**U.S. SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

**FORM 40-F**

** **

**AmendmentNo. 1**

** **

**o****  REGISTRATIONSTATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**OR**

 

**ý****  ANNUAL REPORTPURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year endedDecember 31, 2005**

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

 

**SIERRA WIRELESS, INC.**

(Exactname of Registrant as specified in its charter)

* *

**Canada**

(Jurisdictionof incorporation or organization)

* *

**PrimaryStandard Industrial Classification Doe (if applicable): 3663**

** **

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

** **

**13811Wireless Way, Richmond**

**BritishColumbia, Canada  V6V 3A4**

**(604)231-1100**

(Addressand telephone number of principal executive offices)

 

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

(Agentfor service in the United States)

*** ***

Securities registered or tobe registered pursuant to Section 12(b) of the Act:  **None**

 

Securities registered or tobe registered pursuant to Section 12(g) of the Act: 

 

**CommonShares**

 

(Titleof Class)

* *

Name of exchange on whichsecurities are registered:

Toronto Stock Exchange, TheNasdaq Stock Market

 

Securities for which thereis a reporting obligation pursuant to Section 15(d) of the Act:  **None**

 

Indicate by check mark the information filedwith this Form:

 

ý  Annual  Information Form    ý  AuditedAnnual Financial Statements

 

Indicate the number of outstanding shares ofeach of the issuer’s classes of capital common stock as of the close of theperiod covered by the annual report:  **25,476,447 Common Shares without par value as atDecember 31, 2005**

 

Indicate by check mark whether the Registrant,by filing the information contained in this Form, is also thereby furnishingthe information to 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 connectionwith such Rule.   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)has been subject to such filing requirements for the past 90 days. Yes  ý    No  o

 

 

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**EXPLANATORYNOTE**

 

This Amendment No. 1 amends both Exhibits 99.1and 99.2 by inserting new paragraphs 4 and 5 in each Exhibit. No otherinformation in our annual report on Form 40-F as filed on March 24, 2006 withthe SEC is amended hereby, all such information is current as of the date ofthe Original Filing, and, except for the amendment of Exhibits 99.1, 99.2, 99.3and 99.4, this Amendment No. 1 does not update the disclosure contained in theOriginal Filing to reflect events that have occurred since the date of theOriginal Filing. Accordingly, this Amendment No. 1 should be read inconjunction with our filings made with the SEC subsequent to the filing of theOriginal Filing.

 

**INCORPORATIONBY REFERENCE**

** **

The Registrant’s Annual Information Form andthe Registrant’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, inperson or by telephone, representatives to respond to inquiries made by theCommission staff, and to furnish promptly, when requested to do so by theCommission staff, information relating to: the securities registered pursuantto Form 40-F; the securities in relation to which the obligation to file anannual report on Form 40-F arises; or transactions in said securities.

 

**SIGNATURES**

** **

Pursuant to the requirements of the *Securities Exchange Act of 1934*, asamended, the Registrant certifies that it meets all of the requirements forfiling on Form 40-F/A and has duly caused this annual report to be signed onits behalf by the undersigned, thereto duly authorized.

 

**SIERRAWIRELESS, INC.***(Registrant)*

 

 
|   | “David G. McLennan”         |
|--------|---------------------------------------|
|   | David G. McLennan,                    |
|   | Chief Financial Officer and Secretary |

 

Date: April 12, 2006

 

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Annual Information Form****March 23, 2006

 

**TABLE OFCONTENTS**

 
| 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                                  |   |

 

----

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

 

ii

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

 

Certain statements in this Annual InformationForm, or incorporated by reference herein, that are not based on historicalfacts, constitute forward-looking statements or forward-looking informationwithin the meaning of applicable securities laws (“forward-lookingstatements”). These forward-looking statements are not promises or guaranteesof future performance but are only predictions that relate to future events,conditions or circumstances or our future results, performance, achievements ordevelopments and are subject to substantial known and unknown risks,assumptions, uncertainties and other factors that could cause our actualresults, performance, achievements or developments in our business or in ourindustry to differ materially from those expressed, anticipated or implied bysuch forward-looking statements. Forward-looking statements include alldisclosure regarding possible events, conditions, circumstances or results ofoperations that are based on assumptions about future economic conditions,courses of action and other future events. We caution you not to place unduereliance upon any such forward-looking statements, which speak only as of thedate they are made. These forward-looking statements appear in a number ofdifferent places in this Annual Information Form and can be identified by wordssuch as “may”, “estimates”, “projects”, “expects”, “intends”, “believes”,“plans”, “anticipates”, or their negatives or other comparable words. Forward-lookingstatements include statements regarding the outlook for our future operations,plans and timing for the introduction or enhancement of our services andproducts, statements concerning strategies, developments, statements aboutfuture market conditions, supply conditions, end customer demand conditions,channel inventory and sell through, revenue, gross margin, operating expenses,profits, forecasts of future costs and expenditures, the outcome of legalproceedings, and other expectations, intentions and plans that are nothistorical fact. The risk factors and uncertainties that may affect our actualresults, performance, achievements or developments are many and include,amongst others, our ability to develop, manufacture, supply and market new productsthat we do not produce today that meet the needs of customers and gaincommercial acceptance, our reliance on the deployment of next generationnetworks by major wireless operators, the continuous commitment of ourcustomers, increased competition and other risks detailed herein under theheading “*Risk Factors*”. Many ofthese factors and uncertainties are beyond the control of the Company.Consequently, all forward-looking statements in this Annual Information Form,or the documents incorporated by reference herein, are qualified by thiscautionary statement and there can be no assurance that actual results,performance, achievements or developments anticipated by the Company will berealized. Forward-looking statements are based on management’s current plans,estimates, projections, beliefs and opinions and the Company does not undertakeany obligation to update forward-looking statements should the assumptionsrelated to these plans, estimates, projections, beliefs and opinions change. 

 

## *** CURRENCY***

## * *

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

 

## ***CORPORATE STRUCTURE***

 

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

** **

Sierra Wireless was incorporated under the *Canada Business Corporations Act* on May31, 1993. The Articles of Sierra Wireless were amended by a Certificate ofAmendment issued March 29, 1999 to remove the private company provisions andrestrictions on share transfer. The Articles of the Company were furtheramended by Certificates of Amendment issued May 13, 1999 and May 14, 1999 to:(i) re-designate and change all existing common shares in the capital of theCompany to new common shares in the capital of the Company (the “CommonShares”); (ii) change the rights attached to all preference shares in thecapital of the Company (the “Preference Shares”) and to remove each existingseries of

 

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Preference Shares; and (iii) consolidate the Common Shares on the basisof one post-consolidation Common Share for 1.5 pre-consolidation Common Shares.

 

The Company’s registered and records office islocated at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver,British Columbia, Canada, V7X 1L3 and its head office and principal place ofbusiness is located at 13811 Wireless Way, Richmond, British Columbia, Canada,V6V 3A4.

 

The following table lists subsidiaries ofSierra Wireless and their jurisdictions of incorporation or organization. Allsuch entities are 100% owned, directly or indirectly, 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                                          |

 

## ***GENERAL DEVELOPMENT OF THE BUSINESS***

 

### **General**

### ** **

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 original equipment manufacturers, or OEMs, andrugged vehicle-mounted modems. Our products permit users to access wirelessdata and voice communications networks using laptop computers, handheld mobilecomputing 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 theworld.

 

Our products are primarily used by businessesand government organizations to enable their employees to access a wide rangeof applications, including the Internet, e-mail, corporate intranet, remotedatabases and computer aided dispatch. We sell our products worldwide, withemphasis on the North American, European and Asia-Pacific regions, throughindirect channels, including wireless operators, resellers and OEMs.

 

During the latter part of 2003 and throughout2004, we experienced stronger than expected demand for our products, primarilyas a result of our strong market position in CDMA EV-DO Release 0 PC cards andour CDMA 1X embedded module sales to palmOne. During this period, customerconcentration increased in our revenue base. Following our considerable revenueand earnings growth in 2004, we experienced a significant reduction in ourbusiness in 2005 relative to 2004 as a result of:

 

•                  The reduction in our embedded module businessvolumes as a result of the completion of CDMA 1X module shipments to palmOnefor its Treo 600 Smartphone at the end of 2004;

 

2

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•                  Reported channel inventory at some of ourchannel partners that was already sufficient to meet near-term customer demandduring the first quarter of 2005; and

 

•                  The near-term impact of increased competitionin CDMA EV-DO and EDGE PC cards, including a loss of market share at VerizonWireless.

 

In order to address this change in ourbusiness, we undertook a restructuring of our operations in June 2005, whichincluded exiting our Voq professional phone initiative. The result of thisrestructuring was a reduction in our cost structure and a greater focus on ourcore PC card and embedded modules business, where we already havewell-established market positions and believe there are significant growthopportunities.

 

Since the mid-year restructuring, we havefocused on core PC Card and embedded module opportunities for existingproducts, as well as new product development and business development in theseareas. This focus has allowed us to return to sequential quarterly revenuegrowth during the second half of fiscal 2005, realizing 25% and 37% sequentialgrowth in the third and fourth quarters respectively. Following therestructuring, we were also able to reduce our net loss and improve cash flowduring the second half of 2005.

