**U.S. SECURITIES ANDEXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 40-F**

 

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**o****        ****REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THESECURITIES EXCHANGE ACT OF 1934**

 

**OR**

 

**ý****        ****ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31,2005**

 

**Commission File No.:  0-30718**

 

**SIERRA WIRELESS, INC.**

(Exact name of Registrant as specified in its charter)

 

**Canada**

(Jurisdiction of incorporation or organization)

 

Primary Standard Industrial Classification Doe (ifapplicable):**  3663**

 

I.R.S. Employer Identification Number (if applicable):  **94-3338019**

 

**13811 Wireless Way, Richmond**

**British Columbia, Canada  V6V 3A4**

**(604) 231-1100**

(Address and telephone number of principal executiveoffices)

 

**Davis Wright Tremaine LLP1300 SW Fifth Avenue, 24th FloorPortland, OR  97201**

(Agent for service in the United States)

 

Securities registered or to be registered pursuant to Section 12(b) ofthe Act:  **None**

 

Securities registered or to be registered pursuant to Section 12(g) ofthe Act: 

 

**Common Shares**

(Title of Class)

 

Name of exchange on which securities are registered:

**Toronto Stock Exchange, The Nasdaq StockMarket**

 

Securities for which there is a reporting obligationpursuant to Section 15(d) of the Act:  **None**

 

Indicate by check mark the information filed with this Form:
|   | ý Annual Information Form | ý Audited Annual Financial Statements |
|--------|-------------------------------------|-------------------------------------------------|

 

Indicate the number of outstanding shares of each of the issuer’sclasses of capital common stock as of the close of the period covered by theannual report:  **25,476,447Common Shares without par value as at December 31, 2005**

 

Indicate by check mark whether the Registrant, by filing theinformation contained in this Form, is also thereby furnishing the informationto the Commission pursuant to Rule 12g3-2(b) under the *Securities Exchange Act of 1934*, If “yes”, is marked,indicate the filing number assigned to the Registrant in connection with suchRule. o  Yes     82 -             ý  No

 

Indicate by check mark whether the Registrant:  (1) has filed all reports required to befiled by Section 13 or 15(d) of the *SecuritiesExchange Act of 1934* during the preceding 12 months (or for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes  ý    No  o

 

 

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**INCORPORATIONBY REFERENCE**

 

The Registrant’s Annual Information Form and theRegistrant’s financial statements for the year ended December 31, 2005 areattached hereto as Appendix A and Appendix B, respectively, and areincorporated by reference herein.

 

**UNDERTAKING**

 

The Registrant undertakes to make available, in personor by telephone, representatives to respond to inquiries made by the Commissionstaff, and to furnish promptly, when requested to do so by the Commissionstaff, information relating to: the securities registered pursuant to Form 40-F;the securities in relation to which the obligation to file an annual report on Form 40-Farises; or transactions in said securities.

 

**SIGNATURES**

 

Pursuant to the requirements of the *Securities Exchange Act of 1934*, as amended, the Registrantcertifies that it meets all of the requirements for filing on Form 40-Fand has duly caused this annual report to be signed on its behalf by theundersigned, thereto duly authorized.

 

 
| ** ** | **SIERRA WIRELESS, INC.**        |
|------------|---------------------------------------|
| * *   | *(Registrant)*                        |
| * *   | * *                              |
| * *   | * *                              |
| * *   | *“David G. McLennan”*       | * * |
|       | David G. McLennan,                    |
|       | Chief Financial Officer and Secretary |

 

Date:  March 23, 2006

 

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Annual Information Form****March 23, 2006

 

**TABLE OF CONTENTS**

 
| FORWARD-LOOKING INFORMATION                         |   |
|-----------------------------------------------------|--------|
|                                                |   |
| CORPORATE STRUCTURE                                 |   |
|                                                |   |
| GENERAL DEVELOPMENT OF THE  BUSINESS                |   |
|                                                |   |
| **General**                                         |   |
| **Three Year History**                              |   |
| **Industry Background and  Future Trends**          |   |
|                                                |   |
| NARRATIVE DESCRIPTION OF THE  BUSINESS              |   |
|                                                |   |
| **Our  Solution**                                   |   |
| **Our  Products**                                   |   |
| **Product Development**                             |   |
| **Distribution**                                    |   |
| **Marketing**                                       |   |
| **Manufacturing**                                   |   |
| **Employees**                                       |   |
| **Competition**                                     |   |
| **Intellectual Property**                           |   |
| **Governmental Regulation**                         |   |
| **Additional Information  Concerning Our Business** |   |
|                                                |   |
| DIVIDENDS                                           |   |
|                                                |   |
| DESCRIPTION OF CAPITAL STRUCTURE                    |   |
|                                                |   |
| MARKET FOR SECURITIES                               |   |
|                                                |   |
| DIRECTORS AND EXECUTIVE  OFFICERS                   |   |
|                                                |   |
| **Directors**                                       |   |
| **Executive Officers**                              |   |
|                                                |   |
| CODE OF BUSINESS  CONDUCT AND ETHICS                |   |
|                                                |   |
| AUDIT COMMITTEE                                     |   |
|                                                |   |
| EVALUATION OF  DISCLOSURE CONTROLS AND PROCEDURES   |   |
|                                                |   |
| LEGAL PROCEEDINGS                                   |   |
|                                                |   |
| QUORUM EXEMPTION                                    |   |
|                                                |   |
| REGISTRAR AND TRANSFER  AGENT                       |   |
|                                                |   |
| MATERIAL CONTRACTS                                  |   |

 

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| EXPERTS                |   |
|------------------------|--------|
|                   |   |
| ADDITIONAL INFORMATION |   |

 

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## ***FORWARD-LOOKING STATEMENTS***

## *** ***

Certainstatements in this Annual Information Form, or incorporated by referenceherein, that are not based on historical facts, constitute forward-lookingstatements or forward-looking information within the meaning of applicablesecurities laws (“forward-looking statements”). These forward-lookingstatements are not promises or guarantees of future performance but are onlypredictions that relate to future events, conditions or circumstances or ourfuture results, performance, achievements or developments and are subject tosubstantial known and unknown risks, assumptions, uncertainties and otherfactors that could cause our actual results, performance, achievements ordevelopments in our business or in our industry to differ materially from thoseexpressed, anticipated or implied by such forward-looking statements. Forward-lookingstatements include all disclosure regarding possible events, conditions,circumstances or results of operations that are based on assumptions aboutfuture economic conditions, courses of action and other future events. Wecaution you not to place undue reliance upon any such forward-lookingstatements, which speak only as of the date they are made. Theseforward-looking statements appear in a number of different places in thisAnnual Information Form and can be identified by words such as “may”, “estimates”,“projects”, “expects”, “intends”, “believes”, “plans”, “anticipates”, or theirnegatives or other comparable words. Forward-looking statements includestatements regarding the outlook for our future operations, plans and timingfor the introduction or enhancement of our services and products, statementsconcerning strategies, developments, statements about future market conditions,supply conditions, end customer demand conditions, channel inventory and sellthrough, revenue, gross margin, operating expenses, profits, forecasts offuture costs and expenditures, the outcome of legal proceedings, and otherexpectations, intentions and plans that are not historical fact. The riskfactors and uncertainties that may affect our actual results, performance,achievements or developments are many and include, amongst others, our abilityto develop, manufacture, supply and market new products that we do not producetoday that meet the needs of customers and gain commercial acceptance, ourreliance on the deployment of next generation networks by major wirelessoperators, the continuous commitment of our customers, increased competitionand other risks detailed herein under the heading “*Risk Factors*”. Many of these factors and uncertainties arebeyond the control of the Company. Consequently, all forward-looking statementsin this Annual Information Form, or the documents incorporated by referenceherein, are qualified by this cautionary statement and there can be noassurance that actual results, performance, achievements or developmentsanticipated by the Company will be realized. Forward-looking statements arebased on management’s current plans, estimates, projections, beliefs andopinions and the Company does not undertake any obligation to update forward-lookingstatements should the assumptions related to these plans, estimates,projections, beliefs and opinions change. 

 

## *** ***CURRENCY

## *** ***

Unless otherwise indicated, all figures arestated in U.S. dollars.

 

## ***CORPORATE STRUCTURE***

## *** ***

Unless thecontext otherwise indicates, references to “we”, “our”, “us”, “the Company” or “SierraWireless” in this Annual Information Form means Sierra Wireless, Inc.and its subsidiaries.

 

SierraWireless was incorporated under the *Canada BusinessCorporations Act* on May 31, 1993. The Articles of SierraWireless were amended by a Certificate of Amendment issued March 29, 1999to remove the private company provisions and restrictions on share transfer. TheArticles of the Company were further amended by Certificates of Amendment issuedMay 13, 1999 and May 14, 1999 to: (i) re-designate and changeall existing common shares in the capital of the Company to new common sharesin the capital of the Company (the “Common Shares”); (ii) change therights attached to all preference shares in the capital of the Company (the “PreferenceShares”) and to remove each existing series of

 

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PreferenceShares; and (iii) consolidate the Common Shares on the basis of onepost-consolidation Common Share for 1.5 pre-consolidation Common Shares.

 

The Company’sregistered and records office is located at Suite 2600, Three BentallCentre, 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3 andits head office and principal place of business is located at 13811 WirelessWay, Richmond, British Columbia, Canada, V6V 3A4.

 

The followingtable lists subsidiaries of Sierra Wireless and their jurisdictions ofincorporation or organization. All such entities are 100% owned, directly orindirectly, by Sierra Wireless.

 

| **Name**                               | ** ** | **Jurisdiction of  Incorporation or Organization** |
|----------------------------------------|------------|----------------------------------------------------|
| Sierra Wireless America, Inc.     |       | Delaware, U.S.A.                                   |
| Sierra Wireless (UK) Limited           |       | United Kingdom                                     |
| Sierra Wireless (Asia-Pacific) Limited |       | Hong Kong                                          |

 

## ***GENERALDEVELOPMENT OF THE BUSINESS***

## *** ***

### **General**

###  

We provideleading edge wireless wide-area modem solutions for mobile computing overcellular networks. We develop and market a broad range of products that includewireless modems for mobile computers, embedded modules for original equipment manufacturers, or OEMs, and ruggedvehicle-mounted modems. Our products permit users to access wireless data andvoice communications networks using laptop computers, handheld mobile computing devices, or vehicle-based systems. 

 

Wireless data communications is an expandingmarket positioned at the convergence of wireless communications, mobilecomputing and the Internet, each of which we believe represents a growingmarket. Our products are based on open standards, including the Internetprotocol, and operate on the networks of major wireless operators around the world.

 

Our products are primarily used by businesses and governmentorganizations to enable their employees to access a wide range of applications,including the Internet, e-mail, corporate intranet, remote databases andcomputer aided dispatch. We sell our products worldwide, with emphasison the North American, European and Asia-Pacific regions, through indirect channels, including wirelessoperators, resellers and OEMs.

 

During thelatter part of 2003 and throughout 2004, we experienced stronger than expecteddemand for our products, primarily as a result of our strong market position inCDMA EV-DO Release 0 PC cards and our CDMA 1X embedded module sales to palmOne.During this period, customer concentration increased in our revenue base. Followingour considerable revenue and earnings growth in 2004, we experienced asignificant reduction in our business in 2005 relative to 2004 as a result of:

 

•                  The reduction in our embedded module business volumes as a result ofthe completion of CDMA 1X module shipments to palmOne for its Treo 600Smartphone at the end of 2004;

 

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•                  Reported channel inventory at some of our channel partners that wasalready sufficient to meet near-term customer demand during the first quarterof 2005; and

 

•                  The near-term impact of increased competition in CDMA EV-DO and EDGEPC cards, including a loss of market share at Verizon Wireless.

 

In order toaddress this change in our business, we undertook a restructuring of ouroperations in June 2005, which included exiting our Voq professional phoneinitiative. The result of this restructuring was a reduction in our coststructure and a greater focus on our core PC card and embedded modulesbusiness, where we already have well-established market positions and believethere are significant growth opportunities.

 

Since themid-year restructuring, we have focused on core PC Card and embedded moduleopportunities for existing products, as well as new product development andbusiness development in these areas. This focus has allowed us to return tosequential quarterly revenue growth during the second half of fiscal 2005,realizing 25% and 37% sequential growth in the third and fourth quartersrespectively. Following the restructuring, we were also able to reduce our netloss and improve cash flow during the second half of 2005.

