Company recognized an unrealized loss of $2.6 million ($1.6 million, net of related future income taxes), under other comprehensive income representing the change in fair value of the effective portion of the interest rate swap agreements, with an amount of $0.8 million being recognized as derivative financial instruments on the balance sheet and an increase in future income tax assets of $0.3 million. I n addition, the adoption of these new standards resulted in a decrease in financial expenses of $0.3 million, an increase in net earnings of $0.2 million and an inconsequential impact on both basic and diluted earnings per share.

19

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 – ACCOUNTING POLICIES (Continued)

Year ended December 31, 2006

Accounting by a vendor for considerations given to a customer

During the year ended December 31, 2006, the Company adopted the CICA Emerging Issues Committee (“EIC”) Abstract No. 156 “Accounting by a vendor for considerations given to a customer (including a reseller of the vendor’s products)”. This EIC Abstract requires that consideration given to a customer by a vendor be classified as a reduction of revenue when recognized in the vendor’s income statement. Consideration refers to sales incentives, discounts, coupons, rebates and price reductions amongst others. As a result, the Company retroactively reclassified $19.5 million and $25.8 million of rebates, discounts and allowances historically included with selling, general and administrative expenses as a reduction of sales for the years ended December 31, 2006 and 2005, respectively.

Accounting estimates

The preparation of the consolidated financial statements in accordance with Canadian GAAP requires management to make estimates and assumptions that affect the recorded amount of assets and liabilities and disclosure of contingent assets and liabilities as at the balance sheet date and the recorded amounts of revenues and expenses during the year then ended. On an ongoing basis, management reviews its estimates based on currently available information. Actual results may differ from those estimates.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated.

Derivative financial instruments

Derivative financial instruments are utilized by the Company to reduce interest rate risk on its debt. The Company does not enter into derivative financial instruments for trading or speculative purposes.

The Company’s policy is to formally designate each derivative financial instrument as a hedge of a specifically identified debt instrument. The Company believes that the derivative financial instruments are effective as hedges, both at inception and over the term of the instrument, as the term to maturity, the principal amount and the interest rate basis in the instruments all match the terms of the debt instrument being hedged.

Interest rate swap agreements are used as part of the Company’s program to manage the floating interest rate mix of the Company’s total debt portfolio and related overall cost of borrowing. The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional principal amount upon which the payments are based, and are recorded as an adjustment of interest expense on the hedged debt instrument. The related amount payable to or receivable from counterparties is included as an adjustment to accrued interest.

20

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 – ACCOUNTING POLICIES (Continued)

The fair value of the interest rate swap agreements designated as cash flow hedges that are determined to be effective hedges and the subsequent changes in such fair value are recognized in other comprehensive income. The ineffective portion of the changes in fair value of the interest rate swap agreements are recognized in earnings. In addition, the accumulated changes in fair value of the interest rate swap agreements, included in accumulated other comprehensive income, are recognized in earnings as the hedged items affect earnings.

Foreign currency translation

Reporting currency

The accounts of the Company’s operations having a functional currency other than the US dollar have been translated into the reporting currency using the current rate method as follows: assets and liabilities have been translated at the exchange rate in effect at the balance sheet date and revenues and expenses have been translated at the average rate during the year then ended. All translation gains or losses of the Company’s net equity investments in these operations have been included in accumulated other comprehensive income in the consolidated balance sheet.

Foreign currency translation

Transactions denominated in currencies other than the functional currency have been translated into the functional currency as follows: monetary assets and liabilities have been translated at the exchange rate in effect at the end of each year and revenues and expenses have been translated at the average exchange rate for each year, except for depreciation and amortization which are translated at the historical rate; non-monetary assets and liabilities have been translated at the rates prevailing at the transaction dates. Exchange gains or losses on financial assets and liabilities are recognized in earnings, except for exchange gains or losses on available-for-sale financial assets. Exchange gains or losses on available-for-sale financial assets are considered in the changes in fair value of available-for-sale financial assets and are included in other comprehensive income.

Revenue recognition

Revenue from product sales is recognized when there is persuasive evidence of an arrangement, the amount is fixed or determinable, delivery of the product to the customer has occurred, there are no uncertainties surrounding product acceptance and collection of the amount is considered probable. Title to the product generally passes upon shipment of the product. Sales returns and allowances are treated as reductions to sales and are provided for based on historical experience and current estimates.

Research and development

Research and development expenses are expensed as they are incurred, net of any related investment tax credits, unless the criteria for capitalization of development expenses in accordance with Canadian GAAP are met.

21

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 – ACCOUNTING POLICIES (Continued)

Stock option plan

The Company has a stock-based compensation plan that grants stock options to employees and directors. Stock-based compensation expense is recognized over the vesting period of the options granted. Any consideration paid by employees and directors on exercise of stock options is credited to capital stock together with any related stock-based compensation expense originally recorded in contributed surplus. Forfeitures are estimated at the time of the grant and are subsequently adjusted to reflect actual events.

Comprehensive income

Components of comprehensive income include net earnings, changes in accumulated currency translation adjustments, changes in the fair value of interest rate swap agreements designated as cash flow hedges (net of related tax effects) and changes in fair value of available-for-sale financial assets (net of related tax effects).

Earnings per share

Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. Diluted earnings per share are calculated using the treasury stock method giving effect to the exercise of options. The treasury stock method assumes that any proceeds that could be obtained upon the exercise of options would be used to repurchase common shares at the average market price during the year.

Cash and cash equivalents

The Company’s policy is to present cash and temporary investments having a term of three months or less from the acquisition date with cash and cash equivalents.

Accounts receivable

Credit is extended based on evaluation of a customer’s financial condition and generally, collateral is not required. Accounts receivable are stated at amounts due from customers based on agreed upon payment terms net of an allowance for doubtful accounts. Accounts outstanding longer than the agreed upon payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible and any payments subsequently received on such receivable are credited to the allowance for doubtful accounts.

22

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Inventories and parts and supplies valuation

Raw materials are valued at the lower of cost and replacement cost. Work in process and finished goods are valued at the lower of cost and net realizable value. Cost is principally determined by the first in, first out method. The cost of work in process and finished goods includes the cost of raw materials, direct labour and manufacturing overhead.

Parts and supplies are valued at the lower of cost and replacement cost.

Property, plant and equipment

Property, plant and equipment are stated at cost less applicable investment tax credits and government grants earned and are depreciated over their estimated useful lives according to the following methods, annual rates and periods:

	Methods	Rates and Periods
Buildings and building under capital lease	Diminishing balance or straight-line	5% or 15 to 40 years
Manufacturing equipment	Straight-line	5 to 20 years
Furniture, office and computer equipment, computer equipment under capital lease, software and other	Diminishing balance or straight-line	20% or 3 to 10 years

The Company follows the policy of capitalizing interest during the construction and preproduction periods as part of the cost of significant property, plant and equipment. Normal repairs and maintenance are expensed as incurred. Expenditures which materially increase values, change capacities or extend useful lives are capitalized. Depreciation is not charged on new property, plant and equipment until they become operative.

Impairment of long-lived assets

Long-lived assets, such as property, plant and equipment are tested for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable when it exceeds the sum of the undiscounted cash flows expected from its use and eventual disposal. In such a case, an impairment loss must be recognized and is equivalent to the excess of the carrying amount of a long-lived asset over its fair value.

23

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Deferred charges

Debt issue expenses, incurred in connection with the Company’s revolving credit facility, are deferred and amortized on a straight-line basis over the term of the revolving credit facility. Other deferred charges are amortized on a straight-line basis over the period of future benefit, varying from one to five years.

Prior to January 1, 2007, debt issue expenses relating to long-term debt were deferred and amortized on a straight-line basis over the term of the related debt. Effective January 1, 2007, debt issue expenses relating to long-term debt are capitalized against long-term debt to reflect the utilization of the effective interest method instead of the straight-line method previously applied.

Goodwill

Goodwill is the excess of the cost of acquired businesses over the net of the amounts assigned to assets acquired and liabilities assumed. Goodwill is not amortized. It is tested for impairment annually or more frequently if events or changes in circumstances indicate that it is impaired. Goodwill is allocated to reporting units and any potential goodwill impairment is identified by comparing the carrying amount of a reporting unit with its fair value. If any potential impairment is identified, it is quantified by comparing the carrying amount of goodwill to its fair value. When the carrying amount of goodwill exceeds the fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. The fair value is calculated as discussed in Note 12.

Environmental costs

The Company expenses, on a current basis, recurring costs associated with managing hazardous substances and pollution in ongoing operations. The Company also accrues for the fair value of a liability for costs associated with the remediation of environmental pollution in the period in which it is incurred and when a reasonable estimate of fair value can be made.

Pension and post-retirement benefit plans

The Company has defined benefit and defined contribution pension plans and other post-retirement benefit plans for its Canadian and American employees.

The following policies are used with respect to the accounting for the defined benefit and other post-retirement benefit plans:

–

The cost of pensions and other post-retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and is charged to earnings as services are provided by the employees. The calculations take into account management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees, participants’ mortality rates and expected health care costs;

24

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

–

For the purpose of calculating the expected return on plan assets, those assets are valued at the market-related value for certain plans and for other plans, at fair value. Market-related value of assets as at December 31, is determined based on the assets market value adjusted by a certain percentage, ranging from 20% to 80%, of the assets gains (losses) from the prior four years resulting within 80% to 120% of the assets actual market value. Assets gains (losses) represent the difference between the assets market value and their expected value. The assets expected value is determined as a function of the assets prior year’s market value adjusted for contributions, benefits paid and interest rate at the valuation date.

–

Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service period of employees who are active at the date of amendment;

–

Actuarial gains (losses) arise from the difference between actual long-term rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period from changes in actuarial assumptions used to determine the accrued benefit obligation. The excess of the net actuarial gains (losses) over 10% of the greater of the benefit obligation and the market-related value or the fair value of plan assets is amortized over the average remaining service period of active employees;

–

On January 1, 2000, the Company adopted the new accounting standard on employee future benefits using the prospective application method. The Company is amortizing the transitional obligations on a straight-line basis over the average remaining service periods of employees expected to receive benefits under the benefit plans as of January 1, 2000;

–

When the restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement;

–

Defined contribution plan accounting is applied to a multiemployer defined benefit plan for which the Company has insufficient information to apply defined benefit plan accounting.

Income taxes

The Company provides for income taxes using the liability method of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the financial statement values and tax values of assets and liabilities, using substantially enacted income tax rates expected to be in effect for the year in which the differences are expected to reverse. A valuation allowance is recognized to the extent the recoverability of future income tax assets is not considered to be more likely than not.

