**EXHIBIT
      1**




**FIRSTSERVICE
        CORPORATION**
 
 
 
 
 **ANNUAL
        INFORMATION FORM**
 **FOR
        THE YEAR ENDED**
 **MARCH
        31, 2007**
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 **MAY
        18, 2007**
 
 
 **TABLE
        OF CONTENTS**
  Corporate
                    structure
                3General
                    development of the business
                3Business
                    description
                .4Business
                    strategy
                10Seasonality
                12Trademarks
                12Employees
                13Minority
                    interests
                13Dividend
                    policy
                13Capital
                    structure
                13Market
                    for securities
                13Transfer
                    agents and registrars
                14Directors
                    and officers
                15Legal
                    proceedings
                16Properties
                17Selected
                    annual financial information
                17Risk
                    and uncertainties
                19Management's
                    discussion and analysis
                19Interest
                    of management and others in material transactions
                19Material
                    contracts
                19Cease
                    trade orders, bankruptcies, penalties or sanctions
                20Conflicts
                    of interest
                20Experts
                20Audit
                    Committee
                20Additional
                    information
                22Forward-looking
                    statements
                23Exhibit
                    “A” -Mandate of the
                    Audit Committee
                24
 
 
 
 
 **FIRSTSERVICE
        CORPORATION**
 
 **ANNUAL
        INFORMATION FORM**
 
 **MAY
        18, 2007**
 
 *All
        amounts referred to in this Annual Information Form (“AIF”) are in United States
        dollars unless otherwise indicated. All financial and statistical data in
        this
        AIF is presented as at March 31, 2007 unless otherwise
        indicated.*
 
 **Corporate
        structure**
 FirstService
        Corporation (the “Company” or “FirstService”) was formed under the *Business
        Corporations Act* (Ontario) by Certificate of Incorporation dated February 25, 1988. The Company
        amalgamated with Coloma Resources Limited pursuant to a Certificate of
        Amalgamation dated July 31, 1988, and the amalgamated corporation continued
        under the name “FirstService Corporation”.
 
 By
        Certificate of Amendment dated April 2, 1990, the Company: (i) consolidated
        each
        of its Class A Subordinate Voting Shares on a 30 to 1 basis and changed the
        designation of that class of shares to “Subordinate Voting Shares”, each such
        share carrying one vote; and (ii) consolidated each of its Class B shares
        on a
        30 to 1 basis and changed the designation of that class of shares to “Multiple
        Voting Shares”, each such share carrying 20 votes.
 
 Our
        fiscal year-end is March 31. Our Subordinate Voting Shares are publicly traded
        on both the Toronto Stock Exchange ("TSX") (symbol: FSV) and the NASDAQ Stock
        Market ("NASDAQ") (symbol: FSRV). Our head and registered office is located
        at
        1140 Bay Street, Suite 4000, Toronto, Ontario, M5S 2B4.
 
 The
        following chart sets out the significant subsidiaries of the Company. The
        voting
        securities of such subsidiaries not controlled by us are those owned by
        operating management of each respective subsidiary.
 **Name
                  of subsidiary**
              
              **Percentage
                  of voting securities owned by FirstService**
              
              **Jurisdiction
                  of incorporation**American
                  Pool Enterprises, Inc.
              
              
              88.21
              %
              
              DelawareBLW,
                  Inc. (d/b/a Security Services and Technologies)
              
              
              84.80
              %
              
              PennsylvaniaFirstService
                  Commercial Real Estate Services, Inc.(d/b/a
                  Colliers Macaulay Nicolls and Colliers International)
              
              
              82.98
              %
              
              OntarioFirstService
                  (USA), Inc.
              
              
              100.00
              %
              
              DelawareFirstService
                  Delaware, LLC
              
              
              100.00
              %
              
              DelawareFirstService
                  Delaware, LP
              
              
              100.00
              %
              
              DelawareIntercon
                  Security Ltd.
              
              
              100.00
              %
              
              OntarioThe
                  Continental Group, Inc.
              
              
              85.85
              %
              
              FloridaThe
                  Franchise Company, Inc.
              
              
              82.50
              %
              
              OntarioThe
                  Wentworth Group, Inc.
              
              
              84.35
              %
              
              Pennsylvania
 
 **General
        development of the business**
 Our
        origins date back to 1972 when Jay S. Hennick, the Founder and CEO of the
        Company, started a Toronto swimming pool and recreational facility management
        business, which became the foundation of FirstService. In 1993, we completed
        our
        initial public offering on the TSX, raising C$20 million. In 1995 our shares
        were listed on NASDAQ. In 1997, a second stock offering was completed in
        Canada
        and the United States raising US$20 million. In December 2004, a stock dividend
        was declared effectively achieving a 2-for-1 stock split for all outstanding
        Subordinate and Multiple Voting Shares.
  -
            3 -
 From
        1994 to present, we completed numerous acquisitions, developing and growing
        the
        service lines that exist today.
 
 In
        1996, we obtained a revolving credit facility from a syndicate of banks,
        which
        has been amended and restated at various times to the present. In 2001, we
        completed a private placement of $100 million of 8.06% Senior Notes due June
        29,
        2011 with a group of US institutional investors. In October 2003, $50 million
        of
        6.40% Senior Notes due September 30, 2015 was issued. In April 2005, we
        completed a further private placement of $100 million of 5.44% Senior Notes
        due
        April 1, 2015.
 
 In
        November 2004, we established a new commercial real estate services division
        under the “Colliers International” brand with the acquisition of CMN
        International Inc. (“CMN”). Generating revenues of $285 million in the year
        prior to acquisition and with 80 offices in twenty countries, CMN is the
        largest
        affiliate of the Colliers International commercial real estate services network.
        CMN’s real estate services offerings include brokerage (sale and leasing),
        property management, valuation and advisory services. A Business Acquisition
        Report filed with applicable Canadian securities regulatory authorities on
        February 11, 2005 in respect of the acquisition of CMN is hereby incorporated
        by
        reference herein.
 
 During
        the fiscal year ended March 31, 2005, we sold the assets of Greenspace Services
        Ltd., our company-owned lawn care operation and two other non-strategic
        businesses. The combined revenues of the disposed operations for the fiscal
        year
        ended March 31, 2004, the last full year of ownership, were $39
        million.
 
 In
        March 2006, we disposed of Resolve Corporation, our Business Services operation,
        in an initial public offering of trust units in Canada for consideration
        comprised of cash and a 7.3% interest in the trust. The disposal marked a
        significant milestone in our strategy of focusing on property services
        businesses for future growth.
 
 **Business
        description**
 FirstService
        is a leader in the rapidly growing property services sector, providing services
        in the following areas: residential property management; commercial real
        estate;
        integrated commercial security and property improvement. Market-leading brands
        include Colliers International in commercial real estate; Continental, Wentworth
        and Merit in residential property management; California Closets, Paul Davis
        Restoration and CertaPro Painters in property improvement and Intercon Security
        and SST in integrated security.
 
 Each
        service line provides near-essential services, generates a significant
        percentage of recurring revenues, has strong cash flows, generates strong
        returns on invested capital and can be leveraged through margin enhancement,
        cross-selling or consolidation.
 
 Our
        operations are conducted through four operating segments:
  
 
  -
            4 -
  **Revenues
                      by operating segment**
                  
                  **Year
                      ended March 31**(in
                      thousands of US$)
                  
                  **2007**
                  
                  **2006**
                  
                  **2005**
                  
                  **2004**
                  
                  **2003**Commercial
                      Real Estate Services
                  
                  $
                  608,065
                  
                  $
                  438,434
                  
                  $
                  120,535
                  
                  $
                  -
                  
                  $
                  -Residential
                      Property Management
                  
                  
                  423,797
                  
                  
                  346,133
                  
                  
                  275,229
                  
                  
                  228,790
                  
                  
                  203,515Property
                      Improvement Services
                  
                  
                  150,794
                  
                  
                  134,136
                  
                  
                  111,779
                  
                  
                  89,361
                  
                  
                  70,850Integrated
                      Security Services
                  
                  
                  176,476
                  
                  
                  149,063
                  
                  
                  143,160
                  
                  
                  122,748
                  
                  
                  107,548Corporate
                  
                  
                  554
                  
                  
                  368
                  
                  
                  673
                  
                  
                  434
                  
                  
                  389**Total**
                  
                  $
                  1,359,686
                  
                  $
                  1,068,134
                  
                  $
                  651,376
                  
                  $
                  441,333
                  
                  $
                  382,302
 ***Commercial
        Real Estate Services***
 Through
        CMN, we are a leading international commercial real estate services provider
        offering a full range of commercial real estate services in the United States,
        Canada, Australia, New Zealand and several other countries. Operations in
        the
        United States and Canada generate approximately 65% of total revenues for
        this
        segment, while Asia-Pacific generates approximately 30%. We provide services
        to
        owners, investors and tenants, including brokerage (sale and leasing), property
        management and maintenance services, valuation and corporate advisory
        services.
 
 Commercial
        real estate brokers match buyers and sellers of real estate (investors,
        developers or owners-users) as well as owners and tenants of space for lease
        in
        return for a commission generally based on the value of the transaction.
        CMN’s
        brokerage activities focus primarily on office, industrial, retail and
        multi-unit residential properties. Brokerage activities represent approximately
        70% of CMN's revenues and provide opportunities for cross selling other real
        estate services. In calendar year 2006, through a network of 1,600 brokers
        across 155 offices, CMN executed transactions valued at $30 billion across
        a
        diverse client base, including corporations, financial institutions, governments
        and individuals. Typically, brokers earn a direct commission on individual
        transactions, which results in a highly variable cost structure.
 
 Commercial
        property management focuses on the same client segments as brokerage; however,
        fees are typically multi-year fixed fee contracts that are largely recurring
        in
        nature.
 
 CMN’s
        international corporate services group partners with large corporations in
        managing their overall portfolio and transactions. Professional staff combine
        proprietary technology with high level strategic planning, portfolio management,
        lease administration and facilities and project management. Fees in corporate
        services are derived from a combination of fixed fee services and transaction
        based brokerage fees.
 
