The Board of Directors and management of Finning International Inc. consider good governance to be an important factor in the effective operation of the Company.

The Board has overall responsibility for conduct of the business and affairs of the Company and discharges this responsibility both directly and through delegating certain authority to committees of the Board and to senior management of the Company.

The Corporate Governance Committee enhances corporate performance by assessing and making recommendations regarding board effectiveness and by establishing a process for identifying, recruiting, appointing and re-appointing directors and providing for the on-going development of current board members. The Committee monitors the flow of information between the board and management and, where necessary, makes recommendations on improving these lines of communication.

The Audit Committee assists the Board in fulfilling its oversight responsibility to shareholders, potential shareholders, the investment community and others with respect to the Company’s financial statements, financial reporting process, systems of internal accounting and financial controls, internal audit function, external auditors’ reports and risk assessment and management. The Committee is empowered to investigate any matter, with full access to all books, records, facilities and personnel of the Company. It is also empowered to instruct and retain outside counsel or other experts as required.

The Human Resources, Compensation and Pension Committee plans for the continuity of executive officers and other key employees. The committee also reviews the Company’s overall executive compensation plan to ensure it is competitive and motivating in order to attract, retain and inspire excellence in the performance of executive officers and other key employees. In all its deliberations, the Committee takes into account the cost of executive compensation and the interests of shareholders. In addition, the Committee reviews with the Finning International Management Pension Committee the investment objectives of the Corporation’s Pension funds, the choice of fund manager(s), the ongoing performance of the funds and the design of and benefits arising from the Corporation’s Pension funds.

The Environmental, Health and Safety Committee encourages, assists and counsels the management of the Company in its drive towards attaining and maintaining a high level of performance in areas relating to the environment, health and safety. The Committee also seeks to ensure, through the management of the Company, that the Company’s employees and contractors enjoy a safe and healthy workplace. The Committee pursues the Company’s goal of reducing accidents in the workplace through the adoption, monitoring and employment of policies and procedures designed to meet or exceed the environmental, health and safety goals, which the Company has set for itself and applicable regulatory requirements.

Ranked number 1 by Canadian Business Magazine in 2004 report on corporate governance.
Ranked number 2 by Globe and Mail Report on Business, 2004 study on corporate governance.

Conrad A. Pinette
Chairman Of The Board

The Board of Directors has overall responsibility for conduct of the business and affairs of the Corporation. The Board discharges this responsibility both directly and through delegating certain authority to committees of the Board and to senior management of the Corporation.

The direct responsibilities of the Board include:

1. choosing the Corporation’s Chief Executive Officer, who is responsible for all of the Corporation’s day-to-day operations;
2. reviewing and approving a strategic plan that takes into account an identification of business opportunities and business risks;
3. overseeing and monitoring management’s systems for the operations of the Corporation;
4. monitoring and assessing the Corporation’s performance in meeting both short and long-term goals established by the Board;
5. directly reviewing and approving major transactions proposed by management;
6. reviewing reports and recommendations from committees of the Board with respect to matters such as succession planning and preparation of financial statements and giving necessary directions to management; and
7. reviewing the content of significant communications with shareholders and the investing public, including this management proxy circular, annual reports, annual information forms and quarterly and annual financial statements.

Each director assumes responsibility for keeping himself or herself informed about the Corporation’s business and relevant developments outside the Corporation which affect its business. Management assists directors by providing them with regular updates on relevant developments and other information which management considers of interest to the Board. The Board also meets regularly to discuss issues outside of the presence of management.

In addition, the directors regularly take part in tours of the Corporation’s various operations around the world. These tours include informal presentations and discussions with local management in each location. The Board also encourages senior management to ensure that employees who are seen as potential future senior executives of the Corporation interact with the Board from time to time to allow the Board members themselves to assess that future potential.

Finally, each year the Board (with the assistance of the Corporate Governance Committee) formally reviews its own performance, the performance of each committee of the Board, the performance of the Chairman of the Board and the performance of the Chief Executive Officer. In addition, a formal process of individual director peer assessment has been adopted.

As part of its oversight responsibilities, the Board has approved a number of written policies, job descriptions and mandates. These include each of the following policies, job descriptions or mandates which are attached hereto as Schedules: “Terms of Reference for the Board of Directors” (Schedule D); “Terms of Reference for the President and Chief Executive Officer” (Schedule E); “Terms of Reference for the Corporate Governance Committee” (Schedule F); “Terms of Reference for External Auditor” (Schedule G); a “Code of Ethics and Conduct” (Schedule H); a Code of Ethics for Senior Financial Officers (Schedule I); a “Whistleblower Policy” (Schedule J); a “Policy on Share Trading and Use of Material Information” (Schedule K); a “Corporate Disclosure Policy” (Schedule L); and an “Employee Privacy Policy” (Schedule M). The Code of Ethics and Conduct, the Code of Ethics for Senior Financial Officers and the Policy on Share Trading and Use of Material Information are signed by appropriate employees in order to confirm that such employees are aware of these policies and to acknowledge that they are bound by the terms thereof.

During 2004, the Board of Directors met on 9 occasions, including one special meeting devoted exclusively to the Corporation’s corporate strategy and direction. 7 of these meetings were in person and 2 were by telephone.