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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 20-F

Pursuant to Section 13 or 15 (d) of The Securities Exchange
Act of 1934

For the Fiscal Year ended January 31, 2006

Commission file number 333-116582

Bombardier
      Recreational Products Inc.(Bombardier Produits Récréatifs
      Inc.)(Exact name of registrant as
      specified in its charter)


Canada(Jurisdiction of company or
      organisation)726 St. Joseph
      Street, Valcourt, Quebec, Canada J0E 2L0(450) 532-2211(Address of principal executive
      office)


Securities registered or to be registered pursuant to Section 12 (g) of the
Act: None

Securities for which there is a reporting obligation pursuant to Section 15
(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's class of
capital or common stock as of the close of the period covered by the Annual
Report: One (1) Common Share as of January 31, 2006.

Indicate by check mark if the registrant is a well-seasoned issuer, as
defined in Rule 405 of the Securities Act.

Yes: [   ]    No: [X]

If this report is an annual or transition report, indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934.

Yes: [   ]   No: [X]

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 requirement for the past 90 days.

Yes: [   ]   No: [X]

Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

|Large accelerated
    filer: [   ] | Accelerated filer: [  
    ] | Non-accelerated filer:
    [X]
|---------------------------------- | ---------------------------- | ------------------------------

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Indicate by a check mark which financial statement item the Registrant has
elected to follow.

Item 17: [X]   Item 18: [   ]

If this is an annual report, indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act.

TABLE OF CONTENTS

|                                                                                              |   
|--------------------------------------------------------------------------------------------- | --
|INTRODUCTION                                                                                  | 3 
|ITEM 1 - IDENTITY OF
    DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                            | 5 
|ITEM 2 - OFFER
    STATISTICS AND EXPECTED TIMETABLE                                          | 5 
|ITEM 3- KEY
    INFORMATION                                                                   | 5 
|ITEM 4- INFORMATION ON
    THE COMPANY                                                        | 14
|ITEM 5- OPERATING AND
    FINANCIAL REVIEW AND PROSPECTS                                      | 25
|ITEM 6- DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES                                        | 58
|ITEM 7- MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                 | 65
|ITEM 8- FINANCIAL
    INFORMATION                                                             | 67
|ITEM 9- THE OFFER AND
    LISTING                                                             | 67
|ITEM 10- ADDITIONAL
    INFORMATION                                                           | 67
|ITEM 11- QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                       | 72
|ITEM 12- DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES                           | 74
|ITEM 13- DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUINCIES                                  | 74
|ITEM 14- MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS | 74
|ITEM 15- CONTROLS AND
    PROCEDURES                                                          | 75
|ITEM 16- [RESERVED]                                                                           | 76
|ITEM 16A- AUDIT
    COMMITTEE FINANCIAL EXPERT                                                | 76
|ITEM 16B- CODE OF
    ETHICS                                                                  | 76
|ITEM 16C- PRINCIPAL
    ACCOUNTANT FEES AND SERVICES                                          | 76
|ITEM 16D- EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                      | 78
|ITEM 16E- PURCHASES OF
    EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS          | 78
|ITEM 17- FINANCIAL
    STATEMENTS                                                             | 78
|ITEM 18- FINANCIAL
    STATEMENTS                                                             | 78
|ITEM 19- EXHIBITS                                                                             | 79

Explanatory Notes

Bombardier Recreational Products Inc. is not
currently subject to the periodic reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 and is not required by any
rules or regulations of the Securities and Exchange Commission (the "SEC") to
file this Annual Report on Form 20-F ("Annual Report"). Notwithstanding the
foregoing, Bombardier Recreational Products Inc. is required to file certain
periodic reports with the SEC (to the extent such reports are accepted by the
SEC) pursuant to the terms of the indenture governing its outstanding 8 3/8%
Senior Subordinated Notes due 2013. This Annual Report is being filed solely
pursuant to the terms of such indenture.

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Bombardier Recreational Products Inc. presents its financial information in
Canadian dollars. In this annual report, all references to "U.S.$" refer to U.S.
dollars and all references to "$" refer to Canadian dollars.

Forward-looking Statements

This annual report includes forward-looking
statements regarding, among other things, the Company's plans, strategies and
prospects, both business and financial. All statements contained in this
document other than historical information are forward-looking statements.
Forward-looking statements include, but are not limited to, statements that
represent the Company's beliefs concerning future operations, strategies,
financial results or other developments, and contain words and phrases such as
"may," "believes," "estimates," "expects," "should," or similar expressions.
Because these forward-looking statements are based on estimates and assumptions
that are subject to significant business, economic and competitive
uncertainties, many of which are beyond the Company's control or are subject to
change, actual results could be materially different. Although the Company
believes that its plans, intentions and expectations reflected in or suggested
by these forward-looking statements are reasonable, the Company cannot assure
you that it will achieve or realise these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks, uncertainties and
assumptions. Important factors that could cause actual results to differ
materially from the forward-looking statements include, but are not limited to:

- the Company's leverage and
  debt service obligations;

Consequently, such forward-looking
statements should be regarded solely as the Company's current plans, estimates
and beliefs. The Company does not intend, and does not undertake, any obligation
to update any forward-looking statements to reflect future events or
circumstances after the date of such statements.

INTRODUCTION

Bombardier Recreational Products Inc.
(the "Company" or "BRP") is a leading designer, manufacturer and distributor of
motorised recreational products worldwide. Prior to December 18, 2003, when BRP
purchased Bombardier Inc.'s recreational products business for a total
consideration of $806.3 million (the "Transactions"), BRP's business was
operated as the recreational products division of Bombardier Inc.

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BRP's business consists of a diversified portfolio of
products. BRP has a leading share of the market for each of its established
products: snowmobiles (the Ski-Doo brand in North America and the Ski-Doo and
Lynx brands in Europe), personal watercraft (the Sea-Doo brand), and sport boats
(the Sea-Doo brand). In 1998, the Company launched its product line for all
terrain vehicles, or ATVs (the Bombardier ATV brand). In 2001, BRP also entered
the market for outboard engines, by acquiring the Johnson and Evinrude brands
and related assets from Outboard Marine Corporation. In addition, BRP, through
its BRP-Rotax subsidiary, develops and markets Rotax engines for motorcycles,
scooters, karts and small and ultra-light aircraft. The Company's products (and
related parts and accessories) are distributed worldwide through approximately
1,750 powersports dealers, 2,190 marine dealers, and approximately 125
distributors.

BRP, incorporated under the laws of Canada, is a
wholly owned subsidiary of J. A. Bombardier (J.A.B.) Inc. ("J.A.B." or the
"Company's parent"). The Company's parent is primarily owned by Bain Capital
Luxembourg Investments S.ar.L., the Caisse de Dépôt et Placement du Québec and
the Beaudier Group (comprised of Beaudier Inc., 4260937 Canada Inc., 4260911
Canada Inc. and 4260929 Canada Inc.). Bain Capital Luxembourg Investments S.ar.L.,
the Caisse de Dépôt et Placement du Québec and the Beaudier Group are
collectively referred to as the Sponsors (the "Sponsors").

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ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3- KEY INFORMATION

A. Selected financial data



|                                                                                     | Predecessor Business | Successor | Successor   
|------------------------------------------------------------------------------------ | -------------------- | --------- | ------------
|                                                                                     | Year                 | Year      | 321-day     
|                                                                                     | ended                | ended     | period ended
|                                                                                     | January              | January   | December    
|(millions of Canadian dollars, except ratios)                                        | 31, 2002             | 31, 2003  | 18, 2003    
|Canadian GAAP                                                                        |                      |           |             
|Statement of Income Data:                                                            |                      |           |             
|Revenues(a)                                                                          | $ 1,928.2            | $ 2,383.4 | $ 2,075.6   
|Cost of sales                                                                        | 1,486.7              | 1,828.0   | 1,678.1     
|Gross profit                                                                         | 441.5                | 555.4     | 397.5       
|Operating expenses                                                                   |                      |           |             
|Selling and marketing                                                                | 130.2                | 161.1     | 143.4       
|Research and development                                                             | 97.3                 | 103.2     | 94.4        
|General and
    administrative                                                       | 122.5                | 115.3     | 107.7       
|Other charges and
    (income)                                                       |                      |           |             
|Restructuring                                                                        |                     |          |            
|Impairment loss                                                                      |                     |          |            
|Curtailment gain                                                                     |                     |          |            
|Total operating expenses                                                             | 350.0                | 379.6     | 345.5       
|Operating profit (loss) from continuing operations                                   | 91.5                 | 175.8     | 52.0        
|Financing costs                                                                      | 4.3                  | 12.6      | 6.5         
|Accretion in carrying
    value and loss on early redemption of preferred shares     |                     |          |            
|Loss (gain) on disposal
    of property plant and equipment and assets held for sale |                     |          | (1.4)       
|Foreign exchange loss
    (gain)                                                     |                     |          | 5.2         
|Income (loss) from continuing operations before income taxes                         | 87.2                 | 163.2     | 41.7        
|Income tax expense
    (recovery)                                                    | 22.1                 | 49.3      | 13.9        
|Income (loss) from continuing operations                                             | 65.1                 | 113.9     | 27.8        
|Income (loss) from discontinued
    operations, net of taxes                         | 1.5                  | 0.9       | 2.4         
|Net income (loss)                                                                    | $ 66.6               | $ 114.8   | $ 30.2      

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|                                           |         |         |         |         |         |         |        
|------------------------------------------ | ------- | ------- | ------- | ------- | ------- | ------- | -------
|Other Operating Data:                      |         |         |         |         |         |         |        
|EBITDA (b)                                 | $ 160.1 | $ 272.1 | $ 138.9 | $ (1.2) | $ 137.7 | $ 214.7 | $217.5 
|Depreciation and amortisation              | 68.6    | 96.3    | 90.7    | 14.1    | 104.8   | 120.1   | 102.9  
|Additions to property, plant and equipment | 194.3   | 97.3    | 73.2    | 21.0    | 94.2    | 70.1    | 82.8   
|Cash flows provided by
    (used in):      |         |         |         |         |         |         |        
|Operating activities                       | 185.6   | 195.9   | (77.3)  | 82.8    |        | 193.2   | 146.3  
|Investing activities                       | (359.0) | (96.0)  | (72.3)  | (778.2) |        | (46.6)  | (83.8) 
|Financing activities                       | 192.7   | (118.2) | 247.6   | 895.9   |        | (181.0) | (154.5)



|                                              | Predecessor
    Business | Successor |              | Successor   
|--------------------------------------------- | ------------------------ | --------- | ------------ | ------------
|                                              |                          |           |              |             
|                                              | Year                     | Year      | 321-day      | 44-day      
|                                              | ended                    | ended     | period ended | period ended
|January 31,                                   | January                  | December  | January 31,  | January     
|(millions of Canadian dollars, except ratios) | 2002                     | 31, 2003  | 18, 2003     | 2004        
|Balance Sheet Data (at end of                 |                          |           |              |             
|period):                                      |                          |           |              |             
|Cash                                          | $ 17.0                   | $ 28.7    | $ 140.2      | $ 196.2     
|Working capital (c)                           | (282.4)                  | (280.8)   | 171.8        | 210.8       
|Total assets                                  | 1,127.7                  | 1,134.9   | 1,328.5      | 1,821.1     
|Total long-term debt(d)                       | 5.9                      | 3.5       | 3.9          | 640.0       
|Redeemable preferred shares                   |                         |          |             | 43.2        
|Capital stock                                 |                         |          |             | 304.5       
|Total net equity                              | 178.1                    | 170.2     | 577.8        | 289.0       
|                                              |                          |           |              |             
|US GAAP                                       |                          |           |              |             
|Statement of Income Data:                     |                          |           |              |             
|Net income (loss)                             | $ 53.4                   | $ 132.8   | $ 37.8       | $ (23.7)    
|Other Operating Data:                         |                          |           |              |             
|EBITDA (b) (e)                                | 138.5                    | 295.7     | 147.3        | (10.0)      
|Balance Sheet Data (at end of period):        |                          |           |              |             
|Total assets                                  | 1,129.0                  | 1,152.0   | 1,357.0      | 1,814.4     
|Total long-term debt (d)                      | 13.7                     | 12.5      | 12.5         | 640.0       
|Total net equity (f)                          | 136.4                    | 130.5     | 531.2        | 325.5       

a.  Effective
February 1, 2002, the predecessor business prospectively adopted the
requirements of EITF Issue 01-09 when accounting for sales promotions and
incentive programs. Under the new method, estimated sales promotion and
incentive expenses are generally provided for at the later of revenue
recognition or the announcement of sales promotion and incentive programs. Prior
to the year ended January 31, 2003, these sales promotions and incentive
programs were provided for at the time that management determined that the sales
promotions and incentives were necessary, which was generally before the
announcement to customers.

b.  EBITDA
represents income from continuing operations plus income tax expense (recovery),
interest expense (income), including amortisation of deferred financing costs,
accretion in carrying value of redeemable preferred shares (which is considered
interest expense under Canadian GAAP) and depreciation and amortisation. The
Company presents EBITDA because it believes it provides useful information about
its ability to service and incur debt. EBITDA is not an alternative to net
income nor does it represent cash flow from operations as defined by either
Canadian GAAP or U.S. GAAP, collectively, GAAP, and the Company does not suggest
that readers consider it is an indicator of operating performance or an
alternative to operating cash flow or net income (as measured by GAAP) or as a
measure of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Furthermore, since EBITDA is not defined
by GAAP, it may not be calculated on the same basis as other similarly titled
measures of other companies. The following table represents a reconciliation
from income from continuing operations (a GAAP measure) to EBITDA:

- 6 -

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|                                                                                 | Predecessor Business | Successor   |          | Successor  
|-------------------------------------------------------------------------------- | -------------------- | ----------- | -------- | -----------
|                                                                                 |                      |             | 321-day  | 44-day     
|                                                                                 | Year                 | Year        | period   | period     
|                                                                                 | ended                | ended       | ended    | ended      
|                                                                                 | January 31,          | January 31, | December | January 31,
|(millions of Canadian dollars, except ratios)                                    | 2002                 | 2003        | 18, 2003 | 2004       
|                                                                                 |                      |             |          |            
|Income (loss) from continuing operations                                         | $ 65.1               | $ 113.9     | $ 27.8   | $ (17.1)   
|Financing cost                                                                   | 4.3                  | 12.6        | 6.5      | 7.0        
|Accretion in carrying
    value and loss on early redemption of preferred shares |                     |            |         | 0.5        
|Income tax expense
    (recovery)                                                | 22.1                 | 49.3        | 13.9     | (5.7)      
|Depreciation and amortisation                                                    | 68.6                 | 96.3        | 90.7     | 14.1       
|EBITDA                                                                           | $ 160.1              | $ 272.1     | $ 138.9  | $ (1.2)    

c.  Represents total current
assets less total current liabilities.

d.  In January 2005, the
Company voluntarily repaid, without penalty, U.S.$158.3 million (approximately
$193.0 million) of the Term Facilities and shortly thereafter, on February 9,
2005, fully repaid the remaining outstanding balance of U.S.$118.9 million
(approximately $147.0 million) of the Term Facilities. The U.S.$280 million Term
Facilities has been replaced with a new Term Facility of U.S.$50.0 million. On
January 31, 2006, the Company fully repaid, without penalty, the new Term
Facility.

e.  The following is a
reconciliation of EBITDA from Canadian GAAP to US GAAP:



|                                                                                | Predecessor Business | Successor |              | Successor  
|------------------------------------------------------------------------------- | -------------------- | --------- | ------------ | -----------
|                                                                                |                      |           |              | 44-day     
|                                                                                | Year                 | Year      | 321-day      | period     
|                                                                                | ended                | ended     | period ended | ended      
|                                                                                | January              | January   | December 18, | January 31,
|(millions of Canadian dollars, except ratios)                                   | 31, 2002             | 31, 2003  | 2003         | 2004       
|                                                                                |                      |           |              |            
|                                                                                |                      |           |              |            
|EBITDA (Canadian                                                                |                      |           |              |            
|GAAP)                                                                           | $ 160.1              | $ 272.1   | $ 138.9      | $ (1.2)    
|Adjustments: (i)                                                                |                      |           |              |            
|Development costs capitalised                                                   | (9.5)                | (8.6)     | (4.7)        | (9.3)      
|Foreign exchange loss
    from reduction in net investment in a foreign entity  |                     |          |             |           
|Accretion in carrying
    value and loss on early redemption of preferred share |                     |          |             | 0.5        
|Pension expense                                                                 | (0.5)                | (0.9)     | (0.4)        |           
|Software cost
    capitalised                                                   | 1.5                  | 1.4       | 1.2          |           
|Unrealised gains
    (losses) on foreign exchange
    contracts                 | (13.1)               | 31.7      | 12.3         |           
|EBITDA (US GAAP)(ii)                                                            | $ 138.5              | $ 295.7   | $ 147.3      | $ (10.0)   

(i)  See Note Significant
Difference Between Canadian and US GAAP to the audited consolidated financial
statements of the Company's included elsewhere in this annual report.

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(ii) EBITDA
includes $8.2 million, $13.2 million, $10.0 million, $1.2 million, $11.2
million, $8.6 million and $4.7 million of research and development tax credits
for the fiscal years ended January 31, 2002 and 2003, the 321-day period ended
December 18, 2003, the 44-day period ended January 31, 2004, the combined year
ended January 31, 2004 and the years ended January 31, 2005, and 2006
respectively, which the Company includes as a reduction in its research and
development expenses, as opposed to a reduction in its income tax expense.

f.  Total net
equity under U.S. GAAP includes accumulated other accumulated comprehensive
income (loss) of $(12.3) million, $(10.3) million, $(15.2) million, $2.0
million, $(1.0) million and $(59.0) million as of January 31, 2002 and 2003,
December 18, 2003, January 31, 2004, 2005 and 2006.

g.  On
February 1, 2004, the Company's forward foreign exchange contracts were
designated as hedges of forecasted transactions. For those contracts that were
purchased prior to the beginning of the fiscal year, the designation of the
hedge was made as at February 1, 2004. For forward foreign exchange contracts
that were purchased subsequent to February 1, 2004, the derivative was
designated as a hedge as at the contract inception date. For all of these
derivative instruments the Company had used the critical terms method to assess
hedge effectiveness.

The Company has concluded that the
critical terms method to assess hedge effectiveness did not comply with Canadian
and U.S. GAAP for those derivatives that had a fair value other than zero on
February 1st, 2004, the date they were designated as hedges.
Consequently, for those derivatives purchased prior to February 1, 2004 but
designated as hedges on February 1, 2004, management has concluded that it was
inappropriate to apply hedge accounting for these forward foreign exchange
contracts. As a consequence, the Company was not permitted to defer the
recognition of the change in fair value of forward contracts for these
particular derivatives. Consequently, the consolidated balance sheet as of
January 31, 2005, the consolidated statement of income, the consolidated
statement of cash flows and the consolidated statement of retained earnings and
related notes for the year ended January 31, 2005 have been restated.

B. Capitalisation and indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

D. Risk factors

The following are significant risk factors known to
BRP that could materially adversely affect the Company's business, financial
condition, or operating results. BRP's annual and quarterly financial results
may be subject to significant fluctuations depending on those factors, many of
which are beyond its control.

BRP has restrictive covenants which could limit its activities.

As of January 31, 2006, the Company and
its subsidiaries had $228.0 million (U.S.$200 million) of senior subordinated
debt outstanding. The indenture relating to the notes and BRP's senior secured
Amended and Restated Credit Agreement contain debt covenants which may limit its
ability to engage in activities that could otherwise benefit BRP, including
restrictions on its ability to:

- incur, assume or permit to exist additional indebtedness or
  contingent obligations;
- incur liens and engage in sale and leaseback transactions;
- make capital expenditures;
- make loans and investments;
- declare dividends, make payments or redeem or repurchase
  capital stock;
- engage in mergers, acquisitions and other business
  combinations;
- prepay, redeem or purchase certain indebtedness;
- amend or otherwise alter the terms of its indebtedness;
- sell assets;
- transact with affiliates; and

- 8 -

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- 

BRP's senior secured Amended and Restated Credit
Agreement also contains financial covenants such as a maximum leverage ratio and
a minimum interest coverage. Although the Company believes none of these
covenants are presently restrictive of its operations, its ability to meet the
financial covenants can be affected by events beyond its control.

The Company may incur additional debt, which may
contain additional and more limiting terms, which could have significant
consequences to the Company.

BRP's ability to meet its obligations depends on its
future performance, which will be affected by financial, business, economic and
other factors. The Company will not be able to control many of these factors,
such as economic conditions in the markets where it operates and pressure from
competitors. The Company cannot be certain that its cash flow will be sufficient
to allow it to pay principal and interest on its debt and meet its other
obligations. If BRP does not have enough liquidity, it may be required to
refinance all or part of its existing debt, sell assets or borrow more money.
BRP cannot guarantee that it will be able to do so on terms acceptable to it, if
at all. In addition, the terms of existing or future debt agreements, may
restrict it from pursuing any of these alternatives.

BRP's floorplan, factoring and securitisation arrangements subject the
Company to risks associated with dealer defaults and insufficient liquidity.

BRP is party to written agreements with financing
companies that provide financing for purchases of many of its products by
dealers that meet the credit and other requirements of such financing companies.
When a dealer purchases a product using dealer financing (also known as
floorplan financing arrangements), BRP receives payment from the financing
company soon after shipment to the dealer. If BRP is not able to maintain this
sort of dealer financing on acceptable terms, BRP's dealers will have to pay
cash or obtain independent financing to purchase the Company's products and
consequently, may buy fewer products from BRP.

These financing agreements require BRP to purchase
from the financing company of any new and unused product if dealers default on
their obligations. As a result, if one or more of BRP's dealers defaults and the
Company is required to purchase inventory repossessed by the financing
companies, any funds used for this purpose will not be available to operate the
Company's business. Performance under the obligation to acquire new and unused
products repossessed would likely be required at times when the market for BRP
products is depressed or not in season, which would limit its ability to resell
the units and could have a material adverse effect on its financial position.
The majority of such obligations to purchase new and unused products are subject
to a cap.

Additionally, certain of BRP's factoring agreements
under which BRP sells receivables to third parties, and certain floorplan
agreements, are terminable by the other party on short notice. In the event a
financing company terminates its arrangements with BRP, the Company may not have
an adequate amount of time to find replacement financing on comparable terms or
at all. In the absence of these arrangements, BRP would have to self-finance the
sales of its products, the result of which would be an increase in the Company's
working capital needs. BRP may not be in a financial position to provide
self-financing, and, if it did, it could have a negative impact on its
short-term liquidity.

BRP operates in a highly competitive industry, which may adversely affect its
results of operations or its ability to expand its businesses.

The industry in which BRP operates is highly
competitive and BRP has a number of significant competitors in each of its
markets. Some of its competitors are more diversified, have less debt and have
financial and marketing resources which are substantially greater than BRP's. To
continue to remain competitive, the Company will need to develop new products,
and improve its existing ones. The mature nature of its markets means that
actions by its competitors to increase their market share such as lowering their
prices, increasing the advertising and promotion of their products, improving
their distribution

- 9 -

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network or introducing innovative products could hurt its sales or profits.
BRP may not be able to maintain its competitive position or profitability within
its markets.

BRP relies on dealers to distribute its products, the loss of which could
decrease its profitability.

Certain of BRP's competitors have recently signed
co-distribution agreements, granting access to each other's dealer base. These
agreements, combined with efforts by BRP's competitors to increase their
influence within dealerships common to BRP, could substantially reduce BRP's
presence within these dealerships. If BRP is not able to sustain its dealer base
with a strong value proposition, its profitability could decrease.

Also, particularly with respect to marine engines,
BRP depends on relationships with boat builders who equip their boats with BRP
marine outboard engines. If BRP's competitors continue to increase their
influence on such boat builders through aggressive strategies such as exclusive
arrangements or acquisitions, BRP's profitability may suffer.

If BRP is unable to meet consumers' needs by timely developing new products
or improving upon its existing products, its future profitability could be
negatively affected.

BRP's business is subject to changes in consumer
preferences. The Company believes that its future success depends, in part, on
its ability to develop on a timely basis new technologically advanced products
or improve upon its existing products in innovative ways that meet or exceed
appropriate industry standards. Maintaining its market position will require the
Company to continue to invest in research and development and sales and
marketing. Industry standards, customer expectations or other products may
emerge that could render one or more of its products less desirable. The Company
may not have sufficient resources to make necessary investments or it may be
unable to make the technological advances necessary to develop new products or
improve its existing products to maintain its market position. Furthermore,
there can be no assurance that interest in BRP's products will continue to grow,
or that it will be able to sustain current levels of production and sales, or to
increase such levels.

Actions of BRP's dealers and distributors could harm its sales.

BRP is dependent on a dealer and distribution network
to sell and service its products. BRP sells a majority of its products through
non-exclusive dealer and distribution agreements. Many of the dealers through
which BRP sells its products also carry competing product offerings and most
dealers who sell its products exclusively are not contractually obligated to
continue to do so and may choose to sell competing products at any time, which
may lower BRP's sales. In addition, BRP relies on its dealers to service and
repair its products. There can be no assurance that BRP's dealers will provide
high quality repair services to its customers. If BRP's dealers fail to provide
quality repair work to its customers, its brand and reputation may be damaged
and sales of its products may be adversely affected.

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BRP is subject to regulations and
other restrictions on its ability to terminate its dealer and distribution
relationships, which prescribe the means by which it can terminate dealer and
distributor relationships and impose penalties for failure to comply. These
restrictions may also prevent or deter BRP from terminating dealer and
distributor relationships that are unprofitable or otherwise undesirable to
maintain.

BRP may not be able to execute its growth strategy, which could negatively
affect its profitability.

Part of BRP's strategy is to continue to gain market
share by leveraging the strength of its brands in existing markets and expanding
its development expertise into new markets, and to grow internationally. Many
factors, such as innovation, economic conditions, weather conditions and trends,
consumer demand and BRP's competitors' abilities to achieve similar goals, will
impact whether or not it is able to execute its growth strategy. Additionally,
many of the markets in which BRP currently operates have either remained flat or
declined over time. If BRP is not able to gain additional market share, expand
into new markets and/or increase its presence internationally, its operating
results may be materially harmed.

Unfavourable weather conditions could hurt BRP's sales, increase its
inventory levels and reduce its profitability.

As a manufacturer of outdoor motorised equipment,
BRP's sales, inventory levels and resulting profitability are affected by
weather conditions. For example, lack or timing of snowfall in any year in any
particular region of the United States, Canada or Europe may adversely affect
retail sales of snowmobiles in that region. In addition, sales of personal
watercraft and sport boats may be affected by increased rain during the summer.
Further, sales of parts and accessories for BRP products are also influenced by
weather conditions.

A downturn in general economic or business conditions, could adversely affect
the Company's business and prospects.

Most of BRP's products are considered to be
discretionary purchases by its customers. Therefore sales of these products tend
to decline during periods of economic uncertainty where consumer confidence is
lower as a result of factors such as volatile fuel prices. Accordingly, any
significant decline in general economic conditions, including uncertainty
regarding future economic prospects, could have a material adverse effect on the
Company's business, financial condition and results of operations.

BRP's future growth increasingly depends on its business performance in
markets outside of North America, which are less predictable and controllable.

BRP derives its revenues from more than 85 countries
outside of North America. The business environments in these international
markets are not as well known by BRP and can change rapidly due to the diversity
of their respective economic, political and social factors. Those factors
include political and economic instability, changes to trade tariffs as well as
to applicable tax laws. BRP's inability to accurately predict or control these
factors due to its relative inexperience in those markets could affect its
profitability.

Fluctuations in the value of the Canadian dollar in relation to other
currencies may lead to lower revenues and earnings.

Exchange rate fluctuations could have an adverse
effect on BRP's results of operations. The majority of the Company's revenue and
debt is in U.S. dollars while the majority of its sales and operating expenses
is in Canadian dollars and the Euros. A portion of BRP's sales and operating
expenses are in other currencies, including the Australian dollar, the Norwegian
Kroner and Swedish Krona. Generally, sales made outside Canada are denominated
in the currency of the country in which the sale is made, and this currency
could become less valuable when converted into Canadian dollars as a result of
exchange rate fluctuations. Unfavourable currency fluctuations could lead to
increased prices to customers outside Canada, or could result in lower revenues
for BRP, on a Canadian dollar basis, from such customers.

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If BRP is unable to protect its intellectual property rights or further
develop its existing technologies, brands and marks, or if BRP's competitors
develop and patent equivalent or superior technologies for products competing
against its own, BRP's competitive position may be harmed.

BRP relies on a combination of patent, trademark and
trade secret laws to protect certain aspects of its business. BRP has registered
trademarks, copyrights and patents and trademark and patent applications pending
in the United States, Canada and abroad. However, the Company has selectively
pursued patent and trademark protection in Europe, Canada, and the United
States, and in some instances it has not perfected important patent and
trademark rights in these and other countries. BRP may not be able to obtain
broad enough patent protection over its engine and other technologies to
adequately protect its competitive advantage. The failure to obtain worldwide
patent protection may result in other companies copying and marketing products
based upon BRP's protected technologies outside its protected markets. This
could impede BRP's growth in existing markets and into new markets, and result
in a greater supply of similar products that could erode its pricing power.

It is possible that BRP's competitors will develop
and patent equivalent or superior engine technologies and other products that
compete with BRP's. They may assert these patents against BRP and it may be
required to license these patents on unfavourable terms or cease using the
technology covered by these patents, either of which would harm its competitive
position and may materially adversely affect its business.

Monitoring the unauthorised use of the Company's
intellectual property is difficult, and the steps taken may not prevent
unauthorised use by others. The failure to adequately build, maintain and
enforce the Company's intellectual property portfolio could impair the strength
of its product attractiveness and its brand recognition, and harm its
competitive position.

Product liability and recall claims may materially affect BRP's financial
condition and damage its reputation.

BRP is engaged in a business which exposes it to
product liability claims in the event its products actually or allegedly fail to
perform as expected or the use of its products results, or is alleged to result,
in property damage, personal injury or death. BRP has approximately 50 pending
product liability cases. With respect to product liability claims which arise as
a result of personal injury or property damage that occurred prior to the
consummation of the Transactions (approximately 80% of the pending product
liability cases), Bombardier Inc. agreed to indemnify BRP for certain amounts.
Claims may arise in the future in excess of BRP's indemnities and insurance
coverage. In the future, BRP may not be able to adequately insure its product
liability risk or the cost of doing so may be prohibitive. Adverse determination
of material product liability claims made against BRP could have a material
adverse effect on its financial condition and harm the Company's reputation.

BRP has been the subject of numerous lawsuits for
product liability claims related to (i) fuel tanks for certain of its personal
watercraft which were the subject of a recall, (ii) the steering design of
personal watercraft, and (iii) its Rotax small and ultra-light aircraft engines,
and anticipates future suits of this or similar nature. These and other claims
BRP faces could be costly to the Company and require substantial management
attention.

In addition, if any of the Company's products are, or
are alleged to be, defective, BRP may be required to participate in a recall of
that product if the defect or alleged defect relates to safety.

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Compliance with existing and changing environmental and safety laws and
regulations could increase the Company's costs or restrict its business.

The Company is subject to extensive environmental and
safety laws and regulations concerning, among other things, emissions and
discharges to water, air and land, the handling and disposal of hazardous and
non-hazardous materials and wastes, and employee health and safety.
Environmental risks and liabilities are inherent in many of the Company's
manufacturing operations and products. Future environmental liabilities may
occur or environmental damages may result in future liabilities due to prior or
present practices. From time to time, BRP has incurred and continues to incur
costs and obligations related to environmental compliance matters. Failure to
comply with such laws and regulations could result in costs for corrective
action, penalties or the imposition of additional liabilities or restrictions.
Potential liabilities resulting from past or present practices cannot be
estimated at this time and may be significant. Further, BRP has from time to
time acquired other businesses or entities and it may be subject to claims based
on successor liability with respect to the prior activities of entities or
businesses it acquired.

Additionally, changes in environmental or other laws
could require extensive changes in BRP's operations or to its products. BRP
cannot anticipate what the costs of compliance with these changes might be. New
engine emission regulations are being phased in through the year 2010 by the
U.S. federal government, the State of California, the Canadian government and
the European Union.

BRP cannot be certain, however, that identification
of presently unidentified environmental conditions, more vigorous enforcement by
regulatory agencies, enactment of more stringent laws and regulations or other
unanticipated events will not arise in the future and give rise to additional
material environmental liabilities which could have a material adverse effect on
its business, financial condition or results of operations.

Access to riding areas for motorised recreational vehicles may become more
controlled.

Certain groups have made efforts to have legislation
passed that would restrict access by motorised recreational vehicles to certain
public lakes, parks and other areas. A reduction in the number of areas in which
BRP's products can be used may result in a reduction in BRP's sales and could
have a material adverse effect on its business, financial condition or results
of operations.

BRP relies on third parties to supply materials, components
and, in some instances, its products, and their failure to supply them timely
and in accordance with BRP's quality standards could adversely affect BRP's
sales or reputation and increase its costs.

Some important components of BRP products are sourced
from only one or two suppliers and in some instances BRP has entered into
relationships whereby a third-party manufacturer supplies the Company with the
finished product BRP sells. If these suppliers ceased doing business with,
decreased their supply to, or failed to timely supply BRP, it may be unable to
find satisfactory alternative sources in time or at all. This could interrupt
BRP's production, hurt its sales or increase its costs.

Changes in the availability or cost of raw material
used to manufacture components or products for BRP may also negatively impact
BRP's ability to timely deliver its products, or increase its costs.

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BRP also enters into manufacturing agreements with
third parties to produce some of its products and related components, which it
markets under its brand names. BRP has less control over the quality of
production of these products. Similarly, in return for royalties, BRP licenses
some of its trademarks to third parties that manufacture and sell their products
under the Sea-Doo or Ski-Doo name, for example. As all of these products carry
BRP's name or trademarks, any manufacturing defects would be associated with BRP
and may harm its reputation and sales.

BRP is increasingly sourcing its
materials, components and sometimes products from suppliers in low-cost
countries, which are generally located far away from the Company's main
production facilities. Doing business with such suppliers involves additional
risks with respect to the quality and timely delivery of the sourced goods.

BRP may be unable to match its production to future demand, which could
affect its sales or profitability.

BRP plans annual production levels and long-term
product development and introductions based on anticipated demand. The Company
relies on its market assessment and feedback from its dealers to anticipate the
future volumes of purchase orders. Changes in product demand or delays in
product delivery by BRP could impair its ability to achieve sales goals or
maintain profitability.

Loss of key personnel or BRP's inability to attract and retain qualified
personnel could hurt its business and inhibit its ability to operate and grow
successfully.

BRP's success will continue to depend to a
significant extent on its leadership team and other key management personnel as
well as its ability to attract and retain qualified personnel to staff its
manufacturing, research and development, design, marketing, distribution and
international operations. The loss of these employees or BRP's inability to
recruit and retain qualified personnel could have a material adverse effect on
its operating results.

Employment related matters such as unionisation and pension plan obligations
may affect BRP's profitability.

BRP's employees in Austria and Finland are members of
a union in their respective countries. While the Company has positive labour
relations in these and its other locations, it has little control over the
labour laws, national collective bargaining agreements or union activities and
could face difficulties in the future. Failure to reach agreements with employee
representatives regarding work conditions may affect BRP's competitiveness.

ITEM 4- INFORMATION ON THE COMPANY

A. History and development of the Company

BRP's History

Bombardier Recreational Products Inc. was
incorporated under the laws of Canada on November 3, 2003 and is a wholly owned
subsidiary of J.A.B., also incorporated under the laws of Canada. Prior to
December 18, 2003, BRP's business was operated as the recreational products
division of Bombardier Inc.

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The recreational products division of Bombardier Inc.
was the founding business on which that company expanded into a world leader in
transportation products. In 1937, Joseph-Armand Bombardier developed a vehicle
with steerable skis in front of a set of tracks that could travel across snow.
Bombardier Inc. was founded in 1942 to manufacture this tracked vehicle and
later produced what became the modern snowmobile. The first Ski-Doo snowmobile
was launched in 1959. Thereafter, the recreational products division was
expanded to other recreational motorised products, including the Sea-Doo
personal watercraft in 1968, Sea-Doo sport boat in 1994, and ATV in 1998.
Bombardier Inc. also made key acquisitions that complemented its recreational
product business, including the acquisition in 1970 of the Austrian company that
manufactured Rotax engines, the acquisition of the Lynx brand snowmobile in 1988
and the acquisition of the Johnson and Evinrude outboard engine brands and
related assets in 2001.

On December 18, 2003, BRP purchased Bombardier Inc.'s
recreational products business, and shortly thereafter disposed of its utility
vehicle business.

B. Business overview

BRP operates in the two reportable segments
described below. Each reportable segment offers different products and services
and requires different technology, distribution and marketing strategies.

The powersports segment designs,
develops, manufactures and sells snowmobiles, personal watercraft, all-terrain
vehicles, sport boats and Rotax engines. Powersports products are sold mainly
through a network of independent dealers and distributors.

The marine engines segment designs, develops,
manufactures and sells outboard engines available across three technologies:
2-stroke carbureted, 2-stroke direct injection and 4-stroke technology. Marine
engines products are sold directly to boat builders or through a network of
independent dealers and distributors.

Powersports Segment

The Company's powersports segment
includes its snowmobile, personal watercraft, ATV, sport boat and engine
businesses, including any related parts, accessories and clothing operations.
During the fiscal year ended January 31, 2006, the Company's powersports segment
generated revenues of approximately $1,875.3 million.

Snowmobiles. The Company's founder, Joseph-Armand
Bombardier, introduced the first modern day snowmobile in 1959. BRP currently
produces a line of products marketed under the Ski-Doo brand name in North
America and Europe and the Lynx brand name in Europe. The International
Snowmobile Manufacturer's Association estimates that the size of the snowmobile
market in North America was approximately U.S.$1.2 billion in model year 2005.
BRP leads this market as well as the European market for the number of units
retailed in model year 2005. The Company attributes its success in these markets
to its product performance and innovation and its broad distribution network.
BRP's products have been recognised with industry-related and other awards for
many years. In model year 2003, BRP released the REV platform, which changed the
rider's position on the sled, improving manoeuvrability and comfort. Widespread
market acceptance of the design helped BRP to continually increase its North
American market share from model year 2002 to model year 2006. The Company's
distribution network in North America consists of approximately 800 dealers.

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The Company believes snowmobile sales are affected by
timing and quantity of snowfall. From 1994 to 1998, snowfall was above 20-year
average levels in the U.S. and industry unit sales increased by approximately 9%
per year during that period. The Company believes that the above average
snowfall contributed to an acceleration of sales in these years that would have
otherwise been made after 1998. Because of this trend and several subsequent
years of below average snowfall, U.S. industry unit sales experienced a
compounded annual decrease of approximately 6.5% from model year 1999 to model
year 2005. Despite these negative trends, BRP was able to maintain its level of
retail sales of retail units from model year 2002 to model year 2005.

Due to BRP's more than 45-year presence in the
industry and its market leadership, the Company has a large installed base of
snowmobiles. Through the sale of related parts, accessories and clothing, this
installed base generates a recurring stream of revenues.

BRP produces a broad line of snowmobiles, consisting
of 19 different models, marketed under the Ski-Doo brand name in North America
and Europe and the Lynx brand name in Europe. This broad product offering allows
the Company to successfully compete in all segments of the snowmobile market.
BRP's snowmobiles offer a wide range of standard and optional features that
enhance their operation, riding comfort and performance. BRP also introduces new
models every year and its leadership in innovation, technology, style and
performance has been recognised through numerous industry honours and awards.

The REV platform continues to contribute toward
maintaining BRP's leadership position within this market place. This design
positions the snowmobile driver 12 inches forward, creating a smoother ride and
improving manoeuvrability. The REV has enjoyed considerable success on the
racing circuit, winning many races during the 2005-2006 racing season, including
the SnoCross event of the 2006 X-Games and major HillCross events. For model
year 2007, BRP has expanded its lighter RF platform which is targeted at
bringing new people into the sport, introduced a new engine called the "V-800,"
and launched more racing-inspired packages based on the popular REV platform.

The Company's 2007 Ski-Doo models carry suggested
retail prices ranging from U.S.$4,099 - U.S.$12,249 (excluding the Mini Z model
which retails for U.S.$2,199) for the U.S. market. The Company's Lynx models
carry suggested retail prices which are slightly higher. BRP also generates
revenue from the sale of parts, accessories and clothing related to its
snowmobile products. The Company's clothing reflects the Ski-Doo and Lynx brands
for snowmobile enthusiasts who value having clothing with colors and designs to
match their sleds.

Personal Watercraft. BRP introduced the first
sit-down personal watercraft in 1968. BRP currently produces a line of personal
watercraft marketed under the Sea-Doo brand name. The National Marine
Manufacturer Association, or NMMA, estimates the U.S. retail market was more
than U.S.$725.0 million for model year 2004. BRP has led this market for several
years, in part due to its product performance and innovation as well as its
broad dealer network. The Company's products have been recognised with
industry-related and other awards for many years. In model year 2004, BRP
introduced an "inter-cooled supercharged" version of its 4-TEC engine in the
Sea-Doo RXP, which at 215hp is the industry's most powerful personal watercraft.
BRP believes its customers are attracted to personal watercraft with 4-TEC
engines due to their performance, lower emissions and sound levels. BRP's
distribution network in North America consists of approximately 860 dealers.

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During the mid-1990s, personal watercraft use gained
popularity. The large number of new users created problems with safety and
pollution. This resulted in more regulatory scrutiny, with several bans and
restrictions proposed against the use of personal watercraft. Due in part to
this increased regulatory activity, new unit sales across the industry declined
approximately 14% annually from model year 1995 to model year 2001 in the United
States. Today's personal watercraft have significantly improved noise control
and emissions standards, and the market appears to be stabilising. The active
regulatory environment has also eased with several favourable rulings at
important water destinations in the United States. The Company expects the
market to be relatively stable going forward.

BRP produces a line of personal
watercraft, consisting of 11 different models. BRP also generates revenue from
the sale of parts, accessories and clothing related to these products, which
sales are driven mainly by the existing fleet of personal watercraft sold in
current and past seasons and are recurring in nature.

In model year 2006, BRP introduced the 2006 Sea-Doo
GTI, the latest model in the recreation segment using the Rotax 4-TEC engine
platform. The 130-hp GTI received the "3-Star Ultra-Low Emission" certification
from the California Air Resources Board (CARB) for 2006. BRP's 2006 Sea-Doo
models carry suggested retail prices ranging from U.S.$7,599 - U.S.$13,299 for
the U.S. market.

All-terrain Vehicles. The first 3-wheel ATV
product was introduced in North America in 1971, and the modern 4-wheel ATV was
introduced during the late 1980s. Since that time, the North American market has
expanded each year. The Motorcycle Industry Council estimates the U.S. retail
market for ATVs was approximately U.S.$4.2 billion in 2005. BRP believes that,
similar to other consumer product categories that have experienced rapid growth,
the ATV market will contract and then stabilise over the next few years. BRP
began producing a limited line of ATVs in 1998 to leverage its manufacturing
facilities, technology and dealer network. Since that time, BRP has expanded its
ATV product lines and currently focuses on three main segments: the
recreation-utility segment, the sport segment and the youth vehicle segment. The
Company's products have been recognised with industry awards. The Company's
distribution network in North America consists of approximately 1,100 dealers.

In 2002, BRP was the first company to introduce a
two-rider ATV. The response from the specialised press, dealers and customers
has been extremely positive. BRP's ATVs also have been recognised with many
industry honours and awards. For example, each available Outlander model has
been named "ATV of the Year" in its respective engine class: Outlander 400 HO in
2003, Outlander 800 HO EFI in 2005 and Outlander 650 HO EFI in 2006.

The 2006 ATV models carry suggested retail prices
ranging from U.S.$3,299 - U.S.$10,199 (excluding the youth models, which retail
between U.S.$1,799 - U.S.$2,399) for the U.S. market.

Sport Boats. BRP entered the recreational boating
industry in 1994 as an extension of its already successful personal watercraft
business. It currently produces a line of sport boats marketed under the Sea-Doo
brand name. Sport boats occupy a specific niche in the market, representing
motorised boats that use jet power rather than conventional propeller
propulsion. Compared to conventional boats, sport boats provide superior
acceleration and handling, increased safety for swimmers and marine wildlife,
and better accessibility to shallow waters. The U.S. sport boat retail market
was estimated by the NMMA to be approximately U.S.$130.4 million in 2004.
According to Statistical Surveys, Incorporated, BRP leads the sport boat market
in North America. The Company's distribution network in North America consists
of approximately 355 dealers.

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BRP's model year 2006 line-up consists
of nine different models. BRP's sport boats are available in the musclecraft
segment, with the Sportster and Speedster platforms, the luxury performance
segment with the Utopia platform, the recreational segment, with the Challenger
and Islandia platforms, and the sport segment with the Speedster WAKE platform.
BRP's sport boats have received many industry honours and awards.

For the 2006 season, BRP announced
that all of its 2006 Sea-Doo sport boats will come equipped with Rotax 4-TEC
engines. BRP also launched the Speedster WAKE model, specifically designed for
wakeboarding. BRP's sport boats carry suggested retail prices ranging from
U.S.$15,499 to U.S.$42,499 for the U.S. market.

