**EXHIBIT
2**











**REPORT
OF MANAGEMENT**





To the
shareholders of FirstService Corporation:





Management
is responsible for the preparation and presentation 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 in all material
respects. The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States and
reconciled to generally accepted accounting principles in Canada 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 most appropriate 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 condition.





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. Hennick*
    */s/
      John B. Friedrichsen*Jay
      S. Hennick
    John
      B. FriedrichsenPresident
      and CEO
    Senior
      Vice President and CFO





May 17,
2005























**AUDITORS'
REPORT**





To the
shareholders of FirstService Corporation:





We have
audited the consolidated balance sheets of FirstService Corporation as at March
31, 2005 and 2004 and the consolidated statements of earnings, shareholders'
equity and cash flows for each year in the three-year period ended March 31,
2005. 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, 2005 and 2004
and the results of its operations and its cash flows for each year in the
three-year period ended March 31, 2005 in accordance with generally accepted
accounting principles in the United States.








*/s/
PricewaterhouseCoopers LLP*


PricewaterhouseCoopers
LLP


Chartered
Accountants





Toronto,
Canada


May 17,
2005











-2-








FIRSTSERVICE
CORPORATION


CONSOLIDATED
STATEMENTS OF EARNINGS


(in
thousands of US dollars, except per share amounts) - in accordance with
generally accepted accounting principles in the United States





For
      the years ended March 31
    
    **2005**
    
    2004
    
    2003Revenues
    
    **$**
    **812,290**
    
    $
    593,782
    
    $
    508,675Cost
      of revenues (exclusive of depreciation shown below)
    
    
    **526,623**
    
    
    408,327
    
    
    345,524Selling,
      general and administrative expenses (note 5)
    
    
    **206,904**
    
    
    130,934
    
    
    112,563Depreciation
    
    
    **15,320**
    
    
    12,824
    
    
    11,319Amortization
      of intangibles other than brokerage backlog
    
    
    **3,140**
    
    
    2,212
    
    
    1,837Amortization
      of brokerage backlog
    
    
    **8,735**
    
    
    -
    
    
    -**51,568**
    
    
    39,485
    
    
    37,432Other
      income, net (note 6)
    
    
    **(375**
    **)**
    
    (1,116
    )
    
    (1,106
    )Interest
      expense
    
    
    **11,019**
    
    
    7,900
    
    
    8,934Earnings
      before income taxes and minority interest
    
    
    **40,924**
    
    
    32,701
    
    
    29,604Income
      taxes (note 14)
    
    
    **11,338**
    
    
    9,815
    
    
    8,036Earnings
      before minority interest
    
    
    **29,586**
    
    
    22,886
    
    
    21,568Minority
      interest share of earnings
    
    
    **6,941**
    
    
    3,224
    
    
    3,115Net
      earnings from continuing operations
    
    
    **22,645**
    
    
    19,662
    
    
    18,453Net
      earnings (loss) from discontinued operations, net ofincometaxes
      (note 4)
    
    
    **562**
    
    
    (638
    )
    
    (13
    )Net
      earnings
    
    **$**
    **23,207**
    
    $
    19,024
    
    $
    18,440Net
      earnings (loss) per share (note 15)BasicContinuing operations
    
    **$**
    **0.76**
    
    $
    0.69
    
    $
    0.66Discontinued operations
    
    
    **0.02**
    
    
    (0.02
    )
    
    -**$**
    **0.78**
    
    $
    0.67
    
    $
    0.66DilutedContinuing operations
    
    **$**
    **0.72**
    
    $
    0.67
    
    $
    0.64Discontinued operations
    
    
    **0.02**
    
    
    (0.02
    )
    
    -**$**
    **0.74**
    
    $
    0.65
    
    $
    0.64





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























-3-





**FIRSTSERVICE
CORPORATION**


**CONSOLIDATED
BALANCE SHEETS**


(in
thousands of US dollars) - in accordance with generally accepted accounting
principles in the United States





As
      at March 31
    
    **2005**
    
    2004**Assets****Current
      assets**Cash and cash equivalents
    
    **$**
    **37,458**
    
    $
    15,620Accounts receivable, net of an allowance of $8,471 (2004 -
      $3,976)
    
    
    **168,927**
    
    
    97,367Income taxes recoverable
    
    
    **2,498**
    
    
    -Inventories (note 7)
    
    
    **20,878**
    
    
    15,229Prepaids and other (note 7)
    
    
    **12,591**
    
    
    15,659Deferred income taxes (note 14)
    
    
    **6,418**
    
    
    3,358**248,770**
    
    
    147,233Other
      receivables (note 8)
    
    
    **7,077**
    
    
    5,397Interest
      rate swaps (note 17)
    
    
    **283**
    
    
    6,805Fixed
      assets (note 9)
    
    
    **57,241**
    
    
    49,826Other
      assets (note 9)
    
    
    **6,402**
    
    
    2,829Deferred
      income taxes (note 14)
    
    
    **8,992**
    
    
    2,167Intangible
      assets (note 10)
    
    
    **61,423**
    
    
    37,717Goodwill
      (note 11)
    
    
    **236,540**
    
    
    185,579**377,958**
    
    
    290,320**$**
    **626,728**
    
    $
    437,553**Liabilities****Current
      liabilities**Accounts payable
    
    **$**
    **41,905**
    
    $
    20,526Accrued liabilities (note 7)
    
    
    **113,524**
    
    
    49,353Income taxes payable
    
    
    **3,673**
    
    
    1,985Unearned revenue
    
    
    **5,154**
    
    
    9,736Long-term debt - current (note 12)
    
    
    **18,206**
    
    
    3,502Deferred income taxes (note 14)
    
    
    **320**
    
    
    1,266**182,782**
    
    
    86,368Long-term
      debt - non-current (note 12)
    
    
    **201,809**
    
    
    160,386Deferred
      income taxes (note 14)
    
    
    **29,802**
    
    
    19,594Minority
      interest
    
    
    **26,464**
    
    
    16,104**258,075**
    
    
    196,084**Shareholders'
      equity**Capital stock (note 13)
    
    
    **73,542**
    
    
    68,557Issued and outstanding: 28,867,094 (2004 - 28,174,036) Subordinate Voting
      Shares and 1,325,694       (2004 - 1,325,694)
      convertible Multiple Voting Shares
    
    
    ****Contributed surplus (note 13)
    
    
    **805**
    
    
    183Receivables pursuant to share purchase plan (note 13)
    
    
    **(2,148**
    **)**
    
    (2,148
    )Retained earnings
    
    
    **103,011**
    
    
    81,972Cumulative other comprehensive earnings
    
    
    **10,661**
    
    
    6,537**185,871**
    
    
    155,101**$**
    **626,728**
    
    $
    437,553Commitments
      and contingencies (note 18)





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





On
behalf of the Board,





*/s/
      Jay S. Hennick*
    */s/
      Peter F. Cohen*Director
    Director









-4-








**FIRSTSERVICE
CORPORATION**


**CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY**


(in
thousands of US dollars) - in accordance with generally accepted accounting
principles in the United States





Issued
      and outstanding shares
      (note
      13)
    
    Capital
      stock
    
    Contributed
      surplus
    
    Receivables
      pursuant to share purchase plan
    
    Retained
      earnings
    
    Cumulative
      other comprehensive earnings (loss)
    
    Total
      shareholders' equityBalance,
      March 31, 2002
    
    
    27,550,530
    
    $
    57,712
    
    $
    -
    
    $
    (2,630
    )
    $
    44,765
    
    $
    (626
    )
    $
    99,221Comprehensive
      earnings:Net earnings
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    18,440
    
    
    -
    
    
    18,440Foreign currency translation adjustments
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    2,947
    
    
    2,947Comprehensive
      earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,387Subordinate
      Voting Shares:Stock options exercised
    
    
    843,250
    
    
    3,002
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    3,002Purchased for cancellation
    
    
    (65,400
    )
    
    (143
    )
    
    -
    
    
    -
    
    
    (257
    )
    
    -
    
    
    (400
    )Cash
      payments on share purchase plan
    
    
    -
    
    
    -
    
    
    -
    
    
    196
    
    
    -
    
    
    -
    
    
    196Balance,
      March 31, 2003
    
    
    28,328,380
    
    
    60,571
    
    
    -
    
    
    (2,434
    )
    
    62,948
    
    
    2,321
    
    
    123,406Comprehensive
      earnings:Net earnings
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    19,024
    
    
    -
    
    
    19,024Foreign currency translation adjustments
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    4,216
    
    
    4,216Comprehensive
      earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,240Subordinate
      Voting Shares:Stock option expense
    
    
    -
    
    
    -
    
    
    322
    
    
    -
    
    
    -
    
    
    -
    
    
    322Stock options exercised
    
    
    1,171,350
    
    
    7,986
    
    
    (139
    )
    
    -
    
    
    -
    
    
    -
    
    
    7,847Cash
      payments on share purchase plan
    
    
    -
    
    
    -
    
    
    -
    
    
    286
    
    
    -
    
    
    -
    
    
    286Balance,
      March 31, 2004
    
    
    29,499,730
    
    
    68,557
    
    
    183
    
    
    (2,148
    )
    
    81,972
    
    
    6,537
    
    
    155,101Comprehensive
      earnings:Net earnings
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    23,207
    
    
    -
    
    
    23,207Foreign currency translation adjustments (note 4)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    4,124
    
    
    4,124Comprehensive
      earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,331Subordinate
      Voting Shares:Stock option expense
    
    
    -
    
    
    -
    
    
    622
    
    
    -
    
    
    -
    
    
    -
    
    
    622Stock options exercised
    
    
    911,130
    
    
    5,515
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    5,515Purchased for cancellation
    
    
    (218,072
    )
    
    (530
    )
    
    -
    
    
    -
    
    
    (2,168
    )
    
