NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR:  DANIER LEATHER INC.

TSX SYMBOL:  DL.SV

JANUARY 19, 2005 - 16:07 ET

Danier Leather Reports Fiscal 2005 Second Quarter 
Results

TORONTO, ONTARIO--(CCNMatthews - Jan. 19, 2005) - Danier Leather Inc. 
(TSX:DL.SV) today announced its consolidated financial results for the 
second quarter and 26 weeks ended December 25, 2004.

/T/

HIGHLIGHTS ($000s, except earnings per share):
----------------------------------------------
                  For the 13 weeks ended      For the 26 weeks ended
---------------------------------------------------------------------
              December 25,  December 27,  December 25,  December 27,
                      2004          2003          2004          2003
---------------------------------------------------------------------
Sales              $71,291       $79,293       $95,933      $102,594
---------------------------------------------------------------------
EBITDA             $13,827       $16,998        $9,747       $11,980
---------------------------------------------------------------------
Net Earnings        $7,182        $8,984        $3,769        $4,876
---------------------------------------------------------------------
EPS - Basic          $1.06         $1.30         $0.55         $0.70
---------------------------------------------------------------------
EPS - Fully Diluted  $1.04         $1.29         $0.54         $0.70
---------------------------------------------------------------------
Number of Stores       100           102           100           102
---------------------------------------------------------------------
Retail Square
 Footage           383,020       383,726       383,020       383,726
---------------------------------------------------------------------

/T/

Q2 2005 HIGHLIGHTS

- Second quarter results were impacted by weak consumer spending on 
outerwear, customers delaying purchases until closer to Christmas and 
into the post-Christmas period, and unseasonably warm weather.

- Boxing Week sales took place in the third quarter this year versus the 
second quarter last year. Sales for the week ended January 1, 2005, 
which included Boxing Week, increased by $5.8 million over the same week 
last year.

- Comparable store sales for the 5 weeks ended January 1, 2005 increased 
3%.

- A new power centre store was opened at Vaughan Mills in Vaughan, 
Ontario

- Gross profit margin for the 26 weeks ended December 25, 2004 was 
51.0%, compared to 50.6% during the same period last year

The 2004 holiday season spanned Danier's second and third quarters for 
fiscal 2005, with Boxing Week results being shifted to the third 
quarter. Sales for the week ended January 1, 2005 which included Boxing 
Week, increased by approximately $5.8 million over the same week last 
year. For the five weeks ended January 1, 2005, comparable store sales 
increased 3%. Results for the 27 weeks ended January 1, 2005 decreased 
by less than one percent compared to sales for the 27 week period ended 
January 3, 2004.

"The merchandise offering was well executed but weak consumer spending 
on outerwear, customers delaying purchases closer to Christmas and into 
the post-Christmas period along with unseasonably warmer weather 
negatively affected sales during the second quarter," said Jeffrey 
Wortsman, President and Chief Executive Officer. "Sales of accessories 
continued to perform well, with accessories accounting for 20% of total 
second quarter sales compared with 18% last year."

Revenues for the second quarter ended December 25, 2005 were $71.3 
million, compared to $79.3 million in the same period last year. 
Comparable store sales decreased by approximately 11% for the second 
quarter. After adjusting for the shift in Boxing Week, revenues for the 
14 weeks ended January 1, 2005 were $81.1 million compared with $83.3 
million. Comparable store sales for this period decreased by 4%. For the 
27 weeks ended January 1, 2005, revenues were $105.7 million, compared 
with $106.6 million. Comparable stores sales during the 27 weeks ended 
January 1, 2005 decreased by approximately 2%.

EBITDA(1) for the second quarter was $13.8 million compared with $17.0 
million last year. Net earnings for the second quarter decreased by 20% 
to $7.2 million, or $1.06 per share, compared to earnings of $9.0 
million, or $1.30 per share, for the second quarter of fiscal 2004.