 

During 2006, we expect to continue to invest inour research and development efforts to ensure that we are well-positioned withnew products that will take advantage of market opportunities associated withthe deployment of 3G networks. See “Narrative Description of Business - OurProducts” for discussion of specific product development initiatives.

** **

### **ThreeYear History**

### ** **

***Fiscal 2005***

*** ***

•                  We began commercial shipments of four newproducts – the UMTS/HSDPA AirCard 860 and AirCard 850 for North America andEurope, respectively; the MC5720 PCI express Mini Card embedded module (“MiniCard”) for CDMA 1xEV-DO networks; and the EM5625, an embedded module for CDMA1xEV-DO networks.

*** ***

•                  We commenced commercial shipments of theAirCard 860 and AirCard 850 to Cingular in North America, as well as ManxTelecom and sunrise in Europe, making us the first company in the world tolaunch a fully functional UMTS/HSDPA PC card.

 

•                  We announced OEM design wins with Lenovo andHewlett-Packard (“HP”) for our MC5720 PCI express Mini Card embedded module forEV-DO networks and commenced commercial shipments of our EV-DO Mini Card toLenovo in the fourth quarter of 2005. Our MC5720 is the world’s first 3Gwireless minicard module for laptop OEMs. Early in the first quarter of 2006,HP announced the availability of their first laptop incorporating our MC5720Mini Card. Our MC5720 Mini Card has been certified for operation on both theSprint and Verizon EV-DO networks.

 

•                  We launched the EM5625, an embedded module forCDMA 1xEV-DO networks, and it was subsequently selected by Panasonic®, @Road,Itronix, MobileAria, a subsidiary of Delphi Corporation, and AirLink forintegration into their products.

 

•                  We reported that the MC8755 and MC8765 PCIExpress Mini Card for UMTS/HSDPA networks in North America and Europe,respectively, were available to OEM customers for testing and

 

3

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integration, with commercial shipments expectedto begin late in the first quarter of 2006. In 2005, we secured designs win forour HSDPA Mini Cards with Lenovo and Fujitsu-Siemens Computers.

 

•                  We also reported that we have commenced thedevelopment of the next generation EV-DO (Rev A) and HSDPA (3.6Mps) PC cardsand Mini Cards, all of which are expected to be commercially available in thesecond half of 2006. 

*** ***

•                  We initiated development of two new nextgeneration versions of our MP product, one for EV-DO (Rev A) and one for HSDPA,that we expect to launch later in 2006.

*** ***

•                  We announced the availability of the AirCard775 wireless wide-area network card from Bouygues Telecom in France and fromGuangdong Mobile Communications Corporation in Guangdong province, China. Inaddition, we signed a distribution agreement with Leaf Wireless (Pty) Ltd. todistribute the AirCard 775 in South Africa and surrounding regions.

*** ***

•                  In October 2005, Jason Cohenour, previously ourCOO, was named as our President and CEO. Mr. Cohenour succeeded DavidSutcliffe, who has served as the Company's CEO since 1995 and who had announcedhis intention to retire earlier in the year. Mr. Sutcliffe, at the request ofthe Board of Directors, continues to serve the company in a non-managementcapacity as a member of the Board.

*** ***

•                  We undertook a restructuring of our operationsin June of 2005, which included exiting our Voq professional phone initiative.The result of this restructuring was a reduction in our cost structure and agreater focus on our core PC card and embedded modules business.

*** ***

***Fiscal 2004***

*** ***

•                  We began commercial shipments of six newproducts – the Voq professional phone, the Sierra Wireless AirCard 580 for CDMA1X EV-DO networks, the AirCard 555R for CDMA networks in Asia, the MP555 forCDMA 1X, the MP775 for EDGE networks and the AirCard 775 For EDGE networks.

 

•                  We announced distribution agreements for ourCDMA embedded modules with Premier Wireless Solutions and for our CDMA PC cardswith Tirumala Seven Hills Pvt Ltd in India and Beijing Putian Taili Telecom inChina. We also announced supply agreements with Audiovox CommunicationsCorporation for additional supply of our PC5220 EV-DO PC card and with SymbolTechnologies and Verifone for our EM3420 CDMA 1X embedded modules and wecompleted shipments of this embedded module product to palmOne at the end ofthe year.

 

•                  We announced the availability of the PC3300 andthe MP 555 GPS rugged wireless modem on the Sprint Nationwide PCS Network.

 

•                  We announced the availability of the SierraWireless AirCard 775 and the MP 775 GPS rugged wireless modem on the CingularWireless EDGE network. We also announced the availability of the SierraWireless AirCard 750 for customers in the United Kingdom and in India.

 

•                  We signed a distribution agreement with OndaCommunication Spa for our EDGE/GPRS N775 PC card.

 

4

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**•**                  Weannounced the commercial availability of the Voq professional phone in theNetherlands, Belgium, Luxembourg, Turkey, Austria, Germany, Switzerland, theNordics, the United Kingdom, Italy, France and Spain.

 

**•**                  In NorthAmerica, we announced the commercial availability of the Voq professional phonefrom Brightpoint, Cellstar, members of Intel’s Product Dealer Program, Insight,MobilePlanet, RCS Computer Experience and USA.NET.

 

***Fiscal 2003***

 

•                  On August 12, 2003, we announced the completionof our acquisition of AirPrime, Inc. (“AirPrime”), a privately-held supplier ofhigh-speed wireless data communications products. Under the terms of theacquisition, we issued 3,708,521 of our common shares to the shareholders ofAirPrime. The acquisition provided us with additional knowledge and expertisein CDMA technology as well as a staff of over 70 research and development,engineering, product marketing, manufacturing and technical sales professionalsand enabled us to offer a broader product line of wireless data communicationsproducts to a wider range of customers and also strengthens our engineeringteam to develop new products.

 

•                  In October 2003, we announced plans tointroduce our Voq line of professional wireless cellular phones and value-addedsoftware to deliver a converged mobile telephony and e-mail solution, commonlyreferred to as a Smartphone, targeted at business users. Our new Voq phones arebased on Microsoft Windows MobileTM software for Smartphones and feature both afamiliar cellular phone keypad and a unique flip-open QWERTY thumbpad. The firstVoq-branded phone was made commercially available in the second quarter of 2004in certain countries.

 

•                  In November 2003, we completed a new issue andsecondary offering of 4,600,000 Common Shares, resulting in net proceeds of$67,400,000. Of the 4,600,000 Common Shares sold under this offering, 4,442,222Common Shares were offered by the Company and 157,778 were offered by certainshareholders of the Company.

 

•                  We developed products for the new and expandingCDMA 1xEV-DO networks. Our PC 5220 PC Card for the Verizon Wireless CDMA1xEV-DO network started commercially shipping in the third quarter of 2003. Oursecond CDMA 1xEV-DO product, the Sierra Wireless AirCard 580, began shippingcommercially in the first quarter of 2004.

 

•                  We transferred global fulfillment and certainCDMA product manufacturing to Flextronics. By using their fully integratedsupply chain services, we have reduced product costs, improved alignment withour international customer base and achieved operating efficiencies andscalability.

 

### **IndustryBackground and Future Trends**

 

***WirelessData Growth***

*** ***

We provide a broad range of products includingwireless modems for mobile computers and embedded modules for laptop OEMwireless applications. We believe that our growth potential is tied, in part,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

 

5

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would increase from approximately 3.0 million units in 2005 to 9.7million units in 2009. In-Stat/MDR forecasted that worldwide shipments ofembedded modules for OEMs would increase from approximately 0.5 million unitsin 2005 to 7.3 million units in 2009. Cellular network technologies such asEnhanced Data over GPRS Evolution (EDGE), CDMA 1x EV-DO, Universal MobileTelecommunications System (UMTS), and High Speed Downlink Packet Access (HSDPA)upgrades, are expected to support much of this growth.****

 

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. 

 

*MobileComputing.*Mobile PCs**arenow mainstream. 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. 

 

*TheInternet.*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.

 

*WirelessCommunications.*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 andEmerging Cellular and PCS Technology Standards***

*** ***

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

 

CDMA is a digital technology that significantlyimproves the capacity and quality of both voice and data communications and supportsa broader range of applications, including voice, wireless Internet andmultimedia. Initially, second generation CDMA offered increased data ratecapabilities of 14.4 kbps. In 2001, North American CDMA carriers, includingSprint PCS and Verizon Wireless, began deploying a 2.5G CDMA solution calledCDMA 1X. Other CDMA carriers undertook similar efforts in Asia, Latin Americaand the Middle East. CDMA 1X supports faster wireless data transfers, typicallyranging from 40 to 60 kbps, with a top nominal speed as currently deployed of153 kbps. In 2004, deployments or expansions of EV-DO Release 0 service, thenext generation (3G) CDMA technology were underway with Verizon Wireless andother carriers in North America and Asia Pacific. Sprint also started rollingout the same technology in 2005. EV-DO supports wireless data speeds, typicallyranging from 400 to 700 kbps, an experience similar to wired broadbandconnections. We expect that future deployment of CDMA EV-DO Rev A commercialservice, the next generation of EV-DO, will further increase awareness andexpand the market for wireless data products and services.