    -
    
    
    (2,698
    )**Balance,
      March 31, 2005**
    
    
    **30,192,788**
    
    **$**
    **73,542**
    
    **$**
    **805**
    
    **$**
    **(2,148**
    **)**
    **$**
    **103,011**
    
    **$**
    **10,661**
    
    **$**
    **185,871**
 ****


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







-5-





**FIRSTSERVICE
CORPORATION**


**CONSOLIDATED
STATEMENTS OF CASH FLOWS**


(in
thousands of US dollars) - in accordance with generally accepted accounting
principles in the United States





For
      the years ended March 31
    
    **2005**
    
    2004
    
    2003**Cash
      provided by (used in)****Operating
      activities**Net
      earnings from continuing operations
    
    **$**
    **22,645**
    
    $
    19,662
    
    $
    18,453Items
      not affecting cash:Depreciation and amortization
    
    
    **27,195**
    
    
    15,036
    
    
    13,156Deferred income taxes
    
    
    **(5,287**
    **)**
    
    (683
    )
    
    2,786Minority interest share of earnings
    
    
    **6,941**
    
    
    3,224
    
    
    3,115Stock option expense
    
    
    **622**
    
    
    322
    
    
    -Other
    
    
    **341**
    
    
    (503
    )
    
    (287
    )Changes
      in operating assets and liabilities:Accounts receivable
    
    
    **(13,342**
    **)**
    
    (2,256
    )
    
    9,661Inventories
    
    
    **(6,425**
    **)**
    
    839
    
    
    (4,292
    )Prepaids and other
    
    
    **3,171**
    
    
    (1,069
    )
    
    (1,042
    )Accounts payable
    
    
    **(1,958**
    **)**
    
    (10,464
    )
    
    (355
    )Accrued liabilities
    
    
    **3,189**
    
    
    12,778
    
    
    (6,629
    )Income taxes payable
    
    
    **(1,028**
    **)**
    
    (1,670
    )
    
    (1,503
    )Unearned revenue
    
    
    **967**
    
    
    575
    
    
    (3,033
    )Net
      cash provided by operating activities
    
    
    **37,031**
    
    
    35,791
    
    
    30,030**Investing
      activities**Acquisitions
      of businesses, net of cash acquired
    
    
    **(56,869**
    **)**
    
    (16,019
    )
    
    (9,561
    )Purchases
      of minority shareholders' interests
    
    
    **(2,148**
    **)**
    
    (1,098
    )
    
    (6,352
    )Purchases
      of fixed assets
    
    
    **(17,028**
    **)**
    
    (13,121
    )
    
    (9,335
    )Purchases
      of intangible assets
    
    
    **(235**
    **)**
    
    (551
    )
    
    (579
    )Decrease
      (increase) in other assets
    
    
    **342**
    
    
    (163
    )
    
    2,069Decrease
      (increase) in other receivables
    
    
    **2,092**
    
    
    1,869
    
    
    (578
    )Net
      cash used in investing activities
    
    
    **(73,846**
    **)**
    
    (29,083
    )
    
    (24,336
    )**Financing
      activities**Increase
      in long-term debt
    
    
    **59,586**
    
    
    60,522
    
    
    14,474Repayment
      of long-term debt
    
    
    **(10,956**
    **)**
    
    (62,559
    )
    
    (28,683
    )Financing
      fees paid
    
    
    **(124**
    **)**
    
    (525
    )
    
    -Proceeds
      received on exercise of stock options
    
    
    **5,515**
    
    
    7,847
    
    
    3,002Repurchase
      of Subordinate Voting Shares
    
    
    **(2,698**
    **)**
    
    -
    
    
    (400
    )Collection
      of receivables pursuant to share purchase plan
    
    
    **-**
    
    
    286
    
    
    196Dividends
      paid to minority shareholders of subsidiaries
    
    
    **(606**
    **)**
    
    (510
    )
    
    (191
    )Net
      cash provided by (used in) financing activities
    
    
    **50,717**
    
    
    5,061
    
    
    (11,602
    )Net
      cash provided by (used in) discontinued operations
    
    
    **4,801**
    
    
    (1,052
    )
    
    1,110Effect
      of exchange rate changes on cash
    
    
    **3,135**
    
    
    (475
    )
    
    2,844Increase
      (decrease) in cash and cash equivalents during the year
    
    
    **21,838**
    
    
    10,242
    
    
    (1,954
    )Cash
      and cash equivalents, beginning of year
    
    
    **15,620**
    
    
    5,378
    
    
    7,332Cash
      and cash equivalents, end of year
    
    **$**
    **37,458**
    
    $
    15,620
    
    $
    5,378





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








-6-





NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(in
thousands of US dollars, except per share amounts) - in accordance with
generally accepted accounting principles in the United States





**1.**
    **Description
      of the business**FirstService
      Corporation (the "Company") is a provider of property and business
      services to commercial, institutional and residential customers in the
      United States, Canada and several other countries. The Company's
      operations are conducted through five segments: Residential Property
      Management, Commercial Real Estate Services, Integrated Security Services,
      Property Improvement Services (formerly known as Consumer Services) and
      Business Services.**2.**
    **Summary
      of significant accounting policies**The
      preparation of the financial statements in accordance with generally
      accepted accounting principles in the United States ("GAAP") requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements, and the reported
      amounts of revenues and expenses during the reporting period. The most
      significant estimates are related to goodwill, intangible assets and the
      collectibility of accounts receivable. Actual results could be materially
      different from these estimates. Significant accounting policies are
      summarized as follows:**Basis
      of consolidation**The
      consolidated financial statements include the accounts of the Company and
      its subsidiaries. Where the Company does not have a controlling interest
      but does exert significant influence, the equity method is used.
      Intercompany transactions and accounts are eliminated on
      consolidation.**Cash
      and cash equivalents**Cash
      equivalents consist of highly liquid investments, which are readily
      convertible into cash and have original maturities of three months or
      less.**Inventories**Inventories
      are carried at the lower of cost and net realizable value. Cost is
      determined by the weighted average or first-in, first-out methods. The
      weighted average and the first-in, first-out methods represent
      approximately 35% and 65% (2004 - 35% and 65%) of total inventories,
      respectively. Finished goods and work-in-progress include the cost of
      materials, direct labor and manufacturing overhead
  costs.**Fixed
      assets**Fixed
      assets are stated at cost less accumulated depreciation. The cost of
      additions and improvements are capitalized, while maintenance and repairs
      are expensed as incurred. Fixed assets are depreciated over their
      estimated useful lives as follows:Buildings
    5%
      declining balance and 20 to 40 years straight-lineVehicles
    3
      to 5 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-lineLeasehold
      improvements
    term
      of the leases to a maximum of 10 years





**Financial
      instruments**The
      Company uses interest rate swaps to hedge a portion of its interest rate
      exposure. The swaps, to which hedge accounting is applied, are carried at
      fair value on the consolidated balance sheets, with gains or losses
      recognized in earnings. The carrying value of the hedged debt is adjusted
      for changes in fair value attributable to the hedged
   -7-
   interest rate risk; the
      associated gain or loss is recognized currently in earnings. If swaps are
      terminated, the resulting gain or loss is deferred and recognized over the
      remaining life of the underlying debt. The Company uses foreign exchange
      contracts to fix its exposure to Canadian dollar expenses. These contracts
      are not accounted for as hedges. They are carried on the balance sheet at
      fair value and gains or losses are recognized in earnings.**Financing
      fees**Financing
      fees related to the revolving credit facility are amortized to interest
      expense on a straight-line basis over the term of the associated debt.
      Financing fees related to the Senior Secured Notes are amortized to
      interest expense using the effective interest method.**Goodwill
      and intangible assets**Goodwill
      and intangible assets are accounted for in accordance with Financial
      Accounting Standards Board ("FASB") Statement of Financial Accounting
      Standards ("SFAS") No. 141,*Business
      Combinations*,
      and SFAS No. 142,*Goodwill
      and Other Intangible Assets.*.
      Goodwill represents the excess of purchase price over the fair value of
      identifiable assets acquired in a business combination and is not subject
      to amortization.Intangible
      assets are recorded at cost and are amortized over their estimated useful
      lives as follows:





Brokerage
      backlog
    as
      underlying brokerage transactions are completedManagement
      contracts and other
    straight-line
      over life of contract ranging from 2 to 15 yearsCustomer
      lists and relationships
    straight-line
      over 2 to 25 yearsTrademarks
      and trade names:Indefinite
      life
    not
      amortizedAmortized
    straight-line
      over 25 to 35 yearsFranchise
      rights
    by
      pattern of use





The
      Company reviews the carrying value of finite life intangible assets for
      impairment whenever events and circumstances indicate that the carrying
      amount of an asset may not be recoverable from the estimated future cash
      flows expected to result from its use and eventual disposition. If the sum
      of the expected future cash flows is less than the carrying amount of the
      asset, an impairment loss is recognized. Measurement of the impairment
      loss is based on the excess of the carrying amount of the asset over the
      fair value calculated using discounted expected future cash
      flows.Goodwill
      and indefinite life intangible assets are tested for impairment annually
      or more frequently if events or changes in circumstances indicate the
      asset might be impaired, in which case the carrying amount of the asset is
      written down to fair value. Impairment of goodwill is tested at the
      reporting unit level by comparing the reporting unit's carrying amount,
      including goodwill, to the fair value of the reporting unit. The fair
      values of the reporting units are estimated using a discounted cash flow
      approach. If the carrying amount of the reporting unit exceeds its fair
      value, then a second step is performed to measure the amount of impairment
      loss, if any.**Revenue
      recognition and unearned revenue***(a)
      Real estate brokerage operations*Revenues
      from brokerage transactions are recognized when the related transaction is
      completed, normally the earlier of the closing date or occupancy, unless
      future contingencies exist. If contingencies exist, revenue recognition is
      deferred until the contingencies are
satisfied.









