EXHIBIT 2

REPORT OF MANAGEMENT

To
the shareholders of FirstService Corporation:

Management
is responsible for the preparation of FirstService Corporation's consolidated financial statements. Management believes that the consolidated financial statements fairly
reflect the form and substance of transactions and that the consolidated financial statements reasonably present the Company's financial condition and results of operations. The consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States and reconciled to Canadian generally accepted accounting principles in
note 22 to the consolidated financial statements in all material respects. Management has included in the Company's consolidated financial statements amounts based on estimates and
judgments that it believes are reasonable under the circumstances.

PricewaterhouseCoopers LLP,
the independent auditors of the Company, have audited the Company's consolidated financial statements in accordance with Canadian generally accepted
auditing standards, and they provide an objective, independent review of the fairness of reported operating results and financial position.

The
Board of Directors of the Company has an Audit Committee that meets with financial management and the independent auditors to review accounting, auditing, internal accounting
controls, and financial reporting matters.

|                                    |  |                                                      
|----------------------------------- |  | -----------------------------------------------------
|                                    |  |                                                      
|                                    |  |                                                      
|/s/ Jay S. HennickPresident and CEO |  | /s/ John B. FriedrichsenSenior Vice President and CFO
|May 7, 2004                         |  |                                                      

21

---



INDEPENDENT AUDITORS' REPORT

To
the shareholders of FirstService Corporation:

We
have audited the consolidated balance sheets of FirstService Corporation as at March 31, 2004 and 2003 and the consolidated statements of earnings, shareholders' equity and
cash flows for each year in the three-year period ended March 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2004 and 2003 and the
results of its operations and cash flows for each year in the three-year period ended March 31, 2004 in accordance with United States generally accepted accounting
principles.

|                                                    |  | 
|--------------------------------------------------- |  | 
|                                                    |  | 
|                                                    |  | 
|/s/ PricewaterhouseCoopers LLPChartered Accountants |  | 
|Toronto, Canada
May 7, 2004                         |  | 

22

---







FIRSTSERVICE CORPORATION        CONSOLIDATED STATEMENTS OF EARNINGS        (in thousands of U.S. dollars, except per share amounts)  in accordance with United States generally
accepted accounting principles

|For the years ended March 31                                            |                         | 2004 |         | 2003 |   | 2002    |     
|----------------------------------------------------------------------- | ----------------------- | ---- | ------- | ---- | - | ------- | ----
|Revenues                                                                |                         | $    | 609,794 |      | $ | 523,127 |     
|Cost of revenues                                                        |                         |      | 424,069 |      |   | 359,254 |     
|Selling, general and administrative expenses (note 5)                   |                         |      | 132,328 |      |   | 113,991 |     
|Other income, net (note 6)                                              |                         |      | (897    | )    |   | (1,106  | )   
|Depreciation and amortization                                           |                         |      | 15,223  |      |   | 13,285  |     
|                                                                        |                         |      |         |      |   |         |     
|                                                                        |                         |      | 39,071  |      |   | 37,703  |     
|Interest, net                                                           |                         |      | 7,905   |      |   | 8,936   |     
|                                                                        |                         |      |         |      |   |         |     
|Earnings before income taxes and minority interest                      |                         |      | 31,166  |      |   | 28,767  |     
|Income taxes (note 14)                                                  |                         |      | 9,201   |      |   | 7,701   |     
|                                                                        |                         |      |         |      |   |         |     
|Earnings before minority interest                                       |                         |      | 21,965  |      |   | 21,066  |     
|Minority interest share of earnings                                     |                         |      | 3,101   |      |   | 3,040   |     
|                                                                        |                         |      |         |      |   |         |     
|Net earnings from continuing operations                                 |                         |      | 18,864  |      |   | 18,026  |     
|Net earnings from discontinued operations, net of income taxes (note 4) |                         |      | 160     |      |   | 414     |     
|                                                                        |                         |      |         |      |   |         |     
|Net earnings                                                            |                         | $    | 19,024  |      | $ | 18,440  |     
|                                                                        |                         |      |         |      |   |         |     
|Net earnings per share (note 15)                                        |                         |      |         |      |   |         |     
|Basic                                                                   |                         |      |         |      |   |         |     
|                                                                        | Continuing operations   |      | $       | 1.32 |   | $       | 1.29
|                                                                        | Discontinued operations |      |         | 0.01 |   |         | 0.03
|                                                                        |                         |      |         |      |   |         |     
|                                                                        |                         | $    | 1.33    |      | $ | 1.32    |     
|                                                                        |                         |      |         |      |   |         |     
|Diluted                                                                 |                         |      |         |      |   |         |     
|                                                                        | Continuing operations   |      | $       | 1.29 |   | $       | 1.24
|                                                                        | Discontinued operations |      |         | 0.01 |   |         | 0.03
|                                                                        |                         |      |         |      |   |         |     
|                                                                        |                         | $    | 1.30    |      | $ | 1.27    |     
|                                                                        |                         |      |         |      |   |         |     

The
accompanying notes are an integral part of these consolidated financial statements.