Engines.The
Company manufactures engines for a broad array of vehicles and equipment under
the Rotax brand name. Rotax engines are used in Ski-Doo and Lynx snowmobiles,
Sea-Doo personal watercraft and sport boats, and Bombardier ATVs, as well as in
other manufacturers' motorcycles, scooters, karts and small and ultra-light
aircraft.

- 

During fiscal year 2006, BRP and
Petroliam Nasional Bhd (Petronas), the national oil and gas company of Malaysia,
signed a Joint Development Agreement for the development of high performance
engines.

Marine Engines Segment

The Company's marine engines segment
covers outboard engines available across three technologies: 2-stroke carbureted
2-stroke direct injection and 4-stroke technology and includes any related
parts, accessories and clothing operations. During the fiscal year ended January
31, 2006, the Company's marine engines segment generated revenues of
approximately $540.0 million.

The NMMA estimated the U.S. outboard
engine retail market to be approximately U.S.$2.9 billion in calendar year 2004
and it further observed that over the past several years, the industry continued
to experience a shift toward 2-stroke direct injected (DI) and 4-stroke engines,
away from traditional 2-stroke carbureted engines. According to the NMMA, DI and
4-strokes further strengthened their dominance in calendar year 2005, capturing
a 79.2% share of US wholesale shipments, up from 65.3% in 2004 and 60.2% in
2003. While emissions standards initially prompted this shift, these
technologies continue to gain momentum due to the elimination or reduction in
carbureted engine offerings by several manufacturers, in addition to actual and
perceived advantages over carbureted technology. These include, but are not
limited to, emissions, fuel efficiency and noise. BRP, under the Evinrude brand,
has the most extensive line-up of 2-stroke DI engines.

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In model year 2006, BRP's focus for
outboard engines shifted almost completely to E-TEC, its 2-stroke direct
injection technology, resulting in an increase in Evinrude engine market share.
This increase is due in part to the addition of new E-TEC engine models to the
existing line-up as well as the increasing awareness of this technology within
the market place. Since BRP has deliberately limited its offerings of
conventional 2-stroke and 4-stroke technology, its overall market share has
slightly declined.

Due to the long history of the brands, there is a
large installed base of Johnson and Evinrude outboard engines in the United
States, which generates a recurring stream of revenues.

BRP's model year 2006 product line-up offers a range
of outboard engines available across all three current technologies in the
industry: Johnson 2-stroke carbureted and 4-stroke technology, and Evinrude
2-stroke direct injection and E-TEC direct injection technologies.
Johnson-branded engines are targeted at consumers desiring conventional 2-stroke
and 4-stroke technology, ranging from 3.5 hp to 225 hp. The Evinrude brand
focuses on delivering new and innovative technology to consumers. In the model
year 2006 product line-up, Evinrude 2-stroke direct injection and E-TEC engines
are offered in 60 models in North America ranging from 40 hp to 250 hp. In
addition, BRP's Evinrude E-TEC technology has won several industry-related and
other awards, including the Clean Air Technology Excellence Award from the U.S.
Environmental Protection Agency (EPA).

In model year 2006, BRP expanded the E-TEC line-up,
launching V4 and 60-degree V6 models from 115hp to 200hp. These models have all
the attributes of the smaller and larger platforms (40hp to 90hp and 90-degree
V6 200hp to 250hp), including CARB "3-Star Ultra-Low Emission" certification, no
scheduled dealer maintenance required for three years for recreational use and
lower weights than comparable 4-stroke engines.

Related Parts and Accessories

BRP provides parts, accessories and clothing related
to its powersports and marine engine products. Revenues from the sale of parts,
accessories and clothing related to each segment are included in the results of
operations for that segment. The parts BRP sells include consumables (e.g.,
oil), wearable components (e.g., spark plugs and transmission belts) and
replacement parts (e.g., pistons and windshields), while the accessories it
sells include products that enhance or modify vehicle functionality (e.g.,
second passenger seats, colored covers and racks). Parts and accessories sales
are driven mainly by the installed base of vehicles sold in current and past
seasons and are recurring in nature. Of the parts and accessories sold by the
Company, many are components, gauges and other parts which are not available
from another source. BRP also sells clothing, mainly in connection with its
snowmobile and personal watercraft products, which reflects its brands and is
designed with colors and logos to match its products. Finally, in exchange for
royalties, the Company grants licenses to certain third-parties to use specific
BRP trademarks in conjunction with the sale of approved products.

Manufacturing and Supply

The Company's manufacturing operations are conducted
through eight manufacturing facilities worldwide. The Company's manufacturing
facilities and their businesses and supplier relationships are described below.
The manufacturing of most of the Company's parts, accessories and clothing
products is outsourced.

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Powersports. The Company's manufacturing facility
in Valcourt, Québec produces Ski-Doo snowmobiles, Sea-Doo personal watercraft,
Bombardier ATVs and related components. While ATV production is year-round,
Valcourt maximises its utilisation by producing snowmobiles and personal
watercraft in opposite seasons. However, in 2005, BRP announced its intention to
transfer to Mexico the manufacturing and assembly of most of its ATVs and
related engines, which transfer will be implemented over a three-year period. At
Valcourt, the Company has identified specific core manufacturing competencies
(including final assembly, aluminium forming and welding, steel forming and
welding and painting) and has chosen outside vendors to provide other vehicle
components. Valcourt's most significant supplier is the Company's BRP-Rotax
unit. Most of Valcourt's other suppliers, which principally provide tracks,
hulls, plastics, seats, and transmission components are generally located near
the facility. In addition, in the last few years the Company entered into
agreements with Taiwanese manufacturers, which produce entry-level or youth
model ATVs and related parts for BRP. The Company may continue to look for
opportunities to strengthen its presence in Europe in order to reinforce its
growth, move closer to its clients and revitalise its competitiveness.

The Company's facility in Gunskirchen, Austria
produces Rotax engines for BRP's snowmobiles, personal watercraft, sport boats
and ATVs, as well as engines for other original equipment manufacturers of
motorcycles, karts and small and ultra-light aircraft. Manufacturing operations
are focused on engine assembly and machining of critical engine components. Most
of BRP-Rotax's suppliers, which principally provide castings, electrical and
mechanical components, are located in Europe.

The Company's manufacturing facility
in Benton, Illinois produces sport boats. The Benton facility focuses on
manufacturing fiberglass hulls and decks, as well as boat assembly. Benton's
most significant supplier is BRP-Rotax. Most of Benton's other suppliers, which
principally provide trailers, plastics, raw materials for fiberglass hulls and
boat accessories, are located in the continental U.S.

The Company's Rovaniemi, Finland facility produces
Lynx and certain models of Ski-Doo snowmobiles, and related components. This
facility is focused on snowmobile final assembly, steel forming, and painting.
Its most significant supplier is BRP-Rotax. To benefit from economies of scale
and reduce tooling costs, it purchases several components in common with
Valcourt. Most of Rovaniemi's other suppliers, which principally provide tracks,
plastics, seats, and suspension components, are located near the facility, in
continental Europe or in USA.

Marine Engines.BRP has consolidated
machining and final assembly of outboard engines at facilities in Sturtevant,
Wisconsin, in Juarez, Mexico and in Dongguan, China. Most of the outboard engine
suppliers are located in the United States, with some suppliers located in Asia.
BRP's agreement with a Japanese manufacturer to purchase 4-stroke engines that
BRP sells under the Johnson brand name will expire in August 2006. While the
Company is currently considering various options, it may be unable to find an
adequate alternative supplier.

Distribution, Sales and Marketing

Distribution and SalesPowersports

BRP distributes snowmobiles, personal watercraft and
ATVs worldwide through a network of approximately 1,750 powersports dealers and
125 distributors. BRP also distributes sport boats through both powersports
dealers and marine dealers throughout North America. In North America, BRP's
dealers enter into dealer agreements with the Company pursuant to which the
dealer is authorised to market specific product lines and is required to stock
service parts and perform warranty and other services. Most of these contracts
do not require a dealer to market the Company's products exclusively. Based on
volume and other criteria, dealers become entitled to discounts, co-operative
advertising and inventory financing. Outside of North America, BRP sells its
powersports products through distributors, with the exception of France,
Australia, Japan and Brazil where it sells through its own dealer network.

- 20 -

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For snowmobiles, personal watercraft and sport boats,
a majority of dealers place an annual order at dealer meetings held in February
for Ski-Doo and in September for Sea-Doo. For ATVs, BRP takes biannual orders
from dealers and on-going orders in between order periods. The dealership base
for Ski-Doo and Sea-Doo is largely stable and composed of several dealers with
whom BRP has enjoyed a longstanding relationship. For ATVs, which require much
broader geographical coverage, BRP continues to enhance its current dealer base.
To promote new dealerships and to service its existing dealer network, BRP
employs district sales managers and regional sales managers throughout North
America.

On October 1, 2005, BRP started selling its products
directly in France through its own dealer network, and has opened a sales and
marketing office in Aix-en-Provence. As the European market continues to grow,
BRP has also established its European and International headquarters in
Lausanne, Switzerland.

Distribution and SalesMarine Engines

In North America, outboard engines are distributed
through two channels: boat builders and independent marine dealers. The majority
of new outboard-powered boats today are sold by boat builders to dealers as a
package (boat plus outboard engine). BRP has entered into non-exclusive supply
agreements with many independent boat builders. BRP agrees with boat builders on
a non-binding target order volume for a model year, which allows it to plan
production and the boat builder to plan for a certain level of discount. BRP
also maintains established relationships with more than 2,190 independent
outboard dealers (full-line and package only) to distribute Johnson and Evinrude
products, including parts and accessories. Full-line dealers order products
directly from the factory, while package dealers order boats with BRP's outboard
engines but do not order outboard engines directly from BRP. Outside of North
America, BRP's outboard engines are generally sold through marine distributors.
BRP sells its engines to over 75 countries.

Marketing

BRP's marketing efforts are focused on two target
customers: dealers/distributors and consumers. To attract dealers and
distributors and provide incentives for retailing its products, BRP holds
several dealer meetings, arranges for third-party inventory financing, makes
available point-of-purchase material (including brochures, posters and stands),
and offers targeted discounts and rebate programs and other incentives.

BRP reaches consumers directly by promoting its
products using print advertising in industry press, user groups, websites,
newspapers, and television advertising. BRP also participates in a number of
sponsorship activities, and sponsors the Ski-Doo X-Team, a professional
snowmobile racing team, as well as the Bombardier ATV racing team for the Dakar
Rally event. The Company also sponsors Team Evinrude, a team comprised of
fishing professionals who compete on professional circuits.

Competition

The Company's businesses are highly competitive. The
Company competes domestically and internationally with individual producers as
well as with vertically integrated manufacturers, some of which have resources
greater than BRP has. Competition in such markets is based upon a number of
factors, including brand loyalty, price, quality, reliability, styling, product
innovations and features, and warranties. At the dealer level, competition is
based on a number of factors including sales and marketing support programs
(such as financing and co-operative advertising). In addition, BRP's products
compete with many other recreational products and activities for the
discretionary spending of consumers.

- 21 -

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Powersports. BRP's powersports businesses are
typically mature markets with a few large international competitors with access
to significant financial resources. BRP's principal competitors in snowmobiles
are Arctic Cat, Polaris and Yamaha; in personal watercraft are Honda, Kawasaki
and Yamaha; in ATVs are Arctic Cat, Honda, Kawasaki, Polaris, Suzuki and Yamaha;
and in sport boats are Sugar Sands and Yamaha. However, the powersports industry
continues to see in major markets an increasing number of very cheap,
low-quality imports from low-cost countries, and this trend may continue.

Not all of these competitors compete in each of the
markets that the Company does, however, BRP believes that most have the
resources to do so. BRP believes that significant barriers to entry currently
exist in these businesses due to brand loyalty, long-standing dealer and
distribution networks, limited engine sources, manufacturing and engineering
expertise and high initial start-up costs. In some cases, competitors offer
similar products, with a smaller number of platforms than BRP does, but in other
markets, like ATVs, the Company's competitors have a broader product offering.

Marine Engines. The marine engine market is
extremely competitive, with several major international companies comprising the
majority of the market. BRP's principal competitors in the marine engine market
are Honda, Mercury, Suzuki and Yamaha. During Outboard Marine Corporation's
bankruptcy proceedings, many of its customers moved their business largely to
other competitors. Since acquiring assets of Outboard Marine Corporation's
outboard engine business, BRP has been working to regain that company's
historical market share. Key to regaining market share has been regaining
credibility with dealers and boat manufacturers by providing better service,
expanding BRP's product line and introducing new technologies.

Intellectual Property

The Company relies on a combination of patent,
design, copyright, trade secret, and trademark laws to protect different assets
of its business.

Over the past several years, the Company has worked
aggressively to expand the proprietary position afforded by its patent
portfolio, both through acquisitions and original patent filings. The Company
has also embarked on a program to rationalise its patent portfolio through the
elimination of patents and patent applications that were no longer of value to
the Company. As of January 31, 2006, the Company owned or had rights to use more
than 775 issued or pending U.S. patents and patent applications pertaining to
the most relevant fields of technology as currently used in motorised
recreational products. The Company also has related patents and patent
applications in Canada, Europe, and other jurisdictions. The Company plans to
continue investing in this area as it improves existing technologies and
develops new ones.

In addition to protecting BRP's technical
innovations, the Company relies on a combination of registered and unregistered
trademark rights to protect its position as a branded company with strong name
recognition. The Company uses the registered trademarks Ski-Doo®,
Sea-Doo®, Bombardier®, Johnson®, Evinrude®,
Lynx® and Rotax® in association with their respective
product lines and related accessories. BRP has entered into a license agreement
with Bombardier Inc. which, among other things, enables it to continue to use
certain marks owned by Bombardier Inc. (including the Bombardier®
trademark) which were not otherwise assigned to BRP in connection with the
Transactions.

- 22 -

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Regulation

The Company's operations are subject
to extensive federal, state, provincial, territorial, local and international
environmental and safety laws and regulations relating to, among other things,
the generation, storage, handling, emission, transportation, disposal and
discharge of hazardous and non hazardous substances and materials into the
environment and employee health and safety. Permits are required for certain of
the Company's operations, which are subject to revocation, modification and
renewal by issuing authorities. Governmental authorities have the power to
enforce compliance with their laws and regulations, and violations may result in
enforcement actions such as convictions, the payment of fines or the issuing of
injunctions, or some combination of the foregoing. As the requirements of such
laws and enforcement policies have generally become stricter in recent years,
the Company is unable to predict the ultimate cost of compliance with
environmental and health and safety laws and enforcement policies. The Company
endeavours to ensure that its facilities comply with applicable environmental
laws and regulations.

Laws and regulations relating mostly
to engine gaseous emissions, sound levels, safety and manufacturing standards
are in place or will gradually be implemented in jurisdictions where the
Company's products are manufactured and sold. BRP believes its products comply
with all existing legislative and regulatory requirements in the jurisdictions
where they are manufactured or sold. Moreover, BRP is taking appropriate
measures to ensure that its products will be compliant with anticipated more
stringent regulations as they become effective from time to time. Such measures
include re-calibration of existing engines/vehicles, development of revised
engine combustion chamber/vehicle configurations, as well as development of new
technologies. While these efforts require substantial expenditures, it is
impractical at this time to isolate these specific costs from total project
costs.

Certain groups have made efforts to
have legislation passed that would restrict access by motorised recreational
vehicles to certain public lakes, parks and other areas. A reduction in the
number of areas in which BRP's products can be used may result in a reduction in
BRP's sales and could have a material adverse effect on its business, financial
condition or results of operations.

Legal Proceedings

The Company is engaged in a business
which exposes it to potential claims from the use of its products, many of which
are motorised vehicles that may be operated at high speeds and in a careless or
reckless manner. The Company vigorously defends all litigation to which it
becomes subject, but there can be no assurance that it will be successful or
that, if not successful, that the Company's insurance will be sufficient to
cover any resulting liability.

The Company has approximately 50
pending product liability cases against it. The most common product liability
lawsuits the Company faces involve (i) allegations that its personal watercraft
are defectively designed or lack adequate warnings, because they require power
to steer, and operators sometimes let go of the throttle when attempting to
avoid a collision (this is commonly referred to as the off-throttle steering
issue), (ii) alleged fuel tank explosions for certain of its personal watercraft
that were subject to a recall campaign and (iii) crashes of ultralight airplanes
which use Rotax engines. With respect to product liability claims which arise as
a result of personal injury or property damage that occurred prior to the
consummation of the Transactions, currently approximately 80% of the pending
product liability cases, Bombardier Inc. has agreed under the purchase agreement
to indemnify BRP for certain amounts. The Company has insurance with respect to
any future claims in amounts determined by it to be appropriate, however, claims
may arise in the future in excess of its indemnities and insurance coverage. For
more information, please refer to

C. Operational structure

The Company's significant subsidiaries, all of which
are wholly owned, are:

- 23 -

---



- 

D. Property, plant and equipment

Properties

BRP owns its executive offices located in Valcourt,
Québec, Canada (near Montreal). BRP owns seven separate manufacturing facilities
worldwide and leases one manufacturing facility in Guangdong, China. BRP also
owns or leases approximately 40 other sales, distribution, test and engineering
facilities worldwide. The obligations under the Company's senior secured Amended
and Restated Credit Agreement are secured by the assets of the Company and
certain of its subsidiaries. For a description of any environmental issues that
may affect the Company's utilisation of its assets see "Item 4 - B. Business
Overview - Regulation". Each of BRP's manufacturing facilities is set forth
in the table below:

|                                  | Approx.        |        |                                                                                       
|--------------------------------- | -------------- | ------ | --------------------------------------------------------------------------------------
|Manufacturing facilities          | Size (sq. ft.) | Status | Products                                                                              
|                                  |                |        |                                                                                       
|Powersports Facilities:           |                |        |                                                                                       
|Valcourt, Québec, Canada          | 935,600        | Owned  | Snowmobiles, personal watercraft, and ATVs                                            
|Gunskirchen, Austria              | 570,000        | Owned  | Rotax engines and engine components                                                   
|Benton, Illinois, U.S.            | 380,000        | Owned  | Sport boats                                                                           
|Rovaniemi, Finland                | 60,000         | Owned  | Snowmobiles                                                                           
|                                  |                |        |                                                                                       
|Marine Engine Facilities:         |                |        |                                                                                       
|Sturtevant, Wisconsin, U.S.       | 450,000        | Owned  | Outboard engines, machining and assembling                                            
|Spruce Pine, North Carolina, U.S. | 260,800        | Owned  | Lost foam casting of components for outboard engines and other customers              
|Juarez, Mexico                    | 199,100        | Owned  | Small outboard engines, certain personal watercraft, components, parts and accessories
|Dongguan, Guangdong, China        | 119,300        | Leased | Electronic components and small outboard engines                                      

- 24 -

---



ITEM 5- OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This management's discussion and analysis of financial condition and results
of operations presents the following sections:

- INTRODUCTION
- NON-GAAP FINANCIAL MEASURES
- CONSOLIDATED OVERVIEWOverview
    Consolidated Results of OperationsFor the Three-month Periods
      For the Fiscal Years
- Overview
- Consolidated Results of OperationsFor the Three-month Periods
- For the Three-month Periods
- For the Fiscal Years

- Effect of Currency Fluctuation
- Interest Rate
- Inflation and Price Fluctuation
- Seasonality

- For the Three-month Periods
- For the Fiscal Years

- Financial Position
- Statement of Cash Flows
- Capital Resources

INTRODUCTION

The following Management's discussion and analysis
("MD&A"), is intended to assist the security holders to better understand and
evaluate material changes in the financial condition and results of operations
of the Company. The MD&A should be read together with the annual audited
consolidated financial statements as at January 31, 2006 and 2005 and for the
44-day period ended January 31, 2004 ("The Company") and for the 321-day period
ended December 18, 2003 ("Predecessor business").

For ease of comparison purposes, financial data for
the 44-day period ended January 31, 2004 has been added to financial data for
the 321-day period ended December 18, 2003, to arrive at a 12-month combined
period ended January 31, 2004. This period may be referred to herein as the
"combined year ended January 31, 2004" or "combined year 2004." With the
exception of the consolidated balance sheets, comparative financial information
for periods prior to December 18, 2003 is presented in the Consolidated
Financial Statements pursuant to regulatory requirements. In reviewing this
comparative financial information, readers should remember that Predecessor
business period results of operations do not reflect the effects of the
acquisition and the application of purchase accounting.

Bombardier Recreational Products Inc. amended and
restated its consolidated financial statements ("Consolidated Financial
Statements") and other financial information for the year ended January 31, 2005
and for each of quarters in the year ended January 31, 2005 with respect to the
accounting for certain forward foreign exchange contracts. Further information
on the restatement can be found in note 2 to the Consolidated Financial
Statements.

- 25 -

---



The Consolidated Financial Statements
have been prepared in accordance with Canadian Generally Accepted Accounting
Principles ("GAAP"), which differ in certain material respects from U.S. GAAP.
These differences are described in note 27 to the Consolidated Financial
Statements.

All amounts presented in this MD&A are in Canadian
dollars unless otherwise indicated.

NON-GAAP FINANCIAL MEASURES

This MD&A is based on reported earnings in accordance
with Canadian generally accepted accounting principles ("GAAP") and on the
following non-GAAP financial measures:

EBITDA is defined as earnings from continuing
operations before financing costs, accretion in the carrying value and loss on
early redemption of preferred shares, income taxes and depreciation and
amortisation.

These non-GAAP measures are directly
derived from the Consolidated Financial Statements, but do not have a
standardised meaning prescribed by GAAP; therefore, others using these terms may
calculate them differently.

The reconciliation to the most comparable GAAP
measures as follows:

|                                                                                     | Three-month      | Three-month      | Year ended  | Year ended 
|------------------------------------------------------------------------------------ | ---------------- | ---------------- | ----------- | -----------
|                                                                                     | period ended     | period ended     | January 31, | January 31,
|(millions of Canadian dollars)                                                       | January 31, 2006 | January 31, 2005 | 2006        | 2005       
|Income (loss) from continuing operations                                             | $ 16.2           | $ (24.2)         | $ 61.6      | $ 31.8     
|Financing costs                                                                      | 9.0              | 23.7             | 34.0        | 60.4       
|Accretion in the carrying value and loss on
    early redemption of preferred shares |                 |                 |            | 9.4        
|Income tax expense (recovery)                                                        | 8.9              | (20.5)           | 19.0        | (7.0)      
|Depreciation and amortisation                                                        | 26.3             | 27.6             | 102.9       | 120.1      
|EBITDA                                                                               | 60.4             | 6.6              | 217.5       | 214.7      

Management believes that a significant portion of
the readers of the Company's annual report analyse the Corporation's results
based on the above performance measures and that the presentation of the above
non-GAAP measures is consistent with industry practice. Management uses these
non-GAAP financial measures internally for comparing actual results from one
period to another, as well as for future planning purposes. Management believes
EBITDA provides more insight into the Company's performance.

CONSOLIDATED OVERVIEW

Overview

BRP recorded a net income of $61.6 million during
fiscal 2006, more than twice the net income of $28.5 million of the previous
year. The cost reduction plan implemented is delivering the intended benefits
and management expects to pursue cost improvement initiatives in future years.
Product complexity reduction and changes in the operational organisation have
improved the cost structure. The Company's ability to mitigate the rise of the
Canadian dollar against the U.S. dollar as well as against the increase in the
costs of key inputs has also contributed to controlling overall cost.

During fiscal 2006, the Company pursued
its objective to reduce product complexity. The ultimate objective was to
improve both of the Company's segment financial performance by simplifying
manufacturing processes and lowering production costs. As a result, gross profit
margin increased by 3.8 percentage points to 20.6% of revenues of $2.4 billion
for the year ended January 31, 2006 despite the continued rise of the Canadian
dollar. The Powersports segment, which mainly sells snowmobiles, personal
watercraft, all-terrain vehicles, sport boats and Rotax engines through a
worldwide distribution network of independent dealers and distributors,
increased its operating income to $137.2 million or 7.3% of this segment's
revenues. This increased segmented operating income represents a $33.1 million
or 31.8% improvement over the previous fiscal year. The Marine Engines segment,
which derives its revenues mainly from the sale of outboard marine engines sold
directly to boat builders or through a network of

- 26 -

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independent dealers and distributors, increased its operating income to $12.6
million or 2.3% of segmented revenues. This is a significant turnaround
considering that in the previous fiscal year the Marine Engines segment had
suffered an operating loss of $17.2 million.

As part of its cost reduction plan, the Company is
always looking for opportunities to source components, to manufacture or
assemble at low cost, in order to remain competitive. This includes identifying
its supplier network to low-cost countries, optimising the Company's own assets
as well as maintaining the progressive deployment of RQPS (Recreational Product
Quality and Production Systems). In that context, in November 2005, the Company
announced that it would transfer the vehicle assembly and the engine
manufacturing operations of its ATVs to Mexico in order to increase the
Company's competitiveness.

During fiscal 2006, the Company implemented a new
continuous assembly line at its main production facility located in Valcourt,
Québec, for its snowmobiles and personal watercraft, further maximising the
benefits of the SKU (stock keeping units) rationalisation and footprint
optimisation.

On February 9, 2005, the Company voluntarily fully
repaid, without penalty, the remaining outstanding balance of U.S.$118.9 million
($147.2 million) of the U.S. $280 million term loan facility under the Term
Facilities. The U.S. $280 million Term Facilities had been replaced by a new
Term Facility of U.S. $50 million. During January 2006, the Company fully
repaid, without penalty, the new Term Facility.

On the international front, BRP began selling
directly to dealers in France and opened a sales and marketing office in
Aix-en-Provence. As the European market continues to grow, BRP also established
its European headquarters in Lausanne, Switzerland. The Company may continue to
look for opportunities to strengthen its presence in Europe in order to
reinforce its growth, move closer to its clients and revitalise its
competitiveness.

Overall the Company achieved significantly improved
results despite a rising Canadian dollar against the U.S. dollar and increasing
commodity prices.

Management expects its business to continue to
improve in fiscal 2007 despite the fact that earnings for fiscal 2007 will
continue to be challenged by a strong Canadian dollar and increased commodity
prices. The Company's financial results are subject to various other risks which
are beyond its control, and they could materially adversely affect the financial
results. Those risks are described in this annual report under Item 3 - Key
Information - D. Risk Factors. Management expects EBITDA to increase going
forward.

- 27 -

---



Consolidated Results of Operations 
For the Three-month Periods

|                                                                               | Three-month      | Three-month      | Changes    
|------------------------------------------------------------------------------ | ---------------- | ---------------- | -----------
|                                                                               | period ended     | period ended     | 2006 versus
|(millions of Canadian dollars)                                                 | January 31, 2006 | January 31, 2005 | 2005       
|                                                                               |                  | [Restated]       |            
|Revenues                                                                       | $ 675.3          | $ 622.4          | $ 52.9     
|Cost of sales                                                                  | 546.8            | 527.3            | 19.5       
|Gross profit                                                                   | 128.5            | 95.1             | 33.4       
|As a percentage of revenues                                                    | 19.0%            | 15.3%            | 3.7%       
|Operating expenses                                                             |                  |                  |            
|Selling and marketing                                                          | 38.3             | 38.2             | 0.1        
|Research and development                                                       | 24.5             | 28.8             | (4.3)      
|General and administrative                                                     | 33.9             | 26.8             | 7.1        
|Other charges and (income)                                                     |                  |                  |            
|Restructuring                                                                  |                 | 26.5             | (26.5)     
|Impairment loss                                                                |                 | 12.1             | (12.1)     
|Curtailment gain                                                               |                 | (23.7)           | 23.7       
|Total operating expenses                                                       | 96.7             | 108.7            | (12.0)     
|Operating income (loss) from continuing
    operations                         | 31.8             | (13.6)           | 45.4       
|Other (income) and expenses                                                    |                  |                  |            
|Financing costs                                                                | 9.0              | 23.7             | (14.7)     
|Gain on disposal of property, plant and
    equipment and assets held for sale | (0.1)            |                 | (0.1)      
|Foreign exchange loss from reduction in net
    investment in a foreign entity | 9.5              |                 | 9.5        
|Foreign exchange loss (gain)                                                   |                  |                  |            
|Long-term debt                                                                 | (9.0)            | 3.9              | (12.9)     
|Derivative financial
    instruments                                           |                 | (5.0)            | 5.0        
|Other                                                                          | (2.7)            | 8.5              | (11.2)     
|Income (loss) from continuing operations before income taxes                   | 25.1             | (44.7)           | 69.8       
|Income tax expense (recovery)                                                  | 8.9              | (20.5)           | 29.4       
|Income (loss) from continuing operations                                       | 16.2             | (24.2)           | 40.4       
|Income from discontinued operations, net of income taxes                       |                 | 0.3              | (0.3)      
|Net income (loss)                                                              | $ 16.2           | $ (23.9)         | $ 40.1     

- 28 -

---



Fourth quarter of fiscal 2006 compared to the fourth quarter of fiscal 2005

When comparing the one quarter to another, significant fluctuations in the
exchange rates between the Canadian dollar, particularly against the U.S. dollar
and the euro, impacted revenues, gross profit, operating income from continuing
operations and net income of the Company. When compared to the previous
quarters, management evaluated the unfavourable effects of foreign currency on
revenues, gross profit and operating income from continuing operations, net of
the effect of the Company's hedging programs, to be approximately as follows:

|                                                | Three-month period ended
|----------------------------------------------- | ------------------------
|(millions of Canadian dollars)                  | January 31, 2006        
|Effects of foreign currency on:                 |                         
|Revenues                                        | $ (25)                  
|Gross profit                                    | (6)                     
|Operating income from continuing
    operations | (4)                     

Revenues

The increase in revenues for the fourth quarter of
fiscal 2006 is a reflection of higher revenues in the Powersports segment
partially offset by lower revenues in the Marine Engines segment. The increase
is due to:

- higher number of units sold for $64 million
- improved product and price mix of $12 million

which was partially offset by:

- the unfavourable foreign exchange rate variations of $25 million.

Gross profit

The 3.7 percentage point improvement in gross profit
margin for the fourth quarter of fiscal 2006 is primarily due to:

- increased number of units sold for $19 million
- favourable product and price mix as well as lower production costs for $21
  million

which were partially offset by:

- unfavourable foreign exchange rate variations for $6 million.

Operating expenses

The decrease for the fourth quarter of fiscal 2006 in
operating expenses is mainly due to:

- 

lower R&D expense of $4
  million in the fourth quarter of fiscal 2006 due to favourable foreign
  exchange rate variations and timing in the occurrence of expenses

which were partially
offset by:

- higher general and
  administrative expenses mainly in connection with the opening of its European
  headquarters and of sales offices in Europe during fiscal 2006 as well as the
  SOX implementation.

Foreign exchange loss from reduction in net investment in a foreign entity

A portion of the cumulative translation adjustment
was recognised to income as a result of the reduction in the Company's net
investment in a euro denominated subsidiary.

Financing costs

The decrease in financing costs for the
three-month period ended January 31, 2006 results mainly from:

- expensing, during the fourth quarter of the previous fiscal
  year, $12.9 million of deferred financing costs as a result of the early
  repayment of the term facilities
- lower borrowings pursuant to the debt repayments.

- 29 -

---

Foreign exchange

The net gains and losses on derivative financial
instruments result from not applying hedge accounting to certain forward foreign
exchange contracts. In addition, during fiscal 2006, the Company had lower
foreign denominated borrowings as a result of the debt repayments. The other
foreign exchange gains and losses are derived from the conversion into Canadian
dollars of accounts denominated in foreign currencies and foreign integrated
operations.
Income tax

The increased income tax expense for the three-month
period ended January 31, 2006 is mainly due to:
higher income before income taxes
  an unfavourable mix of pre-tax profits and losses between the various tax
  jurisdictions.- 30 -For the Fiscal Years Ended

|                                                                                      |             |             | Combined    | Changes  | Changes
|------------------------------------------------------------------------------------- | ----------- | ----------- | ----------- | -------- | -------
|                                                                                      | Year ended  | Year ended  | year ended  | 2006     | 2005   
|                                                                                      | January 31, | January 31, | January 31, | versus   | versus 
|(millions of Canadian dollars)                                                        | 2006        | 2005        | 2004[1]     | 2005     | 2004   
|                                                                                      |             | [Restated]  |             |          |        
|Revenues                                                                              | $ 2,361.2   | $ 2,451.3   | $ 2,409.1   | $ (90.1) | $ 42.2 
|Cost of sales                                                                         | 1,875.8     | 2,039.9     | 1,985.5     | (164.1)  | 54.4   
|Gross profit                                                                          | 485.4       | 411.4       | 423.6       | 74.0     | (12.2) 
|As a percentage of revenues                                                           | 20.6%       | 16.8%       | 17.6%       | 3.8%     | (0.8%) 
|Operating expenses                                                                    |             |             |             |          |        
|Selling and marketing                                                                 | 168.5       | 141.4       | 161.6       | 27.1     | (20.2) 
|Research and development                                                              | 97.3        | 108.1       | 107.3       | (10.8)   | 0.8    
|General and administrative                                                            | 129.9       | 120.6       | 115.2       | 9.3      | 5.4    
|Other charges and (income)                                                            |             |             |             |          |        
|Restructuring                                                                         |            | 26.5        |            | (26.5)   | 26.5   
|Impairment loss                                                                       |            | 12.1        |            | (12.1)   | 12.1   
|Curtailment gain                                                                      |            | (23.7)      |            | 23.7     | (23.7) 
|Total operating expenses                                                              | 395.7       | 385.0       | 384.1       | 10.7     | 0.9    
|Operating income (loss) from continuing
    operations                                | 89.7        | 26.4        | 39.5        | 63.3     | (13.1) 
|Other (income) and expenses                                                           |             |             |             |          |        
|Financing costs                                                                       | 34.0        | 60.4        | 13.5        | (26.4)   | 46.9   
|Accretion in carrying value and loss on
    early redemption of preferred shares      |            | 9.4         | 0.5         | (9.4)    | 8.9    
|Loss (gain) on disposal of property, plant
    and equipment and assets held for sale | (1.4)       | 0.7         | (1.4)       | (2.1)    | 2.1    
|Foreign exchange loss from reduction in net investment in a
    foreign entity        | 9.5         |            |            | 9.5      |       
|Foreign exchange loss (gain):                                                         |             |             |             |          |        
|Long-term debt                                                                        | (22.6)      | (46.7)      | (1.3)       | 24.1     | (45.4) 
|Derivative financial
    instruments                                                  | 2.2         | (28.8)      | 7.8         | 31.0     | (36.6) 
|Other                                                                                 | (12.6)      | 6.6         | 1.5         | (19.2)   | 5.1    
|Income from continuing operations before income taxes                                 | 80.6        | 24.8        | 18.9        | 55.8     | 5.9    
|Income tax expense (recovery)                                                         | 19.0        | (7.0)       | 8.2         | 26.0     | (15.2) 
|Income from continuing operations                                                     | 61.6        | 31.8        | 10.7        | 29.8     | 21.1   
|Income (loss) from discontinued
    operations, net of income taxes                   |            | (3.3)       | 2.0         | 3.3      | (5.3)  
|Net income                                                                            | $ 61.6      | $ 28.5      | $ 12.7      | $ 33.1   | $ 15.8 

[1] For ease of comparison
purposes, financial data of the Company for the 44-day period ended January 31,
2004 has been added to financial data of the Predecessor for the 321-day period
from February 1, 2003 to December 18, 2003, to arrive at a 12-month combined
period ended January 31, 2004. This period may be referred to herein as the
"combined year ended January 31, 2004" or "combined year 2004."

- 31 -

---



Year ended January 31, 2006 compared to year ended January 31, 2005

When compared to the previous fiscal year, management
evaluated the unfavourable effects of foreign currency on revenues, gross profit
and operating income from continuing operations, net of the effect of the
Company's hedging programs, to be approximately as follows:

|(millions of Canadian dollars)                  | Year ended January 31, 2006
|----------------------------------------------- | ---------------------------
|Effects of foreign currency on:                 |                            
|Revenues                                        | $ (109)                    
|Gross profit                                    | (30)                       
|Operating income
    from continuing operations | (14)                       

Revenues

The decrease in revenues for fiscal 2006
is a reflection of lower revenues in both the Powersports and the Marine Engines
segments. The decrease is due to:

- lower number of units sold for $140 million
- the unfavourable foreign exchange rate variations of $109
  million

which was partially offset by:

- improved product and price mix of $117 million, and
- management's decision to better align the watercraft
  production and deliveries with the retail season by postponing production and
  hence deliveries from the fourth quarter of fiscal 2005 to the first quarter
  of fiscal 2006 of $42 million.

Gross profit

The 3.8 percentage point improvement in
gross profit margin for fiscal 2006 is primarily due to:

- favourable product and price mix as well as improved
  production costs resulting mainly from the decision to focus on the Evinrude
  E-TEC outboard engines and restructuring of the operations for $98 million

which were partially offset by:

- unfavourable foreign exchange rate variations for $30 million.

Gross margin of the previous fiscal year
was unfavourably impacted by $9 million as a result of inventory sold during
that period, which had been marked up as a result of adjustments from purchase
accounting at the beginning of that period related to the December 2003
acquisition.

Operating expenses

The increase in operating expenses for fiscal 2006 is mainly due
to:

- 

increased general and administrative costs
  related mainly to the termination of the distributor agreement in France and
  also to the opening of its European headquarters in Switzerland and of sales
  offices in Europe during fiscal 2006

which were partially offset by:

- lower research and development expenses in the
  Powersports segment mainly as a result of favourable foreign exchange rate
  variations
- restructuring charges recorded during the
  fourth quarter of fiscal 2005.

Financing costs

The decrease in financing costs for the
year ended January 31, 2006 result mainly from:

- 

lower amortisation of the deferred financing
  costs of $13.8 million as a result of expensing in fiscal 2005 the deferred
  financing costs in connection with the repayment of the term loan.

Foreign exchange loss from reduction in net investment in a
foreign entity

- 32 -

---

A portion of the cumulative translation adjustment
was recognised to income as a result of the reduction in the Company's net
investment in a euro denominated subsidiary.
Foreign exchange

During the previous fiscal year a gain was recorded
as a result from not applying hedge accounting to certain forward foreign
exchange contracts. In addition, during fiscal 2006, the Company had lower
foreign denominated borrowings as a result of the debt repayments. The other
foreign exchange gains and losses are derived from the conversion into Canadian
dollars of accounts denominated in foreign currencies and foreign integrated
operations.
Income tax

The increased income tax expense for the fiscal year
ended January 31, 2006 is mainly due to:
higher income before income taxes
  an unfavourable mix of pre-tax profits and losses between the various tax
  jurisdictions.Year ended January 31, 2005 compared with combined year ended January 31,
2004

When comparing one fiscal year to another fiscal
year, management evaluated the unfavourable effects of foreign currency on
revenues, gross profit and operating income from continuing operations, net of
the effect of the Company's hedging programs, to be approximately as follows:

|                                            | Year ended      
|------------------------------------------- | ----------------
|(millions of Canadian dollars)              | January 31, 2005
|Effects of foreign currency on              | [Restated]      
|Revenues                                    | $ (168)         
|Gross profit                                | (107)           
|Operating income from continuing operations | (98)            

Revenues

The increase in consolidated revenues for fiscal 2005
is due primarily to:

- an increased number of units sold in the Powersports segment of $134
  million



partially offset by:

- the unfavourable impact
  of the strengthening of the Canadian dollar of $168 million.

The increased number of units sold resulted from
higher numbers of deliveries in snowmobiles, ATVs and personal watercraft,
partially offset by lower sales of engines to motorcycle manufacturers. The
increase in the number of deliveries of ATVs is mainly due to the popularity of
the Outlander and Max series and a manufacturing supply agreement with Deere &
Company. The increase in the number of deliveries of personal watercrafts
resulted from a management decision to better align personal watercraft
production with the retail season. The favourable impact of a production
alignment in the latter part of fiscal 2004 was partially offset by the
unfavourable impact of an additional adjustment of production and deliveries in
the fourth quarter of fiscal 2005.

Gross profit

Gross profit margins for the fiscal year 2005
amounted to 16.8% of consolidated revenues, a decrease when compared to the
combined year of fiscal 2004. Consolidated gross profit was primarily influenced
by:

- a favourable product and pricing mix of $63 million
- an increase in the number of units sold of $26 million
- lower warranty costs of $15 million

more than offset by:

- an unfavourable impact of the strengthening Canadian dollar of $107
  million
- increased amortisation of intangibles of $11 million.

- 33 -

---



Operating expenses

The decrease in selling and marketing expenses is
primarily due to:

- a general reduction in marketing expenses in the Powersports segment
- the favourable impact of the strengthening of the Canadian dollar of $6
  million

partially offset by:

- an increase in marketing expenses in the Marine Engines segment.

R&D expense is relatively stable as a percentage of consolidated revenues for
each of the fiscal years due mainly to the Company's continued commitment to
investing in new product research and the improvement of existing products.

BRP now operates as a stand-alone entity and assumes all
corporate functions. General and administrative expenses ("G&A") increased as a
result of:

- the establishment of the new management team
- the grant of stock options by the parent company to certain
  members of management of BRP which are recorded as compensation expense by the
  Company
- professional fees incurred

offset in part by:

- a reduction of expenses for corporate costs of Bombardier
  which were allocated to the recreational products business.

Special charges

The Company recognised charges during the year ended
January 31, 2005 which may not be reflective of future operating results. The
Company recorded, during the fourth quarter of fiscal 2005, restructuring
charges of $26.5 million, an impairment loss of $12.1 million for facilities to
be disposed of by sale, and a curtailment gain of $23.7 million related to the
suspension of a Canadian defined benefit pension plan and the introduction of a
defined contribution plan.

The restructuring charges related to an additional
reduction of the workforce in order to make the Company more competitive in the
current economic environment where the Canadian dollar is strengthening compared
to the U.S. dollar. The restructuring cost includes a special early retirement
benefit of $20.0 million and severance, outplacement services and professional
costs of $6.5 million. The early retirement benefit was recognised as a result
of offering a voluntary early retirement incentive and bridging to early
retirement its more senior employees affected. The cash severance and
outplacement services paid amounted to $3.2 million. Employees received
indemnities that included a cash severance, and other benefits such as
relocation of employees and outplacement services. A non-cash impairment charge
of $12.1 million was recorded after assessing the carrying value of the Delavan
and Spruce Pine plants of the Marine Engines segment both of which management
intended to dispose of.

- 34 -

---



Once completed, approximately 660 jobs will have been
eliminated, of which approximately 150 as a result of severance and
approximately 200through voluntary early retirement and approximately
310 which are on a recall list. Total workforce was reduced by approximately 1,
000 jobs during the year when considering the restructuring related to the
acquisition.

In January 2005, the Company amended a Canadian
defined benefit pension plan to provide for its suspension and thereby
eliminated, for most of the Canadian employees, the right to earn defined
benefit pension benefits for their future service after the June 1, 2005
effective date of the pension plan suspension. A curtailment gain of $23.7
million was recognised in the fourth quarter as a result of the amendment of the
defined benefit pension plan which, with the support of the affected employees,
froze the existing defined benefit pension plan and introduced a new defined
contribution plan.

Financing costs

Financing costs result mainly from the issuance of
long-term debt in December 2003 in connection with the acquisition of the
recreational products business. Financing costs increase resulted primarily from
the impact of having a full year's interest expense on the debt issued as part
of the acquisition. Financing costs, for the year ended January 31, 2005, was
mainly comprised of:

- $16.1 million of interest charges relating to BRP's U.S. $280 million Term
  Facilities
- $21.8 million interest relating to the senior subordinated notes
- $6.5 million of amortisation of the deferred financing costs.

During the fourth quarter, the Company expensed $12.9 million of deferred
financing costs as a result of repaying the Term Facilities.

Loss on early redemption of preferred shares

On October 29, 2004, the Company redeemed all of the
issued and outstanding Class A preferred shares held by its parent company for a
total cash consideration of $52.6 million. The outstanding Class A preferred
shares had a carrying value of $46.2 million and were redeemable at $50.0
million plus the accrued dividend of $2.6 million. A loss of $6.4 million on
early redemption of the preferred shares was recorded as an expense during
fiscal year 2005.

Foreign exchange gain

The following table presents the realised and
unrealised foreign exchange gain on long-term debt for the years ended:

|                                           |                  | Combined        
|------------------------------------------ | ---------------- | ----------------
|                                           | Year ended       | year ended      
|(millions of Canadian dollars)             | January 31, 2005 | January 31, 2004
|U.S. $280 million Term Facilities          |                  |                 
|Realised                                   | $ 18.5           | $              
|Unrealised                                 | 10.5             | 0.7             
|U.S.$200 million senior subordinated notes |                  |                 
|Unrealised                                 | 17.7             | 0.6             
|                                           | $ 46.7           | $ 1.3           

Foreign exchange gain also included a gain of $28.8
million on forward foreign exchange contracts that are not eligible to hedge
accounting as previously explained.

Income tax

This decrease in income tax expense is mainly due to:

- 

certain tax exempt
  expenses such as the $6.4 million loss on early redemption of preferred shares
  and 50% of the foreign exchange gain on U.S. denominated long-term debt.