25

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

New accounting pronouncements not yet implemented

The CICA has issued the following new Handbook Sections:

Financial Instruments – Disclosures

In December 2006, the CICA published Section 3862, “Financial Instruments – Disclosures”, which is effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2007. This section describes the required disclosures for the assessment of the significance of financial instruments for an entity’s financial position and performance and of the nature and extent of risks arising from financial instruments to which the entity is exposed and how the entity manages those risks. This section and Section 3863, “Financial Instruments – Presentation” will replace Section 3861, “Financial Instruments – Disclosure and Presentation”. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

Financial Instruments – Presentation

In December 2006, the CICA also published Section 3863, “Financial Instruments – Presentation”, which is effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2007. This section establishes standards for presentation of financial instruments and non-financial derivatives. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

Capital Disclosures

In December 2006, the CICA published new Section 1535, “Capital Disclosures”, which is effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. This section establishes standards for disclosing information about an entity’s capital and how it is managed. It describes the disclosure requirements of the entity’s objectives, policies and processes for managing capital, the quantitative data relating to what the entity regards as capital, whether the entity has compiled with capital requirements, and, if it has not complied, the consequences of such non-compliance. The Company will implement this new standard as of January 1, 2008. This new standard only addresses disclosure and will have no impact on the Company’s financial results.

26

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

2 - ACCOUNTING POLICIES (Continued)

Inventories

In June 2007, the CICA published Section 3031, "Inventories", which replaces Section 3030 of the same title. The new section provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.

The new section affects the following, in particular:

–

Certain costs, such as storage costs and general and administrative expenses that do not contribute to bringing the inventories to their present location and condition, are excluded from the cost of inventories and expensed during the year in which they are incurred;

–

The reversal of the write-down to net realizable value amounts when there is a subsequent increase in the value of the inventories is now required;

–

The valuation of inventory at the lower of cost and replacement cost is no longer allowed;

–

The new standard also requires additional disclosures.

This new standard is effective for interim and annual financial statements for fiscal years beginning on or after January 1, 2008 and the Company will implement it as of January 1, 2008. The Company's management has determined that the impact of the application of this new standard will have no significant impact on the Company’s financial results upon adoption.

Goodwill and intangible assets

In February 2008, the CICA published new Section 3064, “Goodwill and Intangible Assets”. This section which replaces Goodwill and Other Intangible Assets, Section 3062, and Research and Development Costs, Section 3450, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. In addition, Section 1000, “Financial Statement Concepts” was amended to clarify the criteria for recognition of an asset. Finally, once a company adopts this new section it may no longer apply the guidance in EIC Abstract 27, “Revenues and Expenditures during the Pre-Operating Period”.

This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2008 and the Company will implement it as of January 1, 2009. The Company does not anticipate that the application of this new standard will have a material impact on the Company’s financial results upon adoption.

27

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS

	2007	2006	2005
	$	$	$
Financial expenses
Interest on long-term debt	24,856	25,476	22,506
Amortization of debt issue expenses on long-term debt	2,646	989	992
Interest on credit facilities	237	913	751
Amortization of debt issue expenses on credit facilities	698	371	372
Interest capitalized to property, plant and equipment	(1,012)	(1,093)	(1,035)
Foreign exchange loss (gain)	(996)	(553)	250
Interest income and other	(1,144)	(357)	(37)
	25,285	25,746	23,799
Depreciation of property, plant and equipment	35,313	34,934	29,519
Amortization of other deferred charges	245	328	248
Impairment of property, plant and equipment		32,168	483
Loss on disposal of property, plant and equipment	460	925
Investment tax credits recorded as a reduction of  research and development expenses	355		91

28

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 - MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER CHARGES

Year ended December 31, 2007

The following table is a description of the significant charges incurred by the Company in connection with its strategic alternative process restructuring and the retirement of the interim Chief Executive Officer and Chief Financial Officer, included in the Company’s consolidated statement of earnings for the year ended December 31, 2007 under the caption “Manufacturing facility closures, restructuring, strategic alternatives and other charges”.

		Manufacturing facility closures
			Severance and other labor related costs	Site restoration	Restructuring	Other charges	Total
			$	$	$	$	$
Balance as at January 1, 2007 included in  accounts payable and accrued liabilities			272	2,394	3,162	335	6,163
Staffing reductions	(a)				1,327		1,327
Strategic alternatives process	(b)					6,787	6,787
					1,327	6,787	8,114
Cash payments			272	1,140	3,308	6,832	11,552
Non-cash charges						290	290
Balance as at December 31, 2007 included in  accounts payable and accrued liabilities			-	1,254	1,181	-	2,435

29

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 -

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER COSTS (Continued)

Year ended December 31, 2007

(a)

In connection with the cost reduction initiatives commenced in 2006, the Company recorded $1.3 million in severance and other labour related costs with respect to the staffing reductions undertaken by the Company. With respect to the staffing reductions, the Company has incurred a total of $7.3 million as at December 31, 2007.

(b)

At the annual and special meeting of shareholders held on June 28, 2007, shareholders rejected, by a vote of approximately 70%, a special resolution providing for the sale of all the outstanding common shares of the Company, thereby terminating the strategic alternative process, which commenced in the late part of 2006. In connection with the strategic alternative process and the termination thereof, the Company recorded a charge of approximately $5.5 million, bringing the total related cost to approximately $6.1 million. The $5.5 million incurred in 2007 is comprised of a $1.8 million termination fee paid to the rejected acquirer and $3.7 million paid in professional fees and other charges associated with the process.

In addition, the Company’s Interim Chief Executive Officer retired in the second half of 2007. In connection with his retirement, the Company recorded a charge of approximately $1.1 million including $0.1 million in stock-based compensation expense and $1.0 representing the recognition of the balance of his pension obligation. In addition, the Company’s Chief Financial Officer retired on June 30, 2007. In regards to his retirement, the Company recorded a charge of approximately $0.2 million in stock-based compensation expense.

The Company has substantively completed all announced restructurings and plant closures, as well as strategic alternative activities and it does not expect any additional costs in future periods with respect to such initiatives.

30

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 -

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER COSTS (Continued)

Year ended December 31, 2006

The following table describes the significant charges incurred by the Company in connection with its restructuring efforts, included in the Company’s consolidated statement of earnings for the year ended December 31, 2006 under the caption “Manufacturing facility closures, restructuring, strategic alternatives and other charges”.

		Manufacturing Facility Closures
		Impairment of long-lived assets	Severance and other labor related costs	Site Resto­ration	Inventory	Other	Restruc­turing	Other Charges	Total
		$	$	$	$	$	$	$	$
Piedras Negras, Mexico facility closure	(a)	961	519		1,403	326			3,209
Brighton, Colorado facility closure	(b)	22,131	1,292	2,583	3,524	649			30,179
Environmental remediation	(c)					1,480			1,480
Facilities sale	(d)					925		14	939
Gretna, Virginia facility closure	(e)	1,225	42		1,515	402			3,184
Retirement of Chief Executive Officer	(f)							9,900	9,900
Canadian income trust project	(g)							3,940	3,940
Staffing reductions and Chief Executive Officer  succession planning	(h)						6,005	1,289	7,294
Termination of corporate aircraft lease	(i)						2,515		2,515
Credit facilities amendments	(j)							1,908	1,908
Impairment of long-lived assets	(k)						7,851	176	8,027
Patent litigations	(l)							2,873	2,873
Strategic alternatives process	(m)							609	609
		24,317	1,853	2,583	6,442	3,782	16,371	20,709	76,057
Cash payments			1,581	189		2,857	5,358	9,487	19,472
Non-cash charges		24,317			6,442	925	7,851	10,887	50,422
Balance as at December 31, 2006 included in  accounts payable and accrued liabilities			272	2,394			3,162	335	6,163

31

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 -

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER COSTS (Continued)

Year ended December 31, 2006

Manufacturing facility closures

During the year ended December 31, 2006, the Company underwent significant changes including making several revisions to its business model, which included the following: (1) seeking ways to restructure its business and reduce costs to levels more proportionate with near term anticipated sales volume and gross margins; (2) expanded the use of imported products and (3) exiting of several unprofitable customer accounts and streamlining product offerings, particularly with respect to products sold to its consumer accounts. Consequently, the Company undertook the following facility closures activities during the year ended December 31, 2006:

(a)

In the first quarter of 2006, the Company closed its flexible intermediate bulk container (“FIBC”) manufacturing facility in Piedras Negras, Mexico. The total charge for closing this facility was $3.2 million, of which $2.4 million was non-cash charges resulting from the impairment charge recorded to reflect the fair value of the machinery and equipment which were idled upon closure of the facility, and inventories located in Piedras Negras in the amount of $1.0 million and $1.4 million respectively. In addition, the Company incurred $0.5 million in severance and other labour related costs in connection with the facility’s employees and $0.3 million in other costs associated with the facility closure.

(b)

The Company closed its manufacturing facility in Brighton, Colorado in early November 2006. The total costs for severance, equipment relocation and facility restoration were approximately $1.3 million, $0.6 million and $2.6 million, respectively. The Company also recorded $25.7 million in non-cash charges as an impairment to reflect the estimated recoverable value of the machinery and equipment, which were idled upon the closure of the facility and inventories located in Brighton, in the amount of $22.1 million and $3.5 million respectively.

(c)

In the second quarter of 2006, the Company recorded $1.5 million in additional remediation expenses at its Montreal manufacturing facility that was closed in December 2004. The Company had originally estimated the cost of the environmental remediation to be approximately $0.5 million. When remediation activities commenced in April 2006, the Company was notified that excavation had uncovered additional soil contamination requiring remediation in excess of the original estimate. The remediation was completed during the third quarter and in October 2006, the Company sold the property to a third party and has no residual environmental liability related to this site.

(d)

In June and July 2006, the Company sold the properties of two previously closed manufacturing facilities in Edmunston, New Brunswick and Green Bay, Wisconsin. The Company realized net cash proceeds of approximately $2.5 million and recorded a loss on disposition of approximately $0.9 million.

32

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 -

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER COSTS (Continued)

(e)

In an effort to improve its customer service levels and reduce related service costs, during 2006, the Company implemented changes in the manner in which it handles packaging, sales and delivery of products to retail customers in its consumer business. These changes required the closing of the Company’s repackaging facility in Gretna, Virginia. The cost to close the facility totalled $3.2 million including $2.7 million of non-cash charges related to adjusting discontinued inventories by approximately $1.5 million to estimated fair value, retiring information technology systems amounting to $1.2 million and approximately an additional $0.5 million in other charges associated with the facility closure.