23

---



FIRSTSERVICE CORPORATION        CONSOLIDATED BALANCE SHEETS        (in thousands of U.S. dollars)  in accordance with United States generally accepted accounting principles

|As at March 31                                |                                                                    | 2004                                                                                                                                            |         | 2003   |  
|--------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------ | -
|Assets                                        |                                                                    |                                                                                                                                                 |         |        |  
|Current assets                                |                                                                    |                                                                                                                                                 |         |        |  
|                                              | Cash and cash equivalents                                          |                                                                                                                                                 | $       | 15,620 |  
|                                              | Accounts receivable, net of an allowance of $3,976 (2003  $5,343) |                                                                                                                                                 |         | 97,367 |  
|                                              | Inventories (note 7)                                               |                                                                                                                                                 |         | 15,229 |  
|                                              | Prepaids and other (note 7)                                        |                                                                                                                                                 |         | 15,659 |  
|                                              | Deferred income taxes (note 14)                                    |                                                                                                                                                 |         | 3,358  |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    |                                                                                                                                                 | 147,233 |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|Other receivables (note 8)                    |                                                                    |                                                                                                                                                 | 5,397   |        |  
|Interest rate swaps (note 17)                 |                                                                    |                                                                                                                                                 | 6,805   |        |  
|Fixed assets (note 9)                         |                                                                    |                                                                                                                                                 | 49,826  |        |  
|Other assets (note 9)                         |                                                                    |                                                                                                                                                 | 2,829   |        |  
|Deferred income taxes (note 14)               |                                                                    |                                                                                                                                                 | 2,167   |        |  
|Intangible assets (note 10)                   |                                                                    |                                                                                                                                                 | 37,717  |        |  
|Goodwill (note 11)                            |                                                                    |                                                                                                                                                 | 185,579 |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    |                                                                                                                                                 | 290,320 |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    | $                                                                                                                                               | 437,553 |        | $
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|Liabilities                                   |                                                                    |                                                                                                                                                 |         |        |  
|Current liabilities                           |                                                                    |                                                                                                                                                 |         |        |  
|                                              | Accounts payable                                                   |                                                                                                                                                 | $       | 20,526 |  
|                                              | Accrued liabilities (note 7)                                       |                                                                                                                                                 |         | 49,353 |  
|                                              | Income taxes payable                                               |                                                                                                                                                 |         | 1,985  |  
|                                              | Unearned revenue                                                   |                                                                                                                                                 |         | 9,736  |  
|                                              | Long-term debt  current (note 12)                                 |                                                                                                                                                 |         | 3,502  |  
|                                              | Deferred income taxes (note 14)                                    |                                                                                                                                                 |         | 1,266  |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    |                                                                                                                                                 | 86,368  |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|Long-term debt less current portion (note 12) |                                                                    |                                                                                                                                                 | 160,386 |        |  
|Deferred income taxes (note 14)               |                                                                    |                                                                                                                                                 | 19,594  |        |  
|Minority interest                             |                                                                    |                                                                                                                                                 | 16,104  |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    |                                                                                                                                                 | 196,084 |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|Shareholders' equity                          |                                                                    |                                                                                                                                                 |         |        |  
|                                              | Capital stock (note 13)                                            |                                                                                                                                                 |         | 68,557 |  
|                                              |                                                                    | Issued and outstanding 14,087,018 (2003  13,501,343) Subordinate Voting Shares and 662,847 (2003  662,847) convertible Multiple Voting Shares |         |        |  
|                                              | Contributed surplus (note 13)                                      |                                                                                                                                                 |         | 183    |  
|                                              | Receivables pursuant to share purchase plan (note 13)              |                                                                                                                                                 |         | (2,148 | )
|                                              | Retained earnings                                                  |                                                                                                                                                 |         | 81,972 |  
|                                              | Cumulative other comprehensive earnings                            |                                                                                                                                                 |         | 6,537  |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    |                                                                                                                                                 | 155,101 |        |  
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|                                              |                                                                    | $                                                                                                                                               | 437,553 |        | $
|                                              |                                                                    |                                                                                                                                                 |         |        |  
|Commitments and contingencies (note 18)       |                                                                    |                                                                                                                                                 |         |        |  

|                           |  |                           
|-------------------------- |  | --------------------------
|                           |  |                           
|On behalf of the Board,    |  |                           
|/s/ Jay S. HennickDirector |  | /s/ Peter F. CohenDirector

The accompanying notes are an integral part of these consolidated financial statements.

