2008

Annual

Report

Out of great

challenges

come even

greater

opportunities

_experience the commitmentTM

The CGI Constitution

OUR DREAM To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.   OUR MISSION To help our clients with professional services of outstanding quality, competence and objectivity, delivering the best solutions to fully satisfy client objectives in information technology, business processes and management. In all we do, we foster a culture of partnership, intrapreneurship, teamwork and integrity, building a world class IT and business process services company.   OUR VISION To be a world class IT and business process services leader helping our clients win and grow. OUR VALUES Partnership and quality For us, partnership and quality are both a philosophy and a way of life. We develop and follow the best management practices and we entrench these approaches into client relationships and service delivery frameworks in order to foster long-term and strong partnerships with our clients. We listen to our clients and we are committed to their total satisfaction in everything we do.   Objectivity and integrity We exercise the highest degree of independent thinking in selecting the products, services and solutions we recommend to clients. In doing so, we adhere to the highest values of quality, objectivity and integrity. Consequently, strict rules of business and professional conduct are applied. We do not accept any remuneration from suppliers.   Intrapreneurship and sharing Our success is based on the competence, commitment and enthusiasm of our members. Therefore, we promote a climate of innovation and initiative where we are empowered with a sense of ownership in supporting clients, thus ensuring the firm’s profitable growth. Through teamwork, sharing our know-how and expertise, we bring the best of CGI to our clients. As members, we share in the value we create through equity ownership and profit participation.   Respect As a global company, we recognize the richness that diversity brings to the company and welcome this diversity while embracing the overall CGI culture. In all we do, we are respectful of our fellow members, clients, business partners and competitors.   Financial strength We strive to deliver strong, consistent financial performance, which sustains long term growth and rewards our members and shareholders. Financial strength enables us to continuously invest and improve services and business solutions to the benefit of our clients. To this end, we manage our business to generate industry superior returns.   Corporate social responsibility Our business model is designed to ensure that we are close to our clients and communities. We embrace our social responsibilities and contribute to the continuous development of the communities in which we live and work.

 At CGI, we embrace challenges because we love finding solutions.

We don’t need to read the headlines to know that the world’s economy faces challenging times. The hundreds of companies and government organizations we work with each day must tackle a growing list of pressures. Customers must be satisfied, risks reduced and costs contained. And, in the midst of this, growth must be achieved. CGI works side-by-side with our clients to deliver the solutions they need to succeed. Tough times demand smart investments and solutions. CGI is committed to helping clients win and grow; providing our professionals with rewarding careers; and offering shareholders superior returns over time.

Contract types			Geographic markets		Targeted verticals
Management of IT and business functions (outsourcing)		54%	Canada United States Europe and Asia Pacific	61% 31% 8%	Government and healthcare Financial services	30% 30%
• IT services • Business process    services Systems integration	41% 13%	46%			Telecommunications and utilities Retail and distribution Manufacturing	22% 11% 7%
and consulting

 CGI at a glance         Experience the commitment   At CGI, we’re in the business of satisfying clients. For more than 30 years, we’ve operated upon the principles of sharing in clients’ challenges and delivering quality services to address them. As a leading IT and business process services provider, CGI has 25,500 professionals operating in 100+ offices worldwide, giving us the competitive advantage of close proximity to our clients. Through these offices, we offer local partnerships and a balanced blend of global delivery options to ensure clients receive the combination of value and expertise they require. CGI defines success by exceeding clients’ expectations and helping them achieve superior performance.

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Our build and buy profitable growth strategy Organic growth (the build side) and acquisitions (the buy side) are an integral part of our business strategy and both have contributed to our growth over the years. In addition to operational breadth and depth, accretive acquisitions bring critical mass, which qualifies us for larger partnerships with local and global clients. Organic growth   Systems integration contracts and projects With new contracts and renewals Develop new client relationships Extend service offerings to existing clients   Large outsourcing contracts Pursue lare outsourcing contracts with new and existing clients Grow pipeline of outsourcing proposals   Growth by acquisition   Niche market acquisitions Enhance vertical offerings Increase geographic presence Increase richness of offerings   Transformational acquisitions Increase geographic presence Increase critical mass to qualify for large outsourcing proposals Ensure strategic fit and accretion to net earnings

Helping our clients win and grow

Our approach   We understand it’s how we deliver our services that makes us a partner of choice. Our business approach puts clients and their results first.   Client-proximity business model — organizes operations around metro markets, allowing us to be deeply rooted within clients’ business communities and accountable for project success   Industry expertise — fuels our deep understanding of clients’ realities to implement solutions that transform their business environments   Global delivery options — combines onsite responsiveness through our local offices with the value of remote delivery through CGI’s onshore, nearshore and offshore centers of excellence   Quality processes — ISO 9001:2000- certified operations ensure highly satisfied relationships with clients, members and shareholders; and CMMI Levels 3 and 5-compliant global delivery centers provide agile, high-quality delivery Our services   CGI has a comprehensive portfolio of services—including consulting, systems integration, the full management of IT and business functions, and 100+ proprietary solutions—that enable us to improve all facets of clients’ operations. Key service areas include:   Systems integration and consulting—strategic plans, design and implementation of business and technology solutions that help solve clients’ business challenges   Application management — day-to-day maintenance and improvement of clients’ business applications, helping reduce costs and ensure faster delivery of new initiatives   Technology management —  full infrastructure management capabilities that help clients adapt their unique business requirements and priorities   Business process services — management of back-office business processes to streamline operations and help reach new levels of effectiveness and productivity Our markets   CGI offers its end-to-end services to a selected set of economic sectors where we have deep business and technical expertise. This allows us to fully understand our clients’ business realities and to have the know-how and solutions needed to advance their business goals. Our targeted industries include:   Government and healthcare — helping organizations improve the performance of mission-critical functions through the innovative use of information technology   Financial services — helping clients grow and increase profitability by adopting solutions that support integrated customer-focused operations   Telecommunications and utilities —  helping providers deliver new revenue streams while improving productivity and customer service   Retail and distribution — establishing flexible and customer-centered operating models that help clients lower costs and increase profitability   Manufacturing — helping clients leverage information technology to better manage the entire product lifecycle

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Financial Highlights

New contract bookings in billions of dollars	Revenue in billions of dollars	Earnings from continuing operations in millions of dollars
Earnings from continuing operations margin in percentage	Diluted EPS from continuing operations in dollars	Contract backlog in billions of dollars
Cash provided by continuing operating activities in millions of dollars	Net debt to capitalization in percentage	Number of shares outstanding at year end in millions of shares

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For the years ended September 30	2008	2007	2006
(in thousands of Canadian dollars, except share data, ratios and percentages)	$	$	$
Financial performance
Revenue	3,705,863	3,633,945	3,393,382
Adjusted EBIT 1	429,954	405,177	305,994
Adjusted EBIT margin	11.6%	11.1%	9.0%
Earnings from continuing operations	297,898	234,659	143,770
Basic earnings per share from continuing operations	0.94	0.71	0.39
Diluted earnings per share from continuing operations	0.92	0.70	0.39
Net earnings	292,764	236,402	146,533
Basic earnings per share	0.92	0.72	0.40
Diluted earnings per share	0.90	0.71	0.40
Net earnings (under US GAAP) 2	276,048	239,247	149,176
Basic earnings per share (under US GAAP) 2	0.87	0.73	0.41
Diluted earnings per share (under US GAAP) 2	0.86	0.72	0.41
Cash flow from continuing operating activities	355,910	544,615	302,704
Financial position
Total assets	3,683,973	3,475,808	3,692,032
Shareholders’ equity	1,999,342	1,818,268	1,748,020
Shareholders’ equity per common share	6.48	5.60	5.27
Working capital	81,850	123,706	280,700
Current ratio	1.10	1.16	1.42
Long-term debt (current and long-term portions)	391,091	473,191	813,259
Net debt to capitalization ratio 3	13.9%	16.8%	27.2%

	Fiscal 2008				Fiscal 2007
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Quarterly financial results
Revenue	929,198	950,468	930,770	895,427	903,702	914,023	932,620	883,600
Adjusted EBIT	105,122	110,959	108,382	105,491	100,717	103,837	102,370	98,253
Adjusted EBIT margin	11.3%	11.7%	11.6%	11.8%	11.1%	11.4%	11.0%	11.1%
Net earnings	73,494	77,897	68,785	72,588	65,577	64,433	62,711	43,681
Basic earnings per share	0.24	0.25	0.21	0.22	0.20	0.20	0.19	0.13
Diluted earnings per share	0.23	0.24	0.21	0.22	0.20	0.19	0.19	0.13
Cash flow from continuing operating activities	83,121	106,312	45,714	120,763	118,605	134,771	124,312	166,927

1           Adjusted EBIT represents earnings from continuing operations before restructuring costs related to specific items, interest on long-term debt, other income, interest and other expenses, gain on sale of assets, income taxes, and non-controlling interest.

2           The reconciliation between US and Canadian generally accepted accounting principles is provided in Note 29 to the consolidated financial statements.

3           The net debt to capitalization ratio represents the proportion of long-term debt, including the impact of the fair value of forward contracts, net of cash and cash equivalents over the sum of shareholders’ equity and long-term debt.

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Message to shareholders

Fundamentals matter. In tough times, they are paramount. We write this letter as the global marketplace faces one of its most challenging times in close to a century. Although the state of the economy is changing on a near daily basis, we can tell you with confidence that your company’s foundation is solid. Our performance is among the strongest in our industry.