Gross profit margin for the second quarter was 52.4% compared to 52.7% 
during the second quarter of fiscal 2004. The decrease is the result of 
a more aggressive promotional strategy and markdowns leading up to the 
holidays. Year-to-date gross profit margin was 51.0% compared to 50.6% 
during the same period last year, an increase of 40 basis points.

At the end of the second quarter of fiscal 2005, Danier maintained a 
strong financial position with $20.6M in cash, no long term debt and 
working capital of $45.4 million. For the same period in fiscal 2004, 
Danier reported $13.9 million in cash and working capital of $42.9 
million. On December 1, 2004, Danier paid a dividend of $0.06 cents a 
share, its second quarterly dividend for 2005. In addition, the company 
has purchased for cancellation 243,600 subordinate voting shares during 
the 26-week period ending December 25, 2004.

During the second quarter, Danier opened one new power centre location 
at Vaughan Mills in Vaughan, Ontario.

"For the remainder of fiscal 2005 we will continue to focus on execution 
and driving the top line while carefully managing our expenses and 
inventories, as well, we continue to assess our U.S. strategy," added 
Mr. Wortsman. Our financial position and long-term strategy are all 
fundamentally strong and will help to bring steady improvement to our 
operating and financial results over time."

Investors, analysts and the media are invited to participate in a 
conference call today at 4:30 PM Eastern Time to discuss the results. 
Please dial 416-695-7848 in the Toronto area or 1-888-280-8771 (rest of 
Canada and the U.S.) and quote the Danier Leather Inc. conference call 
with chairperson Jeffrey Wortsman at least five minutes prior to the 
call. The call will also be webcast at www.danier.com or at 
www.ccnmatthews.com.

About Danier

Danier Leather Inc. is a leading integrated designer, manufacturer, and 
retailer of high-quality leather and suede clothing and accessories. The 
Company's merchandise is marketed exclusively under the well-known 
Danier brand name and is available only at its 99 shopping mall, 
street-front, and power centre stores, or through its corporate sales 
division and online through its website, www.danier.com.

(1)EBITDA refers to earnings before interest expense, income tax, 
depreciation and amortization, and is a measure used by management to 
assess operating performance. EBITDA is a non-GAAP earnings measure and 
does not have a standardized meaning. It is therefore unlikely to be 
comparable to similar measures presented by other issuers.

Note: This press release may contain forward-looking statements that 
involve risks, estimates, and uncertainties. Therefore, actual results 
may differ materially. Examples of such risks and uncertainties include 
those associated with product sales, demand for Danier's products, 
availability of raw materials, foreign sourcing and manufacturing, 
weather, estimates of damages, costs and interest associated with the 
class action lawsuit, continued growth of the leather apparel industry, 
and competition and other associated risks with Danier's business. For 
an expanded discussion of risks and uncertainties, please see the 
documents filed by Danier Leather Inc. with the Ontario Securities 
Commission. Danier disclaims any responsibility to update or revise such 
forward-looking statements whether as a result of new information, 
future events or otherwise.

/T/

DANIER LEATHER INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(thousands of dollars, except earnings per share and number
 of shares outstanding)
---------------------------------------------------------------------
---------------------------------------------------------------------

                  For the 13 weeks ended      For the 26 weeks ended
                -----------------------------------------------------
                   December     December       December     December
                   25, 2004     27, 2003       25, 2004     27, 2003
                -----------------------------------------------------
                 (unaudited)  (unaudited)    (unaudited)  (unaudited)

Revenue            $ 71,291     $ 79,293      $  95,933    $ 102,594
Cost of sales
 (Note 6)            33,969       37,499         47,053       50,695
                 ----------------------------------------------------
Gross profit         37,322       41,794         48,880       51,899
Selling, general
 and administrative
 expenses (Note 6)   25,211       26,549         42,564       43,425
                 ----------------------------------------------------
Earnings before
 interest and
 income taxes        12,111       15,245          6,316        8,474
Interest (income)
 expense                (11)         135            (70)         211
                 ----------------------------------------------------
Earnings before
 income taxes        12,122       15,110          6,386        8,263
Provision for
 income tax
 (Note 7)             4,940        6,126          2,617        3,387
                 ----------------------------------------------------
Net earnings
 for the period    $  7,182     $  8,984       $  3,769     $  4,876
                 ----------------------------------------------------
                 ----------------------------------------------------

