##### 



TABLE OF CONTENTS
 TABLE OF CONTENTS
    
    
    1PRELIMINARY NOTES
    
    
    2GENERAL
    
    
    2NON-GAAP MEASURES AND RECONCILIATION
    
    
    2LEGAL NOTICE  FORWARD-LOOKING STATEMENTS
    
    
    2ABBREVIATIONS AND EQUIVALENCIES
    
    
    3CONVERSION
    
    
    4GLOSSARY OF TERMS
    
    
    4CORPORATE STRUCTURE
    
    
    7GENERAL DEVELOPMENT OF THE BUSINESS
    
    
    8BUSINESS STRATEGY
    
    
    12DESCRIPTION OF OUR BUSINESS
    
    
    13UPSTREAM  EXPLORATION AND PRODUCTION
    
    
    13MIDSTREAM  REFINING
    
    
    17MIDSTREAM  LIQUEFACTION
    
    
    19DOWNSTREAM  WHOLESALE AND RETAIL DISTRIBUTION
    
    
    20INTEROIL RESOURCES
    
    
    21THE ENVIRONMENT AND COMMUNITY RELATIONS
    
    
    23RISK FACTORS
    
    
    24DIVIDENDS
    
    
    33DESCRIPTION OF CAPITAL STRUCTURE
    
    
    33MARKET FOR SECURITIES
    
    
    37DIRECTORS AND EXECUTIVE OFFICERS
    
    
    39AUDIT COMMITTEE
    
    
    42LEGAL PROCEEDINGS AND REGULATORY ACTIONS
    
    
    43INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    44MATERIAL CONTRACTS
    
    
    45TRANSFER AGENT AND REGISTRAR
    
    
    48INTERESTS OF EXPERTS
    
    
    48ADDITIONAL INFORMATION
    
    
    48Schedule A  Report of Management and Directors on Oil and Gas Disclosure
    
    
    49Schedule B  Report on Reserves Data by Independent Qualified Reserves Evaluator
    
    
    50Schedule C  Audit Committee Charter
    
    
    52
  Annual Information Form INTEROIL CORPORATION      1




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PRELIMINARY NOTES
 
 GENERAL
      
 NON-GAAP MEASURES AND RECONCILIATION
  
 LEGAL NOTICE  FORWARD-LOOKING STATEMENTS
   
    
    the inherent uncertainty of oil and gas exploration activities;
    
    potential effects of oil and gas price declines;
    
    the uncertain outcome of our negotiations with the Papua New Guinea government to
determine the price at which our refined products may be sold;
    
    the availability of crude feedstock at economic rates;
    
    the ability to meet maturing indebtedness;
    
    the uncertainty in our ability to attract capital;
    
    general economic conditions and illiquidity in financial and credit markets
    
    interest rate risk;
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
    
    the impact of competition
    
    losses from our hedging activities;
    
    inherent limitations in all control systems, and misstatements due to error that may
occur and not be detected;
    
    fluctuations in currency exchange rates;
    
    the recruitment and retention of qualified personnel;
    
    the availability and cost of drilling rigs, oilfield equipment, and other oilfield
exploration services;
    
    our ability to finance the development of our LNG facility;
    
    our ability to timely construct and commission our LNG facility;
    
    the margins for our refined products;
    
    the inability of our refinery to operate at full capacity;
    
    difficulties in marketing our refinerys output;
    
    exposure to certain uninsured risks stemming from our refining operations;
    
    weather conditions and unforeseen operating hazards;
    
    political, legal and economic risks in Papua New Guinea;
    
    compliance with and changes in foreign governmental laws and regulations, including
environmental laws;
    
    landowner claims;
    
    the uncertainty in being successful in pending lawsuits and other proceedings;
    
    law enforcement difficulties;
    
    the impact of legislation regulating emissions of greenhouse gases on current and
potential markets for our products;
    
    stock price volatility; and
    
    contractual defaults.
    
 ABBREVIATIONS AND EQUIVALENCIES
 Abbreviations
 Crude Oil and Natural Gas Liquids
    
    Natural Gasbbl
    
    one barrel equalling 34.972
Imperial gallons or 42 U.S.
gallons
    
    
    
    btu
    
    British Thermal Unitsbblpd
    
    barrels per day
    
    
    
    mscf
    
    thousand standard cubic feetboe(1)
    
    barrels of oil equivalent
    
    
    
    mscfpd
    
    thousand standard cubic feet per dayboepd
    
    barrels of oil equivalent per day
    
    
    
    mmbtu
    
    million British Thermal Unitsmboe
    
    thousand barrels of oil equivalent
    
    
    
    mmbtupd
    
    million British Thermal Units per day
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Crude Oil and Natural Gas Liquids
    
    Natural Gasmbbl
    
    thousand barrels
    
    
    
    mmscf
    
    million standard cubic feetmmbbls
    
    million barrels
    
    
    
    mmscfpd
    
    million standard cubic feet per dayNGL or NGLs
    
    natural gas liquids, consisting
of any one or more of propane,
butane and condensate
    
    
    
    scf
    
    standard cubic feetWTI
    
    West Texas Intermediate crude oil
delivered at Cushing, Oklahoma
    
    
    
    scfpd
    
    standard cubic feet per daybscf
    
    billion standard cubic feet
    
    
    
    tcf
    
    trillion standard cubic feetpsi
    
    pounds per square inch
 
 Note:(1)
    
    All calculations converting natural gas to crude oil equivalent have been made using a ratio
of six mcf of natural gas to one barrel of crude equivalent. Boes may be misleading,
particularly if used in isolation. A boe conversion ratio of six mcf of natural gas to one
barrel of crude oil equivalent is based on an energy equivalency conversion method and does
not represent a value equivalency at the wellhead. 
 CONVERSION
  To Convert From
    
    To
    
    Multiply Bymcf
    
    cubic metres
    
    
    28.317cubic metres
    
    cubic feet
    
    
    35.315bbls
    
    cubic metres
    
    
    0.159cubic metres
    
    bbls
    
    
    6.289feet
    
    metres
    
    
    0.305metres
    
    feet
    
    
    3.281miles
    
    kilometres
    
    
    1.609kilometres
    
    miles
    
    
    0.621acres
    
    hectares
    
    
    0.405hectares
    
    acres
    
    
    2.471
 
 GLOSSARY OF TERMS
 API
 Barrel, Bbl (petroleum)
 BNP Paribas
 BP
 COGE Handbook
 Condensate
 Crack spread
 Crude Oil
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Debentures
 EBITDA Non-GAAP Measures and
Reconciliation
 Farm out
 FEED
 Feedstock
 FID
 GAAP
 Gas
 Gross reserves
 Gross wells
 ICCC
 IPI holders
 IPF
 IPP
 IPWI
 Joint Venture Company PNG LNG
 LNG
 LPG
 LSWR
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Mark-to-market
 MLPLC
 Naphtha
 Natural gas
 Net wells
 NI 51-101 Standards of Disclosure for Oil and Gas
Activities
 NI 52-110 Audit Committee
 OPIC
 Pac LNG
 Petromin
 PGK
 PDL
 PNGDV
 PPL
 PRL
 Royalties
 Shut-in
 State
 Sweet/sour crude
 Working interest
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CORPORATE STRUCTURE
 Name, Address and Incorporation
  Our registered office
    