-8-





*(b)
      Service operations other than real estate brokerage*Revenues
      are recognized at the time the service is rendered or the product is
      shipped. Revenues from security systems installations or similar contracts
      in process are recognized on the percentage of completion method,
      generally in the ratio of actual costs to total estimated contract costs,
      unless the Company cannot reasonably estimate its gross margins in which
      case the completed contract method is used. Amounts received from
      customers in advance of services being provided are recorded as unearned
      revenue when received.*(c)
      Franchise operations*The
      Company operates several franchise systems within its Property Improvement
      Services segment. Initial franchise fees are recognized when all material
      services or conditions related to the sale of the franchise have been
      performed. Royalty revenues are recognized based on a percentage of
      franchisee revenues, as reported by the franchisees. Revenues from
      administrative and other support services, as applicable, are recognized
      as the services are provided.**Foreign
      currency translation**Assets
      and liabilities of the Company's subsidiary operations that are measured
      in a functional currency other than the US dollar are translated into US
      dollars at the exchange rates prevailing at year-end and revenues and
      expenses at the weighted average exchange rates for the year. Exchange
      gains and losses are included in earnings. Currency translation
      adjustments are included in other comprehensive
  earnings.**Income
      taxes**Income
      taxes have been provided using the asset and liability method whereby
      deferred tax assets and liabilities are recognized for the expected future
      income tax consequences of events that have been recognized in the
      financial statements or income tax returns. Deferred tax assets and
      liabilities are measured using enacted income tax rates expected to apply
      to taxable income in the years in which temporary differences are expected
      to be recovered or settled. The effect on deferred tax assets and
      liabilities of a change in income tax rates is recognized in earnings in
      the period in which the change occurs. A valuation allowance is recorded
      when there is uncertainty regarding realization of a deferred income tax
      asset.Income
      taxes are not provided on the unremitted earnings of US and foreign
      subsidiaries because it has been the practice and is the intention of the
      Company to reinvest these earnings indefinitely in these subsidiaries.**Stock-based
      compensation**Effective
      April 1, 2003, the Company began accounting for stock options as
      compensation expense in accordance with SFAS No. 123,*Accounting
      for Stock-Based Compensation*("SFAS 123"). SFAS No. 148,*Accounting
      for Stock-Based Compensation - Transition and Disclosure, an amendment of
      SFAS 123*("SFAS 148") provides alternative methods of transitioning to the fair
      value based method of accounting for employee stock options as
      compensation expense. The Company is using the "prospective method" of
      SFAS 148 and is expensing the fair value of new option grants awarded
      subsequent to March 31, 2003. Compensation expense is allocated to
      reporting periods using the graded attribution
approach.Prior
      to April 1, 2003, the Company applied Accounting Principles Board ("APB")
      Opinion No. 25,*Accounting
      for Stock Issued to Employees*("APB
      25"), and related interpretations in accounting for its stock option
      plans. No compensation expense was recognized when shares or stock options
      were issued to employees or directors. However, the Company






-9-





discloses pro forma
      earnings and earnings per share to reflect compensation costs in
      accordance with the methodology prescribed under SFAS 123.**3.**
    **Acquisitions***2005
      acquisitions:*The
      Company completed the acquisition of 71.8% of the shares of CMN
      International Inc. ("CMN") on November 30, 2004. CMN is a member of the
      Colliers International commercial real estate services network, with
      operations in the United States, Canada, Australia and twenty other
      countries. CMN is headquartered in Vancouver.The
      Company completed seven other business acquisitions in Residential
      Property Management and Property Improvement Services. The Company also
      purchased minority interests from four shareholders in Property
      Improvement Services.Details
      of the 2005 acquisitions are as follows:





**2005****CMN**
    
    **Aggregate
      other acquisitions**
    
    **Purchases
      of minority shareholders' interests**Current
      assets
    
    **$**
    **57,150**
    
    **$**
    **1,281**
    
    **$**
    **-**Long-term
      assets
    
    
    **16,807**
    
    
    **1,747**
    
    
    **-**Current
      liabilities
    
    
    **(83,644**
    **)**
    
    **(2,351**
    **)**
    
    **-**Long-term
      liabilities
    
    
    **(15,167**
    **)**
    
    **(2,604**
    **)**
    
    **-**Minority
      interest
    
    
    **(3,720**
    **)**
    
    **(89**
    **)**
    
    **272****(28,574**
    **)**
    
    **(2,016**
    **)**
    
    **272**Note
      consideration
    
    **$**
    **-**
    
    **$**
    **405**
    
    **$**
    **-**Cash
      consideration
    
    **$**
    **39,833**
    
    **$**
    **10,512**
    
    **$**
    **2,148**Acquired
      intangible assets
    
    
    **29,402**
    
    
    **6,289**
    
    
    **-**Acquired
      goodwill
    
    
    **39,005**
    
    
    **6,644**
    
    
    **1,876**Contingent
      consideration at date of acquisition
    
    **$**
    **-**
    
    **$**
    **3,759**
    
    **$**
    **-**





The
      purchase prices of acquisitions resulted in the recognition of goodwill.
      The primary factors contributing to goodwill are assembled workforces and
      future growth prospects.*2004
      acquisitions:*The
      Company completed six small acquisitions during the year. Four were
      completed in the Property Improvement Services segment in October 2003,
      one was completed in Residential Property Management in January 2004 and
      one was completed in Integrated Security Services in February
      2004.The
      Company purchased minority interests from two shareholders in the Business
      Services segment during the year.








-10-











Details
      of the 2004 acquisitions are as follows:





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
      intangible assets
    
    
    8,011
    
    
    -Acquired
      goodwill
    
    
    8,021
    
    
    424Contingent
      consideration at date of acquisition
    
    $
    6,002
    
    $
    -





*2003
      acquisitions:*The
      Company completed seven small acquisitions during the year, three in
      Consumer Services and two in each of Residential Property Management and
      Business Services, which collectively are shown in the Acquisitions column
      below.The
      Company also acquired minority interests from several shareholders in the
      Business Services, Residential Property Management and Integrated Security
      Services segments during the year.Details
      of the 2003 acquisitions are as follows:








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
      intangible assets
    
    
    2,226
    
    
    2,064Acquired
      goodwill
    
    
    4,765
    
    
    4,353Contingent
      consideration at date of acquisition
    
    $
    4,074
    
    $
    1,000







Certain
      vendors, at the time of acquisition, are entitled to receive contingent
      consideration if the acquired businesses achieve specified earnings levels
      during the two-
   -11-
   to five-year periods following the
      dates of acquisition. Such contingent consideration is issued at the
      expiration of the contingency period. As at March 31, 2005, there was
      contingent consideration outstanding of up to $14,200 ($16,200 as at March
      31, 2004). The contingencies will expire during the period extending to
      January 2009. The contingent consideration will be recorded when the
      contingencies are resolved and the consideration is issued or becomes
      issuable, at which time the Company will record the fair value of the
      consideration issued or issuable, including interest, if any, as
      additional costs of the acquired businesses. Contingent consideration
      issued or issuable during the year ended March 31, 2005 was $7,392 net of
      deferred income tax of $172 (2004 - $1,565, net of deferred income tax of
      $95).The
      acquisitions referred to above were accounted for by the purchase method
      of accounting for business combinations. Accordingly, the accompanying
      consolidated statements of earnings do not include any revenues or
      expenses related to these acquisitions prior to their respective closing
      dates. The cash portions of the consideration for the acquisitions were
      financed through available cash and borrowings from the Company's
      revolving credit facility. The goodwill acquired during 2005 is not
      deductible for income tax purposes.The
      Company has recognized liabilities in connection with business
      acquisitions regarding exiting activities of the acquired businesses and
      involuntary employee terminations. If the ultimate amount expended is less
      than the amount recorded as a liability, the excess is applied to reduce
      the cost of the acquired entity. If the ultimate amount expended is
      greater than the amount accrued, then the difference is expensed. The
      opening accrual as at March 31, 2004 and reduction of excess in the
      current year relate to costs to exit activities of a subsidiary of Herbert
      A. Watts Ltd., acquired in 2001. Regarding the 2005 liabilities,
      terminations affecting managerial employees of the acquired businesses are
      expected to be completed by December
2005.





Accrual
      as at March 31, 2004
    
    $
      1,719Add:
      liabilities recognized upon 2005 business acquisitions
    
    2,000Less:
      cash or other payments
    
    
    -Less:
      excess applied to reduce cost of acquired entity
    
    
    (690
    )Foreign
      exchange
    
    
    99Accrual
      as at March 31, 2005
    
    $
    3,128





Following
      are the Company's unaudited consolidated pro forma results assuming the
      2005 and 2004 acquisitions occurred on April 1 of the respective year of
      acquisition. The year immediately prior to the year of each respective
      acquisition also includes the pro forma results of the respective
      acquisitions.





(unaudited)
    
    **2005**
    
    2004Pro
      forma revenues
    
    **$**
    **998,123**
    
    $
    927,256Pro
      forma net earnings from continuing operations
    
    
    **24,100**
    
    
    19,986Pro
      forma net earnings per share from continuing operationsBasic
    
    **$**
    **0.81**
    
    $
    0.70Diluted
    
    
    **0.77**
    
    
    0.68





The
      pro forma results for each year include $10,626 ($6,801 net of income
      taxes) of brokerage backlog amortization expense related to the CMN
      acquisition. The brokerage backlog has a useful life of approximately 0.5
      years and therefore is a non-recurring item. These unaudited consolidated
      pro forma results have been prepared for comparative purposes only and do
      not purport to be indicative of results of operations that would have
      actually resulted had the combinations been in effect at the beginning of
      each year or of future results of
operations.