Restructuring and other charges

(f)

The Company’s founder, Chief Executive Officer and Chairman of the Board of Directors retired at the Company’s annual shareholders’ meeting on June 14, 2006. In connection with his retirement, the Company recorded charges totalling $9.9 million including $1.5 million in accelerated stock-based compensation expense and $2.4 million related to the recognition of the balance of his pension obligation.

(g)

As originally announced in December 2005, the Company investigated the possibility of selling a portion of its interest in the combined coated products operation and FIBC business through an initial public offering of the combined businesses using a Canadian Income Trust. On May 24, 2006, the Company announced that it had indefinitely deferred the decision to proceed with this offering. Accordingly, during the second and third quarters of 2006, the Company recorded a net charge of $3.9 million representing the write-off of the fees and expenses incurred in connection with the deferred sale.

(h)

The Company made significant reductions in its staffing levels beginning in the second quarter of 2006 and continuing through the reminder of the year. These staffing adjustments, coupled with Chief Executive Officer succession planning costs resulted in restructuring and other charges of approximately $7.3 million.

(i)

In June 2006, the Company decided to exit its corporate aircraft lease, resulting in a charge of $2.5 million. The Company successfully exited the corporate aircraft lease in the fourth quarter of 2006.

(j)

During the year ended December 31, 2006, the Company amended its credit facilities twice in order to accommodate the various charges discussed herein, to allow for the goodwill impairment charge discussed in Note 12 and to provide for the relaxation of the credit facilities’ covenants. As a result, the Company incurred approximately $1.9 million in amendment fees.

(k)

The Company recorded property, plant and equipment impairment charges totalling $8.0 million in 2006 related to efforts to streamline manufacturing operations through the elimination of redundant capacity as well as ongoing revisions to product marketing strategies.

33

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

4 -

MANUFACTURING FACILITY CLOSURES, RESTRUCTURING, STRATEGIC ALTERNATIVES AND OTHER COSTS (Continued)

 (l)

During the second quarter of 2006, the Company reassessed the recoverability of certain legal costs incurred in defence of lawsuits alleging trademark infringement and concluded that the costs did not remain recoverable. Accordingly, in the second quarter of 2006, the Company wrote-off approximately $2.9 million in legal costs related to the litigations.

(m)

On October 2, 2006, the Company announced that its Board of Directors was initiating a process to explore and evaluate various strategic and financial alternatives available to enhance shareholder value. During the fourth quarter of 2006, the Company incurred costs of approximately $0.6 million in connection with this process.

Year ended December 31, 2005

Facility closures

During the year ended December 31, 2005, the Company completed the closures, which began in 2004, of its Cumming, Georgia and Montréal, Quebec manufacturing locations. The Company incurred approximately $1.4 million in additional plant closure costs. The additional costs include an amount of $0.1 million of termination related benefits, an amount of $0.3 million related to impairment of property, plant and equipment and $1.0 million for other facility related closure costs including relocating equipment and inventories to other facilities. As at December 31, 2005, there were no amounts payable relating to the closures of the Cumming, Georgia and Montréal, Quebec facilities.

Industrial accident

During the year ended December 31, 2005, an explosion occurred at one of the Company’s plants resulting in damage to the facility’s structure and assets. The Company recorded a total insurance claim of $5.2 million in 2005 including $1.8 million related to reimbursable damages and expenses incurred and $3.4 million related to the replacement of the boilers destroyed in the explosion. The Company received $1.5 million of the insurance claim during 2005 and the balance in 2006.

An amount of $0.9 million of the insurance claim has been recorded on the consolidated earnings line captioned “Manufacturing facility closures, restructuring, strategic alternatives and other charges” against $0.9 million of insurance deductibles and non-insurance expenses recorded on that same line. The remaining $4.3 million of the insurance claim is recorded as a reduction to the cost of sales against the remaining costs incurred, the write-off of the boilers amounting to $0.5 million and other assets damaged in the explosion.

34

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

5 - INCOME TAXES

The provision for income taxes consists of the following:

	2007	2006	2005
	$	$	$
Current	878	1,548	814
Future	11,439	(32,262)	714
	12,317	(30,714)	1,528

The reconciliation of the combined federal and provincial statutory income tax rate to the Company’s effective income tax rate is detailed as follows:

	2007	2006	2005
	%	%	%
Combined federal and provincial income tax rate	33.9	36.2	35.7
Foreign losses recovered (foreign income taxed) at lower  rates	7.7	0.4	(0.1)
Change in income tax rate	121.1
Impairment of goodwill		(17.2)	(13.3)
Non-deductible expenses	41.5	(1.2)	(3.2)
Impact of other differences	44.2	(2.6)
Change in valuation allowance	65.6		(13.9)
Effective income tax rate	314.0	15.6	5.2

The net future income tax assets are detailed as follows:

	2007	2006
	$	$
Future income tax assets
Trade and other receivables	220	2,344
Inventories	2,502	2,934
Property, plant and equipment	8,355	4,885
Accounts payable and accrued liabilities	2,595	3,783
Tax credits, losses carry-forward and other tax deductions	112,369	117,762
Pension and post-retirement benefits	804	785
Goodwill	4,337	6,009
Other	1,346	3,494
Valuation allowance	(14,286)	(12,446)
	118,242	129,550
Future income tax liabilities
Property, plant and equipment	52,467	58,457
Pension and post-retirement benefits	554
	53,021	58,457
Total net future income tax assets	65,221	71,093
Net current future income tax assets	11,231	13,689
Net long-term future income tax assets	53,990	57,404
Total net future income tax assets	65,221	71,093

35

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

5 - INCOME TAXES (Continued)

As at December 31, 2007, the Company has $85.6 million (CAD$83.8 million) of Canadian operating losses carry-forward expiring in 2008 through 2027 and $204.7 million of US federal and state operating losses expiring in 2011 through 2026.

In assessing the realizability of future income tax assets, management considers whether it is more likely than not that some portion or all of the future income tax assets will not be realized. Management considers the scheduled reversal of future income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the future income tax assets, net of the valuation allowance, as at December 31, 2007, to be realized as a result of the reversal of existing taxable temporary differences.

During the year ended December 31, 2007, the Company recorded a $1.8 million increase to its income tax asset valuation allowance as part of the above analysis. The increase in the valuation allowance is based on the Company’s expectation that certain Canadian net operating losses scheduled to expire in future years, will likely not be utilized, mitigated in part by the expected utilization of certain net operating losses in the US that had previously been provided for. The valuation allowance was unchanged for the year ended December 31, 2006 compared to 2005.

6 - EARNINGS PER SHARE

	2007	2006	2005
	$	$	$
Net earnings (loss)	(8,393)	(166,693)	27,791
Weighted average number of common shares  outstanding	45,286,644	40,980,939	41,174,316
Effect of dilutive stock options (a)			134,602
Weighted average number of diluted common shares  outstanding	45,286,644	40,980,939	41,308,918
Basic earnings (loss) per share	(0.19)	(4.07)	0.67
Diluted earnings (loss) per share	(0.19)	(4.07)	0.67

(a)

The following number of options were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented:

	Number of options
	2007	2006	2005
Options	3,976,337	3,154,028	3,231,251

36

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

7 - BUSINESS ACQUISITIONS

Flexia

On October 5, 2005, the Company, through a wholly-owned Canadian subsidiary, acquired all of the outstanding stock of Flexia Corporation Ltd. (“Flexia”), being the successor entity to Flexia Corporation and Fib-Pak Industries Inc. for a total consideration of approximately $29.7 (CAD$34.8 million), of which $28.1 million was paid in cash and the balance was included in accounts payable and accrued liabilities as at December 31, 2005. Flexia produces a wide range of engineered coated products, polyethylene scrims and polypropylene fabrics. The acquisition was funded from the Company’s cash on-hand and available credit facilities. The acquisition was accounted for using the purchase method of accounting. The operating results of Flexia have been included in the consolidated statement of earnings of the Company starting on October 5, 2005.

During the year ended December 31, 2006, the Company finalized the allocation of the purchase price paid in connection with the acquisition of Flexia based on actual results and newly available information, which did not exist at the time of the acquisition. The final allocation resulted in a decrease in the value of goodwill recorded on the acquisition in the amount of approximately $1.5 million, a decrease in the value of current liabilities in the amount of approximately $2.5 million, a decrease in the value of future income tax assets in the amount of approximately $1.3 million and a decrease in the value of pension and post-retirement benefits in the amount of approximately $0.3 million. During the year ended December 31, 2006, the Company paid $0.2 million representing the remaining purchase price balance following working capital and other adjustments.

Olympian Tape Sales

In November 2005, the Company reacquired and cancelled 250,587 common shares held in escrow pursuant to an escrow agreement created during the acquisition on September 1, 2000 of Olympian Tape Sales, Inc. d/b/a United Tape Company (“UTC”). The shares had been held in escrow pending the resolution of certain third party legal claims arising from the acquisition. As a result of the resolution of such claims and the related expense incurred in connection therewith, the Company became entitled to reacquire the escrowed shares. Pursuant to the transaction, an amount of $1.8 million was accounted for as a reduction of the capital stock; an amount of $0.2 million was accounted for as a decrease of retained earnings representing a premium on the purchase for cancellation of common shares; an amount of $0.9 million was accounted for as an increase of goodwill representing expenses not reimbursed from amounts available under the es crow agreement; and an amount of $2.9 million was accounted for as a reduction of other assets.

8 - OTHER RECEIVABLES

	2007	2006
	$	$
Income and other taxes	269	769
Rebates receivable	402	412
Sales taxes	1,984	260
Other	315	459
	2,970	1,900

37

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

9 - INVENTORIES

	2007	2006
	$	$
Raw materials	32,244	20,766
Work in process	18,875	12,206
Finished goods	48,363	42,407
	99,482	75,379

10 - PROPERTY, PLANT AND EQUIPMENT

			2007
	Cost	Accumulated depreciation	Net
	$	$	$
Land	4,024		4,024
Buildings	79,286	36,952	42,334
Manufacturing equipment	505,805	265,358	240,447
Computer equipment and software	65,165	46,822	18,343
Furniture, office equipment and other	3,077	2,778	299
Construction in progress	12,419		12,419
	669,776	351,910	317,866

			2006
	Cost	Accumulated depreciation	Net
	$	$	$
Land	3,835		3,835
Buildings	73,064	31,519	41,545
Manufacturing equipment	460,011	229,818	230,193
Computer equipment and software	62,933	37,884	25,049
Furniture, office equipment and other	2,652	2,503	149
Construction in progress	22,096		22,096
	624,591	301,724	322,867

Included in property, plant and equipment are assets under capital leases (primarily a building and computer hardware) with cost and accumulated amortization of $11,619 and $4,256 respectively ($11,167 and $2,911 in 2006 respectively).