 Commercial
        real estate brokerage is cyclical and seasonal in nature, affected by external
        factors, including interest rates, investor and consumer confidence and other
        macroeconomic factors and political risk in any specific region. CMN’s revenues
        are somewhat seasonal in nature, with approximately 70% of transactions
        occurring in our second and third fiscal quarters (July through
        December).
 
 CMN
        is
        the largest affiliate within the Colliers International Property Consultants
        (“CIPC”) alliance. Each member of the CIPC alliance licenses the right to use
        the “Colliers International” brand in an exclusive territory. Colliers
        International is recognized as one of the top 3 commercial real estate services
        organizations worldwide with a network of 266 offices generating over $1.6
        billion in revenues in 56 countries. Membership in CIPC provides us with
        a
        global brand name and local market intelligence throughout the world to assist
        the international community of investors, owners and users of real estate.
        Members of CIPC are required, except in certain limited circumstances, to
        direct
        referrals for other regions to member firms.
 
 Commercial
        real estate firms can be segmented into two tiers; (i) large global full-service
        firms with international research abilities, and (ii) regional and niche
        firms
        with strengths in their respective local markets. Recent industry trends
        have
        seen an increase in outsourcing from
  -
            5 -
  sophisticated
        clients with global needs, creating an opportunity for full-service global
        players such as CMN.
  There
        has also been a recent trend amongst larger firms to further improve their
        market position through consolidation. However, the commercial real estate
        competitive landscape market remains highly fragmented with the top five
        real
        estate organizations combining for only about 10% of the estimated $90 billion
        global market.
 
 CMN’s
        growth strategy is to expand the suite of complementary service offerings
        and
        geography where services are offered. This will continue to be achieved both
        organically and through selective acquisitions. During the year ended March
        31,
        2007, we completed five acquisitions of businesses providing such complementary
        services, including mortgage brokerage, valuations, project management and
        advisory services. CMN also plans to enhance its brand and service delivery
        through increased broker training and continued development of its proprietary
        market tools and research resources.
 
 CMN’s
        business is subject to regulation by the countries and regions in which it
        operates. In most countries or regions, laws require that brokers must be
        licensed and conform to a code of ethics, which involves certain examinations
        and continuing education. In addition, CMN’s property managers are subject to
        regulation in the various regions in which they operate.
 
 ***Residential
        Property Management***
 We
        are
        the largest manager of private residential communities in North America.
        Private
        residential communities include condominiums, cooperatives, gated communities
        and a variety of other residential developments governed by multi-unit
        residential community associations (collectively referred to as “community
        associations”). In total, we manage more than 750,000 residential units in 3,500
        community associations in the states of Arizona, California, Delaware, Florida,
        Georgia, Illinois, Maryland, Nevada, New Jersey, New York, North Carolina,
        Pennsylvania, Texas, Virginia and the District of Columbia.
 
 In
        Florida, we operate under the Continental, Service America, Prime and Sterling
        brands. In the mid-Atlantic region, we operate under the Wentworth, Armstrong,
        Cooper Square, Arco Wentworth and American Pool brands. In Arizona, we operate
        as Rossmar & Graham, while in Illinois we operate as Wolin-Levin. In Nevada
        and Texas we operate as RMI. In California, we operate as Merit, which we
        acquired in April 2007.
 
 In
        the
        residential property management industry, there are two types of professional
        property management companies: (i) traditional property managers, and (ii)
        full-service property managers. Traditional property managers primarily handle
        administrative property management functions such as collecting maintenance
        fees, sourcing and paying suppliers, preparing financial statements and
        contracting out support services. Full-service property managers provide
        the
        same services as traditional property managers but also provide a variety
        of
        other services under one exclusive contract.
 
 FirstService
        is a full-service property manager and in many markets provides a full range
        of
        services including grounds maintenance, landscaping, painting, pest control,
        irrigation, home service contracts, real estate sales and leasing, heating,
        air
        conditioning, plumbing and swimming pool management and maintenance. Operations
        are somewhat seasonal in nature, as the majority of swimming pool and grounds
        maintenance revenues, outside the “sunbelt” states, are earned in the first and
        second fiscal quarters.
 
 The
        aggregate budget of all the community associations in the United States is
        estimated to be $40 billion. The aggregate budget of the community associations
        managed by FirstService is estimated at approximately $4.5 billion. Currently,
        FirstService accesses approximately 20% of the aggregate budget of its
        communities through the various services that it offers. Our strategy is
        to
        continue to add communities under management while striving to earn a greater
        percentage
  -
            6 -
 of
          the
          aggregate budget by introducing additional services and products, thereby
          offering our clients a single point of accountability.
 
 Based
        on recent industry data compiled by the Community Associations Institute,
        we
        estimate that: (i) more than 57 million Americans, representing approximately
        23.1 million households, live in condominiums, cooperatives, planned communities
        and other residential developments governed by multiple unit residential
        community associations; (ii) more than 50% of new homes currently being built
        in
        and around major metropolitan areas in the United States are within these
        categories; (iii) there are approximately 286,000 community associations
        in the
        United States; and (iv) the total annual operating expenses for these community
        associations are estimated to be $40 billion. The market is growing at a
        rate of
        approximately 3% per year as a result of the 6,000-8,000 new community
        associations formed each year. In addition, the growing trend from
        self-management to professional management, currently almost 50% of the market,
        is believed to at least double the effective growth rate for professional
        property management companies.
 
 Typically,
        owners of private residential units are required to pay quarterly or monthly
        fees to cover the expenses of managing the condominium or homeowner
        association’s business activities and maintaining community properties.
        Historically, decision making for communities was delegated to volunteer
        boards
        of directors elected by the owners. Increasingly, these volunteer boards
        have
        outsourced the responsibility to manage the day-to-day operation and maintenance
        of community property to professional property management
        companies.
 
 The
        residential property management industry is extremely fragmented and dominated
        by numerous local and regional management companies. Only a small number
        of such
        companies, however, have the expertise and capital to provide both traditional
        property management services as well as the other support services provided
        by
        full-service property managers. FirstService is the largest full-service
        manager
        of private residential communities in the United States, managing over 3%
        of the
        nation’s approximately 23.1 million units in community associations. We enjoy a
        competitive advantage because of our size, depth of financial and management
        resources, and operating expertise.
 
 Our
        business is subject to regulation by the states in which we operate. In most
        states, laws require that property managers must be licensed, which involves
        certain examinations and continuing education. In addition, our residential
        real
        estate sales and leasing operations are subject to regulation as a real estate
        brokerage by the various states in which we operate.
 
 ***Property
        Improvement Services***
 In
        Property Improvement Services, we provide a variety of residential and
        commercial services through our network of approximately 1,900 franchised
        and 11
        Company-owned locations across North America. The principal brands in this
        division include California Closet Company (“California Closets”), Paul Davis
        Restoration, CertaPro Painters, College Pro Painters, Pillar to Post Home
        Inspection and Handyman Connection. During the three years ended March 31,
        2007,
        we sold our Company-owned carpet cleaning business, our Company-owned and
        franchised lawn care operations, and our
        decorative glass treatments franchise system.
 
 California
        Closets is the largest provider of installed closet and home storage systems
        in
        North America. Headquartered in San Rafael, California, California Closets
        has
        108 franchises in the United States and Canada as well as master franchises
        in
        other countries around the world. California Closets receives royalties from
        franchisees based on a percentage of the franchisees’ revenues.
 
 Paul
        Davis Restoration is a Florida-based franchiser of residential and commercial
        restoration services serving the insurance restoration industry in the United
        States through 221 franchises. This company provides restoration services
        for
        property damaged by natural or man-
  -
            7 -
 made
          disasters. Paul Davis Restoration receives royalties from franchisees based
          on a
          percentage of the franchisees’ revenues.
 
 CertaPro
        Painters is a residential and commercial painting franchise system with 282
        franchises operating in major markets across the United States and Canada
        as
        well as master franchises in other countries around the world. CertaPro Painters
        focuses on high-end residential and commercial painting and decorating work
        and
        other programs for property managers who have portfolios of condominium and
        commercial properties. Franchisees pay CertaPro Painters either a royalty
        based
        on a percentage of revenues or a fixed monthly fee, plus administrative fees
        for
        various ancillary services.
 
 College
        Pro Painters is a seasonal exterior residential painting franchise system
        operating in 25 states and across Canada with approximately 640 franchises.
        It
        recruits students and trains them to operate the business, including price
        estimating, marketing, operating procedures, hiring, customer service and
        safety. College Pro Painters receives a royalty from each franchisee based
        on a
        percentage of revenue. College Pro Painters’ operations are seasonal with
        significant revenue and earnings in the Company’s first and second quarters
        followed by losses in the third and fourth quarters.
 
 Pillar
        to Post is North America’s largest home inspection service provider. Services
        are provided through a network of 491 franchises. Pillar to Post earns royalties
        from its franchisees based on a percentage of franchisee revenues.
 
 Based
        in Ohio, Handyman Connection is North America’s leading home repair and
        remodeling service franchiser. Services are provided by a network of 134
        franchises operating throughout the United States. Handyman Connection earns
        royalties from its franchisees based on a percentage of franchisee
        revenues.
 
 Franchise
        agreements are for terms of five or ten years, with the exception of College
        Pro
        Painters where the agreements are for a term of one year. All franchise
        agreements contain renewal provisions that can be invoked at little or no
        cost.
  We
        currently own and operate 11 California Closets franchises located in Boston,
        Seattle, Chicago, Jacksonville, San Francisco, Toronto, Dallas, Phoenix,
        Hartford, Sacramento and Fresno. These operations are referred to as
“branchises”. The purpose of branchising is to reacquire well-established and
        profitable franchises located in large territories to accelerate growth in
        these
        territories in partnership with operating management. We intend to make several
        more branchising acquisitions as opportunities arise.
 
 The
        franchised services industry is highly fragmented, consisting principally
        of a
        large number of smaller, single-service or single-concept companies. Due
        to the
        large size of the overall market for these services, dominant market share
        is
        not considered necessary for becoming a major player in the industry. However,
        because of the low barriers to entry in this segment, we believe that brand
        name
        recognition among consumers is a critical factor in achieving long-term success
        in the businesses we operate.
 
 We
        believe that the largest franchise companies in North America have been
        successful because of their ability to realize economies of scale through
        the
        centralization and successful application of certain administrative functions
        such as finance, marketing, purchasing, training and support
        staffing.
 