-12-





**4.**
    **Dispositions**On
      April 1, 2004, the Company sold substantially all of the assets of the
      lawn care operations carried on by its subsidiary Greenspace Services Ltd.
      to a third party. During the fourth quarter of fiscal 2005, the Company
      sold (i) substantially all of the assets of the South Florida concrete
      restoration operations carried on by its subsidiary Aqua-Shield Corp. to a
      third party and (ii) all of the shares of its subsidiary Stained Glass
      Overlay, Inc., a franchisor of decorative glass treatments, to an officer
      of that subsidiary.The
      aggregate proceeds on the dispositions were $15,555 comprised of cash of
      $5,389, notes receivable of $4,644, and assumption of liabilities by the
      purchasers of $5,522. The pre-tax gain on disposal was $2,695, less income
      taxes of $1,495, resulting in a net gain of $1,200. The net gain on
      disposal includes a gain of $1,578 related to cumulative foreign currency
      translation on Canadian dollars realized upon the disposal of the assets
      of Greenspace Services Ltd.For
      the years ended March 31, 2005, 2004 and 2003, the operating results of
      these operations are reported as discontinued operations. The lawn care
      and decorative glass treatment operations were previously included in the
      Property Improvement Services segment. The concrete restoration operations
      were previously included in the Residential Property Management segment.
      The operating results, balance sheets and cash flow information for the
      discontinued operations are as follows:





**Operating
      results for years ended March 31**
    
    **2005**
    
    2004
    
    2003Revenues
    
    **$**
    **13,164**
    
    $
    39,103
    
    $
    34,017Earnings
      (loss) from discontinued operations before income taxes
    
    
    **(1,126**
    **)**
    
    (1,162
    )
    
    200Provision
      for (recovery of) income taxes
    
    
    **(488**
    **)**
    
    (524
    )
    
    213Net
      loss from discontinued operations
    
    
    **(638**
    **)**
    
    (638
    )
    
    (13
    )Net
      gain on disposal
    
    
    **1,200**
    
    
    -
    
    
    -Net
      earnings (loss) from discontinued operations
    
    **$**
    **562**
    
    $
    (638
    )
    $
    (13
    )Net
      earnings (loss) per share from discontinued operationsBasic
    
    **$**
    **0.02**
    
    $
    (0.02
    )
    $
    -Diluted
    
    
    **0.02**
    
    
    (0.02
    )
    
    -


**Balance
      sheets as at March 31**
    
    
    **2005**
    
    
    2004Current
      assets
    
    **$**
    **7,246**
    
    $
    11,884Non-current
      assets
    
    
    **-**
    
    
    7,966Total
      assets
    
    **$**
    **7,246**
    
    $
    19,850Current
      liabilities
    
    **$**
    **1,286**
    
    $
    8,733Non-current
      liabilities
    
    
    **-**
    
    
    85Total
      liabilities
    
    **$**
    **1,286**
    
    $
    8,818







The
      balance sheet as at March 31, 2005 represents primarily accounts
      receivable and accounts payable related to a discontinued
      operation.





**Cash
      flow information for years ended March 31**
    
    **2005**
    
    2004
    
    2003Cash
      provided by (used in )Operating
      activities
    
    **$**
    **(590**
    **)**
    $
    (140
    )
    $
    2,523Investing
      activities
    
    
    **5,391**
    
    
    (1,496
    )
    
    (1,835
    )Financing
      activities
    
    
    **-**
    
    
    584
    
    
    422Net
      cash provided (used)
    
    **$**
    **4,801**
    
    $
    (1,052
    )
    $
    1,110








-13-





**5.**
    **Unusual
      item**During
      2003, the Company received $4,228 of executive life insurance proceeds
      upon the deaths of two senior management employees, one in the Business
      Services segment in the amount of $3,228 and one in Residential Property
      Management in the amount of $1,000. The amounts received were recorded as
      reductions of selling, general and administrative costs. No such proceeds
      were received in 2005 or 2004.**6.**
    **Other
      income**





**2005**
    
    2004
    
    2003Gain
      on foreign exchange contracts
    
    **$**
    **200**
    
    $
    219
    
    $
    -Earnings
      from equity investments
    
    
    **125**
    
    
    -
    
    
    -Dilution
      gains on sales of shares of subsidiaries
    
    
    **112**
    
    
    1,137
    
    
    1,106Disposal
      of security officer assets of Chicago Integrated Security Services
      branch
    
    
    **-**
    
    
    (240
    )
    
    -Loss
      on sale of equity investments
    
    
    **(62**
    **)**
    
    -
    
    
    -**$**
    **375**
    
    $
    1,116
    
    $
    1,106





**7.**
    **Components
      of working capital accounts**





**2005**
    
    2004**Inventories**Work-in-progress
    
    **$**
    **9,245**
    
    $
    8,888Finished goods
    
    
    **7,831**
    
    
    3,156Supplies and other
    
    
    **3,802**
    
    
    3,185**$**
    **20,878**
    
    $
    15,229
  **Prepaids
      and other**Insurance
    
    **$**
    **4,518**
    
    $
    3,259Security deposits
    
    
    **1,554**
    
    
    1,410Transportation
    
    
    **864**
    
    
    1,775Advertising
    
    
    **180**
    
    
    2,804Other
    
    
    **5,475**
    
    
    6,411**$**
    **12,591**
    
    $
    15,659**Accrued
      liabilities**Accrued payroll, commission and benefits
    
    **$**
    **66,281**
    
    $
    27,472Customer advances
    
    
    **15,667**
    
    
    13,617Liabilities recognized in connection with business acquisitions (note
      3)
    
    
    **3,128**
    
    
    1,719Accrued interest
    
    
    **2,528**
    
    
    2,015Deferred lease inducements
    
    
    **1,572**
    
    
    163Other
    
    
    **24,348**
    
    
    4,367**$**
    **113,524**
    
    $
    49,353





**8.**
    **Other
      receivables**





**2005**
    
    2004Secured
      interest-bearing notes due from purchasers of disposed
      subsidiaries
    
    **$**
    **4,611**
    
    $
    -Secured
      interest-bearing loans due from minority shareholders of
      subsidiaries
    
    
    **1,894**
    
    
    4,003Franchisee
      and customer receivables, certain of which are interest
      bearing
    
    
    **572**
    
    
    1,394**$**
    **7,077**
    
    $
    5,397






-14-





**9.**
    **Fixed
      assets and other assets**





Accumulated**2005**
    
    
    
    depreciation
      /
    
    **Net**Cost
    
    amortization
    
    **2005****Fixed
      assets**Land
    
    $
    2,303
    
    $
    -
    
    **$**
    **2,303**Buildings
    
    
    8,855
    
    
    1,813
    
    
    **7,042**Vehicles
    
    
    15,277
    
    
    8,794
    
    
    **6,483**Furniture
      and equipment
    
    
    57,795
    
    
    38,869
    
    
    **18,926**Computer
      equipment and software
    
    
    36,937
    
    
    22,943
    
    
    **13,994**Leasehold
      improvements
    
    
    15,892
    
    
    7,399
    
    
    **8,493**Total
    
    $
    137,059
    
    $
    79,818
    
    **$**
    **57,241****Other
      assets**Investments
    
    $
    4,652
    
    $
    -
    
    **$**
    **4,652**Financing
      fees
    
    
    4,115
    
    
    2,365
    
    
    **1,750**Total
    
    $
    8,767
    
    $
    2,365
    
    **$**
    **6,402**





Accumulated2004
    
    
    
    depreciation
      /
    
    NetCost
    
    amortization
    
    2004**Fixed
      assets**Land
    
    $
    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
    
    
    30,044
    
    
    16,233
    
    
    13,811Leasehold
      improvements
    
    
    12,820
    
    
    6,159
    
    
    6,661Total
    
    $
    113,803
    
    $
    63,977
    
    $
    49,826**Other
      assets**Investments
    
    $
    815
    
    $
    -
    
    $
    815Financing
      fees
    
    
    3,802
    
    
    1,788
    
    
    2,014Total
    
    $
    4,617
    
    $
    1,788
    
    $
    2,829





Included
      in fixed assets are vehicles and computer equipment under capital lease at
      a cost of $8,737 (2004 - $9,930) and net book value of $4,751 (2004 -
      $4,798).








-15-








**10.**
    **Intangible
      assets**





**2005**
    
    Gross
      carrying amount
    
    Accumulated
      amortization
    
    **Net**
      **2005**Customer
      lists and relationships
    
    $
    20,868
    
    $
    3,094
    
    **$**
    **17,774**Franchise
      rights
    
    
    20,940
    
    
    3,183
    
    
    **17,757**Trademarks
      and trade names:Indefinite life
    
    
    11,165
    
    
    -
    
    
    **11,165**Amortized
    
    
    12,517
    
    
    1,748
    
    
    **10,769**Management
      contracts and other
    
    
    3,357
    
    
    1,290
    
    
    **2,067**Brokerage
      backlog
    
    
    10,626
    
    
    8,735
    
    
    **1,891**$
    79,473
    
    $
    18,050
    
    **$**
    **61,423**





2004
    
    Gross
      carrying amount
    
    Accumulated
      amortization
    
    Net
      2004Customer
      lists and relationships
    
    $
    7,374
    
    $
    1,692
    
    $
    5,682Franchise
      rights
    
    
    20,698
    
    
    2,314
    
    
    18,384Trademarks
      and trade names:Amortized
    
    
    12,517
    
    
    1,367
    
    
    11,150Management
      contracts and other
    
    
    3,924
    
    
    1,423
    
    
    2,501$
    44,513
    
    $
    6,796
    
    $
    37,717





During
      the year ended March 31, 2005, the Company acquired the following
      intangible assets:





Amount
    
    Estimated
      weighted average amortization period in yearsCustomer
      lists and relationships
    