    Our corporate office
    
    Our corporate officein Canada is located at:
    
    in Australia is located at:
    
    in Papua New Guinea is located at:Suite 300,204 Black Street
    
    Level 1, 60-92 Cook
    
    Level 6 Defens HausWhitehouse, Yukon
    
    Street, Portsmith,
    
    Cnr Champion ParadeY1A 2M9
    
    Queensland 4870
    
    and Hunter Street,
Port Moresby
  Inter-corporate Relationships
  
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GENERAL DEVELOPMENT OF THE BUSINESS
 Three Year History
  Upstream  Exploration and Production
 Description of Our Business  Upstream
Exploration and Production  Indirect Participation Interest Agreements
    1 2
   Material Contracts  Investment Agreement dated October 30, 2008
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Midstream  Refining segment
   Material Contracts  Project Agreement Risk
Factors
    Annual Information Form INTEROIL CORPORATION      9




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Material Contracts  Secured Revolving
Crude Import Facility
 Midstream  Liquefaction segment
    Legal Proceedings and Regulatory Actions
 Material
Contracts  Share Purchase and Sale and Settlement Agreement dated February 27, 2009
 Downstream  Wholesale and Retail Distribution
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Financing
  
    
    In May 2006, InterOil entered into a secured credit bridging facility for $130.0 million
provided by Merrill Lynch Capital Corporation and Clarion Finanz A.G., repayable in May 2008.
The loan was fully drawn down by December 31, 2006 and was repaid in May 2009.
    
    In May 2006, we repaid $25.0 million of our unsecured borrowings.
    
    In May 2006, we entered into an agreement to amend the terms of the original PNGDV indirect
participation agreement whereby PNGDV converted their interest into 575,575 InterOil common
            shares while retaining a 6.75% interest in the next four wells (the first of which was Elk-1)
to be drilled by InterOil. PNGDV also retained the right to participate for up to an interest
of 5.75% in the 16 wells that follow the four wells mentioned above by contributing their
share of well costs.
    
    In August 2006, the credit limit under the BNP Paribas working capital facility entered
into in 2004 was increased to $170.0 million from $100.0 million.
    
    In December 2006, we renegotiated the terms of the secured loan with OPIC (see Material
Contracts  OPIC Loan Agreement) where the half yearly principal payment due in December 2006
and June 2007 of $4.5 million each, were deferred until December 31, 2007 and interest
previously due on December 31, 2006 and June 30, 2007 was deferred until September 30, 2007.
  
    
    In July 2007, we entered into the LNG Project Shareholders Agreement which had the effect
of freezing the interest rate on the $130.0 million secured credit bridging facility entered
into in May 2006, at 4% for the life of that loan.
    
    In November and December 2007, we undertook a private placement of 1,078,514 common shares
with institutional investors at an issue price of $23.18 per share and received net proceeds
of $23.5 million,.
    
    In November 2007, we issued 517,777 series A preferred shares at an issue price of $28.97.
We received net proceeds of $14.3 million. In July and August 2008, all $15.0 million Series A
preferred shares issued in November 2007 were converted into 517,777 common shares.
    
    In December 2007, we amended our OPIC loan agreement in order to defer two installments of
$4.5 million, each due on December 31, 2007, until the final year of the OPIC loan. They are
now due to be repaid by January 31, 2008 and February 29, 2008 respectively.
  
    
    In February 2008, payment of the two installments of $4.5 million to OPIC deferred in 2007
was deferred further until the end of the OPIC loan period. They are now due to be repaid by
June 30, 2015 and December 31, 2015, respectively.
    
    In May 2008, we converted $60.0 million of the expiring $130.0 million bridging facility
into common shares. The balance of $70.0 million was repaid on May 12, 2008 with funds raised
from the issuance of $95.0 million worth of 8% subordinated convertible debentures. In July
and August 2008, $15.0 million worth of the $95.0 million 8% debentures issued in May were
converted into 600,000 common shares. In November, a further $1.0 million of the $95.0 million
8% debentures were converted into 41,000 common shares.
    
    In August 2008, we filed a short form shelf prospectus with the Ontario Securities
Commission and a corresponding registration statement on Form F-10/A with the United States
Securities and Exchange Commission, which enables us to provide financial flexibility for the
future and issue, from time to time during the following 25 months, up to a total of $200.0
million of debt securities, common shares, preferred shares and/or warrants in one or more
offerings.
    
    During 2008, we negotiated increases to and the renewal of our crude working capital
facility with BNP Paribas. As a result of variations in crude oil prices, a temporary
increase from a total of $170 million to $220 million was required. This limit was decreased
to $190 million on November 30, 2008. As of
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December 31, 2008, $109 million remained available
for use under the crude working capital facility.
The weighted average interest rate under the crude working capital facility was 5.11% for the
year ended December 31, 2008.
    
    In October 2008, we secured a Papua New Guinea 150.0 million Kina (approximately $57.5
million) combined revolving working capital facility for our wholesale and retail petroleum
products distribution business in Papua New Guinea from Bank of South Pacific Limited and
Westpac Bank PNG Limited. The facilities are secured by the capital assets of the downstream
business. As at December 31, 2008, the weighted average interest rate for the facilities was
7.25%. The Westpac facility has an initial term of three years and is due for renewal in
August 2011. The BSP facility is renewable annually and is due for renewal in August 2009. As
at December 31, we had drawn $15.4 million of the combined facility
 Management Team
  
    
    Effective July 1, 2006, Dr. Jack Hamilton was appointed President.
    
    On August 3, 2006, InterOil announced that Mr. Tom Donovan, Chief Financial Officer, left
us following completion of his employment agreement.
    
    On August 30, 2006, InterOil announced that Mr. William Jasper III was appointed President
and Chief Operating Officer. At the same time, Mr. Christian Vinson, the former Chief
Operating Officer, was appointed Executive Vice President Corporate Development and Government
Relations, while Dr. Jack Hamilton, the former President, was nominated by InterOil to serve
as Chief Executive Officer of the recently formed PNG LNG Inc.
    
    On October 1, 2006, Dr. Michael Folie retired as a director.
    
    On October 26, 2006, Mr. Collin Visaggio was appointed Chief Financial Officer.
    
    On December 29, 2006, Mr. Donald Hansen was appointed as an independent director and also
agreed to serve as a member of the Audit, Nominating and Governance and Compensation
committees.
    
    On June 12, 2007, Mr. Mark Laurie was appointed as General Counsel and Corporate Secretary.
    
    On October 14, 2008, Mr. Donald Hansen resigned from the Board.
    
    On November 26, 2008, Mr. Roger. Lewis was appointed as an independent director and also
agreed to serve as a member of the Audit, Compensation and Nominating and Governance
committees.
 
 BUSINESS STRATEGY
  Developing our position as a business operator in Papua New Guinea
 
    
    Build on 14 years of engagement in Papua New Guinea
    
    Maintain sound health, safety and security record
    
    Continue developing good relationships with government, partners and stakeholders
    
    Remain a significant employer in Papua New Guinea
 Enhancing the existing refining and distribution business in Papua New Guinea
 
    
    Continue growth in profitable market share in the region
    
    Look for added value in refining production, and improved economies of scale
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
    
    Explore improved transport efficiencies and economics
 Maximizing the value of our exploration assets
 
    
    Seek possible early cash flows from NGLs production
    
    Establish gas volumes sufficient to underpin the LNG Project
    
    Introduce strategic investors through the partial sale of Elk/ Antelope field, the LNG
Project and associated LNG off-take to accelerate exploration and development activities.
 Building an export gas liquefaction business in Papua New Guinea
 
    
    Finalize agreement with the State establishing the fiscal and regulatory regime
applicable to the LNG Project.
    