 

During 2006,we expect to continue to invest in our research and development efforts toensure that we are well-positioned with new products that will take advantageof market opportunities associated with the deployment of 3G networks. See “NarrativeDescription of Business - Our Products” for discussion of specific productdevelopment initiatives.

 

### **ThreeYear History**

###  

***Fiscal 2005***

 

•                  We began commercial shipmentsof four new products – the UMTS/HSDPA AirCard 860 and AirCard 850 for NorthAmerica and Europe, respectively; the MC5720 PCI express Mini Card embeddedmodule (“Mini Card”) for CDMA 1xEV-DO networks; and the EM5625, an embeddedmodule for CDMA 1xEV-DO networks.

 

•                  We commenced commercialshipments of the AirCard 860 and AirCard 850 to Cingular in North America, aswell as Manx Telecom and sunrise in Europe, making us the first company in theworld to launch a fully functional UMTS/HSDPA PC card.

 

•                  We announced OEM design winswith Lenovo and Hewlett-Packard (“HP”) for our MC5720 PCI express Mini Cardembedded module for EV-DO networks and commenced commercial shipments of ourEV-DO Mini Card to Lenovo in the fourth quarter of 2005. Our MC5720 is theworld’s first 3G wireless minicard module for laptop OEMs. Early in thefirst quarter of 2006, HP announced the availability of their first laptopincorporating our MC5720 Mini Card. Our MC5720 Mini Card has been certified foroperation on both the Sprint and Verizon EV-DO networks.

 

•                  We launched the EM5625, anembedded module for CDMA 1xEV-DO networks, and it was subsequently selected byPanasonic®, @Road, Itronix, MobileAria, a subsidiary of Delphi Corporation, andAirLink for integration into their products.

 

•                  We reported that the MC8755and MC8765 PCI Express Mini Card for UMTS/HSDPA networks in North America andEurope, respectively, were available to OEM customers for testing and

 

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integration,with commercial shipments expected to begin late in the first quarter of 2006.In 2005, we secured designs win for our HSDPA Mini Cards with Lenovo andFujitsu-Siemens Computers.

 

•                  We also reported that we havecommenced the development of the next generation EV-DO (Rev A) and HSDPA(3.6Mps) PC cards and Mini Cards, all of which are expected to be commerciallyavailable in the second half of 2006. 

 

•                  We initiated development oftwo new next generation versions of our MPproduct, one for EV-DO (Rev A) and one for HSDPA, that we expect to launchlater in 2006.

 

•                  We announced the availabilityof the AirCard 775 wireless wide-area network card from Bouygues Telecom inFrance and from Guangdong Mobile Communications Corporation in Guangdongprovince, China. In addition, we signed a distribution agreement with LeafWireless (Pty) Ltd. to distribute the AirCard 775 in South Africa andsurrounding regions.

 

•                  In October 2005, JasonCohenour, previously our COO, was named as our President and CEO. Mr. Cohenoursucceeded David Sutcliffe, who has served as the Company’s CEO since 1995 andwho had announced his intention to retire earlier in the year. Mr. Sutcliffe,at the request of the Board of Directors, continues to serve the company in anon-management capacity as a member of the Board.

 

•                  We undertook a restructuringof our operations in June of 2005, which included exiting our Voqprofessional phone initiative. The result of this restructuring was a reductionin our cost structure and a greater focus on our core PC card and embeddedmodules business.

 

***Fiscal 2004***

 

•                  We began commercial shipmentsof six new products – the Voq professional phone, the Sierra Wireless AirCard580 for CDMA 1X EV-DO networks, the AirCard 555R for CDMA networks in Asia, theMP555 for CDMA 1X, the MP775 for EDGE networks and the AirCard 775 For EDGEnetworks.

 

•                  We announced distributionagreements for our CDMA embedded modules with Premier Wireless Solutions andfor our CDMA PC cards with Tirumala Seven Hills Pvt Ltd in India and BeijingPutian Taili Telecom in China. We also announced supply agreements withAudiovox Communications Corporation for additional supply of our PC5220 EV-DOPC card and with Symbol Technologies and Verifone for our EM3420 CDMA 1Xembedded modules and we completed shipments of this embedded module product topalmOne at the end of the year.

 

•                  We announced the availabilityof the PC3300 and the MP 555 GPS rugged wireless modem on the Sprint NationwidePCS Network.

 

•                  We announced the availabilityof the Sierra Wireless AirCard 775 and the MP 775 GPS rugged wireless modem onthe Cingular Wireless EDGE network. We also announced the availability of theSierra Wireless AirCard 750 for customers in the United Kingdom and in India.

 

•                  We signed a distributionagreement with Onda Communication Spa for our EDGE/GPRS N775 PC card.

 

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•                  We announced the commercialavailability of the Voq professional phone in the Netherlands, Belgium,Luxembourg, Turkey, Austria, Germany, Switzerland, the Nordics, the UnitedKingdom, Italy, France and Spain.

 

•                  In North America, we announcedthe commercial availability of the Voq professional phone from Brightpoint,Cellstar, members of Intel’s Product Dealer Program, Insight, MobilePlanet, RCSComputer Experience and USA.NET.

 

***Fiscal 2003***

 

•                  On August 12, 2003, weannounced the completion of our acquisition of AirPrime, Inc. (“AirPrime”),a privately-held supplier of high-speed wireless data communications products.Under the terms of the acquisition, we issued 3,708,521 of our common shares tothe shareholders of AirPrime. The acquisition provided us with additionalknowledge and expertise in CDMA technology as well as a staff of over 70research and development, engineering, product marketing, manufacturing and technicalsales professionals and enabled us to offer a broader product line of wirelessdata communications products to a wider range of customers and also strengthensour engineering team to develop new products.

 

•                  In October 2003, weannounced plans to introduce our Voq line of professional wireless cellularphones and value-added software to deliver a converged mobile telephony ande-mail solution, commonly referred to as a Smartphone, targeted at businessusers. Our new Voq phones are based on Microsoft Windows MobileTM software forSmartphones and feature both a familiar cellular phone keypad and a uniqueflip-open QWERTY thumbpad. The first Voq-branded phone was made commerciallyavailable in the second quarter of 2004 in certain countries.

 

•                  In November 2003, wecompleted a new issue and secondary offering of 4,600,000 Common Shares,resulting in net proceeds of $67,400,000. Of the 4,600,000 Common Shares soldunder this offering, 4,442,222 Common Shares were offered by the Company and157,778 were offered by certain shareholders of the Company.

 

•                  We developed products for thenew and expanding CDMA 1xEV-DO networks. Our PC 5220 PC Card for the VerizonWireless CDMA 1xEV-DO network started commercially shipping in the thirdquarter of 2003. Our second CDMA 1xEV-DO product, the Sierra Wireless AirCard580, began shipping commercially in the first quarter of 2004.

 

•                  We transferred globalfulfillment and certain CDMA product manufacturing to Flextronics. By usingtheir fully integrated supply chain services, we have reduced product costs,improved alignment with our international customer base and achieved operatingefficiencies and scalability.

 

### **Industry Background andFuture Trends**

###  

***Wireless Data Growth***

 

We provide a broad range of productsincluding wireless modems for mobile computers and embedded modules for laptopOEM wireless applications. We believe that our growth potential is tied, inpart, to the projected growth of the laptop PC market and to the evolution ofwireless networks. In a 2005 report, research firm Gartner forecasted worldwideshipments of new laptop PCs would increase from approximately 62 million unitsin 2005 to 123 million units in 2009. Additionally, in a 2005 report, ABIResearch forecasted that worldwide shipments of wireless modems (PC cards) formobile computers

 

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would increase from approximately 3.0million units in 2005 to 9.7 million units in 2009. In-Stat/MDR forecasted thatworldwide shipments of embedded modules for OEMs would increase fromapproximately 0.5 million units in 2005 to 7.3 million units in 2009. Cellularnetwork technologies such as Enhanced Data over GPRS Evolution (EDGE), CDMA 1xEV-DO, Universal Mobile Telecommunications System (UMTS), and High SpeedDownlink Packet Access (HSDPA) upgrades, are expected to support much of thisgrowth.****

 

To date, demand for wireless data has comeprimarily from corporations, public organizations and individuals seeking toimprove customer service and productivity. Increased coverage and speeds,significant technological improvements to wireless data networks, devices andsoftware, and price reductions for data communications services have alsocontributed to growth in the wireless data communications industry. The abilityto meet the demand for anytime, anyplace communications is made possible by theconvergence of trends in mobile computing, the growth of the Internet, andwireless communications. Gartner forecasts that by 2007, 65% of Fortune 2000companies will support wireless wide-area wireless data access. 

 

*Mobile Computing.*Mobile PCs**are nowmainstream. Many business professionals utilize laptops as their primarycomputing device giving them the mobility required to work anywhere. Smallerhandheld computers or PDAs continue to be popular, as are newer mobile phonesthat offer more advanced capabilities, such as access to personal information,Internet and e-mail. Mobile PCs and handheld devices continue to be the leadingdevices that are accessing wireless data. 

 

*The Internet.*The Internet has become an indispensable tool for manybusiness professionals, and the volume of Internet traffic has grown rapidly asnew applications and e-commerce have become widely adopted. Wirelinetelecommunications carriers continue to make significant investments inInternet protocol-based networks to handle the expected growth in the volume ofdata traffic.

 

*Wireless Communications.*While wireline communications networks werehistorically dominated by voice traffic, data now comprises more than half ofthe traffic on these networks. A similar evolution is now occurring on wirelessnetworks as wireless service providers address the growing demand for datacommunications with additional technical and commercial offerings. 

 

***Existing and Emerging Cellularand PCS Technology Standards***

 

Data communications over cellular networksis currently supported by various digital technologies, such as CDMA 1X, CDMA1x EV-DO, Global System for Mobile (GSM), Generalized Packet Radio Service(GPRS), EDGE, UMTS and HSDPA.

 

CDMA is a digital technology thatsignificantly improves the capacity and quality of both voice and datacommunications and supports a broader range of applications, including voice,wireless Internet and multimedia. Initially, second generation CDMA offeredincreased data rate capabilities of 14.4 kbps. In 2001, North American CDMAcarriers, including Sprint PCS and Verizon Wireless, began deploying a 2.5GCDMA solution called CDMA 1X. Other CDMA carriers undertook similar efforts inAsia, Latin America and the Middle East. CDMA 1X supports faster wireless datatransfers, typically ranging from 40 to 60 kbps, with a top nominal speed ascurrently deployed of 153 kbps. In 2004, deployments or expansions of EV-DORelease 0 service, the next generation (3G) CDMA technology were underway withVerizon Wireless and other carriers in North America and Asia Pacific. Sprintalso started rolling out the same technology in 2005. EV-DO supports wirelessdata speeds, typically ranging from 400 to 700 kbps, an experience similar towired broadband connections. We expect that future deployment of CDMA EV-DO RevA commercial service, the next generation of EV-DO, will further increase awareness and expand the market forwireless data products and services.

 

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Leading GSM carriers in North America,Europe and Asia also began shifting from first generation technology to 2G GPRSin 2001. Like 2G CDMA, GPRS improves the capacity and quality of datacommunications and supports a broader range of applications including wirelessInternet and multimedia. GPRS offers data speed capabilities ranging from 20 to40 kbps with a top nominal speed of 56kbps. 

 

Third generation, or 3G, systems have beendeveloped and launched to replace and/or complement second generation and 2.5Gdigital cellular systems. In 2003, AT&T Wireless and Cingular began rollingout their EDGE networks in the U.S. EDGE offers significant increases in datarates ranging from 100 to 130 kbps, with burst speeds up to 200 kbps. In 2004,UMTS rolled out, especially in Europe, allowing GSM operators to offer averagedata speeds of 220-320 kbps to their customers. 

 

In late 2005, the first networks to upgradeto High Speed Downlink Packet Access (HSDPA), were Cingular Wireless in NorthAmerica and Manx Telecom in the United Kingdom (an O2 subsidiary) demonstratingspeeds between 500-700kbps with maximum speeds up to 1.8Mbps. Cingular haslaunched HSDPA into 18 metropolitan markets as of early 2006 with the intentionto expand in the U.S. throughout 2006.