38

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

11 - OTHER ASSETS

	2007	2006
	$	$
Debt issue expenses and other deferred charges, at amortized cost	1,086	8,660
Loans to officers and directors, without interest, various repayment terms	108	295
Pension plan prepaid benefit	9,805	7,146
Other receivables	2,951	3,492
Investment tax credits recoverable	6,446	6,390
Other	2,780	918
	23,176	26,901

12 - GOODWILL

In accordance with the specific requirements of the CICA Handbook, Section 3062, “Goodwill and Other Intangible Assets”, the Company performs an annual goodwill impairment test as at December 31. In the fourth quarter of 2007, the Company realigned its organizational and related internal reporting structures as described in Note 18. Consequently, the goodwill was reassigned to two new reporting units using a relative fair value allocation approach. As at December 31, 2007, the carrying amount of goodwill assigned to Tapes and Films was $58.1 million and to Engineered Coated Products was $12.2 million. Prior to the fourth quarter of 2007, the Company had determined that it had one reporting unit. The Company calculates the fair value of each reporting unit using the discounted cash flows method.

During the three months ended September 30, 2006, the Company performed a comprehensive assessment of its business and operating plans, in light of the significant changes to the underlying business. As a result of this assessment, and the resulting changes to the operating market and industry, management revised its estimates of growth and future business activities. Consequently, the Company conducted a goodwill impairment test at the interim date of September 30, 2006. This resulted in a charge to operating expenses of $120.0 million in the three months ended September 30, 2006. No further impairment was required as at December 31, 2006. There was no goodwill impairment charge incurred by the Company for the years ended December 31, 2007 and 2005.

The changes in the carrying amount of goodwill are as follows:

	2007	2006
	$	$
Balance beginning of year	63,746	184,756
Business acquisition (Note 7)		167
Adjustment to the purchase price allocation (Note 7)		(1,491)
Contingent consideration	300	298
Impairment		(120,000)
Foreign exchange impact	6,204	16
Balance end of year	70,250	63,746

39

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

13 - BANK INDEBTEDNESS

Bank indebtedness

On August 8, 2007, the Company successfully amended its credit facilities to accommodate the costs of its strategic alternatives process. The Company paid a fee to its lenders of approximately $0.6 million that was deferred and is being amortized over the remaining term of the related revolving credit facility. The amendment results in an increase to the loan premium under both the Company’s Term Loan, as described in Note 14, and its Revolving Credit Facility. Additionally, the amendment reduces the Company’s maximum Revolving Credit Facility from $75.0 million to $60.0 million and as a result of this reduction, the Company recorded a charge of approximately $0.3 million in its earnings representing the write-off of a portion of debt issue expenses related to the revolving credit facility. This charge is included on the line captioned financial expenses.

The bank indebtedness consists of the utilized portion of the short-term revolving bank credit facilities.

As at December 31, 2007, the Company had bank loans available under a US$60.0 million (US$75.0 million at December 31, 2006) Revolving Credit Facility with a five-year term expiring in July 2009 which is comprised of US$52.0 million (US$65.0 million at December 31, 2006) available in US dollars and US$8.0 million (US$10.0 million at December 31, 2006) available in Canadian dollars. Any loans drawn under the facility bear interest at various interest rates including (i) US prime rate plus a premium varying between 225 and 325 basis points (100 and 200 basis points prior to August 8, 2007) (300 basis points as at December 31, 2007; 200 basis points at December 31, 2006); (ii) Canadian prime rate plus a premium varying between 225 and 325 basis points (100 and 200 basis points prior to August 8, 2007) (300 basis points as at December 31, 2007; 200 basis points at December 31, 2006); and (iii) LIBOR plus a premium varying between 325 and 425 basis points (200 and 300 basis points prior to August 8, 2007) (400 basis points as at December 31, 2007; 275 basis points at December 31, 2006), depending on whether certain financial ratios have been achieved. As at December 31, 2007, the credit facility had not been drawn. The credit facility available, as a result of covenant restrictions, was $57.9 million, after considering outstanding letters of credit of $2.1 million. As at December 31, 2006, the credit facility had not been drawn. An amount of $24.0 million remained available, after covenant restrictions and considering outstanding letters of credit of $2.5 million.

The credit facility has been guaranteed by the Company and substantially all of its subsidiaries and is secured by a first lien on all assets of the Company and substantially all of its subsidiaries.

The credit facility contains certain financial covenants, including interest expense coverage, debt leverage and fixed charge coverage ratios, all of which were respected as at December 31, 2007.

On March 27, 2008 the Company successfully refinanced its Revolving Credit Facility as described in Note 22.

40

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

14 - LONG-TERM DEBT

Long-term debt consists of the following:

	2007	2006
	$	$
Senior subordinated notes (a)(1)	120,697	125,000
Term Loan (b) (1)	114,482	195,500
Obligations under capital leases (c)	7,532	8,174
Other debt (d)	648	1,803
	243,359	330,477
Less: Current portion of long-term debt	3,074	19,743
	240,285	310,734

⁽¹⁾The Senior subordinated notes and the Term loan are presented net of related debt issue expenses and are amortized using the effective interest rate method, as described in Note 2, amounting to $4.3 million and $2.5 million, respectively.

(a)

Senior subordinated notes

Senior subordinated notes bearing interest at 8.5%, payable semi-annually on February 1 and August 1. The principal is due on August 1, 2014. The effective interest rate of the senior subordinated notes is 9.20%.

The Company and all of its subsidiaries, which are all wholly-owned directly or indirectly by the Company, other than the subsidiary issuer, have guaranteed the senior subordinated notes. The senior subordinated notes were issued and the guarantees executed pursuant to an indenture dated as of July 28, 2004. All of the guarantees are full, unconditional, joint and several. There are no significant restrictions on the ability of the Company or any guarantor to obtain funds from its subsidiaries by dividend or loan. The Company, on a non-consolidated basis, has no independent assets or operations. The subsidiary issuer is an indirectly wholly-owned subsidiary of the Company and has nominal assets and no operations.

(b)

Term Loan

Term loan bearing interest at LIBOR plus a premium varying between 325 and 425 basis points (200 and 300 basis points in 2006) depending on whether a certain financial ratio had been achieved (400 basis points as at December 31, 2007; 275 basis points as at December 31, 2006), payable in quarterly instalments of $0.5 million until June 30, 2010, followed by two quarterly instalments of $47.125 million and a final payment of $17.75 million in March 2011. In addition to the quarterly instalments of $0.5 million through June 30, 2010, the term loan requires annual mandatory principal prepayments 90 days after year-end based on a percentage of “Excess Cash Flow” as defined in the Senior Secured Credit Facility. On March 30, 2007, the Company repaid $15.6 million of the term loan pursuant to the “Excess Cash Flow” calculation.

41

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

14 - LONG-TERM DEBT (Continued)

The term loan is guaranteed by the Company and each of its subsidiaries. It is also secured by a first priority lien in substantially all of the tangible and intangible assets of the Company and each of its material subsidiaries, subject to certain customary exceptions.

On August 8, 2007, the Company successfully amended the terms of its Term Loan to accommodate the costs of its strategic alternatives process. The Company paid a fee to its lenders of approximately $1.7 million that was capitalized against the Term Loan and is being charged to earnings using the effective interest method.

In addition, pursuant to the rights offering described in Note 15, the Company used the proceeds from the rights offering to repay $60.9 million of the Term Loan. As a result, the Company recorded a charge of approximately $1.2 million in its earnings reflecting the write-off of a portion of the deferred debt issue expenses relating to the portion of the Term Loan repaid. This charge is included on the line captioned financial expenses.

(c)

Obligations under capital leases

The Company has obligations under capital leases for the rental of a building and computer hardware, bearing interest at rates varying between 0.6% to 5.1% (0.6% to 5.1% as at December 31, 2006), payable in monthly instalments ranging from $359 to $47,817, including interest and maturing on various dates until 2024.

(d)

Other debt

The Company has other debt consisting primarily of a bond bearing a fixed interest rate of 8.03% (8.03% in 2006), requiring periodic principal repayments ranging from $8,119 to $13,737 and matures in 2011.

The Company has complied with the maintenance of all financial ratios and with other conditions that are stipulated in the covenants contained in the various loan agreements.

42

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

14 - LONG-TERM DEBT (Continued)

Long-term debt repayments are due as follows:

	Obligations under capital leases	Other long-term loans
	$	$
2008	1,350	2,133
2009	933	2,296
2010	574	95,389
2011	574	17,830
2012	574
Thereafter	6,694	125,000
Total minimum lease payments	10,699	242,647
Interest expense included in minimum lease payments	3,167
Total	7,532	242,648

On March 27, 2008 the Company successfully refinanced its Term Loan as described in Note 22.

15 - CAPITAL STOCK

Authorized

Unlimited number of shares without par value

Common shares, voting and participating

Class “A” preferred shares, issuable in series, ranking in priority to the common shares with respect to dividends and return of capital on dissolution. The Board of Directors is authorized to fix, before issuance, the designation, rights, privileges, restrictions and conditions attached to the shares of each series.

Rights offering

On September 13, 2007, the Company completed a shareholder’s rights offering. The rights offering granted the shareholders the right to subscribe to one common share of the Company for each 1.6 rights held. The offering raised $60.9 million net of related expenses of $1.9 million. The proceeds were received from several major shareholders, directors and senior officers, including one former senior officer. In connection with the rights offering, the Company issued 17,969,408 common shares during the fourth quarter of 2007. Directors and senior officers of the Company subscribed to 1,508,304 common shares amounting to gross proceeds of $5.2 million. The proceeds from the rights offering were used to repay a portion amounting to $60.9 million of the Company’s Term Loan included with its long-term debt.

43

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (continued)

Share redemption

During the year ended December 31, 2005, the Company redeemed 46,300 common shares for a cash consideration of $340,000. An amount of $324,000 was accounted for as a reduction of the capital stock and an amount of $16,000 was accounted for as a decrease of the retained earnings as a premium on the purchase for cancellation of common shares.