    $
    14,145
    
    
    11.6Trademarks
      and trade names
    
    
    11,165
    
    
    IndefiniteBrokerage
      backlog
    
    
    10,626
    
    
    0.5Franchise
      rights
    
    
    142
    
    
    14.0$
    36,078
    
    
    -





Trademarks
      and trade names related to the Colliers International brand were
      recognized upon the acquisition of CMN. The Company intends to continue to
      use this brand indefinitely. A brokerage backlog intangible asset was also
      recognized on the acquisition of CMN representing the fair value of the
      pipeline of pending commercial real estate brokerage transactions that
      existed at the acquisition date. This amount is being amortized to
      coincide with the expected completion dates of the underlying brokerage
      transactions.The
      following is the estimated annual amortization expense for each of the
      next five years ending March 31:





2006
    
    $
      5,5212007
    
    
    3,4452008
    
    
    3,3152009
    
    
    3,2682010
    
    
    3,133








-16-








**11.**
    **Goodwill**





Residential
      Property Management
    
    Commercial
      Real Estate Services
    
    Integrated
      Security Services
    
    Property
      Improvement Services
    
    Business
      Services
    
    ConsolidatedBalance,
      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
    
    
    185,579Goodwill
      resulting from adjustments to purchase price allocations
    
    
    831
    
    
    -
    
    
    25
    
    
    389
    
    
    (707
    )
    
    538Goodwill
      resulting from contingent acquisition payments
    
    
    1,628
    
    
    -
    
    
    1,966
    
    
    3,798
    
    
    -
    
    
    7,392Goodwill
      resulting from purchases of minority shareholders'
    interests
    
    
    -
    
    
    -
    
    
    -
    
    
    1,876
    
    
    -
    
    
    1,876Goodwill
      acquired during year
    
    
    5,727
    
    
    39,005
    
    
    -
    
    
    917
    
    
    -
    
    
    45,649Goodwill
      disposed during year
    
    
    (1,989
    )
    
    -
    
    
    -
    
    
    (4,435
    )
    
    -
    
    
    (6,424
    )Foreign
      exchange
    
    
    -
    
    
    (43
    )
    
    57
    
    
    -
    
    
    1,916
    
    
    1,930**Balance,
      March 31, 2005**
    
    **$**
    **69,666**
    
    **$**
    **38,962**
    
    **$**
    **29,686**
    
    **$**
    **41,003**
    
    **$**
    **57,223**
    
    **$**
    **236,540**





**12.**
    **Long-term
      debt**





**2005**
    
    2004Revolving
      credit facility
    
    **$**
    **59,374**
    
    $
    -8.06%
      Senior Secured Notes
    
    
    **100,000**
    
    
    100,0006.40%
      Senior Secured Notes
    
    
    **50,000**
    
    
    50,000Adjustment
      to Senior Secured Notes resulting from interest rate swaps (note
      17)
    
    
    **283**
    
    
    6,805Capital
      leases bearing interest ranging from 5% to 10%, maturing at various dates
      through 2010
    
    
    **3,948**
    
    
    4,128Other
      long-term debt bearing interest at 4% to 10%, maturing at various dates
      through 2010
    
    
    **6,410**
    
    
    2,955**220,015**
    
    
    163,888Less:
      current portion
    
    
    **18,206**
    
    
    3,502**$**
    **201,809**
    
    $
    160,386





As
      at March 31, 2005, US$34,325 and C$30,300 (US$25,049) was drawn on the
      revolving credit facility. The revolving credit facility was unused as at
      March 31, 2004. Included in capital leases at March 31, 2005 and 2004 are
      obligations in Canadian dollars of $41 (US$34) and $2,222 (US$1,694),
      respectively. Included in other long-term debt at March 31, 2005 and 2004
      are obligations in Canadian dollars of $1,737 (US$1,436) and $1,335
      (US$1,018), respectively.








-17-








As
      at March 31, 2005, the Company's amended and restated credit agreement
      provided a US$90,000 committed senior revolving credit facility renewable
      and extendible in 364-day increments, and if not renewed, a two year final
      maturity. The revolving credit facility bore interest at 1.50% to 3.00%
      over floating reference rates, depending on certain leverage ratios. The
      average interest rate during fiscal 2005 was 3.7% (2004 - 3.5%). At March
      31, 2005, the revolving credit facility had an outstanding balance of
      $59,374, had letters of credit committed in the amount of $10,632 and had
      $19,994 of available credit.On
      April 1, 2005, the Company entered into an amended and restated credit
      agreement with a syndicate of banks to provide a US$110,000 committed
      senior revolving credit facility with a three year term to replace the
      existing US$90,000 facility. The amended revolving credit facility bears
      interest at 1.00% to 2.25% over floating reference rates, depending on
      certain leverage ratios. The covenants remained substantially unchanged
      relative to the prior revolving credit facility agreement. On the same
      date, the Company completed a private placement of US$100,000 of 5.44%
      fixed rate Senior Secured Notes (the "5.44% Notes") with a group of US
      institutional investors. The 5.44% Notes have a final maturity of April 1,
      2015 with five equal annual principal repayments beginning on April 1,
      2011. The proceeds of the private placement were used to repay outstanding
      balances on the revolving credit facility. The revolving credit facility
      requires a commitment fee of 0.25% to 0.50% of the unused portion,
      depending on certain leverage ratios.The
      Company has outstanding US$100,000 of 8.06% fixed-rate Senior Secured
      Notes (the "8.06% Notes"). The 8.06% Notes have a final maturity of June
      29, 2011, with seven equal annual principal repayments beginning on June
      29, 2005. The Company also has outstanding US$50,000 of 6.40% fixed-rate
      Senior Secured Notes (the "6.40% Notes"). The 6.40% Notes have a final
      maturity of September 30, 2015 with four equal annual principal repayments
      commencing on September 30, 2012.The
      Company has indemnified the holders of the 8.06% Notes, 6.40% Notes and
      5.44% Notes (collectively, the "Notes") from all withholding taxes that
      are or may become applicable to any payments made by the Company on the
      Notes. The Company has interest rate swap agreements related to the Notes.
      See note 17 for information regarding hedge accounting.The
      revolving credit facility and the Notes rank equally in terms of
      seniority. The Company has granted these lenders collateral including the
      following: an interest in all of the assets of the Company including the
      shares of the Company's subsidiaries; an assignment of material contracts;
      and an assignment of the Company's "call rights" with respect to shares of
      the subsidiaries held by minority interests.The
      covenants and other limitations within the revolving credit facility and
      the Notes agreement are substantially the same. The covenants require the
      Company to maintain certain ratios including leverage, fixed charge
      coverage, interest coverage and net worth. The Company is prohibited from
      undertaking certain mergers, acquisitions and dispositions without prior
      approval.After
      giving effect to the April 1, 2005 financings, the estimated aggregate
      amount of principal repayments on long-term debt required in each of the
      next five fiscal years and thereafter to meet the retirement provisions
      are as follows:





2006
    
    $
    18,2062007
    
    
    16,8522008
    
    
    16,3892009
    
    
    15,4502010
    
    
    14,746Thereafter
    
    
    138,089








-18-








**13.**
    **Capital
      stock**The
      authorized capital stock of the Company is as follows:An
      unlimited number of preference shares, issuable in
  series;An
      unlimited number of Subordinate Voting Shares having one vote per share;
      andAn
      unlimited number of Multiple Voting Shares having 20 votes per share,
      convertible at any time into Subordinate Voting Shares at a rate of one
      Subordinate Voting Share for each Multiple Voting Share
      outstanding.The
      following table provides a summary of total capital
  stock:





*Subordinate
      Voting Shares*
    
    *Multiple
      Voting Shares*
    
    Total
    
    TotalNumber
    
    Amount
    
    Number
    
    Amount
    
    number
    
    amountBalance,
      March 31, 2003
    
    
    27,002,686
    
    $
    60,198
    
    
    1,325,694
    
    $
    373
    
    
    28,328,380
    
    $
    60,571Balance,
      March 31, 2004
    
    
    28,174,036
    
    
    68,184
    
    
    1,325,694
    
    
    373
    
    
    29,499,730
    
    
    68,557**Balance,
      March 31, 2005**
    
    
    **28,867,094**
    
    
    **73,169**
    
    
    **1,325,694**
    
    
    **373**
    
    
    **30,192,788**
    
    
    **73,542**





On
      December 15, 2004, the Company completed a 2 for 1 stock split effected in
      the form of a stock dividend. All stock balances for all periods presented
      have been retroactively adjusted to reflect the stock
    split.In
      February 2004, the Company approved a long-term incentive plan ("LTIP")
      for the Chief Executive Officer ("CEO"). Under the LTIP, the CEO is
      entitled to receive a payment upon the arm's length sale of control of the
      Company or upon a distribution of the Company's assets to shareholders.
      The payment amount is determined with reference to the price per
      Subordinate Voting Share received by shareholders upon an arm's length
      sale or upon a distribution of assets. The right to receive the payment
      may be transferred among members of the CEO's family, their holding
      companies and trusts.The
      Company's contributed surplus account relates to stock option compensation
      expense accounting under SFAS 123. Contributed surplus is credited at the
      time stock option compensation expense is recorded. As stock options are
      exercised, contributed surplus is reduced and capital stock is
      credited.During
      the year ended March 31, 2005, the Company repurchased 218,072 (2004 - nil
      and 2003 - 65,400) Subordinate Voting Shares under a Normal Course Issuer
      Bid filed with the Toronto Stock Exchange, which allowed the Company to
      repurchase up to 5% of its outstanding shares on the open market during a
      twelve-month period.The
      Company has $2,148 (C$3,034) (2004 - $2,148 (C$3,034)) of interest bearing
      loans receivable related to the purchase of 730,000 Subordinate Voting
      Shares (2004 - 730,000 shares). The loans, which are collateralized by the
      shares issued, have a ten-year term from the grant date; however, they are
      open for repayment at any time. The maturities of these loans are as
      follows, for the years ending March 31.





