EXHIBIT
1
 
 FIRSTSERVICE
CORPORATION
 
 ANNUAL
INFORMATION FORM
 
 
 
 
 
 
 
 For
the nine months ended December 31, 2008
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FEBRUARY
27, 2009
  
 TABLE
OF CONTENTS
 
 Forward-Looking Statements
                  3Corporate structure
                  4General development of the
      business
                  5Business description
                  5Commercial Real Estate
    Services
                  6Residential Property
    Management
                  7Property Services
                  9Business strategy
                  10Seasonality
                  12Trademarks
                  12Employees
                  13Minority interests
                  13Dividends and dividend
    policy
                  13Capital structure
                  14Rating of Preferred Shares
                  14Market for securities
                  14Transfer agents and
    registrars
                  15Directors and officers
                  15Legal proceedings and regulatory
      actions
                  17Properties
                  17Selected annual information - last five fiscal
      periods
                  18Quarterly results – fiscal periods ended December
      31, 2008, March 31, 2008 and 2007
                  19Risk factors
                  20Management's discussion and
      analysis
                  24Interest of management and others in material
      transactions
                  24Material contracts
                  24Cease trade orders, bankruptcies, penalties or
      sanctions
                  25Conflicts of interest
                  26Experts
                  26Audit Committee
                  26Additional information
                  28Exhibit
      "A" - Audit Committee Mandate
 
 
 
 
 
 FORWARD-LOOKING
STATEMENTS
 
 This
Annual Information Form contains "forward looking statements" which reflect the
current expectations, estimates, forecasts and projections of management
regarding our future growth, results of operations, performance and business
prospects and opportunities. Wherever possible, words such as "may," "would,"
"could, " "will," "anticipate," "believe," "plan," "expect," “intend,"
"estimate," "aim," "endeavour" and similar expressions have been used to
identify these forward-looking statements. These statements reflect management's
current beliefs with respect to future events and are based on information
currently available to management. Forward-looking statements involve
significant known and unknown risks, uncertainties and assumptions. Many factors
could cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements, including, without
limitation, those listed in the "Risk Factors" section of this Annual
Information Form. Should one or more of these risks or uncertainties
materialize, or should assumptions underlying the forward-looking statements
prove incorrect, actual results, performance or achievements could vary
materially from those expressed or implied by the forward-looking statements
contained in this Annual Information Form. These factors should be considered
carefully and prospective investors should not place undue reliance on the
forward-looking statements. Although the forward-looking statements contained in
this Annual Information Form are based upon what management currently believes
to be reasonable assumptions, we cannot assure prospective investors that actual
results, performance or achievements will be consistent with these
forward-looking statements. These forward-looking statements are made as of the
date of this Annual Information Form and we do not intend, and do not assume any
obligation, to update or revise these forward-looking statements.
 
 
 
 FIRSTSERVICE
CORPORATION
 
 ANNUAL
INFORMATION FORM
 February
27, 2009
 
 All
amounts referred to in this Annual Information Form (“AIF”) are in United States
dollars unless otherwise indicated. All financial and statistical data in this
AIF is presented as at December 31, 2008 unless otherwise
indicated.
 
 
 Corporate
structure
 FirstService Corporation (the “Company”
or “FirstService”) was formed under the Business Corporations Act
(Ontario) by Certificate of Incorporation dated February 25, 1988. The Company
amalgamated with Coloma Resources Limited pursuant to a Certificate of
Amalgamation dated July 31, 1988, and the amalgamated corporation continued
under the name “FirstService Corporation”.
 
 By Certificate of Amendment dated April
2, 1990, the Company: (i) consolidated each of its Class A Subordinate Voting
Shares on a 30 to 1 basis and changed the designation of that class of shares to
“Subordinate Voting Shares”, each such share carrying one vote; and (ii)
consolidated each of its Class B shares on a 30 to 1 basis and changed the
designation of that class of shares to “Multiple Voting Shares”, each such share
carrying 20 votes.
 
 By
Certificate of Amendment dated June 27, 2007, the first series of Preference
Shares of the Company were created and designated as 7% cumulative preference
shares, series 1 (the "Preferred Shares"), with each Preferred Share having a
stated value of US$25.00 and carrying a fixed cumulative annual dividend of
US$1.75 payable quarterly.
 
 Our Subordinate Voting Shares are
publicly traded on both the Toronto Stock Exchange ("TSX") (symbol: FSV) and the
NASDAQ Stock Market ("NASDAQ") (symbol: FSRV). Our Preferred Shares trade in US$
on the TSX (symbol: FSV.PR.U). Our head and registered office is located at 1140
Bay Street, Suite 4000, Toronto, Ontario, M5S 2B4.
 
 Our
fiscal year-end was March 31 up to and including the fiscal year ended March 31,
2008. On May 14, 2008, our Board of Directors approved a change in year-end to
December 31, effective December 31, 2008. A Notice of Change in Year-End was
filed with regulators by the Company, a copy of which can obtained at
www.sedar.com.
 
 The
following chart sets out the significant subsidiaries of the Company as of
December 31, 2008. The voting securities of such subsidiaries not controlled by
us are those owned by operating management of each respective
subsidiary.
 
 Name
      of subsidiary
              Percentage
      of voting
                securities
      owned by
                FirstService
              Jurisdiction
      of
                incorporation
      or
                formationAmerican
      Pool Enterprises, Inc.
              93.1%
              DelawareField
      Asset Services, Inc.
              73.8%
              TexasFirstManagement
      Partners, Inc.
              82.9%
              DelawareFirstService
      Commercial Real Estate Services, Inc.
                (d/b/a
      Colliers Macaulay Nicolls and Colliers International)
              92.3%
              OntarioFirstService
      (USA), Inc.
              100.0%
              DelawareFirstService
      Delaware, LLC
              100.0%
              DelawareFirstService
      Delaware, LP
              100.0%
              DelawareThe
      Continental Group, Inc.
              77.9%
              FloridaThe
      Franchise Company, Inc.
              86.8%
              OntarioThe
      Wentworth Group, Inc.
              74.9%
              Pennsylvania
 
 Page
4
 General
development of the business
 Our
origins date back to 1972 when Jay S. Hennick, the Founder and CEO of the
Company, started a Toronto commercial swimming pool and recreational facility
management business, which became the foundation of FirstService. In 1993, we
completed our initial public offering on the TSX, raising C$20 million. In 1995
our shares were listed on NASDAQ. In 1997, a second stock offering was completed
in Canada and the United States raising US$20 million. In December 2004, a stock
dividend was declared effectively achieving a 2-for-1 stock split for all
outstanding Subordinate and Multiple Voting Shares.
  On August
1, 2007, we issued a stock dividend of Preferred Shares to holders of
Subordinate Voting Shares and Multiple Voting Shares (together the “Common
Shares”). One Preferred Share was issued for every five outstanding Common
Shares. The stock dividend resulted in the issuance of 5,979,074 Preferred
Shares, with an aggregate par value of $149.5 million. The annual preferred
dividend obligation is $10.1 million, payable quarterly on or about the last day
of each quarter.
 
 From 1994
to present, we completed numerous acquisitions, developing and growing the
service lines that exist today.
 
 In 1996,
we obtained a revolving credit facility from a syndicate of banks, which has
been amended and restated at various times to the present and now includes a
$225 million revolving credit facility due September 2012. In 2001, we completed
a private placement of $100 million of 8.06% Senior Notes due June 29, 2011 with
a group of US institutional investors. In October 2003, $50 million of 6.40%
Senior Notes due September 30, 2015 was issued. In April 2005, we completed a
further private placement of $100 million of 5.44% Senior Notes due April 1,
2015.
 
 In
November 2004, we established a new commercial real estate services division
under the “Colliers International” brand with the acquisition of CMN
International Inc. (“CMN”). CMN is the largest affiliate of the Colliers
International commercial real estate services network. CMN’s real estate
services offerings include brokerage (sale and leasing), property management,
valuation and advisory services.
 
 In March
2006, we disposed of Resolve Corporation, our Business Services operation,
through an initial public offering of trust units of Resolve Business
Outsourcing Income Fundin
Canada for consideration comprised of cash and a 7.3% interest in the trust. The
disposal marked a significant milestone in our strategy of focusing on property
services businesses for future growth.
 
 In July
2008, we disposed our Integrated Security Services division, which includes
Intercon Security in Canada and SST in the United States, for gross cash
proceeds of approximately $187.5 million. The proceeds were used to pay down
debt and intensify our focus on global diversified real estate
services.
 
 
 Business
description
 FirstService
is a leader in the rapidly growing property services sector, providing services
in the following areas: commercial real estate; residential property management;
and property services. Market-leading brands include Colliers International in
commercial real estate; Continental, Wentworth and Merit in residential property
management; and Field Asset Services, Paul Davis Restoration and California
Closets in property services.
 
 Each
service line provides near-essential services, generates a significant
percentage of recurring revenues, has significant cash flows, generates
substantial returns on invested capital and can be leveraged through margin
enhancement, cross-selling or consolidation.
 
 Page
5
 Our
operations are conducted through three operating segments:
  
  Revenues
      by continuing operating segment
                                                        
                                                        Nine
      months ended
                                                          December
      31
                                                        
                                                        
                                                        Year
      ended March 31(in
      thousands of US$)
                                                        
                                                        2008
                                                        
                                                        
                                                        2008
                                                        
                                                        
                                                        2007
                                                        
                                                        
                                                        2006
                                                        
                                                        
                                                        2005Commercial
      Real Estate Services
                                                        
                                                        $
                                                        578,192
                                                        
                                                        
                                                        $
                                                        787,467
                                                        
                                                        
                                                        $
                                                        577,676
                                                        
                                                        
                                                        $
                                                        438,032
                                                        
                                                        
                                                        $
                                                        120,535Residential
      Property Management
                                                        
                                                        
                                                        475,251
                                                        
                                                        
                                                        
                                                        544,926
                                                        
                                                        
                                                        
                                                        423,797
                                                        
                                                        
                                                        
                                                        346,133
                                                        
                                                        
                                                        
                                                        275,229Property
      Services
                                                        
                                                        
                                                        269,114
                                                        
                                                        
                                                        
                                                        216,972
                                                        
                                                        
                                                        
                                                        150,794
                                                        
                                                        
                                                        
                                                        134,136
                                                        
                                                        
                                                        
                                                        111,779Corporate
                                                        
                                                        
                                                        123
                                                        
                                                        
                                                        
                                                        348
                                                        
                                                        
                                                        
                                                        554
                                                        
                                                        
                                                        
                                                        367
                                                        
                                                        
                                                        
                                                        572Total
                                                        
                                                        $
                                                        1,322,680
                                                        
                                                        
                                                        $
                                                        1,549,713
                                                        
                                                        
                                                        $
                                                        1,152,821
                                                        
                                                        
                                                        $
                                                        918,668
                                                        
                                                        
                                                        $
                                                        508,115
 
 
 Commercial
Real Estate Services
 We are a leading international
commercial real estate services provider offering a full range of commercial
real estate services in the United States, Canada, Australia, and several other
countries in Europe, Asia and Latin America. Operations in the United States and
Canada generate approximately 60% of total revenues for this segment, while
Asia-Pacific, Europe and Latin America generates approximately 40%. We provide
services to owners, investors and tenants, including brokerage (sale, leasing,
and mortgage), property management and maintenance, valuation, project
management, and corporate advisory services. We operate principally under the
Colliers International and FirstService Commercial Real Estate brand
names.
 
 Commercial real estate brokers match
buyers and sellers of real estate (investors, developers or owners-users) as
well as owners and tenants of space for lease in return for a commission
generally based on the value of the transaction. Our brokerage activities focus
primarily on office, industrial, retail and multi-unit residential properties.
Brokerage activities represent approximately 70% of segment revenues and provide
opportunities for cross selling other real estate services. In calendar year
2008, through a network of approximately 1,900 brokers across 148 offices in 36
countries, we executed transactions valued at approximately $40 billion across a
diverse client base, including corporations, financial institutions, governments
and individuals. Typically, brokers earn a direct commission on individual
transactions, which provides variability in our cost structure.
 
 Commercial property management focuses
on the same client segments as brokerage; however, fees are typically multi-year
fixed fee contracts that are largely recurring in nature.
 
 Our international corporate services
group partners with large corporations in managing their overall portfolio and
transactions. Professional staff combines proprietary technology with high level
strategic planning, portfolio management, lease administration and facilities
and project management. Fees in corporate services are derived from a
combination of fixed fee services and transaction based brokerage
fees.
 