24

---





FIRSTSERVICE CORPORATION        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY        (in thousands of U.S. dollars)  in accordance with United States generally accepted accounting
principles

|                                     |                                          | Issued and outstanding shares |         | Capital stock |        | Contributed surplus |   | Receivables pursuant to share purchase plan |      | Retained earnings |        | Cumulative other
comprehensive
earnings (loss) |   | Total shareholders' equity |       
|------------------------------------ | ---------------------------------------- | ----------------------------- | ------- | ------------- | ------ | ------------------- | - | ------------------------------------------- | ---- | ----------------- | ------ | ---------------------------------------------- | - | -------------------------- | ------
|Balance, March 31, 2001              |                                          | 13,168,240                    |         | $             | 54,863 |                     | $ |                                            |      | $                 | (3,196 | )                                              | $ | 27,736                     |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Comprehensive earnings:              |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Net earnings                             |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            | 17,029
|                                     | Foreign currency translation adjustments |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            |      
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Comprehensive earnings               |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Subordinate Voting Shares:           |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Stock options exercised                  |                               | 607,025 |               |        | 2,849               |   |                                             |     |                   |        |                                               |   |                            |      
|Cash payments on share purchase plan |                                          |                              |         |               |       |                     |   |                                            |      |                   | 566    |                                                |   |                           |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Balance, March 31, 2002              |                                          | 13,775,265                    |         |               | 57,712 |                     |   |                                            |      |                   | (2,630 | )                                              |   | 44,765                     |       
|Comprehensive earnings:              |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Net earnings                             |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            | 18,440
|                                     | Foreign currency translation adjustments |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            |      
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Comprehensive earnings               |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Subordinate Voting Shares:           |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Stock options exercised                  |                               | 421,625 |               |        | 3,002               |   |                                             |     |                   |        |                                               |   |                            |      
|                                     | Purchased for cancellation               |                               | (32,700 | )             |        | (143                | ) |                                             |     |                   |        |                                               |   |                            | (257  
|Cash payments on share purchase plan |                                          |                              |         |               |       |                     |   |                                            |      |                   | 196    |                                                |   |                           |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Balance, March 31, 2003              |                                          | 14,164,190                    |         |               | 60,571 |                     |   |                                            |      |                   | (2,434 | )                                              |   | 62,948                     |       
|Comprehensive earnings:              |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Net earnings                             |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            | 19,024
|                                     | Foreign currency translation adjustments |                               |        |               |        |                    |   |                                             |     |                   |        |                                               |   |                            |      
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Comprehensive earnings               |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Subordinate Voting Shares:           |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|                                     | Stock option expense                     |                               |         |               |        |                     |   |                                             | 322  |                   |        |                                                |   |                            |       
|                                     | Stock options exercised                  |                               | 585,675 |               |        | 7,986               |   |                                             | (139 | )                 |        |                                               |   |                            |      
|Cash payments on share purchase plan |                                          |                              |         |               |       |                     |   |                                            |      |                   | 286    |                                                |   |                           |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       
|Balance, March 31, 2004              |                                          | 14,749,865                    |         | $             | 68,557 |                     | $ | 183                                         |      | $                 | (2,148 | )                                              | $ | 81,972                     |       
|                                     |                                          |                               |         |               |        |                     |   |                                             |      |                   |        |                                                |   |                            |       

The
accompanying notes are an integral part of these consolidated financial statements.

25

---



FIRSTSERVICE CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands of U.S. dollars)  in accordance with United States generally accepted accounting principles