 Franchise
        businesses are subject to US Federal Trade Commission regulations and state
        and
        provincial laws that regulate the offering and sale of franchises. Presently,
        the Company is authorized to sell franchises in 40 states, in all Canadian
        provinces and in several other countries around the world. In all jurisdictions,
        we endeavor to have our franchisees meet or exceed regulatory
        standards.
 
 -
            8 -
 ***Integrated
        Security Services***
 FirstService
        is one of North America’s largest providers of integrated security services,
        primarily to the commercial market, with operations in 17 branches in 10
        US
        states and 3 Canadian provinces. Under the FirstService Security umbrella,
        we
        operate two security brands, Intercon in Canada and Security Services and
        Technologies (“SST”) in the United States. The FirstService Security management
        team is responsible for the combined North American operations, with the
        goal of
        enhancing customer service and realizing operating efficiencies.
 
 We
        design, install, repair and maintain integrated electronic security systems
        including identification badging, access control and closed-circuit television
        for office buildings, commercial and industrial facilities, institutional
        campuses and multi-unit residential properties. Our customers include Fortune
        1000 corporations, property management companies, hospitals and universities
        and
        all levels of government. Revenues are derived from installation projects,
        ongoing service, branch and head office upgrades, central station monitoring
        and
        maintenance.
 
 In
        executing our growth strategy to date, we have focused on the development
        of
        long-term customer relationships, providing complete enterprise-wide electronic
        security solutions for all of our customers’ facilities and operations. Going
        forward, this growth strategy will be augmented by acquisitions in key US
        markets enabling us to add strong regional operators that are leaders in
        their
        markets, establish national service capabilities and leverage our existing
        national account relationships and supplier base.
 
 In
        Canada, we supplement our integrated electronic security service offerings
        with
        a premium security officer service, providing highly trained manpower on-site,
        via mobile patrol and in response to central station calls. This full-service
        approach of providing both security systems expertise and security officer
        services has historically been a key success factor in the Canadian market,
        where commercial security clients often express a desire for comprehensive
        security services.
 
 According
        to industry sources, the US security systems integration is a $4.5 billion
        industry growing at an annual rate of approximately 10%. Factors driving
        growth
        include:
 
 •
              The
                  trend toward consolidation of security functions and reducing costs:
                  Corporate and institutional security embodies a variety of independent
                  functions (access control, physical security, employee/user security,
                  surveillance, etc.) operating concurrently. Integrating these functions
                  into one system is simpler, more efficient and requires fewer people
                  and
                  resources to operate. An integrated system may also replace a number
                  of
                  different legacy systems that were required to be managed independently,
                  improving functionality and reducing operating and maintenance
                  costs.
 
 •
              Continued
                  development of network and information technology: Security systems
                  are
                  highly reliant on computer and electronic technology and have benefited
                  from advancements in these technologies, becoming increasingly
                  more
                  powerful, flexible and functional. Security systems and information
                  for
                  multiple sites can be readily integrated and controlled from a
                  centralized
                  location and administered remotely.
 
 •
              Increased
                  public awareness of security issues: Security has become a priority
                  in the
                  workplace, schools and other public
                  facilities.
 
 The
        security systems integration industry is highly fragmented but undergoing
        consolidation. The market is comprised of many small and medium-sized, and
        a few
        very large competitors. FirstService Security is the sixth largest integrated
        security services provider in North America.
 
 -
            9 -
 Larger
        competitors are driving consolidation in response to customer demands for
        comprehensive solution providers with national service capabilities. Customers
        are moving away from developing and sourcing each of their security systems
        separately from several different suppliers. System integrators must be able
        to
        evaluate customer needs, design an integrated suite of systems and products
        that
        is simple and effective, and provide quality installation and service in
        multiple geographic locations. Critical mass and geographic reach have become
        increasingly important success factors in this industry.
 
 Our
        strategy is to combine strong regional operators into a national network,
        focusing on long-term relationships with customers that have complex security
        needs particularly those with somewhat unique requirements, within industry
        verticals that we have targeted. We differentiate ourselves through superior
        customer service and by designing and integrating open architecture systems
        (versus proprietary or closed systems).
 
  **Business
        strategy**
 ***Operating
        strategy***
 Our
        objective is to increase the revenues, profitability and market position
        of each
        operating unit and subsequently acquired business, while maintaining the
        highest
        level of service to our customers. Key elements of our operating strategy
        are:
 
 *Senior
        management commitment:* We
        strongly believe that management ownership at each of our primary operating
        units has contributed significantly to our ability to grow our businesses.
        As a
        result, we expect to continue our practice of encouraging strong operators
        of
        newly acquired platform businesses to retain or acquire a significant equity
        stake in the businesses they operate, in the form of a non-transferable direct
        equity ownership position, stock options or in equity-like stock value
        appreciation rights. In all cases, we have the right to purchase the minority
        interest at a formula price based on a multiple of trailing EBITDA 1 . Management
        believes that its strategy of aligning the ownership interests of operating
        management with those of the Company provides a powerful incentive to deliver
        superior financial performance.
 
 *Performance-based
        compensation:* We use
        performance-based compensation programs throughout each of our businesses
        to
        attract, retain and motivate our employees. In general, senior managers receive
        bonuses that are based on a percentage of the amount by which their results
        exceed prior year EBITDA. Lower level managers’ incentives are also aligned with
        business unit EBITDA targets, but may include other measures deemed important
        for growing their business. We believe these programs are effective incentives
        to operating management and employees to deliver consistent, high-quality
        service in a cost-effective manner.
 
 *Operating
        efficiencies:* We
        have been able to obtain significant operating efficiencies through the
        implementation of a variety of “best practices” and have achieved meaningful
        cost savings through certain economies of scale. We attempt to identify and
        refine our best practices across all of our businesses in order to benefit
        from
        the most innovative and effective management techniques. The implementation
        of
        best practices has resulted in improved labor management,
 
 EBITDA
          is
          defined as net earnings before extraordinary items, discontinued operations,
          minority interest share of earnings, income taxes, interest, other income,
          depreciation and amortization and stock-based compensation expense. The
          Company
          uses EBITDA to evaluate operating performance. EBITDA is an integral part
          of the
          Company’s planning and reporting systems. Additionally, the Company uses
          multiples of current and projected EBITDA in conjunction with discounted
          cash
          flow models to determine its overall enterprise valuation and to evaluate
          acquisition targets. The Company believes EBITDA is a reasonable measure
          of
          operating performance because of the low capital intensity of its service
          operations. The Company believes EBITDA is a financial metric used by many
          investors to compare companies, especially in the services industry, on
          the
          basis of operating results and the ability to incur and service debt. EBITDA
          is
          not a recognized measure of financial performance under generally accepted
          accounting principles ("GAAP") in the United States of America, and should
          not
          be considered as a substitute for operating earnings, net earnings or cash
          flows
          from operating activities, as determined in accordance with GAAP. The Company’s
          method of calculating EBITDA may differ from other issuers and accordingly,
          EBITDA may not be comparable to measures used by other
          issuers.
  -
            10 -
  customer
        service and service delivery routing. We also achieve significant savings
        through the volume purchasing of vehicles, insurance, group benefits,
        advertising and professional and financial services.
 
 *Marketing
        penetration and joint marketing:* We
        capitalize on the complementary nature of our businesses by introducing new
        or
        additional services to customers with which we already have long-term
        contractual relationships. The complementary nature of our property services
        businesses also provides certain advantages when introducing a new service
        in a
        market where we have existing operations. These advantages include significant
        market knowledge, demographic information and the ability to share the
        established overhead of existing operations. Because we provide a number
        of
        property services, we are able to effectively utilize marketing data that
        is
        accumulated to conduct cost-efficient customer referral across our
        businesses.
 
 ***Acquisition
        strategy***
 Our
        acquisition strategy has been developed to complement the internal growth
        strategies of our existing service lines and as a component of our overall
        growth strategy of building a significant, diversified property services
        business that generates recurring and predictable cash flows and earnings.
        The
        acquisition strategy entails the systematic acquisition of established, well
        managed, and profitable service companies operating in fragmented industries
        that will:
  •
              Enhance
                  the market position of an existing service line, provide an entry
                  into a
                  new geographic region/market, or introduce a new service line;
                  and
 •
              Provide
                  a return on invested capital that exceeds our weighted average
                  cost of
                  capital.
 
 Acquisitions
        are classified as “tuck-under” or “platform”. The majority of acquisitions that
        we target and complete are tuck-under acquisitions. These acquisitions are
        generally smaller transactions completed within an existing service line
        that
        strengthen its regional presence or competitive position through increased
        market share or the addition of a complementary service line. Platform
        acquisitions are larger transactions that either establish an existing service
        line in a new geographic region or provide a vehicle for FirstService to
        add a
        new service offering that can be leveraged through cross-selling of services,
        sharing of best practices or other synergies or through further consolidation.
        Each acquisition must meet strict criteria that include the
        following:
  •
              Strong,
                  experienced management teams in place that are interested in growing
                  their
                  businesses and in being rewarded through performance-based
                  compensation;
 •
              History
                  of consistent profitability, supported by significant contractual
                  revenues;
 •
              Non-capital
                  intensive operations with a variable cost
                  structure;
 •
              Leading
                  positions in the markets served;
                  and
 •
              In
                  the case of platform acquisitions, one or more senior managers
                  who wish to
                  retain a significant minority interest in the acquired company
                  in order to
                  participate directly in its future growth and development as part
                  of
                  FirstService.
 
 In
        general, platform companies continue to operate on a stand-alone basis in
        accordance with our operating strategy, while drawing on the resources of
        FirstService to facilitate future growth. Most tuck-under acquisitions are
        fully
        integrated into the operations of the service line making the
        acquisition.
 
 We
        have
        historically paid approximately 4 times normalized and sustainable EBITDA
        (“Valuation EBITDA”) for smaller tuck-under acquisitions and slightly higher
        multiples for larger acquisitions. Usually, consideration is paid with a
        combination of cash at closing and contingent note consideration. Contingent
        consideration is typically issuable over a three-year contingency period,
        subject to achievement of the Valuation EBITDA on an averaged basis over
        the
        three-year period subsequent to closing. In the event that the actual average
        EBITDA is less than the Valuation EBITDA, the purchase price and contingent
        consideration are reduced by a multiple of the deficiency in
        EBITDA.
 