 Page
6
 Commercial real estate brokerage is
cyclical and seasonal in nature, affected by external factors, including
interest rates, access to financing, investor and consumer confidence and other
macroeconomic factors and political risk in any specific region. Our revenues in
this segment are weighted more heavily to the latter half of the calendar year,
with approximately 70% of transactions occurring in our fiscal quarters ending
in September and December.
 
 We are the largest affiliate within the
global Colliers International Property Consultants (“CIPC”) alliance. Each
member of the CIPC alliance licenses the right to use the Colliers International
brand in an exclusive territory. Colliers International is recognized as one of
the top 3 commercial real estate services organizations worldwide with a network
of 293 offices and over 11,000 employees in 61 countries. Membership in CIPC
provides us with a global brand name and local market intelligence throughout
the world to assist the international community of investors, owners and users
of real estate. Members of CIPC are required, except in certain circumstances,
to direct referrals for other regions to member firms. We also operate
commercial real estate services businesses under the following brands:
FirstService Commercial Real Estate, PGP Valuation, PKF Consulting and MHPM
Project Managers.
 
 Commercial real estate firms can be
segmented into two tiers: (i) large global full-service firms with international
service capabilities, and (ii) regional and niche firms with strengths in their
respective local markets. Recent industry trends have seen an increase in
outsourcing by multi-national clients with global needs, creating an opportunity
for full-service global players like our company. There has also been a recent
trend amongst larger firms to further improve their market position through
consolidation. However, the commercial real estate competitive landscape market
remains highly fragmented.
 
 Our growth strategy is to expand our
suite of complementary service offerings and the geographical markets where
services are offered. This will continue to be achieved both organically and
through selective acquisitions. We also plan to enhance our brand and service
delivery through increased broker training and continued development of
proprietary market tools and research resources. During the nine months ended
December 31, 2008, we made investments in several businesses, including
Colliers Netherlands and FirstService Williams Real Estate operating in the
greater New York City area. In January 2008, we wound down our Canadian
commercial mortgage securitization operation and in December 2008, we decided to
dispose of our Chicago-based US commercial mortgage brokerage and servicing
business, both due to unprecedented adverse changes in Canadian and US credit
markets which are fundamental to these operations.
 
 Our
commercial real estate services business is subject to regulation by the
countries and regions in which it operates. In most countries or regions, laws
require that brokers must be licensed and conform to a code of ethics, which
involves certain examinations and continuing education. In addition, our
property managers are subject to regulation in the various regions in which they
operate.
 
 Residential
Property Management
 We are
the largest manager of private residential communities in North America. Private
residential communities include condominiums, cooperatives, gated communities,
homeowner associations and a variety of other residential developments governed
by common interest or multi-unit residential community associations
(collectively referred to as “community associations”). In total, we manage more
than 1 million residential units in 3,700 community associations in 18 American
states. We operate under the umbrella brand name FirstService Residential
Management, along with regional brands.
 
 In Florida, we operate primarily under
the Continental brand. In the mid-Atlantic region, we operate primarily under
the Wentworth, Cooper Square, Planned Companies, and American
  Page
7
 Pool
brands. In Arizona, we operate as Rossmar & Graham, in Illinois as
Wolin-Levin, in Nevada as RMI, in Texas as Premier and in California, we operate
as Merit.
 
 In the
residential property management industry, there are two types of professional
property management companies: (i) traditional property managers, and (ii)
full-service property managers. Traditional property managers primarily handle
administrative property management functions on behalf of their community
association clients, such as advising homeowner boards on a wide variety of
matters relating to the operation of their communities, collecting monthly
maintenance fees, sourcing and paying suppliers, preparing financial statements
and contracting out support services. Full-service property managers provide the
same services as traditional property managers but also provide a variety of
other services under one exclusive contract.
 
 We are a
full-service property manager and in many markets we provide a full range of
ancillary services including grounds maintenance, landscaping, painting, pest
control, irrigation, home service contracts, real estate sales and leasing,
heating, air conditioning, plumbing and swimming pool management and
maintenance. A majority of the swimming pool related services revenues are
generated outside the “sunbelt” states, and are therefore impacted by
weather-related seasonality. Accordingly, revenues are earned primarily in the
fiscal quarters ending in June and September. In most of our major markets, we
also provide rental management and maintenance services to (i) property owners
and (ii) individual investors or owners of single or multiple residential units,
many of which are within the communities we manage. Finally, in most markets we
also provide advisory services with respect to financial services (primarily
lock-box and other transaction-related services), insurance brokerage, and waste
management, utilizing the scale of our operations to economically benefit our
clients.
 
 The
aggregate budget of all the community associations in the United States is
estimated to be approximately $41 billion. The aggregate budget of the community
associations managed by us is estimated at approximately $5 billion. Currently,
we estimate that we access in the range of 12-15% of the aggregate budget of our
client communities through the various services that we offer. Our strategy is
to continue to add communities under management while striving to earn a greater
percentage of the aggregate budget by introducing additional value-added
services and products, thereby offering our clients a single point of
accountability and leveraging our scale and purchasing power to the benefit of
the community associations.
 
 Based on
recent industry data compiled by the Community Associations Institute, we
estimate that: (i) more than 60 million Americans, representing approximately 24
million households, live in condominiums, cooperatives, planned communities and
other residential developments governed by common interest or multiple unit
residential community associations; (ii) more than 50% of new homes currently
being built in and around major metropolitan areas in the United States are
within these categories; (iii) there are approximately 301,000 community
associations in the United States; and (iv) the total annual operating revenues
for these community associations are estimated to be $41 billion. The market is
expected to grow at a rate of approximately 3% per year as a result of the
several thousand new community associations formed each year. In addition, the
growing trend from self-management to professional management, currently almost
50% of the market, is believed to at least double the effective growth rate for
professional property management companies.
 
 Typically,
owners of private residential units are required to pay quarterly or monthly
fees to cover the expenses of managing the community association’s business
activities and maintaining the common areas of the property. Historically,
decision making for communities was delegated to volunteer boards of directors
elected by the owners. Increasingly, these volunteer boards have outsourced the
responsibility to manage the day-to-day operation and maintenance of community
property to professional property management companies.
 
 The
residential property management industry is extremely fragmented and dominated
by numerous local and regional management companies. Only a small number of such
companies,
  Page
8
 however,
have the expertise and capital to provide both traditional property management
services as well as the other support services provided by full-service property
managers. FirstService is the largest full-service manager of private
residential communities in the United States, managing over 4% of the nation’s
approximately 24 million units in community associations. We enjoy a competitive
advantage because of our size, depth of financial and management resources, and
operating expertise.
 
 Our
business is subject to regulation by the states in which we operate. In most
states, laws require that property managers must be licensed, which involves
certain examinations and continuing education. In addition, our residential real
estate sales and leasing operations are subject to regulation as a real estate
brokerage by the various states in which we operate.
 
 Property
Services
 In our
Property Services division, we provide a variety of residential and commercial
services in North America through three service delivery channels: vendor
networks, franchising and branchising. The principal brands in this division
include Field Asset Services (“FAS”), California Closet Company (“California
Closets”), Paul Davis Restoration, CertaPro Painters, College Pro Painters,
Pillar to Post Home Inspection, Handyman Connection and Floorcoverings
International.
 
 Vendor network –FAS,
headquartered in Austin, Texas, is one of America’s largest residential property
preservation services companies. FAS provides comprehensive property
preservation, maintenance and repair services to some of the largest residential
mortgage lenders and servicers in America, for residential properties acquired
through foreclosure. FAS processes client requests through the use of
information technology systems to manage client portfolios of foreclosed
properties. All maintenance and repair services are managed through a process
that includes outsourcing field services to a national network of independent
service contractors. At any one time, FAS provides its services to more than $5
billion in client assets representing over 70,000 residential
properties.
 
 Franchising – we own and
operate seven franchise systems, as described below.
 
 California
Closets is the largest provider of installed closet and home storage systems in
North America. Headquartered in San Rafael, California, California Closets has
94 franchises in the United States and Canada as well as master franchises in
other countries around the world. California Closets receives royalties from
franchisees based on a percentage of the franchisees’ gross
revenues.
 
 Paul
Davis Restoration is a Jacksonville, Florida based franchisor of residential and
commercial restoration services serving the insurance restoration industry in
the United States through 220 franchises. This company provides restoration
services for property damaged by natural or man-made disasters. Paul Davis
Restoration receives royalties from franchisees based on a percentage of the
franchisees’ gross revenues.
 
 CertaPro
Painters is a residential and commercial painting franchise system with 346
franchises operating in major markets across the United States and Canada as
well as master franchises in other countries around the world. CertaPro Painters
focuses on high-end residential and commercial painting and decorating work and
other programs for property managers who have portfolios of condominium and
commercial properties. Franchisees pay CertaPro Painters either a royalty based
on a percentage of gross revenues or a fixed monthly fee, plus administrative
fees for various ancillary services.
 
 College
Pro Painters is a seasonal exterior residential painting franchise system
operating in 29 states and across Canada with approximately 515 franchises. It
recruits students and trains them to operate the business, including price
estimating, marketing, operating procedures, hiring, customer service and
safety. College Pro Painters receives a royalty from
  Page
9
 each
franchisee based on a percentage of revenue. College Pro Painters’ operations
are seasonal with significant revenue and earnings in the Company’s June and
September quarters followed by losses in the December and March
quarters.
 
 Pillar to
Post is one of North America’s largest home inspection service providers.
Services are provided through a network of 327 franchises. Pillar to Post earns
royalties from its franchisees based on a percentage of franchisee gross
revenues.
 
 Handyman
Connection is a leading North American home repair and remodeling service
franchiser. Services are provided by a network of 111 franchises operating
throughout the United States. Handyman Connection earns royalties from its
franchisees based on a percentage of franchisee gross revenues.
 
 Floorcoverings
International is a residential floor coverings design and installation franchise
system operating in North America with 76 franchisees. Floorcoverings
International earns royalties from its franchisees based on a percentage of
franchisee gross revenues.
 
 Franchise
agreements are for terms of five or ten years, with the exception of College Pro
Painters where the agreements are for a term of one year. All franchise
agreements contain renewal provisions that can be invoked at little or no
cost.
  The
franchised services industry is highly fragmented, consisting principally of a
large number of smaller, single-service or single-concept companies. Due to the
large size of the overall market for these services, dominant market share is
not considered necessary for becoming a major player in the industry. However,
because of the low barriers to entry in this segment, we believe that brand name
recognition among consumers is a critical factor in achieving long-term success
in the businesses we operate.
 
 Franchise
businesses are subject to US Federal Trade Commission regulations and state and
provincial laws that regulate the offering and sale of franchises. Presently,
the Company is authorized to sell franchises in 40 states, in all Canadian
provinces and in several other countries around the world. In all jurisdictions,
we endeavor to have our franchisees meet or exceed regulatory
standards.
 
 Branchising– we own and
operate twelve California Closets franchises located in major population centers
in the United States and Canada. These operations are referred to as
“branchises”. The purpose of branchising is to reacquire well-established and
profitable franchises located in large territories to accelerate growth in these
territories in partnership with operating management.
 
 
 Business
strategy
 We
operate in the real estate services sector. Our objective is to increase the
revenues, profitability and market position of each operating unit and
subsequently acquired business, while maintaining the highest level of service
to our customers.
 
 Over the
course of time, and as we have grown, our management style and way of doing
business has been refined and enhanced into an approach we call “The
FirstService Way”. Built on seven strategic pillars, it has guided our growth
and attracted strong management teams with visions for the future success of
their businesses. The seven principles of our business strategy are defined
below:
 
 1.
            Partnership
      philosophy. We believe equity ownership by our management teams is
      essential. Our partners enjoy total authority over front-line operating
      decisions, while equity ownership allows direct participation in the
      financial outcomes of their decisions. With significant equity interests
      in the businesses they operate, management’s interests
 Page
10
 arealigned with our shareholders in building long-term
      value. These interests are in the form of a non-transferable direct
      minority equity ownership position, stock options or in equity-like
      notional value appreciation plans. In all cases, we have the right to
      purchase (“call”) the minority interest at a formula price based on a
      multiple of trailing EBITDA1. Minority shareholders have the right to
      require us to purchase their shares at the same price, generally in
      tranches over a two or three year
period.
 2.
            Focus
      on internal growth. We have a keen focus on operational excellence. We set
      high internal growth targets and leverage our scale, competitive
      advantages, and sales channels by enhancing and broadening our service
      offerings. These differentiate us from competitors and support strong
      internal growth. Our performance-based compensation plan is structured to
      reward internal growth.
 