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Out of challenges come great opportunities and we are positioned, not only to take advantage of these opportunities, but to create them for our clients, our members and our shareholders.
		Serge Godin Founder and Executive Chairman of the Board	Michael E. Roach President and Chief Executive Officer

As demonstrated by our performance — and rooted deeply within our culture — we are focused on the essentials of running a sound and stable business for the long term. This stability is a result of CGI’s business model and focus on growing our backlog of committed orders. Today, at $11.7 billion, our profitable backlog provides revenue and profit visibility for all stakeholders and allows our clients to be confident in the stability of their IT services partner.   We employ best practices in managing your investment and are committed to growing profitably and expanding shareholder value over time. Our fiscal 2008 results demonstrate that our business model is built to withstand tough times.   At CGI, we believe we have the duty to balance the requirements of our three key stakeholders… ● To help clients win and grow, employing the most flexible technologies and best solutions needed to operate their business in both good and challenging times; ● To offer CGI members an opportunity to be owners and intrapreneurs, creating stimulating career opportunities; and ● To provide shareholders with superior returns over time. We regularly confer with our stakeholders so that their views help shape our strategies and, ultimately, our shared destiny. During these consultations, each group confirms that in challenging times such as these, they look for companies like CGI that demonstrate commitment to fundamentals and, as a result, have a long track record of quality and strong performance.   Focused on helping our clients win and grow   Today’s economic pressures require clients to improve the effectiveness of their operations. There is little that can be done in most corporations and governments without information tech­nology. Improving efficiency most often requires an investment in IT and fuels the demand for systems integration and consulting services.   Moreover, the desire to find increased value will lead more companies and governments to consider shared services. CGI’s outsourced services offerings, which are shared services to multiple clients, are therefore even more enticing when clients are focused on improving their bottom lines. Over the years, we have invested hundreds of millions of dollars building industry-specific business solutions and technology architectures that are among the most advanced in each of our selected industry sectors. From our enterprise resource planning systems for government such as AMS Advantage® and Momentum®, to our credit and collections offerings such as CACS®, our solutions are designed to help clients manage through tough times—and all are experiencing considerable pick-up in demand. In addition, our governance model is renowned for helping clients maximize value through a lower and more focused IT spend. These resources along with the business transformation capabilities and the commitment of CGI’s 25,500 professionals are at the disposal of our clients to help them achieve their goals.   Our clients can rely on our technology independence and have ready access to CGI’s flexible network of delivery centers. Rather than dictate a one-size-fits-all approach, we prescribe the best mix of solutions and sourcing for clients’ unique requirements. Spread across onshore,

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We are focused on the essentials of running a sound and stable business for the long term. This stability is a result of CGI’s business model and focus on growing our backlog of committed orders. Today, at $11.7 billion, our profitable backlog provides revenue and profit visibility for all stakeholders and allows our clients to be confident in the stability of their IT services partner.

nearshore and offshore centers, our delivery model offers clients less dependence on any single geography. Gaining traction, this model is responsible for a growing number of client successes.   At CGI, we believe what gets measured gets done. In 2008, as part of our very structured program aimed at evaluating our clients’ degree of satisfaction, we achieved an average rating of 9 out of 10 from more than 2,000 interviews. We would like to take this opportunity to thank our clients for their trust in our ability to help them.   Sharing a common dream as owners   At CGI, our professionals share in a common dream: “To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.”   Our members are committed to achieving client success and their greatest satisfaction is being acknowledged for a job well done. This stems from the fact that an astounding 83 percent of our members are shareholders. Closely connected is the fact that CGI has assembled an outstanding team of professionals and has one of the lowest attrition rates in the industry. These two factors result in consistent and high-quality outcomes for our clients and profitable growth for our shareholders.   Since CGI members represent the single largest ownership block of CGI, it goes without saying that our interests are closely aligned with yours. Our performance-based compensation system, including our stock options program, clearly reflects this, as it is directly linked to value creation.   Our professionals are in daily contact with our clients and in the best position to understand their needs today and into the future. Therefore, the input of all CGI members is an essential part of our strategic planning process.   Our members continue to reinforce a set of long-term goals aimed at the interest of each stakeholder: ● We want to be recognized as a world-class leader in our field; ● We want to be recognized by our clients a their partner and expert of choice; ● We want to be recognized as a world-class employer; and ● We want to be recognized as a well-managed company, creating value for our shareholders.   Driving superior value to shareholders as a long-term growth investment   The stability of our management team is second to none and our team has successfully operated in all types of economic environments—good and bad. While this seems important all the time, it is critical in times like these.   Our day-to-day financial management is focused on ensuring maximum shareholder returns while balancing risk. We continue to use our strong cash flow to invest in what we know best: our own company, either buying CGI stock or reducing debt. We manage our cash tightly and conservatively, and we have not invested in asset-backed securities. We also do not take on any long-term liabilities that could limit our future operating flexibility such as pension obligations.

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Despite current economic challenges, CGI’s strategy is unchanged. It was built to withstand all economic cycles.

During fiscal 2008, our performance remained one of the best in the global IT services industry. ● Revenue increased by 5.3% at constant currency to $3.71 billion. ● New contract bookings were up 29.9% to $4.15 billion, or 112% of revenue. ● Adjusted EBIT was up 6.1%, to $430.0 million or 11.6% of revenue. ● Earnings were up 26.9%, to $297.9 million or 8.0% of revenue. ● Earnings per share were up 31.4%, to 92 cents. ● We generated $1.10 in cash per share from operating activities, or $355.9 million. ● We invested $333.8 million in share buybacks and debt reduction. ● Return on invested capital was 13.9%.   Despite current economic challenges, CGI’s strategy is unchanged. It was built to withstand all economic cycles. In fact, we have opted to aggressively accelerate our marketing, business development and sales efforts on both pillars of growth — the “build” and the “buy.”   On the build side, we continue to focus on our full-offering strategy, which entails reintroducing our broad portfolio of capabilities to targeted clients and prospects. This has generated a steady stream of new contracts, renewals and extensions, representing growth among current and new client accounts.   On the buy side, we continue to patiently monitor many opportunities, critically screening all investments for strategic alignment and accretion to earnings per share in the first year following any investment. While our sound financial position puts us in an excellent position to shape and target transformational deals, we will only move forward if we find the right target at the right time and for the right price. We need all three of these elements to be in place. Not one or two, but all three.   We continue to have the flexibility, liquidity and financial capacity to fully execute this strategy. Our debt levels are low and our mostly undrawn $1.5 billion credit line expires only in 2012 — another example of taking a long-term view.   In short, we have not changed our course to suit the times. Rather, we have operated under the same consistent and sound financial practices for more than 30 years. Out of challenges come great opportunities and we are positioned, not only to take advantage of these opportunities, but to create them for our clients, our members and our shareholders.   We thank our clients and shareholders for their continuing trust in us. To our fellow members and the Board of Directors, we thank you for your dedication; it is a pleasure and an honor to work with you each day.   Serge Godin Founder and Executive Chairman of the Board   Michael E. Roach President and Chief Executive Officer

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	Tough times demand smart solutions
	Government and healthcare
30% of 2008 revenue $1.1 billion Major provider to federal, state, provincial, local and municipal governments, including… ● 100+ U.S. federal agencies and 190+ state and local government agencies ● 90% of Canadian provinces and all territories, and 60+ municipalities www.cgi.com/government www.cgi.com/healthcare	Governments at all levels face unprecedented pressures, such as economic constraints, healthcare challenges and accountability demands. To manage an effective response, organizations must create leaner and more high-performance structures. Success requires increased collaboration with partners who can help navigate an increasingly complex world. To make the most of their resources, clients count on CGI’s expertise and offerings to become more efficient and productive while better meeting constituents’ needs.

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	Client’s challenge Modernize a complex IT infrastructure to better meet the needs of a diverse set of constituents	CGI’s solution Deliver solutions that streamline operations, maximize efficiencies, reduce costs and enhance services
“CGI is an agile, results-oriented partner in helping CMS meet its mission and in modernizing and transforming key IT infrastructure elements. CGI is effective in our dynamic, multi-stakeholder environment.” HENRY CHAO Chief Technology Officer, The Centers for Medicare & Medicaid Services	The Centers for Medicare & Medicaid Services (CMS) is the U.S. federal agency that administers Medicare, Medicaid and the State Children’s Health Insurance Programs. Its mission is to ensure effective, up-to-date healthcare coverage and to promote the health and well being of seniors, people with disabilities and low-income, vulnerable populations. It oversees one of the largest budgets within the federal government. Since 1998, CMS has relied on CGI as one of its partners in modernizing and transforming the complex IT infrastructure that is critical to fulfilling its mission. CMS must meet the needs of a diverse set of constituents with varying needs, ranging from citizens and state and federal government agencies, to healthcare providers and payers. CMS has turned to CGI to implement a number of technology solutions that streamline its operations and improve the delivery of constituent services.	Examples of CGI’s work with CMS over the past 10 years include implementing provider- and citizen-focused solutions that reduce the agency’s administrative burden. These solutions help meet the goals of the landmark Medicare Modernization Act, improve fraud investigation through enhanced case tracking systems, and enhance payments and appeals processing. As the agency readies itself for the future, CGI looks forward to helping CMS continuously evolve its IT infrastructure to meet the needs of the nation, while maximizing operational efficiencies and restraining costs.

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	Client’s challenge Implement a single student record that follows students from preschool through their high school education	CGI’s solution Replace five key systems with the new CHARLEMAGNE platform
On October 27, 2008, as planned, CHARLEMAGNE was launched across the entire Québec education system. The system is already used on a daily basis and has carried out over two million transactions during 2008.	The Ministère de l’Éducation, du Loisir et du Sport du Québec is the government authority responsible for ensuring that Québec’s citizens receive the educational services they need to develop as individuals and become active, contributing members of society. Launched in September 2000, the single student record project — targeting preschool, elementary and high school levels — aimed to integrate five information systems related to three spheres of activity: school attendance, certification of studies, and the funding of institutions and associated controls. The new platform was slated to be fully operational by October 2008. The Ministère de l’Éducation sought to align itself with a partner capable of developing the new, highly strategic system and support it in its mission to manage change internally and within the education system itself. Having already partnered with the Ministère in the design, creation and implementation of its online student financial assistance system, CGI emerged as the ideal candidate for the project.	In both its creation of the financial assistance system and development of the site’s navigation tools, CGI provided innovative solutions to meet the client’s expectations. CGI based its platform on processes that can be updated easily and adapted to regulatory changes as they occur. The Ministère has also selected CGI as a partner to develop and implement its new IT environment. This pivotal project aims to use advanced technology to integrate and optimize all of the information coming from the Ministère and the province’s educational institutions.

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	Client’s challenge Legacy system no longer addresses financial management challenges under a deepening budget crisis	CGI’s solution Upgrade the financial management system to streamline processes, improve reporting, enhance responsiveness and reduce costs
“Our relationship with CGI spans two decades. We value the continuity of our partnership, CGI’s commitment to providing solutions that are truly built-for-government, and the results they have delivered to the City and state and local governments around the world.” RANDI LEVIN Chief Technology Officer and General Manager,  Information Technology Agency, City of Los Angeles	The City of Los Angeles is the second largest city in the United States with 4 million citizens. Managing the City’s $4.5 billion budget during the current financial crisis is a tall order, especially when forced to rely on a 20–year-old legacy system. The City’s current financial management system is labor intensive, and had not been upgraded to provide the capabilities needed to monitor financial performance and support decision making. The City selected CGI’s AMS Advantage® ERP solution to modernize its financial management system and achieve its goal to create a leaner, more efficient government. In addition to improving service delivery, AMS Advantage will improve the efficiency of city operations, improve tools for data analysis, and provide better data for decision-makers and stakeholders at all levels.	Working with CGI on this strategic initiative, the City will take advantage of the current best practices for government accounting and improve its ability to set and achieve performance measures that will give the City of Los Angeles a solid foundation for the future.

