**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


_______________________________




**FORM
      40-F**


(Check
      one)




 ̈ Registration statement pursuant to Section 12 of the Securities Exchange Act
      of
      1934


or


þ Annual
      report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
      1934




For
      the
      fiscal year ended September 30, 2006




Commission
      file number 1-14858




**GROUPE
      CGI INC./CGI GROUP INC.**


*(Exact
      name of Registrant as Specified in Its Charter)*




CGI
      Group
      Inc.


*(Translation
      of Registrant’s Name Into English)*




Québec,
      Canada


*(Province
      or Other Jurisdiction of Incorporation or Organization)*




7374


*(Primary
      Standard Industrial Classification Code Number)*




[Not
      Applicable]


*(I.R.S.
      Employer Identification Number)*




1130
      Sherbrooke Street West


7 th Floor


Montréal,
      Québec


Canada
      H3A 2M8


(514)
      841-3200


*(Address
      and Telephone Number of Registrant’s Principal Executive
      Offices)*




CGI
      Technologies and Solutions Inc.


4050
      Legato Road


Fairfax,
      VA 22033


(703)
      267-8679


*(Name,
      Address and Telephone Number of Agent For Service in the United
      States)*




Securities
      registered or to be registered pursuant to Section 12(b) of the
      Act:




Title
                Of Each Class
            Name
                Of Each Exchange On Which RegisteredClass
                A Subordinate Voting Shares
            New
                York Stock Exchange


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




None


(Title
      of
      Class)




Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:




None




For
      annual reports, indicate by check mark the information filed with this
      form:




þ Annual
      Information Form  þ Audited
      Annual Financial Statements




Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual report:
      297,484,885 Class A Subordinate Shares, 34,208,159 Class B Shares




Indicate
      by check mark whether the registrant by filing the information contained in
      this
      form is also thereby furnishing the information to the Commission pursuant
      to
      Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).
      If “Yes” is marked, indicate the file number assigned to the registrant in
      connection with such rule. Yes____ 82-____ No X




Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter 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 X  No____







**Undertaking**




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




**Controls
      and Procedures**




The
      Registrant has established a system of controls and other procedures designed
      to
      ensure that information required to be disclosed in its periodic reports filed
      under the Securities Exchange Act of 1934, as amended, is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms. These disclosure controls and procedures
      have been evaluated under the direction of the Registrant’s Chief Executive
      Officer and Chief Financial Officer as of the end of the Registrant’s most
      recently completed fiscal year on September 30, 2006. Based on such evaluations,
      the Chief Executive Officer and Chief Financial Officer have concluded that
      the
      disclosure controls and procedures are effective. No change was made in the
      Registrant’s internal controls over financial reporting during the fiscal year
      ended September 30, 2006 that has materially affected, or is reasonably
      likely to materially affect, the Registrant’s internal control over financial
      reporting. No significant changes were made in the Registrant’s internal
      controls or in other factors that could significantly affect these controls
      subsequent to the date of their evaluation.




**Audit
      Committee**




The
      Audit
      and Risk Management Committee of the Board of Directors is composed entirely
      of
      unrelated directors who meet the independence and experience requirements of
      the
      New York Stock Exchange, the Toronto Stock Exchange, the U.S. Securities and
      Exchange Commission rules and Multi-Lateral Instrument 52-110 adopted by the
      Canadian Securities Administrators which took effect on March 30,
      2004.





The
      Audit
      and Risk Management Committee is composed of Mrs. Eileen Mercier, Chair of
      the
      committee, and Messrs. Robert Chevrier, C. Wesley M. Scott and Gerald T. Squire.




The
      Registrant’s Board of Directors has determined that the following members of the
      Audit and Risk Management Committee of the Board of Directors are “audit
      committee financial experts” within the meaning of paragraph (8) of General
      Instruction B to Form 40-F:




-
              Robert
                  Chevrier,-
              Eileen
                  A. Mercier and-
              C.
                  Wesley M. Scott




**Principal
      Accountant Fees and Services**




In
      order
      to satisfy itself as to the independence of the external auditors, the Audit
      and
      Risk Management Committee has adopted an auditor independence policy which
      covers (a) the services that may and may not be performed by the external
      auditors, (b) the governance procedures to be followed prior to retaining
      services from the external auditors, and (c) the responsibilities of the
      key participants. The following is a summary of the material provisions of
      the
      policy.