    Select and contract with strategic partners
    
    Establish LNG Projects commercial viability and structure
 Positioning for long term success
 
    
    Accelerate exploration activity to extract full value from exploration licenses
    
    Undertake seismic work to identify additional exploration opportunities
 
 DESCRIPTION OF OUR BUSINESS
 Overview
  Segments
    
    OperationsUpstream
    
    Exploration and Production  Explores and appraises potential
oil and natural gas structures in Papua New Guinea with a view
to commercializing significant discoveries.Midstream
    
    Refining  Produces refined petroleum products at Napa Napa in
Port Moresby, Papua New Guinea for the domestic market and for
spot export.Liquefaction  Developing an onshore LNG processing facility in
Papua New Guinea (the LNG Project).Downstream
    
    Wholesale and Retail Distribution  Markets and distributes
refined products domestically in Papua New Guinea on a
wholesale and retail basis.Corporate
    
    Corporate  Provides support to the other business segments by
engaging in business development and improvement activities and
providing general and administrative services and management,
undertakes financing and treasury activities, and is
responsible for government and investor relations. General and
administrative and integrated costs are recovered from business
segments on an equitable basis.
  
 UPSTREAM  EXPLORATION AND PRODUCTION
 Description of Properties
  Annual Information Form INTEROIL CORPORATION 13




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InterOil Working
    
    Acreage
    
    AcreageLicense
    
    Location
    
    Operator
    
    Interest
    
    Gross
    
    NetPPL 236
    
    Onshore
    
    InterOil
    
    
    100.00
    %
    
    
    2,244,449
    
    
    
    2,244,449PPL 237
    
    Onshore
    
    InterOil
    
    
    100.00
    %
    
    
    1,618,534
    
    
    
    1,618,534PPL 238
    
    Onshore
    
    InterOil
    
    
    100.00
    %
    
    
    4,168,651
    
    
    
    4,168,651PPL 244
    
    Offshore
    
    Talisman
    
    
    15.00
    %
    
    
    675,400
    
    
    
    101,310Total
    
    
    8,707,034
    
    
    
    8,132,944
 Operated License Commitments, Terms, Expiry and Re-Application
   Second TermLicense
    
    Initial Acreage
    
    Acreage (50%)PPL 236
    
    
    2,244,449
    
    
    
    1,122,224PPL 237
    
    
    1,618,534
    
    
    
    809,267PPL 238
    
    
    4,168,651
    
    
    
    2,084,326Total
    
    
    8,031,634
    
    
    
    4,015,817
  LicenseIssued for
    
    
    
    
    
    Commitment
    
    Commitment
    
    Total Licensesecond
    
    Second
    
    Years 1 -  2
    
    Years 3 - 5
    
    Commitment
    
    LicenseLicense
    
    term in
    
    Term
    
    (US $ Millions)
    
    (US $ Millions)
    
    (US $ Millions)
    
    ExpiryPPL 236
    
    March 2009
    
    5 years
    
    $
    5.0
    
    
    $
    10.0
    
    
    $
    15.0
    
    
    March 2014PPL 237
    
    March 2009
    
    5 years
    
    $
    14.0
    
    
    $
    34.0
    
    
    $
    48.0
    
    
    March 2014PPL 238
    
    March 2009
    
    5 years
    
    $
    2.0
    
    
    $
    30.0
    
    
    $
    32.0
    
    
    March 2014Totals
    
    $
    21.0
    
    
    $
    74.0
    
    
    $
    95.0
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Petroleum License Details
 Net Working Interests on PPL236, PPL237 & PPL238 (the Operated Exploration Licenses)
  With StateParticipant
    
    Working interests *
    
    participationInterOil Corporation
    
    
    71.825
    %
    
    
    55.67
    %IPWI Investors
    
    
    21.425
    %
    
    
    16.60
    %PNGDV
    
    
    6.75
    %
    
    
    5.23
    %State
    
    
    0.00
    %
    
    
    22.50
    %Total
    
    
    100.00
    %
    
    
    100.00
    %
 
 *
    
    These interests assume all existing partners as at December 31, 2008 elect to participate.   Petroleum Prospecting License 236
  Petroleum Prospecting License 237
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Petroleum Prospecting License 238
  Petroleum Prospecting License 244
  Petroleum Development License (PDL)
   Indirect Participation Agreements
     Material Contracts
  Annual Information Form INTEROIL CORPORATION 16




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MIDSTREAM  REFINING
 Marketing
 Facilities and Major Subcontractors
   Crude Supply and Throughput
  Marketing
  Annual Information Form INTEROIL CORPORATION 17




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Competition
  Marketing
 Customers
   Trading and Risk Management
  Annual Information Form INTEROIL CORPORATION 18




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MIDSTREAM  LIQUEFACTION
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(i)
    
    conclusion of FEED for certain (phase 1) facilities;(ii)
    
    execution of the major project contracts;(iii)
    
    approval of the construction plan and budget;(iv)
    
    approval of the financing plan; and(v)
    
    receipt of each material governmental approval required for the project.
  Legal Proceedings and Regulatory Actions"
 Material
Contracts  Share Purchase and Sale and Settlement Agreement dated February 27, 2009"
 
 DOWNSTREAM  WHOLESALE AND RETAIL DISTRIBUTION
  Supply of Products
    Retail Distribution
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Wholesale Distribution
   Competition
  Customers
  
 INTEROIL RESOURCES
   Description Of Our Business
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Gross Resource Estimate for Gas and Condensate
 CaseAs at December 31, 2008
    
    Low
    
    Best
    
    HighContingent Gas Resources (Tcf)
    
    
    2.32
    
    
    
    3.43
    
    
    
    4.73Contingent Condensate Resources (MMBbls)
    
    
    36.7
    
    
    
    59.3
    
    
    
    87.9Contingent Resources MMBOE
    
    
    423.4
    
    
    
    631.0
    
    
    
    876.2
 Resource Estimate for Gas and Condensate  Net to InterOil*
 CaseAs at December 31, 2008
    
    Low
    
    Best
    
    HighContingent Gas Resources (Tcf)
    
    
    1.3
    
    
    
    1.9
    
    
    
    2.6Contingent Condensate Resources (MMBbls)
    
    
    20.4
    
    
    
    33.0
    
    
    
    48.9Contingent Resources MMBOE
    
    
    235.7
    
    
    
    351.3
    
    
    
    487.8
 
 *
    
    55.67% Working Interest assumes all IPWI Investors and the State elect to fully
participate after a Production Development License has been granted.    Annual Information Form INTEROIL CORPORATION 22




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THE ENVIRONMENT AND COMMUNITY RELATIONS
 Environmental Protection
       Environmental and Social Policies
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RISK FACTORS
  We may not be successful in our exploration for oil and gas.
   Oil and gas prices have recently declined substantially. If there is a sustained economic downturn
or recession in the PNG or globally, oil and natural gas prices may continue to fall and may become
and remain depressed for a long period of time, which may adversely affect our results of
operations.
  We may not be successful in our negotiations with the State with respect to revising the price for
which we sell refined product in Papua New Guinea, which, if not revised, may reduce our profit and
cause us to cease operating the refinery.
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Our refinerys financial condition may be materially adversely affected if we are unable to obtain
crude feedstocks at economic rates for our refinery.
   Our inability to generate sufficient cash flow to pay off or refinance our indebtedness with
near-term maturities could have a material adverse effect on our financial condition.
  Our debt levels and debt covenants may limit our future flexibility in obtaining additional
financing.
  