- 35 -

---

Discontinued operations

On August 30, 2004 the Company completed the sale of
the Utility Vehicles segment for net proceeds of $40.3 million. The carrying
value of the Utility Vehicles segment's net assets approximated fair value, as
the net assets were recorded at their estimated fair values as part of the
acquisition on December 18, 2003. The net book value of the assets disposed,
excluding goodwill of $12.9 million, was $27.4 million. BRP did not retain any
financial interest in the disposed segment.
Loss from the discontinued operations represented the
results of operations of the Utility Vehicles segment up to the disposal date.
Loss from discontinued operations of the Utility Vehicles segment, for the year
ended January 31, 2005, amounted to $3.3 million compared to income of $2.0
million for the combined year ended January 31, 2004.
RISKS
Effect of Foreign Exchange Rate Fluctuations

The Company is subject to currency fluctuations from
the translation of revenues and expenses and of assets and liabilities of the
self-sustaining foreign operations using a functional currency other than the
Canadian dollar, mainly the U.S. dollar and the euro, and from transactions in
foreign currencies, mainly the U.S. dollar and the euro. Management believes
that exchange rate movements, particularly of the U.S. dollar to the Canadian
dollar and the euro to the Canadian dollar could have a significant impact on
the Company's Consolidated Financial Statements.
The year-end exchange rates used to translate assets and liabilities were as
follows:

|            | January 31, 2006 | January 31, 2005
|----------- | ---------------- | ----------------
|U.S. dollar | 1.1439 $CA/$US   | 1.2380 $CA/$US  
|Euro        | 1.3906 $CA/Euro  | 1.6157 $CA/Euro 

When comparing the January 31, 2006
exchange rates to the January 31, 2005 exchange rates, the Canadian dollar
strengthened in relation to the U.S. dollar by approximately 7.6%. The Canadian
dollar also strengthened in relation to the euro by approximately 13.9%.

The average exchange rates used to translate revenues
and expenses, excluding any effect of the Company's hedging program, were as
follows:

|            | Year ended       | Year ended       | Combined year ended
|----------- | ---------------- | ---------------- | -------------------
|            | January 31, 2006 | January 31, 2005 | January 31, 2004   
|U.S. dollar | 1.2067 $CA/$US   | 1.2962 $CA/$US   | 1.3812 $CA/$US     
|Euro        | 1.4940 $CA/Euro  | 1.6147 $CA/Euro  | 1.5811 $CA/Euro    

When comparing the average exchange rates for the
year ended January 31, 2006 to the average exchange rates for the year ended
January 31, 2005, the Canadian dollar strengthened in relation to the U.S.
dollar and the euro by approximately 6.9% and approximately 7.5%, respectively.
When comparing the average exchange rates for the year ended January 31, 2005 to
the average exchange rates for the combined year ended January 31, 2004, the
Canadian dollar strengthened in relation to the U.S. dollar by 6.2% whereas the
Canadian dollar weakened in relation to the euro by approximately by 2.1%.

The Company's primary exposures are to U.S. dollar
denominated sales in excess of its purchases, to euro denominated purchases in
excess of its sales and foreign exchange movements on the U.S. dollar
denominated debt. The Company's is also exposed, to a lesser extent, to
Australian dollar and Swedish krona and Norwegian kroner sales in excess of
purchases.

- 36 -

---

In addition to the impact of movements
in exchange rates on translation into Canadian dollars of the Company's foreign
currency transactions, described above, the Company's results can also be
influenced by the impact of movements in exchange rates on foreign integrated
operations. A portion of the Company's sales and operating expenses are derived
from foreign integrated operations denominated in currencies other than the
Canadian dollar. Sales made outside Canada are denominated in foreign
currencies, and these currencies could become less valuable prior to conversion
into Canadian dollars as a result of exchange rate fluctuations. Unfavourable
currency fluctuations could result in lower revenues for the Company, when
expressed in Canadian dollars.
However, foreign currency transactions
occurring in a given fiscal year may not have been fully impacted by the
movements in exchange rates of that same fiscal year as a result of the
Company's hedging programs. The Company's current practice is to use derivative
financial instruments to manage foreign currency exchange rate risks for the
short term exposure while for the long term the Company aims to have a natural
hedge position by balancing its inflows and outflows by currencies.
Complementary information is presented
below under the title "Hedging activities" as well as in Item 17- Financial
Statements - note 4, "Significant Accounting Policies"; note 21, "Foreign
Exchange"; and note 24 "Financial Instruments."
Interest Rates

The credit agreements allow the
Company to borrow up to $250 million under revolving credit facilities (the
"Revolving Facilities") bearing a floating rate of interest based on LIBOR, BA,
Euribor or "prime" rates plus applicable margin. At January 31, 2006, the
effective interest rate on Revolving Facilities borrowings was 5.84% (5.05% as
at January 31, 2005).
On February 9, 2005, the Company
voluntarily fully repaid, without penalty, the remaining outstanding balance of
U.S.$118.9 million (approximately $147.0 million) of the Term Facilities and
entered into a new Term Facility of U.S.$50 million (approximately $57.0
million), under an amended and restated Credit Agreement, which will mature
January 31, 2011. During January 2006, the Company voluntarily repaid, without
penalty, the remaining outstanding balance of U.S.$49.5 million (approximately
$57.0 million) of its new Term Facility.
The U.S.$200 million ($228.8 million)
senior subordinated notes bear a fixed rate of 8.375%, with interest payable
semi-annually in June and December.
Under its dealer financing agreements
with third party large financing companies, the Company generally provides to
its North American dealers a free floorplan period during which the Company pays
the dealers' interest to the financing company for a limited period of time. The
Company pays interest at a variable rate during the free floorplan period.
Inflation and Price Fluctuations

The Company does not believe that
inflation has a significant impact on its results of operations. While raw
materials included as part of cost of sales are subject to inflationary
pressures and price fluctuations, the Company was able, in the past, to mitigate
the effects of inflation and price fluctuations through sales price increases or
cost reduction programs. In order to remain competitive, there is no assurance
that the Company could pass along any or all cost increases to dealers and
distributors by increasing its sales price. This inability could adversely
impact the Company's financial position or operating results.
Seasonality

The Company has
historically realised higher sales of snowmobiles in the summer and fall and
higher sales of personal watercraft in the winter and spring. As a result, the
Company's quarterly operating results are subject to fluctuations. Seasonal
trends in the other businesses are not material.- 37 -
BUSINESS SEGMENT PERFORMANCE

BRP operates in two reportable segments, Powersports
and Marine Engines. During the second quarter of fiscal 2005, the Company
classified its Utility Vehicles segment as discontinued operations. Management
evaluates performance based on operating income. Operating income does not
include allocated corporate office charges for administrative functions as well
as financing costs, other income and expenses and income taxes.
For the Three-month Periods
When comparing the fourth quarter of fiscal 2006 to
the fourth quarter of fiscal 2005, significant fluctuations in the exchange
rates between the Canadian dollar, particularly against the U.S. dollar and the
euro, impacted segmented revenues and segmented operating income. Management
evaluated the unfavourable effects of foreign currency fluctuations, net of the
effect of the Company's hedging programs, approximately as follows:

|                                                              | Three-month period ended
|------------------------------------------------------------- | ------------------------
|(millions of Canadian dollars)                                | January 31, 2006        
|Effects of foreign currency on
    segmented revenues         |                         
|Powersports                                                   | $ (19)                  
|Marine Engines                                                | (6)                     
|                                                              | $ (25)                  
|Effects of foreign
    currency on segmented operating income |                         
|Powersports                                                   | $ (4)                   
|Marine Engines                                                |                        
|                                                              | $ (4)                   

The segmented revenues for the three-month period ended January 31 were as
follows:

|                               | Three-month      | Three-month      |                 
|------------------------------ | ---------------- | ---------------- | ----------------
|                               | period ended     | period ended     | Changes         
|(millions of Canadian dollars) | January 31, 2006 | January 31, 2005 | 2006 versus 2005
|                               |                  | [Restated]       |                 
|Powersports                    | $ 580.4          | $ 518.9          | $ 61.5          
|Marine Engines                 | 109.5            | 117.9            | (8.4)           
|Inter segment revenues         | (14.6)           | (14.4)           | (0.2)           
|                               | $ 675.3          | $ 622.4          | $ 52.9          

The segmented operating income (loss) for the three-month period ended
January 31 were as follows:

|                               | Three-month      | Three-month      |                 
|------------------------------ | ---------------- | ---------------- | ----------------
|                               | period ended     | period ended     | Changes         
|(millions of Canadian dollars) | January 31, 2006 | January 31, 2005 | 2006 versus 2005
|                               |                  | [Restated]       |                 
|Powersports                    | 59.5             | $ 30.4           | $ 29.1          
|Marine Engines                 | (11.7)           | (21.3)           | 9.6             
|                               | $ 47.8           | $ 9.1            | $ 38.7          

Fourth quarter of fiscal 2006 compared to the fourth quarter of fiscal 2005

Powersports

Revenues

The increase in revenues was
primarily caused by:

- an increase in number of units sold of $82 million
  partially offset by:

- 38 -

---

The increase in the number of deliveries results fromtiming in
  deliveries of snowmobiles and watercraft in North America

increased demand for
  snowmobiles in the international market

which was partially offset
by:

- 

less Rotax engines sold
  to OEMs.

Operating income

The increase in operating income is mainly due to:

- 



which was partially offset
by:

- unfavourable foreign
  exchange of $4 million.

Marine Engines

Revenues

The decrease in revenues is mainly due
to:

- 

the unfavourable impact
  of the strengthening Canadian dollar in relation to the U.S. dollar of $6
  million

which was offset partially
by:

- a better pricing and
  product mix of approximately $18 million.

Operating income

The decrease in operating loss is due
to:

- 

lower selling and
  marketing costs of $5 million which was partially offset by:



For the Fiscal Years Ended

When comparing one fiscal year to
another, significant fluctuations in the exchange rates between the Canadian
dollar, particularly against the U.S. dollar and the euro, impacted segmented
revenues, and segmented operating income. Management evaluated the unfavourable
effects of foreign currency fluctuations, net of the effect of the Company's
hedging programs, to be approximately as follows:

|                                                              | Year ended      
|------------------------------------------------------------- | ----------------
|(millions of Canadian dollars)                                | January 31, 2006
|Effects of foreign currency on segmented revenues             |                 
|Powersports                                                   | $ (76)          
|Marine Engines                                                | (33)            
|                                                              | $ (109)         
|Effects of foreign currency on segmented
    operating income |                 
|Powersports                                                   | (18)            
|Marine Engines                                                | 4               
|                                                              | $ (14)          

- 39 -

---



The segmented revenues for the years ended January 31 were as follows:

|                                                                                          |             |             | Combined    |             | Changes
|----------------------------------------------------------------------------------------- | ----------- | ----------- | ----------- | ----------- | -------
|                                                                                          | Year ended  | Year ended  | year ended  | Changes     | 2005   
|                                                                                          | January 31, | January 31, | January 31, | 2006 versus | versus 
|(millions of Canadian dollars)                                                            | 2006        | 2005        | 2004        | 2005        | 2004   
|                                                                                          |             | [Restated]  |             |             |        
|Powersports                                                                               | $ 1,875.3   | $ 1,935.6   | $ 1,888.5   | $ (60.3)    | $ 47.1 
|Marine Engines                                                                            | 540.0       | 561.1       | 559.8       | (21.1)      | 1.3    
|Inter segment revenues                                                                    | (54.1)      | (45.4)      | (39.2)      | (8.7)       | (6.2)  
|Total consolidated revenues                                                               | $ 2,361.2   | $ 2,451.3   | $ 2,409.1   | $ (90.1)    | $ 42.2 
|                                                                                          |             |             |             |             |        
|The segmented operating income
    (loss) for the years ended January 31 were as follows:
|                                                                                          |             |             | Combined    |             | Changes
|                                                                                          | Year ended  | Year ended  | year ended  | Changes     | 2005   
|                                                                                          | January 31, | January 31, | January 31, | 2006 versus | versus 
|(millions of Canadian dollars)                                                            | 2006        | 2005        | 2004        | 2005        | 2004   
|                                                                                          |             | [Restated]  |             |             |        
|Powersports                                                                               | $ 137.2     | $ 104.1     | $ 84.2      | $ 33.1      | $ 19.9 
|Marine Engines                                                                            | 12.6        | (17.2)      | (15.4)      | 29.8        | (1.8)  
|Total                                                                                     | $ 149.8     | $ 86.9      | $ 68.8      | $ 62.9      | $ 18.1 

Year ended January 31, 2006 compared to the year
ended January 31, 2005

Powersports

Revenues

The decrease in revenues was primarily caused by:

- 

a reduction in the number of units sold for $46
  million

partially offset by:

- favourable pricing and product mix of $52
  million mainly for ATVs and watercraft.

The decrease in the
number of deliveries results from:

- 

lower demand for snowmobiles in North America

less Rotax engines sold to OEMs mainly to
  motorcycle manufacturers

partially offset by:

- 

an increased demand for snowmobiles in the
  international market

an increased demand for watercraft in North
  America.

Operating income

The increase in operating
income is due to:

- 

which was partially offset by:

- unfavourable foreign exchange rate variations
  of $18 million
- 

- 40 -

---

Powersports segment includes the following product
lines:
Snowmobiles

The International Snowmobile Manufacturers
Association ("ISMA") estimates that the size of the retail market in North
America was approximately U.S.$1.2 billion in model year 2005 (model year 2005
refers to the period from April 1, 2004 to March 31, 2005). According to ISMA,
the Company leads this market in terms of retail units sold for model year 2005.
The Company also leads the European market in terms of retail units sold for the
same model year. Management attributes the Company's strong position in these
markets to its product performance and innovation and to the strength and
breadth of its distribution network.
Management believes that quantity and timing of
snowfall within a given season affects snowmobile sales as well as the usage of
the snowmobiles and the repurchase of new sleds. Management believes that,
during model year 2006, the North American snowmobile market will record another
year of single digit decline, which should be offset slightly by the growth in
the European market. Despite the negative trend in the North American market,
management expects to maintain its leadership position and consolidate its North
American market position with products such as the Ski-Doo® Mach Z®,
the MX Z®, Renegade and the Summit. Likewise the Company's strong
line-up in Europe should also allow it to maintain its leadership position in
that market.
Personal Watercraft

The North American personal
watercraft market has registered an increase of approximately 10% for the 2005
season. The Company believes that the personal watercraft business remains solid
overall as the popularity of the sport remains high within the powersports
activities, particularly among young adults. In addition, the Company believes
annual sales may grow slightly over the coming years as aging watercraft are
subject to be replaced with those having new cleaner and quieter technologies
available. The National Marine Manufacturer Association estimates the U.S.
retail market was approximately U.S.$733.0 million for calendar year 2004. The
Company has led this market for several years and has maintained its share of
retail units sold in North America.
Management believes that the market share gains made
in past, have been due, in part, to product performance, design and innovation
as well as a broad dealer network. With the most complete product lines of the
industry, the Company expects to benefit in the long run from the reduction in
the number of competitors and maintain its leadership position in the North
American and International markets.
ATVs

Once again, the worldwide retail market grew when
compared to the previous year. North American market increased by low single
digits, whereas the European market experienced a more robust annual growth
percentage, nearing 25%. The Motorcycle Industry Council estimates the U.S.
retail market was approximately U.S.$4.2 billion in calendar year 2005.
Worldwide competition remains tight among manufacturers, especially among the
top three which represent a significant portion of the total market. In June
2005, the Company unveiled its new strategy, shifting its focus on ATV
enthusiasts and Powersports people. During the 2005 model year, the Company's
market share was essentially stable.
Management believes that, similar to other consumer
product categories that have experienced rapid growth, the North American ATV
market has stabilised and will contract over the next few years. Management
expects the market contraction in North America to be partially offset by the
growth in the European and international markets where the Company competes.
Sport boats

Sport boats occupy a specific niche in the market,
representing motorised boats that utilise jet-power rather than conventional
propeller propulsion. The U.S. sport boat retail market was estimated by the
National Marine Manufacturers Association, or NMMA, to be approximately
U.S.$130.0 million in 2004. The Company led the sport boat market in North
America in 2004. Management expects to maintain its leadership position in the
North American market.
- 41 -
Marine Engines

The decrease in revenues is due to:the unfavourable
  impact of the strengthening Canadian dollar in relation to the U.S. dollar of
  $33 million

a reduction in units
  sold of $52 million as a result of SKU rationalisation

partially offset by:

- favourable pricing and
  product mix of $65 million.

The increase in operating income is due to:

- favourable impact of product mix for $43 million which was
  offset mainly by:
- higher selling and marketing expenses of $5 million.

The NMMA estimated the U.S. outboard
engine retail market to be approximately U.S.$2.9 billion in 2004. As observed
over the past years, the industry continues to experience a shift toward
2-stroke direct injected and 4-stroke engines, away from traditional 2-stroke
carbureted engines. This shift has accelerated in the past years due to a
reduction of carbureted engine offerings by several manufacturers. Management
also believes that these technologies continue to gain momentum due to actual
and perceived advantages over carbureted technologies. BRP, under the Evinrude
brand, has the most extensive line-up of 2-stroke direct injected engines.

The Company's worldwide unit market
shares are expected to decline slightly over the next fiscal year as a result of
the Company's plan to focus heavily behind its E-TEC engines. The emphasis on
E-TEC engines resulted in the deliberate elimination of most of its carbureted
2-stroke and 4-stroke engines. However, the Company believes, supported by
proprietary research, that it should be able to recapture some sales with its
E-TEC engines.

Year ended January 31, 2005 compared with combined year ended
January 31, 2004

Powersports

Revenues

The increase in Powersports segment
revenues was caused by:

- a higher number of units sold of $134 million
- a favourable pricing and product mix of $62 million

partially offset by:

- 

The increased number of units sold
resulted from a higher number of deliveries in snowmobiles, ATVs and personal
watercraft, partially offset by lower sales of engines to motorcycle
manufacturers. The increase in the number of deliveries of ATVs is mainly due to
the popularity of the Outlander and Max series and a manufacturing supply
agreement with Deere & Company. The increase in the number of deliveries of
personal watercraft resulted from a management decision to better align personal
watercraft production with the retail season. The favourable impact of the
personal watercraft production alignment in the latter part of fiscal 2004 was
partially offset by the unfavourable impact of an additional adjustment of
production and deliveries in the fourth quarter of fiscal 2005.

Operating income

The $19.9 million increase in operating income is due to:

- 

a reduction in operating
  expenses

which were partially
offset by:

- the unfavourable foreign
  exchange rate variations of $100 million.

- 42 -

---

Marine EnginesRevenuesMarine Engines segment revenues remained relatively
flat for the year ended January 31, 2005 compared to the combined year ended
January 31, 2004. The favourable impacts of better product mix of $14 million
were offset by the unfavourable impact of the strengthening Canadian dollar in
relation to the U.S. dollar of $16 million. Increased deliveries in the
international market was offset by a reduction in deliveries in the North
American market mainly due to the impact of import duties on Japanese
manufactured engines sold in the United States.
Operating income

Marine Engines segment operating loss amounted to
$17.2million for the year ended January 31, 2005 as compared to $15.4
million for the combined year ended January 31, 2004. The favourable impact of
product mix of $13 million was offset by higher selling and marketing expenses
related to the Company's E-TEC technologies in marine engines.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

The Company's principal sources of
liquidity are cash generated from operations and revolving facilities. A summary
of the cash flow and additional information for the years ended January 31, is
presented below:

|                                                                                                                  | Year ended       | Year ended      
|----------------------------------------------------------------------------------------------------------------- | ---------------- | ----------------
|(millions of Canadian dollars)                                                                                    | January 31, 2006 | January 31, 2005
|Cash flow from operating activities before net change in
    non-cash working capital items related to operations | $ 146.6          | $ 111.4         
|Net change in non-cash working capital items
    related to operations                                            | (0.3)            | 81.8            
|Cash flows from operating activities                                                                              | 146.3            | 193.2           
|Additional information                                                                                            |                  |                 
|Additions to property,
    plant and equipment                                                                    | 82.8             | 70.1            
|Increase (decrease) in
    bank loans                                                                             | (12.3)           | 12.3            
|Issuance of long-term debt                                                                                        | 62.1             |                
|Repayment of long-term
    debt                                                                                   | 204.4            | 196.5           
|Cash paid for interest                                                                                            | 27.5             | 36.7            
|Cash paid for income taxes                                                                                        | 8.8              | 15.7            

The Company's primary sources of funds are provided
by cash balances, cash from operating activities, and borrowings under the $250
million Revolving Facilities. The primary uses of funds are capital investments
and working capital. Based on the current level of operations, management
believes that cash on hand, cash flows from operations and available borrowings
under the Revolving Facilities will enable the Company to meet its working
capital, capital expenditure, debt service and other funding requirements for at
least the next twelve months.

The seasonality of production and shipments causes
working capital requirements to fluctuate during the year. Typically, working
capital needs to grow through the spring and summer and decline through the fall
and winter with a peak in mid-summer. Management believes that cash and
availability under the senior secured Amended and Restated Credit Agreement
provides sufficient liquidity for its operations. Cash as at January 31, 2006
totalled $50.9 million, the Revolving Facilities availability stood at $219.1
million since the Company had no borrowings and issued letters of credit of
$30.9 million.

Financial Position

Inventories amounted to $283.5 million as at January
31, 2006, compared to $302.1 million as at January 31, 2005. This $18.6 million
decrease is mainly due to the impact of the strengthening Canadian dollar of $15
million.

- 43 -

---



Other current assets amounted to $94.6
million as at January 31, 2006, compared to $141.4 million as at January 31,
2005. This $46.8 million decrease is mainly due to:

- a reduction in derivative financial assets of $18.9 million
- lower retained interest resulting from the expiry of
  securitisation arrangements with Bombardier Capital Inc.

Property, plant and equipment amounted
to $401.8 million as at January 31, 2006, compared to $425.8 million as at
January 31, 2005. This $24.0 million decrease is mainly a result of the
unfavourable foreign exchange rate variations of $27 million.

Goodwill amounted to $100.0 million as
at January 31, 2006, compared to $119.9 million as at January 31, 2005. This
$19.9 million decrease is mainly due to the unfavourable foreign exchange rate
variations of $20 million.

Other intangible assets amounted to
$65.5 million as at January 31, 2006, compared to $78.1 million as at January
31, 2005. This $12.6 million decrease is mainly due toamortisation
expense.

Other long-term assets amounted to $48.8
million as at January 31, 2006, compared to $67.3 million as at January 31,
2005. This $18.5 million decrease is mainly due to:

- the reclassification to property, plant and equipment of two
  facilities amounting to $10 million which no longer qualified as held for sale
- the expensing of deferred financing charges of $5 million.

Accrued and other liabilities amounted
to $287.2 million as at January 31, 2006, compared to $339.8 million as at
January 31, 2005. This $52.6 million decrease is mainly due to:

- the payment of the amount due to Bombardier Capital Inc. of
  $17 million
- payments made as part of the restructuring provision of $11
  million
- the effect of foreign exchange rate fluctuations of $14
  million
- a decrease in sales promotions and incentive programs of $6
  million mainly in the Powersports segment due to the timing of sales incentive
  programs.

The cumulative translation adjustment
account amounted to a debit of $63.4 million as at January 31, 2006 compared to
a debit of $13.7 million as at January 31, 2005. This variation is mainly due to
the strengthening of the Canadian dollar compared to the U.S. dollar and the
euro. Assets and liabilities mainly from the U.S. dollar and euro denominated
self-sustaining foreign subsidiaries translated at the exchange rate at balance
sheet date resulted in an exchange loss, which is accumulated in the cumulative
translation adjustment account.

Statement of Cash Flows

Net cash provided by operating
activities, before net change in working capital items, totalled $146.6 million
for the year ended January 31, 2006, an improvement of $35.2 million over the
net cash provided by operating activities before net change in non-cash
operating items of $111.4 million for the year ended January 31, 2005. This
results mainly from improved net income and lower non-cash items, mainly
depreciation and amortisation, as well as amortisation of deferred financing
costs, which were offset by lower foreign exchange gain.

Net cash used by investing activities
totalled $83.8 million for the year ended January 31, 2006 which was mainly used
for capital expenditures. Net cash used in investing activities totalled $46.6
million for fiscal 2005 of which $40.3 million was provided from the disposal of
the Utility Vehicles segment, $70.1 million was used for capital expenditures,
and $21.5 million was used to pay costs related to the acquisition of the
recreational product business from Bombardier.

- 44 -

---



Management expects to use approximately $100.0
million for capital expenditures during fiscal year 2007, primarily in
connection with the continued development of new products, the increase of
production capacity for certain products, cost reduction initiatives, and the
maintenance of existing capacity, infrastructure and equipment at the
manufacturing facilities. A portion of the fiscal 2007 capital expenditures are
expected to be incurred in connection with the transfer of the vehicle assembly
and the engine manufacturing operations of the ATVs to Mexico.

Net cash used in financing activities totalled $154.5
million for the year ended January 31, 2006 mainly attributable to the net
repayment of long-term debt. Net cash used in financing activities totalled
$181.0 million for the year ended January 31, 2005 which also resulted mainly
from the repayment of long-term debt.

Cash paid for income taxes for the years ended
January 31, 2006 and 2005 amounted to $8.8 million and $15.7 million. The
decrease is partially due to the timing of tax payments related with the
previous taxation year for Canadian and U.S. legal entities. The 44-day period
ended January 31, 2004 represented a short taxation year for both Canadian and
U.S. legal entities and profits are mainly realised during last quarter.
In addition, due to the tax position of the Canadian and U.S. legal entities for
the taxation year ended January 31, 2005, minimum tax instalments were made in
2006 related to year 2005.

Capital Resources

As at January 31, 2006, the debt structure consisted
of the following:

|                                            |               | Effective interest |            
|------------------------------------------- | ------------- | ------------------ | -----------
|                                            |               | rate as at         | Amount     
|                                            | Maturity date | January 31, 2006   | outstanding
|Classified as current liabilities:          |               |                    |            
|$250million Revolving Facilities            | 2008          | 5.84%              | $         
|Classified as long-term liabilities:        |               |                    |            
|U.S. $200 million Senior subordinated notes | 2013          | 8 3/8%             | 228.8      
|Other                                       | 2008          | 2.00%              | 1.8        

Under the senior secured Amended and Restated Credit
Agreement, the Company can borrow up to $250 million ("available borrowings")
under Revolving Facilities, which terminates on December 18, 2008. Pursuant to
the Revolving Facilities, the Company may borrow up to $200.0 million of the
available borrowings, which borrowings may be denominated, in Canadian dollars,
in U.S. dollars or in euros, and one of the Company's wholly owned subsidiaries
may borrow up to $50.0 million of the available borrowings, which borrowings
will be denominated in U.S dollars. Available borrowings can also be drawn in
the form of letters of credit by the Company for an amount of $100.0 million in
Canadian dollars, U.S dollars or euros and by one of the Company's wholly owned
subsidiaries for an additional U.S.$20.0 million (approximately $25.0 million).

At January 31, 2006, $30.9 million of letters of
credit were outstanding under the Revolving Facilities.

The Senior Secured Credit Agreement was amended and
restated on February 9, 2005 to provide for a new Term Facility of U.S. $50
million (approximately $57.0 million), which was to mature January 31, 2011.
During the fourth quarter of fiscal 2006, the Company voluntarily repaid,
without penalty, the remaining outstanding balance of U.S.$49.5 million
(approximately $57.0 million) of the new Term Facility.

- 45 -

---

OFF-BALANCE SHEET ARRANGEMENTS

The Company has agreements with various large finance
companies to provide financing to its dealers to facilitate their purchase of
the Company's products. These agreements improve the Company's liquidity by
financing dealer purchases of products without requiring substantial use of its
working capital. A significant percentage of the Company's sales of snowmobiles,
personal watercraft, ATVs, sport boats, and outboard engines to dealers in North
America are financed under such arrangements. In the event of a dealer default,
the Company may be required to repurchase, from the finance companies, new and
unused products at the total unpaid principal balance of the dealer to the
finance companies. No material losses have been incurred under these agreements.
However, an adverse change in market conditions or other factors could cause
this situation to change and thereby require the Company to perform under this
obligation and to purchase the finance companies' repossessed units. The
purchase price with respect to these repurchases is generally the unpaid balance
on the original invoice.
The total amount of floorplan financing provided to
dealers in North America, Australia and New Zealand during the year ended
January 31, 2006 and 2005 and the combined year ended January 31, 2004 was $1.5
billion, $1.5 billion and $1.4 billion, respectively. The amount outstanding as
of January 31, 2006 and 2005 was $671.3 million and $739.4 million,
respectively. The Company's portion of financing charges under the free
floorplanning programs described above for the years ended January 31, 2006 and
2005 and the combined year ended January 31, 2004 was $33.2 million, $32.7
million and $28.9 million, respectively.
Also as part of the working capital management, the
Company sells receivables to large financial institutions under factoring or
securitisation agreements. The total amount of receivables factoring worldwide
during the year ended January 31, 2006 and 2005 and the combined year ended
January 31, 2004, was $435.1 million, $732.5 million and $803.6 million,
respectively. The total receivable outstanding under securitisation agreements
between the Company's independent dealers and third-party large financial
companies was $114.9 million and $166.7 million, respectively as of January 31,
2006 and 2005. Related financing charges for the year ended January 31, 2006 and
2005 and the combined year ended January 31, 2004, were $3.2 million, $6.8
million and $3.9 million, respectively.
CONTRACTUAL OBLIGATIONS

The following is a summary of the contractual cash
obligations as of January 31, 2006:

|                                                                                       | Payments Due By Period
|-------------------------------------------------------------------------------------- | ----------------------
|                                                                                       | Less than             
|(millions of Canadian dollars)                                                         | 1 year                
|U.S.$200 million Senior subordinated notes (including
    mandatory interest payments) | $ 19.2                
|Other existing debt                                                                    |                      
|Purchase commitments                                                                   | 17.4                  
|Operating leases including residual value guarantees                                   | 6.1                   
|Total contractual cash obligations                                                     | $ 42.7                

Upon completion of the business acquisition, the
Company and J.A.B. entered into a management agreement with affiliates of the
Sponsors to provide management services. Pursuant to such agreement, affiliates
of the Sponsors receive an aggregate annual management fee of U.S.$2.25 million.
The management agreement expires January 31, 2014

HEDGING ACTIVITIES AND FOREIGN EXCHANGE RATES

BRP's foreign exchange exposures are
managed through a central treasury service. Derivative financial instruments are
concluded with investment grade financial institutions. The derivative financial
instruments consist mainly of forward foreign exchange contracts.

- 46 -

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BRP uses derivative financial instruments to manage
currency exposure arising from forecasted foreign currency cash flows, mainly
the U.S. dollar and the euro. In accordance with generally accepted accounting
principles in Canada, the fair value of forward foreign exchange contracts used
to hedge off-balance sheet forecasted foreign currency cash flows and the
offsetting changes in the fair values of the hedged forecasted foreign currency
cash flow transactions are not recognised in the Consolidated Financial
Statements, when they are eligible to hedge accounting. Otherwise, derivative
financial instruments that are not eligible to hedge accounting are recognised
on the balance sheet at fair value with changes in fair value recognised to
income of the period.

The Company purchases financial derivatives,
primarily forward contracts, to reduce foreign exchange volatility. Currently,
the objective is to hedge at a minimum 80% of its forecasted foreign currency
cash flows exposures in U.S. dollars and in euro over the next rolling twelve
months and 50% of its forecasted foreign currency cash flows exposures in U.S.
dollars and in euro over the following rolling twelve months (months 13 to 24).
Management typically reviews the foreign exchange exposure monthly. The Company
is exposed to credit loss in the event of non-performance by the other party to
the derivative financial instruments. The Company limits this exposure by
entering into agreements directly with a number of major financial institutions
that meet its credit standards and that are expected to satisfy fully their
obligations under the contracts.

Derivative contracts outstanding as of January 31,
2006 have maturity dates between 1 and 24 months. Notional amounts of foreign
exchange contracts outstanding as of January 31, 2006 to manage foreign exchange
exposure on U.S. dollar sales were $435.7 million and to manage foreign exchange
exposure on euro denominated purchases were $157.1 million. Since these
contracts are designated as hedge of foreign currency denominated transactions,
any change in the fair value of the contracts should be offset by changes in the
value of the underlying transaction.

Outstanding foreign exchange contracts, by maturity
date, are as follows:

|                               |          |          | January 31, 2006 | January 31, 2005
|------------------------------ | -------- | -------- | ---------------- | ----------------
|                               |          |          |                  | Canadian        
|                               |          |          | Weighted         | equivalent      
|                               | Sell     | Buy      | average          | notional        
|(millions of Canadian dollars) | currency | currency | rate             | amount          
|Sell contracts:                |          |          |                  |                 
|Less than 1 year               | USD      | CAD      | 1.2598           | $ 322.5         
|Between 1 and 2 years          | USD      | CAD      | 1.2199           | 113.2           
|                               |          |          |                  |                 
|Buy contracts:                 |          |          |                  |                 
|Less than 1 year               | CAD      | Euro     | 1.6144           | 119.1           
|Between 1 and 2 years          | CAD      | Euro     | 1.5335           | 38.0            

Gains and losses resulting from the change in the
fair value of the forward foreign exchange contracts are recorded in the same
category as the forecasted foreign currency denominated transactions, when they
are eligible to hedge accounting. For example, if the hedged item is a
forecasted foreign currency sale, gains and losses will be included in revenues,
and if the hedged item is a forecasted foreign currency purchase, gains and
losses will be included in cost of sales. Whereas, when derivative financial
instruments are not eligible to hedge accounting, changes in the fair value of
the derivatives are recognised immediately to income as foreign exchange gains
or losses.

PENSION AND OTHER BENEFIT PLANS

The Company sponsors several domestic and foreign
funded and unfunded defined benefit pension plans covering certain of its
employees in Canada, the United States, Austria and Belgium. The Company
provides a defined contribution plan to most of its employees in Canada and in
the United States. The Company also provides post-retirement benefits plans.
These benefits plans essentially consist of post-retirement health care coverage
and life insurance benefits in Canada.

- 47 -

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The significant actuarial assumptions adopted to
determine the benefit cost and the projected benefit obligation are disclosed
under Item 17 - Financial Statements - Note 16, Employees Future Benefits.

The determination of the above assumptions was made
by management after a periodic review of factors, such as long-term investment
returns expectations prepared by consultants or economists, historical
investment returns, long-term inflation expectations and bond yields and
recommendations from actuaries. The Company uses the market value of assets for
purposes of measuring the pension cost. The Company also reflects the cost of
future life expectancy improvements.

Based on the current economic environment and
tendency toward increasing the long bond yields, management does not expect
these assumptions to change in such a way so that it would result in higher
remeasured projected benefit obligations.

As at January 31, 2006, the reconciliation of the
funded status of the pension plans to the amounts recorded on the consolidated
balance sheet under employee future benefits obligations was as follows:

|                                   | January 31, 2006
|---------------------------------- | ----------------
|                                   | Pension         
|                                   | Domestic        
|Fair value of plan
    assets      | $ 124.4         
|Projected benefit obligation       | (171.5)         
|Funded status                      | (47.1)          
|Unamortised net
    actuarial loss | 14.1            
|Unamortised past service cost      | 1.5             
|Net recognised amount              | $ (31.5)        

The unfunded foreign plans are mainly located in
Austria where regulations do not require pre-funding.

The Company will amortise any
unamortised net actuarial gains and losses over 10% of the greater of the
benefit obligation and the fair value of plan assets, as well as the cost of any
future plan improvements over the estimated average remaining service life of
the plan members.

It is estimated that a decrease of 50 basis points in
the discount rate assumption would increase the projected benefit obligation for
the pension plans by approximately $22 million and for other benefits by $1
million. The decrease would also increase the pension and other benefit cost by
$1 million.

It is further estimated that a decrease of 50 basis
points in the current long-term expected returns on assets would increase the
pension cost by approximately $1 million.

In accordance with the minimum funding obligations
required under the current regulations, the Company expects to contribute $12
million to all defined benefit pension plans for the year ended January 31,
2007.

The Company froze an existing Canadian defined
benefit pension plan with the support of the affected employees. Following the
curtailment of that pension plan, employees are no longer able to earn benefits
by providing future service but actuarial and investment risks are not
eliminated, since current retirees are still covered by the defined benefit
pension plan, and employees still on the payroll as at the June 1, 2005
termination date did not lose the benefits they had accumulated until that date.
Also the Company agreed to the creation of a replacement pension plan, which is
a defined contribution plan, subject to finalisation of regulatory approval.

- 48 -

---



Participation in the new Canadian defined
contribution plan will be optional for current but mandatory for new employees
with a minimum contribution rate of 4% of their salaries. The Company will match
employee contributions up to a maximum of 6%. As a transition, the Company will
make additional contributions, for the current employees, up to 5% of their
salaries based on age and years of services accumulated as at June 1, 2005, the
reform date.

The Company provides healthcare and life insurance
benefits mainly to eligible Canadian employees. The life insurance benefit is
non-contributory. For most eligible employee who will retire prior to December
31, 2006, the healthcare benefit is contributory. Participants generally become
eligible, for retired healthcare benefits, after reaching age 55 and having
accumulated 5 years of service, immediately prior to retirement. The
participants are covered until they reach age 65. Generally, the medical plan
pays a percentage of most medical expenses which are in excess of the costs
covered by provincial government plans. The plan is funded on a pay as you go
basis. For active employees, on December 31, 2005, that will retire after
December 31, 2006, the retired healthcare benefit will then consist of an annual
benefit of $720 indexed at 3% per year. Employees hired after December 31, 2005
are not eligible to these benefits.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity
with GAAP requires the use of estimates, which may involve a higher degree of
judgment and complexity in their application, and the use of assumptions, all of
which may affect the reported amounts of assets and liabilities, related amounts
of revenues and expenses and disclosure of contingent assets and liabilities.
Estimates are influenced by factors such as historical experience, current
market conditions, changes in the business environment and various other
assumptions that are believed to be reasonable and consistent with industry
practice. Management conducts quarterly reviews of its critical accounting
estimates as well as detailed annual reviews during the fourth quarter as part
of its annual budget process. Actual results may differ from these estimates
under different assumptions or conditions. The basis of accounting for the
significant accounting policies is presented in Item 17 - Financial Statements -
Note 4, "Significant Accounting Policies."

Management discussed the application of these
critical accounting estimates with the Audit Committee of the Company.

Management believes the following are the critical
accounting estimates used in the preparation of the Company's Consolidated
Financial Statements. This discussion addresses only critical accounting
estimates that management considers important based on the degree of uncertainty
and the likelihood of a material impact if different estimates were used. There
are other areas which require the use of estimates about uncertain matters.

Revenue recognition

The Company recognises revenue when title passes upon
delivery of products to dealers, distributors or customers, once the sales price
is fixed or determinable and collection is reasonably assured. The Company has
agreements with finance companies to provide financing to its dealers for the
purchases of the Company's products. In the event of a dealer default, the
Company may be required to purchase, up to a certain limit, from the finance
companies, new and unused products at the total unpaid principal balance of the
dealer to the finance companies. The Company's exposure is capped at an amount
equal to the greater of US$25.0 million (approximately $29.0 million) and 10% of
the 12 months average outstanding floorplan financing under the agreement.
Historically, no material losses have been incurred under such agreements.
Adverse change in the retail sales could cause this situation to change.

- 49 -

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Sales promotions and incentive programs

Sales promotion and incentive programs include dealer
and distributor rebates, volume discounts and retail financing programs. The
Company generally provides for estimated sales promotion and incentive expenses
at the later of revenue recognition or the announcement of sales promotion and
incentive programs. Sales promotion and incentive expenses are estimated based
on current programs, historical rates for each product line, inventory levels at
the dealer network and future forecasted sales of the dealer network. Adverse
changes in the retail market conditions, higher levels of sales promotions and
incentives offered by competitors or changes in the current experience compared
to the historical data may require the Company to review its estimates for sales
promotions and incentive programs.

Product warranties

Most of the Company's products are provided with a
limited manufacturer's warranty for a period of six months to three years. The
estimated warranty cost is accrued for each product at the time of sale.
Estimates are principally based on assumptions regarding lifetime warranty costs
of each product line and each model year of that product line, where little or
no claims experience may exist. In addition, the number and magnitude of
additional service actions expected to be approved, and policies related to
additional service actions, are taken into consideration. Additional service
action costs may occur due to certain factors such as weather and its impact on
product usage and product recalls. Due to the uncertainty and potential
volatility of these estimated factors, changes in management's assumptions could
materially affect net income.

Experience has shown that initial data for any given
model year can be volatile; therefore, the Company's process relies upon
long-term historical averages until sufficient data are available. As actual
experience becomes available, it is used to modify the historical averages to
ensure that the forecast is within the range of likely outcomes. Resulting
balances are then compared with present spending rates to ensure that the
accruals are adequate to meet expected future obligations.

Litigation

The Company incurs expenses on claims as a result of
legal actions against it. The Company maintains insurance for a portion of this
exposure and records a liability for its non-insured obligations. The Company
estimates its liability obligations based on its assessment of the likely range
of exposure stemming from the claim, on historical trends and a review of
product performance. Any liability recorded is established for reported and
unreported potential claims of injuries or damages that occurred prior to the
date of the financial statements. Adverse final determination against the
Company may have a material impact on the Company's financial condition. For
complementary information on claims see Item 17 - Financial Statements - Note
25, "Commitments and Contingencies."

Inventory valuation

Raw materials and work in process, finished products
and parts and accessories are valued at the lower of cost (average cost or
first-in, first-out) and replacement cost (raw materials) or net realisable
value. The Company makes ongoing estimates relating to the net realisable value
of inventories, based upon management's assumptions about future demand and
market conditions. If the Company estimates that the net realisable value of its
inventory is less than the cost of the inventory recorded in its books, the
Company records a reserve equal to the difference between the cost of the
inventory and the estimated net realisable value. This reserve is recorded as a
charge to cost of sales. If changes in market conditions result in reductions in
the estimated realisable value of its inventory below its previous estimate, the
Company would increase its reserve in the period in which the Company made such
a determination and record an expense to cost of sales.

- 50 -

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Pension and other benefit plans

Pension and other employee benefits costs and
obligations are actuarially determined and are affected by assumptions including
the discount rate, the expected long-term rate of return on plan assets, the
annual rate of increase in compensation for plan participants, the increase in
costs of health care benefits and other factors such as demographic factors,
retirement age of participants, mortality rates, and turnover. The discount rate
allows the Corporation to reflect estimated future benefit payments at present
value on the measurement date. Management has little discretion in selecting the
discount rate as it must represent the market rates for high quality fixed
income investments available for the period to maturity of the benefits. A lower
discount rate increases the cost and obligation. The expected long-term rate of
return on plan assets is determined considering historical returns, future
estimates of long-term investment returns and asset allocations. A lower return
assumption increases pension cost. The rate of compensation increase is
determined considering current salary structure, historical wage increases and
anticipated wage increases. The pension plan assumptions are reviewed annually.

RECENT ACCOUNTING AND REPORTING DEVELOPMENTS

Canadian GAAP

Accounting for
Consideration Given by a Vendor to a Customer

In January 2005, the EIC issued abstract 144,
"Accounting by a customer (including a reseller) for certain consideration
received from a vendor." The consensus is effective retroactively for periods
commencing on or after February 15, 2005. The consensus requires companies to
recognise the benefit of non-discretionary rebates for achieving specified
cumulative purchasing levels as a reduction of the cost of purchases over the
relevant period, provided the rebate is probable and reasonably estimable.
Otherwise, the rebates would be recognised as purchasing milestones are
achieved. Equivalent guidance in U.S. GAAP has already been adopted by the
Company.

Financial Instruments  Recognition and Measurement, Hedge, Comprehensive
Income, Equity

In January 2005, the CICA released a new financial
standards relating to recognition and measurement of financial instruments,
hedging relationships, and presentation of equity and comprehensive income.

Section 3855, "Financial Instruments  Recognition
and Measurement" establishes standards for recognising and measuring financial
assets, financial liabilities and non-financial derivatives. It also specifies
how financial instrument gains and losses are to be presented.

Section 3865, "Hedge" establishes standards for when
and how hedge accounting may be applied. Hedge accounting is optional. It
replaces and expands on Accounting Guideline AcG-13 "Hedging Relationships," and
the hedging guidance in Section 1650 "Foreign Currency Translation" by
specifying how hedge accounting is applied and what disclosure is necessary when
it is applied.

Section 1530, "Comprehensive Income" establishes
standards for reporting and display of comprehensive income. It introduces a new
requirement to temporarily present certain gains and losses outside net income.

Section 3251 "Equity" establishes standards for the
presentation of equity and changes in equity during the reporting period. The
requirements of this Section are in addition to those in Section 1530,
"Comprehensive Income," Section 3240, "Share Capital," and Section 3260,
"Reserves."

The adoption may eliminate certain reconciling items
between Canadian and US GAAP. The mandatory effective date for the above new
Sections for the Company will be February 1, 2007.