 

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Leading GSM carriers in North America, Europeand Asia also began shifting from first generation technology to 2G GPRS in2001. 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 upgrade toHigh 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.

 

## ***NARRATIVE DESCRIPTION OF THE BUSINESS***

 

### **OurSolution**

 

We provide leading edge wireless wide-area modemsolutions for mobile computing over cellular networks. We develop and market abroad range of products that include wireless modems for mobile computers,embedded modules for OEMs and rugged vehicle-mounted modems. Our productspermit users to access wireless data and voice communications networks usinglaptop 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.

 

***SierraWireless PC Cards and Embedded 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 certified foroperation 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.Lenovo has 

 

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subsequently announced the integration of this Mini Card in twoadditional business laptops. Early in the first quarter of 2006, HP announcedthe availability of their first laptop incorporating our EV-DO Mini Card. Wehave also secured design wins with Lenovo and Fujitsu-Siemens Computers for ourHSDPA Mini Cards and we expect commercial shipments of our HSDPA Mini Card tocommence late in the first quarter of 2006. Also during 2005, we commencedshipment in North America of our EM5625 EV-DO module to some of our long-timemobile computing OEM customers. One of these OEM customers, Panasonic, hassubsequently integrated our EM5625 module into three of its laptop platforms.We have also commenced the development of the next generation EV-DO (Rev A) andHSDPA (3.6Mps) Mini Cards, both of which are expected to be commerciallyavailable in the second half of 2006.

 

The following table outlines our currentproduct offerings for wireless wide-area network PC cards and embedded modules:

 
| **Product  Type**          | ** **                    | **Product  Class**                                                                                                | ** **                                                                                                                                                                                                                                                                                 | **Description**                                                                                                                                                                                                                                                                                                                    | ** **  | **Products** | ** **                                                                                                                         | **Compatible  Network/Territory**                               |
|----------------------------|-------------------------------|-------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|--------------|------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|
| **Wireless Network Cards** |                          | 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                           |
|                       |                          |                                                                                                              |                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                               |        |         |                                                                                                                               |
|                       | 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 |         | Type II PC card for use on networks  supporting UMTS in the 850 and 1900 MHz frequency bands. Primary territory is  North America. |
|                       |                          |                                                                                                              |
| AirCard 850                |                          | 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       |                                                                                                                               | Dual-band CDMA2000 1X. Territories are North  America and Asia. |
| EM5625                     |                          | 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 Wireless MP product line consists ofa group of rugged, high powered, vehicle-mounted modems, including the MP555GPS and MP775 GPS. Generally, these products are mounted in a vehicle and arephysically connected to a computer or data terminal. The Sierra Wireless MPproduct line is designed to operate in harsh conditions, including extremes oftemperature, humidity, vibration and vehicle ignition noise. Our MP productscome with fully integrated global positioning system, or GPS, capability as astandard feature. The MP775 GPS operates on high-speed EDGE, GPRS and GSMnetworks worldwide while the MP555 GPS operates on CDMA 1X networks in NorthAmerica and Asia. We have initiated development of two new next generationversions of our MP product, one for EV-DO and one for HSDPA, which we expect tolaunch later in 2006. Common applications for Sierra Wireless MP productsinclude: 

 

•                  Police officers looking up license platenumbers, checking criminal databases, communicating with the dispatcher andother officers and filing service reports from a patrol car; and

 

•                  Utility field service technicians receiving dispatchinstructions, consulting service instructions and diagrams, filing reports andtime sheets.

 

***EnablingSoftware***

 

Our line of software allows our modems anddevices to work with laptop and handheld computers and other devices:

 

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•                  *Sierra Wireless WatcherTM**Software* is a graphical user interfacedesigned for everyday use with our modems. While the modem is in use, theWatcher program provides ongoing information on registration status and signalstrength and allows the user to switch operating modes where applicable. SierraWireless Watcher supports all major PC and handheld operating systems.

 

•                  *Developer’s Central,including Sierra Wireless Software Development Kits*, provide tools andinformation that support developers in their integration of Sierra Wirelessproducts into applications. Using these tools, developers can include importantmodem status information into their own user interface. This level ofintegration supports easy-to-use, complete bundled solutions.

 

•                  *MP Modem Manager* 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 by product for the years endedDecember 31 for each of 2004 and 2005 is as follows:

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

 

***FutureProducts***

 

We continually evaluate and develop newproducts and technologies that will allow us to take advantage of the everexpanding and dynamic wireless market. Emerging wireless standards that areareas of significant new product development interest for us include:

 

•                  HSDPA: Next generation 3.6Mbps HSDPA is anupgrade from 1.8Mbps HSDPA capability and is designed to offer transmission oftext, 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. Our plan is to introduce new productsduring 2006 that support the new, higher speed, HSDPA airlink. We expect tolaunch our 3.6Mbps HSDPA PC card and Mini Card in the second half of 2006. Inaddition, we expect to launch a 1.8Mbps HSDPA version of our MP product in thesecond half of 2006.

 

•                  EV-DO: As EV-DO deployments continue, newer upgrades are being developed toenhance the capabilities and experience for end-users. New capabilities willallow for improved video and multimedia transmissions while on the move. CDMA1X EV-DO Release 0 is an evolutionary path for CDMA IA95 and CDMA 1X networks.EV-DO Release A brings significant uplink and downlink speed advantages toEV-DO Release 0. We have established a strong market position in EV-DO Release0 PC cards and Mini Cards over the past 36 months. We intend to enhance ourposition by accelerating the introduction of EV-DO Release A devices. We expectto launch our EV-DO Release A PC cards and Mini Cards in the second half of2006. In addition, we

 

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

 

### **ProductDevelopment**

###  

We have built a reputation in the wireless dataindustry for creating state-of-the-art, high-quality products within aggressivetimeframes. Our development team of approximately 141 staff, located inRichmond, BC and in Carlsbad, CA, are skilled in the areas of radio frequency,hardware, embedded software, windows software and mechanical design. Combined,this team has several hundred person years of experience in the design of smallform factor wireless data and voice devices. Our product development teamcombines leaders with extensive experience in their fields, with youngergraduates from leading universities.

 

We take a “core team” approach to productdevelopment. Our goal is develop a “whole” product and to ensure products aremanaged closely throughout their entire life cycle. As part of this approach,individuals from our product development group form product-specific teams withemployees from other functional areas, including product management,operations, technical support and quality. These teams work closely to bringnew products through the development phase, while balancing the marketrequirements of performance, time to market and product cost. Concepts andprototypes are validated by working with lead customers, channel partners andindustry consultants.

 

Products that result from this process aredesigned and tested to cellular industry standards and introduced to ourhigh-volume contract manufacturing partners for production and delivery to ourcustomers. Included in the development effort is the certification of ourproducts with industry and regulatory standards bodies.

 

A group of senior engineers develops andmonitors our development standards. These standards are applied across alldevelopment projects to ensure uniformity. For example, we have adopted a core-wireless engine design approach to leverage development efforts acrossmultiple different products. This is also intended to help our customers toutilize our different products with moderate additional integration effort ontheir part.

 

Our product development staff stays current intechnology by participating in industry groups such as the Personal ComputerCommunications Association (PCCA), the Cellular Telecommunications IndustryAssociation (CTIA), the Mobile Advisory Council (MAC), the USB Forum, the PCISpecial Interest Group (PCI-SIG), the European Telecommunications StandardsInstitute (ETSI), the PCS Type Certification Review Board (PTCRB), the ThirdGeneration Partnership Project (3GPP), the Third Generation Partnership Project2 (3GPP2) and the International Wireless Packaging Consortium, and throughongoing technical education. We maintain close relationships with localuniversities by hiring co-op students, giving lectures, supporting visitingprofessorships and participating in regular informal meetings with facultymembers.

 

### **Distribution**

 

Our products are used by a variety ofend-users, ranging from sales people and mobile executives, to police officersand utility workers. We have built a distribution channel that responds to theunique purchasing and usage requirements of our customer base. Historically, asubstantial majority of our sales have come from North American markets. As ourwireless technology platforms have diversified, we have built sales anddistribution teams to focus on developing our business outside of NorthAmerica. Currently, we have dedicated sales and distribution teams for theEuropean, Asia-Pacific and North

 

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American regions. Our approach to distribution takes advantage of ourexisting relationships with wireless operators, resellers and OEMs in order tomaximize the productivity of our sales team. 

 

***WirelessOperators***

*** ***

Wireless operators play two key roles in ourdistribution strategy. First, wireless operators are often resellers for us,purchasing our products and then reselling them to end-user customers. Second,the wireless operator sales team often works with our sales team to jointlysell wireless solutions and our equipment to the end-user customers. The wirelessoperator channel provides us with extended customer reach, while the operatorsare able to leverage our wireless data expertise to help sell their productsand services. We have invested a great deal of time and resources incultivating our relationships with wireless operators and view theserelationships as a critical success factor.

 

***Resellers***

 

Resellers purchase our products either directlyfrom us or from a distributor and resell them to end-user customers. In orderto support resellers who prefer to purchase through a distributor, we haveselectively formed distribution relationships. Distributors ensure that ourproducts are available to a large number of resellers that buy products.