Shareholder’s protection rights plan

This agreement was adopted by the shareholders of the Company on June 11, 2003, amending and restating the shareholder protection rights plan originally entered into on August 24, 1993, as first amended on May 21, 1998. The 2003 amended and restated plan, among other things, extended the plan through the date immediately following the date of the Company's 2006 annual shareholders' meeting. The shareholders at their June 14, 2006 meeting voted on the adoption of an amended and restated plan, which, among other things, extended the plan through the date immediately following the date of the Company's 2009 annual shareholders' meeting. The effect of the Plan is to require anyone who seeks to acquire 20% or more of the Company’s voting shares to make a bid complying with specific provisions of the plan.

Stock options

On September 5, 2007, the Company amended its executive stock option plan. Under the amended plan, options may be granted to the Company's executives, directors and employees for the purchase of up to 10% of the Company’s issued and outstanding common shares. Options expire no later than 10 years after the date of granting. The plan provides that such options granted to employees and executives will vest and may be exercisable 25% per year over four years. The options granted to directors who are not officers of the Company will vest and may be exercisable 25% on the grant date, and a further 25% will vest and may be exercisable per year over three years.

All options are granted at a price determined and approved by the Board of Directors, which cannot be less than the average of the closing price of the common shares on the Toronto Stock Exchange and New York Stock Exchange for the day immediately preceding the grant date.

44

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

The changes in number of options outstanding were as follows:

		2007		2006		2005
	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options
	$		$		$
Balance, beginning of year	8.74	3,154,028	9.18	3,919,251	9.37	3,772,155
Granted	3.45	1,651,184	8.15	549,000	8.15	526,378
Exercised			4.54	(29,366)	4.73	(17,500)
Forfeited	8.88	(485,125)
Expired	9.85	(343,750)	10.57	(1,284,857)	10.07	(361,782)
Balance, end of year	6.44	3,976,337	8.74	3,154,028	9.18	3,919,251
Options exercisable at the end of the year		1,909,364		1,811,132		2,431,686

The following table summarizes information about options outstanding and exercisable at December 31, 2007:

	Options outstanding			Options exercisable
	Number	Weighted average contractual life (in years)	Weighted average exercise price	Number	Weighted average exercise price
Range of exercise prices			$		$
$3.44 to $4.85	1,852,684	5.2	3.51	261,500	3.89
$5.86 to $8.60	1,099,575	3.4	7.77	712,450	7.71
$9.00 to $11.92	1,007,078	1.5	10.20	921,414	10.18
$13.97 to $18.53	17,000	1.6	15.01	14,000	15.09
	3,976,337	3.7	6.44	1,909,364	8.43

45

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

In January 2003, the Company adopted the fair value based method of accounting for stock-based compensation and other stock-based payments. Accordingly, the Company recorded a pre-tax stock-based compensation expense of approximately $1.8 million in 2007, $2.0 million in 2006 and $1.9 million in 2005.

For stock options granted during the year ended December 31, 2002, the Company is required to make pro forma disclosures of net earnings (loss) and basic and diluted earnings (loss) per share as if the fair value based method of accounting had been applied. The stock options granted during the year ended December 31, 2002, were fully vested as at December 31, 2006. Consequently, there is no further pro forma impact on net earnings (loss) for periods subsequent to December 31, 2006.

Accordingly, the Company’s net earnings (loss) and basic and diluted earnings (loss) per share would have been increased or decreased to the pro forma amounts indicated in the following table:

	2006	2005
	$	$
Net earnings (loss) - as reported	(166,693)	27,791
Add: Stock-based employee compensation expense included in reported  net earnings (loss)	2,022	1,911
Deduct: Total stock-based employee compensation expense determined  under fair value based method	(2,163)	(2,665)
Pro forma net earning (loss)	(166,834)	27,037
Earnings (loss) per share:
Basic - as reported	(4.07)	0.67
Basic - pro forma	(4.07)	0.66
Diluted - as reported	(4.07)	0.67
Diluted - pro forma	(4.07)	0.65

46

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

15 - CAPITAL STOCK (Continued)

The fair value of options granted was estimated using the Black-Scholes option-pricing, model, taking into account the following weighted average assumptions:

	2007	2006	2005
Expected life	5.2 years	5.5 years	5 years
Expected volatility	52%	55%	55%
Risk-free interest rate	3.27%	4.80%	4.12%
Expected dividends	$0.00	$0.00	$0.00

The weighted average fair value per option granted is:

2007	2006	2005
$	$	$
3.27	4.49	4.21

16 - ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of other accumulated comprehensive income are as follows:

	2007	2006
	$	$
Accumulated currency translation adjustments	36,141	33,830
Changes in accumulated currency translation adjustments	31,824	2,311
	67,965	36,141
Fair value of interest rate swap agreements, designated as cash flow  hedges resulting from the initial application of accounting for hedges  (Note 2)	1,138
Changes in fair value in interest rate swap agreements (net of future  income taxes of $964)	(1,641)
	(503)
	67,462	36,141

The 2006 balance corresponds to the reclassification of the accumulated currency translation adjustments to the accumulated other comprehensive income.

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS

The Company has several defined contribution plans and defined benefit plans for substantially all its employees in both Canada and the United States. These plans are generally contributory in Canada and non-contributory in the United States.

47

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 – PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Total cash payments

Total cash payments for employee future benefits for 2007, consisting of cash contributed by the Company to its funded pension plans, cash payments directly to beneficiaries for its unfunded other benefit plans, cash contributed to its defined contribution plans and cash contributed to its multi-employer defined benefit plans, were $7.1 million ($8.7 million in 2006 and $4.2 million in 2005).

Defined contribution plans

In the United States, the Company maintains a savings retirement plan (401(k) Plan) for the benefit of certain employees who have been employed for at least 90 days. Contribution to this plan is at the discretion of the Company.

The Company contributes as well to multi-employer plans for employees covered by collective bargaining agreements.

In Canada, the Company maintains defined contribution pension plans for its salaried employees and contributes amounts equal to 4% of each participant's eligible salary.

The Company has expensed $2.7 million for these plans for the year ended December 31, 2007 ($2.3 million and $2.1 million in 2006 and 2005, respectively.)

Defined benefit plans

The Company has, in the United States, two defined benefit plans (hourly and salaried). Benefits for employees are based on compensation and years of service for salaried employees and fixed benefits per month for each year of service for hourly employees.

In Canada, certain non-union hourly employees of the Company are covered by a plan which provides a fixed benefit of $20.44 in 2007 ($17.15 in 2006 and 2005) per month for each year of service. In addition, the Company maintains a defined benefit plan, which provides for a fixed benefit at a rate ranging from 40% to 50% (50% to 62.5% and 50% to 110% in 2006 and 2005, respectively) of the employee contributions, depending on the participation start date.

In the United States, the Company provides group health care and life insurance benefits to certain retirees.

In Canada, the Company provides group health care, dental and life insurance benefits for eligible retired employees.

Supplementary Executive Retirement Plans

The Company has Supplementary Executive Retirement Plans (the “SERPs”) to provide supplemental pension benefits to certain key executives. The SERPs are not funded and provide for an annual pension benefit from retirement or termination date in the amounts ranging from $0.2 million to $0.3 million. The SERPs had accrued benefit obligations as at December 31, 2007 of $4.6 million ($3.5 million in 2006).

48

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 – PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

The Company’s Interim Chief Executive Officer has retired in the second half of 2007. In connection with his retirement, the Company recorded a charge of approximately $1.0 million representing the recognition of the balance of past service costs relating to his pension obligation.

Acquisition and plan termination

The Company acquired Flexia in October 2005 (Note 7) including its pension and post-retirement benefits plans. One of the pension plans acquired with the Flexia acquisition was terminated in 2006 with the termination of employees due to the closure of one of the facilities purchased. This termination was taken into account at the time of the acquisition in the valuation of the accrued benefit obligations. The termination resulted in a curtailment gain of $0.2 million and a settlement loss of $0.5 million.

Investment policy

The Company's Investment Committee comprised of the Company’s Chief Financial Officer and Vice President, Human Resources, established a target mix of equities and bonds of 70% equities and 30% bonds over time. In January 2003, the Committee determined, with assistance from the investment manager and trustee, to temporarily increase the allocation for the US plans to 80% equity and 20% bonds due to the performance, current and expected, in the bond market and the expected appreciation in the small and midcap equity markets. The increased investment in those markets was 7.5% target in small cap and 2.5% in midcap. That direction was reviewed with the same advisors, and the Committee determined to continue this approach at its meetings in 2005. In February 2006, the Committee revised the target mix back to 70% equity and 30% bonds. The relatively heavy emphasis on equities is due to the better performance over time in equities v ersus bonds and the fact that the Company's pension funds do not have a large number of current recipients. In Canada, the funds of the non-union plans are split evenly between two balanced mutual funds, thus, over time, achieving the target mix of 70% equities and 30% bonds. The funds of the union plans have a target equity weighing ranging from 45% to 65%.

The rate of return decision is a function of advice from the Company's actuaries and their review of current holdings, general market trends and common levels used by other employers.

Measurement date and date of actuarial valuations

The Company measures its plan assets and accrued benefit obligations for accounting purposes as at December 31 of each year.

The most recent actuarial valuations for funding purposes were October 1, 2006 and January 1, 2007 for the US plans and October 2, 2005, September 30, 2006 and January 1, 2007 for the Canadian plans.

The next valuation dates for actuarial valuations to be used for funding purposes are October 1, 2007 and January 1, 2008 for the US plans and January 1, 2009 and September 30, 2009 for the Canadian plans.