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	Tough times demand smart solutions
	Financial services
30% of 2008 revenue $1.1 billion Partner to leading financial institutions, including... ● 24 of the top 25 banks in the Americas and 17 of the top 25 in Europe ● 6 of the top 10 global property and casualty (P&C) insurers and 25+ life insurers www.cgi.com/insurance www.cgi.com/banking	Financial services firms are under enormous pressure due to the global financial crisis. Tough economic conditions are forcing consumers and companies to rein in spending. Yet despite cost-cutting pressures, bottom-line growth must be attained. Those banks, insurers and other financial institutions that succeed will adopt solutions that maximize growth while containing costs. CGI helps innovative firms solve their challenges and invest in their future.

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	Client’s challenge Establish a strong brand and rapid growth in the North American insurance market	CGI’s solution Manage the entire back-office operation to enable rapid expansion and rollout of lines of business
“We’ve been extremely impressed with CGI’s expertise, professionalism and service delivery. CGI’s team is strong from both a business and technical perspective and has approached our relationship as true partners. We are confident that as we grow, CGI will support our commitment to provide superior service to our agents and policyholders.” RICARDO A. ESPINO President, Universal Insurance Holdings  of North America	Universal Insurance Holdings of North America (UIHNA) sought to establish and quickly expand its U.S. footprint. Its parent company, Universal Group Inc., Puerto Rico’s principal supplier of leading insurance and financing products, knew that it needed an experienced and well-positioned partner to help achieve its growth objectives. UIHNA turned to CGI to provide full business process outsourcing (BPO) services. In 2004, the UIHNA–CGI team quickly established a Florida-based processing center. CGI’s existing data centers and software applications were put into use, providing the necessary systems, processes and procedures to rapidly stand-up the new operation. From this location, CGI now provides all back-end services, from customer and agency inquiry calls to policy processing and claims.	The BPO arrangement with CGI has allowed UIHNA to focus on its core business and rapid growth strategy. By partnering with CGI, UIHNA benefits from the latest technology and business process enhancements to contain costs and best meet agent and customer needs. The provider is also meeting its aggressive growth targets. From its 2004 start, UIHNA has grown to four lines of business and now operates in six states.

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	Client’s challenge Stay ahead of the market by launching its debit and credit smart cards in 2008	CGI’s solution Accelerate development by ensuring flawless synchronization of activities and sharing knowledge of automated banking machines (ABMs)
“Despite a very tight schedule, the CGI team put forth considerable effort, more than 6,000 person-days, and took every means necessary to ensure the success of the multiple aspects of the project. There were no delays, and the transition occurred without clients noticing a thing, as the transaction channels, which are so critical to us, were never interrupted.” PIERRE MIRON Senior Vice-President, Enterprise Systems Delivery Management, National Bank of Canada	National Bank of Canada provides comprehensive financial services to its clientele of consumers, small and medium-sized enterprises and large corporations across Canada, while offering specialized services to its clients elsewhere in the world. It has assets totaling $122 billion and employs upwards of 16,700 people. In 2007, National Bank set a goal to issue smart cards to its clients as of 2008. Equipped with a microprocessor that allows the cardholder to conduct highly secure transactions, these cards will only start to become mandatory in 2009. National Bank saw this as an opportunity and mobilized its major technology partners by inviting them to turn the goal into a collective challenge.	Committed to the bank’s success, the CGI project team applied rigorous monitoring of work plans to ensure flawless synchronization of activities and even completed the project ahead of schedule. CGI demonstrated its ingenuity by focusing on parallelism and creating new utilities to optimize quality manage­ment. It also made its advanced expertise in ABMs available to the other project partners to accelerate the resolution of any technological issues that arose. On June 18, 2008, National Bank conduct­ed its very first smart card transaction at one of its ABMs. Just a few weeks later, it issued its smart MasterCard integrating PayPass™ contactless payment technology. This National Bank credit card became the most complete and flexible payment tool on the market.

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	Tough times demand smart solutions
	Telecommunications and utilities
22% of 2008 revenue $813.9 million Supporting the transformation of... ● 7 of the 10 largest global telecom service providers www.cgi.com/telecom www.cgi.com/utilities	Internet Protocol (IP) technology continues to transform how the telecommunications industry operates. The battle for the customer has intensified as telecom, cable and other providers compete. Utilities face similar pressures, with expectations of low rates and high-quality service—not to mention environmental demands. As a result, providers need to do more with less while providing superior service and products. CGI enables an effective response, ensuring that creativity—rather than infrastructure and systems—sets the standard for successful next-generation products and services.

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	Client’s challenge Become a leader within the digital marketplace, increasing sales and presence in the online world	CGI’s solution Develop a sustainable strategy and build and maintain the eCommerce programme and platform
“CGI has helped position us for the future with a fully manageable and flexible eCommerce platform. The platform perfectly positions us for future growth in the online space. More importantly, CGI has helped double our online sales and has increased our level of online customer service.” VOLKER GLAESER Global Head of Online, Vodafone Group; Director Internet Services, Vodafone DE (Germany)	Vodafone Group Plc is the world’s leading mobile telecommunications company with more than 260 million customers spread across Europe, the Middle East, Africa, Asia Pacific and the United States. In May 2006, Vodafone announced a business objective to become a leader in an increasingly interconnected world. As a result, in late 2006, Vodafone DE (VF DE) — the Group’s German division — began spearheading an initiative to position itself on the Web. A longtime VF DE partner, CGI was selected as the lead consultant to develop the eCommerce strategy and platform. A multi-functional team of CGI business analysts, designers, developers, testers and partners now work alongside VF DE marketing, subject matter experts and operations to build and maintain the resulting programme and platform. While the principal team is located in Düsseldorf, a remote team of developers works full time from Montreal.	With time-to-market a critical driver, the project succeeded in launching a new sales engine within eight months — significantly ahead of estimates. This enabled VF DE to surpass its online sales objectives in 2007 and to be on track to surpass its more aggressive targets for 2008. The project was quickly recognized within the industry, earning CGI the ATG Systems Integrator of the Year 2007 EMEA (Europe/Middle East/Asia) award. With the next phase of the project under way, CGI is helping VF DE extend the eCommerce platform to reach new customer segments and add new functionalities that enhance click-through and conversion rates.

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	Client’s challenge Enhance sales and customer service through the implementation of a next-generation convergent billing system	CGI’s solution Provide project management oversight and technology expertise to help ensure seamless transitions that boost efficiency, customer satisfaction and ROI
“At Polkomtel, we work diligently to stay ahead of market demands and to completely satisfy our customers’ needs. CGI is a trusted partner in helping us execute important strategies that advance our business goals.” ARTUR WASK Director, Convergent Billing Programme, Polkomtel	Polkomtel is a leader in the Polish telecommunications market with over 14 million subscribers, nearly one-third of the total market. To take full advantage of new business opportunities and solidify its strong position, Polkomtel is moving to a convergent billing platform that seamlessly provides outstanding customer service and offerings. A trusted partner to Polkomtel for more than 12 years, CGI delivers a wide range of services to support the company’s successful migration to the new platform and the decommissioning of its legacy systems. Most importantly, Polkomtel relies on CGI to provide numerous Programme Management Office (PMO) services, including having CGI experts serve in key roles such as deputy programme director, lead IT architect, lead business analyst and migrations advisor. As part of these responsibilities, CGI balances both business and IT needs and regularly represents the project in board and steering committee meetings.	As further examples of this partnership, CGI introduced an enterprise architecture tool and several key industry standards, performed mapping and gap analysis exercises, and developed necessary documentation and activities to facilitate rapid implementation of necessary changes. These types of CGI-led initiatives have kept the project moving forward. As the new platform continues to roll out, Polkomtel has seen early successes. Marketing is hitting its targets and customers are able to migrate themselves to the new platform on demand.

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	Tough times demand smart solutions
	Retail and distribution
11% of 2008 revenue $419 million Services provider of choice to… ● 250+ retailers across North America ● Multiple distribution segments and channels, including postal services, transportation & logistics, and wholesale distribution www.cgi.com/retail www.cgi.com/distribution_en	Globalization, consolidation and the recent economic downturn are driving retailers and distributors to reevaluate their business and cost models. Differentiation must come through strategic partnering and improved customer service. By embracing adaptive strategies and technologies—and the appropriate architectures and frameworks—these companies can improve their focus on core competencies and opportunities. CGI is a proven partner in transforming and reengineering retailers and distributors’ operations to successfully reduce costs and drive needed growth.

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Client’s challenge Deliver reliable, domain-specific software that drives customers’ profitability	CGI’s solution Provide the specialized technical resources needed to maintain high quality and efficiency
Retalix is the leading provider of food retail and distribution software. In use at 40,000 retail and distribution sites and 300,000 checkout lanes around the world, Retalix allows the food industry to simplify processes and drive growth throughout their customers’ supply chains. For the past four years, CGI has provided application maintenance and support to the Retalix division that provides software for Small Grocery stores with Headquarters Level Pricing and Merchandising. As part of this relationship, CGI develops and tests needed enhancements to meet ever-changing requirements. By taking advantage of	CGI’s global delivery model, Retalix relies on CGI’s U.S. and India resources to respond quickly, cost-effectively and reliably to their customers’ needs. Having a highly reliable product that combines domain expertise with easy-to-use and advanced technologies is core to Retalix’s business. With CGI, Retalix has the skilled resources it needs to maintain its leadership position.	“Retalix is committed to helping our customers improve their operations and grow their business. CGI helps us deliver on this commitment. Through their IT expertise and flexibility in quickly adjusting to changing priorities, CGI makes us more efficient in successfully running our business.” ELI SPIRER Executive Vice President of Operations, Retalix USA

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	Tough times demand smart solutions
	Manufacturing
7% of 2008 revenue $250.7 million Enhancing focus and agility of global leaders from multiple segments, including… ● Aerospace, mining & metals, automotive and chemicals ● Solution and service provider to 450 oil and gas clients www.cgi.com/manufacturing	Manufacturers face intense competition, ever-changing consumer demands and margin pressures. More than ever, supply chains must deliver the right product at the right time and cost. To achieve this, an integrated approach to system deployment and manufacturing execution is key—as is access to data across the value chain. CGI, through the effective application of information technology, helps manufacturers address these imperatives and extract greater business value from IT at lower costs.