 

Resellers generally combine our products withother elements of an overall solution, such as computer hardware, applicationsoftware and bundled communication services and deliver a complete solution tothe end-user customer. Resellers include computer resellers, wide-area networkresellers, application developers and system integrators.

** **

***OriginalEquipment Manufacturers***

*** ***

Original equipment manufacturers representcompanies that integrate our modem technology into devices they manufacture andsell to end-user customers through their own direct sales force and indirectdistribution channels. Our modems have been integrated into a range of devices,such as industrial handheld computers, PDAs, Smartphones and laptop computers.

 

***ProfessionalServices***

 

We also offer professional engineering servicesto OEM customers, leveraging our expertise in wireless design and integrationto provide built-in wireless connectivity for laptop computers and other mobilecomputing devices.**

* *

***CustomerSupport***

** **

We provide customers, wireless operators andother channel partners with product and technical support in several languagesusing telephone, e-mail and our Web site. Online resources include productdocumentation, technical specifications, frequently asked questions,application notes, troubleshooting notes, troubleshooting tools, and softwaredownloads.

 

### **Marketing**

### ** **

Our marketing team is responsible for providingproduct management, strategic marketing and marketing communications for ourproducts on an increasingly global basis. Members of the product managementteam play an active role in our core team approach to developing and managingindividual products through their entire product life cycle. Emphasis is placedon understanding customer needs,

 

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developing the business case, determining competitive positioning andpricing, and ensuring product completeness, which includes documentation,promotional material and marketing programs.

 

***StrategicMarketing/Marketing Communications***

*** ***

We communicate our corporate and productpositioning to channels and customers in our global markets in several ways,including:

 

•            Actively seeking editorial coverage and placingadvertisements in industry, business and trade publications;

 

•            Actively participating in industryassociations;

 

•            By meeting with opinion leaders and industryanalysts; and

 

•            Participating in targeted conferences and tradeshows.

 

We work with our channel partners to developprograms to encourage end-user customer adoption. Through marketing strategiesincluding market analysis, branding, design, packaging and promotions, weexecute and launch products into the marketplace to complement customer launchtimelines.

 

### **Manufacturing**

### ** **

We outsource most of our manufacturingservices, including parts procurement, kitting, assembly and repair. We believethat outsourcing allows us to:

 

•            Focus on our core competencies, includingresearch and development, sales and marketing;

 

•            Participate in contract manufacturer economiesof scale;

 

•            Access high quality, lower cost manufacturingresources;

 

•            Achieve rapid production scalability; and 

 

•            Reduce equipment capital costs and equipmentobsolescence risk.

 

In addition, we perform certain manufacturingrelated functions in-house, including manufacturing engineering, anddevelopment of manufacturing test procedures and fixtures.

 

Our products are currently manufactured byFlextronics and Creation Technologies. We use Flextronics as our primarycontract manufacturer and logistics partner to provide an end-to-end supplychain solution. This includes design support, procurement, low costmanufacturing and repair in China and global fulfillment services from Memphis,Tennessee. By using its fully integrated supply chain services, we expect tooptimize product costs, improve alignment with our increasingly internationalcustomer base and achieve increased operating efficiencies and scalability. Weexpect that Creation Technologies in Canada will continue to assemble our lowerunit volume products.

 

### **Employees**

### ** **

As of December 31, 2005 we had a total of 224 fulltime employees, 131 of whom are at our head office in Richmond, B.C., with thebalance being located across the United States, Canada, Europe and Asia. Of the224 employees, 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 our retirement plancontribution program are complemented by internal recognition programs andcareer advancement opportunities. We believe our relationships with ouremployees are positive.

 

We have entered into non-disclosure agreementsand confidentiality agreements with key management personnel and withsubstantially all of our employees.

 

### **Competition**

 

Wireless data technologies are convergingtoward standardizing on a few key cellular technologies. Cellular handsets arebecoming 'smart' with increased data functionalities, PDAs are becomingwireless through the integration of embedded wireless capability, and laptopOEMs are beginning to embed wireless wide area network capability into theirlaptops. With the advent of new cellular technologies such as CDMA 1xEV-DO,EDGE, UMTS and HSDPA, new competitors are emerging.

 

*CDMA:* SierraWireless is well established in the CDMA PC Cards, embedded modules and mobilein-vehicle solutions markets. CDMA competition, both announced and actual,includes Novatel Wireless,  Curitel,Kyocera Wireless, Sony Ericsson, ZTE and Wavecom. Sierra Wireless maintains itsmarket leadership position in mobile in-vehicle solutions against competitorssuch as AirLink and Bluetree Wireless.

 

*GSM:*SierraWireless is well established in the GPRS/EDGE/UMTS/HSDPA PC cards embeddedmodules and mobile in-vehicle solutions markets. In these technologies, we facecompetition, both announced and actual, from Option NV, Novatel Wireless,Huawei, Siemens, Sony Ericsson and Blue Tree Wireless.

 

We believe that by focusing on wirelessoperators, OEMS, business and government customers and by providing productsthat are superior in quality, functionality, time to market and value, togetherwith excellent customer service and superior distribution partner relationshipsand programs, we will be successful in our target markets.

 

### **IntellectualProperty**

 

We protect our intellectual property through acombination of patent protection, copyright, trademarks, trade secrets,licenses, non-disclosure agreements and contractual provisions. We enter into anon-disclosure and confidentiality agreement with each of our employees,consultants and third parties that have access to our proprietary technology.Pursuant to assignment of inventions agreements, all of our employees andconsultants assign all intellectual property rights in the inventions createdduring such person’s employment or contract with Sierra Wireless to SierraWireless.

 

We currently hold 45 United States patents and65 international patents. Additional patent applications are pending. When weconsider it to be advantageous, we utilize our intellectual property portfolioand access the intellectual property of third parties by entering intocommercial licenses and cross-licenses.

 

### **GovernmentalRegulation**

 

Our products are subject to certain mandatoryregulatory approvals in the United States, Canada, the European Union (EU) and otherregions in which we operate. In the United States, the Federal

 

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Communications Commission regulates many aspects of communicationsdevices, including radiation of electromagnetic energy, biological safety andrules for devices to be connected to the telephone network. In Canada, similarregulations are administered by the Ministry of Industry, through IndustryCanada. European Union directives provide the comparable regulatory guidance inEurope.

 

Wireless modems must be approved under theseregulations by the relevant government authority prior to these products beingoffered for sale. We have obtained all necessary Federal CommunicationsCommission, Industry Canada, European Union and other required regulatoryapprovals for the products we currently sell.

 

### **AdditionalInformation Concerning Our Business**

 

Sierra Wireless’s operations do not have asignificant impact upon the environment. We have not made, and are not requiredto make, any significant capital expenditures to comply with environmentalregulations. Working with the contract manufacturers who make our products andrelevant component suppliers, we intend to ensure that our products that aresold in the EU comply with the EU directives that restrict the use of certainhazardous substances in electronic equipment sold in the EU after July 1, 2006.

 

***Risk Factors***

 

Our business is subject to significant risksand past performance is no guarantee of future performance. Some of the riskswe face are:

 

**We have incurred net lossesand if our efforts to restore the business to profitability are not successful,we may be required to further restructure or take other actions and our shareprice may decline.**

** **

As a result of the reduction in our business in2005, we incurred a loss of $36.5 million in the year. Our accumulated deficitat December 31, 2005 was $82.9 million. While we had earnings from operationsfor each of the previous two years ended December 31, 2004 and 2003, we incurreda loss from operations in each of the three fiscal years ended December 31,2000, 2001 and 2002.

 

Our ability to achieve and maintainprofitability in the future will depend on, among other things, the success ofour restructuring, the continued sales of our current products and thesuccessful development and commercialization of new products. If we do notreturn to profitability, our total losses will increase and we may be requiredto further restructure our operations or raise additional capital. Additionalfinancing may not be available, and even if available, may not be on acceptableterms. We may seek to raise additional capital through an offering of commonshares, preference shares or debt, which may result in dilution, and/or theissuance of securities with rights senior to the rights, of the holders ofcommon shares. As a result, our share price may decline.

 

**Our revenues and earnings mayfluctuate from quarter to quarter, which could affect the market price of ourcommon shares.**

** **

Our revenues and earnings may vary from quarterto quarter as a result of a number of factors, including:

 

•                  The timing of releases of our new products;

 

•                  The timing of substantial sales orders and OEMand carrier customer sell through;

 

•                  Design win cycles in our embedded modulebusiness;

 

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**•**                  The amountof inventory held by our channel partners;

 

•                  Competition from other market participants;

 

•                  Possible cyclical fluctuations related to theevolution of wireless technologies;

 

•                  Possible delays in the manufacture or shipmentof current or new products;

 

•                  Concentration in our customer base; and

 

•                  Possible delays or shortages in componentsupplies.

 

Because our operating expenses are determinedbased on anticipated sales, are generally fixed and are incurred throughouteach fiscal quarter, any of the factors listed above could cause significantvariations in our revenues and earnings in any given quarter. Therefore, ourquarterly results are not necessarily indicative of our overall business,results of operations and financial condition. However, quarterly fluctuationsin our revenues and earnings may affect the market price of our common shares.