49

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Information relating to the various plans is as follows:

		Pension plans		Other plans
	2007	2006	2007	2006
	$	$	$	$
Accrued benefit obligations
Balance, beginning of year	52,948	51,712	3,266	3,128
Current service cost	1,393	1,289	82	75
Plan participants’ contributions	135	141
Interest cost	2,961	2,887	178	171
Benefits paid	(1,859)	(1,616)	(68)	(61)
Actuarial losses (gains)	(4,301)	1,823	(425)	(42)
Decrease in liability due to  curtailment		(150)
Settlement		(3,192)
Foreign exchange rate adjustment	2,263	54	399	(4)
Balance, end of year	53,540	52,948	3,432	3,267
Plans assets
Balance, beginning of year	39,977	34,879
Actual return on plans assets	1,691	4,109
Employer contributions	4,170	5,998
Plan participants' contributions	135	141
Benefits paid	(1,859)	(1,616)
Settlement		(3,636)
Foreign exchange rate adjustment	2,462	103
Balance, end of year	46,576	39,978		–
Funded status – deficit	6,964	12,970	3,432	3,267
Unamortized past service costs	(2,500)	(3,914)	(6)	(7)
Unamortized net actuarial losses	(8,444)	(11,550)	424	(35)
Unamortized transition assets  (obligation)	109	97	(19)	(23)
Accrued benefit liability (prepaid benefit)	(3,871)	(2,397)	3,831	3,202

50

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Included in the above accrued benefit obligation and fair value of plan assets as at December 31, are the following amounts in respect of plans that are not fully funded:

		Pension plans		Other plans
	2007	2006	2007	2006
	$	$	$	$
Accrued benefit obligation	44,546	45,434
Fair value of plan assets	36,051	32,177
Funded status – plan deficit	8,495	13,257

Weighted average plan assets allocations as at December 31:

		Pension Plans
	2007	2006
Asset category	%	%
Equity securities	69	70
Debt securities	30	28
Other	1	2
Total	100	100

51

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

The accrued benefit liability (prepaid benefit) is included in the Company’s consolidated balance sheets as follows:

		Pension plans		Other plans		Total plans
	2007	2006	2007	2006	2007	2006
	$	$	$	$	$	$
Other assets (Note 11)	(9,805)	(7,146)			(9,805)	(7,146)
Pension and post-retirement benefits	5,934	4,749	3,831	3,202	9,765	7,951
	(3,871)	(2,397)	3,831	3,202	(40)	805

52

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Net Benefit Cost

			Pension plans			Other plans
	2007	2006	2005	2007	2006	2005
	$	$	$	$	$	$
Current service cost	1,393	1,289	1,055	82	75	19
Interest cost	2,961	2,887	2,198	178	171	85
Actual return on plans assets	(1,691)	(4,109)	(1,594)
Actuarial (gains) losses	(4,301)	1,823	1,720	(425)	(42)	19
Curtailment (gain) loss	1,083	(150)
Settlement loss		529
Elements of employee future benefit costs before adjustments to recognize the long-term nature of employee future benefit costs	(555)	2,269	3,379	(165)	204	123
Adjustments to recognize the long-term nature of employee future benefit costs:
Difference between expected return and actual return on plan assets for year	(1,694)	1,148	(598)
Difference between actuarial loss recognized for the year and actual actuarial loss (gain) on accrued benefit obligations	4,959	1,532	(930)	411	43	(18)
Difference between amortization of past service costs for the year and actual plan amendments for the year	383	464	366	1
Amortization of transition obligations (assets)	(6)	(5)	(5)	4	4	4
	3,642	3,139	(1,167)	416	47	(14)
Net benefit cost for the year	3,087	5,408	2,212	251	251	109

53

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

The average remaining service period of the active employees covered by the pension plans ranges from 10.60 to 24.50 years for 2007 and from 11.20 to 24.70 years for 2006.

The significant assumptions which management considers the most likely and which were used to measure its accrued benefit obligations and net periodic benefit costs are as follows:

Weighted-average assumption used to determine benefit obligations as at December 31:

		Pension plans		Other plans
	2007	2006	2007	2006
Discount rate
U.S. plans	6.40%	5.80%	5.75%	5.65%
Canadian plans	5.90%	5.30%	5.90%	5.25%
Compensation increase	3.25%	3.25%

54

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

Weighted-average assumption used to determine net benefit cost for the years ended December 31:

			Pension plans			Other plans
	2007	2006	2005	2007	2006	2005
Discount rate
U.S. plans	5.80%	5.75%	5.75%	5.65%	5.75%	5.75%
Canadian plans	5.30%	5.25%	5.25% and 5.75%	5.25%	5.25%	5.25%and 7.00%
Compensation increase	3.25%	3.25%
Expected long term return on plan assets
U.S. plans	8.50%	8.50%	8.50%
Canadian plans	7.00%	7.00%	7.00%

55

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

17 - PENSION AND POST-RETIREMENT BENEFIT PLANS (Continued)

For measurement purposes, a 9% annual rate increase in the per capita cost of covered health care benefits for the U.S. plans was assumed for 2007 (10.0% in 2006 and 2005). The assumed rate is expected to decrease to 5% by 2013. For the Canadian plans, the annual trend rate is 8.0% for the next nine years and 5% thereafter. An increase or decrease of 1% of these rates would have the following impacts:

	Increase of 1%	Decrease of 1%
	$	$
Impact on net periodic cost	41	(32)
Impact on accrued benefit obligations	457	(365)

The Company expects to contribute $3.8 million to its defined benefit pension plans and $0.1 million to its health and welfare plans in 2008.

18 - SEGMENT DISCLOSURES

In the fourth quarter of 2007, the Company realigned its organizational and related internal reporting structures into three reportable segments including two operating segments and a corporate segment. The comparative financial information on segments has been restated to reflect the change in the composition of the Company’s reportable segments. The two operating segments are the Tapes and Films Division (“T&F”) and the Engineered Coated Products Division (“ECP”), each with a President that is responsible for the performance of the respective division. Management has chosen to operate and evaluate the two divisions independently in order to provide increased focus on the business challenges and opportunities unique to each division.

T&F manufactures a variety of specialized polyolefin plastic and paper based products as well as complementary packaging systems for use in industrial and retail applications. Products include carton sealing tapes, industrial and performance speciality tapes, stretch film and shrink wrap. The products are manufactured and sold to industrial distributors and retailers, primarily under the Company’s brand names. T&F operates ten manufacturing facilities in North America and one in Portugal.

ECP is a leader in the development and manufacture of innovative industrial, consumer packaging and productive covering products utilizing engineered coated polyolefin, paper and laminate materials. Products include lumber wrap, metal wrap, polyethylene membrane fabrics, cotton bags and roof underlayment. Products are manufactured in four manufacturing facilities and sold to both end-users and distributors in a wide variety of industries including construction and agriculture.

56

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

18 - SEGMENT DISCLOSURES (Continued)

The Company evaluates performance of the segments and takes decisions regarding the allocation of resources to the segments based on earnings before financial expenses, income taxes, depreciation and amortization (“EBITDA”). Allocations of general and administrative expenses to the reportable segments are based on an analysis of services provided to each segment. Certain corporate expenses, stock-based compensation expense, financial expenses and manufacturing facility, restructuring, strategic alternatives and other charges, are not allocated to a reportable segment and are included in “Corporate”. The accounting policies of the reportable segments are the same as those applied to the consolidated financial statements described in Note 2. All inter-segment transactions are recorded at the exchange amount and are eliminated upon consolidation.

Segment information

The following tables set forth information by segment for the years ended December 31:

			2007
	T&F	ECP	Total
	$	$	$
Sales from external customers	605,729	161,543	767,272
Costs of sales	508,375	144,490	652,865
Gross profit	97,354	17,053	114,407
EBITDA before unallocated expenses	67,555	9,478	77,033
Depreciation and amortization	30,079	5,479	35,558
Unallocated corporate expenses			2,372
Stock-based compensation expense			1,780
Financial expenses			25,285
Manufacturing facility, restructuring, strategic alternatives and other charges			8,114
Earnings before income taxes			3,924
Total assets	590,618	112,181	702,799
Additions to property, plant and equipment	14,621	3,849	18,470

57

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

18 - SEGMENT DISCLOSURES (Continued)

			2006
	T&F	ECP	Total
	$	$	$
Sales from external customers	626,448	185,837	812,285
Costs of sales	535,063	159,630	694,693
Gross profit	91,385	26,207	117,592
EBITDA before unallocated expenses	49,729	17,040	66,769
Depreciation and amortization	30,438	4,824	35,262
Unallocated corporate expenses			5,089
Stock-based compensation expense			2,022
Financial expenses			25,746
Manufacturing facility, restructuring, strategic alternatives and other charges			76,057
Impairment of goodwill			120,000
Earnings before income taxes			(197,407)
Total assets	598,456	93,930	692,386
Additions to property, plant and equipment	24,674	2,416	27,090

			2005
	T&F	ECP	Total
	$	$	$
Sales from external customers	643,448	132,567	776,015
Costs of sales	524,000	111,845	635,845
Gross profit	119,448	20,722	140,170
EBITDA before unallocated expenses	75,921	13,700	89,621
Depreciation and amortization	26,400	3,367	29,767
Unallocated corporate expenses			3,394
Stock-based compensation expense			1,911
Financial expenses			23,799
Manufacturing facility, restructuring, strategic alternatives and other charges			1,431
Earnings before income taxes			29,319
Total assets	765,374	123,942	889,316
Additions to property, plant and equipment	22,200	1,826	24,026

58

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

18 - SEGMENT DISCLOSURES (Continued)

Geographic information

The following tables present geographic information about sales attributed to countries based on the location of external customers and about property, plant and equipment and goodwill by country based on the location of the assets:

	2007	2006	2005
	$	$	$
Sales
Canada	104,417	114,715	83,279
United States	612,080	651,289	650,844
Other	50,775	46,281	41,892
Total sales	767,272	812,285	776,015
Property, plant and equipment, net
Canada	63,955	56,308
United States	234,883	248,280
Other	19,028	18,279
Total property, plant and equipment, net	317,866	322,867
Goodwill
Canada	33,391	27,187
United States	33,492	33,192
Other	3,367	3,367
Total goodwill	70,250	63,746

19 - RELATED PARTY TRANSACTIONS

During the year ended December 31, 2007, the Company entered into three advisory services agreements, two with companies controlled by two current members of the Board of Directors and one with a company controlled by a former senior officer of the Company. The advisory services include business planning and corporate finance activities, and qualify as related party transactions in the normal course of operations, which are measured at the exchange amount.

The agreements are effective through December 31, 2009, but each can be unilaterally terminated by the companies controlled by the Board members and the former senior officer, respectively, with a 30-day written notice. The agreements provide for aggregate monthly compensation beginning January 2008 in the amount of $175,000 per month for a minimum of at least three months. Beginning April 1, 2008, the Company has a firm financial commitment relating to the services of two of the three companies totalling $125,000 per month through December 31, 2009. The Company has the option to continue the services of the former senior officer’s controlled company on a month-to-month basis at a monthly compensation of $25,000.

59

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

19 - RELATED PARTY TRANSACTIONS (Continued)

In addition to the monthly advisory services described above, the agreements provided for a fee paid to each of the companies in connection with the Company’s concluded shareholder rights offering (Note 15). The aggregate fee paid to the companies in connection with the rights offering was $1,050,000.

Finally, the advisory services agreements provide for an aggregate performance fee payable July 1, 2010 based on the difference between the then-market price of the Company’s common stock listed on the Toronto Stock Exchange and the Canadian rights offering price of CAD$3.61 per share multiplied by 2.2 million.

20 - COMMITMENTS AND CONTINGENCIES

Commitments

As at December 31, 2007, the Company had commitments aggregating approximately $10.7 million through the year 2015 for the rental of offices, warehouse space, manufacturing equipment, automobiles, computer hardware and other assets.