 

## ***NARRATIVEDESCRIPTION OF THE BUSINESS***

## *** ***

### **OurSolution**

###  

We provide leading edge wireless wide-areamodem solutions for mobile computing over cellular networks. We develop andmarket a broad range of products that include wireless modems for mobilecomputers, embedded modules for OEMs and rugged vehicle-mounted modems. Ourproducts permit users to access wireless data and voice communications networksusing laptop computers, handheld mobile computing devices, or vehicle-based systems. 

 

### **OurProducts**

###  

Our current product line of wireless modemsolutions includes wide-area wireless PC cards, embedded modules for OEMcomputers and other devices, vehicle-mounted modems and enabling software. Wehave a number of new products under development within these product lines.

 

***Sierra Wireless PC Cards andEmbedded Modules***

 

PC Cards: We have successfully completed the development of our first UMTS/HSDPAPC card and during the fourth quarter commenced commercial shipments of thisproduct to Cingular in North America, as well as Manx Telecom and sunrise inEurope, making us the first company in the world to launch a fully functionalUMTS/HSDPA PC card. We have also commenced the development of next generationEV-DO (Rev A) and HSDPA (3.6Mbps) PC cards, both of which are expected to becommercially available in the second half of 2006.

 

Embedded Modules:  With the announcement by several leadinglaptop manufacturers of their plans to embed high speed wireless wide-areacapability inside laptops, we believe that the opportunity for sales ofembedded modules has potentially increased significantly. We believe we arewell positioned to benefit from this emerging opportunity as a result of ourextensive experience in the embedded module market. We believe we haveestablished an early leadership position providing embedded 3G wirelesssolutions to major laptop OEMs. Our EV-DO PCI Mini Card has been certifiedfor operation on both the Sprint and Verizon networks. We have design wins withLenovo and HP for our EV-DO Mini Card. We commenced commercial shipments toLenovo in the fourth quarter of 2005, representing the first commercialdeployment of an embedded 3G wireless minicard by any laptop manufacturer. Lenovohas

 

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subsequently announced the integration ofthis Mini Card in two additional business laptops. Early in the first quarterof 2006, HP announced the availability of their first laptop incorporating ourEV-DO Mini Card. We have also secured design wins with Lenovo andFujitsu-Siemens Computers for our HSDPA Mini Cards and we expect commercialshipments of our HSDPA Mini Card to commence late in the first quarter of 2006.Also during 2005, we commenced shipment in North America of our EM5625 EV-DOmodule to some of our long-time mobile computing OEM customers. One of theseOEM customers, Panasonic, has subsequently integrated our EM5625 module intothree of its laptop platforms. We have also commenced the development of thenext generation EV-DO (Rev A) and HSDPA (3.6Mps) Mini Cards, both of which areexpected to be commercially available in the second half of 2006.

 

The following tableoutlines our current product offerings for wireless wide-area network PC cardsand embedded modules: 

 
| **Product   Type**         | ** ** | **Product Class**                  | ** ** | **Description**                                                                                                                                                                                                                                                                                                                    | ** ** | **Products**                       | ** ** | **Compatible   Network/Territory**                                                                                                                                                                                                                   |
|----------------------------|------------|------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |       | AirCard® 700 Series           |       | Wide-area wireless network interface cards, or NICs, providing local  area network, or LAN-like connectivity for computer users on the  GSM/GPRS/EDGE networks. Using these modems, mobile computer users have full  access to e-mail, intranet, corporate applications and full Web browsing  where network service is available. |       | AirCard 775                        |       | Quad-band for EDGE networks worldwide                                                                                                                                                                                                                |
| **Wireless Network Cards** |       | AirCard**® **800  Series |       | Wide-area wireless NICs providing local area network, or LAN-like  connectivity for computer users on HSDPA/UMTS/EDGE/GPRS networks. Mobile  users have access to e-mail, intranet, corporate applications and full Web  browsing where network service is available at increased speeds.                                          |       | AirCard 860

 

  AirCard 850 |       | Type II PC card for use on networks supporting UMTS in the 850 and 1900  MHz frequency bands. Primary territory is North America.  Type II PC card for use on networks supporting UMTS in the 2100 MHz frequency band.  Primary territory is Europe. |
|                       |       | AirCard**®** 500  Series      |       | Wide-area wireless NICs, providing LAN-like connectivity for computer  users on the CDMA 1X and CDMA EV-DO networks.                                                                                                                                                                                                               |       | AirCard 580                        |       | Dual-band CDMA2000 1X EV-DO networks. Territories are North America and  Asia.                                                                                                                                                                       |
|                       |       |                               |       |                                                                                                                                                                                                                                                                                                                               |       |                               |       |                                                                                                                                                                                                                                                 |
| **Embedded Modules**       |       | EM Embedded Modules                |       | Embedded modules deliver wireless data and voice connectivity that OEMs  integrate into products ranging from handheld computers, PDAs, laptops,  Smartphones and mobile terminals, to fixed terminals including industrial  meters, and monitoring equipment.                                                                     |       | EM3420   EM5625                    |       | Dual-band CDMA2000 1X. Territories are North America and Asia.  Dual-band CDMA 1X EV-DO. Territories are North America and Asia.                                                                                                                     |

 

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| **Product   Type** | ** ** | **Product Class**                         | ** ** | **Description**                                                                                                                                                                                                                                  | ** ** | **Products** | ** ** | **Compatible   Network/Territory**                                                                                                                                              |
|--------------------|------------|-------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |       | MC8700 Series PCI Express Mini Cards |       | Embedded 3G wireless modules based on the PCI Express Mini Card form factor  and interface specification. The MC87XX series delivers  HSDPA/UMTS/EDGE/GPRS wireless voice and data capability to laptop OEMs and  other manufacturers. |       | MC8765       |       | HSDPA and UMTS supported in the 850 and 190 frequency bands. Compatible  with EDGE  and GSM/GPRS networks on all four GSM frequency bands (850, 900, 1800, and  1900 MHz)  |
|               |       |                                      |       |                                                                                                                                                                                                                                             |       | MC8755       |       | HSDPA compatible with EDGE and GSM/GPRS networks on all four GSM  frequency bands (850, 900, 1800, and 1900 MHz)                                                                |
|               |       |                                      |       |                                                                                                                                                                                                                                             |       |         |       |                                                                                                                                                                            |
|               |       | MC5700 Series PCI Express Mini Cards |       | Embedded 3G wireless modules based on the PCI Express Mini Card form factor  and interface specification. The MC5700 series delivers CDMA 1X EV-DO  wireless voice and data capability to laptop OEMs and other manufacturers.         |       | MC5720       |       | CDMA 1X EV-DO                                                                                                                                                                   |

 

***SierraWireless MP Modem Product Line***

 

The Sierra WirelessMP product line consists of a group of rugged, high powered, vehicle-mountedmodems, including the MP555 GPS and MP775 GPS. Generally, these products aremounted in a vehicle and are physically connected to a computer or dataterminal. The Sierra Wireless MP product line is designed to operate in harshconditions, including extremes of temperature, humidity, vibration and vehicleignition noise. Our MP products come with fully integrated global positioningsystem, or GPS, capability as a standard feature. The MP775 GPS operates onhigh-speed EDGE, GPRS and GSM networks worldwide while the MP555 GPS operateson CDMA 1X networks in North America and Asia. We have initiated development of two new next generation versions of our MP product, one for EV-DO and one for HSDPA,which we expect to launch later in 2006. Common applications for SierraWireless MP products include: 

 

•                  Police officers looking uplicense plate numbers, checking criminal databases, communicating with thedispatcher and other officers and filing service reports from a patrol car; and

 

•                  Utility field servicetechnicians receiving dispatch instructions, consulting service instructionsand diagrams, filing reports and time sheets.

 

***EnablingSoftware***

 

Our line of softwareallows our modems and devices to work with laptop and handheld computers andother devices:

 

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•                  *Sierra Wireless WatcherTM**Software*is a graphical user interface designed for everyday use with our modems. Whilethe modem is in use, the Watcher program provides ongoing information onregistration status and signal strength and allows the user to switch operatingmodes where applicable. Sierra Wireless Watcher supports all major PC andhandheld operating systems.

 

•                  *Developer’s Central, includingSierra Wireless Software Development Kits*, provide tools and informationthat support developers in their integration of Sierra Wireless products intoapplications. Using these tools, developers can include important modem statusinformation into their own user interface. This level of integration supportseasy-to-use, complete bundled solutions.

 

•                  *MP ModemManager* is afeature-rich, web based diagnostic software management tool allowing networkadministrators access to remote monitoring and configuration of a fleet of MPmodems (GPRS, CDMA 1X, and EDGE).

 

***ProductRevenue***

 

Our revenue byproduct for the years ended December 31 for each of 2004 and 2005 is asfollows:

 

| ** **       | ** ** | **2004** | ** ** | **2005** | ** ** |
|------------------|------------|----------|------------|----------|------------|
| PC Card          |       | 59       | %          | 70       | %          |
| Embedded modules |       | 33       |       | 13       |       |
| Mobile           |       | 5        |       | 13       |       |
| Other            |       | 3        |       | 4        |       |
|             |       | 100      | %          | 100      | %          |

 

***FutureProducts***

 

We continuallyevaluate and develop new products and technologies that will allow us to takeadvantage of the ever expanding and dynamic wireless market. Emerging wirelessstandards that are areas of significant new product development interest for usinclude:

 

•                  HSDPA: Next generation 3.6Mbps HSDPA is an upgradefrom 1.8Mbps HSDPA capability and is designed to offer transmission of text,digitized voice, video and multimedia at broadband speeds. Once fullyimplemented, it will allow customers to remain attached to the Internet atspeeds of up to 3.6Mbps while on the move. HSDPA is an evolutionary path forGSM/GPRS, TDMA, EDGE and UMTS networks. Ourplan is to introduce new products during 2006 that support the new, higherspeed, HSDPA airlink. We expect to launch our 3.6Mbps HSDPA PC card and MiniCard in the second half of 2006. In addition, we expect to launch a 1.8MbpsHSDPA version of our MP product in the second half of 2006.

 

•                  EV-DO:  As EV-DOdeployments continue, newer upgrades are being developed to enhance thecapabilities and experience for end-users. New capabilities will allow forimproved video and multimedia transmissions while on the move. CDMA 1X EV-DORelease 0 is an evolutionary path for CDMA IA95 and CDMA 1X networks. EV-DO Release A brings significant uplink anddownlink speed advantages to EV-DO Release 0. We have established a strongmarket position in EV-DO Release 0 PC cards and Mini Cards over the past 36months. We intend to enhance our position by accelerating the introduction ofEV-DO Release A devices. We expect to launch our EV-DO Release A PC cards andMini Cards in the second half of 2006. In addition, we

 

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expect to launch a CDMA 1X EV-DO Release A version of our MP product in the second half of 2006.

 

### **ProductDevelopment**

###  

We havebuilt a reputation in the wireless data industry for creating state-of-the-art,high-quality products within aggressive timeframes. Our development team ofapproximately 141 staff, located in Richmond, BC and in Carlsbad, CA, areskilled in the areas of radio frequency, hardware, embedded software, windowssoftware and mechanical design. Combined, this team has several hundred personyears of experience in the design of small form factor wireless data andvoice devices. Our product development team combines leaders with extensiveexperience in their fields, with younger graduates from leading universities.

 

We take a “core team” approach to product development. Our goal isdevelop a “whole” product and to ensure products are managed closely throughouttheir entire life cycle. As part of this approach, individuals from ourproduct development group form product-specific teams with employees fromother functional areas, including product management, operations, technicalsupport and quality. These teams work closely to bring new products through thedevelopment phase, while balancing the market requirements of performance, timeto market and product cost. Concepts and prototypes are validated by workingwith lead customers, channel partners and industry consultants.

 

Products that result from this process are designed and tested tocellular industry standards and introduced to our high-volume contractmanufacturing partners for production and delivery to our customers. Includedin the development effort is the certification of our products with industryand regulatory standards bodies.

 

A group of senior engineers develops and monitors our developmentstandards. These standards are applied across all development projects toensure uniformity. For example, we have adopted a core -wireless engine designapproach to leverage development efforts across multiple different products.This is also intended to help our customers to utilize our different productswith moderate additional integration effort on their part.