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	Client’s challenge Deliver superior products that maintain its global leadership position in the aluminum business	CGI’s solution Provide end-to-end IT services that improve operational efficiencies at lower costs
“Rio Tinto Alcan is committed to the responsible advance­ment of our business and to the communities in which we work and live. With CGI as our IT services partner, we have the technology infrastructure that we need to deliver on our commitments, which allows us to focus our resources on having quality operations and products as well as sustainable community programs.” JOHN BECKER Head of IS&T, Rio Tinto	Rio Tinto Alcan is the global leader in the aluminum business and one of five product groups operated by Rio Tinto, a leading international mining group. In October 2007, Rio Tinto acquired Alcan resulting in Rio Tinto Alcan. From its Saguenay development center, CGI has served Rio Tinto Alcan (formerly known as Alcan) for more than 25 years. Over the relationship, CGI has provided state-of-the-art solutions and services, including systems development and integration, application support and IT infrastructure services. Continually evolving Rio Tinto Alcan’s IT environment to keep pace with ever-changing business demands, CGI recently completed the implementation of its IT service management products and processes and the introduction of new services for its outsourcing contract.	This new IT Service Management Framework supports industry best practices, including the IT Infrastructure Library (ITIL®), to help measure and communicate the value and impact of IT initiatives on revenue, profits and shareholder value. The framework also provides Rio Tinto Alcan with access to new technologies and services, resulting in significant cost-saving opportunities. A continuous improvement process is also a key element of CGI’s new framework. In collaboration with Rio Tinto Alcan, the implementation of this framework has helped improve performance throughout the year, with further results anticipated in the coming months. Through a strong partnership and high-quality services, CGI provides Rio Tinto Alcan with a reliable and robust IT infrastructure that allows Rio Tinto Alcan to better focus on its business.

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	Client’s challenge Gain efficiencies, thereby reducing back-office costs in running its production accounting environment	CGI’s solution Streamline and enhance the environment to invest resulting savings into initiatives that grow the business
“CGI’s knowledge of the industry and method of handling production accounting has helped us run our business more efficiently. We spent a great deal of time evaluating the various production accounting systems (PAS) on the market today before choosing CGI’s PAS. We are impressed by the functionality and ease of use of PAS and believe, given the diversity of the sponsoring companies, that this system will address most, if not all, of our needs.” TERRI KINSMAN General Manager, Production Accounting, Penn West	Penn West Energy Trust is the largest conventional oil and natural gas producing income trust in North America. To maintain its leadership position, Penn West acquired various companies within the Calgary region. As a result, each came with its own set of production accounting solutions — many of which were on dated platforms. To maintain the benefits of its growth strategy, Penn West turned to CGI to remove the extra costs and efforts required to run its disparate production accounting environment.	Through CGI’s oil and gas expertise and proprietary Production Accounting Solution (PAS), Penn West is streamlining and enhancing the way it runs its back office. Unlike traditional software solutions, PAS was developed through direct input by production accountants to address the business needs of the industry. It also incorporates a web-based platform, allowing Penn West to take advantage of new technologies that will be supported into the future. Developed through a co-venture between CGI and four industry companies, the streamlined and enhanced system is helping Penn West improve its internal processes and reduce business costs. The result: Penn West can invest savings into growing its business.

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Providing the best mix

of local and global delivery

Strong local presence with global reach With 25,500 members in 100+ offices across 16countries, CGI adheres to the fundamental belief that having a strong local presence with clients is critical to our joint success. This client-proximity business model   combined with global delivery options provide clients with a strong local presence and a best-fit mix of global sourcing. The result: highly accountable services delivered at the best value. Global delivery Our growing and unique global delivery model comprises 12 delivery centers across 5 countries and 5,000 members representing 20 percent of our total workforce.

NORTH AMERICA				EUROPE		ASIA PACIFIC
CANADA Burnaby, BC Calgary, AB Charlottetown, PE Edmonton, AB Fredericton, NB Halifax, NS Laval, QC Markham, ON Mississauga, ON Montréal, QC Ottawa, ON Pickering, ON Québec City, QC Regina, SK Saguenay, QC Sherbrooke, QC Toronto, ON Vancouver, BC Victoria, BC Waterloo, ON	UNITED STATES Albany, NY Annapolis, MD Atlanta, GA Austin, TX Baltimore, MD Birmingham, AL Boston, MA Buffalo, NY Charlotte, NC Chicago, IL Cleveland, OH Columbia, SC Columbus, OH Dallas, TX Denver, CO Fairfax, VA Fort Worth, TX Frankfort, KY	Hartford, CT Honolulu, HI Houston, TX Juneau, AK Lebanon, VA Los Angeles, CA Miami, FL New Carrollton, MD New Orleans, LA New York, NY Oakland, CA Oklahoma City, OK Phoenix, AZ Plymouth, MN Rancho Cordova, CA Redwood City, CA Richmond, VA Rochester, NY	Roseland, NJ Sacramento, CA Salem, OR San Antonio, TX San Diego, CA Sarasota, FL Seattle, WA St. Louis, MO Tallahassee, FL Tampa, FL Trenton, NJ Washington, DC	BELGIUM Brussels ENGLAND Basingstoke Brentwood Bristol Colchester London Milton Keynes Stevenage Sunderland FRANCE Paris GERMANY Düsseldorf Munich HUNGARY Budapest	ITALY Milan NETHERLANDS The Hague POLAND Krakow Warsaw PORTUGAL Lisbon SPAIN Madrid Malaga SWEDEN Stockholm SWITZERLAND Zug	AUSTRALIA Canberra Melbourne Sydney INDIA Bangalore Mumbai

For a complete list of CGI’s worldwide offices and contacts, visit www.cgi.com.

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Leadership team

Serge Godin* Founder and Executive Chairman of the Board   André Imbeau* Founder, Executive Vice-Chairman of the Board and Corporate Secretary   Paule Doré Advisor to the Founder and Executive Chairman of the Board   Michael E. Roach* President and Chief Executive Officer   David Anderson* Executive Vice-President and Chief Financial Officer   André Bourque* Executive Vice-President and Chief Legal Officer   Marinella Ermacora Senior Vice-President, Human Resources, Leadership and Organizational Development   Luc Pinard* Executive Vice-President, Chief Technology and Quality Officer   Daniel Rocheleau* Executive Vice-President and Chief Business Engineering Officer CANADA   Hicham Adra* Senior Vice-President and General Manager, Ottawa and Innovapost   John G. Campbell* Senior Vice-President and General Manager, Communication Services Business   William Clark Senior Vice-President, Western Canada   Jamie Holland Senior Vice-President, Greater Toronto   Bernard Labelle Senior Vice-President, Québec City   Craig Leech Senior Vice-President, Atlantic Canada   Eva Maglis* Senior Vice-President and General Manager, Technologies and Infrastructure   Claude Marcoux* Senior Vice-President and General Manager, Québec   Doug McCuaig* Senior Vice-President and General Manager, Ontario, Atlantic and Western Canada U.S. AND INDIA   Donna Morea* President, U.S. and India   S. (Chandra) Chandramouli Vice-President, India Operations   Jame Cofran Senior Vice-President, Global Banking and Financial Markets   Robert Hannum Senior Vice-President, U.S. Central and South – State and Local   Peter Ihrig Senior Vice-President, U.S. Central and South – Commercial   Michael Keating Senior Vice-President, U.S. West   Paul Raymond* Senior Vice-President, U.S. North East   Donna Ryan Senior Vice-President, CGI Federal   George Schindler* President, CGI Federal   Richard Schmitz Senior Vice-President, CGI Federal Government BPS   Nazzic Turner* Senior Vice-President and General Manager, U.S. Central and South

* Member of the Management Committee

The CGI Management  Foundation The CGI Management Foundation represents the architecture of our management approach. It governs how we deliver services to clients, how we interact with our members and how we respond to shareholder requirements—and it measures the satisfaction level of all three constituents. This allows us to gauge the success of our initiatives, take preventive action before issues arise and evolve in the spirit of continuous improvement that has been the hallmark of CGI since its beginning.   The CGI Management Foundation helps us maintain the best equilibrium between the needs of all our stakeholders. As such, it is at the heart of our strategy for profitable growth.

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	Board of directors
EUROPE AND AUSTRALIA Joseph Saliba* President, Europe and Australia Klaus Elix Senior Vice-President, Central Europe Dave Hudson Vice-President, Australia Jose Carlos Rodriguez Arroyo Vice-President, Southern Europe Pierre Turcotte Senior Vice-President and General Manager, France and Southern Europe	Claude Boivinb,c Director since 1993 Chair of the Corporate Governance Committee, CGI Director of Companies Bernard Bourigeaud Director since 2008 Director of Companies Jean Brassard c Director since 1978 Director of Companies Claude Chamberland b Director since 1998 Director of Companies Robert Chevrier a,b Director since 2003 Lead Director, CGI President, Roche Management Co. Inc. Thomas D’Aquino c Director since 2006 Chief Executive and President, Canadian Council of Chief Executives Paule Doré Director since 1995 Advisor to the Founder and Executive Chairman, CGI Serge Godin Director since 1976 Founder and Executive Chairman of the Board, CGI	André Imbeau Director since 1976 Founder, Executive Vice-Chairman of the Board and Corporate Secretary, CGI David L. Johnston b Director since 1995 Chair of the Human Resources Committee, CGI President and Vice Chancellor, University of Waterloo Eileen A. Mercier a Director since 1996 Chair of the Audit and Risk Management Committee, CGI Director of Companies Michael E. Roach Director since 2006 President and Chief Executive Officer, CGI Gerald T. Squire a,c Director since 2003 Director of Companies Robert Tessier c Director since 2003 Chairman of the Board, Gaz Métro inc.
	a Member of the Audit and Risk Management Committee b Member of the Human Resources Committee c MEMBER of the Corporate Governance Committee