 -
            11 -
 In
        executing acquisitions, our acquisition team works closely with operating
        management of our service lines to identify, negotiate and complete
        acquisitions. A majority of acquisitions are negotiated on an exclusive basis,
        without the imposition of an intermediary-controlled auction process, thereby
        facilitating a focused effort by FirstService to build a relationship with
        its
        prospective partner and emphasize the appropriate balance of financial and
        non-financial, as well as long-term and short-term attributes of the acquisition
        to the vendor. Notwithstanding the varied acquisition opportunities available
        to
        FirstService, management remains committed to a disciplined approach to
        acquisitions, including a rigorous adherence to our strict acquisition criteria
        and transaction structure. As well, we only allocate our financial and human
        resources to existing service lines for acquisitions if the management team
        has
        the capacity to integrate the acquisition and the performance of current
        operations is meeting or exceeding expectations.
 
 The
        integration process is a critical component of all acquisitions executed
        by
        FirstService. This process is initiated during due diligence, when opportunities
        for integration, operational improvements and the sharing of best practices
        are
        identified and an integration plan is drafted. Post-closing, the integration
        plan is reviewed with management of the acquired company to ensure that it
        accurately captures and prioritizes the issues to be addressed. Once a buy-in
        has been obtained, the integration plan is finalized and a timetable established
        for the execution of the plan by the management of the acquired company.
        This is
        a collaborative process with a high degree of involvement from our integration
        team in overseeing the implementation and in monitoring progress against
        the
        timetable.
 
 **Seasonality**
 Certain
        segments of the Company’s operations are subject to seasonal variations. The
        demand for exterior painting (Property Improvement Services segment) and
        swimming pool management in the northern United States and Canada (Residential
        Property Management segment) is highest during late spring, summer and early
        fall and very low during winter. These operations generate most of their
        annual
        revenues and earnings between April and September and comprise approximately
        6%
        of consolidated revenues.
 
 The
        Commercial Real Estate Services operation generates peak revenues and earnings
        in the month of December followed by a low in January and February as a result
        of the timing of closings on commercial real estate brokerage transactions.
        Revenues and earnings during the balance of the year are relatively even.
        These
        brokerage operations comprise approximately 25% of consolidated
        revenues.
 
 The
        seasonality of these service lines results in variations in quarterly revenues
        and operating margins. Variations can also be caused by acquisitions or
        dispositions, which alter the consolidated service mix.
 
 **Trademarks**
 FirstService’s
        trademarks are important for the advertising and brand awareness of all of
        our
        businesses and franchises. We take precautions to defend the value of our
        trademarks by maintaining legal registrations and by litigating against alleged
        infringements, if necessary.
 
 In
        our
        Property Improvement Services unit, four franchise systems - California Closet
        Company, Paul Davis Restoration, Pillar to Post Home Inspection, and Handyman
        Connection - have trademarks to which value has been ascribed in the
        consolidated financial statements. These franchise systems have franchises
        in
        significant population centers in the United States. The value of these
        trademarks is derived from the recognition they enjoy among the target audiences
        for closet system installations, disaster restoration services, home inspections
        and handyman services. These trademarks have been in existence for many years,
        and their prominence among consumers has grown over time through the addition
        of
        franchisees and the ongoing marketing programs conducted by both franchisees
        and
        the Company.
 
 -
            12 -
 In
        our
        Commercial Real Estate Services unit, the Colliers International trademark
        was
        identified as an acquired intangible asset. The Colliers International trademark
        is highly recognized in the commercial real estate industry.
  **Employees**
 We
        employ approximately 16,000 non-unionized employees, rising to a total of
        approximately 17,500 with seasonal employees in the spring and summer
        months.
 
 **Minority
        interests**
 FirstService
        owns a majority interest in all of its subsidiaries, while operating management
        of each subsidiary owns the remaining shares. This structure was designed
        to
        maintain control at FirstService while providing significant risks and rewards
        of equity ownership to management at the operating companies. In all cases,
        the
        Company has the right to “call” management’s shares, usually payable at the
        Company’s option with any combination of FirstService shares or cash.
        FirstService may also be obligated to acquire certain of these minority
        interests in the event of death, disability or cessation of employment of
        the
        employee or if the shares are “put” by the employee. These arrangements provide
        significant flexibility to FirstService in connection with management succession
        planning and shareholder liquidity matters.
 
 **Dividend
        policy**
 The
        Company does not currently pay dividends on any of its shares. The payment
        of
        dividends is at the discretion of the Board of Directors of the Company,
        which
        considers earnings, capital requirements and the financial condition of the
        Company, among other relevant factors. If dividends were declared, they would
        be
        payable in either US or Canadian dollars.
 
 **Capital
        structure**
 The
        authorized capital of the Company consists of an unlimited number of preference
        shares, issuable in series at the discretion of the board of directors of
        the Company, an unlimited number of Subordinate Voting Shares and an
        unlimited number of convertible Multiple Voting Shares. The holders of
        Subordinate Voting Shares are entitled to one (1) vote in respect of each
        Subordinate Voting Share held at all meetings of the shareholders of the
        Company. The holders of Multiple Voting Shares are entitled to twenty (20)
        votes
        in respect of each Multiple Voting Share held at all meetings of the
        shareholders of the Company. Each Mulitple Voting Share is convertible into
        one
        Subordinate Voting Share at the option of the holder. Effective December
        15,
        2004, a stock dividend was declared, effectively achieving a 2-for-1 stock
        split
        for all outstanding Subordinate and Multiple Voting Shares. As of May 18,
        2007,
        there were 28,475,794 Subordinate Voting Shares, 1,325,694 Multiple Voting
        Shares and no preference shares issued and outstanding.
 
 A
        summary of certain rights attaching to the Company’s Subordinate Voting Shares
        is set out in the section entitled “Certain Rights of Holders of Subordinate
        Voting Shares” contained in the Company’s Management Information Circular (the
        "Circular") dated May 15, 2007 filed in connection with the Company’s annual and
        special meeting of shareholders to be held on June 25, 2007, which section
        is
        incorporated herein by reference.
 
 **Market
        for securities**
 The
        Company’s Subordinate Voting Shares are listed for trading on the TSX
        and NASDAQ. The Company’s Multiple Voting Shares are not listed and do not
        trade on any public market or quotation system.
 
  -
            13 -
  The
        table below details the price ranges and volumes traded of Subordinate Voting
        Shares on the NASDAQ in US dollars, and the TSX in Canadian dollars on a
        monthly
        basis during fiscal 2007:


**NASDAQ**
              
              
              **TSX****Month**
              
              
              **High
                  price (US$**
              **)**
              
              **Low
                  price (US$**
              **)**
              
              **Volumetraded**
              
              
              **High
                  price (C$**
              **)**
              
              **Low
                  price (C$**
              **)**
              
              **Volumetraded**April
                  2006
              
              
              26.75
              
              
              24.11
              
              
              629,200
              
              
              30.78
              
              
              27.43
              
              
              815,700May
                  2006
              
              
              25.85
              
              
              23.13
              
              
              408,200
              
              
              28.75
              
              
              26.00
              
              
              849,600June
                  2006
              
              
              26.75
              
              
              24.08
              
              
              406,400
              
              
              29.95
              
              
              26.71
              
              
              551,400July
                  2006
              
              
              27.00
              
              
              22.64
              
              
              412,900
              
              
              30.00
              
              
              26.20
              
              
              568,300August
                  2006
              
              
              25.82
              
              
              23.57
              
              
              395,700
              
              
              29.00
              
              
              26.40
              
              
              475,500September
                  2006
              
              
              25.25
              
              
              22.64
              
              
              375,200
              
              
              27.90
              
              
              25.33
              
              
              344,000October
                  2006
              
              
              24.80
              
              
              22.97
              
              
              467,500
              
              
              27.96
              
              
              26.38
              
              
              543,300November
                  2006
              
              
              24.49
              
              
              23.19
              
              
              170,500
              
              
              27.99
              
              
              26.06
              
              
              436,200December
                  2006
              
              
              24.57
              
              
              22.81
              
              
              288,300
              
              
              28.23
              
              
              26.30
              
              
              989,400January
                  2007
              
              
              25.31
              
              
              21.81
              
              
              572,500
              
              
              29.99
              
              
              25.50
              
              
              1,368,500February
                  2007
              
              
              26.00
              
              
              24.73
              
              
              446,400
              
              
              30.40
              
              
              29.22
              
              
              817,200March
                  2007
              
              
              27.75
              
              
              23.40
              
              
              493,200
              
              
              32.02
              
              
              27.80
              
              
              1,033,200
  **Transfer
      agents and registrars**


The
        transfer agent and registrar for the Subordinate Voting Shares is Equity
        Transfer and Trust Company, 200 University Ave., Suite 200, Toronto, Ontario,
        M5H 4H1. The transfer agent and registrar for the Multiple Voting Shares
        is the
        Company at 1140 Bay Street, Suite 4000, Toronto, Ontario, M5S 2B4.
 -
            14 -
  
 **Directors
        and officers**
 ***Directors*** *-* The
        following are the directors of the Company as at May 18, 2007:
 **Name
                    and municipality of residence**
                **Age**
                **Present
                    position and tenure**
                **Business
                    experience during**
                  **last
                    five years**David
                    R. Beatty2,3
                  *Toronto,
                    Ontario*
                65
                Director
                    since May 2001
                Corporate
                    Director; Chair and CEO, Beatinvest Limited (an investment company);
                    Managing Director of the Canadian Coalition for Good Governance;
                    Professor
                    of Strategy, Director of Clarkson Center for Business Ethics
                    and Board
                    Effectiveness and Professor of Strategic Management, Rotman School
                    of
                    Management, University of TorontoBrendan
                    Calder1,2,3
                  *Toronto,
                    Ontario*
                60
                Director
                    since June 1996
                Corporate
                    Director;
                  Professor,
                  Rotman
                    School of Management,
                  University
                    of TorontoPeter
                    F. Cohen1,2,3
                  *Toronto,
                    Ontario*
                54
                Director
                    since March 1990; Chair of the Board since May 2005
                President,
                    Dawsco Capital Corp.
                  (an
                    Ontario-based real estate and investment company)Bernard
                    I. Ghert1
                  *Toronto,
                    Ontario*
                67
                Director
                    since June 2004
                Corporate
                    DirectorJay
                    S. Hennick
                  *Toronto,
                    Ontario*
                50
                Chief
                    Executive Officer and Director since May 1988
                Chief
                    Executive Officer of the CompanySteven
                    S. Rogers
                  *Mississauga,
                    Ontario*
                51
                Director
                    since August 1989
                President
                    and Chief Executive Officer,
                  The
                    Franchise Company, Inc.
                  (subsidiary
                    of the Company)Michael
                    D. Harris
                  *Vaughan,
                    Ontario*
                62
                Director
                    since June 2006
                Senior
                    Business Advisor, Goodmans LLP; Corporate Director;
                  Senior
                    Fellow, The Fraser Institute
                  Former
                    Premier of the Province of
                    Ontario
  1.
              Member
                  of Audit Committee
 2.
              Member
                  of Executive Compensation Committee
 3.
              Member
                  of Nominating and Corporate Governance
                  Committee
 
 Each
        director remains in office until the following annual shareholders’ meeting or
        until the election or appointment of his successor, unless he resigns or
        his
        office becomes vacant. All directors stand for election or re-election
        annually.
 