 

Our product development staff stays current in technology byparticipating in industry groups such as the Personal Computer CommunicationsAssociation (PCCA), the Cellular Telecommunications Industry Association(CTIA), the Mobile Advisory Council (MAC), the USB Forum, the PCI SpecialInterest Group (PCI-SIG), the European Telecommunications Standards Institute(ETSI), the PCS Type Certification Review Board (PTCRB), the Third GenerationPartnership Project (3GPP), the Third Generation Partnership Project 2 (3GPP2)and the International Wireless Packaging Consortium, and through ongoingtechnical education. We maintain close relationships with local universities byhiring co-op students, giving lectures, supporting visiting professorships andparticipating in regular informal meetings with faculty members.

 

### **Distribution**

###  

Our products are used by a variety of end-users, ranging from salespeople and mobile executives, to police officers and utility workers. We havebuilt a distribution channel that responds to the unique purchasing and usagerequirements of our customer base. Historically, a substantial majority of oursales have come from North American markets. As our wireless technologyplatforms have diversified, we have built sales and distribution teams to focuson developing our business outside of North America. Currently, we havededicated sales and distribution teams for the European, Asia-Pacific and North

 

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American regions. Our approach to distribution takesadvantage of our existing relationships with wireless operators, resellers andOEMs in order to maximize the productivity of our sales team. 

 

***Wireless Operators***

 

Wireless operators play two key roles in our distribution strategy. First,wireless operators are often resellers for us, purchasing our products and thenreselling them to end-user customers. Second, the wireless operator sales teamoften works with our sales team to jointly sell wireless solutions and ourequipment to the end-user customers. The wireless operator channel provides uswith extended customer reach, while the operators are able to leverage ourwireless data expertise to help sell their products and services. We haveinvested a great deal of time and resources in cultivating our relationshipswith wireless operators and view these relationships as a critical successfactor.

 

***Resellers***

 

Resellers purchase our products either directly from us or from adistributor and resell them to end-user customers. In order to supportresellers who prefer to purchase through a distributor, we have selectivelyformed distribution relationships. Distributors ensure that our products areavailable to a large number of resellers that buy products.

 

Resellers generally combine our products with other elements of anoverall solution, such as computer hardware, application software and bundledcommunication services and deliver a complete solution to the end-usercustomer. Resellers include computer resellers, wide-area network resellers,application developers and system integrators.

 

***Original Equipment Manufacturers***

 

Original equipment manufacturers represent companies that integrate ourmodem technology into devices they manufacture and sell to end-user customersthrough their own direct sales force and indirect distribution channels. Ourmodems have been integrated into a range of devices, such as industrialhandheld computers, PDAs, Smartphones and laptop computers.

 

***Professional Services***

 

We also offerprofessional engineering services to OEM customers, leveraging our expertise inwireless design and integration to provide built-in wireless connectivity forlaptop computers and other mobile computing devices.**

 

***Customer Support***

 

We provide customers, wireless operators and other channel partners withproduct and technical support in several languages using telephone, e-mail andour Web site. Online resources include product documentation, technicalspecifications, frequently asked questions, application notes, troubleshootingnotes, troubleshooting tools, and software downloads.

 

### **Marketing**

###  

Our marketing team is responsible for providing product management,strategic marketing and marketing communications for our products on anincreasingly global basis. Members of the product management team play anactive role in our core team approach to developing and managing individualproducts through their entire product life cycle. Emphasis is placed onunderstanding customer needs,

 

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developing the business case, determining competitivepositioning and pricing, and ensuring product completeness, which includesdocumentation, promotional material and marketing programs.

 

***Strategic Marketing/Marketing Communications***

 

We communicate our corporate and product positioning to channels andcustomers in our global markets in several ways, including:

 

•            Actively seeking editorial coverage and placing advertisementsin industry, business and trade publications;

 

•            Activelyparticipating in industry associations;

 

•            Bymeeting with opinion leaders and industry analysts; and

 

•            Participating in targeted conferences andtrade shows.

 

We work with our channel partners to develop programs toencourage end-user customer adoption. Through marketing strategies includingmarket analysis, branding, design, packaging and promotions, we execute andlaunch products into the marketplace to complement customer launch timelines.

 

### **Manufacturing**

###  

We outsource most of our manufacturing services, including partsprocurement, kitting, assembly and repair. We believe that outsourcing allowsus to:

 

•            Focus onour core competencies, including research and development, sales and marketing;

 

•            Participatein contract manufacturer economies of scale;

 

•            Accesshigh quality, lower cost manufacturing resources;

 

•            Achieverapid production scalability; and 

 

•            Reduce equipment capital costs andequipment obsolescence risk.

 

In addition, we perform certain manufacturing related functionsin-house, including manufacturing engineering, and development of manufacturingtest procedures and fixtures.

 

Our products are currently manufactured by Flextronics and CreationTechnologies. We use Flextronics as our primary contract manufacturer andlogistics partner to provide an end-to-end supply chain solution. This includesdesign support, procurement, low cost manufacturing and repair in China andglobal fulfillment services from Memphis, Tennessee. By using its fullyintegrated supply chain services, we expect to optimize product costs, improvealignment with our increasingly international customer base and achieveincreased operating efficiencies and scalability. We expect that CreationTechnologies in Canada will continue to assemble our lower unit volumeproducts.

 

### **Employees**

###  

As of December 31, 2005 we had a total of 224 full time employees,131 of whom are at our head office in Richmond, B.C., with the balance beinglocated across the United States, Canada, Europe and Asia. Of the 224employees, 123 are involved in product development, 32 are involved inmanufacturing, 24 are sales and support personnel, 16 are marketing personnel,and 29 are in finance and administration. Employees have access tocorporate-funded ongoing training and professional development opportunities,both on-the-job and through outside educational programs. Cash compensation,our employee stock

 

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option plan, our employee stock purchase plan and ourretirement plan contribution program are complemented by internal recognitionprograms and career advancement opportunities. We believe our relationshipswith our employees are positive.

 

We have entered into non-disclosure agreements and confidentialityagreements with key management personnel and with substantially all of ouremployees.

 

### **Competition**

###  

Wireless data technologies are converging toward standardizing on a fewkey cellular technologies. Cellular handsets are becoming ‘smart’ withincreased data functionalities, PDAs are becoming wireless through theintegration of embedded wireless capability, and laptop OEMs are beginning toembed wireless wide area network capability into their laptops. With the adventof new cellular technologies such as CDMA 1xEV-DO, EDGE, UMTS and HSDPA, newcompetitors are emerging.

 

*CDMA:* Sierra Wireless is well established in the CDMA PC Cards, embeddedmodules and mobile in-vehicle solutions markets. CDMA competition, bothannounced and actual, includes Novatel Wireless,  Curitel, Kyocera Wireless, Sony Ericsson, ZTEand Wavecom. Sierra Wireless maintains its market leadership position in mobilein-vehicle solutions against competitors such as AirLink and Bluetree Wireless.

 

*GSM:*Sierra Wireless is well established in theGPRS/EDGE/UMTS/HSDPA PC cards embedded modules and mobile in-vehicle solutionsmarkets. In these technologies, we face competition, both announced and actual,from Option NV, Novatel Wireless, Huawei, Siemens, Sony Ericsson and Blue TreeWireless.

 

We believethat by focusing on wireless operators, OEMS, business and government customersand by providing products that are superior in quality, functionality, time tomarket and value, together with excellent customer service and superiordistribution partner relationships and programs, we will be successful in ourtarget markets.

 

### **IntellectualProperty******

###  

We protect ourintellectual property through a combination of patent protection, copyright,trademarks, trade secrets, licenses, non-disclosure agreements and contractualprovisions. We enter into a non-disclosure and confidentiality agreement witheach of our employees, consultants and third parties that have access to ourproprietary technology. Pursuant to assignment of inventions agreements, all ofour employees and consultants assign all intellectual property rights in theinventions created during such person’s employment or contract with SierraWireless to Sierra Wireless.

 

We currentlyhold 45 United States patents and 65 international patents. Additional patentapplications are pending. When we consider it to be advantageous, we utilizeour intellectual property portfolio and access the intellectual property ofthird parties by entering into commercial licenses and cross-licenses.

 

### **Governmental Regulation**

###  

Our productsare subject to certain mandatory regulatory approvals in the United States,Canada, the European Union (EU) and other regions in which we operate. In theUnited States, the Federal

 

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CommunicationsCommission regulates many aspects of communications devices, includingradiation of electromagnetic energy, biological safety and rules fordevices to be connected to the telephone network. In Canada, similar regulationsare administered by the Ministry of Industry, through Industry Canada. EuropeanUnion directives provide the comparable regulatory guidance in Europe.

 

Wirelessmodems must be approved under these regulations by the relevant governmentauthority prior to these products being offered for sale. We have obtained allnecessary Federal Communications Commission, Industry Canada, European Unionand other required regulatory approvals for the products we currently sell.

 

### **Additional InformationConcerning Our Business**

###  

SierraWireless’s operations do not have a significant impact upon the environment. Wehave not made, and are not required to make, any significant capitalexpenditures to comply with environmental regulations. Working with thecontract manufacturers who make our products and relevant component suppliers,we intend to ensure that our products that are sold in the EU comply with theEU directives that restrict the use of certain hazardous substances inelectronic equipment sold in the EU after July 1, 2006.

 

***Risk Factors***

 

Our business is subject to significant risks and past performance is noguarantee of future performance. Some of the risks we face are:

 

**Wehave incurred net losses and if our efforts to restore the business toprofitability are not successful, we may be required to furtherrestructure or take other actions and our share price may decline.**

 

As a result ofthe reduction in our business in 2005, we incurred a loss of $36.5 million inthe year. Our accumulated deficit at December 31, 2005 was $82.9 million. Whilewe had earnings from operations for each of the previous two years ended December 31,2004 and 2003, we incurred a loss from operations in each of the three fiscalyears ended December 31, 2000, 2001 and 2002.

 

Our ability toachieve and maintain profitability in the future will depend on, among otherthings, the success of our restructuring, the continued sales of our currentproducts and the successful development and commercialization of new products.If we do not return to profitability, our total losses will increase and we may berequired to further restructure our operations or raise additional capital.Additional financing may not be available, and even if available, may notbe on acceptable terms. We may seek to raise additional capital through anoffering of common shares, preference shares or debt, which may result indilution, and/or the issuance of securities with rights senior to the rights,of the holders of common shares. As a result, our share price may decline.

 

**Our revenues and earnings may fluctuate fromquarter to quarter, which could affect the market price of our common shares.**

 

Our revenuesand earnings may vary from quarter to quarter as a result of a number offactors, including:

 

•                  The timing of releases of ournew products;

 

•                  The timing of substantialsales orders and OEM and carrier customer sell through;

 

•                  Design win cycles in ourembedded module business;

 

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•                  The amount of inventory heldby our channel partners;

 

•                  Competition from other marketparticipants;

 

•                  Possible cyclical fluctuationsrelated to the evolution of wireless technologies;

 

•                  Possible delays in themanufacture or shipment of current or new products;

 

•                  Concentration in our customerbase; and

 

•                  Possible delays or shortagesin component supplies.

 

Because ouroperating expenses are determined based on anticipated sales, are generallyfixed and are incurred throughout each fiscal quarter, any of the factorslisted above could cause significant variations in our revenues and earnings inany given quarter. Therefore, our quarterly results are not necessarilyindicative of our overall business, results of operations and financialcondition. However, quarterly fluctuations in our revenues and earnings may affectthe market price of our common shares.

 

**We are subject to, and may in thefuture be subject to, certain class action lawsuits, which if decidedagainst us, could require us to pay substantial judgments, settlements or otherpenalties.**

 

In addition tobeing subject to litigation in the ordinary course of business, we arecurrently, and may in the future be, subject to class actions andother securities litigation and investigations. We expect that this type oflitigation will be time consuming, expensive and distracting from the conductof our daily business. It is possible that we will be required to paysubstantial judgments, settlements or other penalties and incur expenses thatcould have a material adverse effect on our operating results, liquidity orfinancial position. Expenses incurred in connection with these lawsuits, whichinclude substantial fees of lawyers and other professional advisors and ourobligations to indemnify officers and directors who may be parties to suchactions, could materially adversely affect our cash position. We do not know ifany of this type of litigation and resulting expenses will be covered byinsurance. In addition, these lawsuits may cause our insurance premiums toincrease in future periods.