Minimum lease payments for the next five years are $3.6 million in 2008, $2.7 million in 2009, $1.6 million in 2010, $0.8 million in 2011, $0.8 million in 2012 and $1.2 million thereafter.

Contingencies

The Company is party to claims and lawsuits which are being contested. In the opinion of management, the outcome of such claims and lawsuits will not have a material adverse effect on the Company.

21 - FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Company is exposed to various financial risks resulting from its operations. The Company's management is responsible for setting acceptable levels of risk and reviewing risk management activities as necessary.

60

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

21 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES, AND FINANCIAL RISKS (Continued)

The Company uses derivative financial instruments only for risk management purposes, in particular with respect to interest rate risk as described below, and not for speculative purposes.

Fair value of financial instruments

The carrying amounts reported in the consolidated balance sheets for short-term financial assets and liabilities, which includes trade receivables, other receivables and accounts payable and accrued liabilities, excluding income, sales and other taxes, approximate fair values due to the immediate or short-term maturities of these financial instruments.

For debts with fixed interest rates, the fair value has been determined based on the discounted value of cash flows under the existing contracts using rates representing those which the Company could currently obtain for loans with similar terms, conditions and maturity dates. For the debts with floating interest rates, the fair value is closely equivalent to their carrying amounts.

The carrying amounts and fair values of the Company’s long-term debt as at December 31, 2007 and 2006 are as follows:

		2007		2006
	Fair value	Carrying amount	Fair value	Carrying amount
	$	$	$	$
Long-term debt	232,109	243,359	318,211	330,477

The fair value of the interest rate swap agreements generally reflect the estimated amounts that the Company would receive (favourable) or pay (unfavourable) to settle these agreements at the reporting date and is estimated by obtaining quotes (marked to market) from the Company’s principal lender. As at December 31, 2007, the fair value of the interest rate swap agreements was approximately $0.8 million unfavourable ($1.8 million favourable as at December 31, 2006).

Exchange risk

The Company is exposed to exchange risk due to cash and cash equivalents, trade receivables, accounts payable and accrued liabilities, long-term debt and future business transactions denominated in Canadian dollars and euros. As at December 31, 2007, financial assets and liabilities in foreign currency represent cash and trade receivables totalling CAD$22.7 million and €4.2 million (CAD$32.4 million and €3.4 million as at December 31, 2006); accounts payable and accrued liabilities totalling CAD$17.8 million and €0.8 million (CAD$20.1 million and €1.0 million as at December 31, 2006) and long-term debt totalling CAD$0.6 million and zero € (CAD$0.1 million and €0.8 million as at December 31, 2006).

61

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

21 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES, AND FINANCIAL RISKS (Continued)

Interest rate risk

The Company’s senior subordinated notes and other long-term debt bear interest at fixed rates and the Company is, therefore, exposed to the risk of changes in fair value resulting from interest rate fluctuations.

The Company’s term loan and other long-term debt bears interest at variable rates and the Company is, therefore, exposed to the cash flow risks resulting from interest rate fluctuations. In order to mitigate such risk on its Term Loan, the Company entered into an interest rate swap agreement for a notional principal amount of $50.0 million maturing in June 2010. The Company entered into a second interest rate swap agreement for a notional principal amount of $25.0 million maturing in July 2010. Under the terms of these interest rate swap agreements, the Company receives, on a quarterly basis, a variable interest rate and pays a fixed interest rate of 4.27% and 4.29% respectively, plus a premium of 4% (2.75% as at December 31, 2006 and prior to August 8, 2007) applicable on its term loan. The premium payable may vary between 325 and 425 basis points (200 and 300 basis points prior to August 8, 2007) depending on whether a certa in financial covenant has been achieved. As at December 31, 2007, the effective interest rate on $75.0 million was 8.28% (7.03% in 2006) and the effective interest rate on the excess was 9.16% (8.04% in 2006).

The Company's other financial liabilities do not comprise any interest rate risk since they do not bear interest.

Credit risk

Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. Generally, the carrying amount on the balance sheet of the Company's financial assets exposed to credit risk, net of any applicable provisions for losses, represents the maximum amount exposed to credit risk. Financial assets that potentially subject the Company to significant credit risk consist primarily of the following:

–

Trade receivables:

Credit risk with respect to trade receivables is limited due to the Company’s credit evaluation process, reasonably short collection terms and the credit worthiness of its customers. The Company regularly monitors the credit risk exposures and takes steps to mitigate the likelihood of these exposures from resulting in actual losses. Allowance for doubtful accounts is maintained, consistent with the credit risks, historical trends, general economic conditions and other information and is taken into account in the financial statements.

62

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

21 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES, AND FINANCIAL RISKS (Continued)

–

Rebates receivable, other receivables and derivative financial instruments:

The Company is also exposed to credit risk for counterparts. Credit risks, for counterparts to its financial instruments, arise from the possibility that counterparts do not respect their contractual obligations. The Company mitigates these risks by dealing with counterparts who possess high quality credit standings. Generally, the Company does not obtain collateral or other security to support financial instruments subject to credit risk, but instead monitors regularly the credit standing of its counterparts.

The Company does not believe it is subject to any significant concentration of credit risk.

Liquidity risk

Liquidity risk management serves to maintain a sufficient amount of cash and cash equivalents and to ensure that the Company has financing sources such as its revolving line of credit for a sufficient authorized amount. The Company establishes budgets, cash estimates and cash management policies to ensure it has the necessary funds to fulfill its obligations for the foreseeable future.

Price risk

The financial results of the Company are impacted by changes in raw material prices as a result of the fluctuating underlying markets. To manage its exposure to price risks, the Company closely monitors current and anticipated changes in market prices and develops pre-buying strategies and patterns.

22 - SUBSEQUENT EVENT

On March 27, 2008 the Company successfully entered into a new borrowing agreement with a syndicate of lenders (the “Agreement”) to refinance its existing Senior Secured Credit Facility (the “Facility”), which consists of the revolving credit facility and the term loan, with a $200.0 million Asset-Based Loan (“ABL”). The amount available to the Company under the ABL is determined by its borrowing base. The borrowing base is a percentage of eligible trade receivable, inventories and property, plant and equipment. The ABL is priced at libor plus a loan premium determined from a pricing grid. The loan premium declines as unused availability increases. The pricing grid ranges from 1.50% to 2.25%. However, through September 2008, the applicable premium is fixed as 1.75%. Unlike the Facility agreement, the ABL contains only one financial covenant, a fixed charge coverage ratio, which becomes effective only wh en unused availability drops below $25.0 million. In connection with the refinancing, the Company expects to record charges amounting to approximately $3.4 million representing the accelerated amortization of the debt issue expenses incurred in connection with the Facility. In addition, the Company expects to settle the two interest rate swap agreements resulting in the reversal of the amount included in accumulated other comprehensive income.

63

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 -

DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA

The consolidated financial statements of the Company have been prepared in accordance with Canadian GAAP, which differ in certain material respects from those principles that the Company would have followed had its consolidated financial statements been prepared in accordance with US GAAP. The differences relating to measurement and recognition are explained below, along with their effect on the Company’s consolidated statements of earnings and consolidated balance sheets. Certain additional disclosures required under US GAAP have not been provided, as permitted by the United States Securities and Exchange Commission.

(a)

Net earnings (loss) and earnings (loss) per share

The adjustment to comply with US GAAP would be as follows:

	2007	2006	2005
	$	$	$
Net earnings (loss) as per Canadian GAAP	(8,393)	(166,693)	27,791
Variable accounting (Note 23 (d))			265
Net earnings (loss) as per US GAAP	(8,393)	(166,693)	28,056
Earnings (loss) per share as per US GAAP
Basic	(0.19)	(4.07)	0.68
Diluted	(0.19)	(4.07)	0.68

64

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(b)

Consolidated balance sheets

The adjustments to comply with US GAAP would be as follows:

				2007				2006
	As per Canadian GAAP	Adjustments		As per US GAAP	As per Canadian GAAP	Adjustments		As per US GAAP
	$	$		$	$	$		$
Assets
Other assets	23,176	(8,274)	(e)	21,020	26,901	(6,858)	(e)	21,850
		6,118	(f)			1,807	(g)
Future income tax assets	53,990	3,861	(e)	58,111	57,404	5,461	(e)	62,196
		260	(f)			(669)	(g)
Liabilities
Pension and post-retirement benefits	9,765	2,162	(e)	11,927	7,951	7,901	(e)	15,852
Long-term debt1	243,359	6,821	(f)	250,180
Shareholders’ equity
Deficit	(67,482)	(443)	(f)	(67,925)
Accumulated other comprehensive income	67,462	(6,575)	(e)	60,887		(9,298)	(e)	(8,160)
						1,138	(g)

The other differences in presentation that would be required under US GAAP to the consolidated balance sheets, other than as disclosed below, are not viewed as significant enough to require further disclosure.

65

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(c)

Consolidated cash flows

Canadian GAAP permits the disclosure of a subtotal of the amount of funds provided by operations before changes in non-cash working capital items to be included in the consolidated statements of cash flows. US GAAP does not permit this subtotal to be presented.

(d)

Accounting for compensation programs

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) 123 (Revised). This standard amends SFAS 123, Accounting for Stock-Based Compensation and supersedes SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123. The principal amendments relate to the requirement to use a fair value method to record stock-based compensation, to the measurement methodology to evaluate equity instruments such as options and to the financial statement disclosure requirements. The measurement methodology must specifically provide for an estimation of forfeitures of employee stock awards, and compensation cost shall only include cost for awards expected to vest. As the fair value provisions of SFAS No. 123 (Revised) are consistent with the Company’s stock-based compensation plan, the applica tion of this standard has not had significant impacts on its consolidated financial statements.

For stock options granted prior to January 1, 2003, the Company includes pro forma disclosures of net earnings (loss) and basic and diluted earnings (loss) per share as if the fair value based method of accounting had been applied. The stock options granted during the year ended December 31, 2002, were fully vested as at December 31, 2006. Consequently, there is no further pro forma impact on net earnings (loss) for periods subsequent to December 31, 2006.