|For the years ended March 31                                     |                                                      | 2004 |         | 2003    |   | 2002    |       
|---------------------------------------------------------------- | ---------------------------------------------------- | ---- | ------- | ------- | - | ------- | ------
|Cash provided by (used in)                                       |                                                      |      |         |         |   |         |       
|Operating activities                                             |                                                      |      |         |         |   |         |       
|Net earnings                                                     |                                                      | $    | 19,024  |         | $ | 18,440  |       
|Less net earnings from discontinued operations                   |                                                      |      | (160    | )       |   | (414    | )     
|Items not affecting cash:                                        |                                                      |      |         |         |   |         |       
|                                                                 | Depreciation and amortization                        |      |         | 15,223  |   |         | 13,285
|                                                                 | Deferred income taxes                                |      |         | (683    | ) |         | 2,786 
|                                                                 | Minority interest share of earnings                  |      |         | 3,101   |   |         | 3,040 
|                                                                 | Write-off of financing fees on early debt retirement |      |         |        |   |         |      
|                                                                 | Other                                                |      |         | (181    | ) |         | (287  
|Changes in operating assets and liabilities:                     |                                                      |      |         |         |   |         |       
|                                                                 | Accounts receivable                                  |      |         | (2,256  | ) |         | 9,661 
|                                                                 | Inventories                                          |      |         | 839     |   |         | (4,292
|                                                                 | Prepaids and other                                   |      |         | (1,069  | ) |         | (1,042
|                                                                 | Accounts payable                                     |      |         | (10,464 | ) |         | (355  
|                                                                 | Accrued liabilities                                  |      |         | 12,778  |   |         | (6,629
|                                                                 | Income taxes payable                                 |      |         | (1,670  | ) |         | (1,503
|                                                                 | Unearned revenue                                     |      |         | 575     |   |         | (3,033
|                                                                 |                                                      |      |         |         |   |         |       
|Net cash provided by operating activities                        |                                                      |      | 35,057  |         |   | 29,657  |       
|                                                                 |                                                      |      |         |         |   |         |       
|Investing activities                                             |                                                      |      |         |         |   |         |       
|Acquisitions of businesses, net of cash acquired                 |                                                      |      | (16,019 | )       |   | (9,561  | )     
|Purchases of minority shareholders' interests                    |                                                      |      | (1,098  | )       |   | (6,352  | )     
|Purchases of fixed assets                                        |                                                      |      | (13,121 | )       |   | (9,335  | )     
|Purchases of intangible assets                                   |                                                      |      | (551    | )       |   | (579    | )     
|(Increase) decrease in other assets                              |                                                      |      | (163    | )       |   | 2,069   |       
|Decrease (increase) in other receivables                         |                                                      |      | 1,869   |         |   | (578    | )     
|                                                                 |                                                      |      |         |         |   |         |       
|Net cash used in investing activities                            |                                                      |      | (29,083 | )       |   | (24,336 | )     
|                                                                 |                                                      |      |         |         |   |         |       
|Financing activities                                             |                                                      |      |         |         |   |         |       
|Increases in long-term debt                                      |                                                      |      | 60,522  |         |   | 14,474  |       
|Repayments of long-term debt                                     |                                                      |      | (62,559 | )       |   | (28,683 | )     
|Financing fees paid                                              |                                                      |      | (525    | )       |   |        |       
|Proceeds received on exercise of stock options                   |                                                      |      | 7,847   |         |   | 3,002   |       
|Collection of receivables pursuant to share purchase plan        |                                                      |      | 286     |         |   | 196     |       
|Repurchases of Subordinate Voting Shares                         |                                                      |      |        |         |   | (400    | )     
|Dividends paid to minority shareholders of subsidiaries          |                                                      |      | (510    | )       |   | (191    | )     
|                                                                 |                                                      |      |         |         |   |         |       
|Net cash provided by (used in) financing activities              |                                                      |      | 5,061   |         |   | (11,602 | )     
|                                                                 |                                                      |      |         |         |   |         |       
|Net cash (used in) provided by discontinued operations           |                                                      |      | (318    | )       |   | 1,483   |       
|                                                                 |                                                      |      |         |         |   |         |       
|Effect of exchange rate changes on cash                          |                                                      |      | (475    | )       |   | 2,844   |       
|                                                                 |                                                      |      |         |         |   |         |       
|Increase (decrease) in cash and cash equivalents during the year |                                                      |      | 10,242  |         |   | (1,954  | )     
|Cash and cash equivalents, beginning of year                     |                                                      |      | 5,378   |         |   | 7,332   |       
|                                                                 |                                                      |      |         |         |   |         |       
|Cash and cash equivalents, end of year                           |                                                      | $    | 15,620  |         | $ | 5,378   |       
|                                                                 |                                                      |      |         |         |   |         |       

The
accompanying notes are an integral part of these consolidated financial statements.

26

---



FIRSTSERVICE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. dollars, except per share amounts)  in accordance with United States generally accepted accounting principles

1.     DESCRIPTION OF THE BUSINESS



2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Buildings

5% declining balance and 20 to 40 years straight-lineVehicles

3 to 10 years straight-lineFurniture and equipment

20% to 30% declining balance and 3 to 10 years straight-lineComputer equipment and software

20% declining balance and 3 to 5 years straight-lineEnterprise system software

5 to 10 years straight-lineLeasehold improvements

term of the leases to a maximum of 10 years




27

---





Management contracts and other

straight-line over life of contract ranging from 2 to 15 yearsCustomer lists and relationships

straight-line over 2 to 15 yearsTrademarks and trade names

straight-line over 25 to 35 yearsFranchise rights

by pattern of use






28

---







29

---



3.     ACQUISITIONS



2004Acquisitions

Purchases of minority shareholders' interestsCurrent assets

$
2,587

$
Long-term assets


700


Current liabilities


(2,136
)