Retained earnings,
 beginning of
 period              32,535       39,891         36,902       43,999
Share purchases
 (Note 5c)           (1,409)           -         (1,946)           -
Dividends              (408)           -           (825)           -
                 ----------------------------------------------------
Retained earnings,
 end of period     $ 37,900     $ 48,875      $  37,900    $  48,875
                 ----------------------------------------------------
                 ----------------------------------------------------

Earnings per Share:
  Basic           $    1.06    $    1.30      $    0.55    $    0.70
  Diluted         $    1.04    $    1.29      $    0.54    $    0.70

Weighted Average
 Number of Shares
 Outstanding:
  Basic           6,789,132    6,919,554      6,861,395    6,919,554
  Diluted         6,895,777    6,984,547      6,938,375    6,984,473
Number of Shares
 Outstanding      6,702,954    6,919,554      6,702,954    6,919,554


DANIER LEATHER INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------

                                      December    December      June
                                      25, 2004    27, 2003  26, 2004
                                  -----------------------------------
                                    (unaudited) (unaudited)

ASSETS
Current Assets
 Cash                                $  20,648   $  13,871  $ 23,000
 Accounts receivable                     1,170       6,662       634
 Inventories (Note 3)                   40,737      42,750    29,915
 Prepaid expenses                          620         567       923
 Future income tax asset                   103       1,098       107
                                  -----------------------------------
                                        63,278      64,948    54,579

Other Assets
 Capital assets (Note 4)                28,822      32,707    30,212
 Goodwill                                  342         342       342
 Future income tax asset                 4,633           -     4,736
                                  -----------------------------------
                                     $  97,075   $  97,997  $ 89,869
                                  -----------------------------------
                                  -----------------------------------

LIABILITIES
Current Liabilities
 Accounts payable and
  accrued liabilities                $  16,427   $  20,132  $  9,425
 Income taxes payable                    1,500       1,319       952
                                  -----------------------------------
                                        17,927      21,451    10,377
Accrued litigation provision
 and related expenses (Note 8)          15,321         562    15,450
Deferred lease inducements               2,087       2,418     2,283
Future income tax liability                470         696       472
                                  -----------------------------------
                                        35,805      25,127    28,582
                                  -----------------------------------

SHAREHOLDERS' EQUITY
 Share capital (Note 5)                 23,151      23,995    24,166
 Contributed surplus                       219           -       219
 Retained earnings                      37,900      48,875    36,902
                                  -----------------------------------
                                        61,270      72,870    61,287
                                  -----------------------------------
                                     $  97,075   $  97,997 $  89,869
                                  -----------------------------------
                                  -----------------------------------


DANIER LEATHER INC.
CONSOLIDATED CASH FLOW STATEMENTS
(thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------

                  For the 13 weeks ended      For the 26 weeks ended
---------------------------------------------------------------------
                   December     December       December     December
                   25, 2004     27, 2003       25, 2004     27, 2003
---------------------------------------------------------------------
                 (unaudited)  (unaudited)    (unaudited)  (unaudited)

Operating
 activities
Net earnings
 for the period    $  7,182    $   8,984     $    3,769    $   4,876
 Items not
  affecting cash:
 Amortization         1,716        1,753          3,431        3,506
 Amortization of
  deferred lease
  inducements           (98)         (94)          (196)        (184)
 Future income taxes     48          (47)           105          (54)
Change in non-cash
 working capital
 items (Note 9)      14,662       25,372         (3,634)          76
                    -------------------------------------------------
Cash flows from
 operating
 activities          23,510       35,968          3,475        8,220
                    -------------------------------------------------