    
    A portion of our cash flow will be used to pay interest and principal on our
debt and will not be available for other purposes;
    
    Our loan agreements and facilities contain financial tests which we must satisfy
in order to avoid a default under such credit facilities; and
    
    Our ability to obtain additional financing for capital expenditures and other
purposes may be limited.
  Annual Information Form INTEROIL CORPORATION 25




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We depend upon access to the capital markets to fund our growth strategy. Currently, the capital
and credit markets are experiencing an unprecedented disruption which, if it continues for an
extended period of time, will adversely affect our growth strategy.
    Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service
obligations to increase significantly.
  The exploration and production, the refining and the distribution businesses are competitive.
   ü
    
    Our access to the capital necessary to drill wells and acquire properties;ü
    
    Our ability to acquire and analyze seismic, geological and other information relating to a property;ü
    
    Our ability to retain the personnel necessary to properly evaluate seismic and other information relating to a property;ü
    
    The development of, and our ability to access, transportation systems to bring future production to the market, and the
costs of such transportation systems;ü
    
    The standards we establish for the minimum projected return on an investment of our capital; andü
    
    The availability of alternate fuel sources.
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Our hedging activities may result in losses.
  
    
    If the amount of refined products produced is less than expected or is not produced or
sold during the planned time period;
    
    If the other party to the hedging contract defaults on its contract obligations, which
risk has increased with the global financial and credit market crisis; or
    
    If there is a change in the expected differential between the underlying price in the
hedging agreement and actual prices received.
   There are inherent limitations in all control systems, and misstatements due to error that could
seriously harm our business may occur and not be detected.
  Annual Information Form INTEROIL CORPORATION 27




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Our results of operations and financial condition may be adversely affected by changes in currency
exchange rates.
  Our ability to recruit and retain qualified personnel may have a material adverse effect on our
operating results and stock price.
  Shortages or unavailability of drilling rigs, oilfield equipment, and other oilfield exploration
services could have a material adverse affect on our results of operations.
  Our ability to develop our planned LNG facility is contingent on our ability to obtain significant
funding.
   Annual Information Form INTEROIL CORPORATION 28




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Even if we obtain sufficient funding for our LNG terminal, we may not be able to timely construct
and commission our LNG terminal.
  
    
    failure by contractors to fulfill their obligations under construction contracts, or
disagreements with them over contractual obligations;
    
    our failure to enter into satisfactory agreements with contractors for the construction
of the LNG terminal;
    
    shortages of materials or delays in delivery of materials;
    
    cost overruns and difficulty in obtaining sufficient financing to pay for such
additional costs;
    
    difficulties or delays in obtaining gas for commissioning activities necessary
to achieve commercial operability of the LNG terminal;
    
    failure to obtain all required governmental and third-party permits, licenses
and approvals for the construction and operation of the LNG facility;
    
    weather conditions and other catastrophes;
    
    difficulties in obtaining a proper workforce for construction purposes,
increased labor costs and potential labor disputes;
    
    resistance in the local and global community to the development of an LNG
facility due to safety, environmental or security concerns; and
    
    local economic and infrastructure conditions.
  If our refining margins do not meet our expectations, we may be required to write down the value of
our refinery.
   Annual Information Form INTEROIL CORPORATION 29




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##### Table of Contents




    
    Our revenues, cash flows and earnings;
    
    Our ability to attract capital to finance our operations, and the cost of such
capital;
    
    The value of our oil properties;
    
    The profit or loss we incur in refining petroleum products; and
    
    The profit or loss we incur in exploring for and developing reserves.
 Our refinery has not operated at full capacity for an extended period of time and our profitability
may be materially negatively affected if it is not able to do so.
   If we are not able to market all of our refinerys output, we will not be able to operate our
refinery at its full capacity and our financial condition and results of operations may be
materially adversely affected.
    Our refining operations expose us to risks, not all of which are insured.
  Annual Information Form INTEROIL CORPORATION 30




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Weather and unforeseen operating hazards may adversely impact our operating activities.
  Our investments in Papua New Guinea are subject to political, legal and economic risks that could
materially adversely affect their value.
    The implementation of new Papua New Guinean laws may have a material adverse effect on our
operations and financial condition.
  Annual Information Form INTEROIL CORPORATION 31




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Title to certain of our properties may be defective or challenged by third party landowner claims.
  Compliance with and changes in environmental laws could adversely affect our performance.
  We are a party to lawsuits and other proceedings in which we may not be successful.
  You may be unable to enforce your legal rights against us.
  The enactment of legislation responsive to the Kyoto Protocol or similar global governmental
initiatives to regulate emissions of greenhouse gases could result in a reduction in demand for
fossil fuels that may reduce demand for our products in the global markets and thus negatively
impact our financial condition.
  The price of our Common Shares has been volatile.
  Annual Information Form INTEROIL CORPORATION 32




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
    
    quarterly variations in our results of operations;
    
    material events public announcements concerning our business and operations;
    
    changes in stock market analyst recommendations or earnings estimates regarding the Common Shares;
    
    strategic actions, such as acquisitions by InterOil or its competitors;
    
    new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
    
    significant sales of the Common Shares;
    
    the acquisition or loss of major customers or suppliers;
    
    additions or departures of key personnel;
    
    changes in market valuations for refining, exploration and production companies or companies
participating in the retail distribution of refined oil products; and
    
    changes in accounting standards, policies, guidance, interpretations or principles.
  Third parties may default on their contractual obligations.
  
 DIVIDENDS
  
 DESCRIPTION OF CAPITAL STRUCTURE
  Common Shares
  Annual Information Form INTEROIL CORPORATION 33




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Preferred Shares
  Series A Preferred Shares
  Voting
 Dividends
 Conversion
 Fundamental Change
 Shareholder Rights Plan
   Annual Information Form INTEROIL CORPORATION 34




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8% Subordinate Convertible Debentures
  Principal Amount and Interest
 Conversion.
 Change of Control Transaction
 Subordination
 Events of Default .
 Annual Information Form INTEROIL CORPORATION 35




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Ratings.
 Options
   Warrants
  Annual Information Form INTEROIL CORPORATION 36




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Other instruments Convertible into or Exchangeable for Common Shares
   
 MARKET FOR SECURITIES
  Toronto Stock Exchange (TSX:IOL) in Canadian Dollars
 Month
    
    High
    
    Low
    
    volumeJanuary
    
    $
    21.88
    
    
    $
    15.93
    
    
    
    1,728,700February
    
    $
    23.92
    
    
    $
    18.51
    
    
    
    1,076,800March
    
    $
    23.22
    
    
    $
    16.50
    
    
    
    974,900April
    
    $
    21.24
    
    
    $
    16.25
    
    
    
    1,296,400May
    
    $
    30.00
    
    
    $
    21.30
    
    
    
    2,118,300June
    
    $
    36.50
    
    
    $
    24.36
    
    
    
    1,678,400July
    
    $
    31.17
    
    
    $
    25.27
    
    
    
    1,086,100August
    
    $
    33.21
    
    
    $
    26.07
    
    
    
    740,500September
    
    $
    33.88
    
    
    $
    23.25
    
    
    
    921,500October
    
    $
    29.00
    
    
    $
    10.99
    
    
    
    1,059,600November
    
    $
    18.00
    
    
    $
    11.40
    
    
    
    647,700December
    
    $
    17.35
    
    
    $
    12.28
    
    
    
    909,600Total
    
    
    
    
    
    
    
    
    
    
    14,238,500
 American Stock Exchange (AMEX:IOC) in United States Dollars
 Month
    
    High
    
    Low
    
    VolumeJanuary
    
    $
    21.94
    
    
    $
    15.78
    
    
    