*Performance
      of Services*





Services
      are either acceptable services or prohibited services.





The
      acceptable services are (a) audit and review of financial statements, (b)
      prospectus work, (c) audit of pension plans, (d) special audits on control
      procedures, (e) tax planning services on mergers and acquisitions activities,
      (f) due diligence relating to mergers and acquisitions, (g) tax services related
      to transfer pricing, (h) sales tax planning, (i) research and interpretation
      related to taxation, (j) research


-2-


relating
      to accounting issues, (k) proposals and related services for financial
      structures and large tax planning projects, (l) preparation of tax returns
      and
      (m) all other services that are not prohibited services.





The
      prohibited services are (a) bookkeeping services, (b) design and implementation
      of financial information systems, (c) appraisal or valuation services or
      fairness opinions, (d) actuarial services, (e) internal audit services, (f)
      management functions, (g) human resources functions, (h) broker-dealer services,
      (i) legal services, (j) services based on contingency fees and (k) expert
      services.





*Governance
      Procedures*





The
      following control procedures are applicable when considering whether to retain
      the external auditors’ services:




For
      all
      services falling within the permitted services category, whether they are audit
      or non-audit services, a request for approval must be submitted to the Audit
      and
      Risk Management Committee through the Executive Vice-President and Chief
      Financial Officer prior to engaging the auditors to perform the
      services.





In
      the
      interests of efficiency, certain permitted services are pre-approved quarterly
      by the Audit and Risk Management Committee and thereafter only require approval
      by the Executive Vice-President and Chief Financial Officer as
      follows:





·
            The
                Audit and Risk Management Committee can pre-approve envelopes for
                certain
                services to pre-determined dollar limits on a quarterly
                basis;·
            Once
                pre-approved by the Audit and Risk Management Committee, the Executive
                Vice-President and Chief Financial Officer may approve the services
                prior
                to the engagement;·
            For
                services not captured within the pre-approved envelopes and for costs
                in
                excess of the pre-approved amounts, separate requests for approval
                must be
                submitted to the Audit and Risk Management Committee;·
            At
                each meeting of the Audit and Risk Management Committee a consolidated
                summary of all fees by service type is presented including a break
                down of
                fees incurred within each of the pre-approved
                envelopes.





*Fees
      Paid to External Auditors*





During
      the years ended September 30, 2006 and September 30, 2005, the Registrant
      paid the following fees to its external auditors:




**Service
                    retained**
                **Fees
                    paid****2006**
                **2005**Audit
                    services
                $4,255,723
                $2,948,591Audit
                    related services(a)
                $1,885,899
                $1,575,009Tax
                    fees(b)
                $1,607,561
                $4,187,281All
                    other fees
                Nil
                Nil


(a)
      the
      audit related fees paid to the external auditors for the years ended September
      30, 2006 and September 30, 2005 were in relation to special audits on control
      procedures, due diligence relating to mergers and acquisitions and research
      relating to accounting issues.


(b)
      the
      tax fees paid to the external auditors for the years ended September 30, 2006
      and September 30, 2005 were in relation to tax planning services on mergers
      and
      acquisitions and major reorganization activities, research and interpretation
      related to taxation, support activities related to tax audit and preparation
      of
      personal tax returns.


-3-


**Code
      of Ethics**




In
      addition to its *Code
      of Ethics and Business Conduct* that
      applies to all the Registrant’s employees, officers and directors, the
      Registrant has adopted an *Executive
      Code of Conduct* that
      applies specifically to the Registrant’s principal executive officer, principal
      financial officer, principal accounting officer or controller, or other persons
      performing similar functions (collectively, the "Officers"). The *Executive
      Code Conduct* is
      designed to deter wrongdoing and to promote:




-
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional
                relationships;-
            Full,
                fair, accurate, timely, and understandable disclosure in reports
                and
                documents that the Registrant files with, or submits to, the Securities
                and Exchange Commission and in other public communications made by
                the
                Registrant;-
            Compliance
                with applicable governmental laws, rules and
                regulations;-
            The
                prompt internal reporting of violations of the code to an appropriate
                person or persons identified in the code; and-
            Accountability
                for adherence to the code.