 

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

** **

In addition to being subject to litigation inthe ordinary course of business, we are currently, and may in the future be,subject to class actions and other securities litigation and investigations. Weexpect that this type of litigation will be time consuming, expensive anddistracting from the conduct of our daily business. It is possible that we willbe required to pay substantial judgments, settlements or other penalties andincur expenses that could have a material adverse effect on our operatingresults, liquidity or financial position. Expenses incurred in connection withthese lawsuits, which include substantial fees of lawyers and otherprofessional advisors and our obligations to indemnify officers and directorswho may be parties to such actions, could materially adversely affect our cashposition. We do not know if any of this type of litigation and resultingexpenses will be covered by insurance. In addition, these lawsuits may causeour insurance premiums to increase in future periods.

 

**Competition from new orestablished wireless communication companies or from those with greaterresources may prevent us from increasing or maintaining our market share andcould result in price reductions and reduced revenues and gross margins.**

** **

The wireless industry is intensely competitiveand subject to rapid technological change. We expect competition to intensify.More established and larger companies with greater financial, technical andmarketing resources sell products that compete with ours. We also may introducenew products that will put us in direct competition with major new competitors.Existing or future competitors may be able to respond more quickly totechnological developments and changes or may independently develop and patenttechnologies and products that are superior to ours or achieve greateracceptance due to factors such as more favorable pricing or more efficientsales channels. If we are unable to compete effectively with our competitors’pricing strategies, technological advances and other initiatives, our marketshare and revenues may be reduced. As an example, during the first quarter of2005, one of the factors that caused a significant decline in CDMA EV-DO PCcard revenue was increased competition and loss of market share.

 

**If demand for our currentproducts declines and we are unable to launch successful new products, ourrevenues 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 new products, it would significantly harm our

 

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

 

**If we are unable to design anddevelop new products that gain sufficient commercial acceptance, we may beunable to maintain our market share or to recover our research and developmentexpenses and our revenues could decline.**

** **

We depend on designing, developing andmarketing new products to achieve much of our future growth. Our ability todesign, develop and market new products depends on a number of factors,including, but not limited to the following:

 

•    Our ability to attract and retain skilledtechnical employees;

 

•    The availability of critical components fromthird parties;

 

•    Our ability to successfully complete thedevelopment of products in a timely manner; and

 

•    Our ability to manufacture products at anacceptable price and quality.

 

A failure by us, or our suppliers, in any ofthese areas, or a failure of new products to obtain commercial acceptance,could mean we receive less revenue than we anticipate and we are unable torecover our research and development expenses, and could result in a decreasein the market price for our shares.

 

**The loss of any of ourmaterial customers could adversely affect our revenues and profitability, andtherefore shareholder value.**

** **

We depend on a small number of customers for asignificant portion of our revenues. In the last three fiscal years, there havebeen five different customers that individually accounted for more than 10% ofour revenues. In the year ended December 31, 2005, two customers individuallyaccounted for more than 10% of our revenue and in the aggregate these twocustomers represented 36% of our revenue. If any of these customers reducetheir business with us or suffer from business failure, our revenues andprofitability could decline, perhaps materially.

 

**We may not be able to continueto design products that meet our customer needs and, as a result, our revenueand profitability 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 business andour revenue and profitability may decrease.

 

**We depend on a limited numberof third parties to manufacture our products and supply key components. If theydo not manufacture our products properly or cannot meet our needs in a timelymanner, we may be unable to fulfill our product delivery obligations and ourcosts may increase, and our revenue and margins could decrease.**

** **

We outsource the manufacture of our products toa limited number of third parties and depend heavily on the ability of thesemanufacturers to meet our needs in a timely and satisfactory manner. Somecomponents used by us may only be available from a small number of suppliers,in some cases from only one supplier. We currently rely on two manufacturers,either of which may terminate the manufacturing contract with us at the end ofany contract year. Our reliance on third party manufacturers and supplierssubjects us to a number of risks, including the following:

 

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•    The absence of guaranteed manufacturingcapacity;

 

•    Reduced control over delivery schedules,production yields and costs; and

 

•    Inability to control the amount of time andresources devoted to the manufacture of our products.

 

If we are unable to successfully manage any ofthese risks or to locate alternative or additional manufacturers or suppliersin a timely and cost-effective manner, we may not be able to deliver productsin a timely manner. In addition, our results of operations could be harmed byincreased costs, reduced revenues and reduced margins.

 

**We do not have fixed-termemployment agreements with our key personnel and the loss of any key personnelmay harm our ability to compete effectively.**

** **

None of our executive officers or other keyemployees has entered into a fixed-term employment agreement. Our successdepends in large part on the abilities and experience of our executive officersand other key employees. Competition for highly skilled management, technical,research and development and other key employees is intense in the wirelesscommunications industry. We may not be able to retain our current executiveofficers or key employees and may not be able to hire and transition in atimely manner experienced and highly qualified additional executive officersand key employees as needed to achieve our business objectives. The loss ofexecutive officers and key employees could disrupt our operations and ourability to compete effectively could be adversely affected.

 

**We may have difficultyresponding to changing technology, industry standards and customer preferences,which could cause us to be unable to recover our research and developmentexpenses and lose revenues.**

** **

The wireless industry is characterized by rapidtechnological change. Our success will depend in part on our ability to developproducts that keep pace with the continuing changes in technology, evolvingindustry standards and changing customer and end-user preferences andrequirements. Our products embody complex technology that may not meet thosestandards, changes and preferences. In addition, wireless communicationsservice providers require that wireless data systems deployed on their networkscomply with their own standards, which may differ from the standards of otherproviders. We may be unable to successfully address these developments in atimely basis or at all. Our failure to respond quickly and cost-effectively tonew developments through the development of new products or enhancements toexisting products could cause us to be unable to recover significant researchand development expenses and reduce our revenues.

 

**We depend on third parties tooffer wireless data and voice communications services for our products tooperate.**

** **

Our products can only be used over wirelessdata and voice networks operated by third parties. In addition, our futuregrowth depends, in part, on the successful deployment of next generationwireless data and voice networks by third parties for which we are developingproducts. If these network operators cease to offer effective and reliableservice, or fail to market their services effectively, sales of our productswill decline and our revenues will decrease.

 

**Acquisitions of companies ortechnologies may result in disruptions to our business or may not achieve theanticipated benefits.**

 

As part of our business strategy, we mayacquire additional assets and businesses principally relating to orcomplementary to our current operations. Any acquisitions and/or mergers by uswill be

 

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accompanied by the risks commonly encounteredin acquisitions of companies. These risks include, among other things:

 

•            Exposure to unknown liabilities of acquiredcompanies, including unknown litigation related to acts or omissions of ouracquired company and/or its directors and officers prior to the acquisition;

 

•    Higherthan anticipated acquisition and integration costs and expenses;

 

•            Effects of costs and expenses of acquiring andintegrating new businesses on our operating results and financial condition;

 

•    The difficultyand expense of integrating the operations and personnel of the companies;

 

•    Disruptionof our ongoing business;

 

•            Diversion of management’s time and attentionaway from our remaining business during the integration process;

 

•            Failure to maximize our financial and strategicposition by the successful incorporation of acquired technology;

 

•    Theinability to implement uniform standards, controls, procedures and policies;

 

•    The lossof key employees and customers as a result of changes in management;

 

•                  The incurrence of amortization expenses; and

 

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

 

In addition, geographic distances may makeintegration of businesses more difficult. We may not be successful inovercoming these risks or any other problems encountered in connection with anyacquisitions. If realized, these risks could reduce shareholder value.

 

**We may infringe theintellectual property rights of others.**

** **

The industry in which we operate has manyparticipants that own, or claim to own, proprietary intellectual property. Inthe past we have received, and in the future may receive, claims from thirdparties alleging that we, and possibly our customers, violate theirintellectual property rights. Rights to intellectual property can be difficultto verify and litigation may be necessary to establish whether or not we haveinfringed the intellectual property rights of others. In many cases, thesethird parties are companies with substantially greater resources than us, andthey may be able to, and may choose to, pursue complex litigation to a greaterdegree than we could. Regardless of whether these infringement claims havemerit or not, we may be subject to the following:

 

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

 

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

 

•            We mayhave to license the third party intellectual property, incurring royalty feesthat may or may not be on commercially reasonable terms. In addition, there isno assurance that we will be able to successfully negotiate and obtain such alicense from the third party;

 

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•            We mayhave to develop a non-infringing alternative, which could be costly and delayor result in the loss of sales. In addition, there is no assurance that we willbe able to develop such a non-infringing alternative;

 

•    The diversion of management’s attention andresources;

 

•    Our relationships with customers may beadversely 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 sucha claim and our inability to either obtain a license from the third party ordevelop a non-infringing alternative, then our business, operating results andfinancial condition may be materially adversely affected and we may have torestructure our business.

 

Absent a specific claim for infringement ofintellectual property, from time to time we have and expect to continue tolicense technology, intellectual property and software from third parties.There is no assurance that we will be able to maintain our third party licensesor obtain new licenses when required and this inability could materiallyadversely affect our business and operating results and the quality and functionalityof our products. In addition, there is no assurance that third party licenseswe execute will be on commercially reasonable terms.