    12,268,100February
    
    $
    23.90
    
    
    $
    18.40
    
    
    
    12,586,500March
    
    $
    23.50
    
    
    $
    16.06
    
    
    
    12,778,300April
    
    $
    20.73
    
    
    $
    15.98
    
    
    
    12,834,900May
    
    $
    30.22
    
    
    $
    20.95
    
    
    
    27,588,500June
    
    $
    41.62
    
    
    $
    24.10
    
    
    
    25,851,300July
    
    $
    30.74
    
    
    $
    24.56
    
    
    
    20,483,400August
    
    $
    32.04
    
    
    $
    24.54
    
    
    
    14,388,600September
    
    $
    31.85
    
    
    $
    21.72
    
    
    
    19,069,000October
    
    $
    27.18
    
    
    $
    9.10
    
    
    
    15,702,600November
    
    $
    15.50
    
    
    $
    8.90
    
    
    
    7,817,200December
    
    $
    14.24
    
    
    $
    10.20
    
    
    
    5,705,900Total
    
    
    
    
    
    
    
    
    
    
    187,074,300
 Annual Information Form INTEROIL CORPORATION 37




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##### Table of Contents



Prior sales
 
    
    58,000 common shares were issued during 2008 upon the exercise of
stock options at various prices defined by the option grant terms in
accordance with relevant stock incentive plans.
    
    Clarion Finanz A.G. converted its $60 million share of the
Companys $130 million secured bridging credit facility into 2,728,477
common shares on May 9, 2008 at a deemed price of $22.65.
    
    $95 million principal amount of 8% Subordinated Convertible
Debentures due 2013 (the Debentures) were issued by us to certain
investors on a private placement basis on May 9, 2008. See Description
of Capital Structure.
    
    9,347 common shares were issued on May 20, 2008 at a deemed price
of $19.95 and 5,630 Common Shares were issued on August 8, 2008 at a
deemed price of $33.12 as payment of dividends on the series A preferred
 shares for the quarters ended March 31, 2008 and June 30, 2008,
respectively.
    
    228,000 common shares were issued on June 5, 2008 at a deemed
price of $25.00 as payment of a finders fee in connection with the
private placement of the Debentures.
    
    317,700 common shares were issued on July 10, 2008 and 200,077
common shares were issued on August 22, 2008 upon conversion of all of
the then issued series A preferred shares.
    
    450,000 common shares were issued on August 15, 2008 at a deemed
price of $37.50 to IPI holders who exercised their rights to convert to
common shares under the IPI Agreement (see Material Contracts  Amended
and Restated Indirect Participation Interest Agreement dated February 25,
2005). In addition, two holders agreed during 2008 to waive their
rights to convert their interest into 696,667 common shares under the
Agreement.
    
    259,105 common shares were issued to on December 16, 2008 at a
deemed price of $10.11 as payment of a proportion of the first interest
installment. 641,000 common shares were issued to holders who elected to
convert their Debentures into common shares during 2008 in accordance
with the provisions of the Debentures.
 Annual Information Form INTEROIL CORPORATION 38




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DIRECTORS AND EXECUTIVE OFFICERS
  Directors and Executive Officers
 Name, Address
    
    Position with InterOil
    
    Date of AppointmentPhil E. Mulacek
Texas, USA
    
    Chairman and Chief
Executive Officer
    
    May 29, 1997Christian Vinson
Port Moresby, PNG
    
    Vice President Corporate
Development and
Government Affairs, Director
    
    May 29, 1997Gaylen Byker
Michigan, USA
    
    Director(1) (4)
    
    May 29, 1997Roger Grundy
Derbyshire, UK
    
    Director (4)
    
    May 29, 1997Edward N. Speal
New York, USA
    
    Director(2) (4)
    
    June 25, 2003Roger F. Lewis
Western Australia, Australia
    
    Director(3)
    
    November 26, 2008William Jasper III
Texas, USA
    
    President and Chief
Operating Officer
    
    September 18, 2006Anthony Poon
New South Wales, Australia
    
    General Manager  Supply
Trading and Risk
Management
    
    October 1, 2005(5)Collin Visaggio 
Western Australia, Australia
    
    Chief Financial Officer
    
    October 26, 2006Mark Laurie
South Australia, Australia
    
    General Counsel and
Corporate Secretary
    
    June 12, 2007
 Notes:(1)
    
    Gaylen Byker acts as Chairman of the Boards Audit Committee, the Nominating and Corporate
Governance Committee and Compensation Committee and has held such positions throughout 2008.(2)
    
    Edward Speal is a member of the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee, and has held such positions throughout 2008.(3)
    
    Roger Lewis replaced Donald Hansen as a Director. Mr Hansen retired as a Director and member
of the Audit Committee, the Nominating and Corporate Governance Committee and Compensation
Committee on October 14, 2008. Mr. Lewis has held the position of Director and member of the
Audit Committee, the Nominating and Corporate Governance Committee and Compensation Committee
from his date of appointment.(4)
    
    Messrs Grundy and Speal and Dr Byker are also members of the Boards Reserves Committee
established in June 2008.(5)
    
    Mr Poon ceased employment on January 15, 2009.    Annual Information Form INTEROIL CORPORATION 39




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Phil E. Mulacek
 Christian M. Vinson
 Gaylen J. Byker
 Roger N. Grundy
 Edward N. Speal
 Roger F. Lewis
 Annual Information Form INTEROIL CORPORATION 40




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William J Jasper III
 Anthony Poon
 Collin F. Visaggio
 Mark Laurie
 Conflicts of Interest
  Annual Information Form INTEROIL CORPORATION 41




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
    
    P.I.E. Group, LLC, which entity is controlled by Mr. Mulacek and in which entities
controlled by Dr. Byker also have an ownership interest, holds small ownership interests
(0.01%) in SPI Exploration & Production Corporation and S.P.I. Distribution Limited which
are subsidiaries of the Company. In addition, Petroleum Independent and Exploration
Corporation, which company is controlled and partly owned by Mr. Mulacek, owns an interest
in SP InterOil, LDC, another subsidiary of the Company.
    
    Mr. Speal occupies a senior position with BNP Paribas in New York. This bank provides,
through its Singapore office, certain credit facilities to finance the purchase of cargoes
of crude oil and other petroleum products for InterOils refining activities, and to
support it hedging positions. See Material Contracts  Secured Revolving Crude Import
Facility.
    