Long-term liabilities


(3,238
)

Minority interest


(223
)

674(2,310
)

674Cash consideration

$
13,722

$
1,098Acquired intangibles


8,011


Acquired goodwill


8,021


424Contingent consideration at date of acquisition

$
6,002

$



30

---





2003Acquisitions

Purchases of minority shareholders' interestsCurrent assets

$
821

$
Long-term assets


1,347


Current liabilities


(1,389
)

Long-term liabilities


(942
)

(840
)Minority interest


(229
)

775(392
)

(65
)Cash consideration

$
6,599

$
6,352Acquired intangibles


2,226


2,064Acquired goodwill


4,765


4,353Contingent consideration at date of acquisition

$
4,074

$
1,000




31

---





(unaudited)

2004

2003Pro forma revenue

$
622,268

$
555,841Pro forma net earnings from continuing operations


19,631


19,185Pro forma net earnings per share from continuing operationsBasic

$
1.37

$
1.38Diluted


1.34


1.32




4.     DISPOSITION



Operating results

2004

2003

2002Revenues

$
23,091

$
19,565

$
19,138Earnings from discontinued operations before income taxes


250


962


793Provision for income taxes


90


548


246Net earnings from discontinued operations


160


414


547Net earnings per share from discontinued OperationsBasic

$
0.01

$
0.03

$
0.04Diluted


0.01


0.03


0.04


Balance sheets

2004

2003Current assets

$
6,083

$
5,466Fixed assets


3,090


2,581Intangible assets


604


713Goodwill


2,115


1,890Total assets

$
11,892

$
10,650Current liabilities

$
6,689

$
6,587Long-term liabilities


790


671Total liabilities

$
7,479

$
7,258


32

---



5.     UNUSUAL ITEM



6.     OTHER INCOME



7.     COMPONENTS OF WORKING CAPITAL ACCOUNTS

2004

2003InventoriesWork-in-progress

$
8,888

$
6,009Finished goods


3,156


4,560Supplies and other


2,769


4,222Small equipment


416


304$
15,229

$
15,095Prepaids and otherInsurance

$
3,259

$
3,108Advertising


2,804


2,441Transportation


1,775


1,248Security deposits


1,410


1,129Other


6,411


5,691$
15,659

$
13,617Accrued liabilitiesAccrued payroll and benefits

$
27,472

$
16,707Customer advances


13,617


10,663Costs to restructure operations of acquired subsidiary


1,719


1,667Other


6,545


5,233$
49,353

$
34,270




33

---



8.     OTHER RECEIVABLES



9.     FIXED ASSETS AND OTHER ASSETS

2004

Cost

Accumulated depreciation / amortization

Net 2004Fixed assetsLand

$
2,273

$


$
2,273Buildings


7,829


1,475


6,354Vehicles


17,661


10,372


7,289Furniture and equipment


43,176


29,738


13,438Computer equipment and software


26,069


14,516


11,553Enterprise system software


3,975


1,717


2,258Leasehold improvements


12,820


6,159


6,661Total

$
113,803

$
63,977

$
49,826Other assetsInvestments

$
815

$


$
815Financing fees


3,802


1,788


2,014Total

$
4,617

$
1,788

$
2,829


2003

Cost

Accumulated depreciation / amortization

Net 2003Fixed assetsLand

$
2,234

$


$
2,234Buildings


7,228


1,156


6,072Vehicles


16,788


10,182


6,606Furniture and equipment


36,345


23,112


13,233Computer equipment and software


24,835


14,397


10,438Enterprise system software


4,549


2,402


2,147Leasehold improvements


11,612


5,742


5,870Total

$
103,591

$
56,991

$
46,600Other assetsInvestments

$
756

$


$
756Financing fees


3,119


1,098


2,021Total

$
3,875

$
1,098

$
2,777




34

---



10.   INTANGIBLE ASSETS

2004

Gross carrying amount

Accumulated amortization

Net 2004Management contracts and other

$
3,924

$
1,423

$
2,501Customer lists and relationships


7,374


1,692


5,682Trademarks and trade names


12,517


1,367


11,150Franchise rights


20,698


2,314


18,384$
44,513

$
6,796

$
37,717


2003

Gross carrying amount

Accumulated amortization

Net 2003Management contracts and other

$
2,085

$
1,067

$
1,018Customer lists and relationships


6,506


1,122


5,384Trademarks and trade names


11,327


970


10,357Franchise rights


16,464


1,796


14,668$
36,382

$
4,955

$
31,427




Amount

Estimated
weighted average
amortization period
in yearsManagement contracts and other