 

Under purchase orders and contracts for thesale of our products we may provide indemnification to our customers for potentialintellectual property infringement claims for which we may have nocorresponding recourse against our third party licensors. This potentialliability, if realized, could materially adversely affect our business,operating results and financial condition.

 

**Misappropriation of ourintellectual property could place us at a competitive disadvantage**.

 

Our intellectual property is important to oursuccess. We rely on a combination of patent protection, copyrights, trademarks,trade secrets, licenses, non-disclosure agreements and other contractualagreements to protect our intellectual property. Third parties may attempt tocopy aspects of our products and technology or obtain information we regard asproprietary without our authorization. If we are unable to protect ourintellectual property against unauthorized use by others it could have anadverse effect on our competitive position.

 

Our strategies to deter misappropriation couldbe inadequate due to the following risks:

 

•            Non-recognitionof the proprietary nature or inadequate protection of our methodologies in theUnited States, Canada or foreign countries;

 

•    Undetected misappropriation of ourintellectual property;

 

•            Thesubstantial legal and other costs of protecting and enforcing our rights in ourintellectual property; and

 

•    Development of similar technologies by ourcompetitors.

 

In addition, we could be required to spendsignificant funds and our managerial resources could be diverted in order todefend our rights, which could disrupt our operations.

 

20

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**As our business expandsinternationally, we will be exposed to additional risks relating tointernational operations.**

** **

Our expansion into international operationsexposes us to additional risks unique to such international markets, includingthe following:

 

•    Increased credit management risks andgreater difficulties in collecting accounts receivable;

 

•            Unexpectedchanges in regulatory requirements, wireless communications standards, exchangerates, trading policies, tariffs and other barriers;

 

•    Uncertainties of laws and enforcementrelating to the protection of intellectual property;

 

•    Language barriers; and

 

•    Potential adverse tax consequences.

 

Furthermore, if we are unable to further developdistribution channels in Europe and the Asia-Pacific region we may not be ableto grow our international operations and our ability to increase our revenuewill be negatively impacted.

 

**Government regulation couldresult in increased costs 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. European Union directives provide the comparable regulatory guidance inEurope. Although we have obtained all the necessary Federal CommunicationsCommission, Industry Canada and other required approvals for the products wecurrently sell, we may not obtain approvals for future products on a timelybasis, 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 ratesbetween the United States dollar and other currencies, including the Canadiandollar may affect our operating results.**

** **

We are exposed to fluctuations in the exchangerate between the United States dollar and the Canadian dollar through ouroperations in Canada. To reduce our risk because of currency fluctuations, wepurchase inventory, other cost of sales items and many of our services inUnited States dollars. If the Canadian dollar rises relative to the UnitedStates dollar, our operating results may be negatively impacted. To date, wehave not entered into any foreign currency futures contracts as part of ahedging 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 anydividends on our common shares. Our current intention is to reinvest earningsto finance the growth of our business. We do not anticipate that we will payany dividends on our common shares in the immediate or foreseeable future.

 

21

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

 

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

 

Holders of common shares are entitled toreceive notice of any meeting of shareholders and to attend and vote at thosemeetings, except those meetings at which only the holders of shares of anotherclass or of a particular series are entitled to vote. Each common shareentitles its holder to one vote. Subject to the rights of the holders ofpreference shares, the holders of common shares are entitled to receive on aproportionate basis such dividends as our board of directors may declare out offunds legally available therefor. In the event of the dissolution, liquidation,winding up or other distribution of our assets, the holders of the commonshares are entitled to receive on a proportionate basis all of our assets remainingafter payment of all of our liabilities, subject to the rights of holders ofpreference shares.

 

The common shares carry no pre-emptive orconversion rights other than rights granted to holders of common shares underthe Shareholders Rights Plan implemented and ratified by our shareholders onApril 27, 2000 and re-adopted by our shareholders on April 28, 2003. TheShareholder Rights Plan is designed to encourage the fair treatment of ourshareholders in connection with any take-over offer for our outstanding commonshares. The Shareholder Rights Plan provides our board of directors andshareholders with 45 days, which is longer than provided by applicable laws, tofully consider any unsolicited take-over bid without undue pressure, to allowour board of directors, if appropriate, to consider other alternatives tomaximize shareholder value and to allow additional time for competing bids toemerge. If a bid is made to all shareholders, is held open for at least 45 daysand is accepted by shareholders holding more than 50% of the outstanding commonshares, or is otherwise approved by our board of directors, then theShareholder Rights Plan will not affect the rights of shareholders. Otherwise,all shareholders, except the parties making a take-over bid, will be able toacquire a number of additional common shares equal to 100% of their existingoutstanding holdings at half the market price. Thus, any party making atake-over bid not permitted by the Shareholder Rights Plan could suffersignificant dilution. The Shareholder Rights Plan will expire in accordancewith its terms upon the termination of our 2006 annual meeting of shareholders.The directors have resolved to continue the Shareholder Rights Plan withcertain minor amendments, by approving an amended and restated shareholderrights plan proposed to be dated April 25, 2006, subject to regulatoryapproval and approval of the shareholders.

 

## ***MARKET FOR SECURITIES***

 

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

 

22

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Set out below are the price ranges and volumeof common shares of Sierra Wireless, Inc. that traded on the Toronto StockExchange for the year ended 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 EXECUTIVE OFFICERS***

 

The tables set forth below list the directorsand executive officers of the Company as at March 23, 2006, indicating theirname, municipalities of residence, their respective positions and offices heldwith the Company, the length of service and their principal occupations withinthe five preceding years.

 

Each director is elected at our annual meetingof shareholders to serve until the next annual meeting or until a successor iselected or appointed, unless such director resigns or is removed earlier. Tothe knowledge of Sierra Wireless, the directors and executive officers as agroup, beneficially own, directly or indirectly, or exercise control ordiscretion over, 321,282 common shares, (not including common shares issuableupon the exercise of stock options), representing as of March 23,2006approximately 1.3%****of the issuedand 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 not intend to stand for re-election at the Company’s annual andspecial meeting of shareholders to be held on April 25, 2006.

 

### **ExecutiveOfficers**

 
| **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                |

 

25

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| **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 |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|

 

----

Notes:

 

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

 

## ***CODE OF BUSINESS CONDUCT AND ETHICS***

 

In 2003, the Board of Directors adopted a Codeof 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 Code ofBusiness 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***

## *** ***

**Mandate of the Audit Committee**

 

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

 

**“1.          Purpose and Scope**

** **

Theaudit committee **(the “AC”)** wasestablished 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:

 

•                  the Company’s systems of internal anddisclosure controls regarding finance, accounting and legal compliance;

 

•                  the Company’s auditing, accounting andfinancial reporting processes generally;

 

•                  the Company’s financial statements and otherfinancial information provided by the Company to its shareholders, the publicand others;

 

•                  the Company’s compliance with legal andregulatory requirements; 

 

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

 

•                  the Company’s whistleblower process; and

 

•                  the fulfillment of the other responsibilitiesset forth in this Mandate.

 

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**2.****             ****Organization, Membership andMeetings**

** **

•                  Committee members shall meet the requirementsof the Toronto Stock Exchange, the NASDAQ Exchange, the Securities and ExchangeCommission, the securities commissions of each of the Provinces of Canada inwhich the Company is a reporting issuer and any other regulatory agency thatmay have jurisdiction over the operations of the Company from time to time.

 

•                  The Committee shall consist of three or moredirectors who are “independent” as defined by applicable law, regulations,guidelines and policies, and as determined by the Governance and NominatingCommittee (“GNC”) of the Board.

 

•                  All members of the Committee shall be “financiallyliterate”, and at least one member of the Committee shall be a “financialexpert”. “Financially literate” and “financial expert” will have the respectivemeanings set out in applicable law, regulations, guidelines and policies.

 

•                  Members of the Committee shall be appointedannually by the Board on the recommendation of the GNC. Members may be replacedby the Board at any time, but shall otherwise serve until a successor has beennamed.

 

•                  No director shall serve on the compensationcommittee of another company that employs such directors.

 

•                  No member shall be affiliated with theCompany or any subsidiary.

 

•                  The Committee shall meet from time to time,as it deems necessary, but at least four times per year.

 

•                  The Committee may include management at itsmeetings, but shall also hold an executive session at each meeting at whichonly independent directors are present.

 

•                  The Committee shall maintain written minutesof its meetings, which minutes will be filed in the corporate minute book.

 

**3.****             ****Authority andResponsibilities**

** **

**3.1.****        ****With respect to theAuditors:**

** **

•                  Be directly responsible for recommending tothe Board the appointment and compensation of the Auditor. Oversee the work ofthe Auditors (including resolution of disagreements between Management and theAuditors regarding financial reporting) for the purpose of preparing or issuingan audit report or performing other audit, review or attest services for theCompany.