 Further
        background information regarding the directors of the Company is set out
        in the
        sections entitled “Particulars of Matters to be Acted Upon at the Meeting -
        Election of Directors" and "Statement of Corporate Governance Practices"
        contained in the Circular, which sections are hereby incorporated herein
        by
        reference.
  -
            15 -
 ***Officers
        -*** The
        following are the executive officers of the Company as at May 18,
        2007:
 **Name
                    and municipality of residence**
                **Age**
                **Present
                    position with the Company**
                **First
                    became**
                  **an
                    officer**Jay
                    S. Hennick
                  *Toronto,
                    Ontario*
                50
                Founder
                    and Chief Executive Officer
                1988D.
                    Scott Patterson
                  *Toronto,
                    Ontario*
                46
                President
                    and Chief Operating Officer
                1995John
                    B. Friedrichsen
                  *Toronto,
                    Ontario*
                45
                Senior
                    Vice President and Chief Financial Officer
                1998Roman
                    Kocur
                  *Toronto,
                    Ontario*
                46
                Managing
                    Director, Corporate Development
                2003Michael
                    Natale
                  *Toronto,
                    Ontario*
                47
                Vice
                    President, Performance & Risk Management
                2005Douglas
                    G. Cooke
                  *Toronto,
                    Ontario*
                47
                Vice
                    President and Corporate Controller
                1995
  The
          directors and executive
          officers of the Company, as a group, own or control 2,315,969 Subordinate
          Voting
          Shares, which represents 8.1% of the total Subordinate Voting Shares
          outstanding. The directors and officers, as a group, control 52.4% of the
          total
          voting rights when all Multiple Voting Shares and Subordinate Voting Shares
          are
          considered. Pursuant to the deferred share unit plan of the Company, certain
          directors of the Company also hold an aggregate of 6,791 deferred share
          units.
          Mr. Hennick controls all of the Company’s Multiple Voting Shares.
 
 Mr.
        Rogers controls a 9% voting interest in The Franchise Company Inc., a subsidiary
        of the Company.
 
 **Legal
        proceedings**
 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 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.
  -
            16 -
 **Properties**
 The
        following chart provides a summary of the properties occupied by the Company
        and
        its subsidiaries as at March 31, 2007:
 (square
                    feet)
                
                **United
                    States (leased)**
                
                **United
                    States**
                  **(owned)**
                
                **Canada**
                  **(leased)**
                
                **Canada**
                  **(owned)**
                
                **International**
                  **(leased)**
                
                **International**
                  **(owned)**Residential
                    PropertyManagement
                
                
                383,000
                
                
                312,000
                
                
                5,000
                
                
                -
                
                
                -
                
                
                -Commercial
                    Real EstateServices
                
                
                348,000
                
                
                -
                
                
                254,000
                
                
                -
                
                
                188,000
                
                
                -Integrated
                    Security Services
                
                
                58,000
                
                
                -
                
                
                56,000
                
                
                -
                
                
                -
                
                
                -Property
                    ImprovementServices
                
                
                202,000
                
                
                -
                
                
                35,000
                
                
                -
                
                
                -
                
                
                -Corporate
                
                
                -
                
                
                -
                
                
                -
                
                
                20,000
                
                
                -
                
                
                -
 
  **Selected
        annual financial information****- last five fiscal
        years**
 (in
        thousands of US$, except per share amounts)
 **Year
                    ended March 31**
                
                **2007**
                
                **2006**
                
                **2005**
                
                **2004**
                
                **2003****OPERATIONS**Revenues
                
                $
                1,359,686
                
                $
                1,068,134
                
                $
                651,376
                
                $
                441,333
                
                $
                382,302Operating
                    earnings
                
                
                82,988
                
                
                65,226
                
                
                35,306
                
                
                27,633
                
                
                23,278Net
                    earnings from continuing operations
                
                
                36,687
                
                
                28,034
                
                
                15,390
                
                
                14,649
                
                
                11,446Net
                    (loss) earnings from discontinuedoperations
                
                
                (471
                )
                
                41,463
                
                
                7,817
                
                
                4,375
                
                
                6,994Net
                    earnings
                
                
                34,863
                
                
                69,497
                
                
                23,207
                
                
                19,024
                
                
                18,440**FINANCIAL
                    POSITION**Total
                    assets
                
                $
                816,998
                
                $
                711,004
                
                $
                626,728
                
                $
                437,553
                
                $
                389,031Long-term
                    debt
                
                
                235,149
                
                
                248,686
                
                
                220,015
                
                
                163,888
                
                
                164,919Shareholders’
                    equity
                
                
                264,875
                
                
                237,752
                
                
                185,871
                
                
                155,101
                
                
                123,406Book
                    value per share
                
                
                8.85
                
                
                7.91
                
                
                6.15
                
                
                5.26
                
                
                4.36**OTHER
                    DATA**EBITDA
                    (note1)
                
                $
                121,356
                
                $
                91,395
                
                $
                58,101
                
                $
                36,541
                
                $
                30,815Diluted
                    earnings per share from continuingoperations
                    adjusted for brokerage
                  backlog
                    amortization and impairment losson
                    available-for-sale securities(note
                    2)
                
                
                1.37
                
                
                1.01
                
                
                0.67
                
                
                0.50
                
                
                0.40**SHARE
                    DATA**Net
                    earnings per shareBasicContinuing
                    operations
                
                $
                1.23
                
                $
                0.93
                
                $
                0.52
                
                $
                0.51
                
                $
                0.41Discontinued
                    operations
                
                
                (0.02
                )
                
                1.37
                
                
                0.26
                
                
                0.16
                
                
                0.25Cumulative
                    effect adjustment
                
                
                (0.04
                )
                
                -
                
                
                -
                
                
                -
                
                
                -1.17
                
                
                2.30
                
                
                0.78
                
                
                0.67
                
                
                0.66DilutedContinuing
                    operations
                
                
                1.14
                
                
                0.87
                
                
                0.49
                
                
                0.50
                
                
                0.40Discontinued
                    operations
                
                
                (0.02
                )
                
                1.34
                
                
                0.25
                
                
                0.15
                
                
                0.24Cumulative
                    effect adjustment
                
                
                (0.04
                )
                
                -
                
                
                -
                
                
                -
                
                
                -1.08
                
                
                2.21
                
                
                0.74
                
                
                0.65
                
                
                0.64Weighted
                    average shares (thousands)Basic
                
                
                29,903
                
                
                30,171
                
                
                29,777
                
                
                28,570
                
                
                27,842Diluted
                
                
                30,354
                
                
                30,896
                
                
                30,467
                
                
                29,192
                
                
                28,995Cash
                    dividends per share
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
  -
            17 -
 **Quarterly
        results - fiscal years ended March 31, 2007 and 2006**
 (in
        thousands of US$, except per share amounts)
  **Period**
                
                **Q1**
                
                **Q2**
                
                **Q3**
                
                **Q4**
                
                **Year****FISCAL
                    2007**Revenues
                
                $
                325,504
                
                $
                338,681
                
                $
                374,757
                
                $
                320,744
                
                $
                1,359,686Operating
                    earnings
                
                
                30,351
                
                
                24,873
                
                
                17,504
                
                
                10,260
                
                
                82,988Net
                    earnings
                    from continuing operations
                
                
                14,133
                
                
                11,973
                
                
                7,757
                
                
                2,824
                
                
                36,687Net
                    loss from
                    discontinued operations
                
                
                -
                
                
                -
                
                
                -
                
                
                (471
                )
                
                (471
                )Net
                    earnings
                
                
                12,780
                
                
                11,973
                
                
                7,757
                
                
                2,353
                
                
                34,863Net
                    earnings
                    per share:Basic
                
                
                0.43
                
                
                0.40
                
                
                0.26
                
                
                0.08
                
                
                1.17Diluted
                
                
                0.39
                
                
                0.38
                
                
                0.25
                
                
                0.06
                
                
                1.08**FISCAL
                    2006**Revenues
                
                $
                251,216
                
                $
                272,320
                
                $
                296,651
                
                $
                247,947
                
                $
                1,068,134Operating
                    earnings
                
                
                24,903
                
                
                24,430
                
                
                12,930
                
                
                2,963
                
                
                65,226Net
                    earnings
                    from continuing operations
                
                
                10,964
                
                
                11,228
                
                
                5,371
                
                
                471
                
                
                28,034Net
                    earnings
                    from discontinued operations
                
                
                156
                
                
                2,564
                
                
                2,782
                
                
                35,961
                
                
                41,463Net
                    earnings
                
                
                11,120
                
                
                13,792
                
                
                8,153
                
                
                36,432
                
                
                69,497Net
                    earnings
                    per share:Basic
                
                
                0.37
                
                
                0.46
                
                
                0.27
                
                
                1.21
                
                
                2.30Diluted
                
                
                0.35
                
                
                0.44
                
                
                0.26
                
                
                1.18
                
                
                2.21**OTHER
                    DATA**EBITDA
                    -
                    fiscal 2007 (note 1)
                