Financing activities
 Subordinate voting
  shares issued           -            -             14            -
 Subordinate voting
  shares repurchased (2,103)           -         (2,975)           -
 Dividends             (408)           -           (825)           -
 Proceeds from lease
  inducements             -          251              -          364
                    -------------------------------------------------
Cash flows from
 financing
 activities          (2,511)         251         (3,786)         364
                    -------------------------------------------------

Investing activities
 Acquisition of
  capital assets       (795)        (924)        (2,041)      (1,967)
                    -------------------------------------------------
Cash flows from
 investing activities  (795)        (924)        (2,041)      (1,967)
                    -------------------------------------------------

Increase in cash     20,204       35,295         (2,352)       6,617
Cash and bank
 overdraft, beginning
 of period              444      (21,424)        23,000        7,254
                    -------------------------------------------------
Cash, end of
 period            $ 20,648    $  13,871      $  20,648    $  13,871
                    -------------------------------------------------
                    -------------------------------------------------

Supplementary cash
 flow information:

 Interest paid             3         160              3          218
 Income taxes paid       793         996          2,260        2,033


DANIER LEATHER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the 13 week and 26 week periods ended December 25, 2004 and 
 December 27, 2003
(Unaudited)

/T/

1. SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of Presentation:

The interim financial statements presented herein follow the same 
accounting policies and their methods of application as the 2004 annual 
financial statements. Generally accepted accounting policies ("GAAP") 
for interim financial statements do not conform in all respects to the 
disclosures required for annual financial statements, and accordingly, 
these interim financial statements should be read in conjunction with 
the Company's audited consolidated financial statements and the 
accompanying notes contained in the Company's 2004 Annual Report.

The preparation of financial statements in conformity with Canadian 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosure of contingent assets and liabilities at the 
date of the financial statements and the reported amounts of revenues 
and expenses during the reporting period. These estimates and 
assumptions are based on management's best knowledge of current events 
and actions that the Company may undertake in the future. Significant 
areas requiring the use of management estimates relate to the 
determination of litigation award reserves, inventory valuation, 
realizable value of capital assets, deferred tax assets, and income tax 
provisions. By their nature, these estimates are subject to measurement 
uncertainty and the impact on the consolidated financial statements of 
future periods could differ materially from those estimated.

(b) Comparative Figures:

Certain of the prior period's figures were reclassified to conform with 
the current year's financial statement presentation.

2. SEASONALITY OF RETAIL OPERATIONS:

Due to the seasonal nature of the retail business and the Company's 
product lines, the results of operations for any interim period are not 
necessarily indicative of the results of operations to be expected for 
the fiscal year. Generally, a significant portion of the Company's sales 
and earnings are generated during the fiscal second quarter, which 
includes the holiday selling season. Sales are generally lowest and 
losses are experienced during the period from April to September.

3. INVENTORIES (thousands of dollars):

/T/

                              December 25,   December 27,   June 26,
                                      2004           2003       2004
                            -----------------------------------------
Raw materials                      $ 4,053        $ 5,531    $ 4,043
Work-in-process                        637          1,918      1,363
Finished goods                      36,047         35,301     24,509
                            -----------------------------------------
                                  $ 40,737       $ 42,750   $ 29,915
                            -----------------------------------------
                            -----------------------------------------


4. Capital Assets (thousands of dollars):

                                         December 25, 2004
                               --------------------------------------
                                             Accumulated    Net Book
                                    Cost    Amortization       Value
                               --------------------------------------
Land                             $ 1,000        $      -     $ 1,000
Building                           7,064           1,245       5,819
Leasehold improvements            28,844          14,403      14,441
Furniture and equipment           12,276           7,638       4,638
Computer hardware and software     9,348           6,424       2,924
                               --------------------------------------
                                $ 58,532        $ 29,710    $ 28,822
                               --------------------------------------
                               --------------------------------------