2006
    
    $
      -2007
    
    9162008
    
    
    4672009
    
    
    765$
    2,148








-19-








The
      Company has a stock option plan for certain officers and key full-time
      employees of the Company and its subsidiaries. Options are granted at the
      market price for the underlying shares on the date of grant. Each option
      vests over a four-year term and expires five years from the date granted
      and allows for the purchase of one Subordinate Voting Share. Options are
      exercisable in either US or Canadian dollars. At March 31, 2005, there
      were 1,844,000 options outstanding to 41 individuals at prices ranging
      from $6.00 to $17.29 (C$9.10 to C$21.40) per share, expiring on various
      dates through 2010. As at March 31, 2005, there were 333,500 options
      available for future grants.The
      number of Subordinate Voting Shares issuable under options and the average
      option prices per share are as follows:





*Shares
      issuable under options*
    
    *Weighted
      average price per share (US$)***2005**
    
    2004
    
    2003
    
    **2005**
    
    2004
    
    2003Shares
      issuable under options - Beginning of year
    
    
    **2,288,630**
    
    
    3,565,980
    
    
    4,238,230
    
    **$**
    **8.01**
    
    $
    7.98
    
    $
    6.60Granted
    
    
    **496,500**
    
    
    266,000
    
    
    203,000
    
    
    **13.63**
    
    
    8.00
    
    
    7.79Exercised
      for cash
    
    
    **(911,130**
    **)**
    
    (1,171,350
    )
    
    (843,250
    )
    
    **6.42**
    
    
    6.27
    
    
    3.71Expired
      or forfeited
    
    
    **(30,000**
    **)**
    
    (372,000
    )
    
    (32,000
    )
    
    **10.43**
    
    
    11.83
    
    
    9.50Shares
      issuable under options - End of year
    
    
    **1,844,000**
    
    
    2,288,630
    
    
    3,565,980
    
    **$**
    **10.83**
    
    $
    8.01
    
    $
    7.98Options
      exercisable - End of year
    
    
    **915,500**
    
    
    1,335,866
    
    
    1,753,012





*Weighted
      average price per share (C$)***2005**
    
    2004
    
    2003Shares
      issuable under options - Beginning of year
    
    **$**
    **11.96**
    
    $
    11.71
    
    $
    10.53Granted
    
    
    **19.28**
    
    
    11.95
    
    
    12.07Exercised
      for cash
    
    
    **9.08**
    
    
    9.37
    
    
    5.74Expired
      or forfeited
    
    
    **14.75**
    
    
    17.67
    
    
    14.72Shares
      issuable under options - End of year
    
    **$**
    **15.31**
    
    $
    11.96
    
    $
    11.71





The
      options outstanding as at March 31, 2005 to purchase Subordinate Voting
      Shares are as follows:





*Options
      outstanding*
    
    *Options
      exercisable*Range
      of exercise prices (US$)
    
    Number
      outstanding
    
    Weighted
      average remaining contractual life (years)
    
    Weighted
      average exercise price
      (US$)
    
    Number
      exercisable
    
    Weighted
      average exercise price
      (US$)$6.00
      - $7.85
    
    
    639,500
    
    
    1.82
    
    $
    6.93
    
    
    449,750
    
    $
    7.05$9.82
      - $11.02
    
    
    475,000
    
    
    3.83
    
    
    11.36
    
    
    124,000
    
    
    11.28$11.57
      - $17.29
    
    
    729,500
    
    
    3.41
    
    
    13.98
    
    
    341,750
    
    
    13.341,844,000
    
    
    2.91
    
    $
    10.83
    
    
    915,500
    
    $
    10.12





*Options
      outstanding*
    
    *Options
      exercisable*Range
      of exercise prices (C$)
    
    Number
      outstanding
    
    Weighted
      average remaining contractual life (years)
    
    Weighted
      average exercise price
      (C$)
    
    Number
      exercisable
    
    Weighted
      average exercise price
      (C$)$9.10
      - $12.50
    
    
    639,500
    
    
    1.82
    
    $
    10.65
    
    
    449,750
    
    $
    10.82$12.91
      - $17.70
    
    
    475,000
    
    
    3.83
    
    
    15.02
    
    
    124,000
    
    
    14.91$18.44
      - $21.40
    
    
    729,500
    
    
    3.41
    
    
    19.58
    
    
    341,750
    
    
    18.691,844,000
    
    
    2.91
    
    $
    15.31
    
    
    915,500
    
    $
    14.31








-20-








Prior
      to April 1, 2003, the Company had accounted for stock options under the
      intrinsic value method under APB 25. Had compensation expense for stock
      options been determined under the fair value method under SFAS 123 for all
      periods, pro forma reported net earnings and earnings per share would
      reflect the following:





**2005**
    
    2004
    
    2003Net
      earnings as reported
    
    **$**
    **23,207**
    
    $
    19,024
    
    $
    18,440Deduct:
      Stock-based compensation expense determined under fair value method, net
      of income taxes
    
    
    **(1,826**
    **)**
    
    (2,158
    )
    
    (2,179
    )Pro
      forma net earnings
    
    **$**
    **21,381**
    
    $
    16,866
    
    $
    16,261Pro
      forma net earnings per share:Basic
    
    **$**
    **0.72**
    
    $
    0.59
    
    $
    0.59Diluted
    
    
    **0.68**
    
    
    0.58
    
    
    0.56Reported
      net earnings per share:Basic
    
    **$**
    **0.78**
    
    $
    0.67
    
    $
    0.66Diluted
    
    
    **0.74**
    
    
    0.65
    
    
    0.64Assumptions:Risk-free interest rate
    
    
    **3.2**
    **%**
    
    3.0
    %
    
    4.5
    %Expected life in years
    
    
    **4.4**
    
    
    4.4
    
    
    4.4Volatility
    
    
    **30**
    **%**
    
    30
    %
    
    30
    %Dividend yield
    
    
    **0.0**
    **%**
    
    0.0
    %
    
    0.0
    %





The
      weighted average fair values of options granted in 2005, 2004 and 2003
      were $4.85 (C$6.20), $2.66 (C$3.59) and $2.55 (C$3.95) per share,
      respectively.The
      Company has stock option plans at several of its subsidiaries. The impact
      of potential dilution from these plans is reflected in the Company's
      diluted earnings per share (note 15).**14.**
    **Income
      taxes**Income
      taxes differ from the amounts that would be obtained by applying the
      statutory rate to the respective years' earnings before taxes. These
      differences result from the following
items:





**2005**
    
    2004
    
    2003Income
      tax expense using combined statutory rate of approximately 40%
      (2004- 40%; 2003 - 40%)
    
    **$**
    **16,370**
    
    $
    13,080
    
    $
    11,842Non-deductible
      expenses
    
    
    **565**
    
    
    576
    
    
    735Non-taxable
      proceeds of life insurance policies
    
    
    **-**
    
    
    -
    
    
    (1,691
    )Reduction
      in tax liability of prior years
    
    
    **(1,133**
    **)**
    
    -
    
    
    -Foreign
      tax rate reduction
    
    
    **(4,464**
    **)**
    
    (3,841
    )
    
    (2,850
    )Provision
      for income taxes as reported
    
    **$**
    **11,338**
    
    $
    9,815
    
    $
    8,036





Earnings
      before income taxes and minority interest by tax jurisdiction comprise the
      following:





**2005**
    
    2004
    
    2003Canada
    
    **$**
    **14,630**
    
    $
    14,282
    
    $
    13,659United
      States
    
    
    **23,466**
    
    
    18,419
    
    
    15,945Foreign
    
    
    **2,828**
    
    
    -
    
    
    -Total
    
    **$**
    **40,924**
    
    $
    32,701
    
    $
    29,604








-21-








The
      provision for income taxes comprises the
following:





**2005**
    
    2004
    
    2003CurrentCanada
    
    **$**
    **6,932**
    
    $
    3,584
    
    $
    1,376United States
    
    
    **8,479**
    
    
    6,043
    
    
    5,352Foreign
    
    
    **834**
    
    
    -
    
    
    -**16,245**
    
    
    9,627
    
    
    6,728DeferredCanada
    
    
    **(2,890**
    **)**
    
    165
    
    
    611United States
    
    
    **(2,017**
    **)**
    
    23
    
    
    697Foreign
    
    
    **-**
    
    
    -
    
    
    -**(4,907**
    **)**
    
    188
    
    
    1,308Total
    
    **$**
    **11,338**
    
    $
    9,815
    
    $
    8,036





The
      significant components of deferred income taxes are as
      follows:





**2005**
    
    2004Deferred
      income tax assetsExpenses not currently deductible
    
    **$**
    **4,282**
    
    $
    553Provision for doubtful accounts
    
    
    **2,136**
    
    
    128Inventory and other reserves
    
    
    **-**
    
    
    24Loss carry-forwards
    
    
    **8,992**
    
    
    4,820**15,410**
    
    
    5,525Deferred
      income tax liabilitiesDepreciation and amortization
    
    
    **29,695**
    
    
    20,219Prepaid and other expenses deducted for tax purposes
    
    
    **320**
    
    
    560Financing fees
    
    
    **107**
    
    
    81**30,122**
    
    
    20,860Net
      deferred income tax liability
    
    **$**
    **14,712**
    
    $
    15,335





As
      at March 31, 2005, the Company had US and Canadian net operating loss
      carry-forward balances of approximately $21,423 and $1,326, respectively.
      These amounts are available to reduce future federal, state and provincial
      income taxes. Net operating loss carry-forward balances attributable to
      the US expire over the next twenty years while net operating losses
      attributable to Canada expire over the next seven years. Foreign net
      operating loss carry-forward balances of approximately $25,906 were
      acquired with the CMN acquisition. The benefit of the foreign balances has
      not been recorded in these consolidated financial statements, but would be
      recorded as an adjustment to the CMN purchase price if
      realized.Cumulative
      undistributed earnings of US and foreign subsidiaries approximated $62,820
      as at March 31, 2005 (2004 - $50,087).**15.**
    **Earnings
      per share**Earnings
      per share information for all periods presented has been retroactively
      adjusted to reflect the 2 for 1 stock split that occurred on December 15,
      2004.