 3.
            Performance-based
      compensation. Successful management teams are well compensated for driving
      growth. Aligning our key operating managers with our shareholders through
      generous performance-based compensation programs ensures that they have
      the incentive needed to continue growing the business. In general, senior
      managers receive bonuses that are based on a percentage of the amount by
      which their results exceed prior year EBITDA on a “same-store” basis.
      Lower level managers’ incentives are also aligned with business unit
      EBITDA targets, but may include other measures deemed important for
      growing their business. We believe these programs are effective incentives
      to operating management to deliver internal growth and consistent,
      high-quality service in a cost-effective
manner.
 
 4.
            Acquisition
      strategy. Our disciplined approach to acquisitions ensures we invest in
      high-potential, well-managed businesses, at a fair price. New acquisitions
      are selected to augment our internal growth strategies and also to support
      the growth of the Company as a whole. The acquisition strategy entails the
      systematic acquisition of established, well managed, and profitable real
      estate service companies operating in fragmented industries that: (i)
      enhance the market position of an existing service line, provide an entry
      into a new geographic region/market, or introduce a new service line; and
      (ii) provide a return on invested capital that exceeds our weighted
      average cost of capital. Each acquisition must meet strict criteria that
      include the following:
 ·
            Strong,
      experienced management teams in place that are interested in growing their
      businesses and in being rewarded through performance-based
      compensation;
 ·
            History
      of consistent profitability, supported by significant contractual
      revenues;
 ·
            Non-capital
      intensive operations with a variable cost
  structure;
 ·
            Leading
      positions in the markets served;
and
 ·
            One
      or more senior managers who wish to retain a significant minority interest
      in the acquired company in order to participate directly in its future
      growth and development as part of
FirstService.
   1 EBITDA
is defined as net earnings from continuing operations before minority interest
share of earnings, income taxes, interest, depreciation and amortization,
stock-based compensation expense and other non-cash or non-recurring
expenses.  The Company uses EBITDA to evaluate operating
performance.  EBITDA is an integral part of the Company’s planning and
reporting systems.  Additionally, the Company uses multiples of
current and projected EBITDA in conjunction with discounted cash flow models to
determine its overall enterprise valuation and to evaluate acquisition
targets.  The Company believes EBITDA is a reasonable measure of
operating performance because of the low capital intensity of its service
operations. The Company believes EBITDA is a financial metric used by many
investors to compare companies, especially in the services industry, on the
basis of operating results and the ability to incur and service
debt.  EBITDA is not a recognized measure of financial performance
under GAAP in the United States, and should not be considered as a substitute
for operating earnings, net earnings or cash flows from operating activities, as
determined in accordance with GAAP.  The Company’s method of
calculating EBITDA may differ from other issuers and accordingly, EBITDA may not
be comparable to measures used by other issuers.
  Page
11
 5.
            People
      development process. Retaining and promoting key operating managers is one
      of our most important practices. Each year, the key people within our
      businesses are evaluated in a consistent manner; strength, weaknesses and
      internal career opportunities are discussed, as are opportunities for
      advancement with other FirstService business
  units.
 
 6.
            Management
      and review process. We have a rigorous process of oversight and
      operational review to maximize cash flows, increase margins, manage
      operational risk and monitor performance indicators. Sharing of best
      practices is proactively incorporated into our management and review
      process to ensure that each business benefits from the experience of
      others.
 
 7.
            Strategic
      planning process. We utilize a consistent strategic planning process to
      determine the major issues facing our operating units. Short-term and
      long-term goals are reviewed and agreed upon, barriers are discussed and
      solutions are developed. Progress in achieving goals is monitored to
      ensure that we successfully execute our strategy and adapt to changes in
      our markets.
 
 
 Seasonality
 Certain
segments of the Company’s operations are subject to seasonal variations. The
Commercial Real Estate Services operation generates peak revenues and earnings
in the month of December followed by a low in January and February as a result
of the timing of closings on commercial real estate brokerage transactions.
Revenues and earnings during the balance of the year are relatively even. These
brokerage operations comprise approximately 35% of consolidated
revenues.
 
 The
demand for exterior painting (Property Services segment) and swimming pool
management in the northern United States and Canada (Residential Property
Management segment) is highest during late spring, summer and early fall and
very low during winter. These operations generate most of their annual revenues
and earnings between April and September and comprise approximately 5% of
consolidated revenues.
 
 The
seasonality of these service lines results in variations in quarterly revenues
and operating margins. Variations can also be caused by acquisitions or
dispositions, which alter the consolidated service mix.
 
 
 Trademarks
 FirstService’s
trademarks are important for the advertising and brand awareness of all of our
businesses and franchises. We take precautions to defend the value of our
trademarks by maintaining legal registrations and by litigating against alleged
infringements, if necessary.
 
 In our
Property Services unit, four franchise systems – California Closets, Paul Davis
Restoration, Pillar to Post Home Inspection, and Handyman Connection – have
trademarks to which value has been ascribed in the consolidated financial
statements. These franchise systems have franchises in significant population
centers in the United States. The value of these trademarks is derived from the
recognition they enjoy among the target audiences for the respective property
services. These trademarks have been in existence for many years, and their
prominence among consumers has grown over time through the addition of
franchisees and the ongoing marketing programs conducted by both franchisees and
the Company.
 
 In our
Commercial Real Estate Services unit, the Colliers International trademark was
identified as an acquired intangible asset. The Colliers International trademark
is highly recognized in the commercial real estate industry.
  Page
12
 Employees
 We have approximately 18,000 employees,
rising to a total of approximately 23,000 with seasonal employees in the spring
and summer months.
 
 
 Minority
interests
 We own a
majority interest in substantially all of our operations, while operating
management of each subsidiary owns the remaining shares. This structure was
designed to maintain control at FirstService while providing significant risks
and rewards of equity ownership to management at the operating businesses. In
all cases, we have the right to “call” management’s shares, usually payable at
our option with any combination of Subordinate Voting Shares or cash. We may
also be obligated to acquire certain of these minority interests in the event of
death, disability or cessation of employment of the employee or if the shares
are “put” by the employee, subject to annual limitations on these puts imposed
by the relevant shareholder agreements. These arrangements provide significant
flexibility to us in connection with management succession planning and
shareholder liquidity matters.
 
 
 Dividends
and dividend policy
 Our
Preferred Shares have a fixed annual dividend of US$1.75 per Preferred Share
payable on or about the last day of each quarter to holders of record generally
on or about the fifteenth day of the last month in each quarter, subject to
declaration by the Board of Directors of the Company. The Preferred Shares were
initially issued on August 1, 2007 and since such date, dividends were paid on
the Preferred Shares as follows:
 
 ·
            US$0.2877
      per Preferred Share for the period of August 1, 2007 to but excluding
      September 30, 2007, which dividend was payable on October 1, 2007 to
      holders of Preferred Shares of record at the close of business on
      September 19, 2007;
  ·
            US$0.4375
      per Preferred Share for the period of September 30, 2007 to but excluding
      December 31, 2007, which dividend was payable on December 31, 2007 to
      holders of Preferred Shares of record at the close of business on December
      18, 2007;
  ·
            US$0.4375
      per Preferred Share for the period of December 31, 2007 to but excluding
      March 31, 2008, which dividend was payable on March 31, 2008 to holders of
      Preferred Shares of record at the close of business on March 18,
      2008;
  ·
            US$0.4375
      per Preferred Share for the period of March 31, 2008 to but excluding June
      30, 2008, which dividend was payable on June 30, 2008 to holders of
      Preferred Shares of record at the close of business on June 19,
      2008;
  ·
            US$0.4375
      per Preferred Share for the period of June 30, 2008 to but excluding
      September 30, 2008, which dividend was payable on September 30, 2008 to
      holders of Preferred Shares of record at the close of business on
      September 25, 2008; and
  ·
            US$0.4375
      per Preferred Share for the period of September 30, 2008 to but excluding
      December 31, 2008, which dividend was payable on December 31, 2008 to
      holders of Preferred Shares of record at the close of business on December
      29, 2008.
 
 The
payment of dividends on the Common Shares is at the discretion of the Board of
Directors of the Company, which considers earnings, capital requirements and the
financial condition of the Company, among other relevant factors. If dividends
were declared on the Common Shares, they could be payable in either US or
Canadian dollars. The Company has not paid any cash dividends on the Common
Shares during the last three fiscal years.
 
 Under the
terms of the Company's amended and restated credit facility, the Company is not
permitted to paydividends,
whether in cash or in
specie, in the circumstances of an event of default thereunder occurring
and continuing or an event of default occurring as a consequence thereof. See
"Material contracts" below.
  Page
13
 Capital
structure
 The
authorized capital of the Company consists of an unlimited number of preference
shares, issuable in series, at the discretion of the Board of Directors of the
Company, of which are authorized an unlimited number of Preferred Shares, an
unlimited number of Subordinate Voting Shares and an unlimited number of
convertible Multiple Voting Shares. As of February 27, 2009, there were
28,007,790 Subordinate Voting Shares, 1,325,694 Multiple Voting Shares and
5,772,274 Preferred Shares issued and outstanding.
 
 The
holders of Subordinate Voting Shares are entitled to one (1) vote in respect of
each Subordinate Voting Share held at all meetings of the shareholders of the
Company. The holders of Multiple Voting Shares are entitled to twenty (20) votes
in respect of each Multiple Voting Share held at all meetings of the
shareholders of the Company. Each Multiple Voting Share is convertible into one
Subordinate Voting Share at the option of the holder. Effective December 15,
2004, a stock dividend was declared, effectively achieving a 2-for-1 stock split
for all outstanding Subordinate and Multiple Voting Shares.
 
 On August
1, 2007 a stock dividend occurred in the amount of one Preferred Share for every
five Common Shares. The Preferred Shares have a stated value of US$25.00, carry
a fixed cumulative annual dividend of US$1.75 payable quarterlyand
are redeemable, in whole or in part, for cash or Subordinate Voting Shares at
the option of the Company. The holders of the Preferred Shares are not entitled,
except as otherwise provided by law or in the conditions attaching to the
preference shares as a class, to receive notice of, attend or vote at any
meeting of the shareholders of the Company.
 
 A summary
of certain rights attaching to the Subordinate Voting Shares is set out in the
section entitled “Certain Rights of Holders of Subordinate Voting Shares”
contained in the Company’s Management Information Circular (the "Circular") to
be filed in connection with the Company’s annual meeting of shareholders to be
held on April 16, 2009, which section is incorporated herein by
reference.
 
 
 Rating
of Preferred Shares
 Our
Preferred Shares are rated by DBRS Ltd. (“DBRS”). As of the date of this AIF,
the rating was “Pfd-3 (low)”. DBRS rates preferred shares with ratings ranging
from “Pfd-1” to “Pfd-5”, with “Pfd-1” representing the highest rating. To show
relative rankings with the categories, DBRS may modify them by the addition of
“high” or “low”. The rating of our Preferred Shares is not a recommendation to
purchase, hold or sell the Preferred Shares and does not comment as to market
price or suitability for a particular investor. There can be no assurance that
the rating shown above will remain in effect for any given period of time or
that the rating will not be revised or withdrawn in its entirety by DBRS in the
future if, in its judgment, circumstances so warrant.
 
 
 Market
for securities
 The
Company’s Subordinate Voting Shares are listed for trading on the TSX and
NASDAQ. The Company’s Preferred Shares are listed for trading on the TSX, and
trade in US$. The Company’s Multiple Voting Shares are not listed and do not
trade on any public market or quotation system.
 