The Company’s net earnings (loss) and earnings (loss) per share would have been increased or decreased to the pro forma amounts indicated in the following table:

	2006	2005
	$	$
Net earnings (loss) in accordance with US GAAP – as reported	(166,693)	28,056
Add: Stock-based employee compensation expense included in reported net earnings (loss)	2,022	1,911
Deduct: Total stock-based employee compensation expense determined under fair value based method	(2,261)	(2,915)
Pro forma net earnings (loss)	(166,932)	27,052
Earnings (loss) per share as per US GAAP:
Basic – as reported	(4.07)	0.68
Basic – pro forma	(4.07)	0.68
Diluted – as reported	(4.07)	0.68
Diluted – pro forma	(4.07)	0.68

66

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(d)

Accounting for compensation programs (continued)

Through December 31, 2002, the Company chose to continue to measure compensation costs related to awards of stock options using the intrinsic value based method of accounting. In March 2000, the FASB issued Interpretation No. 44 (“FIN 44”), which became effective on July 1, 2000, requiring that the cancellation of outstanding stock options by the Company and the granting of new options with a lower exercise price (the replacement options) be considered as an indirect reduction of the exercise price of the stock options. Under FIN 44, the replacement options and any repriced options are subject to variable accounting from the cancellation date or date of grant, depending on which stock options were identified as the replacement options. Using variable accounting, the Company is required to recognize, at each reporting date, compensation expense for the excess of the quoted market price of the stock over the exercise prices of the replacement or repriced options until such time as the replacement options are exercised, forfeited or expire. The prospective adoption of the fair value based method for recognition of compensation costs did not change the accounting for the replacement and repriced options as they will continue to be accounted for by the intrinsic value method and be subject to the variable accounting until they are exercised, forfeited, modified or expire.

In November 2000, 300,000 and 50,000 replacement options were issued at exercise prices of US$10.13 (CA$15.50) and US$14.71 (CA$21.94) respectively, and in May and August 2001, 54,000 and 40,000 replacement options were issued for US$11.92 (CA$18.80) and US$9.00 (CA$13.80), respectively. In addition, in January 2001, 474,163 options were repriced at US$8.28 (CA$12.40).

There is no impact from variable accounting for 2007 and 2006 under US GAAP. The impact of variable accounting for 2005 would be a reduction of the compensation expense of approximately $0.3 million.

(e)

Employee future benefits

Effective December 31, 2006, the Company adopted SFAS 158, Accounting for defined benefit plans and other post-retirement benefits – an amendment of FASB Statements No. 87, 88, 106 and 132 (R). This standard requires an employer to recognize the over-funded or under-funded status of defined benefit post-retirement plans as an asset or liability in its balance sheet and to recognize changes in that status in the year in which the change occurs through “Other comprehensive income (loss). The standard does not change the accounting for the Company’s deferred contribution plans.

67

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(e)

Employee future benefits (continued)

The following table presents the incremental effect of applying this statement on individual line items in the consolidated balance sheet as at December 31, 2007 and 2006:

	2007			2006
	SFAS No. 158 adjustments	Minimum liability adjustments	SFAS No. 158 adjustments	Total adjustments
	$	$	$	$
Other assets	(8,274)	(3,827)	(3,031)	(6,858)
Future income taxes	3,861	4,333	1,128	5,461
Total assets	(4,413)	506	(1,903)	(1,397)
Pension and post-retirement benefits	2,162	7,883	18	7,901
Accumulated other comprehensive income	(6,575)	(7,377)	(1,921)	(9,298)
Total liabilities and shareholders’ equity	(4,413)	506	(1,903)	(1,397)

Until the adoption of SFAS 158, the provisions of SFAS 87, Employers’ Accounting for Pensions required the Company to record an additional minimum pension liability for plans where the accumulated benefit obligation exceeded plan assets’ fair value. With regards to these plans, an intangible asset was recorded up to the extent of unrecognized past service costs. The balance was recorded net of income tax in “Other comprehensive income (loss). There were no such requirements under Canadian GAAP.

68

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(f)

Deferred debt issue expenses

In accordance with the adoption of the new accounting polices under Canadian GAAP, described in Note 2, the debt issue expenses are classified against the related long-term debt and are subsequently amortized using the effective interest method. Previously, the long-term debt was measured at cost and the debt issue expenses were included in the Company’s consolidated balance sheet under the caption “Other assets” and were amortized on a straight-line basis over the term of the related long-term debt. There was no significant difference in the amortization expense resulting from the application of the straight-line and effective interest methods prior to the application of the new standards on January 1, 2007. In addition, as a result of the application of the new accounting policies, the Company recorded a decrease to the opening deficit as at January 1, 2007 in the amount of $0.4 million represent ing the cumulative difference between the two amortization methods.

Under U.S. GAAP, such costs are recorded separately within “Other assets” on the Company’s consolidated balance sheet. Consequently, a reversal of the impact recorded on initial adoption of the new policies under Canadian GAAP has been reversed and the debt issue expenses have been reclassified to “Other assets” for US GAAP purposes.

(g)

Interest rate swap agreements

The Company has outstanding interest rate swap agreements, which it designates as a cash flow hedge related to variations resulting from changes in interest rates. In connection with the adoption of the new accounting standards described in Note 2, the fair value of the interest rate swap agreements is recognized on the consolidated balance sheet for the year ended December 31, 2007 as would have been done in accordance with US GAAP. In addition, the Company continued applying hedge accounting to its cash flow hedge relationship related to its interest rate risk of its interest payments using interest rate swap agreements. These derivatives are measured at fair value at the end of each period and the gains or losses resulting from subsequent measurements are recognized in other comprehensive income when the hedge relationship is deemed effective.

Prior to January 1, 2007, the Company did not record the fair value of the interest rate swap agreements on the consolidated balance sheet under Canadian GAAP but was required to do so in accordance with US GAAP.

69

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

23 - DIFFERENCES IN ACCOUNTING BETWEEN THE UNITED STATES OF AMERICA AND CANADA (Continued)

(h)

Consolidated comprehensive income (loss)

The following table presents consolidated comprehensive income (loss) per US GAAP:

	2007	2006	2005
	$	$	$
Net earnings (loss) in accordance with US GAAP	(8,393)	(166,693)	28,056
Currency translation adjustments1	31,824	2,311	2,645
Minimum pension liability adjustment, net of tax (Note 23 (e))		2,002	(1,262)
Pension and post-retirement benefits   (Note 23 (e))	2,723
Adjustments for fair value of interest rate swap agreements, net of tax (Note 23(g))	(1,641)	206	932
Consolidated comprehensive income (loss)	24,513	(162,174)	30,371

¹ The accounting for currency translation adjustments is not a difference between Canadian GAAP and US GAAP.

(i)

 Accounting for Uncertainty in Income Tax Positions

In July 2006, FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Tax Positions” (“FIN 48”) introducing recognition and measurement criteria for income tax positions. An income tax position is a position taken in a filed tax return or a position that will be taken in a future tax return which has been reflected in the recognition and measurement of income or deferred tax assets or liabilities. Under the provisions of FIN 48 a tax position must be evaluated using a more likely than not recognition threshold based on the technical merits of the position and can only be recognized if it is more likely than not that this position will be sustainable on audit. If the position does not meet this threshold, no amount may be accrued. Additionally, the recognized tax position will be measured at the largest amount that is greater than 50 % likely to be realized on settle ment. FIN 48 became effective for the Company on January 1, 2007. The adoption of FIN 48 had no impact on the Company’s consolidated financial statements.

70

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

24 - SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 replaces the different definitions of fair value in accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for fair value measurements already required or permitted by other standards for financial statements issued for fiscal years after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact SFAS 157 will have on its consolidated financial statements.

Fair Value Option for Financial Assets and Financial Liabilities

In April 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities.  This statement's objective is to improve financial reporting by allowing entities to mitigate volatility in reported earnings caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting provisions.  Under SFAS No. 159, entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date.  The new statement establishes presentation and disclosure requirements to help financial statement users understand the effect of the entity's election on its earnings.  SFAS No. 159 is effective for the Company as of the beginning the of 2008 fiscal year.  The Company is currently evaluating the impact resulting from the adoption of SFAS No. 159.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations.  This Statement replaces SFAS No. 141, Business Combinations.  This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 labels as the “purchase method”) be used for all business combinations and for an acquirer to be identified for each business combination.  This Statement also establishes principles and requirements for how the acquirer:  a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after the Company's fiscal year beginning January 1, 2009.  While the Company has not yet evaluated this statement for the impact, if any, which SFAS No. 141(R) will have on its consolidated financial statements, under SFAS No. 141(R), the Company will be required to expense costs related to any acquisitions after January 1, 2009.

71

Intertape Polymer Group Inc.

Notes to Consolidated Financial Statements

December 31, 2007, 2006 and 2005

(In US dollars; tabular amounts in thousands, except as otherwise noted)

24 - SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS UNDER US GAAP (Continued)

Non-controlling Interests in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements.  This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company's fiscal year beginning January 1, 2008. The Company is currently evaluating the impact, if any, that SFAS No. 160 will have on its consolidated financial statements.

ORLDOCS 11159162 1

Footnotes

¹ Includes amount presented under the caption “Instalments on long-term debt” on the Company’s consolidated balance sheet as at December 31, 2007.

EX-7

Form 52-109F1 – Certification of Annual Filings

I, Melbourne F. Yull, Executive Director of Intertape Polymer Group Inc., certify that:

1.

I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings) of Intertape Polymer Group Inc. (the “Issuer”) for the period ending December 31, 2007;

2.

Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings;

3.

Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the annual filings;

4.

The Issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have:

a.

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared;

b.

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer’s GAAP; and

c.

evaluated the effectiveness of the Issuer’s disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the Issuer to disclose in the annual MD&A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation; and

5.

I have caused the Issuer to disclose in the annual MD&A any change in the Issuer’s internal control over financial reporting that occurred during the Issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting

DATED the 28^th day of March, 2008.

/s/ Melbourne F. Yull

Melbourne F. Yull
Executive Director

Form 52-109F1 – Certification of Annual Filings

I, Victor DiTommaso, Chief Financial Officer of Intertape Polymer Group Inc., certify that:

6.

I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings) of Intertape Polymer Group Inc. (the “Issuer”) for the period ending December 31, 2007;

7.

Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings;

8.

Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the annual filings;

9.

The Issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have:

a.

designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual filings are being prepared;

b.

designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer’s GAAP; and

c.

evaluated the effectiveness of the Issuer’s disclosure controls and procedures as of the end of the period covered by the annual filings and have caused the Issuer to disclose in the annual MD&A our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the annual filings based on such evaluation; and

10.

I have caused the Issuer to disclose in the annual MD&A any change in the Issuer’s internal control over financial reporting that occurred during the Issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting

DATED the 28^th day of March, 2008.

/s/ Victor DiTommaso

Victor DiTommaso
Chief Financial Officer

ORLDOCS 11158828 1