-22-








The
      following table reconciles the numerators used to calculate diluted
      earnings per share:





**2005**
    
    2004
    
    2003Net
      earnings from continuing operations
    
    **$**
    **22,645**
    
    $
    19,662
    
    $
    18,453Dilution
      of net earnings resulting from assumed exercise of stock options in
      subsidiaries
    
    
    **(569**
    **)**
    
    -
    
    
    -Net
      earnings from continuing operations for diluted earnings per share
      calculation purposes
    
    **$**
    **22,076**
    
    $
    19,662
    
    $
    18,453Net
      earnings
    
    **$**
    **23,207**
    
    $
    19,024
    
    $
    18,440Dilution
      of net earnings resulting from assumed exercise of stock options in
      subsidiaries
    
    
    **(569**
    **)**
    
    -
    
    
    -Net
      earnings for diluted earnings per share calculation
    purposes
    
    **$**
    **22,638**
    
    $
    19,024
    
    $
    18,440





The
      following table reconciles the denominators used to calculate earnings per
      share:





**2005**
    
    2004
    
    2003Shares
      issued and outstanding at beginning of year
    
    
    **29,499,730**
    
    
    28,328,380
    
    
    27,550,530Weighted
      average number of shares:Issued during the year
    
    
    **381,309**
    
    
    241,324
    
    
    296,282Repurchased during the year
    
    
    **(103,665**
    **)**
    
    -
    
    
    (4,692
    )Weighted
      average number of shares used in computing basic earnings per
      share
    
    
    **29,777,374**
    
    
    28,569,704
    
    
    27,842,120Assumed
      exercise of stock options, net of shares assumed acquired under the
      Treasury Stock Method
    
    
    **689,597**
    
    
    621,952
    
    
    1,152,970Number
      of shares used in computing diluted earnings per share
    
    
    **30,466,971**
    
    
    29,191,656
    
    
    28,995,090





**16.**
    **Other
      supplemental information**





**2005**
    
    2004
    
    2003**Products
      and services segmentation**RevenuesProducts
    
    **$**
    **142,371**
    
    $
    108,983
    
    $
    96,219Services
    
    
    **669,919**
    
    
    484,799
    
    
    412,456Total
    
    
    **812,290**
    
    
    593,782
    
    
    508,675Cost
      of revenuesProducts
    
    **$**
    **86,215**
    
    $
    67,722
    
    $
    57,633Services
    
    
    **440,408**
    
    
    340,605
    
    
    287,891Total
    
    
    **526,623**
    
    
    408,327
    
    
    345,524**Franchised
      operations**Revenues
    
    **$**
    **79,541**
    
    $
    64,947
    
    $
    57,497Operating
      earnings
    
    
    **15,574**
    
    
    11,369
    
    
    11,121Initial
      franchise fee revenues
    
    
    **3,459**
    
    
    4,467
    
    
    3,822**Cash
      payments made during the year**Income
      taxes
    
    **$**
    **16,854**
    
    $
    13,388
    
    $
    7,667Interest
    
    
    **11,073**
    
    
    5,156
    
    
    7,916**Non-cash
      financing activities**Increases
      in capital lease obligations
    
    **$**
    **1,986**
    
    $
    1,352
    
    $
    1,565**Other
      expenses**Rent
      expense
    
    **$**
    **26,340**
    
    $
    15,679
    
    $
    14,280








-23-








**17.**
    **Financial
      instruments****Concentration
      of credit risk**The
      Company is subject to credit risk with respect to its accounts receivable,
      other receivables, interest rate swaps and foreign exchange contracts.
      Concentrations of credit risk with respect to the receivables are limited
      due to the large number of entities comprising the Company's customer base
      and their dispersion across many different service lines in several
      countries. The counterparties to the interest rate swaps and foreign
      exchange contracts are investment-grade financial institutions that the
      Company anticipates will satisfy their obligations under the contracts.**Interest
      rate risk**The
      Company maintains an interest rate risk management strategy that uses
      interest rate swaps to lower the long-term cost of borrowed funds. The
      Company's specific goals are to (i) manage interest rate sensitivity by
      modifying the characteristics of its debt and (ii) lower the long-term
      cost of its borrowed funds. Fluctuations in interest rates create an
      unrealized appreciation or depreciation in the market value of the
      Company's fixed-rate debt when that fair value is compared with the cost
      of the borrowed funds. The effect of this unrealized appreciation or
      depreciation in market value, however, will generally be offset by the
      gain or loss on the interest rate swaps that are linked to the
      debt.As
      at March 31, 2005, the Company had interest rate swap agreements to
      exchange the fixed rates on a portion of the Notes for variable rates. On
      the 8.06% Notes, one interest rate swap exchanged the fixed rate on
      $75,000 of principal for LIBOR + 250.5 basis points and a second exchanged
      the fixed rate on $25,000 for LIBOR + 445 basis points. The terms of the
      swaps match the term of the 8.06% Notes with a maturity of June 29, 2011.
      On the 6.40% Notes, the Company had an interest rate swap agreement to
      exchange the fixed rate on $20,000 of principal for a variable rate of
      LIBOR + 170 basis points. The term of the swap matches the term of the
      6.40% Notes with a maturity of September 30, 2015.In
      December 2004, the Company settled a swap on $30,000 of principal on the
      6.40% Notes at a cost of $nil. After the end of the fiscal year, in May
      2005, the Company settled the swap on $20,000 of principal on the 6.40%
      Notes for a net loss of $48. The loss will be deferred and amortized over
      the remaining life of the underlying debt.The
      swaps are being accounted for as fair value hedges in accordance with SFAS
      No. 133,*Accounting
      for Derivative Instruments and Hedging Activities.*The swaps are carried at fair value on the consolidated balance sheets,
      with gains or losses recognized in earnings. The carrying value of the
      hedged debt is adjusted for changes in fair value of the swaps; the
      associated gain or loss is recognized currently in earnings. The fair
      values of the swaps are determined based on the present value of the
      estimated future net cash flows using implied rates in the applicable
      yield curve as of the valuation date. Due to changes in the yield curve,
      the fair value of the swaps fluctuates and, as at March 31, 2005, the fair
      values represented a gain of $283 (2004 -
$6,805).





-24-








**Foreign
      exchange risk**The
      Company from time to time uses foreign exchange contracts to fix Canadian
      dollar expenses relative to US dollar revenues. As at March 31, 2005,
      eight such contracts were open, with maturities extending to March 30,
      2006. Details are summarized below.





Buy
      currency
    
    
    Canadian
      dollarsSell
      currency
    
    
    US
      dollarsNotional
      value
    
    $
    8,000Weighted
      average exchange rate
    
    
    1.2356Gain
      included in earnings
    
    $
    200





**Fair
      values of financial instruments**The carrying
      amounts for cash and cash equivalents, accounts receivable, accounts
      payable and accrued liabilities approximate fair values due to the short
      maturity of these instruments, unless otherwise indicated. The following
      are estimates of the fair values for other financial
      instruments:





**2005**
    
    2004**Carrying**
      **amount**
    
    **Fair
      value**
    
    Carrying
      amount
    
    Fair
      valueOther
      receivables
    
    **$**
    **7,077**
    
    **$**
    **7,067**
    
    $
    5,397
    
    $
    5,379Long-term
      debt
    
    
    **219,732**
    
    
    **236,491**
    
    
    157,083
    
    
    175,085Interest
      rate swaps
    
    
    **283**
    
    
    **283**
    
    
    6,805
    
    
    6,805Foreign
      exchange contracts
    
    
    **200**
    
    
    **200**
    
    
    219
    
    
    219








**18.**
    **Commitments
      and contingencies****(a)**
    **Lease
      commitments**Minimum
      operating lease payments are as follows:





Year
      ending March 312006
    
    $
    31,5032007
    
    
    26,4492008
    
    
    22,4362009
    
    
    18,2932010
    
    
    14,126Thereafter
    
    
    50,716





**(b)**
    **Shareholder
      agreements**The
      Company has shareholder agreements with the minority owners of its
      subsidiaries. These agreements allow the Company to "call" the minority
      position at fair value determined with the use of a formula price, which
      is usually equal to a multiple of average net earnings before
      extraordinary items, minority interest share of earnings, income taxes,
      interest, depreciation, and amortization for a defined period. The
      minority owners may also "put" their interest to the Company at the same
      price subject to certain limitations. The purchase price may, at the
      option of the Company, be paid primarily in Subordinate Voting Shares.
      Acquisitions of these minority interests, if any, would be accounted for
      using the purchase method. The total obligation if all call or put options
      were exercised as at March 31, 2005 was approximately $70,000 (2004 -
      $30,000). Approximately $25,000 of the increase between fiscal 2004 and
      fiscal 2005 is attributable to the current year's
      acquisitions.