 

**Competition from new or established wirelesscommunication companies or from those with greater resources may preventus from increasing or maintaining our market share and could result in pricereductions and reduced revenues and gross margins.**

 

The wireless industry is intensely competitive and subject to rapidtechnological change. We expect competition to intensify. More established andlarger companies with greater financial, technical and marketing resources sellproducts that compete with ours. We also may introduce new products thatwill put us in direct competition with major newcompetitors. Existing or future competitors may be able to respond morequickly to technological developments and changes or may independentlydevelop and patent technologies and products that are superior to ours orachieve greater acceptance due to factors such as more favorable pricing ormore efficient sales channels. If we are unable to compete effectively with ourcompetitors’ pricing strategies, technological advances and other initiatives,our market share and revenues may be reduced. As an example, during thefirst quarter of 2005, one of the factors that caused a significant decline inCDMA EV-DO PC card revenue was increased competition and loss of market share.

 

**If demand for our current products declines and weare unable to launch successful new products, our revenues will decrease.**

 

If the markets in which we compete fail togrow, or grow more slowly than we currently anticipate, or if we are unable toestablish markets for our newproducts, it would significantly harm our

 

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business, results of operations and financial condition. In addition,demand for one or all of our current products could decline as a result of competition,technological change or other factors. 

 

**If we are unable to design and develop newproducts that gain sufficient commercial acceptance, we may be unable tomaintain our market share or to recover our research and development expensesand our revenues could decline.**

 

We depend on designing, developing and marketing new products to achievemuch of our future growth. Our ability to design,develop and market new products depends on a number of factors, including, butnot limited to the following:

 

•            Our ability toattract and retain skilled technical employees;

 

•            The availability ofcritical components from third parties;

 

•            Our ability tosuccessfully complete the development of products in a timely manner; and

 

•            Our ability tomanufacture products at an acceptable price and quality.

 

A failure by us, or our suppliers, in any of these areas, or a failure ofnew products to obtain commercial acceptance, couldmean we receive less revenue than we anticipate and we are unable to recoverour research and development expenses, and could result in a decrease in themarket price for our shares.

 

**The loss of any of our material customers couldadversely affect our revenues and profitability, and therefore shareholdervalue.**

 

We depend on a small number of customers for a significant portion of ourrevenues. In the last three fiscal years, there have been five differentcustomers that individually accounted for more than 10% of our revenues. In theyear ended December 31, 2005, two customers individually accounted formore than 10% of our revenue and in the aggregate these two customers represented 36% of our revenue. If any of these customersreduce their business with us or suffer from business failure, our revenues andprofitability could decline, perhaps materially.

 

**We may not be able to continue todesign products that meet our customer needs and, as a result, our revenue andprofitability may decrease.**

 

We develop products to meet our customers’requirements but, particularly with original equipment manufacturers, currentdesign wins do not guarantee future design wins. If we are unable or choose notto meet our customers’ future needs, we may not win their future businessand our revenue and profitability may decrease.

 

**We depend on a limited number of third parties tomanufacture our products and supply key components. If they do not manufactureour products properly or cannot meet our needs in a timely manner, we may beunable to fulfill our product delivery obligations and our costs may increase,and our revenue and margins could decrease.**

 

We outsource the manufacture of our products to a limited number of thirdparties and depend heavily on the ability of these manufacturers to meet ourneeds in a timely and satisfactory manner. Some components used by us may onlybe available from a small number of suppliers, in some cases from only onesupplier. We currently rely on two manufacturers, either of which may terminatethe manufacturing contract with us at the end of any contract year. Ourreliance on third party manufacturers and suppliers subjects us to a number ofrisks, including the following:

 

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•            The absence ofguaranteed manufacturing capacity;

 

•            Reduced control overdelivery schedules, production yields and costs; and

 

•            Inability to controlthe amount of time and resources devoted to the manufacture of our products.

 

If we are unable to successfully manage any of these risks or to locatealternative or additional manufacturers or suppliers in a timely andcost-effective manner, we may not be able to deliver products in a timelymanner. In addition, our results of operations could be harmed by increasedcosts, reduced revenues and reduced margins.

 

**We do not have fixed-term employmentagreements with our key personnel and the loss of any key personnel may harmour ability to compete effectively.**

 

None of ourexecutive officers or other key employees has entered into a fixed-termemployment agreement. Our success depends in large part on the abilitiesand experience of our executive officers and other key employees. Competitionfor highly skilled management, technical, research and development and otherkey employees is intense in the wireless communications industry. We may notbe able to retain our currentexecutive officers or key employees and may not be able to hire andtransition in a timely manner experienced and highly qualified additionalexecutive officers and key employees as needed to achieve our businessobjectives. The loss of executive officers and key employees could disrupt ouroperations and our ability to compete effectively could be adversely affected.

 

**We may have difficulty responding to changingtechnology, industry standards and customer preferences, which could cause usto be unable to recover our research and development expenses and loserevenues.**

 

The wireless industry is characterized by rapid technological change. Oursuccess will depend in part on our ability to develop products that keeppace with the continuing changes in technology, evolving industry standards andchanging customer and end-user preferences and requirements. Our productsembody complex technology that may not meet those standards, changes andpreferences. In addition, wireless communications service providers requirethat wireless data systems deployed on their networks comply with their ownstandards, which may differ from the standards of other providers. We may beunable to successfully address these developments in a timely basis or at all.Our failure to respond quickly and cost-effectively to new developments throughthe development of new products or enhancements to existing products couldcause us to be unable to recover significant research and development expensesand reduce our revenues.

 

**We depend on third parties to offer wireless dataand voice communications services for our products to operate.**

 

Our products can only be used over wireless data and voice networksoperated by third parties. In addition, our future growth depends, in part, onthe successful deployment of next generation wireless data and voice networksby third parties for which we are developing products. If these networkoperators cease to offer effective and reliable service, or fail to markettheir services effectively, sales of our products will decline and our revenueswill decrease.

 

**Acquisitionsof companies or technologies may resultin disruptions to our business or may not achieve the anticipatedbenefits.**

 

As part of our businessstrategy, we may acquire additional assets and businesses principallyrelating to or complementary to our current operations. Any acquisitions and/ormergers by us will be

 

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accompanied bythe risks commonly encountered in acquisitions of companies. These risksinclude, among other things:

 

•            Exposure to unknown liabilities ofacquired companies, including unknown litigation related to acts or omissionsof our acquired company and/or its directors and officers prior to theacquisition;

 

•            Higher than anticipated acquisitionand integration costs and expenses;

 

•            Effects of costs and expensesof acquiring and integrating new businesses on our operating results andfinancial condition;

 

•            The difficulty and expense ofintegrating the operations and personnel of the companies;

 

•            Disruption of our ongoing business;

 

•            Diversion of management’s timeand attention away from our remaining business during the integration process;

 

•            Failure to maximize ourfinancial and strategic position by the successful incorporation of acquiredtechnology;

 

•            The inability to implement uniform standards, controls,procedures and policies;

 

•            The loss of key employees and customers as a result of changes inmanagement;

 

•                  The incurrence of amortization expenses; and

 

•                  Possible dilution to our shareholders if thepurchase price is paid in common shares or securities convertible into commonshares.

 

In addition,geographic distances may make integration of businesses more difficult. Wemay not be successful in overcoming these risks or any other problemsencountered in connection with any acquisitions. If realized, these risks couldreduce shareholder value.

 

**We may infringe the intellectual propertyrights of others.**

 

The industry in which we operatehas many participants that own, or claim to own, proprietary intellectualproperty. In the past we have received, and in the future may receive,claims from third parties alleging that we, and possibly our customers, violatetheir intellectual property rights. Rights to intellectual property can bedifficult to verify and litigation may be necessary to establish whetheror not we have infringed the intellectual property rights of others. In manycases, these third parties are companies with substantially greater resourcesthan us, and they may be able to, and may choose to, pursue complexlitigation to a greater degree than we could. Regardless of whether theseinfringement claims have merit or not, we may be subject to the following:

 

•            We may be liablefor potentially substantial damages, liabilities and litigation costs,including attorneys’ fees;

 

•            We may beprohibited from further use of the intellectual property and may berequired to cease selling our products that are subject to the claim;

 

•            We may have tolicense the third party intellectual property, incurring royalty fees that may ormay not be on commercially reasonable terms. In addition, there is noassurance that we will be able to successfully negotiate and obtain such alicense from the third party;

 

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•            We may have to develop anon-infringing alternative, which could be costly and delay or result in theloss of sales. In addition, there is noassurance that we will be able to develop such a non-infringing alternative;

 

•            The diversion ofmanagement’s attention and resources;

 

•            Our relationshipswith customers may be adversely affected; and

 

•            We may berequired to indemnify our customers for certain costs and damages they incur insuch a claim.

 

In the event of an unfavourable outcome in such a claim and our inabilityto either obtain a license from the third party or develop a non-infringingalternative, then our business, operating results and financial condition may bematerially adversely affected and we may have to restructure our business.

 

Absent a specific claim for infringement of intellectual property, fromtime to time we have and expect to continue to license technology, intellectualproperty and software from third parties. There is no assurance that we will beable to maintain our third party licenses or obtain new licenses when requiredand this inability could materially adversely affect our business and operatingresults and the quality and functionality of our products. In addition, thereis no assurance that third party licenses we execute will be on commerciallyreasonable terms.

 

Under purchase orders and contracts for the sale of our products we may provideindemnification to our customers for potential intellectual propertyinfringement claims for which we may have no corresponding recourseagainst our third party licensors. This potential liability, if realized, couldmaterially adversely affect our business, operating results and financialcondition.

 

**Misappropriation of our intellectualproperty could place us at a competitive disadvantage**.

 

Our intellectual property is important to our success. We rely on acombination of patent protection, copyrights, trademarks, trade secrets,licenses, non-disclosure agreements and other contractual agreements to protectour intellectual property. Third parties may attempt to copy aspects ofour products and technology or obtain information we regard as proprietarywithout our authorization. If we are unable to protect our intellectualproperty against unauthorized use by others it could have an adverse effect onour competitive position.

 

Our strategies to deter misappropriation could be inadequate due to thefollowing risks:

 

•            Non-recognition of theproprietary nature or inadequate protection of our methodologies in the UnitedStates, Canada or foreign countries;

 

•            Undetectedmisappropriation of our intellectual property;

 

•            The substantial legaland other costs of protecting and enforcing our rights in our intellectualproperty; and

 

•            Development of similartechnologies by our competitors.

 

In addition, we could be required to spend significant funds and ourmanagerial resources could be diverted in order to defend our rights, whichcould disrupt our operations.

 

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**As our business expands internationally, we willbe exposed to additional risks relating to international operations.**

 

Our expansioninto international operations exposes us to additional risks unique to suchinternational markets, including the following:

 

•            Increased credit managementrisks and greater difficulties in collecting accounts receivable;

 

•            Unexpected changes inregulatory requirements, wireless communications standards, exchange rates,trading policies, tariffs and other barriers;

 

•            Uncertainties of laws andenforcement relating to the protection of intellectual property;

 

•            Language barriers; and

 

•            Potential adverse taxconsequences.

 

Furthermore,if we are unable to further develop distribution channels in Europe and theAsia-Pacific region we may not be able to grow our internationaloperations and our ability to increase our revenue will be negatively impacted.

 

**Government regulation could result in increasedcosts and inability to sell our products.**

 

Our products are subject to certain mandatoryregulatory approvals in the United States, Canada, the European Union and otherregions in which we operate. In the United States, the Federal CommunicationsCommission regulates many aspects of communications devices. In Canada, similarregulations are administered by the Ministry of Industry, through IndustryCanada. EuropeanUnion directives provide the comparable regulatory guidance in Europe. Although we have obtained all the necessaryFederal Communications Commission,Industry Canada and other required approvals for the products we currentlysell, we may not obtain approvals for future products on a timely basis,or at all. In addition, regulatory requirements may change or we may notbe able to obtain regulatory approvals from countries other than the UnitedStates and Canada in which we may desire to sell products in the future.

 

**Fluctuations in exchange rates between the UnitedStates dollar and other currencies, including the Canadian dollar may affectour operating results.**

 

We are exposed to fluctuations in the exchange rate between the UnitedStates dollar and the Canadian dollar through our operations in Canada. Toreduce our risk because of currency fluctuations, we purchase inventory, othercost of sales items and many of our services in United States dollars. If theCanadian dollar rises relative to the UnitedStates dollar, our operating results may be negatively impacted. To date,we have not entered into any foreign currency futures contracts as part ofa hedging policy. We expect that as our business expands in Europe and theAsia-Pacific region, we will also be exposed to additional foreign currencytransactions and to the associated currency risk. To date, we have not enteredinto any futures contracts.