 The table
below details the price ranges and volumes traded of Subordinate Voting Shares
on NASDAQ in US dollars, and the TSX in Canadian dollars and of Preferred Shares
on the TSX in US dollars, in each case, on a monthly basis, during the nine
month period ended December 31, 2008:
 
 Page
14
 Subordinate
      Voting Shares
                            Preferred
      SharesNASDAQ
                            TSX
                            TSXMonth
                            High
      Price (US$)
                            Low
      Price (US$)
                            Volume
      Traded
                            High
      Price (C$)
                            Low
      Price (C$)
                            Volume
      Traded
                            High
      Price (US$)
                            Low
      Price (US$)
                            Volume
      TradedApril
      2008
                            24,68
                            21.75
                            359,100
                            24.89
                            22.30
                            1,436,400
                            19.50
                            18.75
                            127,100May
      2008
                            24.69
                            16.13
                            676,100
                            25.00
                            16.00
                            2,049,100
                            19.91
                            18.98
                            36,700June
      2008
                            17.25
                            14.08
                            1,290,000
                            17.22
                            14.43
                            4,086,500
                            20.20
                            18.70
                            143,000July
      2008
                            17.65
                            12.00
                            787,500
                            18.08
                            12.01
                            2,950,200
                            19.37
                            17.54
                            67,900August
      2008
                            17.35
                            15.29
                            305,400
                            18.60
                            16.06
                            1,167,300
                            18.90
                            18.05
                            36,700September
      2008
                            16.88
                            13.72
                            713,100
                            17.50
                            14.10
                            3,457,300
                            18.90
                            18.00
                            371,800October
      2008
                            14.86
                            9.65
                            577,400
                            15.85
                            12.51
                            2,981,000
                            18.00
                            13.50
                            44,900November
      2008
                            14.61
                            10.99
                            358,100
                            17.99
                            14.32
                            3,981,000
                            15.25
                            14.20
                            187,300December
      2008
                            14.62
                            12.03
                            698,500
                            18.27
                            14.61
                            2,173,400
                            15.25
                            13.50
                            64,700
 
 
 Transfer
agents and registrars
 The transfer agent and registrar for
the Subordinate Voting Shares and Preferred Shares is Equity Transfer and Trust
Company, 200 University Ave., Suite 200, Toronto, Ontario, M5H 4H1. The transfer
agent and registrar for the Multiple Voting Shares is the Company at 1140 Bay
Street, Suite 4000, Toronto, Ontario, M5S 2B4.
 
 
 Directors
and officers
 
 Directors– The following are the
directors of the Company as at February 27, 2009:
 
 Name
      and province/country of residence
                  Age
                  Present
      position and tenure
                  Principal
      occupation during
                    last
      five yearsDavid
      R. Beatty 1,2,3
                    Ontario,
      Canada
                  67
                  Director
      since May 15, 2001
                  Corporate
      Director; Chair and CEO, Beatinvest Limited (an investment company);
      formerly the Managing Director of the Canadian Coalition for Good
      Governance; Director of the Institute of Corporate Directors; Director of
      the Clarkson Centre for Business Ethics and Board Effectiveness andProfessor of
      Strategic Management at The Rotman School of Management, University of
      TorontoBrendan
      Calder2,3
                    Ontario,
      Canada
                  62
                  Director
      since June 14, 1996
                  Corporate
      Director;
                    Effective
      Executive in Residence & Adjunct Professor of Strategic Management at
      the Rotman School of Management, University of Toronto; Chair of Rotman's
      Desautels Centre for Integrative Thinking; formerly the founding Chair of
      the Rotman International Centre for Pension ManagementPeter
      F. Cohen1,3
                    Ontario,
      Canada
                  56
                  Director
      since March 30, 1990; Chair of the Board since May 2005
                  President,
      Dawsco Group
                    (an
      Ontario-based real estate and investment company)Bernard
      I. Ghert1
                    Ontario,
      Canada
                  69
                  Director
      since June 23, 2004
                  Corporate
      Director;
                    Chairman
      of the Independent Review Committee of the Middlefield Group of Funds;
      President of the B.I. Ghert Family FoundationJay
      S. Hennick
                    Ontario,
      Canada
                  52
                  Chief
      Executive Officer and Director since May 30, 1988
                  Founder
      and Chief Executive Officer of the CompanySteven
      S. Rogers
                    Ontario,
      Canada
                  52
                  Director
      since August 30, 1989
                  President
      and Chief Executive Officer,
                    The
      Franchise Company, Inc.
                    (subsidiary
      of the Company)Michael
      D. Harris2
                    Ontario,
      Canada
                  64
                  Director
      since June 26, 2006
                  Senior
      Business Advisor, Goodmans LLP;
                    President
      of own consulting firm, Steane Consulting Ltd.; Corporate
      Director;
                    Senior
      Fellow, The Fraser Institute
                    Former
      Premier of the Province of
Ontario
 1.
            Member
      of Audit Committee
 2.
            Member
      of Executive Compensation Committee
 3.
            Member
      of Nominating and Corporate Governance
Committee
 
 Page
15
 Each
director remains in office until the following annual shareholders’ meeting of
the Company or until the election or appointment of his successor, unless he
resigns, his office becomes vacant or he becomes disqualified to act as a
director. All directors stand for election or re-election annually.
 
 Further
background information regarding the directors of the Company is set out in the
sections entitled “Business of the Meeting – Election of Directors" and
"Statement of Corporate Governance Practices" contained in the Circular, which
sections are incorporated herein by reference.
 
 Officers–
The following are the executive officers of the Company as at February 27,
2009:
 
 Name
      and province/country of residence
                  Age
                  Present
      position with the Company
                  First
      became
                    an
      officerJay
      S. Hennick
                    Ontario,
      Canada
                  52
                  Founder
      and Chief Executive Officer (Chair of the Board until May 2005 and
      President until October 2005)
                  1988D.
      Scott Patterson
                    Ontario,
      Canada
                  48
                  President
      and Chief Operating Officer (Executive Vice-President and President of
      Business Services until September 2005)
                  1995John
      B. Friedrichsen
                    Ontario,
      Canada
                  47
                  Senior
      Vice President and Chief Financial Officer
                  1998Roman
      Kocur
                    Ontario,
      Canada
                  48
                  Senior
      Vice President, Strategy and Corporate Development
                  2003Michael
      Natale
                    Ontario,
      Canada
                  49
                  Vice
      President, Performance & Risk Management
                  2005Douglas
      G. Cooke
                    Ontario,
      Canada
                  49
                  Vice
      President, Corporate Controller and Corporate Secretary
                  1995Elias
      Mulamoottil
                    Ontario,
      Canada
                  39
                  Vice
      President, Strategy and Corporate Development
                  2007
 
 The
directors and executive officers of the Company, as a group, own or control
2,903,855 Subordinate Voting Shares, which represents 10.4% of the total
Subordinate Voting Shares outstanding. The directors and officers, as a group,
control 54.0% of the total voting rights when all Multiple Voting Shares and
Subordinate Voting Shares are considered. Mr. Hennick controls all of the
Company’s Multiple Voting Shares.
 
 Page
16
 Mr.
Rogers controls a 5.26% voting interest in The Franchise Company Inc., a
subsidiary of the Company.
  Legal
proceedings and regulatory actions
 In the normal course of operations, the
Company is subject to routine claims and litigation incidental to its business.
Litigation currently pending or threatened against the Company includes disputes
with former employees and commercial liability claims related to services
provided by the Company. The Company believes resolution of such proceedings,
combined with amounts set aside, will not have a material impact on the
Company’s financial condition or the results of operations.
 
 We have
responded to the information requests of our primary securities regulator, the
Ontario Securities Commission, and the TSX with respect to the Special Committee
of our Board of Directors’ review of our historical stock option granting
processes and the related accounting for the 13-year period from 1995 to 2007
and the measures taken in response. We will continue to co-operate with the
Ontario Securities Commission, the TSX and any further information requests in
connection with the inquiry. Until further notified by the TSX, all grants of
stock options by us require the prior consent of the TSX.
 
 
 Properties
 The
following chart provides a summary of the properties occupied by the Company and
its subsidiaries as at December 31, 2008:
 
 (square
      feet)
            United
      States (leased)
            United
      States
              (owned)
            Canada
              (leased)
            Canada
              (owned)
            International
              (leased)
            International
              (owned)Commercial
      Real Estate Services
            510,000
            -
            240,000
            -
            395,000
            -Residential
      Property Management
            575,000
            312,000
            8,000
            -
            -
            -Property
      Services
            340,000
            -
            35,000
            -
            -
            -Corporate
            -
            -
            -
            20,000
            -
            -
 
 Page
17
 Selected
annual information - last five fiscal periods
 (in
thousands of US$, except per share amounts)
 
 Nine
      months ended
                                                    December
      31
                                                  
                                                  
                                                  Year
      ended March 312008
                                                  
                                                  
                                                  2007
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2007
                                                  
                                                  
                                                  2006
                                                  
                                                  
                                                  2005OPERATIONSRevenues
                                                  
                                                  $
                                                  1,322,680
                                                  
                                                  
                                                  $
                                                  1,180,582
                                                  
                                                  
                                                  $
                                                  1,549,713
                                                  
                                                  
                                                  $
                                                  1,152,821
                                                  
                                                  
                                                  $
                                                  918,668
                                                  
                                                  
                                                  $
                                                  508,115Operating
      earnings
                                                  
                                                  
                                                  83,130
                                                  
                                                  
                                                  
                                                  89,925
                                                  
                                                  
                                                  
                                                  78,122
                                                  
                                                  
                                                  
                                                  77,005
                                                  
                                                  
                                                  
                                                  61,087
                                                  
                                                  
                                                  
                                                  27,838Net
      earnings from continuing operations
                                                  
                                                  
                                                  11,508
                                                  
                                                  
                                                  
                                                  42,354
                                                  
                                                  
                                                  
                                                  35,474
                                                  
                                                  
                                                  
                                                  34,963
                                                  
                                                  
                                                  
                                                  26,757
                                                  
                                                  
                                                  
                                                  12,172Net
      earnings from discontinued operations
                                                  
                                                  
                                                  50,528
                                                  
                                                  
                                                  
                                                  1,406
                                                  
                                                  
                                                  
                                                  (1,075
                                                  )
                                                  
                                                  
                                                  1,253
                                                  
                                                  
                                                  
                                                  42,740
                                                  
                                                  
                                                  
                                                  11,035Net
      earnings
                                                  
                                                  
                                                  62,036
                                                  
                                                  
                                                  
                                                  43,760
                                                  
                                                  
                                                  
                                                  34,399
                                                  
                                                  
                                                  
                                                  34,863
                                                  
                                                  
                                                  
                                                  69,497
                                                  
                                                  
                                                  
                                                  23,207FINANCIAL
      POSITIONTotal
      assets
                                                  
                                                  $
                                                  990,637
                                                  
                                                  
                                                  $
                                                  1,059,461
                                                  
                                                  
                                                  $
                                                  1,089,343
                                                  
                                                  
                                                  $
                                                  816,998
                                                  
                                                  
                                                  $
                                                  711,004
                                                  
                                                  
                                                  $
                                                  626,728Long-term
      debt
                                                  
                                                  
                                                  266,369
                                                  
                                                  
                                                  
                                                  331,348
                                                  
                                                  
                                                  
                                                  356,030
                                                  
                                                  
                                                  
                                                  235,131
                                                  
                                                  
                                                  
                                                  248,686
                                                  
                                                  
                                                  
                                                  220,015Shareholders’
      equity
                                                  
                                                  
                                                  345,839
                                                  
                                                  
                                                  
                                                  312,161
                                                  
                                                  
                                                  
                                                  305,685
                                                  
                                                  
                                                  
                                                  264,875
                                                  
                                                  
                                                  
                                                  237,752
                                                  
                                                  
                                                  
                                                  185,871Book
      value per common share
                                                  
                                                  
                                                  6.87
                                                  
                                                  
                                                  
                                                  5.44
                                                  
                                                  
                                                  
                                                  5.19
                                                  
                                                  
                                                  
                                                  8.85
                                                  
                                                  
                                                  
                                                  7.91
                                                  
                                                  
                                                  
                                                  6.15COMMON
      SHARE DATANet
      earnings per common share:BasicContinuing
      operations
                                                  
                                                  $
                                                  0.13
                                                  
                                                  
                                                  $
                                                  1.27
                                                  
                                                  
                                                  $
                                                  0.95
                                                  
                                                  
                                                  $
                                                  1.17
                                                  
                                                  
                                                  $
                                                  0.89
                                                  
                                                  
                                                  $
                                                  0.41Discontinued
      operations
                                                  
                                                  
                                                  1.71
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  (0.03
                                                  )
                                                  
                                                  
                                                  0.04
                                                  
                                                  
                                                  
                                                  1.41
                                                  
                                                  
                                                  
                                                  0.37Cumulative
      effect adjustment
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (0.04
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -1.83
                                                  
                                                  
                                                  
                                                  1.32
                                                  
                                                  
                                                  
                                                  0.92
                                                  
                                                  
                                                  
                                                  1.17
                                                  
                                                  
                                                  
                                                  2.30
                                                  
                                                  
                                                  
                                                  0.78DilutedContinuing
      operations
                                                  
                                                  $
                                                  0.11
                                                  
                                                  
                                                  $
                                                  1.17
                                                  
                                                  
                                                  $
                                                  0.89
                                                  
                                                  
                                                  $
                                                  1.08
                                                  
                                                  
                                                  
                                                  0.83
                                                  
                                                  
                                                  
                                                  0.38Discontinued
      operations
                                                  
                                                  
                                                  1.70
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  (0.04
                                                  )
                                                  
                                                  
                                                  0.04
                                                  
                                                  
                                                  