US GAAP

BRP also prepares a reconciliation highlighting the
significant differences between its financial statements as prepared in
accordance with Canadian GAAP as compared to financial statements prepared under
U.S. GAAP see Item 17 - Financial Statements - Note 27, "Differences Between
Canadian and U.S. GAAP."

- 51 -

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Inventory Costs

On November 24, 2004, the FASB issued Statement No.
151 "Inventory Costs" ("FAS 151") to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage). This Statement requires that those items be recognised as
current-period charges regardless of whether they meet the "so abnormal"
criterion outlined in ARB 43. FAS 151 also introduces the concept of "normal
capacity" and requires the allocation of fixed production overheads to inventory
based on the normal capacity of the production facilities. Unallocated overheads
must be recognised as an expense in the period in which they are incurred. This
Statement is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Earlier application is permitted for costs
incurred during fiscal years beginning after the date of the issuance of this
Statement. The Company does not expect the adoption of FAS 151 to have an impact
on the financial position, cash flows, and results of operations of the Company.

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FINANCIAL INFORMATION 
BOMBARDIER RECREATIONAL PRODUCTS INC.

|                                         | January 31,    | April 30, | July 31,  | October 31, | January 31,
|---------------------------------------- | -------------- | --------- | --------- | ----------- | -----------
|                                         | 2005           | 2005      | 2005      | 2005        | 2006       
|ASSETS                                   | [Restated] (1) |           |           |             |            
|Current assets                           |                |           |           |             |            
|Cash and cash equivalents                | $ 150.3        | $ 35.0    | $ 20.9    | $ 30.8      | $ 50.9     
|Receivables                              | 112.7          | 106.3     | 91.3      | 100.9       | 110.1      
|Inventories                              | 302.1          | 319.4     | 332.7     | 353.8       | 283.5      
|Other assets                             | 141.4          | 131.9     | 106.6     | 108.9       | 94.6       
|Total current assets                     | 706.5          | 592.6     | 551.5     | 594.4       | 539.1      
|Property, plant and equipment            | 425.8          | 416.8     | 392.7     | 387.7       | 401.8      
|Goodwill                                 | 119.9          | 120.6     | 108.6     | 102.7       | 100.0      
|Trademarks                               | 151.1          | 151.1     | 151.1     | 151.1       | 151.1      
|Other intangible assets                  | 78.1           | 75.0      | 71.9      | 68.7        | 65.5       
|Other assets                             | 67.3           | 54.8      | 62.7      | 60.5        | 48.8       
|                                         | $ 1,548.7      | $ 1,410.9 | $ 1,338.5 | $ 1,365.1   | $ 1,306.3  
|LIABILITIES AND SHAREHOLDER'S
    EQUITY |                |           |           |            
|Current Liabilities                      |                |           |           |             |            
|Bank loans                               | $ 12.3         | $        | $ 57.6    | $          | $         
|Accounts payable                         | 227.7          | 242.6     | 147.8     | 219.3       | 211.0      
|Accrued and other liabilities            | 339.8          | 286.5     | 294.2     | 278.1       | 287.2      
|Current portion of long-term debt        | 147.2          | 0.6       | 0.6       | 0.6         |           
|Total current liabilities                | 727.0          | 529.7     | 500.2     | 498.0       | 498.2      
|Long-term debt                           | 249.5          | 315.6     | 307.5     | 296.0       | 230.6      
|Employee future benefits                 |                |           |           |             |            
|obligations                              | 122.2          | 125.0     | 121.1     | 115.2       | 112.5      
|Other liabilities                        | 86.0           | 73.7      | 77.0      | 92.7        | 87.5       
|Total liabilities                        | 1,184.7        | 1,044.0   | 1,005.8   | 1,001.9     | 928.8      
|                                         |                |           |           |             |            
|Shareholder's equity                     |                |           |           |             |            
|Capital stock                            | 364.4          | 364.5     | 364.7     | 364.8       | 365.6      
|Additional paid-in capital (2)           | 2.3            | 2.5       | 2.5       | 2.8         | 2.7        
|Retained earnings (2)                    | 11.0           | 8.5       | 7.2       | 56.4        | 72.6       
|Cumulative translation adjustment        | (13.7)         | (8.6)     | (41.7)    | (60.8)      | (63.4)     
|                                         | 364.0          | 366.9     | 332.7     | 363.2       | 377.5      
|                                         | $ 1,548.7      | $ 1,410.9 | $ 1,338.5 | $ 1,365.1   | $ 1,306.3  

(1) See notes 2 to the Consolidated
Financial Statements as at January 31, 2006.

(2) Adjusted to reflect change in
estimate related to stock compensation expense of $0.3 million; $0.7 million and
$1.0 million as at April 30, 2005, July 31, 2005 and October 31, 2005,
respectively.

- 53 -

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BOMBARDIER RECREATIONAL PRODUCTS INC. 
Interim Consolidated Statements of Income 
(millions of Canadian dollars) 
(Unaudited)

|                                                                                      | Three-month  | Three-month  | Three-month  | Three-month 
|------------------------------------------------------------------------------------- | ------------ | ------------ | ------------ | ------------
|                                                                                      | period ended | period ended | period ended | period ended
|                                                                                      | April 30,    | July 31,     | October 31,  | January 31, 
|                                                                                      | 2005         | 2005         | 2005         | 2006        
|Revenues                                                                              | $ 594.0      | $ 467.3      | $ 624.6      | $ 675.3     
|Cost of sales                                                                         | 478.7        | 387.2        | 463.1        | 546.8       
|Gross profit                                                                          | 115.3        | 80.1         | 161.5        | 128.5       
|Operating expenses                                                                    |              |              |              |             
|Selling and marketing                                                                 | 44.2         | 39.6         | 46.4         | 38.3        
|Research and development                                                              | 27.1         | 22.9         | 22.8         | 24.5        
|General and administrative (1)                                                        | 28.8         | 34.5         | 32.7         | 33.9        
|Total operating expenses                                                              | 100.1        | 97.0         | 101.9        | 96.7        
|Operating income (loss)                                                               | 15.2         | (16.9)       | 59.6         | 31.8        
|Other (income) and expenses                                                           |              |              |              |             
|Financing costs                                                                       | 8.1          | 8.9          | 8.0          | 9.0         
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | (1.5)        |             | 0.2          | (0.1)       
|Foreign exchange loss from
    reduction in net investment in a foreign entity        |             |             |             | 9.5         
|Foreign exchange loss (gain)                                                          | 9.8          | (16.3)       | (14.8)       | (11.7)      
|Income (loss) before income taxes                                                     | (1.2)        | (9.5)        | 66.2         | 25.1        
|Income tax expense (recovery)                                                         | 1.3          | (8.2)        | 17.0         | 8.9         
|Net income (loss)                                                                     | $ (2.5)      | $ (1.3)      | $ 49.2       | $ 16.2      

(1) Adjusted to reflect change in
estimate related to stock compensation expense of $0.3 million, $0.4 million and
$0.3 million for the three-month periods ended April 30, 2005, July 31, 2005 and
October 31, 2005, respectively.

- 54 -

---

BOMBARDIER RECREATIONAL PRODUCTS INC. 
Interim Consolidated Statements of Income 
(millions of Canadian dollars) 
(Unaudited)

|                                                                                      | Three-month  | Six-month    | Nine-month   |            
|------------------------------------------------------------------------------------- | ------------ | ------------ | ------------ | -----------
|                                                                                      | period ended | period ended | period ended | Year ended 
|                                                                                      | April 30,    | July 31,     | October 31,  | January 31,
|                                                                                      | 2005         | 2005         | 2005         | 2006       
|Revenues                                                                              | $ 594.0      | $ 1,061.3    | $ 1,685.9    | $ 2,361.2  
|Cost of sales                                                                         | 478.7        | 865.9        | 1,329.0      | 1,875.8    
|Gross profit                                                                          | 115.3        | 195.4        | 356.9        | 485.4      
|Operating expenses                                                                    |              |              |              |            
|Selling and marketing                                                                 | 44.2         | 83.8         | 130.2        | 168.5      
|Research and development                                                              | 27.1         | 50.0         | 72.8         | 97.3       
|General and administrative (1)                                                        | 28.8         | 63.3         | 96.0         | 129.9      
|Total operating expenses                                                              | 100.1        | 197.1        | 299.0        | 395.7      
|Operating income (loss)                                                               | 15.2         | (1.7)        | 57.9         | 89.7       
|Other (income) and expenses                                                           |              |              |              |            
|Financing costs                                                                       | 8.1          | 17.0         | 25.0         | 34.0       
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | (1.5)        | (1.5)        | (1.3)        | (1.4)      
|Foreign Exchange loss from
    reduction in net investment in a foreign entity        |             |             |             | 9.5        
|Foreign exchange loss (gain)                                                          | 9.8          | (6.5)        | (21.3)       | (33.0)     
|Income (loss) before income taxes                                                     | (1.2)        | (10.7)       | 55.5         | 80.6       
|Income tax expense (recovery)                                                         | 1.3          | (6.9)        | 10.1         | 19.0       
|Net income (loss)                                                                     | $ (2.5)      | $ (3.8)      | $ 45.4       | $ 61.6     

(1) Adjusted to reflect change in
estimate related to stock compensation expense of $0.3 million, $0.7 million and
$1.0 million for the periods ended April 30, 2005, July 31, 2005 and October 31,
2005, respectively.

- 55 -

---



BOMBARDIER RECREATIONAL PRODUCTS INC. Interim Consolidated Statements of Cash Flows 
(millions of Canadian dollars) 
(Unaudited)

|                                                                                      | Three-month    | Three-month   | Three-month      | Three-month     
|------------------------------------------------------------------------------------- | -------------- | ------------- | ---------------- | ----------------
|                                                                                      | period ended   | period ended  | period ended     | period ended    
|                                                                                      | April 30, 2005 | July 31, 2005 | October 31, 2005 | January 31, 2006
|OPERATING ACTIVITIES                                                                  |                |               |                  |                 
|Net income (loss) (1)                                                                 | $ (2.5)        | $ (1.3)       | $ 49.2           | $ 16.2          
|Non-cash items:                                                                       |                |               |                  |                 
|Depreciation and
    amortisation                                                     | 26.1           | 26.6          | 23.9             | 26.3            
|Amortisation of deferred
    financing costs                                          | 1.1            | 1.1           | 1.1              | 2.3             
|Employee stock
    compensation (1)                                                   | 0.2            |              | 0.3              | 0.4             
|Deferred income taxes
    expense (recovery)                                          | (3.5)          | (9.8)         | 12.9             | 0.2             
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | (1.5)          |              | 0.2              | (0.1)           
|Foreign exchange loss (gain)                                                          | 7.9            | (7.6)         | (11.7)           | (11.4)          
|Cash flow from operating activities before the following                              | 27.8           | 9.0           | 75.9             | 33.9            
|Net changes in non-cash operating items                                               | (34.9)         | (54.5)        | 19.6             | 69.5            
|Cash flows from operating activities                                                  | (7.1)          | (45.5)        | 95.5             | 103.4           
|INVESTING ACTIVITIES                                                                  |                |               |                  |                 
|Additions to property, plant and equipment                                            | (10.5)         | (12.8)        | (25.7)           | (33.8)          
|Proceeds on disposal of property, plant and
    equipment and assets held for sale    | 4.9            | 0.2           | 0.1              | 0.4             
|Business acquisition                                                                  | (5.3)          | (1.3)         |                 |                
|Cash flows from investing activities                                                  | (10.9)         | (13.9)        | (25.6)           | (33.4)          
|FINANCING ACTIVITIES                                                                  |                |               |                  |                 
|Increase (decrease) in bank loans                                                     | (12.3)         | 57.6          | (57.6)           |                
|Issuance of long-term debt                                                            | 62.1           |              |                 |                
|Repayment of long-term debt                                                           | (147.2)        | (0.3)         |                 | (56.9)          
|Increase in capital stock                                                             | 0.1            | 0.2           | 0.1              | 0.3             
|Other                                                                                 |               | (0.5)         |                 | (0.1)           
|Cash flows from financing activities                                                  | (97.3)         | 57.0          | (57.5)           | (56.7)          
|Effect of exchange rate changes on cash and
    cash equivalent                       |               | (11.7)        | (2.5)            | 6.8             
|Net increase (decrease) in cash and cash equivalents                                  | (115.3)        | (14.1)        | 9.9              | 20.1            
|Cash and cash equivalent at beginning of period                                       | 150.3          | 35.0          | 20.9             | 30.8            
|Cash and cash equivalent at end of period                                             | $ 35.0         | $ 20.9        | $ 30.8           | $ 50.9          

(1) Adjusted to reflect change in
estimate related to stock compensation expense of $0.3 million, $0.4 million and
$0.3 million for the periods ended April 30, 2005, July 31, 2005 and October 31,
2005, respectively.

- 56 -

---



BOMBARDIER RECREATIONAL PRODUCTS INC. Interim Consolidated Statements of Cash Flows 
(millions of Canadian dollars) 
(Unaudited)

|                                                                                   | Three-month    | Six-month     | Nine-month       |                 
|---------------------------------------------------------------------------------- | -------------- | ------------- | ---------------- | ----------------
|                                                                                   | period ended   | period ended  | period ended     | Year ended      
|                                                                                   | April 30, 2005 | July 31, 2005 | October 31, 2005 | January 31, 2006
|OPERATING ACTIVITIES:                                                              |                |               |                  |                 
|Net income (loss) (1)                                                              | $ (2.5)        | $ (3.8)       | $ 45.4           | $ 61.6          
|Non-cash items:                                                                    |                |               |                  |                 
|Depreciation and
    amortisation                                                  | 26.1           | 52.7          | 76.6             | 102.9           
|Amortisation of deferred
    financing costs                                       | 1.1            | 2.2           | 3.3              | 5.6             
|Employee stock
    compensation (1)                                                | 0.2            | 0.2           | 0.5              | 0.9             
|Deferred income taxes
    expense (recovery)                                       | (3.5)          | (13.3)        | (0.4)            | (0.2)           
|Loss on disposal of
    property, plant and equipment and assets held for sale     | (1.5)          | (1.5)         | (1.3)            | (1.4)           
|Foreign exchange loss (gain)                                                       | 7.9            | 0.3           | (11.4)           | (22.8)          
|Cash flow from operating activities before the following                           | 27.8           | 36.8          | 112.7            | 146.6           
|Net changes in non-cash operating items                                            | (34.9)         | (89.4)        | (69.8)           | (0.3)           
|Cash flows from operating activities                                               | (7.1)          | (52.6)        | 42.9             | 146.3           
|INVESTING ACTIVITIES                                                               |                |               |                  |                 
|Additions to property, plant and equipment                                         | (10.5)         | (23.3)        | (49.0)           | (82.8)          
|Proceeds on disposal of property, plant and
    equipment and assets held for sale | 4.9            | 5.1           | 5.2              | 5.6             
|Business acquisition                                                               | (5.3)          | (6.6)         | (6.6)            | (6.6)           
|Cash flows from investing activities                                               | (10.9)         | (24.8)        | (50.4)           | (83.8)          
|FINANCING ACTIVITIES                                                               |                |               |                  |                 
|Increase (decrease) in bank loans                                                  | (12.3)         | 45.3          | (12.3)           | (12.3)          
|Issuance of long-term debt                                                         | 62.1           | 62.1          | 62.1             | 62.1            
|Repayment of long-term debt                                                        | (147.2)        | (147.5)       | (147.5)          | (204.4)         
|Increase in capital stock                                                          | 0.1            | 0.3           | 0.4              | 0.7             
|Other                                                                              |               | (0.5)         | (0.5)            | (0.6)           
|Cash flows from financing activities                                               | (97.3)         | (40.3)        | (97.8)           | (154.5)         
|Effect of exchange rate changes on cash and
    cash equivalent                    |               | (11.7)        | (14.2)           | (7.4)           
|Net increase (decrease) in cash and cash equivalents                               | (115.3)        | (129.4)       | (119.5)          | (99.4)          
|Cash and cash equivalent at beginning of period                                    | 150.3          | 150.3         | 150.3            | 150.3           
|Cash and cash equivalent at end of period                                          | $ 35.0         | $ 20.9        | $ 30.8           | $ 50.9          

(1) Adjusted to reflect change in
estimate related to stock compensation expense of $0.3 million, $0.7 million and
$1.0 million for the periods ended April 30, July 31 and October 31, 2005,
respectively.

- 57 -

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ITEM 6- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and senior management

The following table presents certain information
concerning BRP's directors and members of senior management as of April 26,
2006:

|Name                  | Age | Position(s)                                                                         
|--------------------- | --- | ------------------------------------------------------------------------------------
|                      |     |                                                                                     
|Laurent Beaudoin      | 67  | Chairman of the Board                                                               
|                      |     |                                                                                     
|José Boisjoli         | 48  | President and Chief
    Executive Officer                                           
|                      |     |                                                                                     
|Daniel Denault        | 50  | Chief Financial
    Officer                                                         
|                      |     |                                                                                     
|Pierre Arsenault      | 42  | Vice President and
    General Manager, Snowmobiles, Watercraft, ATV and Sport Boats
|                      |     |                                                                                     
|Christopher Dawson    | 37  | Vice President,
    Strategic Planning, Business Development and Strategic Marketing
|                      |     |                                                                                     
|François Durand       | 54  | Vice President, Human
    Resources                                                 
|                      |     |                                                                                     
|Michel Hade           | 47  | Vice President and
    General Manager, International Sales and Marketing           
|                      |     |                                                                                     
|Roch Lambert          | 43  | Vice President and
    General Manager, Outboard Marine Engines                     
|                      |     |                                                                                     
|Yves Leduc            | 41  | Vice President and
    General Manager, BRP-Rotax                                   
|                      |     |                                                                                     
|Jennifer Millson      | 45  | Vice President,
    General Counsel and Secretary                                   
|                      |     |                                                                                     
|Alain Villemure       | 43  | Executive Vice
    President, Manufacturing and Operations, North America and China 
|                      |     |                                                                                     
|Pierre Beaudoin       | 43  | Director                                                                            
|                      |     |                                                                                     
|Joshua Bekenstein     | 47  | Director                                                                            
|                      |     |                                                                                     
|J.R. André Bombardier | 63  | Director                                                                            
|                      |     |                                                                                     
|Jean Gaulin           | 63  | Director                                                                            
|                      |     |                                                                                     
|Jordan Hitch          | 39  | Director                                                                            
|                      |     |                                                                                     
|Luc Houle             | 49  | Director                                                                            
|                      |     |                                                                                     
|Matthew Levin         | 40  | Director                                                                            
|                      |     |                                                                                     
|Carlos Mazzorin       | 64  | Director                                                                            
|                      |     |                                                                                     
|Pierre Michaud        | 62  | Director                                                                            
|                      |     |                                                                                     
|Nicholas G. Nomicos   | 43  | Director                                                                            

- 58 -

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|                  |     |            
|----------------- | --- | -----------
|Name              | Age | Position(s)
|                  |     |            
|Daniel J. O'Neill | 54  | Director   
|                  |     |            
|Edward Philip     | 40  | Director   

There are no arrangements or understandings pursuant
to which any directors or members of senior management was selected as a
director or a member of senior management, other than as provided for in the
shareholder's agreement described under "Item 10 - Additional Information -
C. Material Contracts - Shareholders Agreement."

Set forth below is a brief description of the
business experience of each of the Company's directors and executive officers:

Laurent Beaudoin became Chairman of BRP on
December 18, 2003. He is the Chairman of the board of directors and the Chief
Executive Officer of Bombardier Inc., a position he assumed in December 2004.
From 1979 to 1999, Mr. Beaudoin served as Bombardier Inc.'s Chief Executive
Officer and Chairman, and from 1993 to 2003, he was Chairman of Bombardier
Inc.'s board and executive committee. He is a Fellow Chartered Accountant. Mr.
Beaudoin holds a Bachelor of Arts degree from Sainte-Anne College and a Master
of Commerce degree from the University of Sherbrooke. He has also received
honorary doctorates from several universities, and a number of business awards,
including CEO of the Year (Financial Post), Canada's Executive of the Year
(International Chamber of Commerce) and membership status in the World Trade
Hall of Fame (World Trade Institute). He is the father of Pierre Beaudoin and
the brother-in-law of J.R. André Bombardier.

José Boisjoli became President and Chief
Executive Officer of BRP on December 18, 2003. He was previously President of
Bombardier Inc.'s snowmobile, personal watercraft and ATV businesses, a position
he had held since May 2001. From October 1998 to May 2001, he was President of
Bombardier Inc.'s snowmobile and personal watercraft divisions. Mr. Boisjoli
joined Bombardier Inc. in February 1989 where he started as Director of
Purchasing and later held the positions of Vice President, Material and Vice
President and General Manager for all of its North American operations. Mr.
Boisjoli holds a Bachelor of Mechanical Engineering degree from the University
of Sherbrooke. Daniel Denault became Chief Financial Officer of
BRP on February 20, 2006. From June 1998 to then, he served as Vice President
and Chief Financial Officer for Transcontinental Inc., a publicly listed
Canadian company. Prior to that, Mr. Denault was Vice President, Finance of
Domtar Inc. where he worked since 1988. From 1985 to 1988, he worked with Canada
Steamship Lines in various finance related positions, after more than seven
years of acting as a financial and tax consultant at Coopers & Lybrand as well
as Samson Bélair. Mr. Denault is a Chartered Accountant and a Fellow of the
Certified Management Accountants Association and holds a Bachelor of
Administration from the University of Sherbrooke.

- 59 -

---



Pierre Arsenault became Vice President and
General Manager, Snowmobiles, Watercraft, ATV and Sport Boats on October 25,
2004. Prior to that, he acted as Vice President, Strategy and Business
Development since March 1, 2004. He was previously Vice President, Sales and
Marketing - North America, for Bombardier Inc.'s snowmobile, personal watercraft
and ATV businesses, a position he had held since September 1, 2002. Mr.
Arsenault joined Bombardier Inc. in May 1995 as Director Strategic Planning and
had held various positions in marketing, business development and as General
Manager of Bombardier Inc.'s Neighborhood Electric Vehicle business. He earned a
Bachelor's degree in Mechanical Engineering from McGill University and a
Master's degree in Business Administration from the Harvard Business School.

Christopher Dawson became Vice President,
Strategic Planning, Business Development and Strategic Marketing on November 11,
2005. He was previously Vice President, Strategic Planning and Business
Development, and has held various other marketing and strategic planning
positions since joining Bombardier Inc. in January 1998. Previously, he worked
with different multinational companies in various domestic and international
marketing positions. Mr. Dawson has a Bachelor of Commerce (Honors) degree from
Queen's University and a Master's degree in Business Administration from INSEAD
in France.

François Durand became Vice President, Human
Resources on November 15, 2004, after having spent nearly six months as Vice
President, Human Resources at BRP-Rotax in Austria. Prior to that, he was
Managing Director with Korn/Ferry International, which acquired in 2000 Illsley
Bourbonnais Inc., which he had joined in 1987. Previously, Mr. Durand worked
with different companies and organisations in various human resources functions,
including Bombardier Inc. Mr. Durand has a Bachelor's degree in Industrial
Relations from Laval University.

Michel Hade became Vice President and General
Manager, International Sales and Marketing on December 18, 2003. He had held
this position at Bombardier Inc. since June 2000. Previously he worked at Bausch
& Lomb Canada (1982-2000) where he rose from Sales Representative to President
and General Manager. Mr. Hade studied Industrial Relations at the University of
Montréal.

Roch Lambert became Vice President and
General Manager, Outboard Marine Engines on October 25, 2004. Prior to that, he
had acted as Executive Vice President, Product Development, Sales and Marketing,
North America, since January 1, 2004. He had been the Vice President and General
Manager of Marine Engines with Bombardier Inc. since February 2001. Mr. Lambert
joined Bombardier Inc. in 1994 and his responsibilities with the company have
included Vice President, Operations and Vice President, Production. Mr. Lambert
holds a Certificate of Business Administration from Laval University and a
Bachelor of Mechanical Engineering degree from the University of Montréal École
Polytechnique.

Yves Leduc became Vice President and General
Manager of BRP-Rotax on March 1, 2004. Previously, he was the Vice President of
Material Management and Aircraft Engines at Bombardier-Rotax (2000-2004), the
Vice President, Strategic Planning and Business Development for the Bombardier
Recreational Products division (1998-2000), and a Consultant with McKinsey &
Company (1994-1998). Mr. Leduc has a Law degree from the University of Montreal
and an LLM from Columbia University. He practiced law with the firm of Stikeman
Elliott in Montreal from 1988-1994.

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Jennifer Millson became Vice President,
General Counsel and Secretary on January 1, 2004. She joined Bombardier Inc. in
August 1998 as Vice President, Legal Services of the Bombardier Services group
and was appointed Vice President, Legal Services of Bombardier Recreational
Products in February 1999. Previously, Ms. Millson was Senior Legal Counsel of
TRW Inc. (1990-1997) and an associate with Thompson, Hine and Flory in
Cleveland, Ohio (1985-1990). Ms. Millson has a J.D. degree from Georgetown
University Law Center and a Bachelor of Arts degree from Miami University.

Alain Villemure became Executive Vice
President, Manufacturing and Operations, North America and China on January 1,
2004. He was previously Vice President, Manufacturing Operations for Bombardier
Inc.'s snowmobile, personal watercraft and ATV businesses, a position he had
held since 2001. Mr. Villemure joined Bombardier Inc. in 1995 as Director of
Operations for the Utility Vehicles division in Granby. He became Plant Manager
two years later. He was then transferred to the snowmobile and personal
watercraft division as Vice President of Engineering. He holds a Bachelor's
degree in Electrical Engineering from l'École de Technologie Supérieure of
Québec University.

Pierre Beaudoin became a director on January
15, 2004. In December 2004, he was appointed Executive Vice President of
Bombardier Inc., Office of the President. Mr. Beaudoin is also the President and
Chief Operating Officer of Bombardier Aerospace, a position he has held since
October 2001. He joined Bombardier Inc. in 1985 and helped organise the Marine
Products division. In October 1990, he was named Vice President of Product
Development for Sea-Doo/Ski-Doo. From June 1992 to January 1994, Mr. Beaudoin
served as Executive Vice President of the Sea-Doo/Ski-Doo division, and from
January 1994 to April 1996, he assumed the role of its President, until he was
appointed the President and Chief Operating Officer of the Bombardier
Recreational Products division from 1996 to February 2001. He was President of
Bombardier Business Aircraft from February 2001 to October 2001. Mr. Beaudoin
studied Industrial Relations at McGill University. He is the son of Chairman
Laurent Beaudoin and the nephew of director J.R. André Bombardier.

Joshua Bekenstein became a director on
December 18, 2003. He is a Managing Director at Bain Capital. Prior to joining
Bain Capital in 1984, Mr. Bekenstein spent several years at Bain & Company where
he was involved with companies in a variety of industries. Mr. Bekenstein serves
as a Director of several corporations, including Dollarama, Burlington Coat
Factory,
Waters Corporation, Toys R Us and Bright Horizons Family Solutions. Mr. Bekenstein
received a Master's degree in Business Administration from Harvard Business
School and a Bachelor of Arts degree from Yale University.

J.R. André Bombardier became a director on
January 15, 2004. He is Vice Chairman of Bombardier Inc., a position he has
held since 1978. Mr. Bombardier joined Bombardier Inc. in 1969 as Vice
President, Industrial Division, and then successively held the positions of Vice
President, Research and Development, Ski-Doo Division; Assistant to the
President in charge of new products, Vice President of Marketing, Marine
Products Division, and President of the Roski Ltd. subsidiary, before taking the
position he now holds. Mr. Bombardier has a Bachelor of Arts degree from the
Séminaire de Sherbrooke as well as a Bachelor of Business from the University of
Sherbrooke. He is also a graduate of the Harvard International Senior Managers
Program. He is the brother-in-law of Chairman Laurent Beaudoin and the uncle of
director Pierre Beaudoin.

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Jean Gaulin became a director on July 23,
2004. He retired as Chairman, President and Chief Executive Officer of Ultramar
Diamond Shamrock as of January 1, 2002. In December 1996 following the merger of
Ultramar Corporation and Diamond Shamrock, Inc., Mr. Gaulin was named Vice
Chairman, President and Chief Operating Officer of Ultramar Diamond Shamrock. He
was promoted to Chief Executive Officer January 1, 1999. In January 2000, Mr.
Gaulin assumed the role of Chairman in addition to President and Chief Executive
Officer. Mr. Gaulin also serves on the boards of Crane Co.; National Bank of
Canada; Groupe St-Hubert Inc; Rona, Inc.; the International Council of l'École
des Hautes Etudes Commerciales and Saputo, Inc. Mr. Gaulin is a 1967 graduate of
the University of Montreal École Polytechnique where he received a Bachelor's
degree in chemical engineering and science. He also attended St. Jean Royal
Military College.

Jordan Hitch became a director on January 15,
2004. Mr. Hitch, a Managing Director at Bain Capital, joined the firm in 1997.
He also serves as a board member of MC Communications and Burlington Coat
Factory. Prior to joining Bain Capital, Mr. Hitch was a consultant at Bain &
Company where he worked in the financial services, healthcare and utility
industries. Mr. Hitch received a Master's degree in Business Administration,
with distinction, from the University of Chicago Graduate School of Business. He
received a Bachelor's degree in Mechanical Engineering from Lehigh University.

Luc Houle became a director on December 18,
2003. He is Senior Vice President, Investments,  Caisse de Dépôt et Placement du Québec, a position he has held
since 2002. Mr. Houle joined the Caisse in 1985 and has held a variety of
positions prior to his current appointment, including with CDP CapitalPrivate
Equity and CDP Capital - World Markets. Mr. Houle has a Bachelor's degree in Finance
from the University of Sherbrooke.

Matthew Levin became a director on December
18, 2003. He is a Managing Director at Bain Capital. Prior to joining Bain
Capital, Mr. Levin was a consultant at Bain & Company where he consulted in the
consumer products and manufacturing industries. He serves as a director of
several corporations, including Dollarama, Toys 'r' us Inc. and Unisource. Mr.
Levin received an M.B.A. from Harvard Business School where he was a Baker
Scholar. He received a Bachelor's degree in Science from the University of
California at Berkeley.

Carlos Mazzorin became a director on July 23,
2004. He is President of Magna Donnelly as well as Magna Electronics, both of
which are wholly
owned subsidiaries of Magna International. Mr. Mazzorin joined Magna Donnelly in
January 2003 after 30 years at Ford Motor Company. At Ford he served as Group
Vice President of Asia Pacific Operations, South America Operations and Global
Purchasing and previous to that as Group Vice President of Ford, Mexico
operations and Global Purchasing.

Pierre Michaud became a director on January
15, 2004. He has been Chairman of the Board of Provigo Inc. since June, 1993. He
held several positions, including President and Chairman of the Board, with
Réno-Dépôt from 1969 until 2003, when he oversaw its successful merger with
Groupe Rona. He has been Vice Chairman of the board of Laurentian Bank of Canada
since 2003. Mr. Michaud sits on the board of directors of Loblaw Companies
Limited, Provigo Inc., Laurentian Trust of Canada Inc., Gaz Metropolitain, Old
Port of Montreal Corporation Inc. and Tremblant Advisory Board and is actively
involved in such non-profit and charitable organisations as the Foundation du
CHUM, the Québec Business Council and the Ste-Justine Hospital Foundation.

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Nicholas G. Nomicos became a director on
January 15, 2004. He is an Executive Vice President at Bain Capital. Prior to
joining Bain Capital, Mr. Nomicos ran several business units at Oak Industries
Inc., a component manufacturer serving the appliance control and
telecommunications industry. Previously, Mr. Nomicos was a manager at Bain &
Company. He serves as a director of Dollarama. Mr. Nomicos received a Master's
degree in Business Administration from Harvard Business School and a B.S.E., Phi
Beta Kappa and magna cum laude, from Princeton University.

Daniel J. O'Neill became a director on July
23, 2004. In 2005, he acted as Vice Chairman, Synergies & Integration of Molson
Coors Brewing Company. Prior to its merger with Coors, Mr. O'Neill was President
and Chief Executive Officer of Molson Inc. Mr. O'Neill's career encompasses over
30 years of international experience in the consumer products area. Mr. O'Neill
graduated from Carleton University with a Bachelor of Arts degree in Economics
from Queen's University with a Master's degree in Business Administration. Mr.
O'Neill also participated in the Program for Management Development course at
Harvard Business School.

Edward Philip became a director on April 4,
2005. He also serves on the Board of Hasbro Inc. In May 2004, he started the
Decision Matrix Group (DMG), working in the Information Services research and
consulting industry, which he subsequently sold in November 2005. Prior to DMG,
Mr. Philip was one of the first employees and founding members of Lycos, serving
at various times as the President, COO and CFO. Before Lycos, Mr. Philip spent
nearly 5 years at Disney in various financial roles. Prior to Disney, he was an
investment banker at Salomon Brothers and Morgan Stanley. Mr. Philip graduated
with a Bachelor of Science from Vanderbilt University and a Master's degree in
Business Administration from Harvard Business School.

B.

The aggregate amount of compensation the Company paid
for the fiscal year ended January 31, 2006 to its directors and senior
management listed in Item 6 as a group, including salaries and profit-sharing
payments was $7,511,300. For a description of material benefits provided to such
directors and employees see "Item 10 - Additional Information - C. Material
Contracts."

Directors are compensated for their participation on
the Company's board of directors by receiving an annual retainer fee, attendance
fees and reimbursement for out-of-pocket expenses incurred in connection with
rendering such services. The Company has no further arrangements pursuant to
which the directors are compensated for their services in their capacity as
directors.

Pension and Retirement Benefits

In the United States and Canada, the Company provides
a defined contribution plan to its employees and a supplemental defined benefit
pension plan for its senior management. A defined benefit pension plan is also
offered to the Company's senior management employees in Austria, Belgium and
Norway.

C. Board practices

Reference is made to "Item 6 -
Directors, Senior Management and Employees - A.Directors and senior management"
for the current term of office, if applicable, and the period during which the
Company's directors and senior management have served in that office.

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The articles of incorporation of BRP provide that its
board of directors shall consist of a minimum of three and a maximum of fifteen
directors. Under Canadian law, 25% of the members of the board of directors must
be residents of Canada. Directors can be either elected annually by the
shareholders at the annual meeting of shareholders or, subject to the articles
of incorporation of BRP and applicable law, appointed by the board of directors
between annual meetings. Each director shall hold office until the close of the
next annual meeting of shareholders or until he or she ceases to be a director
by operation of law or until his or her resignation becomes effective. No
director has any contract or arrangement with BRP entitling him to benefits upon
termination of his directorship. BRP's executive officers are appointed by, and
serve at the discretion of, the board of directors.

Board Committees

There are three committees of the
board of directors of BRP: the Executive, Audit and Compensation Committees.
These committees operate under specific terms of reference as approved by the
board of directors.

The Executive Committee consists of four directors, a
quorum of which requires at least one Bain Director, one Beaudier Director and
one Caisse Director (as such terms are defined in the Unanimous Shareholders
Agreement of J.A. Bombardier (J.A.B.) Inc. dated December 18, 2003 (the
"Shareholders Agreement"). The Executive Committee members are Laurent Beaudoin,
Joshua Bekenstein, Luc Houle and Matthew Levin. The Company's board of directors
has delegated to the Executive Committee, during the intervals between meetings
of the board of directors, all the powers of the board of directors in respect
of the management and direction of the business and affairs of the Company,
subject to the terms of the Shareholders Agreement.

The Audit Committee consists of three directors. The
committee members are Jean Gaulin (Chairman), Nicholas G. Nomicos and Daniel J.
O'Neill. The Company's board of directors adopted the charter of the Audit
Committee in light of the Sarbanes-Oxley Act of 2002. In general, the Company's
Audit Committee members assist the board of directors in overseeing financial
controls and reporting. The Audit Committee also oversees the Company's
compliance with financial covenants and legal and regulatory requirements
governing financial disclosure matters and financial risk management.

The Compensation Committee consists
of four directors, a quorum of which requires at least one Bain Director, one
Beaudier Director and one Caisse Director. The Compensation Committee members
are Laurent Beaudoin, Joshua Bekenstein, Luc Houle and Matthew Levin.

D. Employees

BRP had approximately 6,200 employees at January 31,
2006. As at January 31, 2006, BRP had approximately 2,750 employees in Canada,
1,450 in the United States and 2,000 in Europe and other countries.

E. Share ownership

No member of the Company's board of directors or
senior management owns any shares of capital stock of the Company. BRP's parent,
J.A.B., holds all of the Company's outstanding capital stock. For a summary of
the major shareholders of BRP's parent, including the shares held by members of
BRP's board of directors and senior management as a group, see "Item 7 -Major
Shareholders and Related Party Transactions - A. Major shareholders."

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ITEM 7- MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major shareholders

BRP's parent, J.A.B., holds all of the Company's
outstanding capital stock, represented by one (1) common share. The following
table provides certain information as of January 31, 2006 with respect to the
beneficial ownership of the equity interests of the Company's parent by (i) each
holder known by BRP who beneficially owns 5% or more of the outstanding equity
interests of the Company's parent, and (ii) all of BRP's directors and members
of senior management as a group.

|                                 | Common Shares (1) |            |            | Preference Shares (2)
|-------------------------------- | ----------------- | ---------- | ---------- | ---------------------
|                                 | Percentage        | Percentage |            | Percentage           
|                                 | Ownership         | Ownership  |            | Ownership            
|                                 |                   | Interest   |            | Interest             
|                                 | Class A           | Class A    | Class B    | Class B              
|Beneficial Owner                 | Shares            | Shares     | Shares     | Shares               
|                                 |                   |            |            |                      
|Bain Capital Luxembourg          |                   |            |            |                      
|Investments S.ar.L.              | 152,299,950       | 50%        |           |                     
|                                 |                   |            |            |                      
|Beaudier Inc.                    | 63,965,979        | 21%        | 6,418,000  | 34.42%               
|                                 |                   |            |            |                      
|Caisse de dépôt et placement     |                   |            |            |                      
|du Québec                        | 45,689,985        | 15%        |           |                     
|                                 |                   |            |            |                      
|4260937 Canada Inc.              | 14,214,662        | 4.67%      | 1,425,000  | 7.64%                
|                                 |                   |            |            |                      
|4260911 Canada Inc.              | 14,214,662        | 4.67%      | 1,425,000  | 7.64%                
|                                 |                   |            |            |                      
|4260929 Canada Inc.              | 14,214,662        | 4.67%      | 1,425,000  | 7.64%                
|                                 |                   |            |            |                      
|Bombardier Inc.                  |                  |           |           |                     
|                                 |                   |            |            |                      
|Directors and members of         |                   |            |            |                      
|senior Management as a group (3) |                  |           | 7,954,050  | 42.66%               
|                                 |                   |            |            |                      
|Total :                          | 304,599,900       | 100%       | 18,647,050 | 100%                 

______________________

(1) The Class A Common Shares and Class B Common Shares are fully paid common
equity of J.A.B. These shares will participate together in distributions upon
liquidation after prior payment of the liquidation preference amount payable to
holders of preference shares. Class A Common Shares carry voting rights. Class B
Common Shares are non-voting, except as otherwise required by law. Class B
Common Shares are convertible into Class A Common Shares upon certain events,
including certain change in control transactions, on the third anniversary of an
initial public offering or at any time thereafter in connection with a transfer
to a non-affiliate, and immediately prior to any liquidation, dissolution or
winding-up of BRP's parent.

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(2) The Class A Preference Shares are non-voting, non-participating and are
not convertible into any other class of equity of J.A.B. Class A Preference
Shares are redeemable at their original purchase price plus all accrued or
declared but unpaid dividends (i) at any time at the option of BRP's parent,
(ii) upon a change of control, (iii) subject to approval by BRP's parent's and
BRP's financing sources, upon an initial public offering or, (iv) upon the sale
by BRP's parent or BRP of all or substantially all of BRP's parent or BRP's
assets. Class A Preference Shares have a liquidation preference and carry a 6%
cumulative dividend right which, at the option of BRP's parent, may be paid in
cash or in-kind. So long as any Class A Preference Shares are outstanding, BRP's
parent has agreed not to pay or declare dividends in respect of BRP's Sponsors'
equity or repay or make any payments in respect of certain sponsor loans, unless
concurrent with such repayment or other payment all Class A Preference Shares
are redeemed, in each case unless the holders of preference shares receive
concurrently, but in priority, the full redemption price to which they are then
entitled (plus all accrued or declared but unpaid dividends). Upon liquidation,
the holders of Class A Preference Shares will be entitled to receive an amount
equal to the face amount of such shares plus any accrued or declared but unpaid
dividends prior to any distributions to holders of Class A Common Shares, Class
B Common Shares or Class B Preference Shares. In addition, J.A.B. has an
authorised, but unissued class of preference shares, the Class B Preference
Shares, which will rank junior to the Class A Preference Shares if and when
issued.

(3) Certain of the Company's directors, Joshua Bekenstein, Jordan Hitch and
Matthew Levin, are managing directors of the general partner of the owner of
Bain Capital Luxembourg Investments S.ar.L.. These directors may be considered
to beneficially own the shares of the capital stock of the Company's parent held
by such entity. Notwithstanding, these directors explicitly disclaim any
beneficial ownership of such shares except to the extent of their pecuniary
interest in such shares. As such, this amount does not reflect any beneficial
ownership of such shares.

B. Related party transactions

Arrangements with the Company's Sponsors

In connection with the Transactions, BRP entered into
a shareholders agreement with its parent, the Sponsors and Bombardier Inc. and a
management agreement with its parent and certain affiliates of its Sponsors. See
"Item 10 - Additional Information - C. Material Contracts and Item
17-Financial Statements - Note 7 To the Consolidated Financial Statements -
Related Party Transactions."

Under the revolving credit facilities that is part of
the Company's credit agreement dated December 18, 2003 (amended and restated on
February 9, 2005), the Caisse de Dépôt et Placement du Québec has committed to
lend to the Company an amount of up to CAD$41.0 million.

Arrangements with Bombardier Inc.



In connection with the Transactions, the Company
entered into certain arrangements with Bombardier Inc. or subsidiaries thereof,
including an inventory financing agreement and a trademark license agreement.See "Item 10 - Additional Information - C. Material Contracts and
Item 17-Financial Statements - Note 3 To the Consolidated Financial Statements -
Business Acquisition and Note 7 To the Consolidated Financial Statements -
Related Party Transactions."

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On June 1, 2005, Bombardier Capital sold its
inventory finance division to GE Commercial Finance, thereby ending that related
party transaction. The trademark license agreement, still in effect, provides
BRP with exclusive rights to certain trademarks currently used in its business
but which Bombardier Inc. continues to own, such as the Bombardier name. The
license is royalty-free and subject to certain conditions. The license allows
BRP to use "Bombardier" in its corporate name as long as the Beaudier Group
maintains at least a 10% ownership interest in BRP's parent.

C. Interests of experts and counsels

Not applicable.

ITEM 8- FINANCIAL INFORMATION

A. Consolidated statements and other financial information

BRP's Financial Statements, which are set forth in
the accompanying index to Consolidated Financial Statements included in this
annual report, are filed as a part of this annual report pursuant to Item 17.

B. Significant changes

No significant change has occurred since the date of
the Audited Consolidated Financial Statements included in Item 17.

ITEM 9- THE OFFER AND LISTING

A. Offer and listing details

Not applicable.

B. Plan of distribution

Not applicable.

C. Markets

Not applicable.

D. Selling shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the issue

Not applicable.

ITEM 10- ADDITIONAL INFORMATION

A. Share capital

Not applicable.

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B. Memorandum and articles of association

These items have been previously filed with
Bombardier Recreational Products Inc.'s Registration Statement on Form F-4 (SEC
No. 333-116582) or with Bombardier Recreational Products Inc.'s Annual Report on
Form 20-F for fiscal year 2005 (SEC No. 333-116582). Such items are incorporated
by reference into this Annual Report on Form 20-F.

C. Material contracts

Certain material contracts of the Company are
described below. These summaries are qualified in their entirety by the terms of
the specific contracts, each of which was filed as more fully described above.

Indenture relating to US$200,000,000 8

On December 18, 2003, the Company issued US$200.0
million in aggregate principal amount of 8

Amendment and Restatement, dated as of February 9, 2005, of
the Credit Agreement dated as of December 18, 2003, among the Company, BRP US
Inc., the guarantors party thereto, the Bank of Montreal, as administrative
agent, and the lenders signatory thereto.

On February 9, 2005, the Company
amended and restated its Credit Agreement dated as of December 18, 2003 by
executing and delivering the Amended and Restated Credit Agreement described
above and following the satisfaction of certain conditions precedent. The
Company's credit agreement, as amended provides for (i) a $250.0 million
Revolving Facilities maturing in December 2008 and (ii) a US$50.0 million Term
Facility maturing in January 2011.

The proceeds of the Company's
Revolving Facilities are to be used exclusively for its general corporate
purposes and to fund working capital requirements. Advances under the revolving
credit facilities will bear interest at the Canadian or US prime rate, the
banker's acceptance rate, LIBOR, EUROLIBOR or U.S. base rate, plus in each case
an applicable margin.