ISO 9001

Dream, Mission, Vision, Values, Quality Policies, Strategic Directions & Plans
Governance Policies, Management Frameworks, HR Policies, Financial Policies & Organizational Model
Business Unit Processes									Corporate Processes
Client Partnership Management Framework								Member Partnership Management Framework	Shareholder Partnership Management Framework
Proposal	Contract		Management Plan		Delivery		Closing
Technology Management TIER 1		Application Management TIER 2		System Integration & Development TIER 3		Business Process Services TIER 4		Career and leadership development Integration Performance assessment Communications	Relationship management Governance Communications
		CMMI Level 5
Client Satisfaction Assessment Program								Member Satisfaction Assessment Program	Shareholder Satisfaction Assessment Pogram

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Shareholder information

LISTING   Toronto Stock Exchange, April 1992: GIB.A New York Stock Exchange, October 1998: GIB   Number of registered shareholders as of September 30, 2008: 2,703   Number of shares outstanding as of September 30, 2008: 274,165,370 Class A subordinate shares 34,208,159 Class B shares   High/low of share price from October 1, 2007, to September 30, 2008: TSX (CDN$): 12.02 / 8.95 NYSE (US$): 11.96 / 8.63   The certifications by CGI’s Chief Executive Officer and Chief Financial Officer concerning the quality of the Company’s public disclosure pursuant to Canadian regulatory requirements are filed in Canada on SEDAR (www.sedar.com). Similar certifications pursuant to Rule 13a-14 of the U.S. Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 are exhibits to our Form 40-F filed on EDGAR (www.sev.gov). The Company has also filed with the New York Stock Exchange the certification required by Section 303A.12 of the exchange’s Listed Company Manual.   CGI’s corporate governance practices do not differ in any significant way from those required of domestic companies under New York Stock Exchange listing standards and they are set out in the CGI Management Proxy Circular, which is filed with Canadian and U.S. securities authorities and is therefore available on SEDAR (www.sedar.com) and EDGAR (www.sec.gov), respectively, as well as on CGI’s Web site (www.cgi.com).  AUDITORS   Deloitte & Touche LLP   TRANSFER AGENT   Computershare Investor Services Inc. 100 University Avenue, 9th Floor Toronto, Ontario M5J 2Y1 Telephone: 1 800 564-6253   INVESTOR RELATIONS   For further information about the Company, additional copies of this report or other financial information, please contact: Investor Relations CGI Group Inc. 1130 Sherbrooke Street West Montréal, Québec H3A 2M8 Canada Telephone: 514-841-3200 You may also visit the Investor section at www.cgi.com.   ANNUAL GENERAL MEETING OF SHAREHOLDERS   Tuesday, January 27, 2009 at 11:00 a.m. Fairmont The Queen Elizabeth Hotel Le Grand Salon 900 René-Lévesque West Montréal, Québec   CGI presents a live webcast of its Annual General Meeting of Shareholders via the Internet at www.cgi.com. Complete instructions for viewing the webcast will be available on CGI’s Web site. To vote by phone or by using the Internet, please refer to the instructions provided in the CGI Management Proxy Circular.   This annual report is also available at www.cgi.com.   Le rapport annuel 2008 de CGI est aussi publié en français. GLOBAL HEADQUARTERS   1130 Sherbrooke Street West 7th Floor Montréal, Québec H3A 2M8 Canada Telephone: 514-841-3200 Fax: 514-841-3299

Printed in Canada      Design: www.ardoise.com

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2008

Annual

Report

CGI Group Inc.

numbers

_experience the commitment™

Contents

Financial Highlights	2
Management’s Discussion and Analysis of	4
Financial Position and Results of Operation
Management’s and Auditors’ Reports	29
Consolidated Financial Statements	33
Notes to the Consolidated Financial Statements	37
Shareholder Information	68

Financial Highlights

New contract bookings in billions of dollars	Revenue in billions of dollars	Earnings from continuing operations in millions of dollars
Earnings from continuing operations margin in percentage	Diluted EPS from continuing operations in dollars	Contract backlog in billions of dollars
Cash provided by continuing operating activities in millions of dollars	Net debt to capitalization in percentage	Number of shares outstanding at year end in millions of shares

1. The net debt to capitalization ratio represents the proportion of long-term debt, including the impact of the fair value of forward contracts, net of cash and cash equivalents over the sum of shareholders’ equity and long-term debt.

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For the years ended September 30	2008			2007			2006
(in thousands of Canadian dollars, except share data, ratios and percentages)		$			$			$
Financial performance
Revenue		3,705,863			3,633,945			3,393,382
Adjusted EBIT 1		429,954			405,177			305,994
Adjusted EBIT margin		11.6	%		11.1	%		9.0	%
Earnings from continuing operations		297,898			234,659			143,770
Basic earnings per share from continuing operations		0.94			0.71			0.39
Diluted earnings per share from continuing operations		0.92			0.70			0.39
Net earnings		292,764			236,402			146,533
Basic earnings per share		0.92			0.72			0.40
Diluted earnings per share		0.90			0.71			0.40
Net earnings (under US GAAP) 2		276,048			239,247			149,176
Basic earnings per share (under US GAAP) 2		0.87			0.73			0.41
Diluted earnings per share (under US GAAP) 2		0.86			0.72			0.41
Cash flow from continuing operating activities		355,910			544,615			302,704
Financial position
Total assets		3,683,973			3,475,808			3,692,032
Shareholders’ equity		1,999,342			1,818,268			1,748,020
Shareholders’ equity per common share		6.48			5.60			5.27
Working capital		81,850			123,706			280,700
Current ratio		1.10			1.16			1.42
Long-term debt (current and long-term portions)		391,091			473,191			813,259
Net debt to capitalization ratio 3		13.9	%		16.8	%		27.2	%

							Fiscal 2008									Fiscal 2007
	Q4		Q3		Q2			Q1		Q4		Q3		Q2			Q1
Quarterly financial results
Revenue	929,198		950,468		930,770			895,427		903,702		914,023		932,620			883,600
Adjusted EBIT	105,122		110,959		108,382			105,491		100,717		103,837		102,370			98,253
Adjusted EBIT margin	11.3	%	11.7	%	11.6	%		11.8	%	11.1	%	11.4	%	11.0	%		11.1	%
Net earnings	73,494		77,897		68,785			72,588		65,577		64,433		62,711			43,681
Basic earnings per share	0.24		0.25		0.21			0.22		0.20		0.20		0.19			0.13
Diluted earnings per share	0.23		0.24		0.21			0.22		0.20		0.19		0.19			0.13
Cash flow from continuing operating activities	83,121		106,312		45,714			120,763		118,605		134,771		124,312			166,927

1	Adjusted EBIT represents earnings from continuing operations before restructuring costs related to specific items, interest on long-term debt, other income, interest and other expenses, gain on sale of assets, income taxes, and non-controlling interest.
2	The reconciliation between US and Canadian generally accepted accounting principles is provided in Note 29 to the consolidated financial statements.
3	The net debt to capitalization ratio represents the proportion of long-term debt, including the impact of the fair value of forward contracts, net of cash and cash equivalents over the sum of shareholders’ equity and long-term debt.

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Management’s Discussion and Analysis

of Financial Position and Results of Operations

For the year ended September 30, 2008

November 10, 2008

Basis of Presentation

Throughout this document, CGI Group Inc. is referred to as “CGI”, “we”, “our”or “Company”. This Management’s Discussion and Analysis of Financial Position and Results of Operations (“MD&A”) should be read in conjunction with the audited consolidated financial statements and the notes thereto for the years ended September 30, 2008, 2007 and 2006. CGI’s accounting policies are in accordance with Canadian generally accepted accounting principles (“GAAP”) of the Canadian Institute of Chartered Accountants (“CICA”). These differ in some respects from generally accepted accounting principles in the United States (“US GAAP”). Our reconciliation of results reported in accordance with GAAP to US GAAP can be found in Note 29 of the consolidated financial statements.  All dollar amounts are in Canadian dollars unless otherwise indicated.

Forward-Looking Statements

All statements in this MD&A that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of that term in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and are “forward-looking information” within the meaning of section 138.3 and following of the Ontario Securities Act. These statements and this information represent CGI’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, of which many are beyond the control of the Company. These factors could cause actual results to differ materially from such forward-looking statements or forward-looking information. These factors include but are not restricted to: the timing and size of new contracts; acquisitions and other corporate developments; the ability to attract and retain qualified members; market competition in the rapidly evolving IT industry; general economic and business conditions; foreign exchange and other risks identified in the MD&A, in CGI’s Annual Report, on Form 40-F filed with the U.S. Securities and Exchange Commission (filed on EDGAR at www.sec.gov), the Company’s Annual Information Form filed with the Canadian securities authorities (filed on SEDAR at www.sedar.com), as well as assumptions regarding the foregoing. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan,” and similar expressions and variations thereof, identify certain such forward-looking statements or forward-looking information, which speak only as of the date on which they are made. In particular, statements relating to future performance are forward-looking statements and forward-looking information. CGI disclaims any intention or obligation to publicly update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements or on this forward-looking information. You will find more information about the risks that could cause our actual results to significantly differ from our current expectations in the Risks and Uncertainties section.

Non-GAAP Measures

The Company reports its financial results in accordance with GAAP. However, in this MD&A, certain non-GAAP financial measures are used, which include:

1. Earnings from continuing operations before restructuring costs related to specific items, interest on long-term debt, other income, interest and other expenses, gain on sale of assets, income taxes, and non-controlling interest (“adjusted EBIT”); and

2. Earnings from continuing operations prior to restructuring costs related to specific items.

Adjusted EBIT is used by our management as a measure of our operating performance as it provides information that can be used to evaluate the effectiveness of our business from an operational perspective. A reconciliation of this item to its closest GAAP measure can be found on page 12.

Earnings from continuing operations prior to restructuring costs related to specific items is used by our management as a measure of our operating performance excluding restructuring activities. A reconciliation of this item to its closest GAAP measure can be found on page 14.

Management believes that these non-GAAP measures provide useful information to investors regarding the Company’s financial condition and results of operations as they provide additional measures of its performance. They also provide investors with measures of performance to compare our results between periods without regard to specified items. These non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. They should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

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Corporate Overview

Headquartered in Montreal, Canada, CGI provides end-to-end information technology services (commonly referred to as IT services) and business process services (“BPS”) to clients worldwide, utilizing a highly customized, cost efficient delivery model. The Company’s delivery model provides for work to be carried out onsite at client premises, or through one of its centers of excellence located in North America, Europe and India. We also have a number of leading business solutions that support long-term client relationships. Our services are generally broken down as:

- Consulting – CGI provides a full range of IT and management consulting services, including business transformation, IT strategic planning, business process engineering and systems architecture.