                                                  1.38
                                                  
                                                  
                                                  
                                                  0.36Cumulative
      effect adjustment
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (0.04
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -1.81
                                                  
                                                  
                                                  
                                                  1.22
                                                  
                                                  
                                                  
                                                  0.85
                                                  
                                                  
                                                  
                                                  1.08
                                                  
                                                  
                                                  
                                                  2.21
                                                  
                                                  
                                                  
                                                  0.74Weighted
      average common shares (thousands)Basic
                                                  
                                                  
                                                  29,584
                                                  
                                                  
                                                  
                                                  29,879
                                                  
                                                  
                                                  
                                                  29,905
                                                  
                                                  
                                                  
                                                  29,903
                                                  
                                                  
                                                  
                                                  30,171
                                                  
                                                  
                                                  
                                                  29,777Diluted
                                                  
                                                  
                                                  29,755
                                                  
                                                  
                                                  
                                                  30,417
                                                  
                                                  
                                                  
                                                  30,547
                                                  
                                                  
                                                  
                                                  30,354
                                                  
                                                  
                                                  
                                                  30,896
                                                  
                                                  
                                                  
                                                  30,467Cash
      dividends per common share
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -PREFERRED
      SHARE DATANumber
      outstanding (thousands)
                                                  
                                                  
                                                  5,772
                                                  
                                                  
                                                  
                                                  5,979
                                                  
                                                  
                                                  
                                                  5,979
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Cash
      dividends per preferred share
                                                  
                                                  $
                                                  1.31
                                                  
                                                  
                                                  $
                                                  0.72
                                                  
                                                  
                                                  $
                                                  1.16
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -OTHER
      DATAEBITDA
                                                  
                                                  $
                                                  124,361
                                                  
                                                  
                                                  $
                                                  123,230
                                                  
                                                  
                                                  $
                                                  123,614
                                                  
                                                  
                                                  $
                                                  107,983
                                                  
                                                  
                                                  $
                                                  84,319
                                                  
                                                  
                                                  $
                                                  47,814Adjusted
      diluted net earnings per share from continuing operations
                                                  
                                                  
                                                  1.09
                                                  
                                                  
                                                  
                                                  1.48
                                                  
                                                  
                                                  
                                                  1.32
                                                  
                                                  
                                                  
                                                  1.17
                                                  
                                                  
                                                  
                                                  0.75
                                                  
                                                  
                                                  
                                                  0.26
 
 
 
 Page
18
 Quarterly
results – fiscal periods ended December 31, 2008, March 31, 2008 and
2007
 (in
thousands of US$, except per share amounts)
 
 Fiscal
      period
                
                
                Q1
                
                
                
                Q2
                
                
                
                Q3
                
                
                
                Q4
                
                
                PeriodNine-month
      period ended December 31, 2008Revenues
                
                $
                454,769
                
                
                $
                450,051
                
                
                $
                417,860
                
                
                NA
                
                
                $
                1,322,680Operating
      earnings
                
                
                35,278
                
                
                
                35,442
                
                
                
                12,410
                
                
                
                
                
                
                
                83,130Net
      earnings (loss) from continuing operations
                
                
                17,240
                
                
                
                13,250
                
                
                
                (18,982
                )
                
                
                
                
                
                
                11,508Net
      earnings (loss) from discontinued operations
                
                
                625
                
                
                
                68,073
                
                
                
                (18,170
                )
                
                
                
                
                
                
                50,528Net
      earnings (loss)
                
                
                17,865
                
                
                
                81,323
                
                
                
                (37,152
                )
                
                
                
                
                
                
                62,036Net
      earnings (loss) per common share:Basic
                
                
                0.51
                
                
                
                2.68
                
                
                
                (1.36
                )
                
                
                
                
                
                
                1.83Diluted
                
                
                0.47
                
                
                
                2.66
                
                
                
                (1.36
                )
                
                
                
                
                
                
                1.81Fiscal
      year ended March 31, 2008Revenues
                
                $
                359,661
                
                
                $
                373,287
                
                
                $
                447,634
                
                
                $
                369,131
                
                
                $
                1,549,713Operating
      earnings (loss)
                
                
                33,449
                
                
                
                32,833
                
                
                
                23,643
                
                
                
                (11,803
                )
                
                
                78,122Net
      earnings (loss) from continuing operations
                
                
                14,958
                
                
                
                16,314
                
                
                
                11,082
                
                
                
                (6,880
                )
                
                
                35,474Net
      earnings (loss) from discontinued operations
                
                
                3,124
                
                
                
                1,379
                
                
                
                (3,097
                )
                
                
                (2,481
                )
                
                
                (1,075
                )Net
      earnings (loss)
                
                
                18,082
                
                
                
                17,693
                
                
                
                7,985
                
                
                
                (9,361
                )
                
                
                34,399Net
      earnings (loss) per common share:Basic
                
                
                0.61
                
                
                
                0.53
                
                
                
                0.18
                
                
                
                (0.40
                )
                
                
                0.92Diluted
                
                
                0.56
                
                
                
                0.50
                
                
                
                0.15
                
                
                
                (0.40
                )
                
                
                0.85Fiscal
      year ended March 31, 2007Revenues
                
                $
                275,326
                
                
                $
                289,792
                
                
                $
                316,983
                
                
                $
                270,721
                
                
                $
                1,152,822Operating
      earnings
                
                
                26,036
                
                
                
                24,957
                
                
                
                15,176
                
                
                
                10,836
                
                
                
                77,005Net
      earnings from continuing operations
                
                
                11,926
                
                
                
                12,711
                
                
                
                7,069
                
                
                
                3,258
                
                
                
                34,963Net
      earnings (loss) from discontinued operations
                
                
                2,207
                
                
                
                (738
                )
                
                
                688
                
                
                
                (905
                )
                
                
                1,253Net
      earnings
                
                
                12,780
                
                
                
                11,973
                
                
                
                7,757
                
                
                
                2,353
                
                
                
                34,863Net
      earnings per common share:Basic
                
                
                0.43
                
                
                
                0.40
                
                
                
                0.26
                
                
                
                0.08
                
                
                
                1.17Diluted
                
                
                0.39
                
                
                
                0.38
                
                
                
                0.25
                
                
                
                0.06
                
                
                
                1.08OTHER
      DATAEBITDA
      - Period ended December 31, 2008
                
                $
                47,113
                
                
                $
                47,451
                
                
                $
                29,797
                
                
                NA
                
                
                
                124,361EBITDA
      - Year ended March 31, 2008
                
                
                41,509
                
                
                
                42,760
                
                
                
                38,961
                
                
                
                384
                
                
                
                123,614EBITDA
      - Year ended March 31, 2007
                
                
                32,736
                
                
                
                30,966
                
                
                
                23,526
                
                
                
                20,755
                
                
                
                107,983
 
 Notes
 1.  A
reconciliation of net earnings from continuing operations to EBITDA appears
below.
 
 (in
      thousands of US$)
                                                        
                                                        Nine
      months ended
                                                          December
      31
                                                        
                                                        
                                                        Year
      ended March 312008
                                                        
                                                        
                                                        2007
                                                        
                                                        
                                                        2008
                                                        
                                                        
                                                        2007
                                                        
                                                        
                                                        2006Net
      earnings from continuing operations
                                                        
                                                        $
                                                        11,508
                                                        
                                                        
                                                        $
                                                        42,354
                                                        
                                                        
                                                        $
                                                        35,474
                                                        
                                                        
                                                        $
                                                        34,963
                                                        
                                                        
                                                        $
                                                        26,757Minority
      interest
                                                        
                                                        
                                                        14,519
                                                        
                                                        
                                                        
                                                        16,112
                                                        
                                                        
                                                        
                                                        16,803
                                                        
                                                        
                                                        
                                                        15,282
                                                        
                                                        
                                                        
                                                        11,778Income
      taxes
                                                        
                                                        
                                                        30,878
                                                        
                                                        
                                                        
                                                        25,740
                                                        
                                                        
                                                        
                                                        17,108
                                                        
                                                        
                                                        
                                                        20,367
                                                        
                                                        
                                                        
                                                        16,084Other
      income, net
                                                        
                                                        
                                                        (2,422
                                                        )
                                                        
                                                        
                                                        (3,824
                                                        )
                                                        
                                                        
                                                        (4,650
                                                        )
                                                        
                                                        
                                                        (4,589
                                                        )
                                                        
                                                        
                                                        (3,766
                                                        )Interest
      expense, net
                                                        
                                                        
                                                        8,252
                                                        
                                                        
                                                        
                                                        9,543
                                                        
                                                        
                                                        
                                                        13,387
                                                        
                                                        
                                                        
                                                        7,843
                                                        
                                                        
                                                        
                                                        10,234Impairment
      loss on available-for-sale
                                                          securities
                                                        
                                                        
                                                        14,680
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        3,139
                                                        
                                                        
                                                        
                                                        -Integrated
      Security division divestiture bonus
                                                        
                                                        
                                                        5,715
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Operating
      earnings
                                                        
                                                        
                                                        83,130
                                                        
                                                        
                                                        
                                                        89,925
                                                        
                                                        
                                                        
                                                        78,122
                                                        
                                                        
                                                        
                                                        77,005
                                                        
                                                        
                                                        
                                                        61,087Depreciation
      and amortization
                                                        
                                                        
                                                        31,746
                                                        
                                                        
                                                        
                                                        26,861
                                                        
                                                        
                                                        
                                                        37,673
                                                        
                                                        
                                                        
                                                        26,022
                                                        
                                                        
                                                        
                                                        20,921Stock-based
      compensation expense
                                                        
                                                        
                                                        2,551
                                                        
                                                        
                                                        
                                                        6,444
                                                        
                                                        
                                                        
                                                        7,819
                                                        
                                                        
                                                        
                                                        4,956
                                                        
                                                        
                                                        
                                                        2,311Cost
      containment
                                                        
                                                        
                                                        6,934
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -EBITDA
                                                        
                                                        $
                                                        124,361
                                                        
                                                        
                                                        $
                                                        123,230
                                                        
                                                        
                                                        $
                                                        123,614
                                                        
                                                        
                                                        $
                                                        107,983
                                                        
                                                        
                                                        $
                                                        84,319
 
 
 Page
19
 2.Adjusted diluted earnings
per share from continuing operations is defined as diluted net earnings per
share from continuing operations plus the effect, after income taxes, of: (i)
amortization of intangible assets acquired in connection with acquisitions; (ii)
non-cash impairment loss on available-for-sale securities; (iii) a non-recurring
bonus paid to management upon the divestiture of the Integrated Security
division; (iv) stock-based compensation expense; and (v) a cost containment
charge. The Company believes this measure is useful because: (i) amortization
expense is a non-cash charge that impacts the earnings of acquisitive companies
and reduces comparability with non-acquisitive companies; (ii) it eliminates the
effect of a non-cash impairment of securities; (iii) the divesture bonus was a
payment made in connection with a discontinued operation; (iv) stock-based
compensation expense is a non-cash charge that is effectively double-counted, as
the dilutive effects of stock options are factored into the diluted share count;
and (v) the charge to contain future operating costs is non-recurring. This is
not a recognized measure of financial performance under GAAP, and should not be
considered as a substitute for diluted net earnings per share from continuing
operations, as determined in accordance with GAAP. The Company’s method of
calculating this measure may differ from other issuers and, accordingly, this
measure may not be comparable to measures used by other issuers. A
reconciliation appears below.
 