                
                38,301
                
                
                32,871
                
                
                27,550
                
                
                22,634
                
                
                121,356EBITDA
                    -
                    fiscal 2006 (note 1)
                
                
                29,756
                
                
                29,157
                
                
                21,075
                
                
                11,407
                
                
                91,395
  **Notes**
 1.
        EBITDA is defined
        as net earnings before extraordinary items, discontinued operations, minority
        interest share of earnings, income taxes, interest, other income, depreciation
        and amortization and stock-based compensation expense. The Company uses EBITDA
        to evaluate operating performance. EBITDA is an integral part of the Company’s
        planning and reporting systems. Additionally, the Company uses multiples
        of
        current and projected EBITDA in conjunction with discounted cash flow models
        to
        determine its overall enterprise valuation and to evaluate acquisition targets.
        The Company believes EBITDA is a reasonable measure of operating performance
        because of the low capital intensity of its service operations. The Company
        believes EBITDA is a financial metric used by many investors to compare
        companies, especially in the services industry, on the basis of operating
        results and the ability to incur and service debt. EBITDA is not a recognized
        measure of financial performance under GAAP in the United States of America,
        and
        should not be considered as a substitute for operating earnings, net earnings
        or
        cash flows from operating activities, as determined in accordance with GAAP.
        The
        Company’s method of calculating EBITDA may differ from other issuers and
        accordingly, EBITDA may not be comparable to measures used by other issuers.
        A
        reconciliation of annual amounts appears below.
  (in
                    thousands of US$)**Year
                    ended March 31**
                
                
                **2007**
                
                
                **2006**
                
                
                **2005**
                
                
                **2004**
                
                
                **2003**Operating
                    earnings
                
                $
                82,988
                
                $
                65,226
                
                $
                35,306
                
                $
                27,633
                
                $
                23,278Depreciation
                    and amortization
                
                
                31,587
                
                
                23,578
                
                
                21,107
                
                
                8,586
                
                
                7,537114,575
                
                
                88,804
                
                
                56,413
                
                
                36,219
                
                
                30,815Stock-based
                    compensation expense
                
                
                6,781
                
                
                2,591
                
                
                1,688
                
                
                322
                
                
                -EBITDA
                
                $
                121,356
                
                $
                91,395
                
                $
                58,101
                
                $
                36,541
                
                $
                30,815
  2.
        Adjusted diluted
        net earnings per share from continuing operations is defined as diluted net
        earnings per share from continuing operations plus the effect, after income
        taxes, of (i) the amortization of short-lived intangible assets acquired
        in
        connection with recent commercial real estate services acquisitions and (ii)
        the
        impairment loss on available-for-sale securities. The Company believes this
        measure is useful because (i) it isolates the impact of material non-recurring
        acquisition-related amortization expense and (ii) it eliminates the effect
        of a
        non-cash impairment of securities obtained in connection with the disposal
        of a
        business. This is not a recognized measure of financial performance under
        GAAP
        in the United States of America, and should not be considered as a substitute
        for diluted net earnings per share from continuing operations, as determined
        in
        accordance with GAAP. The Company’s method of calculating this measure may
        differ from other issuers and accordingly, this measure may not be comparable
        to
        measures used by other issuers. A reconciliation appears below.
   -
            18 -
  (in
                    US$)**Year
                    ended March 31**
                
                **2007**
                
                **2006**
                
                **2005**
                
                **2004**
                
                **2003**Diluted
                    net earnings per share from continuingoperations
                
                $
                1.14
                
                $
                0.87
                
                $
                0.49
                
                $
                0.50
                
                $
                0.40Amortization
                    of brokerage backlog, net oftaxes
                
                
                0.15
                
                
                0.14
                
                
                0.18
                
                
                -
                
                
                -Impairment
                    loss on available-for-salesecurities,
                    net of taxes
                
                
                0.08
                
                
                -
                
                
                -
                
                
                -
                
                
                -Adjusted
                    diluted net earnings per share fromcontinuing
                    operations
                
                $
                1.37
                
                $
                1.01
                
                $
                0.67
                
                $
                0.50
                
                $
                0.40
   **Risk
        and uncertainties**
 The
        Company is subject to various risks and uncertainties, which are described
        below
        in order of significance:
 •
              Economic
                  conditions, especially as they relate to consumer
                  spending.
 •
              Commercial
                  real estate property values, vacancy rates and general conditions
                  of
                  financial liquidity for real estate
                  transactions.
 •
              Extreme
                  weather conditions impacting demand for our services or our ability
                  to
                  perform those services.
 •
              Political
                  conditions, including any outbreak or escalation of terrorism or
                  hostilities and the impact thereof on our
                  business.
 •
              Competition
                  in the markets served by the
                  Company.
 •
              Labor
                  shortages or increases in wage and benefit
                  costs.
 •
              The
                  effects of changes in interest rates on our cost of
                  borrowing.
 •
              Unexpected
                  increases in operating costs, such as insurance, workers’ compensation,
                  health care and fuel prices.
 •
              Changes
                  in the frequency or severity of insurance incidents relative to
                  our
                  historical experience.
 •
              The
                  effects of changes in foreign exchange rates in relation to the
                  US dollar
                  on the Company’s Canadian and Australian dollar denominated revenues and
                  expenses.
 •
              Our
                  ability to make acquisitions at reasonable prices and successfully
                  integrate acquired operations.
 •
              Changes
                  in government policies at the federal, state/provincial or local
                  level
                  that may adversely impact our
                  businesses.
 
 Each
        of
        the above factors may have a material adverse affect on the Company’s business,
        operating results and financial condition.
 
 **Management's
        discussion and analysis**
 The
        section entitled “Management’s Discussion and Analysis of Results of Operations
        and Financial Condition” within the Company’s 2007 annual report is incorporated
        herein by reference.
 
 **Interest
        of management and others in material transactions**
 There
        are no material interests, direct or indirect, of directors or executive
        officers of the Company, any shareholder who beneficially owns, directly
        or
        indirectly, or exercises control or direction over more than 10% of the
        outstanding shares of the Company, or any known associate or affiliate of
        such
        persons in any transactions within the three most recently completed financial
        years of the Company or during the current financial year which has materially
        affected, or would materially affect, the Company.
 
 **Material
        contracts**
 On
        February 1, 2004, the Company, upon the review, report and recommendation
        of the
        Executive Compensation Committee of the Board of Directors of the Company,
        entered into a
  -
            19 -
 management
          services agreement (the "Management Services Agreement") with Jayset Capital
          Corp. (“Jayset”) and Jay S. Hennick. Mr. Hennick is the sole officer, director
          and shareholder of Jayset. The particulars of the Management Services Agreement
          are set out in the sections entitled "Executive Compensation - Management
          Contract" and "Sale of Control Agreement" contained in the Circular, which
          sections are incorporated herein by reference.
 
 **Cease
        trade orders, bankruptcies, penalties or sanctions**
 No
        director or executive officer of the Company or shareholder holding a sufficient
        number of securities to materially affect the control the Company is, or
        within
        the ten years prior to the date hereof has been, a director or executive
        officer
        of any company (including the Company) that, while that person was acting
        in
        that capacity: (i) was the subject of a cease trade or similar order or an
        order
        that denied the relevant company access to any exemption under securities
        legislation for a period of more than 30 consecutive days; (ii) was subject
        to
        an event that resulted, after the director or executive officer ceased to
        be a
        director or executive officer, in the company being the subject of a cease
        trade
        or similar order or an order that denied the relevant company access to any
        exemption under securities legislation for a period of more than 30 consecutive
        days; or (iii) within a year of that person ceasing to act in that capacity,
        became bankrupt, made a proposal under any legislation relating to bankruptcy
        or
        insolvency or was subject to or instituted any proceedings, arrangement or
        compromise with creditors or had a receiver, receiver manager or trustee
        appointed to hold its assets, other than David R. Beatty who was a director
        of
        Thistle Mining Inc. (“Thistle”) when Thistle announced on December 21, 2004 that
        it intended to undertake a restructuring under the *Companies’
        Creditors Arrangement Act* .
        While
        Thistle completed its restructuring on June 30, 2005, its common shares were
        suspended from trading on public markets due to the restructuring until Thistle
        delisted in February 2006. Mr. Beatty is no longer a director of
        Thistle.
 
 No
        director or executive officer of the Company or shareholder holding a sufficient
        number of securities to materially affect the control the Company has, within
        the last ten years: (a) become bankrupt, made a proposal under any legislation
        relating to bankruptcy or insolvency or become subject to or instituted any
        proceedings, arrangement or compromise with creditors, or had a receiver,
        receiver manager or trustee appointed to hold his assets; or (b) been subject
        to
        any penalties or sanctions imposed by a court or securities regulatory authority
        relating to trading in securities, promotion or management of a publicly
        traded
        issuer or theft or fraud.
 
 **Conflicts
        of interest**
 Certain
        directors and officers of the Company are engaged in and will continue to
        engage
        in activities outside the Company and, as a result, certain directors and
        officers of the Company may become subject to conflicts of interest. The *Business
        Corporations Act* (Ontario)
        provides that in the event that a director has an interest in a contract
        or
        proposed contract or agreement, the director shall disclose his interest
        in such
        contract or agreement and shall refrain from voting on any matter in respect
        of
        such contract or agreement unless otherwise provided under the *Business
        Corporations Act* (Ontario).
        To the extent that conflicts of interest arise, such conflicts will be resolved
        in accordance with the provisions of the *Business
        Corporations Act* (Ontario).
 
 As
        at
        the date hereof, the Company is not aware of any existing or potential material
        conflicts of interest between the Company and a director or officer of the
        Company.
  **Experts**
 The
        financial statements for the financial year ended March 31, 2007 have been
        audited by PricewaterhouseCoopers LLP, the Company’s external
        auditors.
 
 **Audit
        Committee**
 The
        Audit Committee is comprised of three members who are each “independent” and
“financially literate” as required by Multilateral Instrument 52-110 *Audit
        Committees* (the
        “Audit Committee Rule”). The members of the Audit Committee during the year
        ended March 31, 2007
  -
            20 -
 were
          Messrs. Ghert - Chair, Calder and Cohen. Mr. Ghert was appointed Chair
          of the
          Audit Committee in May 2005. The Audit Committee has the authority to conduct
          any investigation appropriate to fulfilling its responsibilities, and it
          has
          direct access to the external auditors as well as to anyone in the Company.
          The
          Audit Committee has the ability to retain, at the Company’s expense, special
          legal, accounting, or other consultants or experts it deems necessary in
          the
          performance of its duties. The Audit Committee meets at least four times
          annually, or more frequently as circumstances dictate.
 