$
1,949

9.8Customer lists and relationships


1,104

10.9Trademarks and trade names


1,137

30.0Franchise rights


4,387

Pattern of use$
8,577

22.4




2005

$
2,3722006


2,3052007


2,2552008


2,0352009


1,896


35

---



11.   GOODWILL

Residential Property Management

Integrated Security Services

Consumer Services

Business Services

Corporate

ConsolidatedBalance, March 31, 2002

$
55,483

$
24,812

$
27,558

$
52,415

$


$
160,268Goodwill resulting from adjustments to purchase price allocations


(238
)

69


(143
)

19





(293
)Goodwill resulting from contingent acquisition payments


1,450


1,693











3,143Goodwill resulting from purchases of minority shareholders' interests


3,013


380





960





4,353Goodwill acquired during year


2,557





2,208








4,765Foreign exchange





34


149


1,205





1,388Balance, March 31, 2003


62,265


26,988


29,772


54,599





173,624Goodwill resulting from adjustments to purchase price allocations


372





165








537Goodwill resulting from contingent acquisition payments


664


341


560








1,565Goodwill resulting from purchases of minority shareholders' interests











424





424Goodwill acquired during year


168


231


7,622








8,021Foreign exchange





78


339


991





1,408Balance, March 31, 2004

$
63,469

$
27,638

$
38,458

$
56,014

$


$
185,579


12.   LONG-TERM DEBT

2004

2003Revolving credit facility of $90,000, (2003  $140,000) of which up to US$40,000 may be drawn in Canadian funds

$


$
52,0268.06% Senior Secured Notes due June 29, 2011


100,000


100,0006.40% Senior Secured Notes due September 30, 2015


50,000


Adjustment to Senior Secured Notes resulting from interest rate swaps


6,805


6,279Capital leases bearing interest ranging from 5% to 10%, maturing at various dates through 2008


4,128


3,478Other long-term debt bearing interest at 8%, maturing at various dates through 2008


2,955


3,136163,888


164,919Less: current portion


3,502


3,030$
160,386

$
161,889




36

---





2005

$
3,5022006


16,5722007


15,2032008


14,6102009


14,340Thereafter


92,856




37

---



13.   CAPITAL STOCK



Subordinate
Voting Shares

Multiple
Voting SharesTotal AmountNumber

Amount

Number

Amount

Total NumberBalance, March 31, 2002

13,112,418

$
57,339

662,847

$
373

13,775,265

$
57,712Balance, March 31, 2003

13,501,343


60,198

662,847


373

14,164,190


60,571Balance, March 31, 2004

14,087,018


68,184

662,847


373

14,749,865


68,557




2005

$
2006


2007


9162008


4672009


765$
2,148




38

---





Shares issuable under options

Weighted average price per share (US$)2004

2003

2002

2004

2003

2002Shares issuable under options  Beginning of year

1,782,990

2,119,115

2,119,640

$
15.95

$
13.20

$
8.57Granted

133,000

101,500

625,000


15.99


15.58


20.93Exercised for cash

(585,675
)
(421,625
)
(607,025
)

12.54


7.41


4.70Expired or forfeited

(186,000
)
(16,000
)
(18,500
)

23.65


19.00


7.25Shares issuable under options  End of year

1,144,315

1,782,990

2,119,115

$
16.01

$
15.95

$
13.20Options exercisable  End of year

667,933

876,506

925,498


Weighted average price per share (C$)2004

2003

2002Shares issuable under options  Beginning of year

$
23.41

$
21.05

$
13.52Granted


23.89


24.14


32.77Exercised for cash


18.73


11.48


7.35Expired or forfeited


35.33


29.43


11.35Shares issuable under options  End of year

$
23.92

$
23.41

$
21.05




Options outstanding

Options exercisableRange of exercise prices
(US$)

Number Outstanding

Weighted
average
remaining
contractual
life (years)

Weighted average exercise price
(US$)

Number exercisable

Weighted
average
exercise
price
(US$)$10.50 to $11.68

304,440

0.9

$
11.09

272,883

$
11.14$12.00 to $14.62

374,875

2.3


13.45

221,200


13.78$15.70 to $23.14

465,000

3.2


21.38

173,850


22.081,144,315

2.3

$
16.01

667,933

$
14.86


Options outstanding

Options exercisableRange of exercise prices
(C$)

Number outstanding

Weighted
average
remaining
contractual
life (years)

Weighted average exercise price
(C$)