 (in
      US$)
                                              
                                              Nine
      months ended
                                                December
      31
                                              
                                              
                                              Year
      ended March 312008
                                              
                                              
                                              2007
                                              
                                              
                                              2008
                                              
                                              
                                              2007
                                              
                                              
                                              2006Diluted
      net earnings per common share from continuing operations
                                              
                                              $
                                              0.11
                                              
                                              
                                              $
                                              1.17
                                              
                                              
                                              $
                                              0.89
                                              
                                              
                                              $
                                              1.08
                                              
                                              
                                              $
                                              0.83Pro
      forma impact of dividends on preferred shares
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (0.12
                                              )
                                              
                                              
                                              (0.12
                                              )
                                              
                                              
                                              (0.35
                                              )
                                              
                                              
                                              (0.34
                                              )Amortization,
      net of tax
                                              
                                              
                                              0.25
                                              
                                              
                                              
                                              0.24
                                              
                                              
                                              
                                              0.33
                                              
                                              
                                              
                                              0.23
                                              
                                              
                                              
                                              0.20Impairment
      loss on available-for-sale securities, net of tax
                                              
                                              
                                              0.41
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              0.09
                                              
                                              
                                              
                                              -Integrated
      Security division divestiture bonus, net of tax
                                              
                                              
                                              0.12
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Stock-based
      compensation expense, net of tax
                                              
                                              
                                              0.05
                                              
                                              
                                              
                                              0.19
                                              
                                              
                                              
                                              0.22
                                              
                                              
                                              
                                              0.12
                                              
                                              
                                              
                                              0.06Cost
      containment, net of tax
                                              
                                              
                                              0.15
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Adjusted
      diluted net earnings per common share from continuing
      operations
                                              
                                              $
                                              1.09
                                              
                                              
                                              $
                                              1.48
                                              
                                              
                                              $
                                              1.32
                                              
                                              
                                              $
                                              1.17
                                              
                                              
                                              $
                                              0.75
 
 
 Risk
factors
 Investors in the Company’s shares
should carefully consider the following risks, as well as the other information
contained in this Annual Information Form, and Management’s Discussion and
Analysis of Financial Condition and Results of Operations for the nine months
ended December 31, 2008. If any of the following risks actually occurs, the
Company's business could be materially harmed. The risks and uncertainties
described below are not the only ones the Company faces. Additional risks and
uncertainties, including those of which the Company is currently unaware or the
Company currently deems immaterial, may also adversely affect the Company’s
business.
 
 Economic
conditions, especially as they relate to credit conditions and consumer
spending
 During
periods of economic slowdown or contraction, our business is impacted directly.
Credit conditions affect commercial real estate transactions, which reduces the
demand for our services. Consumer spending directly impacts our franchising and
branchising businesses because as consumers spend less on property services, our
revenues decline. These factors could also negatively impact the timing or the
ultimate collection of accounts receivable, which would negatively impact our
operating revenues, profitability and cash flow.
 
 Commercial
real estate property values, vacancy rates and general conditions of financial
liquidity for real estate transactions
 Since our
Commercial Real Estate segment accounted for 44% of our revenues and 25% of our
EBITDA in 2008, factors affecting the commercial real estate industry have a
direct impact on our operations. Property values have a direct impact on the
commissions earned on sales transactions. Vacancy rates affect the market lease
rates that are the basis of leasing commissions earned. Both property values and
vacancy rates can influence the number of sales transactions that
occur.
 
 Page
20
 Extreme
weather conditions impact demand for our services or our ability to perform
those services
 Natural
disasters, such as hurricanes, can have a direct impact in our Property Services
and Residential Property Management segments. These events damage property,
which require various services that our companies offer such as restoration and
large-scale landscaping. They may also harm our employees, facilities and
franchisees, resulting in an inability to serve clients and generate
revenues.
 
 Economic
deterioration impacts our ability to recover goodwill and other intangible
assets
 During
2008, we experienced a decline in the operating performance of some of our
businesses. Expectations of future earnings drive the recoverability of goodwill
and other intangible assets, which are tested, at least, on an annual basis.
Although as of December 31, 2008, we have not recorded any substantial
impairment to our goodwill or intangible assets, further deterioration of
operating performance may necessitate a non-cash impairment charge.
 
 Ability
to generate cash from our businesses to fund future acquisitions and meet our
debt obligations
 We rely
on our businesses to generate the necessary cash to service our financial
obligations. As at December 31, 2008, we have $266.4 million of debt outstanding
($186.7 million net of cash) that will be required to be refinanced or repaid
over the next seven years. We also have $134.2 million of available un-drawn
credit at December 31, 2008, committed to September 2012. To date, we have been
able to meet all of our debt obligations, however with a decline in performance
in some of our businesses, surplus cash may not be available to be remitted
which may result in the inability to meet a debt repayment.
 
 An
important component of our growth strategy is strategic and selective
acquisitions, which we tend to complete with cash. Although we have a revolving
credit facility available to us as noted above, we also rely on surplus cash on
hand to fund acquisitions. If cash on hand is not available and the credit
facility is fully utilized, then future acquisitions may not be
possible.
 
 The
effects of changes in foreign exchange rates in relation to the US dollar on our
Canadian dollar, Australian dollar and Euro denominated revenues and
expenses
 In our
Commercial Real Estate segment, we generate 70% of our revenues outside of the
United States. Consequently, our consolidated results are impacted directly by
fluctuations in the relative strength of the US dollar versus the Canadian
dollar, Australian dollar and Euro currencies.
 
 In the
future, in our Commercial Real Estate segment, we expect to acquire additional
international operations. As a consequence, the impact of foreign currency
exchange rate fluctuations may increase.
 
 Competition
in the markets served by the Company
 We
operate in highly competitive markets. Changes in the source and intensity of
competition in the markets served by us impact the demand for our services and
may result in additional pricing pressures. The relatively low capital cost of
entry to certain of our businesses has led to strong competitive markets,
including regional and local owner-operated companies. Regional and local
competitors operating in a limited geographic area may have lower labour,
benefits and overhead costs. The principal methods of competition in our
businesses include name recognition, quality and speed of service, pricing,
customer satisfaction and reputation. No assurance can be given that we will be
able to compete successfully against current or future competitors and that the
competitive pressures that we face will not result in reduced market share or
negatively impact our financial performance.
 
 Labour
and franchisee shortages or increases in wage and benefit costs
 As a
services company, our primary asset is the human capital that comprises our
workforce. In particular, we rely on property managers, real estate brokers,
franchisees and other skilled staff
  Page
21
 to
generate revenues. A shortage, or increase in wage and benefit costs, of this
human capital could reduce our revenues and profitability.
 
 The
effects of changes in interest rates on our cost of borrowing
 As at
December 31, 2008, we had $201.0 million of debt that is at fixed interest rates
and $65.4 million of debt at variable interest rates. As a result, changes in
base rates such as LIBOR will affect our interest expense as these base rates
fluctuate. On our fixed rate debt, we have from time-to-time entered into
fixed-for-floating interest rate swaps, where advantageous, to convert the fixed
interest payments to floating. These swaps are intended to manage interest rate
sensitivity and reduce overall interest costs.
 
 Continued
compliance with the financial covenants under our debt agreements, or our
ability to negotiate a waiver of certain covenants with our lenders
 Although
we have always been in compliance with our financial covenants, a prolonged
decline in our earnings performance could result in a non-compliance with one or
more financial covenants. While we maintain good relationships with our lenders,
the current economic climate may test our relationships especially if a covenant
is breached. If the Company fails to meet its payment or other obligations under
its amended and restated credit facility, the lenders will be entitled to demand
immediate repayment of all amounts owing and thereafter, if unpaid, exercise
their secured creditor rights.
 
 Unexpected
increases in operating costs, such as insurance, workers’ compensation, health
care and fuel prices
 As a
services company, the costs of providing services to our customers can
fluctuate. Certain operating costs, such as fuel prices, are based on market
rates which we cannot control and, absent an offsetting price increase in our
services, have a direct impact on our operating margins.
 
 Changes
in the frequency or severity of insurance incidents relative to our historical
experience
 Adverse
changes in claims experience could increase our insurance costs and/or increase
the risk of being unable to renew insurance coverage at our operations. In our
Residential Property Management and Property Services segments, we effectively
self-insure certain risks, with a layer of third-party insurance for
catastrophic claims. An increase in the frequency or severity of claims in these
areas could materially affect our financial position and results of operations.
There can be no assurance that we will be able to obtain insurance coverage on
favourable economic terms in the future.
 
 Our
ability to make acquisitions at reasonable prices and successfully integrate
acquired operations
 As an
acquisitive organization, we actively pursue acquisitions to expand our global
footprint and services offerings as well as supplement existing businesses. Not
only does our acquisition strategy depend on the continued availability of
suitable targets, it also depends on the ability to negotiate favorable terms
and conditions. Another risk with acquisitions is the ability to integrate the
acquired business into an existing service line.
 
 Declaration
of dividends on the Preferred Shares
 Future
dividends on the Preferred Shares will depend on the Company's results of
operations, financial condition, capital requirements, general business
conditions and other factors that the Company's Board of Directors may deem
relevant. Additionally, under the Company's amended and restated credit
facility, the Company is not permitted to pay dividends, whether in cash or
in specie, in the
circumstances of an event of default thereunder occurring and continuing or an
event of default occurring as a consequence thereof.
  Risks
arising from any regulatory review and litigation
 As
discussed in under "Statement of Corporate Governance Practices – Board
Committees – Special Committee" in the Management Information Circular of the
Company dated May 14,
  Page
22
 2008,
during fiscal 2007, the Board of Directors established a Special Committee of
independent directors to conduct a comprehensive review of historical stock
option granting processes and the related accounting for the 13 year period from
1995 to 2007, to make recommendations to the Board on same and otherwise to
attend to regulatory and other matters in respect thereof.The results
of the Special Committee's review and a summary of its report are set out in the
Company's Management Information Circular dated May 14, 2008 which is available
on SEDAR at www.sedar.com. During fiscal 2008, the Special Committee's existence
continued solely for the purposes of co-operating with, and answering any
requests of, securities regulators and others related to its mandate. While
management is not currently aware of any formal regulatory reviews or
investigations, the commencement of any such reviews or investigations may
result in the diversion of significant management attention and resources and,
if the securities regulators determine that a violation of securities or other
laws may have occurred, or has occurred, the Company or its officers and
directors may receive notices regarding potential enforcement action or
prosecution and could be subject to civil or criminal penalties or other
remedies. For example, the Company or its officers could be required to pay
substantial damages, fines or other penalties, the regulators could seek an
injunction against the Company or seek to ban an officer or director of the
Company from acting as such, any of which actions would have a material adverse
effect on the Company.
 
 Intellectual
property and other proprietary rights that are material to our
business
 Our
ability to compete effectively depends in part on our rights to service marks,
trademarks, trade names and other intellectual property rights we own or license
(including "Colliers"). We have not sought to register every one of our marks in
every country in which they are used. Furthermore, because of the differences in
foreign trademark, patent and other intellectual property or proprietary rights
laws, we may not receive the same protection in other countries as we would in
Canada or the United States. If we are unable to protect our proprietary
information and brand names, we could suffer a material adverse effect on our
business, financial condition or results of operations. Litigation may be
necessary to enforce our intellectual property rights and protect our
proprietary information, or to defend against claims by third parties that our
products or services infringe their intellectual property rights. Any litigation
or claims brought by or against us could result in substantial costs and
diversion of our resources. A successful claim of trademark, patent or other
intellectual property infringement against us, or any other successful challenge
to the use of our intellectual property, could subject us to damages or prevent
us from providing certain services under our recognized brand names, which could
have a material adverse effect on our business, financial condition or results
of operations.
 
 Disruptions
or security failures in our information technology systems
 Our
information technology systems facilitate our ability to monitor, operate and
control our operations. While we have disaster recovery plans in place, any
disruption in these plans or the failure of our information technology systems
to operate as expected could, depending on the magnitude of the problem,
adversely affect our operating results by limiting, among other things, our
capacity to monitor, operate and control our operations effectively. In
addition, because our systems contain information about individuals and
businesses, our failure to maintain the security of the data we hold, whether
the result of our own error or the malfeasance or errors of others, could harm
our reputation or give rise to legal liabilities relating to violations of
privacy laws or otherwise, which may lead to lower revenues, increased costs and
other material adverse effects on our results of operations.
 
 Colliers
International
 A key
area of competitive advantage for the Commercial Real Estate Services unit is
derived from its membership in CIPC. In the event that the Commercial Real
Estate Services unit were to lose the license for Colliers International, its
prospects could be adversely affected. However, as the Commercial Real Estate
Services unit is currently the largest member firm of the Colliers International
network, we believe that this is unlikely.
 
 Page
23
 Multiple
voting shares and a change of control
 The
existence of the Multiple Voting Shares results in various impediments on the
ability or desire of a third party to acquire control of the Company. This may
discourage, delay or prevent a change of control of the Company or an
acquisition of the Company at a price that shareholders may find attractive. The
existence of the Multiple Voting Shares also may discourage proxy contests and
make it difficult or impossible for the Company’s holders of Subordinate Voting
Shares to elect directors and take other corporate actions.
 
 Blank
cheque preference shares
 The
Company has the right to issue so-called "blank cheque" preference shares which
may affect the voting and liquidation rights of holders of Common Shares. The
Company's Board of Director's is authorized, without any further shareholder
approval, to issue one or more additional series of preference shares in an
unlimited number and to set the rights, privileges, restrictions and conditions
attached thereto.
 
 Political
conditions, including any outbreak or escalation of terrorism or hostilities and
the impact thereof on our business
 Political
events and situations can have an effect on our Company because of our global
operations. Events could occur that may hamper our ability to manage operations,
extract cash and implement FirstService policies in certain regions,
particularly in developing countries that have had a recent history of political
and economic instability.
 