**(c)**
    **Contingencies**In
      the normal course of operations, the Company is subject to routine claims
      and litigation incidental to its business. Litigation currently pending or
      threatened against the Company





-25-








includes
      disputes with former employees and commercial liability claims related to
      services provided by the Company. The Company believes resolution of such
      proceedings, combined with amounts set aside, will not have a material
      impact on the Company's financial condition or the results of
      operations.**19.**
    **Related
      party transactions**During
      the year, the Company paid $530 (2004 - $544; 2003 - $847) in rent to
      entities in which an officer of the Company has equity interests. In
      addition, the Company paid $746 (2004 - $514; 2003 - $853) in rent to
      entities controlled by minority shareholders of subsidiaries. The
      transactions were completed at market rates.**20.**
    **Segmented
      information***Operating
      segments*The
      Company has five reportable operating segments. The segments are grouped
      with reference to the types of services provided and the types of clients
      that use those services. The Company assesses each segment's performance
      based on operating earnings or operating earnings before depreciation and
      amortization. Residential Property Management provides property
      management, maintenance, landscaping and other services to residential
      community associations in the United States. Commercial Real Estate
      Services provides brokerage and advisory services to clients in North
      America, Australia and several other countries. Integrated Security
      Services provides security systems installation, maintenance, monitoring
      and manpower to primarily commercial customers in Canada and the United
      States. Property Improvement Services provides franchised and
      Company-owned property services to customers in the United States and
      Canada. Business Services provides marketing support and business process
      outsourcing services to corporate and institutional clients in Canada and
      the United States. Corporate includes the costs of operating the Company's
      headquarters.Included
      in total assets of the Commercial Real Estate Services segment is $3,797
      (2004 and 2003 - nil) of investments in subsidiaries accounted for under
      the equity method.





**2005**
    
    Residential
      Property Management
    
    Commercial
      Real Estate Services
    
    Integrated
      Security Services
    
    Property
      Improvement Services
    
    Business
      Services
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    275,229
    
    $
    120,535
    
    $
    143,160
    
    $
    111,779
    
    $
    160,914
    
    $
    673
    
    $
    812,290Depreciation
      and amortization
    
    
    5,170
    
    
    9,868
    
    
    2,819
    
    
    3,071
    
    
    6,088
    
    
    179
    
    
    27,195Operating
      earnings
    
    
    18,917
    
    
    1,276
    
    
    7,468
    
    
    16,796
    
    
    16,262
    
    
    (9,151
    )
    
    51,568Other
      income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375Interest
      expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,019
    )Income
      taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,338
    )Minority
      interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,941
    )Net
      earnings from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,645Net
      earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562Net
      earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,207Total
      assets
    
    
    150,080
    
    
    100,634
    
    
    86,598
    
    
    107,063
    
    
    170,293
    
    
    12,060
    
    
    626,728Total
      additions to long-lived assets
    
    
    21,412
    
    
    77,255
    
    
    3,684
    
    
    10,437
    
    
    3,462
    
    
    357
    
    
    116,607











-26-








2004
    
    Residential
      Property Management
    
    Commercial
      Real Estate Services
    
    Integrated
      Security Services
    
    Property
      Improvement Services
    
    Business
      Services
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    228,790
    
    $
    -
    
    $
    122,748
    
    $
    89,361
    
    $
    152,449
    
    $
    434
    
    $
    593,782Depreciation
      and amortization
    
    
    4,219
    
    
    -
    
    
    1,948
    
    
    2,270
    
    
    6,450
    
    
    149
    
    
    15,036Operating
      earnings
    
    
    15,515
    
    
    -
    
    
    6,481
    
    
    12,669
    
    
    11,852
    
    
    (7,032
    )
    
    39,485Other
      income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,116Interest
      expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,900
    )Income
      taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,815
    )Minority
      interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,224
    )Net
      earnings from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,662Net
      loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (638
    )Net
      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
    
    Commercial
      Real Estate Services
    
    Integrated
      Security Services
    
    Property
      Improvement Services
    
    Business
      Services
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    203,515
    
    $
    -
    
    $
    107,548
    
    $
    70,850
    
    $
    126,373
    
    $
    389
    
    $
    508,675Depreciation
      and amortization
    
    
    4,009
    
    
    -
    
    
    1,502
    
    
    1,875
    
    
    5,620
    
    
    150
    
    
    13,156Operating
      earnings
    
    
    11,196
    
    
    -
    
    
    5,834
    
    
    11,227
    
    
    14,153
    
    
    (4,978
    )
    
    37,432Other
      income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,106Interest
      expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,934
    )Income
      taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,036
    )Minority
      interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,115
    )Net
      earnings from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,453Net
      loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Net
      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








-27-








*Geographic
      information*Revenues
      in each geographic segment are reported by customer location. Amounts
      reported in geographic regions other than the United States and Canada are
      primarily denominated in Australian and US
dollars.





**2005**
    
    2004
    
    2003**United
      State****s**Revenues
    
    **$**
    **525,035**
    
    $
    418,789
    
    $
    359,105Total
      long-lived assets
    
    
    **244,447**
    
    
    204,715
    
    
    182,941**Canada**Revenues
    
    **$**
    **241,905**
    
    $
    174,993
    
    $
    149,570Total
      long-lived assets
    
    
    **85,009**
    
    
    68,408
    
    
    68,710





**Other**Revenues
    
    **$**
    **45,350**
    
    $
    -
    
    $
    -Total
      long-lived assets
    
    
    **25,748**
    
    
    -
    
    
    -


**Consolidated**Revenues
    
    **$**
    **812,290**
    
    $
    593,782
    
    $
    508,675Total
      long-lived assets
    
    **$**
    **355,204**
    
    $
    273,123
    
    $
    251,651








**21.**
    **Impact
      of recently issued accounting standards**SFAS
      No. 151,*Inventory
      Costs - an amendment of ARB No. 43, Chapter 4*was issued in November 2004 and is effective for the Company's fiscal year
      beginning on April 1, 2006. This standard deals with recognizing certain
      inventory-related costs as current period expenses. The Company is
      currently evaluating the impact of this new accounting
      standard.SFAS
      No. 123 (revised 2004),*Share-Based
      Payment*was issued in December 2004 and is effective for the Company's fiscal year
      beginning on April 1, 2006. This standard deals with the expensing of
      stock-based compensation. The Company is currently evaluating the impact
      of this new accounting standard.SFAS
      No. 153,*Exchanges
      of Nonmonetary Assets - an amendment of APB Opinion No.
      29*was issued in December 2004 and is effective for the Company's fiscal year
      beginning on April 1, 2006. This standard amends certain exceptions where
      the measurement amount of nonmonetary assets exchanged is other than fair
      value. The Company is currently evaluating the impact of this new
      accounting standard.**22.**
    **Reconciliation
      to Canadian GAAP**The
      following adjustments are required to reconcile these consolidated
      financial statements to Canadian generally accepted accounting
      principles:(i)
    *Deficit
      elimination*.
      On September 15, 1997, the shareholders of the Company approved a
      reduction of the stated capital attributable to the Company's capital
      stock by $5,683, thereby eliminating the Company's





-28-








deficit
      as at March 31, 1997. While permitted under Canadian GAAP, this
      elimination is not permitted under United States GAAP.(ii)
    *Currency
      translation adjustments*.
      Under United States GAAP, currency translation and certain other
      transactions must be reported in an equity account called "other
      comprehensive earnings". Under Canadian GAAP, such an account does not
      exist, and currency translations are reported in an equity account called
      "currency translation adjustments". The Company's foreign currency
      translation adjustments account is similar to the other comprehensive
      earnings account in all material respects.(iii)
    *Accounting
      for interest rate swaps*.
      Under Canadian GAAP, hedge accounting does not require interest rate swaps
      to be recorded on the balance sheet. However, the earnings impact of
      interest rate swaps is identical under Canadian and United States GAAP.There
      are no material reconciling items between United States and Canadian GAAP
      that impact the consolidated statements of earnings. Below is a continuity
      schedule of retained earnings under Canadian
GAAP:





**2005**
    
    2004Balance,
      beginning of year
    
    **$**
    **87,655**
    
    $
    68,631Net
      earnings
    
    
    **23,207**
    
    
    19,024Subordinate
      Voting Shares purchased for cancellation
    
    
    **(2,168**
    **)**
    
    -Balance,
      end of year
    
    **$**
    **108,694**
    
    $
    87,655





The
      tables below provide a reconciliation of the Company's affected
      consolidated balance sheet accounts from United States GAAP to Canadian
      GAAP:





**As
      at March 31, 2005**
    
    **United
      States**
      **GAAP**
    
    Reconciling
      adjustments
    
    **Canadian**
      **GAAP****Assets**Interest rate swaps
    
    **$**
    **283**
    
    $
    (283
    )
    **$**
    **-**Subtotal non-current assets
    
    
    **377,958**
    
    
    (283
    )
    
    **377,675**Total assets
    
    **$**
    **626,728**
    
    $
    (283
    )
    **$**
    **626,445****Liabilities**Long-term debt - non-current
    
    **$**
    **201,809**
    
    $
    (283
    )
    **$**
    **201,526**Subtotal non-current liabilities
    
    
    **258,075**
    
    
    (283
    )
    
    **257,792****Shareholders'
      equity**Capital stock
    
    
    **73,542**
    
    
    (5,683
    )
    
    **67,859**Retained earnings
    
    
    **103,011**
    
    
    5,683
    
    
    **108,694**Subtotal
      shareholders' equity
    
    
    **185,871**
    
    
    -
    
    
    **185,871**Total
      liabilities and shareholders' equity
    
    **$**
    **626,728**
    
    $
    (283
    )
    **$**
    **626,445**








-29-








**As
      at March 31, 2004**
    
    United
      States
      GAAP
    
    Reconciling
      adjustments
    
    Canadian
      GAAP**Assets**Interest rate swaps
    
    $
    6,805
    
    $
    (6,805
    )
    $
    -Subtotal non-current assets
    
    
    290,320
    
    
    (6,805
    )
    
    283,515Total
      assets
    
    $
    437,553
    
    $
    (6,805
    )
    $
    430,748**Liabilities**Long-term debt - non-current
    
    $
    160,386
    
    $
    (6,805
    )
    $
    153,581Subtotal non-current liabilities
    
    
    196,084
    
    
    (6,805
    )
    
    189,279**Shareholders'
      equity**Capital 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





There
      are no material reconciling items between United States and Canadian GAAP
      that impact the consolidated statements of cash
flows.












-30-