 

## ***DIVIDENDS***

## *** ***

Since incorporation, we have not paid any dividends on our commonshares. Our current intention is to reinvest earnings to finance the growth ofour business. We do not anticipate that we will pay any dividends on our commonshares in the immediate or foreseeable future.

 

21

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## ***DESCRIPTION OF CAPITAL STRUCTURE***

## *** ***

Our authorizedcapital consists of an unlimited number of common shares, of which, at March 23,2006, 25,502,170 are issued and outstanding, and an unlimited number ofpreference shares, issuable in series, of which none are issued and outstanding.Our board of directors is authorized to determine the designation, rights andrestrictions to be attached to the preference shares upon issuance.

 

Holders of commonshares are entitled to receive notice of any meeting of shareholders and toattend and vote at those meetings, except those meetings at which only theholders of shares of another class or of a particular series areentitled to vote. Each common share entitles its holder to one vote. Subject tothe rights of the holders of preference shares, the holders of common sharesare entitled to receive on a proportionate basis such dividends as our board ofdirectors may declare out of funds legally available therefor. In theevent of the dissolution, liquidation, winding up or other distribution of ourassets, the holders of the common shares are entitled to receive on aproportionate basis all of our assets remaining after payment of all of ourliabilities, subject to the rights of holders of preference shares.

 

The commonshares carry no pre-emptive or conversion rights other than rights granted toholders of common shares under the Shareholders Rights Plan implemented andratified by our shareholders on April 27, 2000 and re-adopted by ourshareholders on April 28, 2003. The Shareholder Rights Plan is designed toencourage the fair treatment of our shareholders in connection with anytake-over offer for our outstanding common shares. The Shareholder Rights Planprovides our board of directors and shareholders with 45 days, which is longerthan provided by applicable laws, to fully consider any unsolicited take-overbid without undue pressure, to allow our board of directors, if appropriate, toconsider other alternatives to maximize shareholder value and to allowadditional time for competing bids to emerge. If a bid is made to allshareholders, is held open for at least 45 days and is accepted by shareholdersholding more than 50% of the outstanding common shares, or is otherwiseapproved by our board of directors, then the Shareholder Rights Plan will notaffect the rights of shareholders. Otherwise, all shareholders, except theparties making a take-over bid, will be able to acquire a number of additionalcommon shares equal to 100% of their existing outstanding holdings at half themarket price. Thus, any party making a take-over bid not permitted by theShareholder Rights Plan could suffer significant dilution. The ShareholderRights Plan will expire in accordance with its terms upon the termination ofour 2006 annual meeting of shareholders. The directors have resolved tocontinue the Shareholder Rights Plan with certain minor amendments, byapproving an amended and restated shareholder rights plan proposed to be dated April 25,2006, subject to regulatory approval and approval of the shareholders.

 

## ***MARKET FOR SECURITIES***

## *** ***

Our common shares have been listed on The Toronto Stock Exchange since May 17,1999, and currently trade under the symbol “SW”. Our common shares areco-listed on The Nasdaq National Market under the symbol “SWIR”.

 

22

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Set out below are the price ranges and volume of common shares of SierraWireless, Inc. that traded on the Toronto Stock Exchange for the yearended December 31, 2005.

 
| **2005**   | ** ** | **Low  Cdn $** | ** ** | **High  Cdn $** | ** ** | **Total Monthly  Volume** | ** ** |
|------------|------------|---------------------|------------|----------------------|------------|--------------------------------|------------|
| ** ** | ** ** | ** **          | ** ** | ** **           | ** ** | ** **                     | ** ** |
| January    |       | 10.94               |       | 20.49                |       | 17,296,100                     |       |
| February   |       | 10.59               |       | 13.11                |       | 8,931,000                      |       |
| March      |       | 9.75                |       | 11.40                |       | 5,453,400                      |       |
| April      |       | 7.95                |       | 10.20                |       | 3,344,300                      |       |
| May        |       | 8.00                |       | 11.69                |       | 3,423,400                      |       |
| June       |       | 8.95                |       | 11.98                |       | 4,930,400                      |       |
| July       |       | 8.67                |       | 10.15                |       | 2,408,300                      |       |
| August     |       | 8.38                |       | 9.34                 |       | 1,927,400                      |       |
| September  |       | 8.50                |       | 14.30                |       | 6,934,400                      |       |
| October    |       | 11.60               |       | 13.97                |       | 6,345,200                      |       |
| November   |       | 12.80               |       | 15.80                |       | 4,935,900                      |       |
| December   |       | 12.45               |       | 16.05                |       | 3,998,400                      |       |

 

## ***DIRECTORS AND EXECUTIVEOFFICERS***

## *** ***

The tables set forth below list the directors and executive officers ofthe Company as at March 23, 2006, indicating their name, municipalities ofresidence, their respective positions and offices held with the Company, thelength of service and their principal occupations within the five precedingyears.

 

Each director is elected at our annual meeting of shareholders to serveuntil the next annual meeting or until a successor is elected or appointed,unless such director resigns or is removed earlier. To the knowledge of SierraWireless, the directors and executive officers as a group, beneficially own,directly or indirectly, or exercise control or discretion over, 321,282 commonshares, (not including common shares issuable upon the exercise of stockoptions), representing as of March 23,2006 approximately 1.3%****of the issued and outstanding common shares.

 

### **Directors**

 
| **Name, Position and   Residence**                                    | ** ** | **Principal Occupation or  Employment****(1)**                                                                                                                                                                                                          | ** ** | **Director   Since** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|
|                                                                  |       |                                                                                                                                                                                                                                                    |       |                 |
| **Jason W. Cohenour**President, CEO and Director   Washington, U.S.A. |       | President and  Chief Executive Officer of the Company since October 2005. Chief  Operating Officer of the Company from August 2004 to October 2005,  Senior Vice President, Worldwide Sales of the Company from 2000 to August 2004 |       | October 2005    |

 

23

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| **Gregory D. Aasen (3) **Director   British Columbia, Canada                |   | Chief Strategy Officer of PMC-Sierra, Inc.  (a broadband communications company) from September 2005 to present;  Vice-President and General Manager, Communication Products Division of  PMC-Sierra, Inc. from 2004 to September 2005, Chief Operating  Officer of PMC-Sierra, Inc. from 1997 to 2004 and Chief Technology  Officer of PMC-Sierra, Inc. from 2003 to 2004                           |   | December 1997 |
|----------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
| ** **                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |
| **Paul G. Cataford (2) (4) **Director   Alberta, Canada                |   | President and Chief Executive Officer of  University Technologies International Inc. (a technology transfer and  commercialization company) from 2004 to present; Managing Partner of  HorizonOne Asset Management from December 2002 to 2004; Consultant from March 2002  to December 2002; Executive Managing Director of BMO Nesbitt Burns  Equity Partners Inc. from 2001 to 2002                               |   | July 1998     |
| ** **                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |
| **Peter Ciceri  (4) **Chairman and Director   British Columbia, Canada |   | Corporate Director and principal of Peter  Ciceri & Associates Executive Coaching and Business Counselling  Services from 2001 to present; President of Rogers Telecom, Inc. from  2000 to May 2001                                                                                                                                                                                                             |   | February 2000 |
| ** **                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |
| **Charles E. Levine (3) **Director   California, U.S.A.                     |   | Independent Outside Director of @Road, Inc.,  Somera Communications, Inc., Viisage Technology, Inc. and Lexar  Media, Inc.; President and Chief Operating Officer of Sprint PCS from  2000 to 2002                                                                                                                                                                                                             |   | May 2003      |
| ** **                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |
| **Nadir Mohamed (2) (5) **  Director   Ontario, Canada                 |   | President and  Chief Operating Officer of the Communications Division, which includes Rogers  Wireless and Rogers Cable, of Rogers Communications Inc. and Director of  Rogers from May 2005 to present; President,  Chief Executive Officer and Director of Rogers Wireless Communications Inc.  from 2001 to May 2005; President and Chief Operating Officer of Rogers  Wireless Communications Inc. from 2000 to 2001 |   | March 2003    |
| ** **                                                                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |
| **S. Jane Rowe (2) **Director   Ontario, Canada                             |   | President and Chief Executive Officer of  Roynat Capital from 2004 to present; Senior Vice President, Global Risk  Management Division of Scotiabank from 2002 to 2004; Managing Director and  Co-Head of Scotia Merchant Capital Corporation from 1997 to 2002                                                                                                                                                                    |   | March 1998    |

 

24

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| **David B. Sutcliffe  (4) **Director   British Columbia, Canada |   | Corporate  director. Chief Executive Officer of the Company from May 1995 through October 2005.                                                                                                                                                                                                                                             |   | June 1995  |
|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|
| ** **                                                                |   |                                                                                                                                                                                                                                                                                                                                                  |   |            |
| **Kent Thexton (3) **Director   British Columbia, Canada             |   | President and Chief Executive Officer of  SEVEN Networks, Inc. (a software company) from June 2005 to  present; Co-Chief Executive Officer of SEVEN Networks, Inc. from April 2004  to June 2005; Chief Data and Marketing Officer of O2 and President of O2  Online from 2001 to 2004; President of Genie from 2000 to 2001 |   | March 2005 |

 

----

Notes:

(1)          Theinformation as to “principal occupation” has been furnished by the respectivedirectors.

(2)          Memberof the Audit Committee

(3)          Memberof the Human Resources Committee

(4)          Memberof the Governance and Nominating Committee

(5)          Mr. Mohamed does notintend to stand for re-election at the Company’s annual and special meeting ofshareholders to be held on April 25, 2006.

 

### **Executive Officers**

 
| **Name, Position and   Province or State and   Country of Residence**                                      | ** ** | **Principal Occupation in  the Preceding   Five Years(1)**                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Length of Service** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|
|                                                                                                       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                  |
| **Jason W. Cohenour**   President and Chief Executive Officer   Washington, U.S.A.                    |       | President and  Chief Executive Officer of the Company since October 2005. Chief  Operating Officer of the Company from August 2004 to October 2005,  Senior Vice President, Worldwide Sales of the Company from 2000 to August 2004                                                                                                                                                                                    |       | 10 years              |
| ** **                                                                                                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                  |
| **David G. McLennan**   Chief Financial Officer and Secretary   British Columbia, Canada              |       | Consultant to BCE Emergis** **from September 2002 to January 2003; Chief  Financial Officer of Bell Canada from June 2002 to September 2002;  President and Chief Operating Officer of Bell ExpressVu from November 1999  to June 2002                                                                                                                                                                  |       | 2 years               |
| ** **                                                                                                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                  |
| **James B. Kirkpatrick**Chief Technical Officer  California, U.S.A.                                        |       | Senior Vice-President, Engineering of the  Company from August 2003 to October 2004; President and Chief  Executive Officer of AirPrime, Inc. from July 2002 to August 2003;  Senior Vice-President, Engineering of AirPrime, Inc. from September 2000  to March 2003; Vice-President of Wireless Technologies of DENSO  International America, Inc. from June 2000 to October 2000 |       | 3 years               |
| ** **                                                                                                 |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                  |
| **Trent H. Punnett**Senior  Vice President, Marketing  and Corporate Development  British Columbia, Canada |       | Vice-President,  Marketing of the Company from January 2005 to January 2006;  Vice-President, Marketing and Product Line Management of Motorola from July 2003  to December 2004; Senior Director, Marketing and Product Line Management  of Motorola from 2000 to June 2003                                                                                                                                      |       | 1 year                |

 

25

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Notes:

(1)          The information as to “principaloccupation” has been furnished by the respective senior officers.

 

## ***CODE OF BUSINESS CONDUCTAND ETHICS***

## *** ***

In 2003, the Board of Directors adopted aCode of Business Conduct and Ethics applying to all directors, officers andemployees of the Company to ensure that the Company conducts its business inaccordance with the highest standards of business conduct and ethics. The Boardof Directors approved an updated version of the Code of Business Conduct andEthics in December 2005. There have been no waivers granted from the Codeof Business Conduct and Ethics since its adoption. The Code of Business Conductand Ethics is available on the Company’s website at www.sierrawireless.com.