The Amended and Restated Credit Agreement contains
customary restrictive and financial covenants with respect to the Company and
its subsidiaries, and customary events of default. Such covenants, however,
permit the Company's repayment of interest on its subordinated debt, payment of
management fees or other similar expenses to its direct or indirect parent, and
transactions for the primary purpose of creating tax benefits.

On January 31, 2006, BRP voluntarily repaid its
US$50.0 million (approximately $57.0 million) Term Facility.

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Floorplan Financing

The Company has agreements with various finance
companies to provide floorplan financing to its dealers in North America,
Australia and New Zealand to facilitate their purchase of the Company's
products. These agreements improve the Company's liquidity by financing dealer
purchases of products without requiring substantial use of the Company's working
capital. A significant percentage of the Company's sales of snowmobiles, sport
boats, personal watercraft, ATVs and outboard engines to dealers in the USA,
Canada, Australia and New Zealand are financed under such arrangements.

Generally, the Company's floorplan financing
arrangements work as follows: after conducting a credit review of a dealer, the
financing company establishes a line of credit for such dealer on terms that the
Company has helped to arrange. The Company may then begin to ship products to
the dealer, up to the available credit line of the dealer and simultaneously
delivering a copy of the dealer's invoice to the financing company, which then
pays the Company for the product on behalf of the dealer. As a sales incentive,
the Company generally provides a "free floorplanning" period to its dealers
during which the Company pays interest to the financing company for a limited
period of time and thereafter, the dealer assumes responsibility for interest
payments to the financing company. See also

Receivables Factoring Programs

The Company has agreements in place with various
finance companies, to provide receivables factoring or securitisation as part of
the Company's plan to manage working capital. These factoring or securitisation
programs generally relate to receivables from sales of products for which
floorplan financing is not available.

On an ongoing basis, the Company sells certain of its
receivables in securitisation transactions to fund its operations. Those
receivables are sold for cash at an advance rate to be determined by the Company
up to a maximum rate and for deferred compensation to be paid upon collection of
the receivables owed by the obligors. These transactions are accounted for as
sales because the Company has surrendered control over the receivables
transferred. The retained interest is recorded in the Company's accounts
receivable at the lower of cost and fair market value.

Under the factoring agreements, BRP typically
receives the face value of the receivable less some negotiated discount. Each of
the Company's factoring agreements is typically terminable, by either party,
upon short notice. See also

Shareholders Agreement

In connection with the Transactions, BRP entered into
a shareholders agreement with its parent, its Sponsors and Bombardier Inc. The
shareholders agreement contains agreements among the parties with respect to BRP,
its parent and BRP's subsidiaries that include the following provisions:

- 

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> board of directors of BRP's parent.

- 



Any members of management who hold shares or options
of BRP's parent are required to become a party to this agreement. In addition,
simultaneous with the closing of the Transactions, BRP entered into a
registration rights agreement with its Sponsors and its parent. Subject to
specified restrictions, after an initial public offering of the common shares of
BRP's parent, and upon written request, BRP's Sponsors may, individually or
collectively, demand the registration of registrable securities having an
anticipated net aggregate offering price of at least $10.0 million.
Additionally, subject to certain exempted transactions, BRP's Sponsors will have
piggyback registration rights when its parent proposes to register any of its
equity securities, whether in connection with an initial public offering or
otherwise. The registration rights agreement contains customary indemnification
provisions.

Management Agreement

Upon completion of the Transactions, BRP and its
parent entered into a management agreement with affiliates of BRP's Sponsors to
provide management services. Pursuant to such agreement, affiliates of BRP's
Sponsors receive an aggregate annual management fee of U.S. $2.25 million, and
reimbursement for out-of-pocket expenses incurred in connection with the
provision of services pursuant to the agreement. In addition, the management
agreement provides that affiliates of BRP's Sponsors will also receive fees in
connection with certain subsequent financing and acquisition transactions
(excluding an initial public offering). The management agreement includes
customary indemnification provisions in favour of BRP's Sponsors and their
affiliates. The term of the management agreement runs until January 31, 2014.

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Management Share Subscription Agreement

On March 31, 2004, the board of directors of the
Company's parent approved a management share subscription agreement for its
directors, executive officers and certain of its employees. Under the management
share subscription agreement, the subscribers are entitled to purchase a certain
amount of Class B common shares of the Company's parent for an amount equal to
their fair value. The terms of the management subscription agreement provide the
Company's parent with the right to repurchase all or a portion of the
subscription shares, and provide the subscribers with a right to sell to the
parent all or a portion of their subscription shares, in each case, under
certain corporate transactions or other circumstances. The call option and put
option each expire on the occurrence of an initial public offering or upon a
change in control. As of January 31, 2006, 7,954,050 Class B common shares of
the Company's parent were held by the Company's directors, executive officers
and certain of its employees.
On February 1, 2006 the board of
directors of J.A.B. approved the sale of 419,000 Class B common shares to
certain members of management for an amount equal to their fair value. The share
subscription agreements have the same call and put option terms described above.
Stock Option Plan

On March 31, 2004, the board of directors of the
Company's parent approved a stock option plan for BRP's executive officers and
certain of its employees. The options are exercisable into Class B common shares
of the Company's parent at an exercise price equal to the fair market value of
underlying the Class B common shares on the date of grant, and are exercisable
for a period of up to 10 years. The options granted vest or become eligible to
vest in equal annual instalments on each of the five annual anniversary dates of
the date of grant (the "Reference Date"); certain options vest only upon certain
performance measures being achieved at the date of either a change in control or
an initial public offering. As of January 31, 2006, 18,962,150 options were held
by participants of the stock option plan.
On February 1, 2006 the board of directors of J.A.B.
approved a grant of 3,791,000 options to certain members of management. The
options are exercisable into Class B common shares of J.A.B. at an exercise
price equal to the fair market value of the Class B shares on the date of grant,
and are exercisable for a period of up to 10 years. The options granted vest in
equal annual instalments on each of the five anniversary dates of the date of
grant.
D. Exchange controls

There are no government laws, decrees or regulations
in Canada which restrict the export or import of capital or, subject to the
following sentence, which affect the remittance of dividends or other payments
to non-resident holders of the shares of BRP's parent. However, any such
remittance to a resident of the United States is generally subject to
non-resident tax pursuant to Article X of the 1980 Canada-United States Income
Tax Convention.
There are currently no limitations of general
application imposed by Canadian federal or provincial laws on the rights of
non-residents of Canada to hold or vote the shares of BRP's parent. There are,
however, certain requirements on the acquisition of control of the shares of
BRP's parent by non-residents of Canada. The Investment Canada Act
requires notification to and, in certain cases, advance review and approval by,
the Government of Canada, of the acquisition by a "non-Canadian" of "control" of
a "Canadian business," all as defined in the Investment Canada Act.
Generally speaking, in order for an acquisition to be subject to advance review
and approval, the asset value of the Canadian business being acquired must meet
or exceed certain monetary thresholds.
- 71 -
E. Taxation

Not applicable.
F. Dividends and paying agents

Not applicable.
G. Statement by experts

Not applicable.
H. Documents on display

Copies of documents that the Company has filed or
incorporated by reference as exhibits to this annual report may be read and
viewed at the Public Reference Room of the Securities and Exchange Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C., USA, 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission (the "SEC") at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of this Internet site is http://www.sec.gov. Any
documents referred to in this annual report may also be inspected at our offices
at 726 St. Joseph Street, Valcourt, Quebec, Canada J0E 2L0.
I. Subsidiary information

Not Applicable.
ITEM 11- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Effect of Foreign Exchange Rate Fluctuations

The Company is subject to currency fluctuations from
the translation of revenues and expenses and of assets and liabilities of the
self-sustaining foreign operations using a functional currency other than the
Canadian dollar, mainly the U.S. dollar and the euro, and from transactions in
foreign currencies, mainly the U.S. dollar and the euro. Management believes
that exchange rate movements, particularly of the U.S. dollar to the Canadian
dollar and the euro to the Canadian dollar could have a significant impact on
the Company's Consolidated Financial Statements.
The year-end exchange rates used to translate assets and liabilities were as
follows:
January 31, 2006
    January 31, 2005U.S. dollar
    1.1439 $CA/$US
    1.2380 $CA/$USEuro
    1.3906 $CA/Euro
    1.6157 $CA/EuroWhen comparing the January 31, 2006 exchange rates to
the January 31, 2005 exchange rates, the Canadian dollar strengthened in
relation to the U.S. dollar by approximately 7.6%. The Canadian dollar also
strengthened in relation to the euro by approximately 13.9%.
- 72 -The average exchange rates used to translate revenues and expenses, excluding
any effect
of the Company's hedging program, were as
follows:

|            |                  |                  | Combined        
|----------- | ---------------- | ---------------- | ----------------
|            | Year
    ended   | Year
    ended   | year
    ended  
|            | January 31, 2006 | January 31, 2005 | January 31, 2004
|U.S. dollar | 1.2067 $CA/$US   | 1.2962 $CA/$US   | 1.3812 $CA/$US  
|Euro        | 1.4940 $CA/Euro  | 1.6147 $CA/Euro  | 1.5811 $CA/Euro 

When comparing the average exchange rates for the
year ended January 31, 2006 to the average exchange rates for the year ended
January 31, 2005, the Canadian dollar strengthened in relation to the U.S.
dollar and the euro by approximately 6.9% and approximately 7.5%, respectively.
When comparing the average exchange rates for the year ended January 31, 2005 to
the average exchange rates for the combined year ended January 31, 2004, the
Canadian dollar strengthened in relation to the U.S. dollar by 6.2% whereas the
Canadian dollar weakened in relation to the euro by approximately by 2.1%.

The Company's primary exposures are to U.S. dollar
denominated sales in excess of its purchases, to euro denominated purchases in
excess of its sales and foreign exchange movements on the U.S. dollar
denominated debt. The Company's is also exposed, to a lesser extent, to
Australian dollar and Swedish krona and Norwegian kroner sales in excess of
purchases.

In addition to the impact of movements in exchange
rates on translation into Canadian dollars of the Company's foreign currency
transactions, described above, the Company's results can also be influenced by
the impact of movements in exchange rates on foreign integrated operations. A
portion of the Company's sales and operating expenses are derived from foreign
integrated operations denominated in currencies other than the Canadian dollar.
Sales made outside Canada are denominated in foreign currencies, and these
currencies could become less valuable prior to conversion into Canadian dollars
as a result of exchange rate fluctuations. Unfavourable currency fluctuations
could result in lower revenues for the Company, when expressed in Canadian
dollars.

However, foreign currency transactions occurring in a
given fiscal year may not have been fully impacted by the movements in exchange
rates of that same fiscal year as a result of the Company's hedging programs.
The Company's current practice is to use derivative financial instruments to
manage foreign currency exchange rate risks for the short term exposure while
for the long term the Company aims to have a natural hedge position by balancing
its inflows and outflows by currencies.

Notional amounts of foreign exchange contracts
outstanding as of January 31, 2006 to manage foreign exchange exposure on U.S.
dollar sales were $435.7 million and to manage foreign exchange exposure on euro
denominated purchases were $157.1 million. Since these contracts are designated
as hedge of foreign currency denominated transactions, any change in the fair
value of the contracts should be offset by changes in the value of the
underlying transaction. The average exchange rate for the US dollar and the Euro
forward foreign exchange contracts was $ 1.2492 Canadian dollar to the US dollar
and $1.5941 Canadian dollar to the Euro, respectively. The fair value of the US
dollar and the Euro forward foreign exchange contracts amounted to a gain of
$39.2 million and a loss of $19.8 million, respectively. A one percent
fluctuation in the currency rates as at January 31, 2006 would have resulted in
a change in the fair value of the US dollar and the Euro forward foreign
exchange contracts of approximately $3.5 million and $1.0 million, respectively.
Since these contracts are designated as hedge of foreign currency denominated
transactions, any change in the fair value of the contracts should be offset by
changes in the value of the underlying transaction.

- 73 -

---

Interest Rates

The credit agreements allow the Company to borrow up
to $250 million under revolving credit facilities (the "Revolving Facilities")
bearing a floating rate of interest based on LIBOR, BA, Euribor or "prime" rates
plus applicable margin. At January 31, 2006, the effective interest rate on
Revolving Facilities borrowings was 5.84% (5.05% as at January 31, 2005).
On February 9, 2005, the Company voluntarily fully
repaid, without penalty, the remaining outstanding balance of U.S.$118.9 million
(approximately $147.0 million) of the Term Facilities and entered into a new
Term Facility of U.S.$50 million (approximately $57.0 million), under an amended
and restated Credit Agreement, which will mature January 31, 2011. During
January 2006, the Company voluntarily repaid, without penalty, remaining
outstanding balance of U.S.$49.5 million (approximately $57.0 million) of its
new Term Facility.
The U.S.$200 million ($228.8 million) senior
subordinated notes bear a fixed rate of 8.375%, with interest payable
semi-annually in June and December.
Under its dealer financing agreements
with third party large financing companies, the Company generally provides to
its North American dealers a free floorplan period during which the Company pays
interest to the financing company for a limited period of time. The Company pays
interest at a variable rate during the free floorplan period.
Inflation and Price Fluctuations

The Company does not believe that inflation has a
significant impact on its results of operations. While raw materials included as
part of cost of sales are subject to inflationary pressures and price
fluctuations, the Company was able, in the past, to mitigate the effects of
inflation and price fluctuations through sales price increases or cost reduction
programs. In order to remain competitive, there is no assurance that the Company
could pass along any or all cost increase to dealers and distributors by
increasing sales price which could in turn adversely impact the Company's
financial position or operating results.
Seasonality

The Company has historically realised higher sales of
snowmobiles in the summer and fall and higher sales of personal watercraft in
the winter and spring. As a result, the Company's quarterly operating results
are subject to fluctuations. Seasonal trends in the other businesses are not
material.
ITEM 12- DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not applicable.
ITEM 13- DEFAULTS, DIVIDEND ARREARAGES AND DELINQUINCIES

On February 9, 2005, the Company announced an
amendment and restatement of its senior secured credit facility. In connection
with that amendment and restatement, certain technical defaults were waived.
ITEM 14- MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS

There have been no material modifications to the
rights of security holders.
- 74 -ITEM 15- CONTROLS AND PROCEDURES

The Board of Directors has overall
responsibility for reviewing the Company's disclosure to ensure the Company
provides full and plain disclosure to its security holders and other
stakeholders. The Board discharges its responsibilities through its committees,
specifically, with respect to financial disclosure, through the Audit Committee,
which is responsible for reviewing the Company's financial reporting procedures
and internal controls to ensure full and accurate disclosure of the Company's
financial position.
Under the supervision and with the
participation of the Company's management, the Company evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures as of the end of the period covered by this annual report. Based upon
that evaluation, the Company's principal executive officer and principal
financial officer concluded that, as of such date, the Company's disclosure
controls and procedures were effective in ensuring that information required to
be disclosed in periodic SEC filings, to the extent the Company was required to
make such filings, is recorded, processed, summarised and reported with the time
periods specified in the SEC's rules and forms. In addition, such officers
concluded that the Company's disclosure controls and procedures were also
effective to ensure that information required to be disclosed in such reports is
accumulated and communicated to the Company's management, including such
officers, to allow timely decisions regarding required disclosure.
There were no significant changes made
in the Company's internal controls during the period covered by this annual
report or, to the Company's knowledge, in other factors that could significantly
affect these controls subsequent to the date of their execution.
The Company's management does not
expect that its disclosure controls and procedures or internal controls and
procedures will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.- 75 -ITEM 16- [RESERVED]
ITEM 16A- AUDIT COMMITTEE FINANCIAL EXPERT

The Company's board of directors has
determined that none of its members who serve on the audit committee is an
"audit committee financial expert" as that term is defined by the SEC. The
Company's board of directors has determined, however, that the absence from its
audit committee of a person who would qualify as an audit committee financial
expert does not impair the ability of the audit committee to provide effective
oversight of its external financial reporting and internal control over
financial reporting. Accordingly, the Company's board of directors does not
intend to add a person to its membership solely for the purpose of adding an
audit committee financial expert. In reaching its determination that the members
of the audit committee, as it is presently constituted, have sufficient
knowledge and experience to exercise effective oversight without the addition of
an audit committee financial expert, the Company's board of directors considered
the knowledge gained by the current members of the audit committee in connection
with their prior experience.

ITEM 16B- CODE OF ETHICS

The Company has adopted a code of ethics that applies
to all of its employees, including its Chief Executive Officer and Chief
Financial Officer. The Company will provide without charge to each person, on
the written or oral request of such person, a copy of such code of ethics.
Requests for such copies should be directed to Bombardier Recreational Products
Inc. at the following address: 726 St-Joseph, Valcourt, Quebec, Canada, J0E 2L0
Attention: Vice President, General Counsel and Secretary, telephone number (450)
532-2211.

ITEM 16C- PRINCIPAL ACCOUNTANT FEES AND SERVICES

Accountant fees payable for the year ended January 31, 2006 to Deloitte and
Touche and its affiliates amounted to $2,106.2 million and for the year ended
January 31, 2005 to Ernst & Young LLP and its affiliates were $2,856.9 million.

The accountant fees payable were as follows.

|                               | Year
    ended   | Year
    ended  
|------------------------------ | ---------------- | ----------------
|(millions of Canadian dollars) | January 31, 2006 | January 31, 2005
|Audit fees                     | $ 1,572.0        | $ 2,246.9       
|Audit-related fees             | 61.8             | 99.7            
|Tax fees                       | 128.7            | 510.3           
|All other fees                 | 343.7            | -               
|Total                          | $ 2,106.2        | $ 2,856.9       

The nature of each category of fees is described below.

Audit Fees

Audit fees were paid for professional services rendered for the:

- 



- 76 -

---



- 

Audit-Related Fees

Audit-related fees were paid for assurance and related services related to
information systems reviews not performed in connection with the audit and
Sarbanes-Oxley advisory services.

Tax Fees

Tax fees were paid for services related to:

- Tax compliance services
  consisting in the preparation, review or other consultations and assistance
  with regard to Canadian, US and foreign taxes;
- Assistance
  with tax audits and appeals before Canadian, US and foreign tax authorities
  and similar provincial, state or local and foreign agencies with regard to
  income, social security, sales and local taxes and customs duties;
- Tax planning services,
  assistance and advice;
- Tax only valuation services
  executed as part of tax reorganisation projects (such as roll over or other
  inter-company transfers of assets) to comply with tax legislation
  requirements;
- Tax planning services in
  connection with the international structure of the group;
- Services in connection with
  matters relating to accounting for tax;
- Tax services related to
  taxation of employees;
- Services in connection with
  Scientific Research and Experimental Development tax incentives; and
- Services in connection with
  tax risk management.

All Other Fees

Fees disclosed in the table above under the item "all
other fees" were paid for advice on the North American Distribution network
optimisation.

Pre-Approval Policies and Procedures

The Company's Audit Committee has adopted a
pre-approval policy with respect to permitted audit and non-audit services.
Non-audit fees are expected to relate primarily to tax advisory services. Under
the policy, estimated audit and non-audit fees payable by the Company and its
subsidiaries must be submitted prior to the initiation of non-audit services and
in advance of each financial quarter for pre-approval by the Company's Audit
Committee. Requests by the Company or its subsidiaries for pre-approval of audit
and non-audit fees within any financial quarter must be submitted to the
Company's chief financial officer and approved by the Chair of the Audit
Committee.

Prior to December 3, 2004, when the Audit Committee
adopted the above pre-approval policy, none of the services described above were
approved by the Audit Committee pursuant to paragraph (c) (7)(i)(C) of Rule 2-01
of Regulation S-X.

- 77 -

---



ITEM 16D- EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

Not applicable.

ITEM 16E- PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS

Not applicable.

ITEM 17- FINANCIAL STATEMENTS

The Company's Audited Consolidated Financial Statements commence on page F-1
of this annual report.

ITEM 18- FINANCIAL STATEMENTS

Not applicable.

- 78 -

---



ITEM 19- EXHIBITS

The following documents are filed as exhibits to the Annual Report on Form
20-F:

|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|1.1*    | Articles of
    Incorporation of Bombardier Recreational Products Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|1.2*    | Bylaws of Bombardier
    Recreational Products Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.1*    | Indenture with respect
    to the 8 3/8% Senior Subordinated Notes due 2013 between Bombardier
    Recreational Products Inc., as issuer, the Guarantors listed on the
    signature pages thereto, as
    guarantors, and U.S. Bank, National Association as trustee, dated December 18, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.2*    | Supplemental
    Indenture, dated as of March 12, 2004, among Bombardier (Mexico) S.A. de C.V., as additional
    guarantor, Bombardier Recreational Products Inc., as issuer, the Other Guarantors, and U.S.
    Bank, National Association as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.3*    | Supplemental
    Indenture, dated as of March 12, 2004, among Bombardier Recreational Products Australia Pty
    Ltd., as additional guarantor, Bombardier Recreational Products Inc., as issuer, the
    Other Guarantors and U.S. Bank, National Association as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.4*    | Supplemental
    Indenture, dated as of March 12, 2004, among Bombardier Recreational Products Japan Co.
    Ltd., as additional guarantor, Bombardier Recreational Products Inc., as issuer, the Other
    Guarantors and U.S. Bank, National Association as trustee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.5**   | Supplemental
    Indenture, dated as of February 9, 2005, among Aircraft Engine Services (AES) Inc., 4279174
    Canada Inc., and BRP Holdings (Hungary) Asset Management Limited Liability
    Company, as additional guarantors, Bombardier Recreational Products Inc., as issuer, the
    Other Guarantors and U.S. Bank, National Association, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2.6*    | Form of 8 3/8%
    Senior Subordinated Notes due 2013 (included in Exhibit 2.1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.1**   | Amended and Restated
    Credit Agreement dated as of February 9, 2005, among Bombardier Recreational Products
    Inc., BRP US Inc., the Guarantors party thereto from time to time, Merrill Lynch & Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Global Transaction
    Coordinator, Royal Bank of Canada, as Canadian Transaction Coordinator, Merrill Lynch & Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC, as
    Joint Book Runners and Lead Arrangers of the Term Facilities, BMO Nesbitt Burns Inc. and
    Royal Bank of Canada as Joint Book Runners and Lead Arrangers of the Revolving
    Facilities, Bank of Montreal, as Administrative Agent, Merrill Lynch & Co., Merrill Lynch,
    Pierce, Fenner & Smith Incorporated, UBS Securities LLC and Royal Bank of Canada as
    Co-Syndication Agents, General Electric Capital Corporation, as Documentation Agent,
    and the Lenders party thereto from time to time.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.2**   | Amended and Restated
    U.S. Security Agreement by BRP US Inc., as U.S. Revolving Borrower, the
    Guarantors named therein and Bank of Montreal, as Administrative Agent, dated as of December
    18, 2003 and Amended and Restated as of February 9, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.3**   | Amended and Restated
    Canadian Security Agreement by Bombardier Recreational Products Inc., as
    Canadian Borrower, the Guarantors named therein and Bank of Montreal, as Administrative
    Agent, dated as of December 18, 2003 and Amended and Restated as of February 9, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

- 79 -

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|        |                                                                                                                                                                                                                                                                                                               
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |                                                                                                                                                                                                                                                                                                               
|No.     | Description                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                               
|4.4*    | License Agreement
    dated December 18, 2003 between Bombardier Inc., as Trademark Owner, and 4145321
    Canada Inc., as Licensee.                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                               
|4.5*    | Second Amended and
    Restated Wholesale Financing Agreement, dated as of December 18, 2003, by and between
    Bombardier Motor Corporation of America and Bombardier Capital Inc.                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                               
|4.5*    | Amended and Restated
    Wholesale Financing Agreement, dated as of December 18, 2003, by and between 6090851
    Canada Inc. and Bombardier Capital Inc.                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                               
|4.6*    | Purchase Agreement,
    dated as of December 18, 2003, among Bombardier Motor Corporation of
    America, Bombardier Nordtrac AB, Bombardier Nordtrac AS and Bombardier-Nordtrac OY
    and Bombardier Recreational Products Inc. and BRP Receivables Funding,
    LLC.                                       
|        |                                                                                                                                                                                                                                                                                                               
|4.7*    | Receivables Purchase
    Agreement, dated as of December 18, 2003, among BRP Receivables Funding,
    LLC and Bombardier Capital Inc. and Bombardier Motor Corporation of
    America, Bombardier Nordtrac AB, Bombardier Nordtrac AS and Bombardier-Nordtrac OY
    and Bombardier Recreational Products Inc.
|        |                                                                                                                                                                                                                                                                                                               
|4.8     | Amended J. A.
    Bombardier (J.A.B.) Inc. Management Option Plan, dated February 1, 2006.                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                               
|4.9**   | Management Share
    Subscription Agreement, dated March 31, 2004.                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                               
|4.10*   | Unanimous Shareholders
    Agreement among J. A. Bombardier (J.A.B.) Inc., Bombardier Recreational Products
    Inc., and the shareholders of J. A. Bombardier (J.A.B.) Inc., dated as of December 18, 2003.                                                                                                  
|        |                                                                                                                                                                                                                                                                                                               
|4.11*   | Management Agreement
    among J. A. Bombardier (J.A.B.) Inc., Bombardier Recreational Products Inc.,
    Beaudier Inc., Bain Capital Partners, LLC and Caisse de Dépôt et placement du Québec, dated as of
    December 18, 2003.                                                                            
|        |                                                                                                                                                                                                                                                                                                               
|8.1     | Subsidiaries of
    Bombardier Recreational Products Inc.                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                               
|12.1    | Certification of Chief
    Executive Officer Pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                               
|12.2    | Certification of Chief
    Financial Officer Pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                               
|13.1    | Certification of Chief
    Executive Officer Pursuant Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                               
|13.2    | Certification of Chief
    Financial Officer Pursuant Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                               

- 80 -

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|        |                                                                                                                                                                                                                             
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |                                                                                                                                                                                                                             
|No.     |                                                                                                                                                                                                                             
|        | Description                                                                                                                                                                                                                 
|        | *This item has been filed with Bombardier Recreational Product's Registration
Statement on Form F-4 (SECNo. 333-116582). Such item is incorporated by
    reference into this annual report on Form 20-F.                   
|        |                                                                                                                                                                                                                             
|        | ** This item has been filed with Bombardier
    Recreational Product's annual report on Form 20-F for fiscal year 2005 (SEC No.
    333-116582). Such item is incorporated by reference into this annual report on Form 20-F

- 81 -

---



INDEX TO FINANCIAL STATEMENTS

Bombardier Recreational Products Inc. Audited Consolidated
Financial Statements for the fiscal years ended January 31, 2006, January 31,
2005, the 44-day period ended January 31, 2004 and the 321-day period ended
December 18, 2003:

|- | Independent
    Auditors' Report Deloitte & Touche                                                    | F-2
|- | ----------------------------------------------------------------------------------------------------- | ---
|  |                                                                                                       |    
|- | Consolidated
    Balance Sheets                                                                       | F-3
|  |                                                                                                       |    
|- | Consolidated
    Statements of Income                                                                 | F-4
|  |                                                                                                       |    
|- | Consolidated
    Statements of Cash Flows                                                             | F-5
|  |                                                                                                       |    
|- | Consolidated Statements of Earnings and
    Statements of Changes in Bombardier Inc.'s Net Investment | F-6
|  |                                                                                                       |    
|- | Notes to
    Consolidated Financial Statements                                                        | F-7



- 82 -

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F-2

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

To the Board of Directors and shareholders Bombardier Recreational Products
Inc.

We have audited the consolidated balance sheet of Bombardier Recreational
Products Inc. (the "Company") as at January 31, 2006 and the related
consolidated statements of income, retained earnings, and cash flows for the
year then ended. 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 audit. The financial statements of the Company
for the year ended January 31, 2005 and for the 44-day period ended January 31,
2004 and the financial statements of the Predecessor business as at and for the
321-day period ended December 18, 2003, were audited by other auditors whose
report, dated April 19, 2005 (except for note 2 which is as of July 15, 2005),
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public
Accounting Oversight Board (United States) and Canadian generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. We were not engaged to perform an audit of the
Company's internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements as at and for the year
ended January 31, 2006 present fairly, in all material respects, the financial
position of the Company at January 31, 2006, and the results of its operations
and its cash flows for the year then ended in conformity with Canadian generally
accepted accounting principles.

(signed) Deloitte & Touche LLP 
Independent Registered Chartered Accountants 
Montreal, Canada 
April 13, 2006

- 83 -

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F-3

Bombardier Recreational Products Inc.

CONSOLIDATED BALANCE SHEETS

|[millions of Canadian dollars]       |       |             |            
|------------------------------------ | ----- | ----------- | -----------
|                                     |       | January 31, | January 31,
|                                     | Notes | 2006        | 2005       
|                                     |       |             | (Restated -
|ASSETS                               |       |             | Note 2)    
|Current assets                       |       |             |            
|Cash and cash equivalents            |       | $ 50.9      | $ 150.3    
|Receivables                          | 8     | 110.1       | 112.7      
|Inventories                          | 9     | 283.5       | 302.1      
|Other assets                         | 10    | 94.6        | 141.4      
|Total current assets                 |       | 539.1       | 706.5      
|Property, plant and equipment        | 11    | 401.8       | 425.8      
|Goodwill                             |       | 100.0       | 119.9      
|Trademarks                           |       | 151.1       | 151.1      
|Other intangible assets              | 12    | 65.5        | 78.1       
|Other assets                         | 10    | 48.8        | 67.3       
|                                     |       | $ 1,306.3   | $ 1,548.7  
|LIABILITIES AND SHAREHOLDER'S EQUITY |       |             |            
|Current liabilities                  |       |             |            
|Bank loans                           | 13    | $          | $ 12.3     
|Accounts payable                     |       | 211.0       | 227.7      
|Accrued and other liabilities        | 14    | 287.2       | 339.8      
|Current portion of long-term debt    | 15    |            | 147.2      
|Total current liabilities            |       | 498.2       | 727.0      
|Long-term debt                       | 15    | 230.6       | 249.5      
|Employee future benefits obligations | 16    | 112.5       | 122.2      
|Other liabilities                    | 14    | 87.5        | 86.0       
|Total liabilities                    |       | 928.8       | 1,184.7    
|Commitments and contingencies        | 25    |             |            
|                                     |       |             |            
|Shareholder's equity                 |       |             |            
|Capital stock                        | 17    | 365.6       | 364.4      
|Additional paid-in capital           | 18    | 2.7         | 2.3        
|Retained earnings                    |       | 72.6        | 11.0       
|Cumulative translation adjustment    |       | (63.4)      | (13.7)     
|                                     |       | 377.5       | 364.0      
|                                     |       | $ 1,306.3   | $ 1,548.7  

The accompanying notes are an integral part of these Consolidated Financial
Statements.

- 84 -

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F-4

Bombardier Recreational Products Inc.

CONSOLIDATED STATEMENTS OF INCOME

|[millions of Canadian dollars]                                                              |      |             |                     |             |      |             
|------------------------------------------------------------------------------------------- | ---- | ----------- | ------------------- | ----------- | ---- | ------------
|                                                                                            |      |             |                     |             |      | Predecessor 
|                                                                                            |      |             | The Company         |             |      | Business    
|                                                                                            |      |             |                     | 44-day      |      |             
|                                                                                            |      |             |                     | period      |      | 321-day     
|                                                                                            |      | Year ended  | Year ended          | ended       |      | period ended
|                                                                                            |      | January 31, | January 31,         | January 31, |      | December 18,
|Notes                                                                                       | 2006 | 2005        | 2004                |             | 2003
|                                                                                            |      |             | (Restated - Note 2) |             |      |             
|                                                                                            |      |             |                     |             |      |             
|Revenues                                                                                    |      | $ 2,361.2   | $ 2,451.3           | $ 333.5     |      | $ 2,075.6   
|Cost of sales                                                                               |      | 1,875.8     | 2,039.9             | 307.4       |      | 1,678.1     
|Gross profit                                                                                |      | 485.4       | 411.4               | 26.1        |      | 397.5       
|Operating expenses                                                                          |      |             |                     |             |      |             
|Selling and marketing                                                                       |      | 168.5       | 141.4               | 18.2        |      | 143.4       
|Research and development                                                                    | 19   | 97.3        | 108.1               | 12.9        |      | 94.4        
|General and administrative                                                                  |      | 129.9       | 120.6               | 7.5         |      | 107.7       
|Other charges and (income)                                                                  |      |             |                     |             |      |             
|Restructuring                                                                               | 14   |            | 26.5                |            |      |            
|Impairment loss                                                                             | 14   |            | 12.1                |            |      |            
|Curtailment gain                                                                            | 16   |            | (23.7)              |            |      |            
|Total operating expenses                                                                    |      | 395.7       | 385.0               | 38.6        |      | 345.5       
|Operating income (loss) from
    continuing operations                                      |      | 89.7        | 26.4                | (12.5)      |      | 52.0        
|Other (income) and expenses                                                                 |      |             |                     |             |      |             
|Financing costs                                                                             | 20   | 34.0        | 60.4                | 7.0         |      | 6.5         
|Accretion in carrying value and
    loss on early redemption of preferred shares            |      |            | 9.4                 | 0.5         |      |            
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale       |      | (1.4)       | 0.7                 |            |      | (1.4)       
|Foreign exchange loss from
    reduction in net investment in a foreign entity              |      | 9.5         |                    |            |      |            
|Foreign exchange loss (gain)                                                                | 21   | (33.0)      | (68.9)              | 2.8         |      | 5.2         
|                                                                                            |      |             |                     |             |      |             
|Income (loss) from continuing
    operations before income taxes                            |      | 80.6        | 24.8                | (22.8)      |      | 41.7        
|Income tax expense (recovery)                                                               | 22   | 19.0        | (7.0)               | (5.7)       |      | 13.9        
|Income (loss) from continuing
    operations                                                |      | 61.6        | 31.8                | (17.1)      |      | 27.8        
|Income (loss) from discontinued
    operations, net of taxes                                | 6    |            | (3.3)               | (0.4)       |      | 2.4         
|Net income (loss)                                                                           |      | $ 61.6      | $ 28.5              | $ (17.5)    |      | $ 30.2      
|                                                                                            |      |             |                     |             |      |             
|The accompanying notes are an
    integral part of these Consolidated Financial Statements.

- 85 -

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F-5

Bombardier Recreational Products Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

[millions of Canadian dollars]

|                                                                                                              |       |             |             |              |  | Predecessor 
|------------------------------------------------------------------------------------------------------------- | ----- | ----------- | ----------- | ------------ |  | ------------
|                                                                                                              |       |             | The Company |              |  | Business    
|                                                                                                              |       |             |             |              |  |             
|                                                                                                              |       |             |             | 44-day       |  | 321-day     
|                                                                                                              |       | Year ended  | Year ended  | period ended |  | period ended
|                                                                                                              |       | January 31, | January 31, | January 31,  |  | December 18,
|                                                                                                              | Notes | 2006        | 2005        | 2004         |  | 2003        
|                                                                                                              |       |             | (Restated - |              |  |             
|OPERATING ACTIVITIES                                                                                          |       |             | Note 2)     |              |  |             
|Income (loss) from continuing
    operations                                                                  |       | $ 61.6      | $ 31.8      | $ (17.1)     |  | $ 27.8      
|Non-cash items:                                                                                               |       |             |             |              |  |             
|Depreciation and amortisation                                                                                 |       | 102.9       | 120.1       | 14.1         |  | 90.7        
|Amortisation of deferred
    financing costs                                                                  | 20    | 5.6         | 19.4        | 0.8          |  |            
|Employee stock compensation                                                                                   | 18    | 0.9         | 2.3         |             |  |            
|Deferred income taxes expense
    (recovery)                                                                  | 22    | (0.2)       | (14.3)      | (8.6)        |  | 0.1         
|Employee future benefits                                                                                      |       |            |            | 1.7          |  |            
|Other charges                                                                                                 |       |            | 8.4         |             |  |            
|Accretion in carrying value and
    loss on early redemption of preferred shares                              |       |            | 9.4         | 0.5          |  |            
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale                         |       | (1.4)       | 0.7         |             |  | (1.4)       
|Foreign exchange loss (gain)                                                                                  |       | (22.8)      | (66.4)      | (3.2)        |  | 3.3         
|Cash flow from operating
    activities before the following                                                  |       | 146.6       | 111.4       | (11.8)       |  | 120.5       
|Net changes in non-cash
    operating items                                                                   | 23    | (0.3)       | 81.8        | 94.6         |  | (197.8)     
|Cash flows from operating
    activities                                                                      |       | 146.3       | 193.2       | 82.8         |  | (77.3)      
|INVESTING ACTIVITIES                                                                                          |       |             |             |              |  |             
|Additions to property, plant
    and equipment                                                                |       | (82.8)      | (70.1)      | (21.0)       |  | (73.2)      
|Proceeds on disposal of
    property, plant and equipment and assets held for sale                            |       | 5.6         | 4.7         |             |  | 5.5         
|Proceeds from the disposal of
    the Utility Vehicles segment, net of transaction costs of $ 1.6
    million |       |            | 40.3        |             |  |            
|Business acquisition, net of
    cash acquired                                                                | 3, 14 | (6.6)       | (21.5)      | (757.2)      |  |            
|Other                                                                                                         |       |            |            |             |  | (4.6)       
|Cash flows from investing
    activities                                                                      |       | (83.8)      | (46.6)      | (778.2)      |  | (72.3)      
|FINANCING ACTIVITIES                                                                                          |       |             |             |              |  |             
|Increase (decrease) in bank
    loans                                                                         |       | (12.3)      | 12.3        |             |  |            
|Issuance of long-term debt                                                                                    |       | 62.1        |            | 638.0        |  | 2.0         
|Repayment of long-term debt                                                                                   |       | (204.4)     | (196.5)     | (0.5)        |  | (1.6)       
|Debt issuance costs                                                                                           |       |            | (1.4)       | (46.1)       |  |            
|Increase in capital stock                                                                                     | 17    | 0.7         | 60.0        | 304.5        |  |            
|Redemption of preferred shares                                                                                | 17    |            | (52.6)      |             |  |            
|Net variation in advances from
    related parties                                                            |       |            |            |             |  | (118.0)     
|Net contribution from
    Bombardier Inc.                                                                     |       |            |            |             |  | 367.8       
|Other                                                                                                         |       | (0.6)       | (2.8)       |             |  | (2.6)       
|Cash flows from financing
    activities                                                                      |       | (154.5)     | (181.0)     | 895.9        |  | 247.6       
|Effect of exchange rate changes
    on cash and cash equivalents                                              |       | (7.4)       | (0.1)       | (1.1)        |  | 19.6        
|Cash flows from continuing
    operations                                                                     |       | (99.4)      | (34.5)      | 199.4        |  | 117.6       
|Cash flows from discontinued
    operations                                                                   |       |             |             |              |  |             
|Operating activities                                                                                          |       |            | (11.0)      | (3.2)        |  | (3.8)       
|Investing activities                                                                                          |       |            | (0.4)       |             |  | (3.1)       
|Effect of exchange rate on cash
    and cash equivalent                                                       |       |            |            |             |  | 0.8         
|Net increase (decrease) in cash
    and cash equivalents                                                      |       | (99.4)      | (45.9)      | 196.2        |  | 111.5       
|Cash and cash equivalents at
    beginning of the period                                                      |       | 150.3       | 196.2       |             |  | 28.7        
|Cash and cash equivalents at
    end of the period                                                            |       | $ 50.9      | $ 150.3     | $ 196.2      |  | $ 140.2     
|Supplemental information                                                                                      |       |             |             |              |  |             
|Cash paid for:                                                                                                |       |             |             |              |  |             
|Interest                                                                                                      |       | $ 27.5      | $ 36.7      | $ 2.6        |  | $ 3.2       
|Income taxes                                                                                                  |       | 8.8         | 15.7        | 1.6          |  | 5.4         
|                                                                                                              |      
|The accompanying notes are an
    integral part of these Consolidated Financial Statements.                  

- 86 -

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F-6

Bombardier Recreational Products Inc.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND STATEMENT OF
CHANGES IN BOMBARDIER INC.'S NET INVESTMENT

[millions of Canadian dollars]

|                                              |                   |                             |               |              | Predecessor 
|--------------------------------------------- | ----------------- | --------------------------- | ------------- | ------------ | ------------
|                                              | The Company's     |                             | Business' Net
|                                              | Retained Earnings |                             | Investment   
|                                              |                   |                             | 44-day        |              |             
|                                              |                   |                             | period        |              | 321-day     
|                                              | Year ended        | Year ended                  | ended         |              | period ended
|                                              | January 31,       | January 31,
    January 31, |               | December 18,
|                                              | 2006              | 2005                        | 2004          |              | 2003        
|                                              |                   | (Restated -                 |               |              |             
|                                              |                   | Note 2)                     |               |              |             
|Balance at beginning of the period            | $ 11.0            | $ (17.5)                    | $            |              | $ 170.2     
|Net income (loss)                             | 61.6              | 28.5                        | (17.5)        |              | 30.2        
|Net change in currency translation adjustment |                  |                            |              |              | 9.6         
|Net contribution from Bombardier Inc.         |                  |                            |              |              | 367.8       
|Balance at end of the period                  | $ 72.6            | $ 11.0                      | $ (17.5)      |              | $ 577.8     

The accompanying notes are an integral part of these Consolidated Financial
Statements.



- 87 -

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F-7

Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

1.

Bombardier Recreational Products Inc. ("BRP"),
incorporated under the laws of Canada, is a wholly owned subsidiary of J. A.
Bombardier Inc. ("J.A.B."). J.A.B.'s voting shares are owned by Bain Capital
Luxembourg Investments S. ar. L. (50%), La Caisse de Dépôt et Placement du
Québec (15%) and Beaudier Inc., 4260937 Canada Inc., 4260911 Canada Inc. and
4260929 Canada Inc. collectively ("Beaudier group") (35%) (collectively, the
"Sponsors").

BRP and its subsidiaries, collectively (the
"Company"), through its Powersports and Marine Engines segments, designs,
develops, manufactures and sells snowmobiles, watercraft, all-terrain vehicles,
sport boats, outboard engines, recreational and small aircraft engines (the
"recreational products business"). The Company's products are sold mainly
through an international network of independent dealers, distributors and
original equipment manufacturers. The Company manufactures its products
primarily in North America and in certain European countries.

On December 18, 2003, the Company acquired the
recreational products business from Bombardier Inc. Prior to December 18, 2003,
the recreational products business consisted primarily of a division within the
Bombardier Inc. group of companies ("Bombardier").

2.

On February 1, 2004, the Company's forward foreign
exchange contracts were designated as hedges of forecasted transactions. For
those contracts that were purchased prior to the beginning of the fiscal year,
the designation of the hedge was made as at February 1, 2004. For forward
foreign exchange contracts that were purchased subsequent to February 1, 2004,
the derivatives were designated as hedges at the contract inception date. For
all of these derivative instruments the Company had used the critical terms
method to assess hedge effectiveness.

The Company has concluded that the critical terms
method to assess hedge effectiveness did not comply with AcG-13 for those
derivatives that had a fair value other than zero on the date they were
designated as hedges. Consequently, for those derivatives purchased prior to
February 1, 2004 but designated as hedges on February 1, 2004, management
concluded that it was inappropriate to apply hedge accounting for these forward
foreign exchange contracts. As a consequence, the Company was not permitted to
defer the recognition of the changes in fair value of forward contracts for
these particular derivatives. Consequently, the consolidated balance sheet as of
January 31, 2005, the consolidated statement of income, the consolidated
statement of cash flows and the consolidated statement of retained earnings and
related notes for the year ended January 31, 2005 have been restated.

- 88 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

2.

The effect of the restatement, by line item, is as
follows:

|                                                                                                               |               | January 31, 2005
|-------------------------------------------------------------------------------------------------------------- | ------------- | ----------------
|                                                                                                               | As previously |                 
|Consolidated balance sheet                                                                                     | reported      | As restated[1]  
|Other current assets                                                                                           | $ 136.9       | $ 141.4         
|Total assets                                                                                                   | 1,546.8       | 1,548.7         
|Accrued and other liabilities                                                                                  | 356.2         | 339.8           
|Retained earnings (deficit)                                                                                    | (1.5)         | 11.0            
|Total liabilities and shareholder's equity                                                                     | 1,546.8       | 1,548.7         
|[1] Certain figures
    have been reclassified to conform to the presentation adopted in the current
    year.

|                                                          |                            
|--------------------------------------------------------- | ---------------------------
|                                                          | Year ended January 31, 2005
|                                                          | As previously              
|Consolidated statement of income                          | reported                   
|Revenues                                                  | $ 2,467.0                  
|Cost of sales                                             | 2,044.9                    
|Gross profit                                              | 422.1                      
|Foreign exchange
    gain                                 | (40.1)                     
|Income from
    continuing operations before income taxes | 6.7                        
|Income tax
    recovery                                   | (12.6)                     
|Income from
    continuing operations                     | 19.3                       
|Net income                                                | 16.0                       



- 89 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

3.

Acquisition of the recreational products business

Pursuant to a purchase agreement dated
December 2, 2003, the Company purchased Bombardier's recreational products
business for a total consideration of $806.3 million. The net assets acquired
were subject to a purchase price adjustment based on indemnification amounts
related to income taxes due to Bombardier, which are included in other long-term
liabilities. The total cost of the purchase was preliminarily allocated to the
assets acquired and liabilities assumed on the basis of their estimated fair
values, as determined by independent valuations, using the purchase method of
accounting. During the year ended January 31, 2005, the Company completed its
purchase price allocation and an adjustment was made to increase previously
recorded goodwill by $6.1 million.