- Systems integration – CGI integrates and customizes leading technologies and software applications to create IT systems that respond to clients’ strategic needs.

- Management of IT and business functions (“outsourcing”) – Clients delegate entire or partial responsibility for their IT or business functions to CGI to achieve significant savings and access the best technology, while retaining control over strategic IT and business functions. As part of such agreements, we implement our quality processes and best-of-breed practices to improve the efficiency of the clients’ operations. We also integrate clients’ operations into our technology network. Finally, we may transfer specialized professionals from our clients, enabling them to focus on mission critical operations. Services provided as part of an outsourcing contract may include development and integration of new projects and applications; applications maintenance and support; technology management (enterprise and end-user computing and network services); transaction and business processing, as well as other services such as payroll and document management services. Outsourcing contracts typically have terms from five to ten years and are renewable.

CGI offers its end-to-end services to a focused set of industry verticals (“verticals” or “vertical markets”) where we have developed deep expertise. This allows us to fully understand our clients’ business realities and to have the knowledge and solutions needed to advance their business goals. Our targeted verticals include: a) financial services - includes banking, credit unions, wealth management and insurance as disciplines helping clients increase competitiveness by evolving complex environments and systems to support more integrated and client-focused operations; b) government and healthcare-assisting organizations in managing incremental change and undertaking large-scale, citizen-centric transformation; c) telecommunications and utilities - helping providers deliver new revenue streams while improving productivity and client service; d) retail and distribution - helping clients establish flexible and client centered operating models that build profitability and enhance loyalty; and e) manufacturing - transforming clients’ operations and supply chains for enhanced profitability and global competitiveness.

Our operations are managed through three operating segments (“reporting segments” or “segments”), in addition to Corporate services, namely: Canada, U.S. and India, and Europe and Asia Pacific. The segments are based on a delivery view and the results incorporate domestic activities as well as impacts from our delivery model utilizing our centers of excellence.

We take great pride in delivering services of the highest quality to our clients. To do so consistently, we have implemented and maintain a quality program under The International Organization for Standardization (“ISO”). We firmly believe that by designing and implementing rigorous service delivery quality standards, followed by continuous monitoring of conformity with those standards, we are best able to satisfy our clients’ needs. As a measure of the scope of our ISO program, approximately 98% of our revenue was generated by business units having successfully obtained certification.

Competitive Environment

As a global provider of end-to-end information technology and business process services, CGI operates in a highly competitive and rapidly evolving global industry. Our competition comprises a variety of global players, from niche companies providing specialized services to other end-to-end service providers, mainly in the U.S., Europe and India, all of whom are competing for some or all of the services we provide.

To compete effectively, CGI focuses on high-end systems integration, consulting and outsourcing where vertical industry knowledge and expertise are required. Our client proximity metro markets business model, combined with our global delivery model results in highly responsive and cost competitive delivery. CGI’s global delivery model provides clients with a unique blend of onshore, nearshore and offshore delivery options that cater to their strategic and cost requirements.  CGI also has a number of leading business solutions that support long-term client relationships. Moreover, all of CGI’s business operations are executed based on the same management foundation, ensuring consistency and cohesion across the company.

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There are many factors involved in winning and retaining IT and BPS contracts in today’s global market, including the following: total cost of services; ability to deliver; track record; vertical market expertise; investment in business solutions; local presence; global delivery capability; and the strength of client relationships. CGI compares favorably with its competition with respect to all of these factors.

In summary, CGI’s competitive value proposition encompasses the following: end-to-end IT and BPS capability; expertise and proprietary business solutions in five vertical markets covering approximately 81% of global IT spending; a unique global delivery model, which includes industry leading nearshore delivery capabilities; a disciplined management foundation; and our focus on client satisfaction which is supported by our client proximity metro markets business model. Based on this value proposition and CGI’s growing critical mass in our three main markets — Canada, the U.S. and Europe and Asia Pacific, collectively covering approximately 76% of global IT spending — we are in a position to compete effectively on an international scale and win large contracts.

Vision and Strategy

Most companies begin with a business vision, but CGI began with a dream: to create an environment in which members enjoy working together and, as owners, contribute to building a company they can be proud of. That dream led to CGI’s vision of being a world-class IT and BPS leader, helping its clients win and grow.Through a four-pillar growth strategy that combines organic growth and acquisitions, CGI has been a consolidator in the IT services industry.

The first pillar of this strategy focuses on generating organic growth through contract wins, renewals and extensions in the areas of outsourcing and systems integration and consulting (“SI&C”).

The second pillar of the strategy involves the pursuit of new large outsourcing contracts, leveraging our end-to-end services, global delivery model and critical mass. CGI’s global delivery model offers a unique blend of onshore, nearshore and offshore delivery options that result in highly responsive and cost effective delivery. Further, based on the Company’s growth rate over the last several years, we have the critical mass required to bid on large and complex opportunities in North America and Europe.

The third pillar of our growth strategy focuses on the acquisition of smaller firms or niche players. We identify niche acquisitions through a strategic mapping program that systematically searches for targets that will strengthen our vertical market knowledge or increase the richness of our service offerings.

The fourth pillar involves the pursuit of transformational acquisitions focused on expanding our geographic presence and critical mass. This approach further enables us to strengthen our qualifications to compete for large outsourcing contracts.

Throughout its history, CGI has been highly disciplined in following this four-pillar growth strategy, with an emphasis on earnings accretion and maximizing shareholder value. Currently, our key growth market targets are the U.S. and Europe.

Developments in 2008

CGI continued delivering strong financial performance throughout fiscal 2008. Steady organic and profitable growth as well as leading margins characterized our operational performance. The Company has booked 30% more new business in fiscal 2008 compared with the previous year and the more significant bookings have been outlined below. As part of its build and buy strategy, the Company's strategic expansion plans call for its growth targets to be evenly split between acquisition and organic growth. Using our disciplined investment criteria, the Company reviewed several acquisition opportunities in fiscal 2008, but ultimately chose not to proceed because of timing, alignment or price.

Instead, cash was re-invested in organic growth, reducing debt and buying back shares as part of the Normal Course Issuer Bid. During the year, we repaid $106.2 million of our credit facility net of drawings, and repurchased 19.9 million shares for $213.5 million.  Entering 2009, CGI believes it is extremely well-positioned to capitalize on market opportunities as they present themselves.

Bookings

The Company booked new business that exceeded its revenue, resulting in a book-to-bill of 112% for the year. Book-to-bill is stated as a proportion of total bookings to revenue for the period. New business booked in the year was across all verticals and geographies.  Our three largest verticals for bookings were government and healthcare, financial services, and telecommunications and utilities, making up approximately 40%, 35% and 13% of total bookings, respectively. From a geographical perspective, Canada made up 51% of total bookings, followed by the U.S. and Europe and Asia Pacific at 41% and 8%, respectively.

All geographies showed year-over-year improvements highlighted by Canada with 47% followed by Europe and Asia Pacific and U.S. with improvements of 26% and 15%, respectively.

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Significant Bookings in the Year

- October 3, 2007: 10-year US$110 million managed services contract with Océ North America to deliver infrastructure services, including end-user computing, service desk, enterprise operations and data center hosting.

- November 14, 2007: Three-year $91.8 million contract with Public Works and Government Services Canada (“PWGSC”) for  the provision of engineering and technical management services to their Information Technology Services Branch. The agreement also entitles PWGSC to four one-year extensions, with a total potential contract value of $400 million.

- February 4, 2008: Two-year contract valued at approximately US$27 million with the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services (“CMS”) to implement CMS’ Provider Enrollment Chain and Ownership System One-Stop-Shop release.

- April 2, 2008: Consulting contracts awarded by Revenu Québec valued at more than $40 million for the improvement of the government’s existing personal income tax system and the development of a new system.

- April 10, 2008: 10-year project valued at US$83 million with the U.S. Environmental Protection Agency to modernize its financial system using CGI’s commercial Momentum software, and to transition its financial system IT hosting and application management to CGI.

- May 1, 2008: Five-year contract with Daimler Financial Services to provide a full end-to-end applications management service for international Vehicle Asset Financing.

- May 7, 2008: 10-year US$115 million contract with Magnolia Insurance Company to provide back-office services including complete policy administration, billing and accounting, claims administration, statistical reporting, and statutory accounting services.

- May 28, 2008: Three-year US$29.6 million contract with the Oregon Department of Human Services to design, develop and implement its next generation Statewide Automated Child Welfare Information System.

- June 19, 2008: Seven-year agreements valued at US$80 million with Autralia and New Zealand Banking Group Limited and Bank of Montreal Financial Group to extend their use of CGI’s Proponix global trade platform.

- September 15, 2008: Five-year agreement with the Ontario Education Collaborative Marketplace valued at $40 million to build and manage the electronic marketplace.

- October 8, 2008: Seven-year contract extension with Co-operators General Insurance Company valued at approximately $110 million, whereby CGI will continue to provide data center services. This contract renewal was signed prior to and announced subsequent to our year end.

CGI measures bookings as a key indicator of our future revenue. However, due to the timing and transition period associated with outsourcing contracts, the realization of revenue related to these bookings may fluctuate from quarter to quarter.

Divestiture

As announced on July 21, 2008, the Company divested its Canadian claims adjusting and risk management services business for purchase consideration of $38.1 million. The Company received net cash proceeds of $29.2 millionin August 2008.  Of the remaining $6.4 million, $5.5 million is to be paid on or before August 5, 2014. The net assets disposed of included goodwill of $7.7 million, which is net of an impairment of $4.1 million. For more information on this transaction, please see Note 19 of our consolidated financial statements.

Prior to this transaction, management regularly reviewed CGI’s operating results based on its two lines of business – IT services and BPS. Subsequent to this divestiture, the Company integrated BPS into its ITS line of business to drive incremental operating efficiencies. The new segments are: Canada, U.S. and India (“U.S.”), and Europe and Asia Pacific (“Europe”), as mentioned previously. As a consequence of our new reporting segments, CGI conducted two tests for its 2008 goodwill impairment: before and after the change in segmentation.  As a result of the tests conducted, no impairment was identified.

As a result, certain comparative figures have been restated to conform to the current year’s presentation.

Share Repurchase Program

On February 5, 2008, the Company’s Board of Directors authorized the renewal of a Normal Course Issuer Bid and the purchase of up to 10% of the public float of the Company’s Class A subordinate shares during the period ending no later than February 6, 2009. The Company received approval from the Toronto Stock Exchange for its intention to make an Issuer Bid, which allows CGI to purchase on the open market, through the facilities of the Toronto Stock Exchange, up to 28,502,941 Class A subordinate shares for cancellation.