                                         December 27, 2003
                               --------------------------------------
                                             Accumulated    Net Book
                                    Cost    Amortization       Value
                               --------------------------------------
Land                             $ 1,000        $      -     $ 1,000
Building                           7,035           1,058       5,977
Leasehold improvements            27,862          11,447      16,415
Furniture and equipment           12,298           6,728       5,570
Computer hardware and software     9,397           5,652       3,745
                               --------------------------------------
                                $ 57,592        $ 24,885    $ 32,707
                               --------------------------------------
                               --------------------------------------


                                             June 26, 2004
                               --------------------------------------
                                             Accumulated    Net Book
                                    Cost    Amortization       Value
                               --------------------------------------
Land                             $ 1,000        $      -     $ 1,000
Building                           7,066           1,080       5,986
Leasehold improvements            27,351          12,779      14,572
Furniture and equipment           12,101           7,036       5,065
Computer hardware and software     8,973           5,384       3,589
                               --------------------------------------
                                $ 56,491        $ 26,279    $ 30,212
                               --------------------------------------
                               --------------------------------------

5. Share Capital (thousands of dollars, except per share amounts):

(a) Authorized

1,224,329 Multiple Voting Shares
Unlimited Subordinate Voting Shares
Unlimited Class A Preference Shares

(b) Issued

                                          Dec 25,  Dec 27,  June 26,
                                             2004     2003      2004
                                       ------------------------------
1,224,329 Multiple Voting Shares
 (December 27, 2003 and June 26, 2004
 - 1,224,329)                                  (a)      (a)       (a)
5,478,625 Subordinate Voting Shares
 (December 27, 2003 - 5,695,225 and
 June 26, 2004 - 5,720,225)                23,151   23,995    24,166
                                       ------------------------------
                                         $ 23,151 $ 23,995  $ 24,166
                                       ------------------------------
                                       ------------------------------

(a) Nominal

The following transactions occurred during the first 26 weeks of the
fiscal year with respect to the Subordinate Voting shares:


                               26 Weeks Ended         26 Weeks Ended
                            December 25, 2004      December 27, 2003
                           ------------------------------------------
                              Number        $        Number        $
                           ------------------------------------------
Shares outstanding at
 beginning of the period   5,720,225  $24,166     5,695,225  $23,995
Issued                         2,000       14             -        -
Repurchased                 (243,600)  (1,029)            -        -
                           ------------------------------------------
Shares outstanding at end
 of the period             5,478,625  $23,151     5,695,225  $23,995
                           ------------------------------------------
                           ------------------------------------------

/T/

(c) Normal course issuer bid

On February 4, 2004, the Company received approval from the Toronto 
Stock Exchange to renew its normal course issuer bid. The bid permits 
the Company to acquire up to 284,761 subordinate voting shares, 
representing approximately 5% of the issued and outstanding subordinate 
voting shares, during the period from February 6, 2004 to February 5, 
2005. Effective December 17, 2004, the Toronto Stock Exchange approved 
an amendment to the normal course issuer bid that allows the Company to 
acquire up to 563,762 subordinate voting shares representing 
approximately 10% of the issued and outstanding subordinate voting 
shares. During the 26 week period ended December 25, 2004, 243,600 
Subordinate Voting Shares (December 27, 2003 - NIL) were purchased for 
cancellation at prevailing market prices for cash consideration of 
$2,975,000. The excess of $1,946,000 over the average paid-in value of 
the shares was charged to retained earnings.

(d) Stock option plan

As at December 25, 2004, the Company has reserved 913,275 Subordinate 
Voting Shares for issuance under its Stock Option Plan. As at December 
25, 2004, there were 642,400 options outstanding with exercise prices 
ranging from $6.02 to $17.94. Of these outstanding options, 576,400 are 
exercisable. During the 26 weeks ended December 25, 2004 no stock 
options were granted. Further details of the Stock Option Plan are 
contained in Note 6(e) of the consolidated financial statements 
contained in the 2004 Annual Report.