The following table summarises the aggregate fair
values of the assets acquired and liabilities assumed at the acquisition date,
as well as total amounts given as consideration for the acquisition:

|                                           | Purchase Price Allocation [1]
|------------------------------------------ | -----------------------------
|Assets acquired and liabilities assumed    |                              
|Current assets                             | $ 737.2                      
|Property, plant and equipment              | 503.3                        
|Other long-term assets                     | 21.9                         
|Long-term deferred income tax assets       | 2.4                          
|Intangibles assets :                       |                              
|Trademarks                                 | 151.1                        
|Dealer network                             | 46.3                         
|Patents                                    | 32.1                         
|License agreement                          | 13.8                         
|Current liabilities                        | (627.4)                      
|Long-term deferred income tax liabilities  | (52.8)                       
|Employee future benefits obligations       | (123.1)                      
|Other long-term liabilities                | (34.0)                       
|Net assets acquired                        | 670.8                        
|Goodwill                                   | 135.5                        
|Purchase price                             | $ 806.3                      
|                                           |                              
|Consideration given                        |                              
|Cash, net of cash acquired of $196.7[2]    | $ 713.3                      
|50,000 Redeemable Class A Preferred Shares | 42.7                         
|                                           | 756.0                        
|Transaction costs[3]                       | 50.3                         
|Total consideration                        | $ 806.3                      

[1]

- 90 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

3.

The effect of the retroactive
restatement of the purchase price allocation resulted in an increase to the
long-term deferred income tax of $38.0 million and increase to goodwill of $38.0
million. There was no impact of this restatement to shareholder's equity or net
income.

[2]Includes an amount of $49.0 million of cash received from
Bombardier related to the working capital purchase price adjustment, in
accordance with the terms of the purchase agreement.

[3]Transaction
costs are principally comprised of sponsors fees and professional fees.

In connection with the acquisition, the
Company and Bombardier entered into a trademark license agreement, at no cost to
the Company, expiring on December 31, 2008, with automatic consecutive five year
renewal terms, conditional upon the Beaudier Group's continued direct or
indirect participation in the Company, under which the Company licenses from
Bombardier certain trademarks owned by Bombardier.

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying Consolidated Financial
Statements as at January 31, 2006 and 2005 and for the years ended January 31,
2006 and 2005, for the 44-day period ended January 31, 2004 and for the 321-day
period ended December 18, 2003 have been prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"). These accounting
principles conform, in all material respects, with accounting principles
generally accepted in the United States ("US GAAP"), except as described in note
27.

All inter-company transactions and
balances have been eliminated upon consolidation.

The Consolidated Financial Statements as
at January 31, 2006 and 2005 and for the years ended January 31, 2006 and 2005
and for the 44-day period ended January 31, 2004 include the accounts of BRP and
its subsidiaries, which are controlled through voting equity interests. The
Company currently operates in 14 countries, with major operating units in
Canada, the United States and Europe. The most important manufacturing
subsidiaries of the Company included in the Consolidated Financial Statements
are as follows:

- 

BRP-Rotax GmbH &
  Co. KG, located in Austria; and

BRP Finland Oy,
  located in Finland.

- 91 -

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Bombardier Recreational Products Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]4. SIGNIFICANT
ACCOUNTING POLICIES [CONT'D]

The combined financial statements for the 321-day
period ended December 18, 2003 present the results of operations and cash flows
of Bombardier's recreational products business on a carve out basis from
Bombardier (the "predecessor business"), and are not necessarily indicative of
the results of operations and cash flows that might have occurred had the
recreational products business been financed as a stand alone business at that
time since they include allocations for certain costs such as corporate office
charges, interest expense, employee future benefits and income taxes. As a
result of adjustments to the carrying value of assets and liabilities pursuant
to the acquisition by the Company of the predecessor business, the results of
operations and cash flows subsequent to the acquisition may not be comparable to
those of the predecessor business.

Certain comparative figures have been reclassified to
conform to the presentation adopted in the current year.

The principal accounting policies of the Company are
summarised as follows:

Use of estimates

The preparation of consolidated financial statements
in accordance with Canadian GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, related
amounts of revenues and expenses and disclosure of contingent assets and
liabilities. Significant areas requiring the use of management estimates relate
to: revenue recognition, net realisable value of inventory, promotion and
incentive program accruals, provision for product warranty, provision for
litigation, determination of pension and other employee benefits. Actual results
could differ from these estimates and such differences could be material.

- 92 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4. SIGNIFICANT ACCOUNTING POLICIES [CONT'D]

Translation of foreign currencies

Foreign operations are classified as self-sustaining
or integrated.

a) Self-sustaining foreign operations

All assets and liabilities are
translated at exchange rates in effect at the balance sheet date. Revenues and
expenses are translated at the average exchange rates for the period. The
Company's translation gains and losses are deferred and shown separately in
shareholder's equity. The predecessor business resulting net gains or losses are
part of "Net change in currency translation adjustment" included in Bombardier's
net investment.

b) Accounts in foreign currencies and integrated foreign
investees

Accounts in foreign currencies,
including integrated foreign investees, are translated using the temporal
method. Under this method, monetary balance sheet items are translated at the
exchange rates in effect at year-end and non-monetary items are translated at
historical exchange rates. Revenues and expenses (other than depreciation and
amortisation, which are translated at the same exchange rates as the related
assets) are translated at the exchange rates in effect on the transaction dates
or at the average exchange rates of the period. Translation gains or losses are
included in the consolidated statement of income.

Cash and cash equivalents

Cash and cash equivalents consist of
cash and highly liquid investments, with maturities of three months or less from
the date of acquisition. The investments are with investment grade financial
institutions only.

Sales of receivables

The Company transfers certain of its
trade receivables on an ongoing basis to large financial institutions under
receivable factoring agreements and securitisation transactions. The financial
institutions buy these receivables without recourse to the seller. Such
transfers are accounted for as sales when the Company is deemed to have
surrendered control and as a result the related receivables have been excluded
from the consolidated balance sheet. Losses on sales of receivables are
recognised when incurred in the statement of income and are classified with
financing costs.

Under factoring agreements, the Company
receives the face value of the receivable less a negotiated discount.

- 93 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4.

When the Company sells its receivables
to a third party qualified special purpose entity, under the securitisation
agreement, the Company retains rights to future excess cash flows generated by
the entity which is accounted for as retained interests in the securitised
receivable. Retained interests are subsequently accounted for as investments in
debt securities and are included within other current assets on the consolidated
balance sheets. The fair value of the retained interest approximates its
carrying value given the short-term nature of associated cash flows.

Inventory valuation

Raw materials and work in process,
finished products and parts and accessories are valued at the lower of cost
(average cost or first-in, first-out) and replacement cost (raw materials) or
net realisable value. The cost of work in process and finished products includes
the cost of raw materials, direct labour and related manufacturing overhead.

Income taxes

The Company's income taxes are provided
for using the liability method. Under this method, deferred income tax assets
and liabilities are determined based on all significant differences between the
carrying amounts and tax bases of assets and liabilities using enacted or
substantively enacted tax rates and laws expected to be in effect when the
differences reverse.

For purposes of preparing the financial
statements of the predecessor business, management has calculated income taxes
as if all of its predecessor business operations had been separate tax paying
legal entities, each filing a separate tax return in its local tax jurisdiction
and giving effect to any tax sharing agreements with Bombardier.

Property, plant and equipment

Property, plant and equipment are
recorded at cost and are depreciated on a straight line basis over the following
estimated useful lives:

|Equipment | 3 to 10 years 
|--------- | --------------
|Tooling   | 3 to 5 years  
|Buildings | 10 to 40 years

Depreciation of assets under construction begins when
they are ready for their intended use.

Fully depreciated long-lived assets are
retained in the cost and accumulated depreciation accounts until such assets are
removed from service. In the case of disposals, assets and related accumulated
depreciation amounts are removed from the accounts, and the net amounts, less
proceeds from disposals, are included in income.

- 94 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4. SIGNIFICANT ACCOUNTING POLICIES [CONT'D]

Goodwill and other intangible assets

Goodwill represents the excess of the purchase price
of businesses acquired over the fair value of the net assets acquired. Goodwill
is tested for impairment annually, in the fourth quarter, on the basis of its
fair value, or more frequently if events or circumstances indicate that the
asset might be impaired. The impairment test consists of a comparison of the
fair value of the Company's reporting units with their carrying amount. The fair
value of the reporting units is determined according to an estimate of future
discounted cash flows. When the carrying amount of a reporting unit is greater
than its fair value, the Company compares the fair value of the goodwill related
to the reporting units with its carrying amount. Any impairment in the carrying
amount of goodwill is charged to income.

The change in the carrying amount of goodwill is due
to foreign exchange fluctuations. Goodwill is allocated entirely to the
Powersports segment.

Trademarks and the license agreement have an
indefinite life and are not amortised to earnings but are assessed for
impairment on an annual basis, or more frequently if events or circumstances
indicate that the asset might be impaired when comparing carrying value to fair
value, using discounted expected future net cash flows to determine fair value.

Patents and dealer networks, acquired as part of the
business acquisition, are amortised on a straight-line basis over a period of 3
and 25 years respectively. Any potential impairment is calculated in the same
manner as that disclosed under impairment of long-lived assets.

Impairment of long-lived assets

The Company periodically evaluates the
carrying value of long-lived assets to be held and used, including property,
plant and equipment and intangibles subject to amortisation, when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The recoverability test is performed using undiscounted future
net cash flows that are directly associated with the asset's use and eventual
disposition. The amount of the impairment, if any, is measured as the difference
between the carrying value and the fair value of the impaired assets and
presented as an additional current period depreciation and amortisation charge.
Assets held for sale are valued at the lower of cost and fair value.

Deferred financing costs

Deferred financing costs are amortised on the
effective yield basis over the duration of the related loans and are presented
with financing costs on the consolidated statement of income. The unamortised
portion is presented in other long-term assets.

- 95 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4. SIGNIFICANT ACCOUNTING POLICIES [CONT'D]

Employee future benefits

The Company sponsors several domestic and foreign
funded and unfunded defined benefit and defined contribution pension plans
covering a majority of its employees. The Company also provides post-retirement
benefits plans. These benefits plans essentially consist of post-retirement
health care coverage and life insurance benefits in Canada.

The cost of pension and other benefits earned by
employees under the Company's defined benefit plans is actuarially determined
using the projected benefit method and management's best estimate of expected
plan investment performance, salary escalation, retirement ages of employees and
health care costs. Plan obligations are determined based on expected future
benefit payments discounted using current market interest rates and plan assets
are presented at fair value. The net actuarial gains and losses over 10% of the
greater of the benefit obligation and the fair value of plan assets are
amortised to income over the estimated average remaining service life of
participants of approximately 17 years. The Company uses a measurement date of
December 31.

Derivative financial instruments

The Company uses forward foreign exchange contracts
to mitigate foreign currency risks and exposures of forecasted foreign currency
cash flows.

The Company does not use derivative financial
instruments for trading or speculative purposes. Forecasted foreign currency
cash flows can only be hedged when significant characteristics and the expected
terms of the forecasted foreign currency cash flows are identified and it is
probable that these cash flows will occur. There is no recognition in the
Consolidated Financial Statements of unrealised gains or losses on foreign
exchange contracts designated as hedges of forecasted foreign currency cash
flows until the anticipated transactions occur. Gains or losses related to the
derivative financial instruments designated as hedges are recorded in the same
category as the hedged item.

Gains and losses associated with derivative financial
instruments designated as hedges, which have been settled prior to maturity, are
deferred on the consolidated balance sheet and recognised to income in the
period in which the underlying hedged transaction is recognised to income, if
the underlying transaction is still probable of occurring. Otherwise, these
gains and losses are recognised immediately to income. In the event that a
hedged item is settled prior to the termination of the corresponding derivative
financial instrument or is no longer probable of occurring, any gain or loss on
such derivative financial instrument is recognised to income immediately.

Derivative financial instruments that give rise to a
financial asset or financial liability, and are not designated as hedges, are
recognised on the consolidated balance sheet at fair value as derivative
financial assets or as derivative financial liabilities with changes in fair
value recognised in current income as gains or losses on derivative financial
instruments.

- 96 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4. SIGNIFICANT ACCOUNTING POLICIES [CONT'D]

Stock based compensation

The Company records compensation expense for grants
of stock options issued by J.A.B. to directors, officers and employees of the
Company using the fair value method over the service period, with a
corresponding amount recorded as additional paid-in capital.

Revenue recognition

Revenue is derived primarily from the
sale of products. Revenues are recognised when title passes upon delivery of
products to independent dealers, distributors or customers, once the sale price
is fixed or determinable and collection is reasonably assured.

Sales promotions and incentive programs

The Company generally provides for estimated sales
promotion and incentive expenses at the later of revenue recognition or the
announcement of sales promotion and incentive programs. Cash sales promotions
and incentive programs are recorded as a reduction of revenues. Examples of
these costs include dealer and distributor rebates, volume discounts and retail
financing programs. Sales incentive programs that involve a free product or
service delivered to the consumer are recorded as a component of cost of sales.
Sales promotion and incentive expenses are estimated based on current programs
and historical rates of the recreational products operations for each product
line.

Dealer holdback programs

The Company provides dealer incentive programs
whereby at the time of shipment, the Company invoices an amount to the dealer
that is reimbursable upon ultimate sale of the product. Holdback payments are
generally made to dealers twice each year subject to product registration. The
Company presents these amounts as a liability on the consolidated balance sheet.

Shipping and handling

The Company records revenues from freight as a part
of revenue and shipping and handling costs as a component of cost of sales at
the time the product is shipped.

- 97 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

4. SIGNIFICANT ACCOUNTING POLICIES [CONT'D]

Product warranties

The Company provides limited product warranties
covering periods from six months to three years for most product lines. However,
in certain geographical markets, the Company provides longer warranties as
determined by local regulations and market conditions. The warranty provision is
established at the time of sale based on management's best estimate, using
historical rates and trends. Adjustments to the warranty provision are made from
time to time as actual claims materialise. In addition, the Company provides
certain extended product warranties.

Advertising costs

The Company expenses advertising costs as incurred.
The Company's total advertising expense amounted to $80.9 million, $53.4 million
and $6.2 million for the year ended January 31, 2006, and 2005 and for the
44-day period ended January 31, 2004. The predecessor business total advertising
expense amounted to $69.6 million for the 321-day period ended December 18,
2003.

Research and development costs and tax credits

Research and development costs are charged to income
when incurred, except for significant development costs on certain projects,
which are capitalised when specific criteria are met and their recovery is
reasonably assured. The related tax credits are deducted from research and
development expense and are deducted from the related assets for items of a
capital nature.

5. CHANGE IN ACCOUNTING PRINCIPLES

Variable interest entities

In June 2003, the CICA issued Accounting Guideline
No. 15, "Consolidation of Variable Interest Entities" ("

- 98 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

6. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Discontinued operations

As a result of the Company's decision on July 23,
2004 to sell its Utility Vehicles segment, the results of operations, cash flows
and financial position of the Utility Vehicles segment have been segregated in
the accompanying Consolidated Financial Statements and are reported as
discontinued operations.

The Company sold the Utility Vehicles segment on
August 30, 2004. The carrying value of the Utility Vehicles segment net assets
approximated fair value, as the net assets were recorded at their estimated fair
values as part of the acquisition on December 18, 2003. The net book value of
the assets disposed, excluding goodwill of $12.9 million, was $27.4 million. The
Company received net proceeds of $40.3 million on the disposal and recorded a
curtailment gain of $3.5 million related to the pension plan under discontinued
operations. As a result, there was no gain or loss recorded on the disposal.



- 99 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

6.

The results of discontinued operations presented in
the accompanying consolidated statements of income, were as follows:

|                                                              |             |              |          | Predecessor 
|------------------------------------------------------------- | ----------- | ------------ | -------- | ------------
|                                                              | The Company |              | Business
|                                                              |             | 44-day       |          | 321-day     
|                                                              | Year ended  | period ended |          | period ended
|                                                              | January 31, | January 31,  |          | December 18,
|                                                              | 2005[1]     | 2004         |          | 2003        
|Revenues                                                      | $ 22.6      | $ 11.5       |          | $ 71.5      
|Cost of sales                                                 | 21.0        | 10.8         |          | 56.9        
|Gross profit                                                  | 1.6         | 0.7          |          | 14.6        
|Operating expenses                                            |             |              |          |             
|Selling and marketing                                         | 2.5         | 0.4          |          | 3.8         
|Research and development                                      | 1.6         | 0.4          |          | 2.8         
|General and administrative                                    | 2.5         | 0.5          |          | 4.2         
|Total operating expenses                                      | 6.6         | 1.3          |          | 10.8        
|Income (loss) before income taxes                             | (5.0)       | (0.6)        |          | 3.8         
|Income tax expense (recovery)                                 | (1.7)       | (0.2)        |          | 1.4         
|Income (loss) from discontinued operations                    | $ (3.3)     | $ (0.4)      |          | $ 2.4       
|[1] Reflects results of operations up to
    August 30, 2004. |             |              |          |             

Assets held for sale

Assets held for sale included three
facilities in the United States amounting to $13.4 million as at January 31,
2005. During the year ended January 31, 2006, one of the facilities was sold and
the two remaining facilities, amounting to $10.0 million, no longer qualified as
held for sale and were reclassified to property, plant and equipment.

- 100 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

7.

The Company is party to various related party
transactions carried out in the normal course of business. In addition to other
related party transactions disclosed elsewhere in the Consolidated Financial
Statements, related party transactions are described below. All transactions are
measured at their exchange amount.

a) Transactions with sponsors

The Company and J.A.B. entered into a management
agreement with affiliates of the Sponsors to provide management services.
Pursuant to such agreement, affiliates of the Sponsors receive an aggregate
annual management fee of U.S.$2.25 million and out-of-pocket expenses. The
management agreement expires January 31, 2014.

|                                    |             |             |              |  | Predecessor 
|----------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                    | The Company |             | Business    
|                                    |             |             | 44-day       |  | 321-day     
|                                    | Year ended  | Year ended  | period ended |  | period ended
|                                    | January 31, | January 31, | January 31,  |  | December 18,
|                                    | 2006        | 2005        | 2004         |  | 2003        
|Incurred and paid during the period | $ 2.9       | $ 2.9       | $ 0.4        |  |            

Under the revolving credit facility that is part of
its credit agreement dated December 18, 2003 (amended and restated on February
9, 2005), the Caisse de Dépôt et Placement du Québec has committed to lend to
the Company an amount of up to $41.0 million.

b) Floorplan financing

On June 1, 2005, Bombardier Capital Ltd. and
Bombardier Capital Inc. (collectively "BC"), wholly owned subsidiaries of
Bombardier, which has significant shareholders in common with the Company, sold
its floorplan portfolio to a third party company. Related party transactions
with BC reported herein are until June 1, 2005.

The total amount of floorplan financing provided by
BC was as follows:

| |             |             |              |  | Predecessor 
| | ----------- | ----------- | ------------ |  | ------------
| | The Company |             | Business    
| |             |             | 44-day       |  | 321-day     
| | Year ended  | Year ended  | period ended |  | period ended
| | January 31, | January 31, | January 31,  |  | December 18,
| | 2006        | 2005        | 2004         |  | 2003        
| | $ 404.5     | $ 1,379.7   | $ 174.6      |  | $ 1,221.4   

The outstanding floorplan financing between the
Company's dealers and BC amounted to $705.3 million as at January 31, 2005.

- 101 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

7.

The Company's portion of the financing charges under
the floorplan financing agreement with BC was as follows:

| |             |             |              |  | Predecessor 
| | ----------- | ----------- | ------------ |  | ------------
| | The Company |             | Business    
| |             |             | 44-day       |  | 321-day     
| | Year ended  | Year ended  | period ended |  | period ended
| | January 31, | January 31, | January 31,  |  | December 18,
| | 2006        | 2005        | 2004         |  | 2003        
| | $ 10.4      | $ 28.5      | $ 3.5        |  | $ 23.2      

c) Sales of receivables

On June 8, 2005, the receivable transfer arrangement
with Bombardier Capital Inc. ("BCI") expired and a new arrangement was concluded
with a third party financial institution. Related party transactions with BCI
reported herein are until such date.

|                                 |             |             |              |  | Predecessor 
|-------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                 | The Company |             | Business    
|                                 |             |             | 44-day       |  | 321-day     
|                                 | Year ended  | Year ended  | period ended |  | period ended
|                                 | January 31, | January 31, | January 31,  |  | December 18,
|                                 | 2006        | 2005        | 2004         |  | 2003        
|Total receivable transfers to BC | $ 111.8     | $ 510.8     | $ 196.4      |  | $ 354.4     
|Loss incurred by the Company in  |             |             |              |  |             
|connection with transfers of     |             |             |              |  |             
|receivables                      | $ 1.1       | $ 2.4       | $ 0.7        |  | $ 2.0       

The loss incurred was classified with financing
costs.

|                                                                                                                                  | January 31, | January 31,
|--------------------------------------------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                                                                  | 2006        | 2005       
|Receivables held by the BRP
    Receivables Funding, LLC ("BRFL")                                                                 | $          | $ 21.6     
|Total receivable outstanding
    with BC                                                                                          |            | 125.1      
|BRFL's retained interest in
    receivables transferred to BCI (January 31, 2005 - net of provision for loss
    of $0.5 million) |            | 38.0       
|Owed by BRFL to BCI with
    respect to collections on receivables transferred to BCI pursuant to the
    arrangement             |            | 16.4       

- 102 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

7. RELATED PARTY TRANSACTIONS

d) Predecessor business
allocations from Bombardier

|                                             | 321-day period ended
|-------------------------------------------- | --------------------
|                                             | December 18, 2003   
|                                             |                     
|Allocation of corporate office charges       | $ 12.6              
|Allocation of employee future benefits costs | 21.1                
|Allocation of insurance charges and other    | 7.7                 
|                                             | $ 41.4              

The predecessor business corporate
office charges are included in general and administrative expenses. The
predecessor business employee future benefits costs are allocated to the same
line items as the respective salary expense.



- 103 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

8.

The Company's receivables were as follows:

|                                | January 31, | January 31,
|------------------------------- | ----------- | -----------
|                                | 2006        | 2005       
|Trade receivables               |             |            
|Canadian dollars                | $
    5.4   | $
    9.7  
|U.S. dollars                    | 31.4        | 22.9       
|Euros                           | 22.7        | 20.5       
|Brazilian real                  | 5.7         | 7.3        
|Swedish krona                   | 4.9         | 6.5        
|Other currencies                | 4.2         | 9.7        
|                                | 74.3        | 76.6       
|Allowance for doubtful accounts | (2.7)       | (3.2)      
|                                | 71.6        | 73.4       
|Sales tax                       | 24.2        | 24.5       
|Bombardier                      | 7.7         | 6.7        
|Other                           | 6.6         | 8.1        
|                                | $ 110.1     | $ 112.7    

The dollar denomination of trade receivables was
attributed based on the invoicing currency.

Sales of receivables

In addition to the related party
transactions disclosed previously, the Company also sells receivables to third
parties. The fair value of the receivables sold approximates their carrying
value at the time of sale.

|                                                  |             |             |              |  | Predecessor 
|------------------------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                                  | The Company |             | Business    
|                                                  |             |             | 44-day       |  | 321-day     
|                                                  | Year ended  | Year ended  | period ended |  | period ended
|                                                  | January 31, | January 31, | January 31,  |  | December 18,
|                                                  | 2006        | 2005        | 2004         |  | 2003        
|Total receivable transferred to
    third parties | $ 324.2     | $ 221.7     | $51.7        |  | $201.0      

Receivables outstanding, excluding those disclosed in
related party transactions, transferred under securitisation arrangements,
between the Company's independent dealers and third-party large finance
companies amounted to $114.9 million and $41.6 million, respectively as of
January 31, 2006 and 2005.

- 104 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

9.

The Company's inventories were as follows:

|                                  | January 31, | January 31,
|--------------------------------- | ----------- | -----------
|                                  | 2006        | 2005       
|Raw materials and work in process | $ 135.6     | $ 140.3    
|Finished products                 | 71.9        | 79.6       
|Parts and accessories             | 76.0        | 82.2       
|                                  | $ 283.5     | $ 302.1    

10. OTHER ASSETS

The Company's other assets were as follows:

|                                                       | January 31, | January 31,        
|------------------------------------------------------ | ----------- | -------------------
|                                                       | 2006        | 2005               
|Current                                                |             | (Restated - Note 2)
|Deferred income taxes                                  | $ 43.4      | $ 47.8             
|Investment in retained interests [note 7c]             | 21.0        | 38.0               
|Derivative financial assets                            |            | 18.9               
|Prepaid expenses and other                             | 13.1        | 13.4               
|Income taxes and investment tax credits
    receivable | 17.1        | 19.9               
|Assets held for sale                                   |            | 3.4                
|                                                       | $ 94.6      | $ 141.4            
|Long-term                                              |             |                    
|Deferred income taxes                                  | $ 13.6      | $ 14.2             
|Deferred financing costs                               | 19.6        | 24.8               
|Deferred development costs                             | 2.9         | 5.8                
|Restricted investments                                 | 11.0        | 12.5               
|Assets held for sale                                   |            | 10.0               
|Other                                                  | 1.7         |                   
|                                                       | $ 48.8      | $ 67.3             

The restricted investments can only be used for
severance payments and pension costs associated with pension plans of a
subsidiary located in Austria, BRP-Rotax GmbH & Co. KG, and are not available
for general corporate use and are, therefore, classified as restricted long-term
assets.

- 105 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

10. OTHER ASSETS

Amortisation of development costs was as follows:

| |             |             |              |  | Predecessor 
| | ----------- | ----------- | ------------ |  | ------------
| | The Company |             | Business    
| |             |             | 44-day       |  | 321-day     
| | Year ended  | Year ended  | period ended |  | period ended
| | January 31, | January 31, | January 31,  |  | December 18,
| | 2006        | 2005        | 2004         |  | 2003        
| | $ 2.2       | $ 3.1       | $ 0.3        |  | $ 2.5       

There was no addition to deferred development costs
during the years ended January 31, 2006 and 2005.

11. PROPERTY, PLANT AND EQUIPMENT

|          | January 31, 2006 |              | January 31, 2005
|--------- | ---------------- | ------------ | ----------------
|          | Cost             | Accumulated  | Net book        
|          |                  | depreciation | value           
|Equipment | $ 201.5          | $ 77.8       | $ 123.7         
|Tooling   | 169.9            | 91.0         | 78.9            
|Buildings | 172.2            | 17.8         | 154.4           
|Land      | 44.8             |             | 44.8            
|          | $ 588.4          | $ 186.6      | $ 401.8         

Included in the above are assets under construction
amounting to $16.0 million as at January 31, 2006 and $19.0 million as at
January 31, 2005.

Depreciation of property, plant and equipment was as
follows:

|                   |             |             |              |  | Predecessor 
|------------------ | ----------- | ----------- | ------------ |  | ------------
|                   | The Company |             | Business    
|                   |             |             | 44-day       |  | 321-day     
|                   | Year ended  | Year ended  | period ended |  | period ended
|                   | January 31, | January 31, | January 31,  |  | December 18,
|                   | 2006        | 2005        | 2004         |  | 2003        
|Cost of sales      | $ 78.9      | $ 95.2      | $ 9.7        |  | $ 74.6      
|Operating expenses | 9.2         | 9.2         | 2.6          |  | 10.9        
|                   | $ 88.1      | $ 104.4     | $ 12.3       |  | $ 85.5      

- 106 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

12. OTHER INTANGIBLE ASSETS

|                                                  | January 31, 2006 |              | January 31, 2005
|------------------------------------------------- | ---------------- | ------------ | ----------------
|                                                  |                  | Accumulated  | Net book        
|                                                  | Cost             | Amortisation | value           
|Intangible assets subject to amortisation         |                  |              |                 
|Patents                                           | $ 32.1           | $ 22.7       | $ 9.4           
|Dealer network                                    | 46.3             | 4.0          | 42.3            
|                                                  | 78.4             | 26.7         | 51.7            
|Intangible assets not subject to
    amortisation |                  |              |                 
|License agreement                                 | 13.8             |             | 13.8            
|                                                  | $ 92.2           | $ 26.7       | $ 65.5          

Amortisation of patents and dealer network was $12.6
million for the year ended January 31, 2006, $12.6 million for the year ended
January 31, 2005 and $1.5 million for the 44-day period ended January 31, 2004.
The predecessor business amortisation of patents for the 321-day period ended
December 18, 2003 was $2.7 million.

The estimated aggregate amortisation expenses for
each of the next five successive fiscal years:

|2007 | $ 11.3
|---- | ------
|2008 | 1.9   
|2009 | 1.9   
|2010 | 1.9   
|2011 | 1.9   

- 107 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

13. BANK LOANS

|                          | January 31, | January 31,
|------------------------- | ----------- | -----------
|                          | 2006        | 2005       
|Revolving credit facility | $          | $ 12.3     

The outstanding borrowings were
denominated in U.S. dollars as at January 31, 2005. The Company also had issued
letters of credit for an amount of $30.9 million as at January 31, 2006 ($38.9
million as at January 31, 2005), under the revolving credit facility.

Under the credit agreement (the "credit agreement")
dated December 18, 2003 (amended and restated on February 9, 2005), the Company
can borrow up to $250.0 million ("available borrowings") under a revolving
credit facility (the "revolving facility"). Available borrowings may be
denominated either in Canadian dollars, in U.S. dollars or in Euros, at various
interest rates plus applicable margin. Weighted-average interest rate on the
revolving facility was 5.84% for the year ended January 31, 2006 (5.05% for the
year ended January 31, 2005). The revolving facility can be used for general
corporate purposes and to fund working capital requirements and matures in 2008.

The revolving facility is secured by all of the
assets of the Company, certain of its subsidiaries and of J.A.B. and contains
restrictions including the obligation to maintain certain financial ratios. The
revolving facility requires that the Company comply on a quarterly basis with
certain financial covenants, such as a maximum total leverage ratio test and a
minimum interest coverage ratio test. In addition, the revolving facility
restricts or limits the Company's ability to make capital expenditures and incur
additional indebtedness. The Company was in compliance with each of the
covenants as at January 31, 2006.

- 108 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

14. ACCRUED AND OTHER LIABILITIES

|                                        | January 31, | January 31,
|--------------------------------------- | ----------- | -----------
|                                        | 2006        | 2005       
|                                        |             | (Restated -
|                                        |             | Note 2)    
|Accrued liabilities                     | $ 92.4      | $ 104.6    
|Wages and related liabilities           | 69.7        | 73.1       
|Warranty provision                      | 62.4        | 66.3       
|Sales promotions and incentive programs | 29.1        | 35.1       
|Dealer holdback programs                | 39.3        | 41.3       
|Due to BCI                              |            | 16.7       
|Restructuring provision                 |            | 10.6       
|Deferred revenue                        | 5.8         | 4.9        
|Income taxes payable                    | 12.0        | 8.5        
|Due to Bombardier                       | 25.8        | 23.0       
|Deferred income taxes                   | 28.0        | 30.2       
|Other                                   | 10.2        | 11.5       
|Total accrued and other                 | 374.7       | 425.8      
|Current                                 | 287.2       | 339.8      
|Long-term                               | 87.5        | 86.0       
|Total accrued and other                 | $ 374.7     | $ 425.8    

Long term portion of accrued and
other liabilities is comprised of a portion of the warranty provision, deferred
income taxes, due to Bombardier mainly in connection with indemnification
related to income taxes, and other.

The change in the accrued warranty provision was as
follows:

|                                                 |             |             |              |  | Predecessor 
|------------------------------------------------ | ----------- | ----------- | ------------ |  | ------------
|                                                 | The Company |             | Business    
|                                                 |             |             | 44-day       |  | 321-day     
|                                                 | Year ended  | Year ended  | period ended |  | period ended
|                                                 | January 31, | January 31, | January 31,  |  | December 18,
|                                                 | 2006        | 2005        | 2004         |  | 2003        
|Balance at beginning of the period               | $ 66.3      | $ 73.8      | $ 73.5       |  | $ 68.7      
|Expensed during the period                       | 43.9        | 47.2        | 5.7          |  | 51.7        
|Claims paid during the period                    | (46.6)      | (40.0)      | (5.3)        |  | (42.6)      
|Change in estimate                               | 2.8         | (12.6)      | (0.2)        |  |            
|Effect of foreign currency exchange rate changes | (4.0)       | (2.1)       | 0.1          |  | (4.3)       
|Balance at end of the period                     | 62.4        | $ 66.3      | $ 73.8       |  | $ 73.5      

- 109 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

14. ACCRUED AND OTHER LIABILITIES

a) Restructuring provisions of
November 2004

In November 2004, the Company announced the
restructuring of certain of its operations, including a reduction of its
workforce. Approximately 660 jobs were eliminated. Employees received
indemnities that included a cash severance, early retirement pension benefits,
and other benefits such as relocation and career transition services. Departures
began during the last quarter of the year ended January 31, 2005.

The restructuring costs relating to the November 2004
announcement were charged to income during the year ended January 31, 2005 and
consisted of $6.5 million of severance and a $20.0 million charge for special
termination benefits. The special termination benefits were mainly as a result
of offering a voluntary early retirement incentive and bridging to early
retirement, which increased the Company's employee future benefit obligation.
Severance payments during the year ended January 31, 2005 amounted to $3.2
million resulting in an outstanding restructuring provision of $3.3 million as
at January 31, 2005. During fiscal 2006, the Company completed its November 2004
restructuring and paid the remaining severances.

The restructuring costs related to the November 2004
announcement recorded were as follows:

|                            | Employee severance     
|--------------------------- | -----------------------
|                            | and relocation expenses
|Balance at January 31, 2005 | $ 3.3                  
|Cash payments               | (3.0)                  
|Change in estimate          | (0.3)                  
|Balance at January 31, 2006 | $                     

Additionally, a non-cash impairment charge of $12.1
million was recorded in fiscal 2005 after assessing the fair value of two Marine
Engines segment facilities located in the United States.

b) Restructuring provisions related to business acquisition

Costs associated with certain
restructuring activities related to the business acquisition are recorded as a
liability assumed as of the consummation date of the business acquisition and
are included in the cost of the acquired business.

- 110 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

14. ACCRUED AND OTHER LIABILITIES

b) Restructuring provisions
related to business acquisition
[
Cont'd]

In connection with the acquisition, management
approved and initiated a plan to restructure the recreational products business,
and recorded a related accrual of $24.8 million. The acquisition liabilities
include incremental costs to terminate approximately 337 employees and costs to
shut down manufacturing facilities and to relocate the Company's head office.
During the year ended January 31, 2005, the Company completed its assessment of
restructuring activities related to the business acquisition. Revision of prior
accruals of $0.7 million, during the year ended January 31, 2006, resulted
primarily from the finalisation of the restructuring plans related to the
business acquisition and was recorded as an adjustment to goodwill.

The restructuring costs related to the business
acquisition recorded were as follows:

|                                                              | Severance      | Facilities |       
|------------------------------------------------------------- | -------------- | ---------- | ------
|                                                              | and relocation | shutdown   |       
|                                                              | costs          | costs      | Total 
|Restructuring accrual in connection with business acquisition | $ 17.8         | $ 7.0      | $ 24.8
|Cash payments                                                 | (0.2)          |           | (0.2) 
|Balance as at January 31, 2004                                | $ 17.6         | $ 7.0      | $ 24.6
|Revision of prior accruals                                    |               | (0.8)      | (0.8) 
|Restructuring charges                                         |                |            |       
|Cash payments                                                 | (14.0)         | (2.1)      | (16.1)
|Effect of foreign currency exchange rate changes              | (0.3)          | (0.1)      | (0.4) 
|Balance as at January 31, 2005                                | $3.3           | $4.0       | $7.3  
|Revision of prior accruals                                    | (0.7)          |           | (0.7) 
|Cash payments                                                 | (2.6)          | (4.0)      | (6.6) 
|Balance as at January 31, 2006                                | $             | $         | $    

The facilities shutdown charge consisted of cash
payments of approximately $2.1 million and $4.0 million which consisted of the
net lease charges related to leased facilities (mainly office space) that were
no longer required pursuant to the acquisition.

- 111 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

15. LONG-TERM DEBT

The Company's long-term debt, average effective rates
and maturities were as follows:

|                                              |          | Effective   | Effective   |             |            
|--------------------------------------------- | -------- | ----------- | ----------- | ----------- | -----------
|                                              |          | interest    | interest    |             |            
|                                              |          | rate as at  | rate as at  |             |            
|                                              | Maturity | January 31, | January 31, | January 31, | January 31,
|                                              | date     | 2006        | 2005        | 2006        | 2005       
|Term Facilities (U.S. $280 million)           | 2010     | %          | 4.97%       | $          | $ 147.2    
|Senior subordinated notes (U.S. $200 million) | 2013     | 8 %         | 8 %         | 228.8       | 247.6      
|Other                                         | 2008     | 2.00%       | 2.00%       | 1.8         | 1.9        
|                                              |          |             |             | 230.6       | 396.7      
|Current portion                               |          |             |             |            | (147.2)    
|Long-term portion                             |          |             |             | $ 230.6     | $ 249.5    

Senior Secured Credit Facilities

On February 9, 2005, the Company voluntarily fully
repaid, without penalty, U.S.$ 118.9 million ($147.2 million) of the U.S. $280
million term loan facility under the Term Facilities. The U.S. $280 million Term
Facilities had been replaced by a new term loan facility of U.S. $50 million,
under the amended and restated Senior Secured Credit Facilities, which matures
January 31, 2011.

On January 31, 2006, the Company voluntarily repaid,
without penalty, the outstanding balance of U.S. $49.5 million (approximately
$57.0 million) of the Term Facility.

Senior Subordinated Notes

On December 18, 2003 the Company issued U.S.$200
million ($228.8 million) of unsecured senior subordinated notes (the "notes"),
maturing on December 15, 2013. Interest on the notes accrues at a rate of 8

Before December 15, 2006, the Company may redeem, on
one or more occasions, 35% of the aggregate principal amount of the notes at a
redemption price of 108.375% of the principal amount, conditional on the
occurrence of an equity offering and that at least 65% of the aggregate
principal amount of the notes remains outstanding, and otherwise subject to the
terms and conditions of the indenture governing the notes.

- 112 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

15. LONG-TERM DEBT

Senior Subordinated Notes[
Cont'd]

After December 15, 2006 and before December 15, 2008,
the Company may redeem the notes, as a whole, but not in part, upon the
occurrence of a change of control (as defined in the indenture governing the
notes) at a redemption price equal to 100% of the principal amount thereof plus
an applicable premium, and accrued and unpaid interest and additional interest
thereon, if any, to the date of redemption, and otherwise subject to the terms
of the indenture governing the notes.

On or after December 15, 2008, subject to certain
terms, the Company may redeem, in whole or in part, at the redemption prices set
forth below (expressed as a percentage of the principal amount of the notes plus
accrued and unpaid interest and additional interest thereon, if any, to the
applicable redemption date), if redeemed during the 12-month period beginning on
December 15 of the years as follows:

|                    | Redemption Price
|------------------- | ----------------
|                    |                 
|2008                | 104.188%        
|2009                | 102.792%        
|2010                | 101.396%        
|2011 and thereafter | 100.000%        

Repayment Requirements

The repayment requirements for the next five years ended January 31 and
thereafter, are as follows:

|2007       | $     
|---------- | -------
|2008       | 1.8    
|2009       |       
|2010       |       
|2011       |       
|Thereafter | 228.8  
|           | $ 230.6

16. EMPLOYEE FUTURE BENEFITS

The Company maintains non-contributory defined
benefits plans that provide for pensions and other post-retirement benefits, and
also makes contributions to defined contribution retirement plans.

- 113 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

a) Canadian employee future
benefits

The Company sponsors defined benefit
pension and other post-retirement benefit plans for its Canadian employees. In
addition, the Company has a supplementary executive retirement plan to provide
supplemental pension benefits to executives.

Since Canadian employees were part of Bombardier
common plans an agreement was reached with Bombardier, at the time of the
acquisition, with respect to the transfer of a proportionate share of assets to
fund the liabilities assumed by the Company under its new plans. The liabilities
assumed by the Company relate only to the active Canadian employees (not the
retirees) as of December 18, 2003 and cover past services with Bombardier for
eligibility and determination of benefits. As part of the acquisition,
Bombardier agreed to make a special one time contribution to these new plans in
order to ensure that the contribution of Bombardier provided sufficient funds
over the active Canadian employees' remaining working careers for the new plans
to be in position to pay pension benefits as they become due.

During the year ended January 31, 2006, Bombardier's
finalised the transfer of the plan assets and made the one-time contribution to
the new plans.

In January 2005, the Company suspended a Canadian
defined benefit pension plan covering the majority of the Canadian employees and
introduced a defined contribution pension plan with an effective date of June 1,
2005. The Canadian plan suspension freezes the plan participants' benefits
accrued prior to June 1, 2005 which will remain payable by the plan. The new
defined contribution pension plan has been communicated to employees prior to
January 31, 2005. The Company recognised a curtailment gain of $23.7 million
resulting from the removal of future salary projections for Canadian employees
who participate in the career pay formula in the calculation of the benefit
obligation of a Canadian defined benefit pension plan and is subject to
finalisation of regulatory approval.

b) United States employee future benefits

The Company did not assume liabilities for the active
and retired employees as of  December 18, 2003 under the Bombardier common
defined benefit plans, with the exception of the non-registered supplementary
executive retirement plan for its executive employees, for which the Company
assumed the liabilities.

Since the acquisition, the Company offers a defined
contribution benefit plan to the majority of its employees in the United States.
Effective December 18, 2003, the Company also put in place a non-registered
supplementary executive retirement plan for its executive employees in the
United States.

- 114 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

c) Other employee future benefits

The Company also provides healthcare and life
insurance benefits mainly to eligible Canadian employees. The life insurance
benefit is non-contributory. For most eligible employee who will retire prior to
December 31, 2006, the healthcare benefit is contributory. Participants
generally become eligible, for retiree healthcare benefits after reaching age 55
and having accumulated 5 years of service, immediately prior to retirement.
Generally, the medical plan pays a percentage of most medical expenses which are
in excess of the costs covered by provincial government plans. The plan is
funded on a pay as you go basis. For active employees on December 31, 2005 who
will retire after December 31, 2006, the healthcare benefit will consist of an
annual benefit of $720 indexed at 3% per year. Employees hired after December
31, 2005 are not eligible for these benefits.

Defined Benefit Pension Plans

The significant actuarial assumptions adopted to
determine the benefit cost and the projected benefit obligation were as follows
(weighted-average assumptions as at the measurement date, December 31 preceding
the fiscal year end):

|                                                           |             |             |              |         |              |         | Predecessor
|---------------------------------------------------------- | ----------- | ----------- | ------------ | ------- | ------------ | ------- | -----------
|                                                           | The Company |             | Business    
|                                                           |             |             |              |         | 44-day       |         |            
|                                                           | Year ended  | Year ended  | period ended |         | period ended
|                                                           | January 31, | January 31, | January 31,  |         | December 18,
|                                                           | 2006        |             | 2005         |         | 2004         |         |            
|                                                           |             |             |              |         |              |         |            
|                                                           | Domestic    | Foreign     | Domestic     | Foreign | Domestic     | Foreign |            
|Benefit cost actuarial assumptions (1)                     |             |             |              |         |              |         |            
|Discount rate                                              | 6.00%       | 5.01%       | 6.00%        | 5.01%   | 6.00%        | 5.01%   |            
|Rate of compensation increase                              | 4.07%       | 3.51%       | 4.09%        | 3.51%   | 4.10%        | 3.51%   |            
|Expected long-term rate of return on plan
    assets       | 6.75%       | 6.00%       | 6.81%        | 6.00%   | 6.81%        | 6.00%   |            
|Projected benefit obligation
    actuarial assumptions (2) |             |             |              |         |              |         |            
|Discount rate                                              | 5.35%       | 4.28%       | 6.00%        | 5.01%   | 6.00%        | 5.01%   |            
|Rate of compensation increase                              | 4.09%       | 3.51%       | 4.07%        | 3.51%   | 4.09%        | 3.51%   |            

(1) Determined as of beginning of period

(2) Determined as of end of period

The expected return on plan assets is determined by
considering the long-term historical returns, future estimates of long-term
investment returns and assets allocation.