 

•                  Have the sole authority to review in advanceand pre-approve all non-audit services to be provided to the Company or itssubsidiaries by the Auditors, as permitted by applicable governance rules andin particular Section 10A of the Securities Exchange Act of 1934 and, inconnection therewith, to approve all fees and other terms of engagement. TheCommittee shall also review and pre-approve all disclosures required to beincluded in any public filings with respect to non-audit services. TheCommittee may delegate to one or more members the authority to pre-approvenon-audit services, provided a report is made to the Committee at its nextscheduled meeting. The Committee may consult with Management but shall notdelegate these responsibilities to Management.

 

•                  Have the authority to communicate directlywith the Auditors.

 

27

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•                  Review the performance of the Auditors on atleast an annual basis.

 

•                  On an annual basis, review and discuss withthe Auditors all relationships the Auditors have with the Company in order toevaluate the Auditors’ continued independence. The Committee: (i) shall ensurethat the Auditors submit to the Committee on an annual basis a writtenstatement delineating all relationships and services that may impact the objectivityand independence 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.

 

•                  At least annually, obtain and review anannual report from the Auditors describing (i) the Auditors’ internal qualitycontrol procedures and (ii) any material issues raised by the most recentinternal quality control review, or peer review, of the Auditors, or by anyinquiry or investigation by governmental or professional authorities, withinthe preceding five years, respecting one or more independent audits carried outby the Auditors, and any steps taken to deal with any such issues.

 

•                  Confirm that the rotation of the lead auditpartner, or the lead audit partner responsible for reviewing the audit, for theCompany’s Auditors complies with the requirements of the Canadian and USregulatory authorities. 

 

•                  Review all reports required to be submittedby the Auditors to the Committee particularly including those required bySection 10A of the Securities Exchange Act of 1934.

 

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

 

**3.2.****        ****With respect to financialstatements:**

** **

•                  Review and discuss with Management and theAuditors the Company’s quarterly financial statements (including disclosuresmade in Management’s Discussion and Analysis, as defined in Multilateral Instrument51-102, and interim earnings press releases) prior to submission toshareholders, any governmental body, any stock exchange or disclosure to thepublic. Subject to delegation from the Board, approve the interim financialstatements and footnotes, MD&A and interim earnings press release.

 

•                  Review and discuss with Management and theAuditors the Company’s annual audited financial statements (including disclosuresmade in Management’s Discussion and Analysis and annual earnings pressreleases) prior to submission to shareholders, any governmental body, any stockexchange or disclosure to the public. Recommend to the Board approval of theannual audited financial statements and footnotes, MD&A and annual earningspress release.

 

•                  Recommend to the Board, if appropriate, thatthe Company’s annual audited financial statements be included in the Company’sannual report for filing with appropriate securities regulatory agencies.

 

•                  Prepare any reports required to be includedin the Company’s annual meeting materials and any other Committee reportsrequired by applicable securities laws or stock exchange listing requirementsor rules.

 

**3.3.****        ****With respect to periodic andannual reviews:**

** **

•                  Periodically review separately with each ofManagement and the Auditors (i) any significant disagreement between Managementand the Auditors in connection with the preparation of the

 

28

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financialstatements, (ii) any difficulties encountered during the course of the audit orreview (including any restrictions on the scope of work or access to requiredinformation), and (iii) Management’s response to each.

 

•                  Periodically discuss with the Auditors,without Management being present (i) their judgments about the quality,appropriateness, and acceptability of the Company’s accounting principles andfinancial disclosure practices, as applied in its financial reporting, and (ii)the completeness and accuracy of the Company’s financial statements.

 

•                  Consider and approve, if appropriate,significant changes to the Company’s accounting principles and financialdisclosure practices as suggested by the Auditors or Management. Review withthe Auditors and Management, at appropriate intervals, the extent to which anychanges or improvements in accounting or financial practices, as approved bythe Committee, have been implemented.

 

•                  Review with Management, the Auditors and theCompany’s counsel, as appropriate, any legal, regulatory or compliance mattersthat could have a significant impact on the Company’s financial statements,including significant changes in accounting standards or rules as promulgatedby the Canadian Institute of Chartered Accountants, the securities regulatorshaving jurisdiction over the Company or other regulatory authorities withrelevant jurisdiction.

 

•                  Obtain and review an annual report fromManagement relating to the accounting principles used in preparation of theCompany’s financial statements (including those policies for which Managementis required to exercise discretion or judgments regarding the implementationthereof).

 

**3.4.****        ****Discussions with Management:**

 

•                  Review and discuss with Management theCompany’s annual and interim earnings press releases (including the use of “proforma” or “adjusted” non-GAAP information), financial information and earningsguidance provided to analysts and rating agencies as well as all other materialpublic disclosure documents such as the Company’s AIF, management informationcircular and any prospectuses.

 

•                  Review and discuss with Management allmaterial off-balance sheet transactions, arrangements, obligations (includingcontingent obligations) and other relationships of the Company withunconsolidated entities or other persons, that may have a material current orfuture effect on financial condition, changes in financial condition, resultsof operations, liquidity, capital resources, capital reserves or significantcomponents of revenues or expenses.

 

•                  Inquire about the application of the Company’saccounting policies and its consistency from period to period, and thecompatibility of these accounting policies with generally accepted accountingprinciples, and (where appropriate) the Company’s provisions for futureoccurrences that may have a material impact on the financial statements of theCompany.

 

•                  Review and discuss with Management theCompany’s major financial risk exposures and the steps Management has taken tomonitor and control such exposures (including Management’s risk assessment andrisk management policies).

 

•                  Review and discuss with Management alldisclosures made by the Company concerning any material changes in thefinancial condition or operations of the Company.

 

29

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•                  The Committee will meet periodically and separatelywith the Company’s counsel to review material legal affairs of the Company andthe Company’s compliance with applicable law and listing standards.

 

•                  Obtain explanations from Management forunusual variances in the Company’s annual financial statements from year toyear, and review annually the Auditors’ letter of the recommendations toManagement and Management’s response.

 

**3.5.****        ****With respect to internalcontrols and disclosure:**

** **

•                  In consultation with the Auditors andManagement: (a) review the adequacy of the Company’s internal control structureand system, and the procedures designed to ensure compliance with laws andregulations, (b) discuss the responsibilities, budget and staffing needs of theCompany’s internal accounting department, and (c) review and consider whetherthere is any need for the Company to establish an internal audit department.

 

•                  Establish whistleblowing procedures for (i)the receipt, retention and treatment of complaints received by the Companyregarding accounting, internal accounting controls or auditing matters, and(ii) the confidential, anonymous submission by employees of the Company ofconcerns regarding questionable accounting or auditing matters.

 

•                  Be satisfied that adequate procedures are inplace for the review of the Company’s public disclosure of financialinformation extracted or derived from the Company’s financial statements andperiodically assess the adequacy of those procedures.

 

**3.6.****        ****With respect to reportingobligations:**

** **

•                  Ensure that all reporting obligations relatedto the AIF (Form 40-F for US purposes) and management information circular underPart 5 of Multilateral Instrument 52-110 are fully complied with.

 

**3.7.****        ****Other:**

** **

•                  Review and approve all related-partytransactions.

 

•                  Review and approve the Company’s hiringpolicies regarding partners, employees, and former partners and employees ofthe present and former external auditor of the Company.

 

•                  Review any Management decision to seek asecond opinion from Auditors other than the Company’s regular Auditors withrespect to any significant accounting issue.

 

•                  Review with Management and the Auditors thesufficiency and quality of the financial and accounting personnel of theCompany.

 

•                  Review and reassess the adequacy of thisMandate annually and recommend to the Board any changes the Committee deemsappropriate.

 

•                  Conduct an annual performance evaluation ofCommittee operations.

 

•                  As necessary to carry out its duties, toengage independent legal, accounting or other advisors to advise the Committeeand set and pay the compensation for any such legal, accounting or otheradvisors employed by the Committee.

 

30

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•                  Perform any other activities consistent withthis Mandate, the Company’s By-laws and governing law as the Committee or theBoard deems necessary or appropriate.

 

•                  The Committee will have full access to allbooks, records, facilities and personnel of the Company.

 

**4.****             ****External and InternalLinkages**

** **

•                  The Board

 

•                  The CEO and Senior Management

 

•                  Outside Consultants and Advisors

 

•                  The Corporate Governance and NominatingCommittee”

 

**Composition of the AuditCommittee**

** **

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 Audit Committee’sfinancial experts.

** **

**Relevant Education andExperience**

** **

S. Jane Rowe is the President and ChiefExecutive Officer of Roynat Capital, a merchant bank specializing in innovativelong-term capital and business solutions for mid-sized companies. Ms. Rowe hasan extensive background in the banking industry with over 17 years ofexperience with the Scotiabank Group. Ms. Rowe holds a Bachelor of Commercedegree with honours from Memorial University of Newfoundland and an MBA fromYork University.

 

Paul G. Cataford is the President and ChiefExecutive Officer of University Technologies Inc., a wholly-owned subsidiary ofthe University of Calgary that is responsible for the university’s technologycommercialization. Mr. Cataford’s other experience includes consulting,Managing Director of BMO Nesbitt Burns Equity Partners Inc. from 2001 to 2002and Managing Director and President of BCE Capital Inc. from 1997 to 2001. Mr.Cataford has extensive knowledge of venture capital investing and technology.Mr. Cataford completed a Mechanical Engineering Degree at Queen’s Universityand an MBA at York University.