The
      Registrant’s *Executive
      Code of Conduct* and
      of
      its *Code
      of Ethics and Business Conduct* have
      been
      posted on the Registrant’s website at http://www.cgi.com.





The
      Registrant has not amended its *Executive
      Code of Conduct* in
      any
      substantive respect since its adoption, nor have any waivers been granted in
      respect of any of its provisions.





**Off-balance
      sheet arrangements**




The
      Registrant does not enter into off-balance sheet financing as a matter of
      practice except for the use of operating leases for office space, computer
      equipment and vehicles, none of which are off-balance sheet arrangements within
      the meaning of paragraph (11) of General Instruction B to Form 40-F. In
      accordance with Canadian GAAP, neither the lease liability nor the underlying
      asset is carried on the balance sheet as the terms of the leases do not meet
      the
      threshold for capitalization.




As
      disclosed in Note 24 to the Registrant’s Consolidated Financial Statements, in
      the normal course of business, the Registrant enters into agreements that may
      provide for indemnification and guarantees to counterparties in transactions
      such as consulting and outsourcing services, business divestitures, lease
      agreements and financial obligations. These indemnification undertakings and
      guarantees may require the Company to compensate counterparties for costs and
      losses incurred as a result of various events, including breaches of
      representations and warranties, intellectual property right infringement, claims
      that may arise while providing services or as a result of litigation that may
      be
      suffered by counterparties. The nature of most indemnification undertakings
      prevent the Registrant from making a reasonable estimate of the maximum
      potential amount the Registrant could be required to pay counterparties, as
      the
      agreements do not specify a maximum amount and the amounts are dependent upon
      the outcome of future contingent events, the nature and likelihood of which
      cannot be determined at this time. The Registrant does not expect that any
      sum
      it may have to pay in connection with these guarantees will have a materially
      adverse effect on its Consolidated Financial Statements.





-4-


**Tabular
      Presentation of Contractual Obligations**




As
      of
      September 30, 2006, the Registrant’s known contractual obligations were as
      follows:




**Contractual
                Obligations**
              (in
                ‘000 of Canadian dollars)
            **Payment
                due by period****Total**
            **Less
                than**
              **1
                year**
            **2****nd****and 3****rd****years**
            **4****th****and 5****th****years**
            **After**
              **5
                years**Long-Term
                Debt Obligations
            812,478
            7,626
            98,351
            684,231
            22,270Capital
                (Finance) Lease Obligations
            781
            616
            165
            -
            -Operating
                Lease Obligations(1)
            1,194,802
            217,644
            299,246
            186,971
            490,941Purchase
                Obligations(1)
            209,652
            72,213
            81,482
            46,511
            9,446Total
            2,217,713
            298,099
            479,244
            917,713
            522,657


(1)  Included
      in these obligations: $60.1 million of ofӿce space leases and $6.7 million of
      long-term service agreements which are accounted for within accounts payable
      and
      accrued liabilities, accrued integration charges and other long-term liabilities
      and long-term debt.




**Information
      to be Filed on This Form**




The
      following materials are filed as a part of this Annual Report:




1.
            Annual
                Information Form for the fiscal year ended September 30, 20062.
            Audited
                Annual Financial Statements for the fiscal year ended September 30,
                20063.
            Management’s
                Discussion and Analysis of Financial Position and Results of
                Operations


The
      following documents are filed as exhibits to this Annual Report:




23.1
            Consent
                of Deloitte & Touche LLP99.1
            Certification
                of the Registrant’s Chief Executive Officer required pursuant to Rule
                13a-14(a).99.2
            Certification
                of the Registrant’s Chief Financial Officer required pursuant to Rule
                13a-14(a).99.3
            Certification
                of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.99.4
            Certification
                of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.