During fiscal 2008, the Company repurchased 19,910,068 of its Class A subordinate shares for $213.5 million at an average share price of $10.72, under the current and the previous Normal Course Issuer Bid.

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Competitive Position Strengthening Program

In the first quarter of 2007, we completed our Competitive Position Strengthening Program and the objectives of the program were successfully met. A total pre-tax provision of $90.3 million was taken for the program with $67.3 million taken in fiscal 2006 and $23.0 million taken in 2007. Please refer to Note 16 to the consolidated financial statements for more information on our Competitive Position Strengthening Program.

Overview of the Year

SELECTED ANNUAL INFORMATION

Years ended September 30	2008			2007			2006			Change 2008/2007			Change 2007/2006
Backlog 1 (in millions of dollars)		11,645			11,696			12,403			-0.4	%		-5.7	%
Bookings (in millions of dollars)		4,145			3,190			3,917			29.9	%		-18.6	%
Revenue
Revenue (in ‘000 of dollars)		3,705,863			3,633,945			3,393,382			2.0	%		7.1	%
Year-over-year growth prior to foreign currency impact		5.3	%		7.4	%		-2.6	%
Profitability
Adjusted EBIT 2 margin		11.6	%		11.1	%		9.0	%
Net earnings (in ‘000 of dollars)		292,764			236,402			146,533			23.8	%		61.3	%
Net earnings margin		7.9	%		6.5	%		4.3	%
Net earnings prior to restructuring costs related to specific items 3 margin		7.9	%		6.9	%		5.6	%
Earnings from continuing operations (in ‘000 of dollars)		297,898			234,659			143,770			26.9	%		63.2	%
Earnings from continuing operations margin		8.0	%		6.5	%		4.2	%
Basic EPS from continuing operations (in dollars)		0.94			0.71			0.39			32.4	%		82.1	%
Diluted EPS from continuing operations (in dollars)		0.92			0.70			0.39			31.4	%		79.5	%
Basic EPS (in dollars)		0.92			0.72			0.40			27.8	%		80.0	%
Diluted EPS (in dollars)		0.90			0.71			0.40			26.8	%		77.5	%
Balance sheet (in ‘000 of dollars)
Total assets		3,683,973			3,475,808			3,692,032			6.0	%		-5.9	%
Long-term financial liabilities 4		326,916			516,470			876,269			-36.7	%		-41.1	%
Total long-term liabilities before clients’ funds obligations		547,041			737,991			1,127,811			-25.9	%		-34.6	%
Cash generation / Financial structure
Cash provided by continuing operating  activities (in ‘000 of dollars)		355,910			544,615			302,704			-34.6	%		79.9	%
Days sales outstanding 5		50			42			50			19.0	%		-16.0	%
Net debt to capitalization ratio 6		13.9	%		16.8	%		27.2	%

1	Backlog includes new contract wins, extensions and renewals, partially offset by the backlog consumed during the year as a result of client work performed and adjustments related to the volume, cancellation and/or the impact of foreign currencies to our existing contracts. Backlog incorporates estimates from management that are subject to change from time to time.
2	Adjusted EBIT is a non-GAAP measure for which we provide a reconciliation to its closest GAAP measure on page 13.
3	Net earnings prior to restructuring costs is a non-GAAP measure. A reconciliation to its closest GAAP measure is provided on page 15.
4	Long-term financial liabilities include the long-term portion of debt and capital leases, integration and restructuring costs, asset retirement obligations, deferred compensation and any forward contracts in a liability position.
5	Days sales outstanding (“DSO”) is obtained by subtracting deferred revenue and tax credits receivable from accounts receivable and work in progress; the result is divided by the latest quarter’s revenue over 90 days.
6	The net debt to capitalization ratio represents the proportion of long-term debt, including the impact of the fair value of forward contracts, net of cash and cash equivalents over the sum of shareholders’ equity and long-term debt.

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FINANCIAL REVIEW 2008, 2007 AND 2006

Revenue Variation and Revenue by Segment

The following table provides a summary of our revenue growth, in total and by segment, separately showing the impacts of foreign currency variations between 2008 and 2007. The 2007 and 2006 revenue by segment is recorded reflecting the actual foreign exchange rates of each respective year.

Years ended September 30 (in '000 of dollars except for percentage)	2008			2007			2006			Change 2008/2007			Change 2007/2006
Revenue		3,705,863			3,633,945			3,393,382			2.0	%		7.1	%
Variation prior to foreign currency impact		5.3	%		7.4	%		-2.6	%
Foreign currency impact		-3.3	%		-0.3	%		-3.0	%
Variation over previous year		2.0	%		7.1	%		-5.6	%
Canada revenue prior to foreign
currency impact		2,340,856			2,251,326			2,104,647			4.0	%		7.0	%
Foreign currency impact		(5,290	)		-			-
Canada revenue		2,335,566			2,251,326			2,104,647			3.7	%		7.0	%
U.S. and India revenue prior to foreign
currency impact		1,196,390			1,115,449			1,064,795			7.3	%		7.2	%
Foreign currency impact		(109,877	)		-
U.S. and India revenue		1,086,513			1,115,449			1,064,795			-2.6	%		4.8	%
Europe and Asia Pacific revenue prior to foreign
currency impact		287,057			267,170			223,940			7.4	%		13.0	%
Foreign currency impact		(3,273	)		-
Europe and Asia Pacific revenue		283,784			267,170			223,940			6.2	%		19.3	%
Revenue		3,705,863			3,633,945			3,393,382			2.0	%		7.1	%

For fiscal 2008, revenue was $3,705.9 million, an increase over both 2007 and 2006. On a constant currency basis, revenue increased by 5.3% compared to last year. The unfavourable impact of foreign currency fluctuations amounted to $118.4 million or 3.3%, mainly due to U.S. dollar fluctuations. On a constant currency basis, the largest growth in our vertical markets was from telecommunications and utilities (13%), retail and distribution (8%) and financial services (3%).

For fiscal 2007, revenue increased by 7.4% on a constant currency basis against fiscal 2006, but was impacted by a slight decrease of 0.3% due to foreign currency fluctuations, resulting in a total revenue variation of 7.1% year-over-year. The improvement was due to strong growth in all our geographies and targeted vertical markets. Fiscal 2006 was impacted by lower volumes from BCE, the unfavourable impacts of the ramping down and completion of isolated contracts not meeting our profitability standards, and the impact of the weakening U.S. dollar.

CANADA

For the fiscal year ended September 30, 2008, revenue from our Canadian operating segment was $2,335.6 million, an increase of $84.3 million or 3.7% over 2007. On a constant currency basis, revenue grew by 4.0% or $89.5 million when compared to the prior year. The growth was driven primarily by higher revenue from our SI&C activities, mainly in our telecommunications and utilities, retail and distribution, and financial services vertical markets, slightly offset by the completion of certain isolated outsourcing contracts.

When comparing fiscal 2007 to 2006, revenue from our Canadian operating segment was $2,251.3 million, an increase of $146.7 million or 7.0% over 2006.  This strong growth was mainly attributable to the increase in business activity with existing clients across all key vertical markets.

U.S. AND INDIA

For the fiscal year ended September 30, 2008, U.S revenue increased by 7.3% or $80.9 million on a constant currency basis when compared to the same period last year. The unfavourable impact of foreign currency fluctuations represented $109.9 million or 9.9%, which resulted in an overall decrease of 2.6% for this segment. We experienced growth on a constant currency basis, with the government and healthcare vertical market being the primary driver.

When comparing fiscal 2007 to 2006, revenue from the U.S. increased by 4.8 % or $50.7 million to $1,115.4 million including the unfavourable impact of approximately $25.7 million in foreign currency fluctuations. The growth was driven mainly by new business with existing clients in the government and financial services vertical markets.

EUROPE AND ASIA PACIFIC

In fiscal 2008, revenue from our Europe operating segment was $283.8 million, an increase of $16.6 million or 6.2% against 2007. On a constant currency basis, this segment grew by $19.9 million or 7.4%, with foreign currency fluctuations having an unfavourable impact of $3.3 million or 1.2%. The net growth in Europe was mainly a result of higher SI&C work from our telecommunication clients in Central Europe. During the year, we also had incremental revenue from Daimler Financial Services representing a new outsourcing contract in the financial services vertical market.

When comparing fiscal 2007 to 2006, revenue reached $267.2 million in Europe, a growth of $43.2 million or 19.3%. Most of the growth was due to increased volumes from our existing telecommunication clients. In addition, there was a favourable impact of approximately $14.2 million due to foreign currency fluctuations.

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Revenue Distribution

The following tables provide additional information regarding our revenue mix:

Contract Types	Geographic Markets *	Targeted Verticals
Management of IT                         54% and business functions (outsourcing) IT services                              41% BPS                                        13% Systems integration and consulting   46%	Canada                      61% U.S. 3                        1% Europe and Asia Pacific  8%	Government and healthcare        30% Financial services                      30% Telecommunications and utilities  22% Retail and distribution                11% Manufacturing                           7%

                                                        *Based on the client’s domicile

Client Concentration

In fiscal 2008, our revenue from BCE and its subsidiaries, our largest client, represented 12.2% of our revenue, compared to 11.8% in fiscal 2007, and 12.1% in fiscal 2006.

OPERATING EXPENSES

Years ended September 30 (in '000 of dollars except for percentage)	2008		2007		2006		As a percentage of revenue 2008			As a percentage of revenue 2007			As a percentage of revenue 2006
Costs of services, selling and
administrative		3,111,965		3,053,739		2,919,007		84.0	%		84.0	%		86.0	%
Amortization
Capital assets		43,455		32,396		33,983		1.2	%		0.9	%		1.0	%
Contract costs related to transition costs		18,457		19,476		14,914		0.5	%		0.5	%		0.4	%
Finite-life intangibles		102,032		123,157		119,484		2.8	%		3.4	%		3.5	%
Total amortization		163,944		175,029		168,381		4.4	%		4.8	%		5.0	%

Costs of Services, Selling and Administrative

When comparing fiscal 2008 to fiscal 2007, costs of services, selling and administrative expenses as a percentage of revenue remained stable at 84.0%.  Our gross margin and selling and administrative ratios remained consistent between the two years. During the year, fluctuations in foreign currencies favorably impacted our costs of services, selling and administrative by $103.3 million, significantly offsetting the impact of the currency related revenue reduction noted in the previous section. We continue to look for opportunities to increase our operating margins and leverage our cost structure.