 Changes
in government policies at the federal, state/provincial or local level that may
adversely impact our businesses
 As a
multinational company, changes in laws and regulation at the different
jurisdictional levels can have direct effect on our operations. It is difficult
to predict the future impact of the legislative and regulatory requirements
affecting our businesses. The laws and regulations applicable to our businesses
will likely change in the future and affect our operations and financial
performance. In addition, if we were to fail to comply with any applicable law
or regulation, we could be subject to substantial fines or damages, be involved
in litigation, suffer losses to our reputation and suffer the loss of licenses
or penalties that may affect how our business is operated, which, in turn, would
have a material adverse effect on our business, financial condition and results
of operations.
 
 Management's
discussion and analysis
 The
section entitled “Management’s Discussion and Analysis of Results of Operations
and Financial Condition” within the Company’s December 31, 2008 annual report is
incorporated herein by reference.
 
 Interest
of management and others in material transactions
 There are
no material interests, direct or indirect, of directors or executive officers of
the Company, any shareholder who beneficially owns, directly or indirectly, or
exercises control or direction over more than 10% of the outstanding shares of
the Company, or any known associate or affiliate of such persons in any
transactions within the three most recently completed financial years of the
Company or during the current financial year which has materially affected, or
is reasonably expected to materially affect, the Company.
 
 Material
contracts
 On
February 1, 2004, the Company, upon the review, report and recommendation of the
Executive Compensation Committee of the Board of Directors of the Company,
entered into a management services agreement (the "Management Services
Agreement") with Jayset Capital Corp. (“Jayset”) and Jay S. Hennick. Mr. Hennick
is the sole officer, director and shareholder of
  Page
24
 Jayset.
The particulars of the Management Services Agreement are set out in the sections
entitled "Executive Compensation – Management Contract" and "Incentive
Award Plans – Sale of Control Agreement" contained in the Circular, which
sections are incorporated herein by reference.
 
 On
September 10, 2007, the Company successfully completed an amended and restated
credit facility, increasing the amount to $225 million from the then current
amount of $110 million. The new facility also increased the term to 5 years from
3 years and included an "accordion feature" providing an additional $50 million
in financing under the same terms if required, bringing the total financing
capacity of the facility to $275 million. The lead arranger for the financing
was TD Securities. The syndicate of banks included incumbents, The
Toronto-Dominion Bank, The Bank of Nova Scotia, Royal Bank of Canada, JP Morgan
Chase Bank, HSBC Bank, as well as new participants United Overseas Bank, Bank of
Montreal and Bank of America. A copy of the amended and restated credit facility
is available on SEDAR at www.sedar.com.
 
 The
Company entered into a: (i) Note and Guarantee Agreement dated as of April 1,
2005 among the Company, FirstService Delaware, LP and others in respect of the
Company's 5.44% Guaranteed Senior Secured Notes due 2015; (ii) Note and
Guarantee Agreement dated as of June 21, 2001 among the Company, FirstService
Delaware, LP and others in respect of the Corporation's 8.06% Guaranteed Senior
Secured Notes due 2011; and (iii) Note and Guarantee Agreement dated as of
September 29, 2003 among the Company, FirstService Delaware, LP and others in
respect of the Corporation's 6.40% Guaranteed Secured Notes due 2015. The
foregoing Note and Guarantee Agreements were entered into in connection with the
Company's issuance of guaranteed senior secured notes on the dates
indicated.
 
 On April
14, 2008, the Company entered into a share purchase agreement with ADT Security
Services Canada, Inc. ("ADT") pursuant to which it agreed to sell its Integrated
Security Services division, FirstService Security, to ADT, a unit of Tyco
International (NYSE: TYC). The sale was completed in July 2008 and, pursuant to
the terms of the agreement, ADT acquired 100% of the shares of FirstService
Security from the Company for gross cash proceeds of approximately $187.5
million.
  Cease
trade orders, bankruptcies, penalties or sanctions
 To the
best of the knowledge of the Company:
 
 (A)
            none
      of the directors or executive officers of the Company is, as at the date
      of this AIF, or has been, within 10 years before the date of this AIF, a
      director, chief executive officer or chief financial officer of any
      company (including the Company) that: (i) was subject to an order that was
      issued while the director or executive officer was acting in the capacity
      as director, chief executive officer or chief financial officer; or (ii)
      was subject to an order that was issued after the director or executive
      officer ceased to be a director, chief executive officer or chief
      financial officer and which resulted from an event that occurred while
      that person was acting in the capacity as director, chief executive
      officer or chief financial officer;
 
 (B)
            none
      of the directors or executive officers of the Company, or a shareholder
      holding a sufficient number of securities of the Company to affect
      materially the control the Company: (a) is, as at the date of this AIF, or
      has been, within 10 years before the date of this AIF, a director or
      executive officer of any company (including the Company) that, while that
      person was acting in that capacity, or within a year of that person
      ceasing to act in that capacity, became bankrupt, made a proposal under
      any legislation relating to bankruptcy or insolvency or was subject to or
      instituted any proceedings, arrangement or compromise with creditors or
      had a receiver, receiver manager or trustee appointed to hold its assets;
      or (b) has, within the 10 years before the date of this AIF, become
      bankrupt, made a proposal under any legislation relating to bankruptcy or
      insolvency, or
  Page
25
 become subject to or
      instituted any proceedings, arrangement or compromise with creditors, or
      had a receiver, receiver manager or trustee appointed to hold the assets
      of the director, executive officer or
  shareholder;
  except
for: (i) David R. Beatty who was a director of Thistle Mining Inc. (“Thistle”)
when Thistle announced on December 21, 2004 that it intended to undertake a
restructuring under the Companies'Creditors Arrangement Act.
While Thistle completed the restructuring on June 30, 2005, its common shares
were suspended from trading on the Alternative Investment Market from June 30,
2005 to July 13, 2005 and its common shares were suspended from trading on the
TSX on December 31, 2004 due to the restructuring until Thistle delisted in
February 2006. Mr. Beatty is no longer a director of Thistle Mining Inc.; and
(ii) Michael D. Harris who was a director of Naturade, Inc., a company publicly
traded in the United States, from December 2005 until August 2006, which
company, within a year after Mr. Harris' resignation as a director, filed for
reorganization under Chapter 11 of the US Bankruptcy Code.
 
 Conflicts
of interest
 Certain
directors and officers of the Company are engaged in and will continue to engage
in activities outside the Company, and as a result, certain directors and
officers of the Company may become subject to conflicts of interest. The Business Corporations Act(Ontario) provides that in the event that a director has an interest in a
contract or proposed contract or agreement, the director shall disclose his
interest in such contract or agreement and shall refrain from voting on any
matter in respect of such contract or agreement unless otherwise provided under
the Business Corporations Act(Ontario). To the extent that conflicts of interest arise, such conflicts
will be resolved in accordance with the provisions of the Business Corporations Act(Ontario).
 
 As at the
date hereof, the Company is not aware of any existing or potential material
conflicts of interest between the Company and a director or officer of the
Company.
  Experts
 The Company’s independent auditors are
PricewaterhouseCoopers LLP, Chartered Accountants, who have issued an integrated
auditors’ report dated February 27, 2009 in respect of the Company’s
consolidated financial statements as at December 31, 2008, March 31, 2008 and
2007 and for the nine months ended December 31, 2008 and for each year in the
three year period ending March 31, 2008, and on the effectiveness of the
Company’s internal control over financial reporting as at December 31, 2008.
PricewaterhouseCoopers LLP has advised that they are independent with respect to
the Company within the meaning of the Rules of Professional Conduct of the
Institute of Chartered Accountants of Ontario and the rules of the US Securities
and Exchange Commission.
 
 Audit
Committee
 The Audit
Committee is comprised of three members who are each “independent” and
“financially literate” as required by Multilateral Instrument 52-110 Audit Committees(the “Audit
Committee Rule”). The members of the Audit Committee during the year ended
December 31, 2008 were Messrs. Ghert - Chair, Beatty and Cohen. Mr. Ghert was
appointed Chair of the Audit Committee in May 2005. Mr. Beatty was appointed to
the Audit Committee in August 2007, replacing Mr. Calder. The Audit Committee
has the authority to conduct any investigation appropriate to fulfilling its
responsibilities, and it has direct access to the external auditors as well as
to anyone in the Company. The Audit Committee has the ability to retain, at the
Company’s expense, special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties. The Audit Committee meets at
least four times annually, or more frequently as circumstances
dictate.
 
 Page
26
 The Audit
Committee reviews the annual and interim financial statements intended for
circulation among shareholders and reports upon these to the Board of Directors
of the Company (the "Board") prior to their approval by the full Board. The
Audit Committee is also responsible for the oversight of the integrity of the
Company’s internal accounting and control systems. The Audit Committee
communicates directly with the Company’s external auditors in order to discuss
audit and related matters whenever appropriate. In addition, the Board may defer
to the Audit Committee on other matters and questions relating to the financial
position of the Company and its affiliates. All reports made to the
Corporation's ethics hotline are reviewed by the Audit Committee at it next
meeting. The Board has adopted an Audit Committee mandate, a copy of which is
annexed as Exhibit "A" hereto. The Audit Committee mandate is also published on
the Company’s website (www.firstservice.com).
 
 The
education and related experience of each of the members of the Audit Committee
that is relevant to the performance by such members of their responsibilities on
such committee is described below.
 
 Bernard I. Ghert (Chair) – Mr.
Ghert has a Masters degree in Business Administration (MBA). Mr. Ghert was
previously President and Chief Executive Officer of the Cadillac Fairview
Corporation Limited from 1981 to 1987 and President of Stelworth Investments
Inc. from 1987 to 1992. Mr. Ghert has been a director of many organizations in
the private and public sectors, including Cadillac Fairview, Stelworth, CT
Financial and Canada Trust, Wellington Insurance and the Canada Deposit
Insurance Corporation. Mr. Ghert has served as Director of the Managers of
several Middlefield Funds, President of the Canadian Institute of Public Real
Estate Companies and was a former member of the Advisory Board of the Office of
the Superintendent of Financial Institutions. Mr. Ghert currently is Chairman of
the Independent Review Committee of the Middlefield Group of Funds, President of
the B.I. Ghert Family Foundation and Immediate Past Chair of the Mount Sinai
Hospital Board of Directors.
 
 Peter F. Cohen– Mr. Cohen is
a Chartered Accountant and a former partner in an audit practice of a public
accounting firm. Mr. Cohen is currently the Chair of the Board of the Company
and President and Chief Executive Officer of the Dawsco Group, a private real
estate and investment company owned by Mr. Cohen and his family. Mr. Cohen was a
co-founder and Chair and Chief Executive Officer of Centrefund Realty
Corporation, a publicly traded shopping center investment company until August
2000 when control of the company was sold. Mr. Cohen is a member of the boards
of a number of private companies and charities.
 
 David Beatty – Mr. Beatty is
currently the Chairman and Chief Executive Officer of Beatinvest Limited (an
investment company), Director of the Institute of Corporate Directors, Director
of the Clarkson Centre for Business Ethics and Board Effectiveness andProfessor of Strategic
Management at The Rotman School of Management, University of Toronto. Mr. Beatty
was previously the founding Managing Director of the Canadian Coalition for Good
Governance, founding Chairman of Orogen Minerals Limited, Chairman and Chief
Executive Officer of Old Canada Investment Corporation Limited and President of
Weston Foods. Mr. Beatty is Honorary Consul to Canada for the Government of
Papua New Guinea and in 1993 was awarded the O.B.E. A graduate in economics from
the University of Toronto (Trinity College), he was a Nuffield Scholar at the
University of Cambridge (Queens' College) where he obtained an M.A. in
Economics.
  The Audit
Committee Rule requires the Company to disclose whether its Audit Committee has
adopted specific policies and procedures for the engagement of non-audit
services and to prepare a summary of these policies and procedures. The mandate
of the Audit Committee provides that it is such committee’s responsibility to:
(a) approve the appointment and, when circumstances warrant, discharge of the
external auditor and monitor its qualifications, performance and independence;
(b) approve and oversee the disclosure of all audit services
  Page
27
 provided
by the external auditor to the Company or any of its subsidiaries, determining
which non-audit services the external auditor are prohibited from providing and,
exceptionally, pre-approve and oversee the disclosure of permitted non-audit
services to be performed by the external auditor, in accordance with applicable
laws and regulations; and (c) approve the basis and amount of the external
auditor’s fees and other significant compensation. The Audit Committee has
adopted a pre-approval policy pursuant to which the Company may not engage the
Company’s external auditor to carry out certain non-audit services that are
deemed inconsistent with the independence of auditors under US and Canadian
applicable laws. The Audit Committee must pre-approve all audit services as well
as permitted non-audit services. The Audit Committee has delegated to the Chair
of the Audit Committee, who is independent, the authority to act on behalf of
the Audit Committee with respect to the pre-approval of all audit and permitted
non-audit services provided by its external auditors from time to time. Any
approvals by the Chair are reported to the full Audit Committee at its next
meeting.
 