-5-


**ANNUAL
        INFORMATION FORM**
 
 For
        the
        fiscal year ended
 September 30,
        2006
 
 
 
 
 
       
 
 
 
 
 December
        12, 2006
 
 
 
  TABLE
        OF
        CONTENTS
 
 CORPORATE
                  GOVERNANCE
              1Board
                  and Standing Committee Charters and Codes of Ethics
              1Audit
                  Committee Information
              1INCORPORATION
                  AND DESCRIPTION OF CAPITAL STOCK
              1Corporate
                  Structure
              1Subsidiaries
              1Capital
                  Structure
              2Stock
                  Splits
              2Market
                  for Securities, Trading Price and Volume
              2GENERAL
                  DEVELOPMENT AND DESCRIPTION OF THE BUSINESS
              3Mission
                  and Profile
              3CGI's
                  Business Approach
              3Related
                  Party Transactions
              3Commercial
                  Alliances
              4DESCRIPTION
                  OF CGI'S BUSINESS
              7Business
                  Structure
              7Principal
                  Offices
              8Main
                  Services Offered by CGI
              8Research
              8Human
                  and Material Resources
              9Client
                  Base
              9The
                  North American Information Technology Services Industry
              9Industry
                  Trends and Outlook
              9CGI's
                  Growth and Positioning Strategy
              10Quality
                  Processes
              11RISK
                  FACTORS
              11DIRECTORS
                  AND OFFICERS
              12Directors
              12Officers
              12Ownership
                  of Securities on the Part of Directors and Officers
              14INTEREST
                  OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
              14TRANSFER
                  AGENT AND REGISTRAR
              14MATERIAL
                  CONTRACTS
              14ADDITIONAL
                  INFORMATION
              14APPENDIX
                  A
              16Fundamental
                  Texts
              16
 
 
 This *Annual
          Information Form* is
          dated
          December 12, 2006 and, unless specifically stated otherwise, all information
          disclosed in this form is provided as at September 30, 2006, the end of
          CGI’s
          most recently completed fiscal year. All dollar amounts herein are in Canadian
          dollars, unless otherwise stated.
 
 **CORPORATE
          GOVERNANCE**
  **Board
          and Standing Committee Charters and Codes of Ethics**
 CGI’s
          Code of Ethics and Business Conduct, its Executive Code of Conduct, the
          charter
          of the Board of Directors and the charters of the standing committees of
          the
          Board of Directors, including the charter of the Audit and Risk Management
          Committee, are set out in CGI’s *Fundamental
          Texts* which
          are annexed as Appendix A to this Annual Information Form.
 
 **Audit
          Committee Information**
 The
          Company incorporates by reference the disclosure contained under the heading
          “Expertise and financial and operational literacy” on page 34 and the
          disclosure under the heading “Report of the Audit and Risk Management Committee”
on page 40 and following of CGI’s *Management
          Proxy Circular* dated
          December 12, 2006 which was filed with the Canadian securities regulatory
          authorities and which is available at www.sedar.com and on CGI’s web site at
          www.cgi.com. A copy of the *Management
          Proxy Circular* will
          be
          provided promptly to shareholders upon request.
 
 **INCORPORATION
          AND DESCRIPTION OF CAPITAL STOCK**
  **Corporate
          Structure**
 *CGI Group Inc.* (the
          “Company” or “CGI”) was incorporated on September 29, 1981 under, and is
          governed by, the provisions of Part IA of the *Companies
          Act* (Quebec) *.* The
          Company continued the activities of *Conseillers
          en gestion et informatique C.G.I. inc.* ,
          which
          was originally founded in 1976. The executive and registered office of
          the
          Company is situated at 1130 Sherbrooke Street West, 7th floor, Montreal,
          Quebec,
          Canada, H3A 2M8. CGI became a public company on December 17, 1986, upon
          completing an initial public offering of 800,000 Class A subordinate voting
          shares.
 
 **Subsidiaries**
 The
          following is a list of the subsidiaries of CGI having (i) total assets
          representing more than 10% of the consolidated assets of CGI as at
          September 30, 2006, or (ii) sales and operating revenues representing
          more than 10% of the consolidated sales and operating revenues of CGI for
          the
          year ended September 30, 2006.
 