Number exercisable

Weighted
average
exercise
price
(C$)$15.60 to $17.25

304,440

0.8

$
16.48

272,883

$
16.56$18.20 to $22.50

374,875

2.3


20.39

221,200


20.91$25.00 to $36.89

465,000

3.2


31.63

173,850


32.671,144,315

2.3

$
23.92

667,933

$
22.19


39

---





2004

2003

2002Net earnings as reported

$
19,024

$
18,440

$
17,029Deduct: Stock-based compensation expense determined under fair value method, net of tax


(2,158
)

(2,179
)

(1,144
)Pro forma net earnings


16,866


16,261


15,885Pro forma net earnings per share:Basic

$
1.18

$
1.17

$
1.17Diluted


1.16


1.12


1.09Assumptions:Risk-free interest rate


3.0%


4.5%


5.0%Expected life in years


4.4


4.4


4.0Volatility


30%


30%


30%Dividend yield


0.0%


0.0%


0.0%


14.   INCOME TAXES



2004

2003

2002Income tax expense using combined statutory rate of approximately 40% (2003  40%; 2002  41%)

$
12,509

$
11,377

$
12,545Non-deductible expenses:Loss not tax effected








443Other


576


735


250Non-taxable proceeds of life insurance policies





(1,691
)

Foreign tax rate reduction


(3,884
)

(2,720
)

(3,043
)Provision for income taxes as reported

$
9,201

$
7,701

$
10,195




2004

2003

2002Canada

$
13,612

$
13,273

$
10,820United States


17,554


15,494


19,515Total

$
31,166

$
28,767

$
30,335


40

---





2004

2003

2002CurrentCanada

$
3,360

$
1,319

$
2,844United States


5,665


5,129


6,8629,025


6,448


9,706DeferredCanada


67


585


(1,130
)United States


109


668


1,619176


1,253


489Total

$
9,201

$
7,701

$
10,195




2004

2003Deferred income tax assetsExpenses not currently deductible

$
553

$
900Provision for doubtful accounts


128


410Inventory and other reserves


24


350Loss carry-forwards


4,820


1,2515,525


2,911Deferred income tax liabilitiesDepreciation and amortization


20,219


19,464Prepaid and other expenses deducted for tax purposes


560


865Financing fees


81


14120,860


20,470Net deferred income tax liability

$
15,335

$
17,559




15.   SHARES OUTSTANDING FOR EARNINGS PER SHARE CALCULATIONS

2004

2003

2002Shares issued and outstanding at beginning of year

14,164,190

13,775,265

13,168,240Weighted average number of shares:Issued in the year

120,662

148,141

397,077Repurchased in the year



(2,346
)
Weighted average number of shares used in computing basic earnings per share

14,284,852

13,921,060

13,565,317Assumed exercise of stock options, net of shares assumed acquired under the Treasury Stock Method

310,976

576,485

1,034,551Number of shares used in computing diluted earnings per share

14,595,828

14,497,545

14,599,868


41

---



16.   OTHER SUPPLEMENTAL INFORMATION

2004

2003

2002Products and services segmentationRevenueProducts

$
108,983

$
96,219

$
75,337Services


500,811


426,908


418,214Total


609,794


523,127


493,551Cost of revenueProducts

$
67,721

$
57,633

$
46,060Services


356,348


301,621


288,404Total


424,069


359,254


334,464Franchised operationsRevenue

$
64,947

$
57,497

$
54,173Operating earnings


11,369


11,121


9,283Initial franchise fee revenue


4,467


3,822


2,951Cash payments made during the yearIncome taxes

$
13,388

$
7,667

$
10,649Interest


5,156


7,916


9,633Non-cash financing activitiesIncreases in capital lease obligations

$
1,352

$
1,565

$
1,965Depreciation and amortization expenseFixed assets

$
13,011

$
11,447

$
10,671Intangible assets


2,212


1,838


1,28215,223


13,285


11,953Other expensesAdvertising expense

$
8,577

$
8,141

$
6,103Rent expense


15,679


14,280


13,445


17.   FINANCIAL INSTRUMENTS



42

---





Buy currency

Canadian dollarsSell currency

U.S. dollarsNotional value

$8,000Weighted average exchange rate

1.3547Gain included in earnings

$   219




2004

2003Carrying amount

Fair value

Carrying amount

Fair valueOther receivables

$
5,397

$
5,379

$
5,839

$
5,784Long-term debt including current portion


157,083


175,085


158,640


166,892Interest rate swaps


6,805


6,805


6,279


6,279Foreign exchange contracts


219


219








18.   COMMITMENTS AND CONTINGENCIES





Year ending March 312005

$
16,8102006


13,4602007


10,9372008


10,1112009


7,543Thereafter


15,795


43

---









19.   RELATED PARTY TRANSACTIONS



20.   SEGMENTED INFORMATION



44

---





2004

Residential Property Management

Integrated Security Services

Consumer Services

Business Services

Corporate

ConsolidatedRevenues

$
241,293

$
122,748

$
92,870

$
152,449

$
434

$
609,794Depreciation and amortization


4,363


1,948


2,313


6,450


149


15,223Operating earnings


13,675


6,241


14,116


12,071


(7,032
)