 

Nadir Mohamed is the President and ChiefOperating Officer of the Communications Division of Rogers Communications Inc.,a cable television and wireless communications service provider across Canada.Prior to his most recent appointment in May 2005, Mr. Mohamed had been Presidentand Chief Executive Officer and Director of Rogers Wireless Communications Inc.since 2001. Mr. Mohamed received a Bachelor of Commerce degree from theUniversity of British Columbia and is a Chartered Accountant. As Mr. Mohameddoes not intend to stand for re-election at the Company’s annual and specialmeeting of shareholders to be held on April 25, 2006, the Board of Directorsintends to appoint another member of the Board to serve on the Audit Committeeeffective that date.

 

**Reliance on Certain Exemptions**

** **

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

 

31

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**Audit Committee Oversight**

** **

At no time since the commencement of theCompany’s most recently completed financial year was a recommendation of theCommittee to nominate or compensate an external auditor not adopted by theboard of directors of the Company.

 

**Pre-approval Policies andProcedures**

** **

The Committee has the sole authority to reviewin advance and pre-approve all non-audit services to be provided to the Companyor its subsidiaries by the Auditor, as well as all fees and other terms ofengagement. 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.

 

**Auditor Independence**

** **

Sierra Wireless’s Audit Committee has concludedthat the Auditors are independent under applicable rules and guidelines and, inparticular, that the Auditors are free from conflicts of interest that couldimpair their objectivity in conducting the audit of the Company’s financialstatements. The Audit Committee is required to approve all non-audit relatedservices performed by our Auditors, and our Auditors are not permitted toperform services for us prohibited for an independent auditor under applicableCanadian and United States regulations, including the Sarbanes-Oxley Act. 

 

**Auditors’ Fees**

** **

In the 2005 and 2004 fiscal years, the feespaid 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      |       |
|                    |            |          |            |          |            |  |  |

 

**Audit Fees**

 

Audit fees for 2004 and 2005 are related to theaudit of the year-end financial statements and the review of the Company’squarterly financial statements and related filing documents including financialpress releases.

 

**Audit-Related Fees**

** **

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

 

**Tax Fees**

** **

Tax fees for 2005 and 2004 are primarily forthe preparation of our Canadian and U.S. tax returns, assistance with taxplanning 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 the Company,including our consolidated subsidiaries, is made known to management by otherswithin the Company and such subsidiaries; and (b) to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted 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 the ChiefExecutive Officer and Chief Financial Officer, do not expect the Company’s disclosurecontrols will prevent or detect all error and all fraud. A control system, nomatter how well designed and operated, can provide only reasonable, notabsolute, 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 on certainassumptions 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 Company is not yet required to be incompliance with the requirements of Section 404 of the Sarbanes-Oxley Act and,as such, is in the process of further evaluation and testing and, if required,enhancement of internal controls as a result of work being completed inconnection with the requirements of section 404 of the Sarbanes-Oxley Act.

 

## ***LEGAL PROCEEDINGS***

## * *

Sierra Wireless America, Inc., as successor toAirPrime, Inc., along with other defendants, has been served with the complaintof Joshua Cohen and David Beardsley and others, filed in the U.S. DistrictCourt for the Central District of California for alleged violations of federaland state securities laws allegedly occurring prior to the time AirPrime, Inc.was acquired by the Company. The plaintiffs filed the third amended complainton July 7, 2005. In November of 2005, the District Court dismissed the thirdamended complaint, without prejudice, with respect to the Company and most ofthe other defendants. The plaintiffs did not file a fourth amended complaintand sought an order from the District Court dismissing the federal actions asto all defendants, with prejudice for the purposes of final judgment, howeverwithout prejudice to the state claims in the third amended complaint. TheDistrict Court so ordered on February 27, 2006. The plaintiffs filed a noticeof appeal to the U.S. Court of Appeals for the Ninth Circuit on March 8, 2006.We expect that it will be several months before they file their appeal

 

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brief. In December 2005, we were served with a similar class actioncomplaint of David Beardsley and others, filed in the Superior Court of theState of California, County of San Diego, for alleged violations of statesecurities laws in connection with the same alleged facts. On February 6, 2006,we filed a Motion to Stay the state court action pending resolution of thenearly identical federal action. We expect the Motion to Stay will be heard bythe San Diego Superior Court in late March, 2006. 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 it is determined that the carrier has no liability for this litigationand without conceding any liability for payment of loss. We have also submittedan escrow claim notice under the escrow agreement dated August 12, 2003relating to the acquisition of AirPrime and the escrow shareholders aredisputing their obligations with respect to this complaint. Although there canbe no assurance that an unfavourable outcome of the dispute would not have amaterial adverse effect on our operating results, liquidity or financialposition, we believe the claims are without merit and will vigorously defendthem. The Company has determined that it is not possible to establish areasonable estimate of the possible loss, or range of possible loss, if any. 

 

The Company and certain of our current andformer officers were named as defendants in several class action complaintsfiled in the U.S. District Court for the Southern District of New York and theU.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 Southern District of New York. By order dated December16, 2005, the U.S. District Court for the Southern District of New Yorkconsolidated all of the actions for pretrial purposes, appointed co-leadplaintiffs in the consolidated action, approved the selection of co-leadcounsel. Plaintiffs filed their consolidated amended complaint on February 21, 2006and the defendants have until early April to file their Motion to Dismiss. Wehave given notice to our liability insurance carrier, which has agreed to payour costs of defense that exceed the policy’s retention amount, subject to areservation of rights in the event that it is determined that the carrier hasno liability for this litigation. Although there can be no assurance that anunfavourable outcome would not have a material adverse effect on our operatingresults, liquidity or financial position, we believe the claims are withoutmerit and will vigorously defend the lawsuits. The Company has determined thatit is not possible to establish a reasonable estimate of the possible loss, orrange of possible loss, if any. However, the Company believes that it isprobable that the legal costs related to these complaints may exceed our policyretention amount of $1.0 million. Accordingly, we accrued $1.0 million in ourresults of operations for the year ended December 31, 2005.

 

On February 8, 2005, Sierra Wireless, Inc. wasserved with the first amended complaint of MLR, LLC filed in the U.S. DistrictCourt for the Northern District of Illinois Eastern Division for alleged patentinfringement relating to our line of professional phones. We were added as a defendantin existing Civil Action No. 04 C 7044 MLR, LLC v. Kyocera Wireless Corporationand Novatel Wireless, Inc. Since that date, we have reached an agreement withMLR under 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 in other legal actions in theordinary course of business and believe that the ultimate outcome of theseactions will not have a material adverse effect on our operating results,liquidity or financial position.

 

## ***QUORUM EXEMPTION***

## *** ***

The rules and regulations of the Nasdaq StockMarket applicable to the Company require each listed issuer to provide that aquorum for its shareholders’ meetings be at least 33 1/3 percent of the issuer’soutstanding shares. The Company has been granted an exemption from thisrequirement because it is

 

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contrary to generally accepted business practices in Canada, theCompany’s country of domicile. The Company has had the benefit of thisexemption in the current and prior year.

 

In determining whether a requirement iscontrary to generally accepted business practices, the Nasdaq rules generallylook to the requirements of the primary market in the issuer’s country ofdomicile. The rules and policies of the Toronto Stock Exchange, the primarymarket in Canada, do not contain quorum requirements, and the *Canada Business Corporations Act*, theCorporation’s governing statute, defers to the quorum requirements contained inan issuer’s By-laws. Under the Company’s By-laws, a quorum for a meeting of theCompany’s shareholders is two persons present in person, each being ashareholder entitled to vote thereat or a duly appointed proxyholder orrepresentative for a shareholder so entitled.

 

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

## *** ***

The Registrar and Transfer Agent for the commonshares in Canada is Computershare Investor Services Inc., 510 Burrard Street,Vancouver, British Columbia, and in the United States is Computershare InvestorServices, Inc., 12039 West Alameda Parkway, Suite Z-2, Lakewood, Colorado.These offices and the principal offices of Computershare Investor Services Inc.in the City of Toronto maintain the register of common shares and can effecttransfers and make deliveries of certificates for common shares.

 

## ***MATERIAL CONTRACTS***

 

There are no material contracts entered intooutside of the Company’s ordinary course of business.

 

## ***EXPERTS***

## *** ***

KPMG LLP, independent chartered accountants,have audited our consolidated financial statements as at December 31, 2005 and2004, and for each of the years in the three year period ended December 31,2005 as set forth in their reports. KPMG LLP has advised the Company that theyare independent with respect to the Company within the meaning of the Rules ofProfessional Conduct of the Institute of Chartered Accountants of BritishColumbia.

 

## ***ADDITIONAL INFORMATION***

## *** ***

Additional information relating to the Company:

 

(a)                                  may befound on SEDAR on www.sedar.com;

 

(b)                                 includingdirectors’ and officers’ remuneration and indebtedness, principal holders ofthe Company’s securities and securities authorized for issuance under equitycompensation plans, is contained in the Company’s Information Circular for itsmost recent annual meeting of shareholders; and

 

(c)                                  isprovided in the Company’s financial statements and MD&A for the financialyear ended December 31, 2005.

 

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