 **Name**
                **Laws
                    of**
                  **Incorporation**
                **Percentage
                    of**
                  **Ownership**CGI
                    Information Systems and Management Consultants Inc.
                Canada
                100%Conseillers
                    en gestion et informatique C.G.I. inc.
                Québec
                100%CGI
                    Technologies and Solutions Inc.
                  (previously
                    named CGI-AMS Inc.)
                Delaware
                100%
 
    -1-
 **Capital
            Structure**
 The
            Company’s authorized share capital consists of an unlimited number of First
            Preferred Shares (“First Preferred Shares”), issuable in series, an unlimited
            number of Second Preferred Shares (“Second Preferred Shares”), issuable in
            series, an unlimited number of Class A subordinate shares (“Class A
            subordinate voting shares”) and an unlimited number of Class B shares
            (multiple voting) (“Class B shares”), all without par value, of which, as
            of December 12, 2006, 296,240,025 Class A subordinate voting shares,
            34,208,159 Class B shares
            were issued and outstanding and none of the First Preferred Shares or
            Second
            Preferred Shares were issued and outstanding. As of December 12, 2006,
            46.4% and 53.6% of the aggregate voting rights were attached to the outstanding
            Class A subordinate voting shares and Class B shares
            respectively.
  The
          Company incorporates by reference the disclosure contained under the headings
          “Class A Subordinate Voting Shares and Class B Shares”, on page 3
          and “First Preferred Shares” and “Second Preferred Shares” on page 5 of
          CGI’s *Management
          Proxy Circular* dated
          December 12, 2006 which was filed with the Canadian securities regulatory
          authorities and which is available at www.sedar.com and on CGI’s web site at
          www.cgi.com. A copy of the *Management
          Proxy Circular* will be
          provided promptly to shareholders upon request.
  **Stock
          Splits**
  As
          of
          December 12, 2006, the Company had proceeded with four subdivisions of its
          issued and outstanding Class A subordinate voting shares as
          follows:
 
 ·
                August
                    12, 1997 on a two for one basis;·
                December
                    15, 1997 on a two for one basis;·
                May
                    21, 1998 on a two for one basis; and·
                January
                    7, 2000 on a two for one basis.
 
 **Market
          for Securities, Trading Price and Volume**
  CGI’s
          Class A subordinate voting shares are listed for trading on the *Toronto
          Stock Exchange* under
          the
          symbol GIB. A and on the *New
          York Stock Exchange* ,
          under
          the symbol GIB. A total of 290,744,071 Class A subordinate voting shares
          were traded on the *Toronto
          Stock Exchange* during
          the year ended September 30, 2006 as follows:
 
 **Month**
                **High****(a)**
                  **($)**
                **Low****(a)**
                  **($)**
                **Volume**October
                    2005
                8.90
                8.20
                9,989,782November
                    2005
                8.73
                8.36
                15,600,220December
                    2005
                9.36
                8.32
                28,171,631January
                    2006
                9.94
                8.79
                33,480,809February
                    2006
                9.49
                8.29
                23,389,933March
                    2006
                8.95
                7.50
                31,898,807April
                    2006
                8.55
                7.72
                37,949,780May
                    2006
                8.28
                7.24
                26,210,597June
                    2006
                7.39
                6.70
                15,209,235July
                    2006
                7.16
                6.50
                16,703,446August
                    2006
                7.33
                6.50
                18,646,579September
                    2006
                7.49
                6.92
                33,493,252
  (a)
                  The
                      high and low prices reflect the highest and lowest prices at
                      which a board
                      lot trade was executed in a trading session during the
                      month.
  -2-
 **Normal
            Course Issuer Bid and Share Repurchases**
 