 In
addition to performing the audit of the Company’s annual consolidated financial
statements, PricewaterhouseCoopers LLP provided other services to the Company
and they billed the Company the following fees for each of the Company’s two
most recently completed fiscal periods:
 
 (in
      US$)
                          
                          Nine
      months ended
                            December
      31, 2008
                          
                          
                          Year
      ended
                            March
      31, 2008Audit
      fees (note 1)
                          
                          $
                          1,590,000
                          
                          
                          $
                          2,020,700Audit-related
      fees (note 2)
                          
                          
                          220,000
                          
                          
                          
                          324,500Tax
      fees (note 3)
                          
                          
                          271,000
                          
                          
                          
                          254,800All
      other fees
                          
                          
                          -
                          
                          
                          
                          -$
                          2,081,000
                          
                          
                          $
                          2,600,000
  Notes:
  1.
            Refers
      to the aggregate fees billed by the Company’s external auditor for audit
      services, including statutory and subsidiary audits. In the year ended
      March 31, 2008, audit fees included $242,000 of fees related to the
      divestiture of the Integrated Security Services
  segment.
 2.
            Refers
      to the aggregate fees billed for assurance and related services by the
      Company’s external auditor that are reasonably related to the performance
      of the audit or review of the Company’s financial statements and are not
      reported under (1) above, including professional services rendered by the
      Company’s external auditor for accounting consultations on proposed
      transactions and consultations related to accounting and reporting
      standards. Such fees included fees incurred in respect of: due diligence
      and other work related to the disposition and acquisition of businesses,
      such work being unrelated to the audit of the Company’s financial
      statements; accounting consultations with respect to proposed
      transactions; as well as other audit-related
  services.
 3.
            Refers
      to the aggregate fees billed for professional services rendered by the
      Company’s external auditor for tax compliance, tax advice and tax
      planning.
 
 
 
 Additional
information
 Additional
information, including the directors’ and officers’ remuneration and
indebtedness, principal holders of the Company’s securities and options to
purchase securities, where applicable, is contained in the
Circular.
 
 Copies of
publicly filed documents of the Company, including those incorporated herein by
reference, can be found through the SEDAR web site at www.sedar.com. Additional
financial information is provided in the Company’s consolidated financial
statements and Management's Discussion and Analysis for the nine months ended
December 31, 2008.
  Upon
request, the Corporate Secretary of the Company will provide to any person or
company:
 
 (a)
            when
      the securities of the Company are in the course of a distribution pursuant
      to a short form prospectus or a preliminary short form prospectus has been
      filed in respect of a distribution of its
  securities:
  Page
28
 (i)
            one
      copy of the current AIF of the Company, together with one copy of any
      document, or the pertinent pages of any document, incorporated by
      reference in the AIF;
 (ii)
            one
      copy of the comparative consolidated financial statements of the Company
      for its most recently completed financial year for which financial
      statements have been filed together with the accompanying reports of the
      auditors and one copy of the most recent interim consolidated financial
      statements of the Company that have been filed, if any, for any period
      after the end of its most recently completed financial
    year;
 (iii)
            one
      copy of the information circular of the Company in respect of its most
      recent annual meeting of shareholders that involved the election of
      directors or one copy of any annual filing prepared instead of that
      information circular, as appropriate;
and
 (iv)
            one
      copy of any other documents that are incorporated by reference into the
      preliminary short form prospectus or the short form prospectus and are not
      required to be provided under (i) to (iii)
  above.
 
 (b)
            at
      any other time, one copy of any document referred to in (a)(i), (ii) and
      (iii) above, provided that the Company may require the payment of a
      reasonable charge if the request is made by a person or company who is not
      a shareholder of the Company.
 
  
 EXHIBIT
"A"
  AUDIT
COMMITTEE MANDATE
  
 Purpose
  The Audit
Committee (the "Committee") is appointed by and shall assist the Board of
Directors (the "Board") of FirstService Corporation (the "Company") in
fulfilling its oversight responsibilities in the following principal areas: (i)
accounting policies and practices, (ii) the financial reporting process, (iii)
financial statements provided by the Company to the public, (iv) risk management
including systems of accounting and financial controls, (v) appointing,
overseeing and evaluating the work and independence of the external auditors,
and (vi) compliance with applicable legal and regulatory requirements. In
addition to the responsibilities specifically enumerated in this Mandate, the
Board may refer to the Committee such matters and questions relating to the
financial position and operations of the Company and its subsidiaries as the
Board may from time to time see fit.
  Membership
  The
Committee shall consist of at least three directors appointed annually by the
Board and selected based upon the following, in accordance with applicable laws,
rules and regulations: Independence. Each member shall be independent in
accordance with applicable legal and regulatory requirements and in such regard
shall have no direct or indirect material relationship with the Company which
could, in the view of the Board, reasonably interfere with the exercise of a
member's independent judgment.
  Financially
Literate. Each member shall be financially literate or must become financially
literate within a reasonable period of time after his or her appointment to the
Committee. For these purposes, an individual is financially literate if he or
she has the ability to read and understand a set of financial statements that
present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by the Company's financial
statements.
  Commitment.
In addition to being a member of the Committee, if a member is also on the audit
committee or board of directors of other public companies or organizations, the
Board shall determine that such simultaneous service does not impair the ability
of such member to serve effectively on the Committee.
  Chair
and Secretary
  The Chair
of the Committee shall be selected by the Board. If the Chair is not present,
the members of the Committee may designate a Chair for the meeting by majority
vote of the members present. The Secretary of the Company shall be the Secretary
of the Committee, provided that if the Secretary is not present, the Chair of
the meeting may appoint a secretary for the meeting with the consent of the
other Committee members who are present.
  Meetings
  The times
and locations of meetings of the Committee and the calling of and procedures at
such meetings, shall be determined from time to time by the Chair of the
Committee, in consultation with management when necessary, provided that there
shall be a minimum of four meetings per year. The Committee shall have
sufficient notice in order to prepare for each meeting. Notice of each meeting
shall also be given to the external auditors of the Company, and meetings shall
be convened whenever requested by the external auditors or any member of the
Committee in accordance with applicable law.
  
 Meetings
Agendas
  Agendas
for meetings of the Committee shall be developed by the Chair of the Committee
in consultation with management and the corporate secretary, and shall be
circulated to the Committee members prior to any meetings.
  Resources
and Authority
  The
Committee shall have the resources and the authority to discharge its
responsibilities, including the authority to engage, at the expense of the
Company, outside consultants, independent legal counsel and other advisors as it
determines necessary to carry out its duties, without seeking approval of the
Board or management.
  The
Committee shall have the authority to conduct any investigation necessary and
appropriate to fulfilling its responsibilities, and has direct access and
authority to communicate directly with the external auditors, legal counsel and
officers and employees of the Company.
  The
members of the Committee have the right, for the purpose of performing their
duties, to inspect the books and records of the Company and to discuss such
accounts and records and any matters relating to the financial position, risk
management and internal controls of the Company with the officers and external
auditors of the Company.
  Responsibilities
  The
Company's management is responsible for preparing the Company's financial
statements while the external auditors are responsible for auditing those
financial statements. The Committee is responsible for overseeing the conduct of
those activities by the Company's management and external auditors, and
overseeing the activities of any internal audit initiatives. The Company's
external auditors are accountable to the Committee as representatives of the
Company's shareholders.
  It is
recognized that members of the Committee are not full-time employees of the
Company and do not represent themselves to be accountants or auditors by
profession or experts in the fields of accounting or auditing or the preparation
of financial statements. It is not the duty or responsibility of the Committee
or its members to conduct "field work" or other types of auditing or accounting
reviews or procedures. Each member of the Committee shall be entitled to rely on
(i) the integrity of those persons and organizations within and outside the
Company from whom it receives information, and (ii) the accuracy of the
financial and other information provided to the Committee by such persons or
organizations absent actual knowledge to the contrary.
  The
specific responsibilities of the Committee are as follows:
  Financial
Reporting Process and Financial Statements
 In
consultation with the external auditors and management, review the integrity of
the Company's financial reporting process, both internal and external, and any
major issues as to the adequacy of the internal controls and any special audit
procedures adopted in light of any material control deficiencies; Review all
material transactions and contracts entered into by the Company with any insider
or related party of the Company, other than director, officer or employee
compensation which is approved by the Compensation Committee; Review with
management and the external auditors the Company's annual audited consolidated
financial statements and discuss with the external auditors all matters required
to be discussed by generally accepted auditing standards (GAAS) in Canada and
the United States. This would include reviewing an annual report prepared by the
external auditors describing: (i) all critical accounting policies used by the
Company, (ii) any material alternative accounting treatments within generally
accepted accounting principles (GAAP) that have been discussed with management
of the Company, including the ramifications of the use of such alternative
treatments and disclosures, and (iii) any other material written communications
between the external auditors and management; Following
  Page
A2
 completion
of the annual audit, review with management and the external auditors any
significant issues, concerns or difficulties encountered and resolve any
disagreements between management and the external auditors; Review the interim
quarterly and annual financial statements and annual and interim press releases
prior to the release of earnings information, including earnings guidance
provided to analysts; Review and be satisfied that adequate procedures are in
place for the review of the public disclosure of financial information by the
Company extracted or derived from the Company's financial statements, other than
as referred to in (f), and periodically assess the adequacy of those procedures;
and Meet separately with management and with the external auditors, including at
the time of the annual audit plan review with management and the external
auditors.
  External
Auditors
  The
Committee shall require the external auditor to report directly to it and is
responsible for the selection, nomination, compensation, retention, termination
and oversight of the work of the external auditors engaged for the purpose of
issuing an auditor's report or performing other audit, review or attest services
for the Company, and in such regard recommend to the Board the external auditors
to be nominated for approval by the shareholders; Pre-approve all audit
engagements and the provision by the external auditors of all non-audit
services, including fees and terms for all audit and non-audit engagements, and
in such regard the Committee may establish the types of non-audit services the
external auditors shall be prohibited from providing and shall establish the
types of audit, audit related and non-audit services for which the Committee
will retain the external auditors. The Committee may delegate the responsibility
to pre-approve non-audit services to one of its members and any such delegated
pre-approvals shall be presented to the Committee at its next scheduled meeting
; Review and approve the Company's policies for the hiring of partners and
employees and former partners and employees of the external auditing firm;
Consider, assess and report to the Board with regard to the independence and
performance of the external auditors; and Request and review annually a report
by the external auditors regarding the auditing firm's internal quality-control
procedures, any material issues raised by the most recent internal
quality-control review of the auditing firm, or by any inquiry or investigation
by governmental or professional authorities, within the past five
years.
  Internal
Controls and Risk Management
  Oversee
management's design, implementation and evaluation of the Company's internal
controls over financial reporting, including compliance with the requirements of
the Sarbanes-Oxley Act. Receive and review reports from management and the
external auditors with regard to the reliability and effective operation of the
Company's accounting systems and internal controls; Discuss with management the
Company's approach to risk assessment and management, controls over fraud and
assessment of the need for internal auditing; Establish policies and procedures
for the confidential, anonymous submission by employees of the Company of any
concerns regarding questionable accounting or other acts and for the receipt,
retention and treatment of complaints received regarding accounting, internal
accounting controls or auditing matters.
  Legal
and Regulatory Requirements
  Receive
and review timely analysis by management of significant issues relating to
public disclosure and reporting, including, prior to finalization, the
Management's Discussion and Analysis and Annual Information Form; Prepare the
report of the Committee required to be included with the Company's periodic
filings; and Assist the Board in the oversight of compliance with legal and
regulatory matters.
  Additional
Responsibilities
  Report
regularly to the Board, including on matters such as the quality and integrity
of the Company's financial statements, compliance with legal and regulatory
requirements, the results
  Page
A3
 of any
internal audit initiatives, including evaluation of internal controls over
financial reporting for purposes of compliance with Sarbanes-Oxley, and the
performance and independence of the external auditors; and Reassess annually the
adequacy of the Committee's Mandate and prepare and review with the Board an
annual performance evaluation of the Committee.