In September 2003, the CICA amended Handbook Section 3870 to require the 
use of the fair value-based method to account for stock options, 
commencing with fiscal years beginning on or after January 1, 2004. 
Under the fair value-based method, compensation cost is measured at fair 
value at the date of the grant and is expensed over the vesting period. 
In accordance with the permitted transitional options, during the fourth 
quarter of 2004, the Company prospectively applied the fair value-based 
method to all stock options granted on or after June 29, 2003.

Options granted during the year ended June 28, 2003 continue to be 
accounted for using the settlement accounting method. During that year, 
the Company granted 111,000 stock options (net of 25,000 forfeited 
options during fiscal 2003 and 50,000 forfeited options during fiscal 
2004) with an exercise price of $15.85. Had compensation cost been 
determined using the fair value-based method at the grant date of the 
stock options awarded to employees and directors, the net earnings and 
earnings per share for the 13 and 26 weeks ended December 25, 2004 and 
December 27, 2003 would have been reduced to the pro forma amounts 
indicated in the following table:

/T/

                              13 Weeks Ended          13 Weeks Ended
                           December 25, 2004       December 27, 2003
                    -------------------------------------------------
                      As Reported  Pro-forma  As Reported  Pro-forma
                    -------------------------------------------------

Net earnings              $ 7,182    $ 7,122      $ 8,984    $ 8,924
Basic earnings per share  $  1.06    $  1.05      $  1.30    $  1.29
Diluted earnings per
 share                    $  1.04    $  1.03      $  1.29    $  1.28


                              26 Weeks Ended          26 Weeks Ended
                           December 25, 2004       December 27, 2003
                    -------------------------------------------------
                      As Reported  Pro-forma  As Reported  Pro-forma
                    -------------------------------------------------

Net earnings              $ 3,769    $ 3,648      $ 4,876    $ 4,755
Basic earnings per share  $  0.55    $  0.53      $  0.70    $  0.69
Diluted earnings
 per share                $  0.54    $  0.52      $  0.70    $  0.68

/T/

The pro forma effect on net earnings of the period is not representative 
of the pro forma effect on net earnings of future periods because it 
does not take into consideration the pro forma compensation cost related 
to options awarded prior to June 29, 2002.

The fair value of options granted during fiscal 2003 and fiscal 2004 was 
estimated on the grant date using the Black-Scholes Option Pricing 
Model. The Black-Scholes Option Pricing Model was developed for use in 
estimating the fair value of traded options, which have no vesting 
restrictions and are fully transferable. In addition, the Black-Scholes 
Option Pricing Model requires the use of subjective assumptions 
including the expected stock price volatility. As a result the Company's 
stock option plan having characteristics different from those of traded 
options, and because changes in the subjective assumptions can have a 
material effect on the fair value estimate, the Black-Scholes Option 
Pricing Model does not necessarily provide a reliable single measure of 
the fair value of options granted.

(e) Deferred Share Unit Plan

Effective October 19, 2004, the Company established a Deferred Share 
Unit ("DSU") Plan for non-employee directors. Under this plan, 
non-employee directors of the Company receive an annual grant of DSU's 
and can also elect to receive their annual retainers and meeting fees in 
DSU's. The number of DSU's issued is based upon the market value of the 
Company's subordinate voting shares at each allocation date during the 
year. After retirement from the board, these directors receive a cash 
payment equal to the market value of the accumulated DSU's. During the 
quarter ended December 25, 2004, each non-employee director was issued 
1,200 DSU's. The number of DSU's issued each year, multiplied by the 
market value of the subordinate voting shares, is recorded as an expense 
by the Company.