 

## ***AUDIT COMMITTEE***

## *** ***

**Mandateof the Audit Committee**

 

The full text of the Mandate of the AuditCommittee is set out below:

 

**“1.**  **Purpose and Scope**

 

The audit committee **(the “AC”)** was established by the Board of Directors **(“Board”)** of Sierra Wireless Inc. **(“Company”)**to assist the Board in all issues relating to the oversight of the following:

 

•                  theCompany’s systems of internal and disclosure controls regarding finance,accounting and legal compliance;

 

•                  theCompany’s auditing, accounting and financial reporting processes generally;

 

•                  theCompany’s financial statements and other financial information provided by theCompany to its shareholders, the public and others;

 

•                  theCompany’s compliance with legal and regulatory requirements; 

 

•                  theappointment, compensation, independence, oversight, communication with,performance and change of the Company’s external and independent auditors (the “Auditors”);

 

•                  theCompany’s whistleblower process; and

 

•                  thefulfillment of the other responsibilities set forth in this Mandate.

 

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**2.**              Organization,Membership and Meetings

** **

•                  Committeemembers shall meet the requirements of the Toronto Stock Exchange, the NASDAQExchange, the Securities and Exchange Commission, the securities commissions ofeach of the Provinces of Canada in which the Company is a reporting issuer andany other regulatory agency that may have jurisdiction over the operationsof the Company from time to time.

 

•                  TheCommittee shall consist of three or more directors who are “independent” asdefined by applicable law, regulations, guidelines and policies, and asdetermined by the Governance and Nominating Committee (“GNC”) of the Board.

 

•                  Allmembers of the Committee shall be “financially literate”, and at least onemember of the Committee shall be a “financial expert”. “Financially literate”and “financial expert” will have the respective meanings set out in applicablelaw, regulations, guidelines and policies.

 

•                  Membersof the Committee shall be appointed annually by the Board on the recommendationof the GNC. Members may be replaced by the Board at any time, but shallotherwise serve until a successor has been named.

 

•                  Nodirector shall serve on the compensation committee of another company thatemploys such directors.

 

•                  Nomember shall be affiliated with the Company or any subsidiary.

 

•                  TheCommittee shall meet from time to time, as it deems necessary, but at leastfour times per year.

 

•                  TheCommittee may include management at its meetings, but shall also hold anexecutive session at each meeting at which only independent directors arepresent.

 

•                  TheCommittee shall maintain written minutes of its meetings, which minutes will befiled in the corporate minute book.

 

**3.**              Authority andResponsibilities

** **

**3.1.**         With respect tothe Auditors:

** **

•                  Bedirectly responsible for recommending to the Board the appointment andcompensation of the Auditor. Oversee the work of the Auditors (includingresolution of disagreements between Management and the Auditors regardingfinancial reporting) for the purpose of preparing or issuing an audit report orperforming other audit, review or attest services for the Company.

 

•                  Havethe sole authority to review in advance and pre-approve all non-audit servicesto be provided to the Company or its subsidiaries by the Auditors, as permittedby applicable governance rules and in particular Section 10A of theSecurities Exchange Act of 1934 and, in connection therewith, to approve allfees and other terms of engagement. The Committee shall also review andpre-approve all disclosures required to be included in any public filings withrespect to non-audit services. The Committee may delegate to one or moremembers the authority to pre-approve non-audit services, provided a report ismade to the Committee at its next scheduled meeting. The Committee may consultwith Management but shall not delegate these responsibilities to Management.

 

•                  Havethe authority to communicate directly with the Auditors.

 

27

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•                  Reviewthe performance of the Auditors on at least an annual basis.

 

•                  On anannual basis, review and discuss with the Auditors all relationships theAuditors have with the Company in order to evaluate the Auditors’ continuedindependence. The Committee: (i) shall ensure that the Auditors submit tothe Committee on an annual basis a written statement delineating allrelationships and services that may impact the objectivity andindependence of the Auditors; (ii) shall discuss with the Auditors anydisclosed relationship or services that may impact the objectivity andindependence of the Auditors; and (iii) shall satisfy itself as to the Auditors’independence.

 

•                  Atleast annually, obtain and review an annual report from the Auditors describing(i) the Auditors’ internal quality control procedures and (ii) anymaterial issues raised by the most recent internal quality control review, orpeer review, of the Auditors, or by any inquiry or investigation bygovernmental or professional authorities, within the preceding five years,respecting one or more independent audits carried out by the Auditors, and anysteps taken to deal with any such issues.

 

•                  Confirmthat the rotation of the lead audit partner, or the lead audit partnerresponsible for reviewing the audit, for the Company’s Auditors complies withthe requirements of the Canadian and US regulatory authorities. 

 

•                  Reviewall reports required to be submitted by the Auditors to the Committeeparticularly including those required by Section 10A of the SecuritiesExchange Act of 1934.

 

•                  Review,based upon the recommendation of the Auditors and Management, the scope andplan of the work to be done by the Auditors for each fiscal year.

 

**3.2.**         With respect tofinancial statements:

** **

•                  Reviewand discuss with Management and the Auditors the Company’s quarterly financialstatements (including disclosures made in Management’s Discussion and Analysis,as defined in Multilateral Instrument 51-102, and interim earnings pressreleases) prior to submission to shareholders, any governmental body, any stockexchange or disclosure to the public. Subject to delegation from the Board,approve the interim financial statements and footnotes, MD&A and interimearnings press release.

 

•                  Reviewand discuss with Management and the Auditors the Company’s annual auditedfinancial statements (including disclosures made in Management’s Discussion andAnalysis and annual earnings press releases) prior to submission toshareholders, any governmental body, any stock exchange or disclosure to thepublic. Recommend to the Board approval of the annual audited financialstatements and footnotes, MD&A and annual earnings press release.

 

•                  Recommendto the Board, if appropriate, that the Company’s annual audited financialstatements be included in the Company’s annual report for filing withappropriate securities regulatory agencies.

 

•                  Prepareany reports required to be included in the Company’s annual meeting materialsand any other Committee reports required by applicable securities laws or stockexchange listing requirements or rules.

 

**3.3.**         With respect toperiodic and annual reviews:

** **

•                  Periodicallyreview separately with each of Management and the Auditors (i) anysignificant disagreement between Management and the Auditors in connection withthe preparation of the

 

28

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financial statements, (ii) any difficultiesencountered during the course of the audit or review (including anyrestrictions on the scope of work or access to required information), and (iii) Management’sresponse to each.

 

•                  Periodicallydiscuss with the Auditors, without Management being present (i) theirjudgments about the quality, appropriateness, and acceptability of the Company’saccounting principles and financial disclosure practices, as applied in itsfinancial reporting, and (ii) the completeness and accuracy of the Company’sfinancial statements.

 

•                  Considerand approve, if appropriate, significant changes to the Company’s accountingprinciples and financial disclosure practices as suggested by the Auditors orManagement. Review with the Auditors and Management, at appropriate intervals,the extent to which any changes or improvements in accounting or financialpractices, as approved by the Committee, have been implemented.

 

•                  Reviewwith Management, the Auditors and the Company’s counsel, as appropriate, anylegal, regulatory or compliance matters that could have a significant impact onthe Company’s financial statements, including significant changes in accountingstandards or rules as promulgated by the Canadian Institute of CharteredAccountants, the securities regulators having jurisdiction over the Company orother regulatory authorities with relevant jurisdiction.

 

•                  Obtainand review an annual report from Management relating to the accountingprinciples used in preparation of the Company’s financial statements (includingthose policies for which Management is required to exercise discretion orjudgments regarding the implementation thereof).

 

**3.4.**         Discussionswith Management:

** **

•                  Reviewand discuss with Management the Company’s annual and interim earnings pressreleases (including the use of “pro forma” or “adjusted” non-GAAP information),financial information and earnings guidance provided to analysts and ratingagencies as well as all other material public disclosure documents such as theCompany’s AIF, management information circular and any prospectuses.

 

•                  Reviewand discuss with Management all material off-balance sheet transactions,arrangements, obligations (including contingent obligations) and otherrelationships of the Company with unconsolidated entities or other persons,that may have a material current or future effect on financial condition,changes in financial condition, results of operations, liquidity, capitalresources, capital reserves or significant components of revenues or expenses.

 

•                  Inquireabout the application of the Company’s accounting policies and its consistencyfrom period to period, and the compatibility of these accounting policies withgenerally accepted accounting principles, and (where appropriate) the Company’sprovisions for future occurrences that may have a material impact on thefinancial statements of the Company.

 

•                  Reviewand discuss with Management the Company’s major financial risk exposures andthe steps Management has taken to monitor and control such exposures (includingManagement’s risk assessment and risk management policies).

 

•                  Reviewand discuss with Management all disclosures made by the Company concerning anymaterial changes in the financial condition or operations of the Company.

 

29

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•                  TheCommittee will meet periodically and separately with the Company’s counsel toreview material legal affairs of the Company and the Company’s compliance withapplicable law and listing standards.

 

•                  Obtainexplanations from Management for unusual variances in the Company’s annualfinancial statements from year to year, and review annually the Auditors’letter of the recommendations to Management and Management’s response.

 

**3.5.**         With respect tointernal controls and disclosure:

** **

•                  Inconsultation with the Auditors and Management: (a) review the adequacy ofthe Company’s internal control structure and system, and the proceduresdesigned to ensure compliance with laws and regulations, (b) discuss theresponsibilities, budget and staffing needs of the Company’s internal accountingdepartment, and (c) review and consider whether there is any need for theCompany to establish an internal audit department.

 

•                  Establishwhistleblowing procedures for (i) the receipt, retention and treatment ofcomplaints received by the Company regarding accounting, internal accountingcontrols or auditing matters, and (ii) the confidential, anonymoussubmission by employees of the Company of concerns regarding questionableaccounting or auditing matters.

 

•                  Besatisfied that adequate procedures are in place for the review of the Company’spublic disclosure of financial information extracted or derived from theCompany’s financial statements and periodically assess the adequacy of thoseprocedures.

 

**3.6.**         With respect toreporting obligations:

** **

•                  Ensurethat all reporting obligations related to the AIF (Form 40-F for USpurposes) and management information circular under Part 5 of MultilateralInstrument 52-110 are fully complied with.

 

**3.7.**         Other:

** **

•                  Reviewand approve all related-party transactions.

 

•                  Reviewand approve the Company’s hiring policies regarding partners, employees, andformer partners and employees of the present and former external auditor of theCompany.

 

•                  Reviewany Management decision to seek a second opinion from Auditors other than theCompany’s regular Auditors with respect to any significant accounting issue.

 

•                  Reviewwith Management and the Auditors the sufficiency and quality of the financialand accounting personnel of the Company.

 

•                  Reviewand reassess the adequacy of this Mandate annually and recommend to the Boardany changes the Committee deems appropriate.

 

•                  Conductan annual performance evaluation of Committee operations.

 

•                  Asnecessary to carry out its duties, to engage independent legal, accounting orother advisors to advise the Committee and set and pay the compensation for anysuch legal, accounting or other advisors employed by the Committee.

 

30

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•                  Perform anyother activities consistent with this Mandate, the Company’s By-laws andgoverning law as the Committee or the Board deems necessary or appropriate.

 

•                  TheCommittee will have full access to all books, records, facilities and personnelof the Company.

 

**4.**              External andInternal Linkages

** **

•                  TheBoard

 

•                  TheCEO and Senior Management

 

•                  OutsideConsultants and Advisors

 

•                  TheCorporate Governance and Nominating Committee”

 

**Compositionof the Audit Committee**

 

S. Jane Rowe (Chair), Paul G. Cataford andNadir Mohamed are the current members of the Audit Committee. Each of them isan Independent Director and is Financially Literate. The Board of Directors hasdetermined that Mr. Nadir Mohamed and Ms. S. Jane Rowe are the AuditCommittee’s financial experts.

 

**RelevantEducation and Experience**

 

S. JaneRowe is the President and Chief Executive Officer of Roynat Capital, a merchantbank specializing in innovative long-term capital and business solutions formid-sized companies. Ms. Rowe has an extensive background in the bankingindustry with over 17 years of experience with the Scotiabank Group. Ms. Roweholds a Bachelor of Commerce degree with honours from Memorial University ofNewfoundland and an MBA from York University.