- 115 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

The following tables provides a
reconciliation of the changes in the pension plans' projected benefit obligation
and fair value of assets as at the measurement date, December 31 preceding the
fiscal year end.

|                                                                                               | January 31, | January 31,
|---------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                               |             | 2006       
|                                                                                               | Domestic    | Foreign    
|Projected benefit obligation                                                                   |             |            
|Obligation at beginning of the period                                                          | $ 144.7     | $ 74.0     
|Current service cost                                                                           | 4.4         | 3.0        
|Interest cost                                                                                  | 8.7         | 3.5        
|Plan amendments                                                                                | 1.6         |           
|Actuarial loss                                                                                 | 17.9        | 8.1        
|Benefits paid                                                                                  | (5.8)       | (3.2)      
|Curtailment gains                                                                              |            |           
|Special termination benefits                                                                   |            |           
|Effect of foreign currency exchange rate changes                                               |            | (10.9)     
|Projected benefit obligation at end of the period                                              | $ 171.5     | $ 74.5     
|                                                                                               |             |            
|Plan assets                                                                                    |             |            
|Fair value at beginning of the period                                                          | $ 112.4     | $ 0.8      
|Adjustment [1]                                                                                 |            |           
|                                                                                               | 112.4       | 0.8        
|Actual return on plan assets                                                                   | 9.5         |           
|Employer contributions                                                                         | 8.3         | 3.3        
|Benefits paid                                                                                  | (5.8)       | (3.2)      
|Effect of foreign currency exchange rate changes                                               |            | (0.1)      
|Fair value at end of the period                                                                | $ 124.4     | $ 0.8      
|[1] Following
    finalisation of negotiations with Bombardier plan assets have been adjusted.

- 116 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

The allocation of the projected benefit obligation
and plan assets by major countries was as follows:

|                             | January 31, | January 31,
|---------------------------- | ----------- | -----------
|                             | 2006        | 2005       
|Projected benefit obligation |             |            
|Canada                       | $ 171.5     | $ 144.7    
|United States                | 1.3         | 1.1        
|Austria                      | 72.6        | 72.4       
|Other                        | 0.6         | 0.5        
|                             | 246.0       | $ 218.7    
|Plan assets                  |             |            
|Canada                       | 124.4       | $ 112.4    
|Other                        | 0.8         | 0.8        
|                             | $ 125.2     | $ 113.2    

The reconciliation of the funded status of the
pension plans to the amounts recorded on the consolidated balance sheets under
employee future benefits obligations was as follows:

|                                      | January 31, | January 31,
|------------------------------------- | ----------- | -----------
|                                      |             | 2006       
|                                      | Domestic    | Foreign    
|Fair value of plan assets             | $ 124.4     | $ 0.8      
|Projected benefit obligation          | (171.5)     | (74.5)     
|Funded status                         | (47.1)      | (73.7)     
|Unamortised net actuarial loss (gain) | 14.1        | 8.9        
|Unamortised past service cost         | 1.5         |           
|Net recognised amount                 | $ (31.5)    | $ (64.8)   

All of the pension plans had projected benefit
obligations in excess of plan assets.

Pension plans with accumulated benefit obligations in
excess of plan assets were as follows:

|                                                             | January 31, |         | January 31,
|------------------------------------------------------------ | ----------- | ------- | -----------
|Accumulated benefit obligations in excess
    of plan assets |             | 2006    |            
|                                                             | Domestic    | Foreign | Domestic   
|Accumulated benefit obligation                               | (156.3)     | (74.5)  | $ (126.1)  
|Fair value of plan assets                                    | 110.2       | 0.4     | 99.6       
|                                                             | (46.1)      | (74.1)  | $ (26.5)   

- 117 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

Components of the net benefit cost recognised were as
follows:

|                                                                                    |             |             |              |         |              |         |         |             |        
|----------------------------------------------------------------------------------- | ----------- | ----------- | ------------ | ------- | ------------ | ------- | ------- | ----------- | -------
|                                                                                    |             |             |              |         |              |         |         | Predecessor
|                                                                                    | The Company |             | Business    
|                                                                                    |             |             |              |         | 44-day       |         | 321-day
|                                                                                    | Year ended  | Year ended  | period ended |         | period ended
|                                                                                    | January 31, | January 31, | January 31,  |         | December 18,
|                                                                                    | 2006        | 2005        | 2004         |         | 2003        
|                                                                                    | Domestic    | Foreign     | Domestic     | Foreign | Domestic     | Foreign |         | Domestic    | Foreign
|Net benefit plan cost                                                               |             |             |              |         |              |         |         |             |        
|Current service cost                                                                | $ 4.4       | $ 3.0       | $ 10.6       | $ 2.9   | $ 1.3        | $ 0.4   |         | $ 8.1       | $ 7.8  
|Interest cost                                                                       | 8.7         | 3.5         | 8.3          | 3.5     | 1.0          | 0.4     |         | 11.2        | 3.9    
|Actual return on plan assets                                                        | (9.5)       |            | (8.2)        |        | (0.2)        |        |         | (8.1)       | (0.7)  
|Actuarial loss (gain)                                                               | 17.9        | 8.1         | 1.1          | 1.2     | (1.6)        | (0.4)   |         | 1.5         | 0.3    
|Plan amendments                                                                     | 1.6         |            |             |        |             |        |         |            |       
|Curtailment gain                                                                    |            |            | (23.7)       |        |             |        |         |            |       
|Special termination benefits                                                        |            |            | 19.0         |        |             |        |         |            |       
|Benefit cost before adjustments
    to recognised the long-term nature of the plans | 23.1        | 14.6        | 7.1          | 7.6     | 0.5          | 0.4     |         | 12.7        | 11.3   
|Difference between actual and
    expected return on plan assets                    | 2.3         |            | 1.6          |        | (0.6)        |        |         |            |       
|Difference between actual
    actuarial loss and the amount recognised              | (17.9)      | (8.1)       | (1.1)        | (1.2)   | 1.6          | 0.4     |         |            |       
|Amortisation of past service
    costs                                              | (1.5)       |            |             |        |             |        |         | 0.9         | 0.1    
|Benefit cost recognised                                                             | $ 6.0       | $ 6.5       | $ 7.6        | $ 6.4   | $ 1.5        | $ 0.8   |         | $ 13.6      | $ 11.4 

For the Canadian Registered Pension Plan for
Executives and the Supplemental Executive Pension Plan, the most recent
actuarial valuation for funding purposes were prepared with an effective date of
December 18, 2003, and the next valuation will be completed by September 30,
2006 with and effective date of December 31, 2005.

For the Canadian Registered Pension Plan for
employees of BRP, the most recent actuarial valuation for funding purposes was
prepared with an effective date of December 31, 2004, and the next valuation
will be completed by September 30, 2008 with and effective date of December 31,
2007.

- 118 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

Plan assets are held in trust and their weighted-average allocations were as
follows as at the December-31 measurement date:

|Asset category
    (in percentage)             | 2007Target Allocation | 2006Actual Allocation
|---------------------------------------------- | --------------------- | ---------------------
|Publicly-traded
    Canadian equity securities | 30%                   | 20%                  
|Publicly-traded
    foreign equity securities  | 30%                   | 30%                  
|Publicly-traded
    fixed income securities    | 40%                   | 50%                  

Since the transfer from Bombardier of the plan assets
was still pending as at January 31, 2005 the Company's contribution were
temporarily invested in indexed balance funds.

As at December 31, 2005, the publicity traded
securities included 254,800 Class B Shares (subordinated voting) of Bombardier
with a fair value of $0.8million.

In accordance with the minimum
funding obligations required under the current regulations, the Company expects
to contribute $12.0 million to all defined benefit pension plans for the year
ended January 31, 2007.

Based on current estimates, the future benefit
payments under the Company's defined benefit pension plans over the next ten
years are expected to be as follows:

|             | Domestic | Foreign | Total
|------------ | -------- | ------- | -----
|2007         | $ 4.7    | $ 3.2   | $ 7.9
|2008         | 6.4      | 3.1     | 9.5  
|2009         | 7.6      | 3.2     | 10.8 
|2010         | 8.4      | 3.3     | 11.7 
|2011         | 9.1      | 3.4     | 12.5 
|2012 to 2016 | 49.0     | 16.5    | 65.5 

Defined Contribution Pension Plans

The Company contributions under defined contribution
pension plans totalled $11.5 million for the year ended January 31, 2006, $4.3
million for the year ended January 31, 2005 and $0.1 million for the 44-day
period ended January 31, 2004. Predecessor business contributions under defined
contribution plans totalled $2.0 million for the 321-day period ended December
18, 2003.

- 119 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

Other post-retirement benefit
plans

The significant actuarial assumptions adopted to
determine the benefit cost and the projected benefit obligation were as follows
(weighted-average assumptions as at the measurement date, December 31 preceding
the fiscal year end):

|                                                          |             |              |          |              | Predecessor
|--------------------------------------------------------- | ----------- | ------------ | -------- | ------------ | -----------
|                                                          | The Company |              | Business
|                                                          |             |              | 44-day   |              | 321-day    
|Year ended                                                | Year ended  | period ended |          | period ended
|January 31,                                               | January 31, | January 31,  |          | December 18,
|                                                          | 2006        | 2005         | 2004     |              | 2003       
|                                                          | Domestic    | Domestic     | Domestic |              | Domestic   
|Benefit cost actuarial assumptions (1)                    |             |              |          |              |            
|Discount rate                                             | 6.00%       | 6.00%        | 6.00%    |              | 6.50%      
|Rate of compensation increase                             | 4.07%       | 4.09%        | 4.10%    |              | 4.25%      
|Projected benefit obligation
    actuarial assumptions(2) |             |              |          |             
|Discount rate                                             | 5.35%       | 6.00%        | 6.00%    |              | 6.00%      
|Rate of compensation increase                             | 4.14%       | 4.07%        | 4.09%    |              | 4.00%      
|(1) Determined as of beginning of the period              |             |              |          |              |            
|(2) Determined as of end of the period                    |             |              |          |              |            

The following tables provide a reconciliation of the
changes in the benefit plans' projected benefit obligation as at the measurement
date, December 31 preceding the fiscal year end.

|                                                  | January 31, | January 31,
|------------------------------------------------- | ----------- | -----------
|                                                  | 2006        | 2005       
|                                                  | Domestic    | Domestic   
|Projected benefit obligation                      |             |            
|Obligation at beginning of the period             | $ 16.1      | $ 12.5     
|Current service cost                              | 1.0         | 0.9        
|Interest cost                                     | 0.8         | 0.8        
|Plan amendments                                   | (3.0)       | 1.4        
|Actuarial loss                                    | 0.3         | 0.3        
|Benefits paid                                     | (0.3)       | (0.1)      
|Curtailment gain                                  |            | (0.7)      
|Special termination benefit                       |            | 1.0        
|Projected benefit obligation at end of the period | $ 14.9      | $ 16.1     

The Company's post-retirement benefits plans are all
unfunded.

- 120 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

The reconciliation of the funded status of the other
post-retirement benefit plans to the amounts recorded under accrued benefit
liability on the consolidated balance sheets was as follows as at January 31:

|                               | January 31, | January 31,
|------------------------------ | ----------- | -----------
|                               | 2006        | 2005       
|                               | Domestic    | Domestic   
|Deficit                        | $ (14.9)    | $ (16.1)   
|Unamortised net actuarial loss | 0.4         | 0.1        
|Unamortised past service cost  | (1.7)       |           
|Net recognised amount          | $ (16.2)    | $ (16.0)   

Components of the net benefit plan cost were as
follows:

|                                                                                                      |             |             |              |  | Predecessor 
|----------------------------------------------------------------------------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                                                                                      | The Company |             | Business    
|                                                                                                      |             |             | 44-day       |  | 321-day     
|                                                                                                      | Year ended  | Year ended  | period ended |  | period ended
|                                                                                                      | January 31, | January 31, | January 31,  |  | December 18,
|                                                                                                      | 2006        | 2005        | 2004         |  | 2003        
|                                                                                                      | Domestic    | Domestic    | Domestic     |  | Domestic    
|Net benefit plan cost                                                                                 |             |             |              |  |             
|Current service cost                                                                                  | $ 1.0       | $ 0.9       | $ 0.1        |  | $ 0.4       
|Interest cost                                                                                         | 0.8         | 0.8         | 0.1          |  | 0.6         
|Actuarial loss (gain)                                                                                 | 0.3         | 0.3         | (0.2)        |  | 0.2         
|Plan amendments                                                                                       | (3.0)       | 1.4         |             |  |            
|Special termination benefits                                                                          |            | 1.0         |             |  |            
|Benefit cost before adjustments
    to recognised the long-term nature of the plans                   | (0.9)       | 4.4         |             |  | 1.2         
|Difference between actual and
    actuarial gain and the amount recognised                            | (0.3)       | (0.3)       | 0.2          |  |            
|Difference between amortisation
    of past service cost for year and actual plan amendments for year | 1.7         |            |             |  |            
|Benefit cost recognised                                                                               | $ 0.5       | $ 4.1       | $ 0.2        |  | $ 1.2       

- 121 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

16. EMPLOYEE FUTURE BENEFITS

Health care costs

The health care cost trend rate, which is a
weighted-average annual rate of increase in the per capita cost of covered
health and dental-care benefits, was assumed to start at 11.50% in fiscal year
2006 and is expected to gradually decline by 0.75% per year to be at 5.50% in
fiscal year 2014 and remaining at that level thereafter. Other benefit costs
were assumed to increase at the same rate as price inflation.

A one-percentage-point change in assumed health care
cost trend rates would have the following effects:

|                                             | One percentage point
|-------------------------------------------- | --------------------
|                                             | Increase            
|                                             |                     
|Effect on total of service and interest cost | $ 0.2               
|Effect on post-retirement benefit obligation | 0.2                 

17. CAPITAL STOCK

The authorised capital stock of the Company is as
follows:

Classified as liabilities

Unlimited number of Class A Preferred
Shares, cumulative dividend per share of 6% per annum calculated on the
redemption price of $1,000 per share plus any unpaid dividends for prior years,
redeemable at the option of the Company or mandatory redemption on a direct or
indirect change of control of the Company to a party other than the sponsors,
sale of all or substantially all of the assets of the Company, or on a direct of
indirect change of control of J.A.B. to a party other than the Sponsors, at a
price of $1,000 plus accrued dividends.

Classified as equity

Unlimited number of Common Shares

Unlimited number of Class B Preferred
Shares, rights and privileges to be determined by the board of directors of the
Company prior to the issuance of any Class B Preferred Shares, provided that all
Class B Preferred Shares will in all instances rank junior as to liquidation
rights, dividend rights and redemption rights to the Class A Preferred Shares
for so long as any Class A Preferred Shares are outstanding.

- 122 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

17. CAPITAL STOCK [CONT'D]

|                       | January 31, | January 31,
|---------------------- | ----------- | -----------
|Issued and outstanding | 2006        | 2005       
|1 Common Share         | $ 365.6     | $ 364.4    

On December 18, 2003, the Company issued
1 common share to its parent company for a total cash consideration of $304.5
million.

During the year ended January 31, 2006,
the stated capital was increased as a result of receiving $0.7 million from
J.A.B. following the issue of shares of J.A.B.

During the year ended January 31, 2005,
the stated capital was increased as a result of the following:

- $7.4 million received from J.A.B. following the issue of
  shares of J.A.B.; and
- $52.6 million received from J.A.B. following the redemption of
  all of the issued and outstanding class A preferred shares held by J.A.B.

18. MANAGEMENT SHARE SUBSCRIPTION AGREEMENT AND STOCK OPTION
PLAN

During the year ended January 31, 2005,
the board of directors of J.A.B. approved a management share subscription
agreement and a stock option plan for directors, officers and certain employees
of the Company.

Under the management share subscription
agreement, the subscribers purchased 7,641,550 Class B common shares (the
"subscription shares") of J.A.B. for an amount equal to their fair value. The
net proceeds of $7.4 million were then transferred by J.A.B. to the Company, and
were accounted for by the Company as an increase in shareholder's equity. The
terms of the management share subscription agreement provide J.A.B. with the
right to repurchase all or a portion of the subscription shares (a "call
option"), and provide the subscribers with a right to sell to J.A.B. all or a
portion of their subscription shares (a "put option"), under certain
circumstances. The call and put options expire on the occurrence of an Initial
Public Offering ("IPO") by the Company or upon a change in control.

- 123 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

18. MANAGEMENT SHARE SUBSCRIPTION AGREEMENT AND STOCK OPTION PLAN

Under the stock option plan, the board of directors
of J.A.B. approved a grant of 21,424,650 options. The options are exercisable
into Class B common shares of J.A.B. at an exercise price equal to the fair
market value of the Class B shares on the date of grant and are exercisable for
a period of up to 10 years. One-third of the options granted vest in equal
annual instalments on each of the five anniversary dates of the date of grant.
The remaining two-thirds of the options granted become eligible to vest in equal
annual instalments on each of the five anniversary dates of the date of grant,
and shall only vest upon certain performance measures being achieved following
either an IPO or a change in control.

The number of J.A.B's stock options varied as
follows:

|                    |             |          | Year ended  |             |          | Year ended 
|------------------- | ----------- | -------- | ----------- | ----------- | -------- | -----------
|                    |             |          | January 31, |             |          | January 31,
|                    |             |          | 2006        |             |          | 2005       
|                    | Number of   | Exercise | Life        | Number of   | Exercise | Life       
|                    | options     | price    | (years)     | options     | price    | (years)    
|Balance at the      |             |          |             |             |          |            
|beginning           | 20,074,650  | $ 1      |             |            | $       |            
|Granted             | 187,500     | 1        |             | 21,424,650  | 1        |            
|Forfeited           | (1,300,000) | 1        |             | (1,350,000) | 1        |            
|Balance at the end  | 18,962,150  | $ 1      | 8           | 20,074,650  | $ 1      | 9          
|                    |             |          |             |             |          |            
|Options exercisable | 2,581,620   | $ 1      | 8           | 1,243,310   | $ 1      | 9          

The Company records compensation expense for stock
options using the fair value method, for these grants of stock options by J.A.B.
that are expected to vest, over the expected service period with a corresponding
amount recorded as additional paid in capital.

- 124 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

18. MANAGEMENT SHARE SUBSCRIPTION AGREEMENT AND STOCK OPTION PLAN

The estimated fair value of the granted options,
excluding options that vest upon the occurrence of a change of control or
initial public offering, is approximately $9.9 million of which $0.9 million has
been recorded as compensation expense in general and administrative expenses
during the year ended January 31, 2006. For the year ended January 31, 2005,
compensation expense related to stock options amounted to $2.3 million. Fair
value is estimated at the grant date based on a Black-Scholes option-pricing
model using the following weighted average assumptions:

|                        | Year ended  | Year ended 
|----------------------- | ----------- | -----------
|                        | January 31, | January 31,
|                        | 2006        | 2005       
|Risk-free interest rate | 3.91%       | 3.98%      
|Expected life           | 10 years    | 10 years   
|Expected volatility     | 35%         | 35%        
|Dividend yield          | 0%          | 0%         

On February 1, 2006 the board of directors of J.A.B.
approved a grant of 3,791,000 options to certain members of management. The
options are exercisable into Class B common shares of J.A.B. at an exercise
price equal to the fair market value of the Class B shares on the date of grant,
and are exercisable for a period of up to 10 years. The options granted vest in
equal annual instalments on each of the five anniversary dates of the date of
grant.

19. RESEARCH AND DEVELOPMENT EXPENSE

|                                            |             |             |               |  | Predecessor 
|------------------------------------------- | ----------- | ----------- | ------------- |  | ------------
|                                            | The Company |             | Business     
|                                            |             |             | 44-day period |  | 321-day     
|                                            | Year ended  | Year ended  | ended         |  | period ended
|                                            | January 31, | January 31, | January 31,   |  | December 18,
|                                            | 2006        | 2005        | 2004          |  | 2003        
|Research and development expense            | $ 107.1     | $ 119.3     | $ 14.3        |  | $ 107.8     
|Tax credits and other government assistance | (9.8)       | (11.2)      | (1.4)         |  | (13.4)      
|                                            | $ 97.3      | $ 108.1     | $ 12.9        |  | $ 94.4      

- 125 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

20. FINANCING COSTS

|                                            |             |             |              |  | Predecessor 
|------------------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                            | The Company |             | Business    
|                                            |             |             | 44-day       |  | 321-day     
|                                            | Year ended  | Year ended  | period ended |  | period ended
|                                            | January 31, | January 31, | January 31,  |  | December 18,
|                                            | 2006        | 2005        | 2004         |  | 2003        
|Interest on long-term debt                  | $ 23.6      | $ 38.8      | $ 5.4        |  | $ 0.2       
|Interest on bank loan                       | 2.5         | 0.9         |             |  |            
|Receivable factoring losses                 | 3.2         | 6.8         | 0.6          |  | 3.3         
|Interest on advances from related parties   |            |            |             |  | 2.7         
|Amortisation of deferred financing costs    | 5.6         | 19.4        | 0.8          |  |            
|Interest income                             | (1.0)       | (4.1)       |             |  |            
|Change in fair value of interest rate swaps | (0.2)       | (1.6)       |             |  |            
|Other                                       | 0.3         | 0.2         | 0.2          |  | 0.3         
|                                            | $ 34.0      | $ 60.4      | $ 7.0        |  | $ 6.5       

Deferred financing costs of $12.9 million relating to
the U.S.$280 million Term Facilities were expensed during the year ended January
31, 2005 as a result of the repayment of the Term Facilities of which the
Company repaid U.S.$158.3 million (approximately $193.0

21. FOREIGN EXCHANGE

|                                 |             |             |              |  | Predecessor 
|-------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                 | The Company |             | Business    
|                                 |             |             | 44-day       |  | 321-day     
|                                 | Year ended  | Year ended  | period ended |  | period ended
|                                 | January 31, | January 31, | January 31,  |  | December 18,
|                                 | 2006        | 2005        | 2004         |  | 2003        
|Long-term debt                   | $ (22.6)    | $ (46.7)    | $ (1.3)      |  | $          
|Derivative financial instruments | 2.2         | (28.8)      | 4.5          |  | 3.3         
|Other                            | (12.6)      | 6.6         | (0.4)        |  | 1.9         
|                                 | $ (33.0)    | $ (68.9)    | $ 2.8        |  | $ 5.2       

- 126 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

22. INCOME TAX

The reconciliation of income taxes computed at the
Canadian statutory rates to income tax expense was as follows:

|                                                         |             |             |                     |       |              |        |  | Predecessor
|-------------------------------------------------------- | ----------- | ----------- | ------------------- | ----- | ------------ | ------ |  | -----------
|                                                         | The Company |             | business           
|                                                         |             |             |                     |       |              | 44-day |  |            
|                                                         | Year ended  | Year ended  | period ended        |       | period ended
|                                                         | January 31, | January 31, | January 31,         |       | December 18,
|                                                         |             | 2006        |                     | 2005  |              | 2004   |  |            
|                                                         |             |             | (Restated - Note 2) |       |              |        |  |            
|Income taxes
    calculated at statutory rates           | $ 25.2      | 31.3%       | $ 7.7               | 31.0% | $ (7.3)      | 31.8%  |  | $ 13.8     
|Increase
    (decrease) resulting from:                  |             |             |                     |       |              |        |  |            
|Income tax rate
    differential of foreign subsidiaries | (6.0)       |             | (12.6)              |       | 0.6          |        |  | (3.4)      
|Effect of income
    tax rate changes                    | 1.5         |             | 0.6                 |       | 0.1          |        |  | 0.3        
|Tax-exempt items                                         | (3.5)       |             | (3.8)               |       | 0.5          |        |  | 2.0        
|Large
    corporation tax                                | 0.6         |             | 1.1                 |       | 0.2          |        |  |           
|Manufacturing
    and processing credit                  |            |             |                    |       | 0.2          |        |  | (0.5)      
|Other                                                    | 1.2         |             |                    |       |             |        |  | 1.7        
|Income tax
    expense (recovery)                        | $ 19.0      |             | $ (7.0)             |       | $ (5.7)      |        |  | $ 13.9     

- 127 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

22. INCOME TAX [CONT'D]

Details of income tax expense (recovery) are as
follows:

|                                                      |             |             |              |  | Predecessor 
|----------------------------------------------------- | ----------- | ----------- | ------------ |  | ------------
|                                                      | The Company |             | Business    
|                                                      |             |             | 44-day       |  | 321-day     
|                                                      | Year ended  | Year ended  | period ended |  | period ended
|                                                      | January 31, | January 31, | January 31,  |  | December 18,
|                                                      | 2006        | 2005        | 2004         |  | 2003        
|                                                      |             | (Restated - |              |  |             
|Current income tax expense                            |             | Note 2)     |              |  |             
|Domestic                                              | $ 5.6       | $ (0.5)     | $ 1.6        |  | $ 6.9       
|Foreign                                               | 13.6        | 7.8         | 1.3          |  | 6.9         
|                                                      | 19.2        | 7.3         | 2.9          |  | 13.8        
|Deferred income tax expense
    (recovery)            |             |             |              |  |             
|Temporary differences                                 | (1.5)       | (14.7)      | (8.6)        |  | (0.2)       
|Effect of income tax rate
    changes                 | 1.5         | 0.6         | 0.1          |  | 0.3         
|Recognition of previously
    unrecorded tax benefits | (0.2)       | (0.2)       | (0.1)        |  |            
|                                                      | (0.2)       | (14.3)      | (8.6)        |  | 0.1         
|Income tax expense (recovery)                         | $ 19.0      | $ (7.0)     | $ (5.7)      |  | $ 13.9      

Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax asset (liability)
were as follows:

|                                     | January 31, | January 31,
|------------------------------------ | ----------- | -----------
|                                     | 2006        | 2005       
|                                     |             | (Restated -
|                                     |             | Note 2)    
|Inventories                          | $ 8.1       | $ 10.3     
|Other current assets                 | (3.2)       | (8.0)      
|Property, plant and equipment        | (22.6)      | (43.1)     
|Other intangible assets              | (44.2)      | (43.1)     
|Other long-term assets               | 1.3         | 13.8       
|Accrued liabilities                  | 38.7        | 44.0       
|Long-term debt                       | (6.3)       | (4.5)      
|Employee future benefits obligations | 23.0        | 22.5       
|Other long-term liabilities          | 11.1        | 9.0        
|Loss carry-forwards                  | 25.4        | 30.7       
|Other                                | (0.3)       | 1.8        
|                                     | 31.0        | 33.4       
|Valuation allowance                  | (2.0)       | (1.6)      
|Net amount                           | $ 29.0      | $ 31.8     

- 128 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

22. INCOME TAX [CONT'D]

The goodwill recorded as a result of the acquisition
is not deductible for tax purposes. As at January 31, 2006, out of the
trademarks and other intangible assets of $216.6 million ($229.2 million at
January 31, 2005) recorded on the balance sheet, $33.3 million ($41.0 million at
January 31, 2005) is deductible for tax purposes.

Deferred income taxes have not been provided for the
undistributed earnings of foreign subsidiaries based upon management's
determination that such earnings will be indefinitely reinvested. As at January
31, 2006 and 2005, the cumulative undistributed earnings of these foreign
subsidiaries were approximately $86.7 million and $44.8 million, respectively.
If such earnings were not considered indefinitely reinvested, deferred foreign
income taxes would have been provided, after consideration of estimated foreign
tax credits for an amount of $1.1 million as at January 31, 2006 and an amount
of $1.0 million as at January 31, 2005.

23. NET CHANGES IN NON-CASH WORKING CAPITAL BALANCES RELATED TO OPERATIONS

The net changes in non-cash working capital balances
related to operations were as follows:

|                                                       |             |             |               |  | Predecessor 
|------------------------------------------------------ | ----------- | ----------- | ------------- |  | ------------
|                                                       | The Company |             | Business     
|                                                       |             |             | 44-day period |  | 321-day     
|                                                       | Year ended  | Year ended  | ended         |  | period ended
|                                                       | January 31, | January 31, | January 31,   |  | December 18,
|                                                       | 2006        | 2005        | 2004          |  | 2003        
|Receivables                                            | $ 10.6      | $ 35.8      | $ (22.8)      |  | $ (84.0)    
|Receivables from related
    parties                   |            |            |              |  | (14.6)      
|Inventories                                            | (4.7)       | 21.1        | 83.0          |  | (71.7)      
|Other current assets                                   | 2.6         | (12.5)      |              |  | 0.8         
|Accounts payable and accrued
    and other liabilities | (29.6)      | 1.3         | 11.6          |  | (31.8)      
|Employee future benefits
    obligations               | 0.4         | 5.8         | (0.1)         |  | 3.2         
|Derivative financial
    instruments                   | 18.9        | 28.6        | 25.6          |  |            
|Other                                                  | 1.5         | 1.7         | (2.7)         |  | 0.3         
|                                                       | $ (0.3)     | $ 81.8      | $ 94.6        |  | $ (197.8)   

- 129 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated



Non-cash transactions

Issuance of redeemable preferred shares in
conjunction with the business acquisition at a fair value of $42.7 million
during the 44-day period ended January 31, 2004.

|                                                       |             |             |               |  | Predecessor 
|------------------------------------------------------ | ----------- | ----------- | ------------- |  | ------------
|                                                       | The Company |             | Business     
|                                                       |             |             | 44-day period |  | 321-day     
|                                                       | Year ended  | Year ended  | ended         |  | period ended
|                                                       | January 31, | January 31, | January 31,   |  | December 18,
|                                                       | 2006        | 2005        | 2004          |  | 2003        
|Decrease (increase) in investment in retained interest | $ (15.4)    | $38.0       | $40.5         |  |            

Investments in retained interest are obtained
pursuant to the transfer of receivables.

24. FINANCIAL INSTRUMENTS

Foreign exchange risks

The Company uses derivative financial instruments to
manage foreign currency risks and exposures. The Company does not trade in
derivatives for speculative purposes.

Foreign exchange contracts

As discussed in note 2, the Company's forward foreign
exchange contracts were designated as hedges of forecasted transactions for
accounting purposes effective February 1, 2004 for contracts entered into after
such date. As a result, there is no recognition in the Consolidated Financial
Statements of unrealised gains or losses arising on these contracts.

For the forward foreign exchange contracts purchased
prior to February 1, 2004, which had a fair value other than zero on the date
they were designated as hedges; these derivatives were recognised on the
consolidated balance sheet at fair value as at January 31, 2005. In the 44-day
period ended January 31, 2004, the Company's forward foreign exchange contracts
were not designated as hedges for accounting purposes. Accordingly such
contracts were recognised in the consolidated financial statements at fair value
on January 31, 2004.

- 130 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

24. FINANCIAL INSTRUMENTS [CONT'D]

The following tables set out the significant notional
amounts outstanding under foreign exchange contracts, the average contractual
exchange rates and the settlement periods of these contracts.

|                      | January 31, 2006
|--------------------- | ----------------
|                      |                 
|                      |                 
|                      | Sell            
|                      | currency        
|Sell contracts        |                 
|Less than 1 year      | USD             
|Between 1 and 2 years | USD             
|Buy contracts         |                 
|Less than 1 year      | CAD             
|Between 1 and 2 years | CAD             
|                      |                 
|                      | January 31, 2005
|                      |                 
|                      |                 
|                      | Sell            
|                      | currency        
|Sell contracts        |                 
|Less than 1 year      | USD             
|Between 1 and 2 years | USD             
|Buy contracts         |                 
|Less than 1 year      | CAD             
|Between 1 and 2 years | CAD             

Fair value of financial instruments

The estimated fair value of certain financial
instruments has been determined using available market information or other
valuation methodologies that require considerable judgment in interpreting
market data and developing estimates. The use of different assumptions and/or
estimation methodologies may have a material effect on the estimated fair
values. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realise in a current market
exchange.

Cash and cash equivalents, receivables, investment in retained interest, bank
loans, accounts payable and accrued liabilities

The carrying amounts reported, on the consolidated
balance sheets, approximate the fair values of these items due to their
short-term nature.

- 131 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

24. FINANCIAL INSTRUMENTS

Restricted investments

The carrying amount of restricted investments
approximates their fair value, which are estimated using public quotations, when
available, or discounted cash flow analyses, using interest rates applicable for
assets with similar terms.

Long-term debt

The fair values of long-term debt are determined
using public quotations or discounted cash flow analyses, based on current
corresponding borrowing rates for similar types of borrowing arrangements.

Derivative financial instruments

The fair values generally reflect the estimated
amounts that the Company would receive upon the settlement of favourable
contracts or be required to pay to terminate unfavourable contracts at the
reporting dates. Investment dealers' quotes from the Company's bankers are
available for substantially all of the Corporation's forward foreign exchange
contracts.

The fair value of financial instruments for which the
carrying amount reported is different from the fair value was as follows:

|                                   | January 31, 2006 | January 31, 2005
|---------------------------------- | ---------------- | ----------------
|                                   | Carrying         |                 
|                                   | Value            | Fair Value      
|                                   |                  |                 
|Senior subordinated notes          | $ 228.8          | $ 236.5         
|Forward foreign exchange contracts |                  |                 
|Favourable                         |                 | 39.3            
|Unfavourable                       |                 | (19.7)          

Credit risk

The Company is subject to risk related to derivative
financial instruments, whereby counterparty failure would result in economic
losses on favourable contracts. However, the counterparties to these derivative
financial instruments are all investment grade financial institutions, which the
Company anticipates will satisfy their obligations under the contracts.

The Company considers that its credit
risk associated with its receivables did not represent a significant
concentration of credit risk at January 31, 2006 and 2005, due to the large
number of customers and their dispersion across many geographic areas.

- 132 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

25. COMMITMENTS AND CONTINGENCIES

In addition to the commitments and contingencies
described elsewhere in these Consolidated Financial Statements, the Company is
subject to the following (all amounts presented are undiscounted):

a) Operating leases

The Company leases buildings and equipment under
operating leases. The Company's rent expense under all lease agreements, was
$7.2 million, $11.4 million and $1.8 million for the years ended January 31,
2006 and 2005 and for the 44-day period ended January 31, 2004, respectively.
The predecessor business rent expense under all lease agreements, including
intercompany transactions, was $16.5 million for the 321-day period ended
December 18, 2003. The related minimum lease payments and residual value
guarantees for the next five years are as follows:

|     | Buildings and | Residual value |       
|---- | ------------- | -------------- | ------
|     | equipment     | guarantees     | Total 
|2007 | $ 5.5         | $ 0.6          | $ 6.1 
|2008 | 3.4           | 1.1            | 4.5   
|2009 | 2.3           | 0.4            | 2.7   
|2010 | 1.5           |               | 1.5   
|2011 | 0.5           |               | 0.5   
|     | $ 13.2        | $2.1           | $ 15.3

b) Sale of receivables and floorplan financing

Under sales of receivable and dealer financing
agreements with large financing companies, the Company may be required to
repurchase new and unused products at a price equivalent to the total unpaid
principal balance owed to the financing company, subject to pre-set limits, in
the event of dealer default. The Company or the predecessor business have not
incurred material losses under these agreements. Outstanding floorplan financing
between the Company's dealers and the respective financing companies, subject to
repurchase, as at January 31, 2006 was $671.3 million ($739.4 million as at
January 31, 2005). The outstanding amount under sales of receivable agreement,
subject to repurchase, as at January 31, 2006 was $50.5 million ($46.3 million
as at January 31, 2005).

c) Purchase agreement

In the normal course of its business,
the Company entered into a purchase agreement with a Japanese marine engines
manufacturer whereby it must buy a certain number of units of marine engines
with an annual minimum purchase requirement for each year through August 31,
2006. Using the purchase price paid during the period ended January 31, 2006;
the minimum purchase commitment would be $17.4 million for the year ending
January 31, 2007.

- 133 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

25. COMMITMENTS AND CONTINGENCIES

d) Litigation

The Company is subject to product
liability claims in the normal course of business. On any product liability
claim relating to injuries or damages occurring prior to December 18, 2003,
Bombardier shares equally with the Company the first $250,000 per claim in case
expenses (fees, settlements and judgments) and indemnifies the Company for any
expenses in excess of $125,000 on such claims.

The Company maintains various insurance
coverage including a general liability coverage for product liability claims
relating to injuries or damages occurring after December 18, 2003. Product
liability provision are established based on the Company's best estimate of the
amounts necessary to resolve existing and probable claims based on historical
information. This accrual is included as a component of accrued and other
liabilities on the accompanying consolidated balance sheets.

The Company intends to vigorously defend
its position in these matters. Management believes the Company has recorded
adequate provisions to cover potential losses and amounts not recoverable under
insurance coverage, if any, in relation to these legal actions. While the final
outcome with respect to actions outstanding or pending as at January 31, 2006
cannot be predicted with certainty, it is management's opinion that their
resolution will not have material adverse effects on the Company's financial
position, results of operations, or cash flows.

e) Guarantees

In the normal course of business, the Company has
entered into agreements that include indemnities in favour of third parties and
which are customary in the industry, such as purchase and sale agreements,
securitisation, confidentiality agreements, engagement letters with advisors and
consultants, outsourcing agreements, leasing contracts, underwriting and agency
agreements, information technology agreements, and service agreements. These
indemnification agreements may require the Company compensates counterparties
for losses incurred by the counterparties as a result of breaches in
representation and regulations or as a result of litigation claims or statutory
sanctions that may be suffered by the counterparty as a consequence of the
transaction. The terms of these indemnities are not explicitly defined and the
maximum amount of any potential reimbursement cannot be reasonably estimated.

- 134 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

25. COMMITMENTS AND CONTINGENCIES

e) Guarantees (Cont'd)

The nature of these indemnification
agreements prevents the Company from making a reasonable estimate of the maximum
exposure due to the difficulties in assessing the amount of liability which
stems from the unpredictability of future events and the unlimited coverage
offered to counterparties. Historically, the Company and its predecessor have
not made any significant payments under such or similar indemnification
agreements, and therefore, no amount has been accrued in the Consolidated
Balance Sheets with respect to these agreements.

The Company shall indemnify directors
and officers of the Company for various losses including, but not limited to,
all costs to settle suits or actions due to association with the Company,
subject to certain restrictions. The Company has purchased directors' and
officers' liability insurance to mitigate the cost of any potential future suits
or actions. The term of the indemnification is not explicitly defined, but is
limited to the period over which the indemnified party served as a trustee,
director or officer of the Company. The maximum amount of any potential future
payment cannot be reasonably estimated.

26. SEGMENT DISCLOSURE

The Company determined that it operates in the two
reportable segments since operations within each of the segment identified have
similar aggregation criteria: economic characteristics, product and services,
production processes, customers, distribution channels and regulatory
environments. Each reportable segment offers different products and services and
requires different technology and marketing strategies.

The Powersports segment designs, develops,
manufactures and sells snowmobiles, watercraft, all-terrain vehicles, sport
boats and Rotax engines. Powersports products are sold mainly through an
international network of independent dealers and distributors. The manufacturing
plants are located primarily in Canada, the United States, Austria and Finland.

The Marine Engines segment designs, develops,
manufactures and sells outboard engines available across three technologies:
2-stroke carbureted, 2-stroke direct injection and 4-stroke technology. Marine
Engine products are sold directly to boat builders or through an international
network of independent dealers and distributors. The Marine Engines
manufacturing plants are located primarily in the United States and Mexico.

The Company's accounting policies for its segments
are the same as those described in the Summary of Significant Accounting
Policies. Management evaluates performance based on operating income. Operating
income does not include allocated corporate office charges for administrative
functions as well as financing cost, other income and expense and income taxes.
Intersegment services are accounted for at the exchange amount which management
believes reflects current market prices as if the services were provided to
third parties.

- 135 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

26. SEGMENT DISCLOSURE

|                                                                                      |              |             |                | The Company |             |              |            
|------------------------------------------------------------------------------------- | ------------ | ----------- | -------------- | ----------- | ----------- | ------------ | -----------
|                                                                                      | Consolidated | Powersports | Marine Engines
|                                                                                      |              |             | 44-day         |             |             | 44-day       |            
|                                                                                      | Year ended   | Year ended  | period ended   | Year ended  | Year ended  | period ended | Year ended 
|                                                                                      | January 31,  | January 31, | January 31,    | January 31, | January 31, | January 31,  | January 31,
|                                                                                      | 2006         | 2005        | 2004           | 2006        | 2005        | 2004         | 2006       
|                                                                                      |              | (Restated - |                |             | (Restated - |              |            
|                                                                                      |              | Note 2)     |                |             | Note 2)     |              |            
|External revenues                                                                     | $ 2,361.2    | $ 2,451.3   | $ 333.5        | $ 1,847.6   | $ 1,912.0   | $ 273.7      | $ 513.6    
|Intersegment revenues                                                                 |             |            |               | 27.7        | 23.6        | 3.7          | 26.4       
|Segment revenues                                                                      | 2,361.2      | 2,451.3     | 333.5          | 1,875.3     | 1,935.6     | 277.4        | 540.0      
|Cost of sales and operating
    expenses                                              | 2,111.3      | 2,246.4     | 332.5          | 1,658.4     | 1,735.2     | 278.5        | 507.0      
|Depreciation and amortisation                                                         | 100.1        | 118.0       | 13.9           | 79.7        | 96.3        | 10.8         | 20.4       
|                                                                                      | 2,211.4      | 2,364.4     | 346.4          | 1,738.1     | 1,831.5     | 289.3        | 527.4      
|Segment operating income (loss)
    from continuing operations                        | 149.8        | 86.9        | (12.9)         | $ 137.2     | $ 104.1     | $ (11.9)     | $ 12.6     
|Corporate and other                                                                   | 58.2         | 43.7        | (0.6)          |             |             |              |            
|Restructuring, impairment and
    other charges                                       |             | 14.9        |                |             |             |              |            
|Depreciation dealer network                                                           | 1.9          | 1.9         | 0.2            |             |             |              |            
|Operating income (loss) from
    continuing operations                                | 89.7         | 26.4        | (12.5)         |             |             |              |            
|Other (income) and expenses                                                           |              |             |                |             |             |              |            
|Financing costs                                                                       | 34.0         | 60.4        | 7.0            |             |             |              |            
|Accretion in carrying value and
    loss on early redemption of preferred shares      |             | 9.4         | 0.5            |             |             |              |            
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | (1.4)        | 0.7         |               |             |             |              |            
|Foreign exchange loss from
    reduction in net investment in a foreign entity        | 9.5          |            |               |             |             |              |            
|Foreign exchange loss (gain)                                                          | (33.0)       | (68.9)      | 2.8            |             |             |              |            
|Income (loss) from continuing
    operations before income taxes                      | $ 80.6       | $ 24.8      | $ (22.8)       |             |             |              |            



- 136 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

26. SEGMENT DISCLOSURE

The Company's net segment assets
exclude cash and cash equivalents deferred income taxes, goodwill, dealer
network and license agreement and are net of accounts payable and accrued
liabilities, excluding income taxes payable, due to Bombardier in connection
with indemnification related to income taxes, deferred income taxes and other.

|                              | January 31, 2006 | January 31, 2005
|----------------------------- | ---------------- | ----------------
|                              | Consolidated     | Powersports     
|                              |                  |                 
|Net segment assets            | $ 499.0          | $ 325.9         
|Net head office and other     | 18.8             |                 
|Income taxes receivable       | 8.1              |                 
|Goodwill                      | 100.0            |                 
|Dealer network                | 42.3             |                 
|License agreement             | 13.8             |                 
|Accounts payable              | 211.0            |                 
|Accrued and other liabilities | 305.4            |                 
|Deferred income taxes         | 57.0             |                 
|Cash and cash equivalents     | 50.9             |                 
|Total assets                  | $ 1,306.3        |                 

- 137 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

26. SEGMENT DISCLOSURE

|                                                                                      | Predecessor Business     
|------------------------------------------------------------------------------------- | -------------------------
|                                                                                      | Consolidated             
|                                                                                      | 321-day                  
|                                                                                      | period ended December 18,
|                                                                                      | 2003                     
|External revenues                                                                     | $ 2,075.6                
|Intersegment revenues                                                                 |                         
|Segment revenues                                                                      | 2,075.6                  
|Cost of sales and operating
    expenses                                              | 1,903.2                  
|Depreciation and amortisation                                                         | 90.7                     
|                                                                                      | 1,993.9                  
|Segment operating income (loss)
    from continuing operations                        | 81.7                     
|Corporate and other                                                                   | 29.7                     
|Depreciation dealer network                                                           |                         
|Operating income from
    continuing operations                                       | 52.0                     
|Financing costs                                                                       | 6.5                      
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | (1.4)                    
|Foreign exchange loss                                                                 | 5.2                      
|Income from continuing
    operations before income taxes                             | $ 41.7                   

- 138 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

26. SEGMENT DISCLOSURE

|                    | Additions to
    property, plant and equipment
|------------------- | ----------------------------------------------
|                    |                                               
|                    | Year ended                                    
|                    | January 31,                                   
|                    | 2006                                          
|                    |                                               
|Powersports         | $ 64.4                                        
|Marine Engines      | 14.9                                          
|Corporate and other | 3.5                                           
|                    | $ 82.8                                        

- 139 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

26. SEGMENT DISCLOSURE

|Geographic information:                                  |             |                     |              |                                |              |  |                                |            
|-------------------------------------------------------- | ----------- | ------------------- | ------------ | ------------------------------ | ------------ |  | ------------------------------ | -----------
|                                                         |             |                     |              |                                |              |  | Property, plant and equipment,
|                                                         | Revenues 1  |                     |              | goodwill and intangible assets
|                                                         |             |                     |              |                                | Predecessor  |  |                                |            
|                                                         | The Company |                     | Business     |                                |              | 
|                                                         |             |                     | 44-day       |                                | 321-day      |  |                                |            
|                                                         | Year ended  | Year ended          | period ended |                                | period ended |  |                                |            
|                                                         | January 31, | January 31,         | January 31,  |                                | December 18, |  | January 31,                    | January 31,
|                                                         | 2006        | 2005                | 2004         |                                | 2003         |  | 2006                           | 2005       
|                                                         |             | (Restated - Note 2) |              |                                |              |  |                                |            
|Canada                                                   | $ 446.7     | $
    379.8         | $
    45.3   |                                | $
    362.5  |  | $ 430.4                        | $
    462.2
|United States                                            | 1,218.1     | 1,376.6             | 177.1        |                                | 1,183.7      |  | 166.0                          | 173.5      
|Australia                                                | 77.7        | 79.9                | 11.7         |                                | 44.4         |  | 0.4                            | 0.3        
|Finland                                                  | 50.5        | 45.4                | 3.8          |                                | 35.6         |  | 8.2                            | 8.7        
|Austria                                                  | 15.7        | 16.6                | 1.0          |                                | 13.7         |  | 103.8                          | 121.3      
|Other - Americas                                         | 55.1        | 51.8                | 7.9          |                                | 42.8         |  | 6.2                            | 6.2        
|Other - Europe                                           | 344.6       | 317.2               | 66.6         |                                | 273.4        |  | 2.6                            | 1.8        
|Other                                                    | 152.8       | 184.0               | 20.1         |                                | 119.5        |  | 0.8                            | 0.9        
|                                                         | $ 2,361.2   | $ 2,451.3           | $ 333.5      |                                | $ 2,075.6    |  | $ 718.4                        | $ 774.9    
|1The attribution of revenues was based on the invoicing.