When comparing fiscal 2007 to fiscal 2006, cost of services, selling and administrative expenses decreased as a percentage of revenue from 86.0% to 84.0%. This improvement resulted from increased gross margin through productivity improvements and a reduction in our selling and administrative costs. In the second quarter of 2006, the rapid reduction in the BCE work program adversly impacted our cost structure leading the Company to undertake the Competitive Position Strengthening Program. We successfully achieved the objectives of the program allowing the Company to improve margins through better utilization rates and decreased overhead.

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Amortization

The increase in amortization expense for capital assets over fiscal 2007 is mainly due to additions of computer equipment made over the last year to support our revenue growth and improve our data center infrastructure. We are also purchasing certain types of equipment that were previously financed through operating leases.  This was partially offset by a reduction in amortization expense associated with leasehold improvements.

The decrease in contract cost amortization over 2007 was mainly due to the accelerated amortization taken in the second quarter of fiscal 2007 related to the reorganization of a client, partly offset by the ramp-up and full year impact of transition cost amortization associated with new clients and contracts started during the last year.

The decrease in finite-life intangibles amortization expense over last year was mainly due to the incremental amortization in fiscal 2007 associated with a business solution for our oil and gas clients in Western Canada, certain software licenses and other intangibles, such as trademarks and client relationships, being fully amortized and the extension made to the useful life of a business solution to support the brokerage industry. This was partially offset by incremental amortization associated with investments made in business solutions mainly for our government vertical market and our internal systems.

In addition, the effect of foreign currency fluctuations, mainly against the U.S. dollar, contributed to the decrease of total amortization expense for the year in the amount of $5.7 million.

The increase in amortization expense relating to contract costs between 2007 and 2006 is mainly due to the accelerated amortization taken in the second quarter of 2007 as a result of the reorganization of a client.

When comparing 2007 to 2006, the increase in finite-life intangibles amortization expense was mainly due to the amortization associated with a business solution for our oil and gas clients in Western Canada, as described above, partly offset by lower amortization associated with certain internal software licenses and other intangibles being fully amortized in the year.

ADJUSTED EBIT BY SEGMENT

Years ended September 30 (in '000 of dollars except for percentage)	2008			2007			2006			Change 2008/2007			Change 2007/2006
Canada		332,295			321,390			243,352			3.4	%		32.1	%
As a percentage of Canada revenue		14.2	%		14.3	%		11.6	%
U.S. and India		129,401			123,512			112,436			4.8	%		9.9	%
As a percentage of U.S. and India revenue		11.9	%		11.1	%		10.6	%
Europe and Asia Pacific		24,692			23,152			29,121			6.7	%		-20.5	%
As a percentage of Europe and Asia Pacific revenue		8.7	%		8.7	%		13.0	%
Corporate		(56,434	)		(62,877	)		(78,915	)		-10.2	%		-20.3	%
As a percentage of revenue		-1.5	%		-1.7	%		-2.3	%
Adjusted EBIT		429,954			405,177			305,994			6.1	%		32.4	%
Adjusted EBIT margin		11.6	%		11.1	%		9.0	%

CANADA

For the fiscal period ended September 30, 2008, adjusted EBIT for our Canadian operating segment was $332.3 million, an increase of 3.4% or $10.9 million over 2007, while as a percentage of revenue, our margin decreased slightly from 14.3% to 14.2%. Excluding the relatively higher level of termination costs in the last quarter of 2008, our adjusted EBIT margin for Canada would have improved slightly over the prior year.

When comparing fiscal 2007 to 2006, adjusted EBIT for our Canadian operating segment was $321.4 million, an increase of 32.1% or $78.0 million over 2006.  As a percentage of revenue, the segment profitability increased to 14.3% from 11.6%.  This favourable variation is mostly driven by the benefits achieved from our Competitive Position Strengthening Program.

U.S. AND INDIA

Adjusted EBIT for our U.S. operating segment for fiscal 2008 was $129.4 million, an increase of $5.9 million or 4.8% when compared to 2007, while as a percentage of revenue, our margin improved from 11.1% to 11.9%. This increase was primarily caused by the incremental margin on revenue growth as previously mentioned, partially offset by the timing between the start and completion of specific contracts in the financial services as well as the government and healthcare vertical markets, and to a lesser extent by the unfavourable impact of foreign currency fluctuations.

When comparing fiscal 2007 to 2006, adjusted EBIT for the U.S. increased 9.9% or $11.1 million to $123.5 million.  Adjusted EBIT as a percentage of revenue also increased from 10.6% to 11.1%.  The growth was primarily due to the increase in margins from existing contracts in the financial services as well as government and healthcare vertical markets.

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EUROPE AND ASIA PACIFIC

Adjusted EBIT for our Europe operating segment was $24.7 million in fiscal 2008, up $1.5 million or 6.7% from fiscal 2007, while as a percentage of revenue, our margin remained stable at 8.7%. This increase was mainly due to the incremental margin earned on new contracts, as described in the revenue section.

When comparing fiscal 2007 to 2006,  adjusted EBIT decreased by $6.0 million to $23.2 million.  Adjusted EBIT as a percentage of revenue also decreased to 8.7% from 13.0%.  This decrease is due to the margin associated with a one-time license sale in 2006 for a client in our financial services vertical.

Corporate

For fiscal 2008 corporate expenses represented 1.5% of revenue, down from the 1.7% in fiscal 2007, as we continue to look for opportunities to leverage our cost structure to improve our EBIT.

Comparing fiscal 2007 to 2006, corporate expenses decreased from 2.3% to 1.7% of revenue.  This is primarily the result of the Competitive Position Strengthening Program announced in 2006 to reduce our overall cost structure.

As a result of our decentralized and highly accountable business model, we continue to evaluate services that are centrally provided and if necessary will rationalize and integrate them within the operating segments.

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 

AND NON-CONTROLLING INTEREST

The following table provides, for the periods indicated, a reconciliation between our adjusted EBIT and earnings from continuing operations before income taxes and non-controlling interest, which is reported in accordance with Canadian GAAP.

Years ended September 30 (in '000 of dollars except for percentage)	2008			2007			2006			As a percentage of revenue 2008			As a percentage of revenue 2007			As a percentage of revenue 2006
Adjusted EBIT		429,954			405,177			305,994			11.6	%		11.1	%		9.0	%
Restructuring costs related to specific items		-			23,010			67,266			0.0	%		0.6	%		2.0	%
Interest on long-term debt		27,284			41,818			43,291			0.7	%		1.2	%		1.3	%
Other income		(5,570	)		(9,336	)		(7,588	)		-0.2	%		-0.3	%		-0.2	%
Interest and other expenses		3,341			283			491			0.1	%		0.0	%		0.0	%
Gain on sale of assets		-			(700	)		(10,475	)		0.0	%		0.0	%		-0.3	%
Earnings from continuing operations before
income taxes and non-controlling interest		404,899			350,102			213,009			10.9	%		9.6	%		6.3	%

Restructuring Costs Related to Specific Items

In the first quarter of 2007, we successfully completed our Competitive Position Strengthening Program. For background information on the program, please refer to page 8 of this MD&A.

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Interest on Long-Term Debt

Interest expense for the last three fiscal years primarily includes interest paid on the debt used to finance the purchase of 100 million Class A subordinate shares from BCE in January 2006.  The decrease in interest expense in fiscal 2008 over fiscal 2007 is a direct result of debt repayments made since that time and the reduced interest costs resulting from the amendment of our credit facility made in the fourth quarter of fiscal 2007. Please refer to Note 10 to the consolidated financial statements for additional information on our outstanding debt obligations.

Other Income

Other income includes interest and other investment income earned on cash balances held during the year, in excess of interest expenses. It also includes the favourable change in the value of certain investments related to a deferred compensation arrangement we manage as a trustee on behalf of certain U.S. employees. The change in value is totally offset in the compensation expense under costs of services, selling and administrative, thus not impacting our earnings before income taxes. The $3.8 million unfavourable variance against the prior year is mainly related to a $1.7 million favourable fluctuation in the value of the trust’s assets for 2007, whereas for 2008, the Company had an unfavourable variance.  In addition, $1.3 million of interest income was earned on research and development claims received in 2007.  Modifications in the management of our cash pooling has also allowed us to better utilize our funds for general corporate purposes including the reduction of debt.

Interest and Other Expenses

Interest and other expenses includes the unfavourable change in the value of our trust for certain U.S. employees as described above. It also includes expenses associated with the management of our cash balances in excess of interest and other investment income earned.  The unfavourable variance over 2007 is mainly due to the fluctuation in the trust as outlined above.

Gain on Sale of Assets

In fiscal 2006, we recorded a $10.5 million gain on the sale of our electronic switching assets.

Income Taxes

Income tax expense was $106.1 million for the year ended September 30, 2008, compared to $115.2 million in the prior year, representing a $9.1 million decrease year-over-year. Our effective income tax rate also decreased from 32.9% in 2007 to 26.2% in fiscal 2008 mainly as a result of two non-recurring items: the impact of $6.3 million coming from the revaluation of our tax assets and liabilities due to newly enacted tax rates in Canada; and the net reversal of prior years’ income tax provisions of $20.3 million mainly pertaining to the determination of prior years’ tax liabilities after reaching the final agreements with tax authorities. Without these impacts, our income tax rate would have been 32.8%. We continue to expect our effective tax rate to be in the range of 32-34% in subsequent years.

When comparing fiscal 2007 and 2006, the increase in income tax expense of $46.0 million was due to higher earnings predominatly from lower restructuring charges incurred, while the 2007 income tax rate of 32.9% is comparable to 2006.

Non-Controlling Interest

During the third quarter of fiscal 2007, we began using the consolidation method to account for our interest in CIA. Previously, this operation qualified as a joint venture and was proportionally consolidated in the financial statements. Our current ownership interest in CIA stands at 64.7%, unchanged from that held at the end of fiscal 2007.

2008 Annual Report - CGI Group Inc.

13

NET EARNINGS

The following table includes a reconciliation between earnings from continuing operations prior to restructuring costs related to specific items and net earnings which is reported in accordance with Canadian GAAP:
 

Years ended September 30 (in '000 of dollars unless otherwise indicated)	2008	2007	2006	Change 2008/2007	Change 2007/2006
Earnings from continuing operations prior to