 

Paul G.Cataford is the President and Chief Executive Officer of UniversityTechnologies Inc., a wholly-owned subsidiary of the University of Calgary thatis responsible for the university’s technology commercialization. Mr. Cataford’sother experience includes consulting, Managing Director of BMO Nesbitt BurnsEquity Partners Inc. from 2001 to 2002 and Managing Director and President ofBCE Capital Inc. from 1997 to 2001. Mr. Cataford has extensive knowledgeof venture capital investing and technology. Mr. Cataford completed aMechanical Engineering Degree at Queen’s University and an MBA at York University.

 

NadirMohamed is the President and Chief OperatingOfficer of the Communications Division of Rogers Communications Inc., a cable television and wireless communications service provideracross Canada. Prior to his most recent appointment in May 2005, Mr. Mohamedhad been President and Chief Executive Officer and Director of Rogers WirelessCommunications Inc. since 2001. Mr. Mohamed received a Bachelor ofCommerce degree from the University of British Columbia and is a CharteredAccountant. As Mr. Mohamed does not intend to stand for re-election at theCompany’s annual and special meeting of shareholders to be held on April 25,2006, the Board of Directors intends to appoint another member of the Board toserve on the Audit Committee effective that date.

 

**Relianceon Certain Exemptions**

 

At no time since thecommencement of the Company’s most recently completely financial year has theCompany relied upon any exemption from MI 52-110 provided therein.

 

31

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**AuditCommittee Oversight**

 

At no time since thecommencement of the Company’s most recently completed financial year was arecommendation of the Committee to nominate or compensate an external auditornot adopted by the board of directors of the Company.

 

**Pre-approvalPolicies and Procedures**

 

The Committee has the sole authority to review in advance andpre-approve all non-audit services to be provided to the Company or itssubsidiaries by the Auditor, as well as all fees and other terms of engagement.The Committee may delegate to one or more members the authority topre-approve non-audit services, provided a report is made to the Committee atits next scheduled meeting. All of the audit-related, tax and all other feesbelow were pre-approved by the Committee.

 

**AuditorIndependence**

 

Sierra Wireless’sAudit Committee has concluded that the Auditors are independent underapplicable rules and guidelines and, in particular, that the Auditors arefree from conflicts of interest that could impair their objectivity inconducting the audit of the Company’s financial statements. The Audit Committeeis required to approve all non-audit related services performed by ourAuditors, and our Auditors are not permitted to perform services for usprohibited for an independent auditor under applicable Canadian and UnitedStates regulations, including the Sarbanes-Oxley Act. 

 

**Auditors’Fees**

 

In the 2005 and 2004fiscal years, the fees paid to the Auditors were as follows:

 
| ** **         | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit Fees         |       | $        | 297,000    |     | $          | 288,000 |   |
| Audit-Related Fees |       | 23,000   |       | 31,000   |       |
| Tax Fees           |       | 212,000  |       | 205,000  |       |
| All Other Fees     |       | Nil      |       | Nil      |       |
|                    |            |          |            |          |            |  |  |

 

**AuditFees**

 

Audit fees for 2004 and 2005 are related to the audit ofthe year-end financial statements and the review of the Company’s quarterlyfinancial statements and related filing documents including financial pressreleases.

 

**Audit-RelatedFees**

 

Audit-related feesfor 2005 are primarily for fees related to our Sarbanes-Oxley 404documentation. 

 

**Tax Fees**

 

Tax fees for 2005 and2004 are primarily for the preparation of our Canadian and U.S. tax returns,assistance with tax planning and completion of transfer pricing studies.

 

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## ***EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES***

## *** ***

The Company’s management is responsible forestablishing and maintaining adequate disclosure controls and procedures forthe Company. Towards that end, management has designed such disclosure controlsand procedures, or caused such disclosure procedures to be designed under oursupervision (a) to ensure that material information relating to theCompany, including our consolidated subsidiaries, is made known to managementby others within the Company and such subsidiaries; and (b) to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. 

 

As of the end of the period covered by thisannual report, the Company’s management, with the participation of the Company’sChief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of the Company’s disclosure controls and procedures. Based uponthat evaluation, the Company’s Chief Executive Officer and Chief FinancialOfficer concluded that, as of the end of the period covered by this annualreport, the Company’s disclosure controls and procedures were effective toprovide reasonable assurance that information required to be disclosed in theCompany’s filings with applicable securities regulatory authorities****is****reported,processed, summarized and reported within the time periods specified by theapplicable securities commissions and stock exchanges and that all materialinformation is accumulated and communicated to the Company’s management,including the Company’s Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely decisions regarding required disclosure.

 

The Company’s management, including theChief Executive Officer and Chief Financial Officer, do not expect the Company’sdisclosure controls will prevent or detect all error and all fraud. A controlsystem, no matter how well designed and operated, can provide only reasonable,not absolute, assurance that the control system’s objectives will be met. Becauseof the inherent limitations in all control systems, no evaluation of controlscan provide absolute assurance that misstatements due to error or fraud willnot occur. Any design of any system of controls is based in part oncertain assumptions about the likelihood of certain events, and there can be noassurance that any design will succeed in achieving its stated goals under allpotential conditions. Limitations in control systems include the realities thatjudgments and decision-making can be faulty and that breakdowns can occurbecause of simple error or mistake.

 

The Companyis not yet required to be in compliance with the requirements of Section 404of the Sarbanes-Oxley Act and, as such, is in the process of further evaluationand testing and, if required, enhancement of internal controls as a result ofwork being completed in connection with the requirements of section 404 ofthe Sarbanes-Oxley Act.

 

## ***LEGAL PROCEEDINGS***

## *** ***

Sierra Wireless America, Inc., assuccessor to AirPrime, Inc., along with other defendants, has been servedwith the complaint of Joshua Cohen and David Beardsley and others, filed in theU.S. District Court for the Central District of California for allegedviolations of federal and state securities laws allegedly occurring prior tothe time AirPrime, Inc. was acquired by the Company. The plaintiffs filedthe third amended complaint on July 7, 2005. In November of 2005, theDistrict Court dismissed the third amended complaint, without prejudice, withrespect to the Company and most of the other defendants. The plaintiffs did notfile a fourth amended complaint and sought an order from the District Courtdismissing the federal actions as to all defendants, with prejudice for thepurposes of final judgment, however without prejudice to the state claims inthe third amended complaint. The District Court so ordered on February 27,2006. The plaintiffs filed a notice of appeal to the U.S. Court of Appeals forthe Ninth Circuit on March 8, 2006. We expect that it will be severalmonths before they file their appeal

 

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brief. In December 2005, we wereserved with a similar class action complaint of David Beardsley andothers, filed in the Superior Court of the State of California, County of SanDiego, for alleged violations of state securities laws in connection with thesame alleged facts. On February 6, 2006, we filed a Motion to Stay thestate court action pending resolution of the nearly identical federal action. Weexpect the Motion to Stay will be heard by the San Diego Superior Court in lateMarch, 2006. We have given notice to our liability insurance carrier, which hasagreed to pay our costs of defense that exceed the policy’s retention amount,subject to a reservation of rights in the event it is determined that thecarrier has no liability for this litigation and without conceding anyliability for payment of loss. We have also submitted an escrow claim noticeunder the escrow agreement dated August 12, 2003 relating to the acquisitionof AirPrime and the escrow shareholders are disputing their obligations withrespect to this complaint. Although there can be no assurance that anunfavourable outcome of the dispute would not have a material adverse effect onour operating results, liquidity or financial position, we believe the claimsare without merit and will vigorously defend them. The Company has determinedthat it is not possible to establish a reasonable estimate of the possibleloss, or range of possible loss, if any.

 

The Company and certain of our current andformer officers were named as defendants in several class actioncomplaints filed in the U.S. District Court for the Southern District of NewYork and the U.S. District Court for the Southern District of California for allegedviolations of federal securities laws. The actions filed in the U.S. DistrictCourt for the Southern District of California have been transferred to the U.S.District Court for the SouthernDistrict of New York. By order dated December 16, 2005, the U.S. DistrictCourt for the Southern District of New York consolidated all of the actions forpretrial purposes, appointed co-lead plaintiffs in the consolidated action,approved the selection of co-lead counsel. Plaintiffs filed their consolidatedamended complaint on February 21, 2006 and the defendants have until earlyApril to file their Motion to Dismiss. We have given notice to ourliability insurance carrier, which has agreed to pay our costs of defense thatexceed the policy’s retention amount, subject to a reservation of rights in theevent that it is determined that the carrier has no liability for thislitigation. Although there can be no assurance that an unfavourable outcomewould not have a material adverse effect on our operating results, liquidity orfinancial position, we believe the claims are without merit and will vigorouslydefend the lawsuits. The Company has determined that it is not possible toestablish a reasonable estimate of the possible loss, or range of possibleloss, if any. However, the Company believes that it is probable that the legalcosts related to these complaints may exceed our policy retention amountof $1.0 million. Accordingly, we accrued $1.0 million in our results ofoperations for the year ended December 31, 2005.

 

On February 8, 2005, Sierra Wireless, Inc.was served with the first amended complaint of MLR, LLC filed in the U.S.District Court for the Northern District of Illinois Eastern Division foralleged patent infringement relating to our line of professional phones. Wewere added as a defendant in existing Civil ActionNo. 04 C 7044 MLR, LLC v. Kyocera Wireless Corporation and NovatelWireless, Inc. Since that date, we have reached an agreement with MLRunder which we received non-royalty bearing licenses to use all of MLR’spresent and future patents for all of our products and MLR released us from allclaims related to their patent portfolio. MLR has dismissed all claims againstus in the lawsuit.

 

We are engaged inother legal actions in the ordinary course of business and believe that theultimate outcome of these actions will not have amaterial adverse effect on our operating results, liquidity or financialposition.

 

## ***QUORUM EXEMPTION***

## *** ***

The rules andregulations of the Nasdaq Stock Market applicable to the Company require eachlisted issuer to provide that a quorum for its shareholders’ meetings be atleast 33 1/3 percent of the issuer’s outstanding shares. The Company has beengranted an exemption from this requirement because it is

 

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contrary to generallyaccepted business practices in Canada, the Company’s country of domicile. TheCompany has had the benefit of this exemption in the current and prior year.

 

In determiningwhether a requirement is contrary to generally accepted business practices, theNasdaq rules generally look to the requirements of the primary market inthe issuer’s country of domicile. The rules and policies of the TorontoStock Exchange, the primary market in Canada, do not contain quorumrequirements, and the *Canada BusinessCorporations Act*, the Corporation’s governing statute, defers to thequorum requirements contained in an issuer’s By-laws. Under the Company’sBy-laws, a quorum for a meeting of the Company’s shareholders is two personspresent in person, each being a shareholder entitled to vote thereat or a dulyappointed proxyholder or representative for a shareholder so entitled.

 

## ***REGISTRAR AND TRANSFER AGENT***

## *** ***

The Registrar andTransfer Agent for the common shares in Canada is Computershare InvestorServices Inc., 510 Burrard Street, Vancouver, British Columbia, and in theUnited States is Computershare Investor Services, Inc., 12039 West AlamedaParkway, Suite Z-2, Lakewood, Colorado. These offices and the principaloffices of Computershare Investor Services Inc. in the City of Toronto maintainthe register of common shares and can effect transfers and make deliveries ofcertificates for common shares.

 

## ***MATERIAL CONTRACTS***

## *** ***

There are no materialcontracts entered into outside of the Company’s ordinary course of business.

 

## ***EXPERTS***

 

KPMG LLP, independentchartered accountants, have audited our consolidated financial statements as atDecember 31, 2005 and 2004, and for each of the years in the three yearperiod ended December 31, 2005 as set forth in their reports. KPMG LLP hasadvised the Company that they are independent with respect to the Companywithin the meaning of the Rules of Professional Conduct of the Instituteof Chartered Accountants of British Columbia.

 

## ***ADDITIONAL INFORMATION***

## *** ***

Additional information relating to the Company:

 

(a)                                  may be found on SEDAR on www.sedar.com;

 

(b)                                 including directors’ and officers’ remuneration andindebtedness, principal holders of the Company’s securities and securitiesauthorized for issuance under equity compensation plans, is contained in theCompany’s Information Circular for its most recent annual meeting ofshareholders; and

 

(c)                                  is provided in the Company’s financial statements andMD&A for the financial year ended December 31, 2005.

 

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