- 140 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND US GAAP

The Consolidated Financial Statements have been
prepared in accordance with Canadian GAAP, which differs in certain respects
from US GAAP. The following tables present a summary of the material adjustments
and additional disclosures to the Company's financial statements that would be
required in order to conform with US GAAP and the related rules and regulations
adopted by the United States Securities and Exchange Commission ("SEC").

Changes in US GAAP Accounting Policies

Share-Based Payment

Financial Accounting Standards Board issued FAS No.
123 (revised) FAS 123R, "Share-Based Payment" was issued on December 16, 2004.
FAS123R addresses accounting for share-based payment transactions where an
enterprise receives employee services in exchange for either equity instruments
of the enterprise, or liabilities that are based on the fair value of the
enterprise's equity instruments, or that may be settled by the issuance of such
equity instruments. FAS 123R eliminates the option of accounting for share-based
compensation transactions using the intrinsic value as prescribed by APB 25,
"Accounting for Stock Issued to Employees," and generally would require instead
that such transactions be accounted for using a fair value- based method. The
adoption of these recommendations did not have a material impact on the
Consolidated Financial Statements.

- 141 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP [CONT'D]

Reconciliation of consolidated statements of income captions

|                                                                                                                                   |             |             |             |  | Predecessor
|---------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ----------- |  | -----------
|                                                                                                                                   | The Company |             | Business   
|                                                                                                                                   |             |             | 44-day      |  | 321-day    
|                                                                                                                                   |             |             | period      |  | period     
|                                                                                                                                   | Year ended  | Year ended  | ended       |  | ended      
|                                                                                                                                   | January 31, | January 31, | January 31, |  | December 18
|                                                                                                                                   | 2006        | 2005        | 2004        |  | 2003       
|                                                                                                                                   |             | (Restated - |             |  |            
|                                                                                                                                   |             | Note 2)     |             |  |            
|Net income under Canadian GAAP                                                                                                     | $ 61.6      | $ 28.5      | $ (17.5)    |  | $ 30.2     
|Development costs (c)                                                                                                              | 2.2         | 3.1         | (9.0)       |  | (2.2)      
|Foreign exchange loss from
    reduction in net investment in a foreign entity (h)                                                 | 9.5         |            |            |  |           
|Accretion in carrying value and
    loss on early redemption of preferred shares (d)                                               |            | 9.4         | 0.5         |  |           
|Employee future benefits (a)                                                                                                       |            |            |            |  | (0.4)      
|Foreign exchange contracts (b)                                                                                                     |            |            |            |  | 12.3       
|Software costs (e)                                                                                                                 |            |            |            |  | 1.2        
|Total adjustments before the
    following:                                                                                        | 11.7        | 12.5        | (8.5)       |  | 10.9       
|Income tax expense (recovery)
    (f)                                                                                              | 0.6         | 1.0         | (2.3)       |  | 3.3        
|Total adjustments                                                                                                                  | 11.1        | 11.5        | (6.2)       |  | 7.6        
|Net income (loss) under US GAAP                                                                                                    | 72.7        | 40.0        | (23.7)      |  | 37.8       
|Minimum pension liability
    adjustment, net of income tax of $6.1 million for the 321-day period ended
    December 18, 2003 (a) |            |            |            |  | (14.2)     
|Change in cumulative
    translation adjustment                                                                                    | (58.5)      | (15.6)      | (2.0)       |  | 9.3        
|Gain (loss) on derivative
    financial instruments:                                                                               | 1.4         | 18.2        |            |  |           
|Effect of income tax of the
    above items                                                                                        | (0.9)       | (5.6)       |            |  |           
|Comprehensive income under US
    GAAP                                                                                             | $ 14.7      | $ 37.0      | $ (25.7)    |  | $ 32.9     

- 142 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP [CONT'D]

Reconciliation of consolidated balance sheets captions

|                                                             | As at January 31, 2006 |             | As at January 31, 2005
|------------------------------------------------------------ | ---------------------- | ----------- | ----------------------
|                                                             | Canadian               |             | US                    
|                                                             | GAAP                   | Adjustments | GAAP                  
|                                                             |                        |             |                       
|Other current assets (b)                                     | $ 94.6                 | $ 32.7      | $ 127.3               
|Other long-term assets (c)                                   | 48.8                   | (2.1)       | 46.7                  
|Accrued and other liabilities
    (b)                        | 287.2                  | 19.7        | 306.9                 
|Retained earnings (deficit)                                  | 72.6                   | 6.5         | 79.1                  
|Cumulative translation
    adjustment                        | (63.4)                 | 63.4        |                      
|Accumulated other comprehensive
    income:                  |                        |             |                       
|Cumulative translation
    adjustment                        |                       | (72.1)      | (72.1)                
|Unrealised gains on derivative
    financial instruments (b) |                       | 13.1        | 13.1                  
|Total assets                                                 | 1,306.3                | 30.6        | 1,336.9               

Reconciliation of consolidated statements of cash flow captions

|                     | The Company                
|-------------------- | ---------------------------
|                     | Year ended January 31, 2006
|                     | Canadian                   
|                     | GAAP                       
|Cash flows from:     |                            
|operating activities | $ 146.3                    
|investing activities | (83.8)                     
|                     |                            

|                         |                                 |             |                                   |  |                      |         |         
|------------------------ | ------------------------------- | ----------- | --------------------------------- |  | -------------------- | ------- | --------
|                         | The Company                     |             | Predecessor business             
|                         | 44-day period ended January 31, |             | 321-day period ended December 18,
|                         | 2004                            |             | 2003                             
|                         | Canadian                        | Adjustments | US                                |  | Canadian Adjustments | US     
|                         | GAAP                            |             | GAAP                              |  | GAAP                 |         | GAAP    
|Cash flows from:         |                                 |             |                                   |  |                      |         |         
|operating activities (c) | $ 82.8                          | $ (9.3)     | $ 73.5                            |  | $ (77.3)             | $ (4.7) | $ (82.0)
|investing activities (c) | (778.2)                         | 9.3         | (768.9)                           |  | (72.3)               | 4.7     | (67.6)  

- 143 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP [CONT'D]

a) Employee future benefits Predecessor Business

Under Canadian GAAP, effective February
1, 2000, the predecessor business adopted the new method of accounting for
employee future benefits. In reporting the impact of the adoption of this
method, the transitional obligation was accounted for as a charge to
Bombardier's net investment. Under US GAAP, the transitional pension obligation
that arose on February 1, 1989, upon the adoption of Financial Accounting
Standards Board Statement No. 87 is being amortised over 16 years.

Under US GAAP, an additional minimum
pension liability is recorded for any excess of the unfunded accumulated benefit
obligation over the recorded employee future benefits liability. An offsetting
intangible asset is recorded equal to unrecognised prior service and
transitional obligation, with any difference recorded in accumulated other
comprehensive income.

b) Foreign exchange contracts

The Company

Under US GAAP, the change in fair value of derivative
financial instruments designated as hedges of a forecasted transaction is
recorded in comprehensive income. When the gain/loss on these derivative
financial instruments are realised, the realised gain/loss is recorded as part
of net income, in the same period as the hedged item, and any unrealised
gain/loss previously recorded as part of comprehensive income is reversed. The
ineffective portion of the change in fair value of derivative financial
instruments designated as a hedge is recognised in the consolidated statement of
income.

Under Canadian and US GAAP, gains and losses on
derivative financial instruments that are not eligible to hedge accounting are
recognised immediately to income of the period.

As at January 31, 2005 accumulated other
comprehensive income included an unrealised foreign exchange gain on derivative
financial instruments of $12.6 million. During the year ended January 31, 2006
an unrealised gain on derivative financial instruments of $0.5 million was
recorded in the statement of comprehensive income therefore the unrealised
foreign exchange gain on derivative financial instruments in accumulated other
comprehensive income amounted to $13.1 million as at January 31, 2006.

Predecessor Business

Under Canadian GAAP, foreign exchange contracts
entered into, by the predecessor, to hedge foreign currency exposure met the
criteria for hedge accounting. Under U.S. GAAP, hedging activities and practices
did not meet the documentation criteria necessary to apply hedge accounting
under FAS 133 or firm commitment criteria under SFAS 52. Accordingly, changes in
the fair value of forward exchange contracts are recorded in income under U.S.
GAAP.

- 144 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP [CONT'D]

c) Development costs

Under Canadian GAAP, certain development costs are
deferred and amortised if they meet certain criteria. Under U.S. GAAP, these
costs are expensed as incurred.

Upon acquisition of the recreational
products business, as described in note 3 development costs were recorded on the
balance sheet at their fair market value. Under U.S. GAAP, the acquired
development costs were recorded at their fair market value on the balance sheet
as of the acquisition date and were expensed immediately following the
acquisition. The Company's appraisal of in-process research was an immaterial
amount, and therefore the acquisition of the recreational products business did
not require the write-off of any in-process research.

d) Redeemable preferred shares

Under Canadian GAAP preferred shares which are
mandatory redeemable by the Company upon the occurrence of certain future events
that management considers to be likely are recorded as liabilities and are
accreted to the redemption value at the estimated redemption date. Accretion of
carrying value and unpaid dividends are included in net loss.

Under U.S. GAAP, the redeemable
preferred shares are recorded at fair value outside of equity and the accretion
of the carrying value and unpaid dividends are recorded as a capital
transaction.

e) Software costs

Under Canadian GAAP, costs incurred
to enhance the service potential of computer software that extends its useful
life may be capitalised. Under U.S. GAAP, costs that extend the useful life
absent any additional functionality are expensed.

f) Income taxes

The income taxes adjustment reflects the income tax
effect on the adjustments between Canadian GAAP and U.S. GAAP.

g) FAS 130 "Comprehensive Income"

U.S. GAAP establishes standards for reporting and
display of comprehensive income (loss) and its components. Comprehensive income
is defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. Under U.S. GAAP, all
components of comprehensive income must be reported in the financial statements
in the period in which they are recognised. A total amount for comprehensive
income shall be displayed in the financial statements where the components of
other comprehensive income are reported.

- 145 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

27. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP [CONT'D]

h) Reduction in net investment in a foreign entity

Under Canadian GAAP, a proportionate amount of the
cumulative translation adjustment is transferred to income when there is a
reduction in the shareholders' equity of the foreign operation resulting from
capital transactions.

Under U.S. GAAP, the accumulated translation
difference should be reported as part of the gain or loss on sale or liquidation
of the investment when the sale or complete or substantially complete
liquidation of the investment occurs.

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

(All capitalised terms used but not defined in this
note have the meanings set forth in the Credit Facility Agreement entered into
by the Company, on December 18, 2003, as amended on February 9, 2005, unless the
context requires otherwise).

The Company entered into a Senior Secured Credit
Facility, and issued senior subordinated notes. Certain of the Company's
wholly-owned subsidiaries («Guarantor Subsidiaries») fully and unconditionally
guarantee the senior secured credit facility and the senior subordinated notes
(the Guaranteed Debt») on a joint and several basis. The Guaranteed Debt is not
guaranteed by Austrian Subsidiaries which produce RotaxTM engines,
the Finland Subsidiaries which produce LynxTM and certain models of
Ski-DooTM snowmobiles, all other non-domestic subsidiaries and
certain immaterial domestic subsidiaries which are either intended to be used
for foreign tax planning purposes or are prohibited by law from guaranteeing the
Guaranteed Debt (collectively the "Non-Guarantor Subsidiaries").

As at January 31, 2006, the main guarantor
subsidiaries included BRP U.S. Inc., BRP (Barbados) Inc., BRP Mexico S.A. de
C.V., BRP Australia Pty Ltd., BRP Japan Ltd. and BRP Holdings (Hungary) Asset
Management Limited and the non-guarantor subsidiaries included BRP Finland OY,
BRP Sweden AB, BRP Norway A.S., BRP-Rotax Management GmbH, BRP-Rotax GmbH & Co
KG, BRP Receivables Funding LLC, BRP Europe NV, Bombardier Recreational Products
Brazil Ltda, BRP Asia Ltd and BRP European Distribution S. A..

On March 12, 2004, BRP Mexico S.A. de
C.V., and BRP Japan Ltd., both of which were Non-Guarantor Subsidiaries as at
January 31, 2004, guaranteed the senior subordinated notes through supplemental
indentures.

- 146 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The following condensed consolidating financial
information sets forth, on an unconsolidated basis, the balance sheets as at
January 31, 2006 and 2005 and the statements of income and cash flows for the
year ended January 31, 2006 and 2005 and for the 44-day period ended January 31,
2004, for Bombardier Recreational Products Inc. (the "Parent Company"), and on a
combined basis for the Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries. The condensed consolidating financial information reflects the
investments of the Parent Company in the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries using the equity method. The Parent Company's fair
value increments, including applicable intangible assets, arising from the
business acquisition have been pushed down to the applicable subsidiary columns.

Prior to the acquisition, the issuance of the
Guaranteed Debt on December 18, 2003, the parent company of the Predecessor
Business, the Guaranteed Subsidiaries of the Predecessor Business and the
Non-Guarantor Subsidiaries of the predecessor business did not legally exist, as
all operations of the Company were within Bombardier. For purposes of presenting
the following condensed consolidating financial information, amounts were
allocated to the parent company, the Guaranteed Subsidiaries and the
Non-Guarantor Subsidiaries assuming that they did exist for the periods
presented and assuming that the operations of the Predecessor Business were
allocated to these subsidiaries under the same assumptions as those allocations
actually applied by our Successor Company.

The following condensed consolidating financial
information for the 321-day period ended December 18, 2003, show the statements
of income and cash flows for the parent company and on a combined basis for the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The condensed
consolidating financial information reflects the investments of the parent
company in the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the
equity method.

- 147 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Condensed Consolidating Balance
Sheet as at January 31, 2006

|                                     |           | Guarantor    | Non-Guarantor |              |             
|------------------------------------ | --------- | ------------ | ------------- | ------------ | ------------
|                                     | Parent    | Subsidiaries | Subsidiaries  | Eliminations | Consolidated
|ASSETS                               |           |              |               |              |             
|Current Assets                       |           |              |               |              |             
|Cash and cash equivalents            | $ 11.4    | $ 35.8       | $ 3.7         | $           | $ 50.9      
|Receivables                          | 20.8      | 40.4         | 48.9          |             | 110.1       
|Inventories                          | 108.0     | 88.0         | 106.1         | (18.6)       | 283.5       
|Intercompany accounts                | 169.6     | 192.3        | 353.5         | (715.4)      |            
|Other assets                         | 20.2      | 37.6         | 31.2          | 5.6          | 94.6        
|Total current assets                 | 330.0     | 394.1        | 543.4         | (728.4)      | 539.1       
|Property, plant and equipment        | 145.9     | 140.2        | 115.7         |             | 401.8       
|Goodwill                             |          |             |              | 100.0        | 100.0       
|Trademarks                           | 151.1     |             |              |             | 151.1       
|Other intangible assets              | 33.8      | 56.2         |              | (24.5)       | 65.5        
|Investments in affiliates            | 373.1     | 22.5         | 14.4          | (410.0)      |            
|Other assets                         | 17.6      | 3.7          | 18.4          | 9.1          | 48.8        
|                                     | $ 1,051.5 | $ 616.7      | $ 691.9       | $ (1,053.8)  | $ 1,306.3   
|LIABILITIES AND                      |           |              |               |              |             
|SHAREHOLDER'S                        |           |              |               |              |             
|EQUITY                               |           |              |               |              |             
|Current Liabilities                  |           |              |               |              |             
|Accounts payable                     | $ 94.9    | $ 43.0       | $ 73.1        | $           | $ 211.0     
|Accrued and other liabilities        | 116.4     | 105.1        | 65.7          |             | 287.2       
|Intercompany accounts                | 75.7      | 109.2        | 361.1         | (546.0)      |            
|Total current liabilities            | 287.0     | 257.3        | 499.9         | (546.0)      | 498.2       
|Long-term debt                       | 228.8     | 1.8          |              |             | 230.6       
|Employee future benefits obligations | 47.6      | 1.3          | 63.6          |             | 112.5       
|Other liabilities                    | 51.8      | 23.9         | 11.8          |             | 87.5        
|Total liabilities                    | 615.2     | 284.3        | 575.3         | (546.0)      | 928.8       
|Shareholder's equity                 |           |              |               |              |             
|Capital stock                        | 365.6     | 363.0        | 88.9          | (451.9)      | 365.6       
|Additional paid-in capital           | 2.7       |             |              |             | 2.7         
|Retained earnings                    | 68.0      | 23.3         | 39.6          | (58.3)       | 72.6        
|Cumulative translation adjustment    |          | (53.9)       | (11.9)        | 2.4          | (63.4)      
|                                     | 436.3     | 332.4        | 116.6         | (507.8)      | 377.5       
|                                     | $ 1,051.5 | $ 616.7      | $ 691.9       | $ (1,053.8)  | $ 1,306.3   

- 148 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Condensed Consolidating Balance
Sheet as at January 31, 2005

|                                         |             | Guarantor    | Non-Guarantor |              |             
|---------------------------------------- | ----------- | ------------ | ------------- | ------------ | ------------
|                                         | Parent      | Subsidiaries | Subsidiaries  | Eliminations | Consolidated
|                                         | (Restated - |              |               |              | (Restated - 
|ASSETS                                   | Note 2)     |              |               |              | Note 2)     
|Current Assets                           |             |              |               |              |             
|Cash and cash equivalents                | $ 88.8      | $ 22.9       | $ 38.6        | $           | $ 150.3     
|Receivables                              | 33.7        | 19.7         | 59.3          |             | 112.7       
|Inventories                              | 135.0       | 98.7         | 84.7          | (16.3)       | 302.1       
|Intercompany accounts                    | 167.2       | 252.7        | 398.3         | (818.2)      |            
|Other assets                             | 43.7        | 44.8         | 46.6          | 6.3          | 141.4       
|Total current assets                     | 468.4       | 438.8        | 627.5         | (828.2)      | 706.5       
|Property, plant and equipment            | 146.7       | 146.3        | 132.8         |             | 425.8       
|Goodwill                                 |            |             |              | 119.9        | 119.9       
|Trademarks                               | 151.1       |             |              |             | 151.1       
|Other intangible assets                  | 45.0        | 57.6         |              | (24.5)       | 78.1        
|Investments in affiliates                | 324.0       | 22.5         |              | (346.5)      |            
|Other assets                             | 22.9        | 14.5         | 20.7          | 9.2          | 67.3        
|                                         | $ 1,158.1   | $ 679.7      | $ 781.0       | $ (1,070.1)  | $ 1,548.7   
|LIABILITIES AND SHAREHOLDER'S EQUITY     |             |              |               |              |             
|Current Liabilities                      |             |              |               |              |             
|Bank loans                               | $ 12.3      | $           | $            | $           | $ 12.3      
|Accounts payable and accrued liabilities | 227.0       | 168.9        | 171.5         | 0.1          | 567.5       
|Current portion of long-term debt        | 103.0       | 44.2         |              |             | 147.2       
|Intercompany accounts                    | 88.2        | 125.1        | 437.0         | (650.3)      |            
|Total current liabilities                | 430.5       | 338.2        | 608.5         | (650.2)      | 727.0       
|Long-term debt                           | 247.6       | 1.9          |              |             | 249.5       
|Employee future benefits obligations     | 49.9        | 1.1          | 71.2          |             | 122.2       
|Other long-term liabilities              | 52.4        | 18.5         | 15.1          |             | 86.0        
|Total liabilities                        | 780.4       | 359.7        | 694.8         | (650.2)      | 1,184.7     
|Shareholder's equity                     |             |              |               |              |             
|Capital stock                            | 364.4       | 339.0        | 59.7          | (398.7)      | 364.4       
|Additional paid-in capital               | 2.3         |             |              |             | 2.3         
|Retained earnings (deficit)              | 11.0        | (6.5)        | 27.5          | (21.0)       | 11.0        
|Cumulative translation adjustment        |            | (12.5)       | (1.0)         | (0.2)        | (13.7)      
|                                         | 377.7       | 320.0        | 86.2          | (419.9)      | 364.0       
|                                         | $ 1,158.1   | $ 679.7      | $ 781.0       | $ (1,070.1)  | $ 1,548.7   

- 149 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION 
[
Cont'd]

The Company's Condensed
Consolidating Statements of Income

|                                                                                     | For the year ended January 31, 2006
|------------------------------------------------------------------------------------ | -----------------------------------
|                                                                                     |                                    
|                                                                                     | Parent                             
|                                                                                     |                                    
|Revenues                                                                             | $1,442.2                           
|Cost of sales                                                                        | 1,286.8                            
|Gross profit                                                                         | 155.4                              
|Operating expenses                                                                   |                                    
|Selling and marketing                                                                | 36.2                               
|Research and development                                                             | 43.3                               
|General and administrative                                                           | 60.3                               
|Total operating expenses                                                             | 139.8                              
|Operating income                                                                     | 15.6                               
|Other (income) and expense                                                           |                                    
|Financing costs                                                                      | 31.4                               
|Loss (gain) on disposal of
    property plant and equipment and assets held for sale |                                   
|Gain on disposal of an
    investment in subsidiary                                  |                                   
|Foreign exchange loss from
    reduction in net investment in a foreign entity       | 9.5                                
|Foreign exchange loss (gain)                                                         | (33.9)                             
|Share in earnings of equity accounted investees                                      | (72.0)                             
|Dividend revenue                                                                     |                                   
|Income before income taxes                                                           | 80.6                               
|Income tax expense (recovery)                                                        | 19.0                               
|Net income                                                                           | $61.6                              

- 150 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's Condensed
Consolidating Statements of Income

|                                                                                     | For the year ended January 31, 2005
|------------------------------------------------------------------------------------ | -----------------------------------
|                                                                                     |                                    
|                                                                                     | Parent                             
|                                                                                     | (Restated - Note 2)                
|Revenues                                                                             | $ 1,457.5                          
|Cost of sales                                                                        | 1,335.6                            
|Gross profit                                                                         | 121.9                              
|Operating expenses                                                                   |                                    
|Selling and marketing                                                                | 30.0                               
|Research and development                                                             | 41.5                               
|General and administrative                                                           | 32.1                               
|Other charges and (income)                                                           |                                    
|Restructuring                                                                        | 23.8                               
|Impairment loss                                                                      |                                   
|Curtailment gain                                                                     | (23.7)                             
|Total operating expenses                                                             | 103.7                              
|Operating income (loss)
    from continuing operations                               | 18.2                               
|Other (income) and expense                                                           |                                    
|Financing costs                                                                      | 48.0                               
|Accretion in carrying value
    and loss on early redemption of preferred shares     | 9.4                                
|Loss (gain) on disposal of
    property, plant and equipment and asset held for sale | 0.4                                
|Foreign exchange loss (gain)                                                         | (67.5)                             
|Share in earnings of equity accounted investees                                      | 3.1                                
|Income from continuing operations before income taxes                                | 24.8                               
|Income tax expense (recovery)                                                        | (7.0)                              
|Income from continuing operations                                                    | 31.8                               
|Income (loss) from
    discontinued operations, net of income taxes                  | (3.3)                              
|Net income                                                                           | $ 28.5                             

- 151 -

---



Bombardier Recreational Products Inc.







For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]









28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's Condensed Consolidating Statements of Income

|                                                                    | For the 44-day period January 31, 2004
|------------------------------------------------------------------- | --------------------------------------
|                                                                    |                                       
|                                                                    | Parent                                
|Revenues                                                            | $ 204.2                               
|Cost of sales                                                       | 204.6                                 
|Gross profit                                                        | (0.4)                                 
|Operating expenses                                                  |                                       
|Selling and marketing                                               | 6.3                                   
|Research and development                                            | 8.3                                   
|General and administrative                                          | 2.1                                   
|Total operating expenses                                            | 16.7                                  
|Operating profit (loss) from
    continuing operations              | (17.1)                                
|Other (income) and expense                                          |                                       
|Financing costs                                                     | 7.8                                   
|Accretion in carrying value of
    redeemable preferred shares      | 0.5                                   
|Foreign exchange loss (gain)                                        | 0.9                                   
|Share in earnings of equity accounted investees                     | (3.0)                                 
|Income (loss) from continuing operations before income
    taxes    | (23.3)                                
|Income tax expense (recovery)                                       | (5.6)                                 
|Income (loss) from continuing operations                            | (17.7)                                
|Income (loss) from
    discontinued operations, net of income taxes | 0.2                                   
|Net income (loss)                                                   | $ (17.5)                              

- 152 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Predecessor Business Condensed
Consolidating Statements of Income

|                                                                                     | For the 321-day period ended December 18, 2003
|------------------------------------------------------------------------------------ | ----------------------------------------------
|                                                                                     |                                               
|                                                                                     | Parent                                        
|Revenues                                                                             | $ 1,243.8                                     
|Cost of sales                                                                        | 1,069.2                                       
|Gross profit                                                                         | 174.6                                         
|Operating expenses                                                                   |                                               
|Selling and marketing                                                                | 39.0                                          
|Research and development                                                             | 41.4                                          
|General and administrative                                                           | 55.3                                          
|Total operating expenses                                                             | 135.7                                         
|Operating profit (loss) from
    continuing operations                               | 38.9                                          
|Financing costs                                                                      | 0.2                                           
|Loss (gain) on disposal of
    property, plant and equipment and asset held for sale | 0.8                                           
|Foreign exchange loss (gain)                                                         | (1.3)                                         
|Income (loss) from continuing operations before income
    taxes                     | 39.2                                          
|Income tax expense (recovery)                                                        | 12.1                                          
|Income (loss) from continuing operations                                             | 27.1                                          
|Income (loss) from
    discontinued operations, net of income taxes                  | 1.5                                           
|Net income (loss)                                                                    | $ 28.6                                        

- 153 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's Condensed Consolidating Statements of Cash
Flow

|                                                                                      | For the year ended January 31, 2006
|------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                      |                                    
|                                                                                      |                                    
|                                                                                      | Parent                             
|OPERATING ACTIVITIES                                                                  |                                    
|Income from continuing operations                                                     | $ 61.6                             
|Non-cash items:                                                                       |                                    
|Depreciation and
    amortisation                                                     | 50.5                               
|Amortisation of deferred
    financing costs                                          | 4.9                                
|Employee stock
    compensation                                                       | 0.9                                
|Deferred income taxes
    expense (recovery)                                          | (0.2)                              
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale |                                   
|Foreign exchange loss
    (gain)                                                      | (23.3)                             
|Share in earnings of equity accounted
    investees                                   | (72.0)                             
|Cash flow from operating activities before the following                              | 22.4                               
|Net changes in non-cash operating items                                               | 35.0                               
|                                                                                      |                                    
|Cash flows from operating activities                                                  | 57.4                               
|INVESTING ACTIVITIES                                                                  |                                    
|Additions to property, plant and equipment                                            | (38.4)                             
|Proceeds on disposal of property, plant and
    equipment and assets held for sale    | 0.2                                
|Investment in affiliates                                                              | 16.1                               
|Business acquisition, net of cash acquired                                            | (4.5)                              
|                                                                                      |                                    
|Cash flows from investing activities                                                  | (26.6)                             
|FINANCING ACTIVITIES                                                                  |                                    
|Decrease in bank loans                                                                | (12.3)                             
|Issuance of long-term debt                                                            | 62.1                               
|Repayment of long-term debt                                                           | (160.2)                            
|Increase of capital stock                                                             | 0.7                                
|Redemption of common shares                                                           |                                   
|Dividend paid                                                                         |                                   
|                                                                                      |                                    
|Intercompany accounts                                                                 | 1.5                                
|Other                                                                                 |                                   
|                                                                                      |                                    
|Cash flows from financing activities                                                  | (108.2)                            
|Effect of exchange rate changes on cash and
    cash equivalents                      |                                   
|Net increase (decrease) in cash and cash
    equivalents                              | (77.4)                             
|Cash and cash equivalents at beginning of the period                                  | 88.8                               
|Cash and cash equivalents at end of the
    period                                    | 11.4                               
|Supplemental information                                                              |                                    
|Cash paid for:                                                                        |                                    
|Interest                                                                              | $26.9                              
|Income taxes                                                                          | 0.2                                

- 154 -

---



Bombardier Recreational Products Inc.







For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]









28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's Condensed Consolidating Statements of Cash Flow

|                                                                                                          | For the year ended January 31, 2005
|--------------------------------------------------------------------------------------------------------- | -----------------------------------
|                                                                                                          |                                    
|                                                                                                          |                                    
|                                                                                                          | Parent                             
|                                                                                                          | (Restated -                        
|OPERATING ACTIVITIES                                                                                      | Note 2)                            
|Income from continuing operations                                                                         | $ 31.8                             
|Non-cash items:                                                                                           |                                    
|Depreciation and
    amortisation                                                                         | 56.8                               
|Amortisation of deferred
    financing costs                                                              | 13.6                               
|Employee stock
    compensation                                                                           | 2.3                                
|Deferred income taxes
    expense (recovery)                                                              | 8.2                                
|Other charge and income                                                                                   | (3.7)                              
|Accretion in carrying
    value and loss on early redemption preferred shares                             | 9.4                                
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale                     | 0.4                                
|Foreign exchange loss
    (gain)                                                                          | (57.6)                             
|Share in earnings of equity accounted investees                                                           | 3.1                                
|Cash flow from operating activities before the following                                                  | 64.3                               
|Net changes in non-cash operating items                                                                   | 71.9                               
|                                                                                                          |                                    
|Cash flows from operating activities                                                                      | 136.2                              
|INVESTING ACTIVITIES                                                                                      |                                    
|Additions to property, plant and equipment                                                                | (29.5)                             
|Proceeds on disposal of property, plant and
    equipment and assets held for sale                        | 0.2                                
|Proceeds from the disposal of the Utility
    Vehicles segment, net of transaction costs of $ 1.6 million | 40.3                               
|Investment in affiliates                                                                                  | 16.3                               
|Business acquisition, net of cash acquired                                                                | (0.5)                              
|Acquisition of patents                                                                                    |                                   
|                                                                                                          |                                    
|Cash flows from investing activities                                                                      | 26.8                               
|FINANCING ACTIVITIES                                                                                      |                                    
|Increase in bank loans                                                                                    | 12.3                               
|Repayment of long-term debt                                                                               | (136.3)                            
|Debt issuance costs                                                                                       | (1.4)                              
|Increase of capital stock                                                                                 | 60.0                               
|Redemption of preferred shares                                                                            | (52.6)                             
|Redemption of common shares                                                                               |                                   
|Dividend paid                                                                                             |                                   
|Intercompany accounts                                                                                     | 2.8                                
|Other                                                                                                     | (2.8)                              
|                                                                                                          |                                    
|Cash flows from financing activities                                                                      | (118.0)                            
|Effect of exchange rate changes on cash and
    cash equivalents                                          |                                   
|Cash flows from continuing operations                                                                     | 45.0                               
|Cash flows from discontinued operations                                                                   | (13.1)                             
|Net increase (decrease) in cash and cash equivalents                                                      | 31.9                               
|Cash and cash equivalents at beginning of the period                                                      | 56.9                               
|Cash and cash equivalents at end of the period                                                            | $ 88.8                             
|Supplemental information                                                                                  |                                    
|Cash paid for:                                                                                            |                                    
|Interest                                                                                                  | $32.2                              
|Income taxes                                                                                              | 3.8                                

- 155 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's Condensed
Consolidating Statements of Cash Flows

|                                                                   | For the 44-day period ended January 31, 2004
|------------------------------------------------------------------ | --------------------------------------------
|                                                                   | Parent                                      
|                                                                   |                                             
|OPERATING ACTIVITIES                                               |                                             
|Income from continuing operations                                  | $ (17.7)                                    
|Non-cash items:                                                    |                                             
|Depreciation and
    amortisation                                  | 6.1                                         
|Amortisation of deferred
    financing costs                       | 0.7                                         
|Deferred income taxes
    expense (recovery)                       | (8.9)                                       
|Employee future benefits                                           | 1.4                                         
|Accretion in carrying
    value of
    redeemable preferred shares | 0.5                                         
|Foreign exchange gain                                              | (3.2)                                       
|Cash flow from operating activities before the following           | (21.1)                                      
|Net changes in non-cash operating items                            | 86.6                                        
|                                                                   |                                             
|Cash flows from operating activities                               | 65.5                                        
|                                                                   |                                             
|INVESTING ACTIVITIES                                               |                                             
|Additions to property, plant and equipment                         | (11.6)                                      
|Investments in affiliates                                          | (320.5)                                     
|Business acquisition                                               | (592.6)                                     
|                                                                   |                                             
|Cash flows from investing activities                               | (924.7)                                     
|                                                                   |                                             
|FINANCING ACTIVITIES                                               |                                             
|Issuance of long-term debt                                         | 526.4                                       
|Repayment of long-term debt                                        |                                            
|Debt issuance costs                                                | (38.0)                                      
|Increase of share capital                                          | 304.5                                       
|Intercompany account                                               | 128.6                                       
|                                                                   |                                             
|Cash flows from financing activities                               | 921.5                                       
|Effect of exchange rate changes on cash and cash
    equivalent    | (1.4)                                       
|Cash flows from continuing operations                              | 60.9                                        
|Cash flows from discontinued operations                            | (4.0)                                       
|Net increase (decrease) in cash and cash equivalent                | 56.9                                        
|Cash and cash equivalent at beginning of
    period                |                                            
|Cash and cash equivalent at end of
    period                      | $ 56.9                                      
|Supplemental information                                           |                                             
|Cash paid for:                                                     |                                             
|Interest                                                           | $ 1.7                                       
|Income taxes                                                       |                                            

- 156 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Predecessor Business Condensed
Consolidating Statements of Cash Flows

|                                                                                      | For the 321-day period ended December 18, 2003
|------------------------------------------------------------------------------------- | ----------------------------------------------
|                                                                                      |                                               
|                                                                                      | Parent                                        
|OPERATING ACTIVITIES                                                                  |                                               
|Income from continuing operations                                                     | $ 27.1                                        
|Non-cash items:                                                                       |                                               
|Depreciation and
    amortisation                                                     | 37.6                                          
|Deferred income taxes
    expense (recovery)                                          | 5.3                                           
|Loss (gain) on disposal of
    property, plant and equipment and assets held for sale | 0.8                                           
|Foreign exchange loss                                                                 | 3.3                                           
|Cash flow from operating activities before the following                              | 74.1                                          
|Net changes in non-cash operating items                                               | (158.3)                                       
|                                                                                      |                                               
|Cash flows from operating activities                                                  | (84.2)                                        
|INVESTING ACTIVITIES                                                                  |                                               
|Additions to property, plant and equipment                                            | (36.7)                                        
|Proceeds on disposal of property, plant and equipment and assets held
    for sale    | 0.2                                           
|Other                                                                                 | (2.4)                                         
|                                                                                      |                                               
|Cash flows from investing activities                                                  | (38.9)                                        
|FINANCING ACTIVITIES                                                                  |                                               
|Increase in long-term debt                                                            |                                              
|Repayment of long-term debt                                                           |                                              
|Net variation in advance to related parties                                           |                                              
|Net contribution by Bombardier Inc.                                                   | 191.9                                         
|Other                                                                                 | (3.0)                                         
|                                                                                      |                                               
|Cash flows from financing activities                                                  | 188.9                                         
|Effect of exchange rate changes on cash and cash
    equivalent                       | 0.3                                           
|                                                                                      |                                               
|Cash flows from continuing operations                                                 | 66.1                                          
|Cash flows from discontinued operations                                               | (4.1)                                         
|Net increase (decrease) in cash and cash equivalent                                   | 62.0                                          
|Cash and cash equivalent at beginning of
    period                                   | (0.4)                                         
|Cash and cash equivalent at end of period                                             | $ 61.6                                        
|Supplemental information                                                              |                                               
|Cash paid for:                                                                        |                                               
|Interest                                                                              | $ (0.5)                                       
|Income taxes                                                                          |                                              

- 157 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Summary of Differences Between
Canadian and U.S. GAAP

As disclosed in note 27, the Consolidated Financial Statements have been
prepared in accordance with Canadian GAAP. As well, the supplemental condensed
consolidating financial information has been prepared in accordance with
Canadian GAAP, which differs in certain respects from U.S. GAAP and related
rules and regulations by the SEC. Such differences are summarised below.

Reconciliation of Condensed Balance Sheet Captions as at January 31, 2006

|                                                         | Parent   | Guarantor Subsidiaries | Non-Guarantor Subsidiaries
|-------------------------------------------------------- | -------- | ---------------------- | --------------------------
|                                                         | Canadian | Adjustments            | U.S.                      
|                                                         | GAAP     |                        | GAAP                      
|Other current assets (b)                                 | 20.2     | 32.7                   | 52.9                      
|Investment in affiliates                                 | 373.1    | 9.5                    | 382.6                     
|Other long-term
    assets                               | 17.6     | (0.1)                  | 17.5                      
|Accrued and
    other liabilities (b)                    | 116.4    | 19.7                   | 136.1                     
|Retained
    earnings (deficit)                          | 68.0     | 9.3                    | 77.3                      
|Cumulative
    translation adjustment                    |         |                       |                          
|Accumulated
    other comprehensive income:              |          |                        |                           
|Cumulative
    translation adjustment                    |         |                       |                          
|Unrealised gains
    on derivative financial instruments |         | 13.1                   | 13.1                      
|Total assets                                             | 1,051.5  | 42.1                   | 1,093.6                   
|                                                         |          |                        |                           

- 158 -

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Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Reconciliation of Condensed
Balance Sheet Captions as at January 31, 2005

|                                                         | Parent              | Guarantor Subsidiaries | Non-Guarantor Subsidiaries
|-------------------------------------------------------- | ------------------- | ---------------------- | --------------------------
|                                                         | Canadian            | Adjustments            | U.S.                      
|                                                         | GAAP                |                        | GAAP                      
|                                                         | (Restated - Note 2) |                        |                           
|Other current assets (b)                                 | 43.7                | 18.3                   | 62.0                      
|Other long term
    assets                               | 22.9                | (0.3)                  | 22.6                      
|Accounts payable
    and accrued liabilities (b)         | 227.0               | 5.7                    | 232.7                     
|Retained
    earnings (deficit)                          | 11.0                | (0.3)                  | 10.7                      
|Cumulative
    translation adjustment                    |                    |                       |                          
|Accumulated
    other comprehensive income:              |                     |                        |                           
|Unrealised gains
    on derivative financial instruments |                    | 12.6                   | 12.6                      
|Cumulative
    translation adjustment                    |                    |                       |                          
|Total assets                                             | 1,158.1             | 18.0                   | 1,176.1                   

- 159 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Reconciliation of the Company's
Condensed Statements of Income and Other Comprehensive Income

|                                                                                 | For the year ended January 31, 2006
|-------------------------------------------------------------------------------- | -----------------------------------
|                                                                                 |                                    
|                                                                                 | Parent                             
|                                                                                 |                                    
|Net income (loss) under Canadian GAAP                                            | 61.6                               
|Development costs                                                                | 0.2                                
|Foreign exchange loss from
    reduction from net investment in a foreign entity | 9.5                                
|Income tax expense                                                               | 0.1                                
|Total adjustments                                                                | 9.6                                
|Net income (loss) under U.S. GAAP                                                | 71.2                               
|Change in cumulative translation adjustment                                      |                                   
|Gain on derivative financial instruments                                         | 1.4                                
|Effect of income tax of the above item                                           | (0.9)                              
|Comprehensive income (loss) under U.S. GAAP                                      | 71.7                               

Reconciliation of the Company's Condensed Statements of Income and Other
Comprehensive Income

|                                                                                 | For the year ended January 31, 2005
|-------------------------------------------------------------------------------- | -----------------------------------
|                                                                                 |                                    
|                                                                                 | Parent                             
|                                                                                 | (Restated -                        
|                                                                                 | Note 2)                            
|Net income (loss) under Canadian GAAP                                            | $ 28.5                             
|Development costs                                                                | 0.5                                
|Accretion in
    carrying value and loss on early redemption of preferred shares | 9.4                                
|Total adjustments before the
    following:                                      | 9.9                                
|Income tax expense (recovery)                                                    | 0.1                                
|Total adjustments                                                                | 9.8                                
|Net income (loss) under U.S. GAAP                                                | 38.3                               
|Change in cumulative translation adjustment                                      |                                   
|Gain on derivative financial instruments                                         | 18.2                               
|Effect of income taxes on the above item                                         | (5.6)                              
|Comprehensive income (loss) under U.S. GAAP                                      | $ 50.9                             

- 160 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

|                                                               | For the 44-day period ended January 31, 2004
|-------------------------------------------------------------- | --------------------------------------------
|                                                               |                                             
|                                                               | Parent                                      
|                                                               |                                             
|Net income (loss) under Canadian GAAP                          | $ (17.5)                                    
|Development costs                                              | (0.8)                                       
|Accretion in carrying
    value of redeemable preferred shares | 0.5                                         
|Total adjustments before the following:                        | (0.3)                                       
|Income tax expense (recovery)                                  | (0.1)                                       
|Total adjustments                                              | (0.2)                                       
|Net income (loss) under U.S. GAAP                              | (17.7)                                      
|Change in cumulative translation adjustment                    |                                            
|Comprehensive income (loss) under U.S. GAAP                    | $ (17.7)                                    

Reconciliation of the Predecessor Business Condensed Statements of Income and
Other Comprehensive Income

|                                                                     | For the 321-day period ended December 18, 2003
|-------------------------------------------------------------------- | ----------------------------------------------
|                                                                     |                                               
|                                                                     |                                               
|                                                                     | Parent                                        
|                                                                     |                                               
|Net income (loss) under Canadian GAAP                                | $ 28.6                                        
|Development costs                                                    | 0.5                                           
|Employee future benefits
    (a)                                     | (0.6)                                         
|Foreign exchange contracts
    (b)                                   | 12.5                                          
|Software costs                                                       | 1.2                                           
|Total adjustments before the following:                              | 13.6                                          
|Income tax expense (recovery)                                        | 4.2                                           
|Total adjustments                                                    | 9.4                                           
|Net income (loss) under U.S. GAAP                                    | 38.0                                          
|Minimum pension liability adjustment, net
    of tax of $6.1 million | (17.6)                                        
|Change in cumulative translation
    adjustment                      |                                              
|Comprehensive income (loss) under U.S. GAAP                          | $ 20.4                                        

- 161 -

---



Bombardier Recreational Products Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended January 31, 2006 
[Tabular figures in millions of Canadian dollars, unless otherwise indicated]

28. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Reconciliation of Condensed Statements of Cash Flows

|                                     | The Company           
|------------------------------------ | ----------------------
|                                     | For the year
    ended
|                                     | January 31, 2005      
|                                     |                       
|                                     | Parent                
|                                     | Canadian              
|                                     | GAAP                  
|Cash flows from operating activities | $ 136.2               
|Cash flows from investing activities | $ 26.8                
|                                     |                       

|                                     |                                                | Predecessor business                           |                           
|------------------------------------ | ---------------------------------------------- | ---------------------------------------------- | --------------------------
|                                     | For the 321-day period ended December 18, 2003 | For the 321-day period ended December 18, 2003
|                                     |                                                | Parent                                         | Non-Guarantor Subsidiaries
|                                     | Canadian GAAP                                  | U.S. GAAP                                      | Canadian GAAP             
|Cash flows from operating activities | $ (84.2)                                       | $ (84.2)                                       | $ 89.4                    
|Cash flows from investing activities | $ (38.9)                                       | $ (38.9)                                       | $ (28.3)                  
|                                     |                                                |                                                |                           

- 162 -

---



SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorised the undersigned
to sign this annual report on its behalf.

|                     | BOMBARDIER RECREATIONAL PRODUCTS INC.       
|-------------------- | --------------------------------------------
|                     |                                             
|                     |                                             
|                     | By: / s / JOSÉ BOISJOLI                     
|                     | Name: José Boisjoli                         
|                     | Title: President and Chief Executive Officer
|Date: April 27, 2006 |                                             

- 163 -

---