    Mr. Grundy is a principal of Breckland Limited, which entity provides technical and
advisory services to InterOil on customary commercial terms.
 Interests of Management and Others in Material Transactions
 
 AUDIT COMMITTEE
 Charter of the Audit Committee
  Composition of the Audit Committee
   Relevant Education and Experience
 Directors and Executive Officers
  Pre-Approval Policies and Procedures
  Annual Information Form INTEROIL CORPORATION 42




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External Auditor Service Fees
  PricewaterhouseCoopers
 2008
    
    2007Audit Fees(1)
    
    $
    1,416,583
    
    
    $
    968,316Audit-Related Fees(2)
    
    $
    170,404
    
    
    $
    14,887Tax Fees(3)
    
    $
    473,493
    
    
    $
    167,491All Other Fees(4)
    
    $
    39,192
    
    
    $
    266,870Total
    
    $
    2,099,672
    
    
    $
    1,417,565
 Notes:
     
 LEGAL PROCEEDINGS AND REGULATORY ACTIONS
 Legal Proceedings
 Todd Peters, et. al. v. Phil Mulacek et. al. ;
   Annual Information Form INTEROIL CORPORATION 43




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Regulatory Actions
     
 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    Directors and Executive Officers  Conflicts of Interest
 Annual Information Form INTEROIL CORPORATION 44




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MATERIAL CONTRACTS
  Share Purchase and Sale and Settlement Agreement dated February 27, 2009
    Investment Agreement dated October 30, 2008
 Oil & Gas Act Oil & Gas
Act
 Amended and Restated Common Share Purchase Agreement dated June 10, 2008
  Annual Information Form INTEROIL CORPORATION      45




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##### Table of Contents



LNG Project Shareholders Agreement dated July 30, 2007
 Description of the Business Midstream -Liquefaction
 General Development of the Business  Three Year History  Midstream
 Liquefaction Segment Legal Proceedings and Regulatory Actions.
 Secured Revolving Crude Import Facility renewed on August 31, 2008 and originally dated August 12,
2005
  Amended and Restated Indirect Participation Interest Agreement dated February 25, 2005
 Description of Our BusinessUpstream-Exploration and ProductionIndirect Participation
Agreements
 Amended Indirect Participation Interest Agreement dated May 12, 2004
  Drilling Participation Agreement dated July 21, 2003
  Annual Information Form INTEROIL CORPORATION      46




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##### Table of Contents



OPIC Loan Agreement dated June 12, 2001
 Description of the Business 
Midstream-Refining Liquefaction
 Refinery State Project Agreement
      Annual Information Form INTEROIL CORPORATION      47




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TRANSFER AGENT AND REGISTRAR
  Transfer Agent and Registrar
 Main Agent
 th
 Co-Transfer Agent (USA)
 
  
 INTERESTS OF EXPERTS
 .
  
 ADDITIONAL INFORMATION
   Annual Information Form INTEROIL CORPORATION      48




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Schedule A  Report of Management and Directors on Oil and Gas Disclosure
 FORM 51-101F3 REPORT OF
MANAGEMENT AND DIRECTORS
ON OIL AND GAS DISCLOSURE
 REPORT OF MANAGEMENT AND DIRECTORS
ON RESOURCE DATA AND OTHER INFORMATION
    (a)
    
    reviewed the Companys procedures for providing information to the independent qualified
resources evaluator;(b)
    
    met with the independent qualified resources evaluator to determine whether any restrictions
affected the ability of the independent qualified resources evaluator to report without
reservation; and(c)
    
    reviewed the reserves data with management and the independent qualified resources evaluator.
  (a)
    
    the content and filing with securities regulatory authorities of Form 51-101F1 containing
resources data and other oil and gas information;(b)
    
    the filing of the report of the independent qualified resources evaluator on the resources
data; and(c)
    
    the content and filing of this report.
   Phil E. Mulacek
    
    Roger GrundyPhil E. Mulacek
    
    Roger GrundyChief Executive Officer
    
    DirectorCollin F. Visaggio
    
    Edward SpealCollin F. Visaggio
    
    Edward SpealChief Financial Officer
    
    Director
 Annual Information Form INTEROIL CORPORATION      49




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Schedule B  Report on Reserves Data by Independent Qualified Reserves Evaluator
 FORM 51-101F2
REPORT ON RESOURCES DATA
BY
INDEPENDENT QUALIFIED RESERVES
EVALUATOR OR AUDITOR
  1.
    
    We have prepared an assessment of the Companys resources data as at December 31, 2008.
The resources data are estimates of low, best and high estimates of contingent resources as
at December 31, 2008.2.
    
    The resources data are the responsibility of the Companys management. Our
responsibility is to express an opinion on the resources data based on our assessment.We carried out our assessment in accordance with standards set out in the Canadian Oil and
Gas Evaluation Handbook (the COGE Handbook) prepared jointly by the Society of Petroleum
Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy &
Petroleum (Petroleum Society).3.
    
    Those standards require that we plan and perform an assessment to obtain reasonable
assurance as to whether the resources data are free of material misstatement. An assessment
also includes assessing whether the resources data are in accordance with principles and
definitions in the COGE Handbook.4.
    
    The following table sets forth the estimates of low, best and high estimates of
contingent resources as at December 31, 2008:
 Location ofDescription and
    
    ReservesPreparation Date
    
    (Country or
    
    Company GrossIndependent
    
    of
    
    Foreign
    
    Contingent ResourcesQualified Reserves
    
    Assessment
    
    Geographic
    
    MMBOEEvaluator
    
    Report
    
    Area)
    
    Low
    
    Best
    
    HighGLJ Petroleum Consultants
    
    March 20, 2009
    
    Papua New Guinea
    
    
    235.7
    
    
    
    351.2
    
    
    
    487.8
 5.
    
    In our opinion, the resources data evaluated by us have, in all material respects, been
determined and are in accordance with the COGE Handbook.6.
    
    We have no responsibility to update our reports referred to in paragraph 4 for events
and circumstances occurring after their respective preparation dates.7.
    
    Because the resources data are based on judgments regarding future events, actual
results will vary and the variations may be material. However, any variations should be
consistent with the fact that resources are categorized according to the probability of
their recovery.8.
    
    Contingent resources estimates are not classified as reserves at this time, pending
further reservoir delineation, project application, facility and reservoir design work.
Contingent resources entail commercial risk not applicable to reserves. There is no
certainty that it will be commercially viable to produce any portion of the contingent
resources.
 Annual Information Form INTEROIL CORPORATION      50




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Annual Information Form INTEROIL CORPORATION      51




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Schedule C  Audit Committee Charter
 INTEROIL CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
  Charter  Committee  Board  Company 
 1.
    
    Purpose. The purpose of the Committee is to assist the Board in fulfilling its oversight
responsibilities relating to the Companys corporate accounting and financial reporting
processes and the audits of the Companys financial statements. In fulfilling this function,
the Committees primary duties and responsibilities are to:
 
    
    Serve as an independent and objective party to oversee the integrity of the
Companys financial statements and to monitor the Companys financial reporting process
and systems of internal controls regarding financial, accounting, and legal compliance.
    
    Monitor the qualifications, independence and performance of the Companys
independent auditors and the performance of the Companys internal auditing function.
    
    Provide an avenue of communication between the Board and the independent auditors,
management and the internal auditor.
    
    Report actions of the Committee to the Board with such recommendations as the
Committee may deem appropriate.
 The Committee shall be empowered to conduct or cause to be conducted any investigation
appropriate to fulfilling its responsibilities, and shall have direct access to the independent
auditors, the internal auditor and Company employees as necessary. The Committee shall be
empowered to retain, at the Companys expense, independent legal, accounting, or other
consultants or experts as the Committee deems necessary in the performance of its duties. The
Committee shall have sole authority to approve related fees and retention terms.
 2.
    
    Committee Membership.
 2.1.
    
    Composition and Appointment. The Committee shall consist of three or more members of
the Board. The Board shall designate members of the Committee. Membership on the
Committee shall rotate at the Boards discretion. The Board shall fill vacancies on the
Committee and may remove a Committee member from the membership of the Committee at any
time without cause. Members shall serve until their successors are appointed by the Board
and as otherwise required by applicable law or the rules of the American Stock Exchange
(AMEX).2.2.
    
    Independence and Financial Literacy. Each member of the Committee must meet the
independence, or an applicable exception, financial literacy, and experience requirements
of the AMEX rules and applicable Canadian and U.S. federal securities laws, including the
rules and regulations of the U.S. Securities and Exchange Commission (SEC). In addition,
at least one member of the Committee must be financially sophisticated, as determined by
the Board, for purposes of applicable AMEX rules.2.3.
    