6. Amortization (thousands of dollars):

Amortization included in cost of sales and selling, general and 
administrative expenses ("SG&A") is summarized as follows:

/T/

                                   13 weeks ended     26 weeks ended
                            -----------------------------------------
                                Dec 25,   Dec 27,  Dec 25,   Dec 27,
                                   2004      2003     2004      2003
                            -----------------------------------------
Amortization included in
 cost of sales                    $ 195     $ 184    $ 390     $ 369
Amortization included in SG&A     1,521     1,569    3,041     3,137
                            -----------------------------------------
                                $ 1,716   $ 1,753  $ 3,431   $ 3,506
                            -----------------------------------------

7. Income taxes (thousands of dollars):

The Company's effective income tax rate consists of the following:


                                         Dec 25, 2004  Dec 27, 2003
                                       ------------------------------
Combined basic federal and provincial
 average statutory rate                          36.1%         37.0%
Manufacturing and processing credit              (0.5%)        (0.9%)
Effect of foreign operating losses                4.5%          3.9%
Other                                             0.9%          1.0%
                                       ------------------------------
                                                 41.0%         41.0%
                                       ------------------------------
                                       ------------------------------


8. Litigation provision and related expenses:

                                         Dec 25, 2004  Dec 27, 2003
                                       ------------------------------
Provision for damages, costs
 and interest                                $ 15,000    $        -
Legal and professional fees                       321           562
                                       ------------------------------
Accrued litigation provision and
 related expenses                            $ 15,321    $      562
                                       ------------------------------
                                       ------------------------------

/T/

In fiscal 1999, the Company and certain of its directors and officers 
were served with a Statement of Claim under the Class Proceedings Act 
(Ontario) concerning the accuracy and disclosure of certain information 
contained in a financial forecast issued by the Company during its 
initial public offering ("IPO") in 1998. The suit sought damages be paid 
equal to the alleged diminution in value of the shares.

In October 2001, a motion to certify the action as a class action was 
granted. The trial commenced in the Superior Court of Justice (Ontario) 
during May 2003 and was completed in January 2004. On May 7, 2004 the 
Judge issued a judgment in favour of the Plaintiffs and awarded damages 
to Canadian shareholders who purchased subordinate voting shares in the 
IPO. The Judge concluded that at the time of pricing of the IPO, which 
was two weeks before the closing, the forecast was reasonable and that 
the Company's CEO and CFO had an honest belief at the time the IPO 
closed that the forecast could be achieved. The Judge further held that 
the forecast was, in fact, substantially achieved. Despite these 
findings, the Court decided that management's judgement that the 
forecast was still achievable at the time of closing was not reasonable. 
The Company is contesting this decision and has filed a Notice of Appeal 
as discussed below.

For those shareholders who sold their shares between June 4 and 9, 1998, 
the Court awarded them the difference between the IPO price and the 
price at which they sold their shares. For those shareholders who sold 
or still hold those shares after June 9, 1998, the Court awarded $2.35 
per share.

Based solely on the information currently available, if the award had 
been paid at the fiscal 2004 year-end, the Company estimates the damages 
to be about $10 million. Interest and costs have not been dealt with by 
the Court but if awarded, the Company estimates the total award could 
increase by approximately $5 million. During the fourth quarter of 2004, 
the Company recorded an expense and set up a provision of $15 million 
pursuant to this judgment. The judgment is a joint and several 
responsibility of the Company and two of its Senior Officers. The 
Company carries directors and officers insurance and it expects that the 
insurance will cover the two Senior Officers' portion of the total award 
but the amount of insurance is not reasonably determinable at this time 
and its recovery has therefore not been accrued. The provision for 
recovery of income taxes related to the award is based on the entire $15 
million provision and does not take account of the potential results of 
the appeal discussed in the next paragraph, any possible insurance 
recoveries or future tax adjustments. The damages award and income tax 
recovery is based on management's best estimate and is subject to 
adjustment when all facts are known and all issues are resolved. The 
possible adjustment could be significant.

In June 2004, a Notice of Appeal was filed by the Company and two of its 
senior officers. The appeal is scheduled to be heard during June 2005. 
Payment of any damages will be deferred as the award and the judgment 
are stayed by the filing of the appeal.