 The
        Audit Committee reviews the annual and interim financial statements intended
        for
        circulation among shareholders and reports upon these to the Board of Directors
        of the Company (the "Board") prior to their approval by the full Board. The
        Audit Committee is also responsible for the integrity of the Company’s internal
        accounting and control systems. The Audit Committee communicates directly
        with
        the Company’s external auditors in order to discuss audit and related matters
        whenever appropriate. In addition, the Board may defer to the Audit Committee
        on
        other matters and questions relating to the financial position of the Company
        and its affiliates. In
        fiscal 2007, the Board adopted an updated Audit Committee mandate, a copy
        of
        which is annexed hereto as Exhibit ‘A’. the Audit Committee mandate is also
        published on the Company’s website (www.firstservice.com).
  The
        education and related experience of each of the members of the Audit Committee
        that is relevant to the performance by such members of their responsibilities
        on
        such committee is described below.
 
 **Bernard
        I. Ghert** (Chair) - Mr. Ghert has a Masters degree in Business Administration (MBA).
        Mr.
        Ghert was President and Chief Executive Officer of The Cadillac Fairview
        Corporation Limited from 1981 to 1987 and President of Stelworth Investments
        Inc. from 1987 to 1992. Mr. Ghert has been a director of many organizations
        in
        the private and public sectors, including Cadillac Fairview, Stelworth, CT
        Financial and Canada Trust, Wellington Insurance, Canada Deposit Insurance
        Corporation, and has served as President of the Canadian Institute of Public
        Real Estate Companies. He is currently a director of several Middlefield Funds
        and is on the Advisory Board of the Office of the Superintendent of Financial
        Institutions. Mr. Ghert currently serves as President of the B.I. Ghert Family
        Foundation and is a past chair of the Mount Sinai Hospital Board of
        Directors.
 
 **Peter
        F. Cohen -** Mr.
        Cohen is a Chartered Accountant and a former partner in an audit practice
        of a
        public accounting firm. Mr. Cohen is currently the Chair of the Board of
        the
        Company and President and Chief Executive Officer of the Dawsco Group, a
        private
        real estate and investment company owned by Mr. Cohen and his family. Mr.
        Cohen
        was a co-founder and Chair and Chief Executive Officer of Centrefund Realty
        Corporation, a publicly traded shopping center investment company until August
        2000 when control of the company was sold. Mr. Cohen is a member of the boards
        of a number of private companies and charities.
 
 **Brendan
        Calder** - Mr.
        Calder has been the Effective Executive in Residence & Adjunct Professor of
        Strategic Management at the Rotman School of Management, University of Toronto,
        since 2001. Between 1998 and 2000, Mr. Calder was Chair of the Board of CIBC
        Mortgages, Inc., the mortgage banking subsidiary of a Canadian chartered
        bank,
        and he served as that company’s President, Chief Executive Officer, and director
        from 1995 to 1998. Mr. Calder is also past Chair of the Peter F. Drucker
        Canadian Foundation and is a director of Custom Direct Income Fund and the
        Toronto International Film Festival Group.
 
 The
        Audit Committee Rule requires the Company to disclose whether its Audit
        Committee has adopted specific policies and procedures for the engagement
        of
        non-audit services and to prepare a summary of these policies and procedures.
        The mandate of the Audit Committee provides that it is such committee’s
        responsibility to: (a) approve the appointment and,
  -
            21 -
 when
          circumstances warrant, discharge of the external auditor and monitor its
          qualifications, performance and independence; (b) approve and oversee the
          disclosure of all audit services provided by the external auditor to the
          Company
          or any of its subsidiaries, determining which non-audit services the external
          auditor is prohibited from providing and, exceptionally, pre-approve and
          oversee the disclosure of permitted non-audit services to be performed
          by the
          external auditor, in accordance with applicable laws and regulations; and
          (c)
          approve the basis and amount of the external auditor’s fees and other
          significant compensation. The Audit Committee has adopted a pre-approval
          policy
          pursuant to which the Company may not engage the Company’s external auditor to
          carry out certain non-audit services that are deemed inconsistent with
          the
          independence of auditors under US and Canadian applicable laws. The Audit
          Committee must pre-approve all audit services as well as permitted non-audit
          services. The Audit Committee has delegated to the Chair of the Audit Committee,
          who is independent, the authority to act on behalf of the Audit Committee
          with
          respect to the pre-approval of all audit and permitted non-audit services
          provided by its external auditor from time to time. Any approvals by the
          Chair
          are reported to the full Audit Committee at its next meeting.
 
 In
        addition to performing the audit of the Company’s annual consolidated financial
        statements, PricewaterhouseCoopers LLP provided other services to the Company
        and billed the Company the following fees for each of the Company’s two most
        recently completed fiscal years:
 (in
                    US$)
                  **Year
                    ended March 31**
                
                **2007**
                
                **2006**Audit
                    fees (note 1)
                
                $
                1,102,400
                
                $
                1,477,900Audit-related
                    fees (note 2)
                
                
                339,600
                
                
                131,500Tax
                    fees (note 3)
                
                
                147,100
                
                
                322,000All
                    other fees (note 4)
                
                
                5,000
                
                
                4,600**$**
                **1,594,100**
                
                **$**
                **1,936,000**
 
 **Notes:**
  1.
        Refers to the aggregate fees billed by the Company’s external auditor for audit
        services, including statutory and subsidiary audits. In 2006, audit fees
        included audits of Resolve Corporation and issuance of comfort letters in
        relation to the sale of Resolve Corporation.
 2.
        Refers to the aggregate fees billed for assurance and related services by
        the
        Company’s external auditor that are reasonably related to the performance of the
        audit or review of the Company’s financial statements and are not reported under
        (1) above, including professional services rendered by the Company’s external
        auditor for accounting consultations on proposed transactions and consultations
        related to accounting and reporting standards. Such fees included fees incurred
        in respect of: compliance with the *Sarbanes-Oxley
        Act* ;
        due
        diligence and other work related to the disposition and acquisition of
        businesses, such work being unrelated to the audit of the Company’s financial
        statements; accounting consultations with respect to proposed transactions;
        as
        well as other audit-related services.
 3.
        Refers to the aggregate fees billed for professional services rendered by
        the
        Company’s external auditor for tax compliance, tax advice and tax
        planning.
 4.
        Refers to fees for software product licensing billed by the Company’s external
        auditor.
 
 
 **Additional
        information**
 Additional
        information, including the directors’ and officers’ remuneration and
        indebtedness, principal holders of the Company’s securities and options to
        purchase securities, where applicable, is contained in the
        Circular.
 
 Copies
        of publicly filed documents of the Company, including those incorporated
        herein
        by reference, can be found through the SEDAR website at www.sedar.com.
        Additional financial information is provided in the Company’s consolidated
        comparative financial statements and Management's Discussion and Analysis
        for
        the year ended March 31, 2007.
 
 Upon
        request, the Secretary of the Company will provide to any person or
        company:
 
 (a)
              when
                  the securities of the Company are in the course of a distribution
                  under a
                  short form prospectus or a preliminary short form prospectus has
                  been
                  filed for a distribution of its
                  securities:
    -
            22 -
  (i)
              one
                  copy of the most recent Annual Information Form of the Company,
                  together
                  with one copy of any document, or the pertinent pages of any document,
                  incorporated by reference in the Annual Information
                  Form;
 (ii)
              one
                  copy of the comparative financial statements of the Company for
                  its most
                  recently completed financial year for which financial statements
                  have been
                  filed together with the accompanying report of the auditor and
                  one copy of
                  any interim financial statements of the Company for any period
                  after the
                  end of its most recently completed financial
                  year;
 (iii)
              one
                  copy of the management information circular of the Company in respect
                  of
                  its most recent annual meeting of shareholders that involved the
                  election
                  of directors or one copy of any annual filing prepared instead
                  of the
                  management information circular, as appropriate;
                  and
 (iv)
              one
                  copy of any other documents that are incorporated by reference
                  into the
                  preliminary short form prospectus or the short form prospectus
                  and are not
                  required to be provided under subparagraphs (i) to (iii);
                  or
 
 (b)
              at
                  any other time, one copy of any document referred to in subparagraphs
                  (a)(i), (ii) and (iii), provided that the Company may require the
                  payment
                  of a reasonable charge if the request is made by a person or company
                  who
                  is not a shareholder of the
                  Company.
 
 **Forward-looking
        statements**
 This
        Annual Information Form contains or incorporates by reference certain
        forward-looking statements. Such forward-looking statements involve risks
        and
        uncertainties and include, but are not limited to, statements regarding future
        events and the Company’s plans, goals and objectives. Such statements are
        generally accompanied by words such as “intend”, “anticipate”, “believe”,
“estimate”, “expect” or similar statements. Our actual results may differ
        materially from such statements. Factors that could result in such differences,
        among others, are described in the section entitled “Risks and uncertainties”
above.
 
 Although
        we believe that the assumptions underlying our forward-looking statements
        are
        reasonable, any of the assumptions could prove inaccurate and, therefore,
        there
        can be no assurance that the results contemplated in such forward-looking
        statements will be realized. The inclusion of such forward-looking statements
        should not be regarded as a representation by the Company or any other person
        that the future events, plans or expectations contemplated by the Company
        will
        be achieved. We note that past performance in operations and share price
        are not
        necessarily predictive of future performance. We disclaim any intention and
        assume no obligation to update or revise any forward-looking statement even
        if
        new information becomes available, as a result of future events or for any
        other
        reason.