    Service on Multiple Audit Committees. If a member of the Committee serves on the audit
committee (or, in the absence of an audit committee, the board committee performing
equivalent functions, or in the absence of such committee, the board of directors) of more
than two other public companies, the Board must affirmatively determine that such
simultaneous service on multiple audit committees will not impair the ability of such
member to serve on the Committee.2.4.
    
    Subcommittees. The Committee may form and delegate authority to subcommittees
consisting of one or more members, including the authority to grant pre-approvals of audits
and permitted non-audit services, provided that decisions of said subcommittee to grant
pre-approvals shall be presented to the full Committee at its next scheduled meeting.
 Annual Information Form INTEROIL CORPORATION      52




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3.
    
    Meetings.
 3.1.
    
    Frequency of Meetings. The Committee shall meet at least quarterly, or more frequently
as circumstances dictate. The schedule for regular meetings of the Committee shall be
established by the Committee. The Chairperson of the Committee may call a special meeting
at any time he or she deems advisable. Meetings may be by written consent. When
necessary, the Committee will meet in executive session outside the presence of any senior
executive officer of the Company. The Committee and any other independent members of the
Board that are not members of the Committee will meet in executive session, without the
presence of non-independent directors and management at least once annually.3.2.
    
    Minutes. Minutes of each meeting of the Committee shall be kept to document the
discharge by the Committee of its responsibilities.3.3.
    
    Quorum. A quorum shall consist of at least one-half of the Committees members, but no
fewer than two persons. The act of a majority of the Committee members present at a
meeting at which a quorum is present shall be the act of the Committee.3.4.
    
    Agenda. The Chairperson of the Committee shall prepare an agenda for each meeting of
the Committee, in consultation with Committee members and any appropriate member of the
Companys management or staff, as necessary. As requested by the Chairperson, members of
the Companys management and staff shall assist the Chairperson with the preparation of any
background materials necessary for any Committee meeting.3.5.
    
    Presiding Officer. The Chairperson of the Committee shall preside at all Committee
meetings. If the Chairperson is absent at a meeting, a majority of the Committee members
present at a meeting shall appoint a different presiding officer for that meeting.3.6.
    
    Private Meetings. The Committee may meet privately with management, the chief executive
officer (CEO), the general counsel, the internal auditor, the independent auditors, and
as a Committee to discuss any matters that the Committee or each of these groups believe
should be discussed privately.
 4.
    
    General Review Procedures.
 4.1.
    
    Annual Report Review. The Committee shall review with management, the independent
auditors, and the internal auditors, the Companys year-end financial results prior to the
release of earnings and the Companys year-end financial statements prior to filing or
distribution. Such review shall also include the Companys disclosures that are to be
included in the Companys Annual Information Form, Annual Report, Managements Discussion
and Analysis for the year and Annual Report on Form 40-F. The Committee shall also discuss
with management, the independent auditors and the internal auditors any significant issues
or findings or any changes to the Companys accounting principles, any items required to be
communicated by the independent auditors in accordance with Statement on Auditing Standards
No. 61, as amended, and various topics and events that may have a significant impact on the
Company or that are the subject of discussions between management and the independent
auditors. The Committee shall approve the audited financial statements and recommend to
the Board whether or not the audited financial statements should be filed on SEDAR and
included in the Companys Annual Report on Form 40-F for the last fiscal year.4.2.
    
    Quarterly Report Review. The Committee shall review with management, the internal
auditors, and the independent auditors (if the independent auditors were involved in a
review of such financial statements), (i) the Companys interim financial results prior to
the release of earnings, the Companys interim financial statements prior to filing or
distribution and the disclosures that are to be included in the Companys Managements
Discussion and Analysis for each quarter and Form 6-K and (ii) the operation of the
Companys internal controls and any special steps adopted in light of material control
deficiencies. The Committee shall discuss with management, the internal auditors and the
independent auditors (if required by GAAP, AMEX rules, or applicable Canadian and U.S.
federal securities laws), any significant findings or any changes to the Companys
accounting principles and any items required to be communicated by the independent auditors
in accordance with Statement on Auditing Standards No. 61 as amended.
 Annual Information Form INTEROIL CORPORATION      53




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4.3.
    
    Canadian and SEC Filings Review. The Committee shall review with financial management
and the independent auditor (if the independent auditors were involved in a review of such
financial statements) filings with Canadian securities regulators and the SEC which contain
or incorporate by reference the Companys financial statements or Managements Discussion
and Analysis and consider whether the information in these documents is consistent with
information contained in the financial statements.4.4.
    
    Reporting System Review. In consultation with management, the independent auditors,
and the internal auditors, the Committee shall consider the integrity of the Companys
financial reporting processes and controls, including computerized information system
controls and security. The Committee shall review and discuss with management the
Companys significant financial risk exposures and the steps management has taken to
monitor, control, and report such exposures. The Committee shall review significant
findings prepared by the independent auditors and the internal auditors together with
managements responses, including the status of previous recommendations.4.5.
    
    Non-GAAP Financial Data Review. The Committee shall review and discuss with management
earnings including the use of pro forma, adjusted or other non-GAAP information,
financial guidance and other press releases of a material financial nature, as well as
financial information and earnings guidance provided to analysts and rating agencies. Such
discussion may be done generally consisting of discussing the types of information to be
disclosed and the types of presentations to be made.4.6.
    
    Off-Balance Sheet Review. The Committee shall discuss with management and the
independent auditor the effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Companys financial statements.4.7.
    
    Risk Assessment. Although it is the job of the CEO and senior management to assess and
manage the Companys exposure to risks, the Committee shall discuss guidelines and policies
to govern the process by which risk assessment and risk management is addressed.4.8.
    
    Audit Difficulties. The Committee shall review with the independent auditor any audit
problems or difficulties encountered in the course of the audit work and managements
response, any restrictions on the scope of activities or access to requested information;
and any significant disagreements between auditors and management. The Committee shall
work to resolve disagreements that may have occurred between auditors and management
related to the Companys financial statements or disclosures.4.9.
    
    Hiring Approval. The Committee shall approve the hiring of any employee or former
employee of the independent auditor.4.10.
    
    Financial Officer Code of Ethics Review. The Committee shall review and periodically
recommend modifications to the Companys Code of Ethics for the Chief Executive Officer and
Senior Financial Officers.4.11.
    
    Certification Review. The Committee shall review disclosures made to the Committee by
the Companys CEO and CFO during the certification process for the audited annual financial
statements, interim financial statements, related Managements Discussion and Analysis and
Form 40-F concerning significant deficiencies or material weaknesses in internal controls
and any fraud.4.12.
    
    Legal Counsel Review. On at least an annual basis, the Committee shall review with
the Companys legal counsel any legal matters that could have a significant impact on the
Companys financial statements or the Companys compliance with applicable laws and
regulations, and inquiries received from regulators or governmental agencies.
 5.
    