During the years ended June 26, 2004 and June 28, 2003, a provision for 
future legal and professional fees was set up in the amounts of $0.5 
million and $1.2 million, respectively. As at December 25, 2004, the 
provision for future legal and professional fees in connection with the 
appeal was $0.3 million and as at December 27, 2003, the provision for 
future legal and professional fees related to the trial was 
approximately $0.6 million.

9. Changes in non-cash operating working capital items (thousands of 
dollars):

/T/

                                   13 weeks ended     26 weeks ended
                            -----------------------------------------
                                Dec 25,   Dec 27,  Dec 25,   Dec 27,
                                   2004      2003     2004      2003
                            -----------------------------------------
Accounts receivable              $    6   ($5,416)   ($536)  ($6,062)
Inventories                       3,666    14,706  (10,822)   (5,721)
Prepaid expenses                    110       246      303       322
Accounts payable and accrued
 liabilities                      6,684    10,665    6,873    10,135
Income taxes payable              4,196     5,171      548     1,402
                            -----------------------------------------
                               $ 14,662  $ 25,372  ($3,634) $     76
                            -----------------------------------------

10. Commitments and Contingencies - (thousands of dollars):

(a) Operating leases

Minimum rentals for the next five fiscal years and thereafter,
 excluding rentals based upon revenue are as follows:

2005                                     $ 11,745
2006                                     $ 11,200
2007                                     $ 10,376
2008                                     $  8,451
2009                                     $  6,509
Thereafter                               $ 12,115

/T/

(b) Letters of credit

The Company had outstanding letters of credit in the amount of $4,298 
(December 27, 2003 - $6,450; June 26, 2004 - $6,804) for imports of 
finished goods inventories to be received.

(c) Guarantees

In the normal course of business, the Company enters into numerous 
agreements that may contain features that meet the AcG-14 definition of 
a guarantee. AcG-14 defines a guarantee to be a contract (including an 
indemnity) that contingently requires the Company to make payments to 
the guaranteed party based upon certain criteria including failure of 
another party to perform under an obligating agreement or failure of a 
third party to pay its indebtedness when due.

The Company has provided the following guarantees to third parties and 
no amounts have been accrued in the financial statements for these 
guarantees:

(i) In the ordinary course of business, the Company has agreed to 
indemnify its lenders under its credit facility against certain costs or 
losses resulting from changes in laws and regulations or from a default 
in repaying a borrowing. These indemnifications extend for the term of 
the credit facility and do not provide any limit on the maximum 
potential liability. Historically, the Company has not made any 
indemnification payments under such agreements.

(ii) In the ordinary course of business, the Company has provided 
indemnification commitments to certain counterparties in matters such as 
real estate leasing transactions, director and officer indemnification 
agreements and certain purchases of fixed assets such as computer 
software. These indemnification agreements generally require the Company 
to compensate the counterparties for costs or losses resulting from 
legal action brought against the counterparties related to the actions 
of the Company. The terms of these indemnification agreements will vary 
based on the contract and generally do not provide any limit on the 
maximum potential liability.

(iii) The Company sublet one location during fiscal 2004 and has 
provided the landlord with a guarantee in the event the subtenant 
defaults on its obligation to pay rent. The term of the guarantee is 
approximately 4 years and the Company's maximum exposure is $158.

11. Segmented information:

Management has determined that the Company operates in one dominant 
industry and geographic segment which involves the design, manufacture 
and retail of fashion leather and suede apparel.

-30-

Investor Relations Contact: Danier Leather Inc.
Jeffrey Wortsman
President and Chief Executive Officer
(416) 762-8175 ext. 302
(416) 762-7408 (FAX)
Email: leather@danier.com

or

Danier Leather Inc.
Bryan Tatoff
Senior Vice-President and Chief Financial Officer
(416) 762-8175 ext. 328
(416) 762-7408 (FAX)
Email: bryan@danier.com