39,071Interest, net

















(7,905
)Income taxes

















(9,201
)Minority interest

















(3,101
)Net earnings from continuing operations

















18,864Net earnings from discontinued operations

















160Net earnings
















$
19,024Total assets

$
110,439

$
75,198

$
102,802

$
144,677

$
4,437

$
437,553Total additions to long-lived assets

$
6,566

$
2,953

$
19,966

$
6,047

$
340

$
35,872


2003

Residential Property Management

Integrated Security Services

Consumer Services

Business Services

Corporate

ConsolidatedRevenues

$
214,965

$
107,548

$
73,852

$
126,373

$
389

$
523,127Depreciation and amortization


4,089


1,502


1,924


5,620


150


13,285Operating earnings


10,531


5,834


12,163


14,153


(4,978
)

37,703Interest, net

















(8,936
)Income taxes

















(7,701
)Minority interest

















(3,040
)Net earnings from continuing operations

















18,026Net earnings from discontinued operations

















414Net earnings
















$
18,440Total assets

$
107,998

$
64,803

$
83,923

$
117,432

$
14,875

$
389,031Total additions to long-lived assets

$
10,991

$
3,942

$
7,749

$
7,781

$
41

$
30,504


2002

Residential Property Management

Integrated Security Services

Consumer Services

Business Services

Corporate

ConsolidatedRevenues

$
205,376

$
95,507

$
64,826

$
127,478

$
364

$
493,551Depreciation and amortization


3,716


1,377


1,780


4,964


116


11,953Operating earnings


15,118


5,158


10,184


17,412


(4,585
)

43,287Interest, net

















(12,952
)Income taxes

















(10,195
)Minority interest

















(3,658
)Net earnings from continuing operations

















16,482Net earnings from discontinued operations

















547Net earnings
















$
17,029Total assets

$
106,268

$
57,515

$
77,060

$
117,874

$
7,212

$
365,929Total additions to long-lived assets

$
13,237

$
5,154

$
8,984

$
13,365

$
478

$
41,218


45

---





2004

2003

2002CanadaRevenues

$
174,992

$
149,570

$
149,531Total long-lived assets


68,408


68,710


53,082United StatesRevenues

$
434,802

$
373,557

$
344,020Total long-lived assets


204,715


182,941


180,685ConsolidatedRevenues

$
609,794

$
523,127

$
493,551Total long-lived assets

$
273,123

$
251,651

$
233,767


21.   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS



22.   RECONCILIATION TO CANADIAN GAAP



46

---





2004

2003Balance, beginning of year

$
68,631

$
50,448Net earnings


19,024


18,440Subordinate Voting Shares purchased for cancellation





(257
)Balance, end of year

$
87,655

$
68,631




As at March 31, 2004

United States GAAP

Reconciling adjustments

Canadian GAAPAssetsInterest rate swaps

$
6,805

$
(6,805
)
$
Subtotal non-current assets


290,320


(6,805
)

283,515Total assets

$
437,553

$
(6,805
)
$
430,748LiabilitiesLong-term debt less current portion

$
160,386

$
(6,805
)
$
153,581Subtotal non-current liabilities


196,084


(6,805
)

189,279Shareholders' equityCapital stock


68,557


(5,683
)

62,874Retained earnings


81,972


5,683


87,655Subtotal shareholders' equity


155,101





155,101Total liabilities and shareholders' equity

$
437,553

$
(6,805
)
$
430,748


As at March 31, 2003

United States GAAP

Reconciling adjustments

Canadian GAAPAssetsInterest rate swaps

$
6,279

$
(6,279
)
$
Subtotal non-current assets


266,649


(6,279
)

260,370Total assets

$
389,031

$
(6,279
)
$
382,752LiabilitiesLong-term debt less current portion

$
161,889

$
(6,279
)
$
155,610Subtotal non-current liabilities


195,117


(6,279
)

188,838Shareholders' equityCapital stock


60,571


(5,683
)

54,888Retained earnings


62,948


5,683


68,631Subtotal shareholders' equity


123,406





123,406Total liabilities and shareholders' equity

$
389,031

$
(6,279
)
$
382,752




47

---



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