    Independent Auditors.
 Auditor Performance Review. The Committee shall confirm with the independent auditors
their ultimate accountability to the Committee. The independent auditors will report
directly to the Committee. The Committee will ensure that the independent auditors are
aware that the Chairperson of the Committee is to be contacted directly by the
independent auditor (i) to review items of a sensitive nature that can impact the
accuracy of financial reporting or (ii) to discuss
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significant issues relative to the
overall Board responsibility that have been communicated to management but, in their
judgment, may warrant follow-up by the Committee. The Committee shall review and
evaluate the performance of the auditors and the lead partner on the independent auditor
team.Approval of Independent Auditor and Pre-Approval of Services. The Committee shall be
directly responsible for the appointment, compensation, retention, termination, and
oversight of the work of the independent auditors engaged (including resolution of
disagreements between management and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or performing other audit, review or
attest services for the Company. The Committee shall pre-approve all auditing services,
including the compensation and terms of the audit engagement, and all other non-audit
services to be performed by the independent auditors, subject to the de-minimus
exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities
Exchange Act of 1934 which are approved by the Audit Committee prior to the completion
of the audit. The Committee shall periodically discuss current year non-audit services
performed by the independent auditors and review and pre-approve all permitted non-audit
service engagements.Auditor Independence. The Committee shall oversee the independence of the independent
auditors by, among other things, (i) on an annual basis, receiving from the independent
auditors a formal written statement delineating all relationships between the
independent auditors and the Company, consistent with Independence Standards Board
Standard No. 1, that could impair the auditors independence; (ii) actively engaging in
a dialogue with the independent auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of the independent auditors;
and (iii) taking, or recommending to the Board the appropriate action to be taken, in
response to the independent auditors report to satisfy itself of the independent
auditors independence.Auditor Report. The Committee shall annually obtain from the independent auditor and
review a written report describing (i) the independent auditors internal
quality-control procedures; and (ii) any material issues raised by (a) the independent
auditors most recent internal quality-control review, or peer review or (b) any inquiry
or investigation by governmental or accounting profession authorities, in each case,
within the preceding five years, respecting one or more independent audits carried out
by the independent auditor, and any steps taken to deal with any such issues.Audit Partner Rotation. The Committee shall ensure the rotation of the lead (or
coordinating) audit partner having primary responsibility for the audit and the audit
partner responsible for reviewing the audit as required by law. The Committee shall
obtain, annually, from the independent auditor a written statement confirming that
neither the lead (or coordinating) audit partner having primary responsibility for the
Companys audit nor the audit partner responsible for reviewing the Companys audit has
performed audit services for the Company in each of the Companys five previous fiscal
years.Internal Controls Report. Beginning in fiscal year 2006 or earlier if required by
applicable accounting rules or Canadian and U.S. federal securities laws, the Committee
shall annually obtain from the independent auditor a written report in which the
independent auditor attests to and reports on the assessment of the Companys internal
controls made by the Companys management. The Committee shall review and discuss with
management, the independent auditor, and the Companys independent auditor (i) the
adequacy and effectiveness of the Companys internal controls (including any significant
deficiencies and significant changes in internal controls reported to the Committee by
the independent auditor or management; (ii) the Companys internal audit procedures; and
(iii) the adequacy and effectiveness of the Companys disclosures controls and
procedures, and management reports thereon.National Office Consultation. The Committee shall discuss with the national office of
the independent auditor issues on which they were consulted by the Companys audit team
and matters of audit quality and consistency.Audit Planning. The Committee shall review and discuss with the independent auditors
their audit plan and engagement letter and discuss with the independent auditors and the
internal auditor the scope of the audit, staffing, locations, reliance upon management,
and internal audit and general audit approach.
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Accounting Principles. The Committee shall consider the independent auditors judgments
about the quality and appropriateness of the Companys accounting principles as applied
in its financial reporting, including critical accounting policies and practices used by
the Company, GAAP alternatives discussed with management (including the ramifications
and the auditors preferred treatment) and any other material written communications
between the independent auditor and management.Auditor Assurance. The Committee shall obtain from the independent auditor assurance
that Section 10A of the Securities Exchange Act of 1934, addressing the reporting of
illegal acts, has not been implicated.Additional Auditors. The Committee shall review the use of auditors other than the
independent auditor where management has requested a second opinion or another auditor
is proposed to be engaged for other reasons.
 6.
    
    Internal Audit Department and Legal Compliance.
 Budget and Plan. The Committee shall review the budget, plan, changes in plan,
activities, organizational structure, and qualifications of the internal auditor. The
internal auditor function shall be responsible to senior management, but shall have a
direct reporting responsibility to the Board through the Committee. The internal
auditor will be responsible for contacting the Chairperson of the Committee directly (i)
to review items of a sensitive nature that can impact the accuracy of financial
reporting or (ii) to discuss significant issues relative to the overall Board
responsibility that have been communicated to management but, in the internal auditors
judgment, may warrant follow-up by the Committee.Approval of Internal Auditor. The Committee shall review and approve the appointment,
performance, dismissal and replacement of the internal auditor or the entity retained to
provide internal audit services.Internal Audit Review. The Committee shall review a summary of findings from completed
internal audits and, where appropriate, review significant reports prepared by the
internal audit department together with managements response and follow-up to these
reports.
 7.
    
    General Audit Committee Responsibilities.
 Code of Ethics for the Chief Executive Officer and Senior Financial Officers. The
Committee shall inquire of management, the independent auditor and the internal auditor
as to their knowledge of (i) any violation of the Code of Ethics for the Chief Executive
Officer and Senior Financial Officers, (ii) any waiver of compliance with such code, and
(iii) any investigations undertaken with regard to compliance with such code. The
Committee may make recommendations to the Board regarding the waiver of any provision of
the Code of Ethics for the Chief Executive Officer and Senior Financial Officers,
however any waiver of such code may only be granted by the Board. All waivers granted
by the Board shall be promptly publicly disclosed as required by the rules and
regulations of the SEC and the AMEX.Complaints Procedure. The Committee shall establish procedures to (i) receive, process,
retain and treat complaints received by the Company regarding accounting, internal audit
controls or auditing matters and (ii) the confidential and anonymous submission by
employees of concerns regarding questionable accounting or audit practices.Related Party Transactions. The Committee shall approve all related party transactions
after a review of the transactions by the Committee for potential conflicts of interest
and transaction will be considered a related party transaction if the transaction
would be required to be disclosed in the Companys Managements Discussion and Analysis
or any other filings with Canadian Securities Administrators or the SEC.Use of Assets. The Committee shall review Company policies and procedures with respect
to executive officers expense accounts and prerequisites, including their use of
corporate assets, and consider the results of any review of these areas by the internal
auditors or the independent accountant.
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General Activities. The Committee shall perform any other activities consistent with
this Charter, the Companys bylaws, the Companys Code of Ethics and Business Conduct
and governing law, as the Committee or the Board deems necessary or appropriate,
including reviewing the Companys corporate compliance activities.
 8.
    
    Reports and Assessments.
 8.1.
    
    Board Reports. The Chairperson shall, periodically at his or her discretion, report to
the Board on Committee actions and on the fulfillment of the Committees responsibilities
under this Charter. Such reports shall include any issues that arise with respect to the
quality or integrity of the Companys financial statements, the Companys compliance with
legal or regulatory requirements, the performance and independence of the Companys
independent auditors and the performance of the Companys internal audit function.8.2.
    
    Charter Assessment. The Committee shall annually assess the adequacy of this Charter
and advise the Board of its assessment and of its recommendation for any changes to the
Charter. The Committee shall, if requested by management, assist management with the
preparation of a certification to be presented annually to the AMEX affirming that the
Committee reviewed and reassessed the adequacy of this Charter.8.3.
    
    Committee Self-Assessment. The Committee shall regularly make a self-assessment of its
performance, which shall include eliciting input from management, the Board and the General
Counsel on the performance of the Committee.8.4.
    
    Audit Committee Report. The Committee shall prepare any Audit Committee Reports
required by the rules of the Canadian Securities Administrators or the SEC to be included
in the Companys filings with such agencies.
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