-
              23
              -
 **EXHIBIT
            “A”**
 
 **MANDATE
            OF THE AUDIT COMMITTEE**
  **PURPOSE**
  The
            Audit Committee (the " **Committee** ")
            is
            appointed by and shall assist the Board of Directors (the " **Board** ")
            of
            FirstService Corporation (the " **Company** ")
            in
            fulfilling its oversight responsibilities in the following principal
            areas: (i)
            accounting policies and practices, (ii) the financial reporting process,
            (iii)
            financial statements provided by the Company to the public, (iv) risk
            management
            including systems of accounting and financial controls, (v) appointing,
            overseeing and evaluating the work and independence of the external auditors,
            and (vi) compliance with applicable legal and regulatory
            requirements.
  In
            addition to the responsibilities specifically enumerated in this Mandate,
            the
            Board may refer to the Committee such matters and questions relating
            to the
            financial position and operations of the Company and its subsidiaries
            as the
            Board may from time to time see fit.
  **MEMBERSHIP**
  The
            Committee shall consist of at least three directors appointed annually
            by the
            Board and selected based upon the following, in accordance with applicable
            laws,
            rules and regulations:
  a.
                *Independence*.
                    Each member shall be independent in accordance with applicable
                    legal and
                    regulatory requirements and in such regard shall have no direct
                    or
                    indirect material relationship with the Company which could,
                    in the view
                    of the Board, reasonably interfere with the exercise of a member’s
                    independent judgment.  b.
                *Financially
                    Literate*.
                    Each member shall be financially literate or must become financially
                    literate within a reasonable period of time after his or her
                    appointment
                    to the Committee. For these purposes, an individual is financially
                    literate if he or she has the ability to read and understand
                    a set of
                    financial statements that present a breadth and level of complexity
                    of
                    accounting issues that are generally comparable to the breadth
                    and
                    complexity of the issues that can reasonably be expected to be
                    raised by
                    the Company’s financial statements.  c.
                *Commitment.*In addition to being a member of the Committee, if a member is
                    also on the
                    audit committee or board of directors of other public companies
                    or
                    organizations, the Board shall determine that such simultaneous
                    service
                    does not impair the ability of such member to serve effectively
                    on the
                    Committee.  **CHAIR
            AND SECRETARY**
  The
            Chair of the Committee shall be selected by the Board. If the Chair is
            not
            present, the members of the Committee may designate a Chair for the meeting
            by
            majority vote of the members present. The Secretary of the Company shall
            be the
            Secretary of the Committee, provided that if the Secretary is not present,
            the
            Chair of the meeting may appoint a secretary for the meeting with the
            consent of
            the other Committee members who are present.
  **MEETINGS**
  The
            times and locations of meetings of the Committee and the calling of and
            procedures at such meetings, shall be determined from time to time by
            the Chair
            of the Committee, in consultation with management when necessary, provided
            that
            there shall be a minimum of four meetings per year. The Committee shall
            have
            sufficient notice in order to prepare for each meeting. Notice of each
            meeting
            shall also be given to the external auditors of the Company, and meetings
            shall
            be convened whenever requested by the external auditors or any member
            of the
            Committee in accordance with applicable law.
  -
                  24
                  -
  **MEETING
            AGENDAS**
  Agendas
            for meetings of the Committee shall be developed by the Chair of the
            Committee
            in consultation with management and the corporate secretary, and shall
            be
            circulated to the Committee members prior to any meetings.
  **RESOURCES
            AND AUTHORITY**
  The
            Committee shall have the resources and the authority to discharge its
            responsibilities, including the authority to engage, at the expense of
            the
            Company, outside consultants, independent legal counsel and other advisors
            as it
            determines necessary to carry out its duties, without seeking approval
            of the
            Board or management.
  The
            Committee shall have the authority to conduct any investigation necessary
            and
            appropriate to fulfilling its responsibilities, and has direct access
            and
            authority to communicate directly with the external auditors, legal counsel
            and
            officers and employees of the Company.
  The
            members of the Committee have the right, for the purpose of performing
            their
            duties, to inspect the books and records of the Company and to discuss
            such
            accounts and records and any matters relating to the financial position,
            risk
            management and internal controls of the Company with the officers and
            external
            auditors of the Company.
  **RESPONSIBILITIES**
  The
            Company's management is responsible for preparing the Company's financial
            statements while the external auditors are responsible for auditing those
            financial statements. The Committee is responsible for overseeing the
            conduct of
            those activities by the Company's management and external auditors, and
            overseeing the activities of any internal audit initiatives. The Company's
            external auditors are accountable to the Committee as representatives
            of the
            Company's shareholders.
  It
            is
            recognized that members of the Committee are not full-time employees
            of the
            Company and do not represent themselves to be accountants or auditors
            by
            profession or experts in the fields of accounting or auditing or the
            preparation
            of financial statements. It is not the duty or responsibility of the
            Committee
            or its members to conduct "field work" or other types of auditing or
            accounting
            reviews or procedures. Each member of the Committee shall be entitled
            to rely on
            (i) the integrity of those persons and organizations within and outside
            the
            Company from whom it receives information, and (ii) the accuracy of the
            financial and other information provided to the Committee by such persons
            or
            organizations absent actual knowledge to the contrary.
  The
            specific responsibilities of the Committee are as follows:
  1.
                **Financial
                    Reporting Process and Financial
                    Statements**  a.
                In
                    consultation with the external auditors and management, review
                    the
                    integrity of the Company's financial reporting process, both
                    internal and
                    external, and any major issues as to the adequacy of the internal
                    controls
                    and any special audit procedures adopted in light of any material
                    control
                    deficiencies;  -
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  b.
                Review
                    all material transactions and contracts entered into by the Company
                    with
                    any insider or related party of the Company, other than director,
                    officer
                    or employee compensation which is approved by the Compensation
                    Committee;  c.
                Review
                    with management and the external auditors the Company’s annual audited
                    consolidated financial statements and discuss with the external
                    auditors
                    all matters required to be discussed by generally accepted auditing
                    standards (GAAS) in Canada and the United States. This would
                    include
                    reviewing an annual report prepared by the external auditors
                    describing:
                    (i) all critical accounting policies used by the Company, (ii)
                    any
                    material alternative accounting treatments within generally accepted
                    accounting principles (GAAP) that have been discussed with management
                    of
                    the Company, including the ramifications of the use of such alternative
                    treatments and disclosures, and (iii) any other material written
                    communications between the external auditors and
                    management;  d.
                Following
                    completion of the annual audit, review with management and the
                    external
                    auditors any significant issues, concerns or difficulties encountered
                    and
                    resolve any disagreements between management and the external
                    auditors;  e.
                Review
                    the interim quarterly and annual financial statements and annual
                    and
                    interim press releases prior to the release of earnings information,
                    including earnings guidance provided to
                    analysts;  f.
                Review
                    and be satisfied that adequate procedures are in place for the
                    review of
                    the public disclosure of financial information by the Company
                    extracted or
                    derived from the Company's financial statements, other than as
                    referred to
                    in (f), and periodically assess the adequacy of those procedures;
                    and  g.
                Meet
                    separately with management and with the external auditors, including
                    at
                    the time of the annual audit plan review with management and
                    the external
                    auditors.  **2.**
                **External
                    Auditors**   a.
                The
                    Committee shall require the external auditor to report directly
                    to it and
                    is responsible for the selection, nomination, compensation, retention,
                    termination and oversight of the work of the external auditors
                    engaged for
                    the purpose of issuing an auditor's report or performing other
                    audit,
                    review or attest services for the Company, and in such regard
                    recommend to
                    the Board the external auditors to be nominated for approval
                    by the
                    shareholders;   b.
                Pre-approve
                    all audit engagements and the provision by the external auditors
                    of all
                    non-audit services, including fees and terms for all audit and
                    non-audit
                    engagements, and in such regard the Committee may establish the
                    types of
                    non-audit services the external auditors shall be prohibited
                    from
                    providing and shall establish the types of audit, audit related
                    and
                    non-audit services for which the Committee will retain the external
                    auditors. The Committee may delegate the responsibility to pre-approve
                    non-audit services to one of its members and any such delegated
                    pre-approvals shall be presented to the Committee at its next
                    scheduled
                    meeting ;  c.
                Review
                    and approve the Company’s policies for the hiring of partners and
                    employees and former partners and employees of the external auditing
                    firm;  d.
                Consider,
                    assess and report to the Board with regard to the independence
                    and
                    performance of the external auditors; and  -
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  e.
                Request
                    and review annually a report by the external auditors regarding
                    the
                    auditing firm's internal quality-control procedures, any material
                    issues
                    raised by the most recent internal quality-control review of
                    the auditing
                    firm, or by any inquiry or investigation by governmental or professional
                    authorities, within the past five years.  **3.**
                **Internal
                    Controls and Risk Management**  a.
                Oversee
                    management's design, implementation and evaluation of the Company's
                    internal controls over financial reporting, including compliance
                    with the
                    requirements of the Sarbanes-Oxley Act. Receive and review reports
                    from
                    management and the external auditors with regard to the reliability
                    and
                    effective operation of the Company's accounting systems and internal
                    controls;   b.
                Discuss
                    with management the Company's approach to risk assessment and
                    management,
                    controls over fraud and assessment of the need for internal
                    auditing;   c.
                Establish
                    policies and procedures for the confidential, anonymous submission
                    by
                    employees of the Company of any concerns regarding questionable
                    accounting
                    or other acts and for the receipt, retention and treatment of
                    complaints
                    received regarding accounting, internal accounting controls or
                    auditing
                    matters.   **4.**
                **Legal
                    and Regulatory Requirements**  a.
                Receive
                    and review timely analysis by management of significant issues
                    relating to
                    public disclosure and reporting, including, prior to finalization,
                    the
                    Management's Discussion and Analysis and Annual Information
                    Form;  b.
                Prepare
                    the report of the Committee required to be included with the
                    Company’s
                    periodic filings; and  c.
                Assist
                    the Board in the oversight of compliance with legal and regulatory
                    matters.  **5.**
                **Additional
                    Responsibilities**  a.
                Report
                    regularly to the Board, including on matters such as the quality
                    and
                    integrity of the Company's financial statements, compliance with
                    legal and
                    regulatory requirements, the results of any internal audit initiatives,
                    including evaluation of internal controls over financial reporting
                    for
                    purposes of compliance with Sarbanes-Oxley, and the performance
                    and
                    independence of the external auditors;
                    and  b.
                Reassess
                    annually the adequacy of the Committee’s Mandate and prepare and review
                    with the Board an annual performance evaluation of the
                    Committee.  
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