 On
            January 31, 2006, CGI announced that it was renewing its normal course
            issuer
            bid to repurchase up to 10% of the public float of its issued and outstanding
            Class A subordinate voting shares. In addition to the share repurchases
            carried out under the normal course issuer bid, on January 12, 2006,
            the Company
            repurchased for cancellation from BCE Inc. (“BCE”) 100 million of its
            Class A subordinate voting shares. See “Significant developments of the
            most recent three fiscal years - Fiscal Year ended September 30, 2006 -
            Significant Developments” ** below.
  **GENERAL
          DEVELOPMENT AND DESCRIPTION OF THE BUSINESS**
  **Mission
          and Profile**
  CGI’s
          vision is to be a world-class information technology (“IT”) and business process
          outsourcing (“BPO”) leader helping our clients win and grow. The mission of CGI
          is to help its clients with professional services of outstanding quality,
          competence and objectivity, delivering the best solutions to fully satisfy
          client objectives in IT, business processes and management. In all we do,
          we
          foster a culture of partnership, intrapreneurship and integrity, building
          a
          world-class IT and BPO company.
 
 At
          CGI we
          have always understood, and we have always valued, the link between sound,
          ethical business practices and the creation of shareholder value. We believe
          in
          balancing the interests of our key stakeholders: our clients, our members
          and
          our shareholders in order to be recognized by our clients as their partner
          of
          choice, for the depth of our experience in their industry sectors; to be
          recognized by our members and industry peers as the best employer in the
          industry; and by our shareholders as a well-managed company providing superior
          returns.
 
 When
          our
          employees (whom we call our members) know that their contribution is valued
          and
          when their work environment is both challenging and rewarding, they deliver
          services to our clients that are consistently timely and of the highest
          quality.
          Our clients reap the considerable benefits of our members’ exceptional
          performance, and they in turn reward us with the trust and loyalty that
          help us
          to build the long-term partnerships on which CGI is built.
 
 These
          fundamental business principles that underlie all of the Company’s business
          activities are contained in a collection of documents and policies that
          collectively are called CGI’s *Fundamental
          Texts* which
          contain the charter of the Company’s Board of Directors and those of its
          standing committees, reflect applicable corporate governance regulations
          and
          guidelines and take into account evolving best practices in Canada and
          the US.
          These documents are to be read in the context of CGI’s *Mission,
          Vision, Dream and Values* which
          are explained in the preamble to the *Fundamental
          Texts* .
          The *Fundamental
          Texts* are
          annexed below as Appendix A and are posted on the Company’s web site at
          www.cgi.com.
 
 CGI
          now
          ranks among the largest independent IT and business process services firms
          in
          North America. CGI helps its clients in the private and public sectors
          meet
          their strategic goals by providing them with an end-to-end offering of
          high-level IT services and business solutions from offices located around
          the
          world. CGI’s unique mix of services is comprised of management of IT and
          business functions, systems development and integration, and consulting.
 
 **CGI’s
          Business Approach**
 
 As
          of
          December 12, 2006, CGI focused on serving markets in five sectors. Over
          time the Company has been able to develop close, long term relationships
          with
          its clients and to become their IT partner of choice. CGI professionals
          have a
          thorough understanding of their clients’ business needs.
 
 CGI
          chooses to focus on industries that make a strategic use of IT to enhance
          their
          competitive position. CGI therefore provides end-to-end IT services in
          the
          following five economic sectors: financial services, manufacturing, retail
          and
          distribution, governments and healthcare, as well as telecommunications
          and
          utilities.
   -3-
 **Related
            Party Transactions**
 
 *BCE
            Inc. and*  *Bell
            Canada*
 
 In
            December 2005 CGI entered into agreements with BCE pursuant to which
            it
            repurchased 100 million of its Class A subordinate voting shares and
            extended the outsourcing agreement with the BCE group of companies (See
            “Significant developments of the most recent three fiscal years - Fiscal
            Year
            ended September 30, 2006 - Significant Developments” below). Previously, in July
            of 2004 CGI, *Bell
            Canada* and *Connexim
            Inc.* ,
            a subsidiary
            of *Bell
            Canada* ,
            entered
            into an agreement pursuant to which the Company’s network services are
            outsourced to *Connexim
            Inc.* The
            outsourcing agreement provides the Company with economies of scale as
            well as
            best practices in network management. While *Bell
            Canada* and *Connexim
            Inc.* were
            affiliates of BCE and therefore related parties when the agreement was
            entered
            into, following the repurchase of Class A subordinate voting shares from
            BCE, they are no longer related parties.
 
 *Innovapost
          Inc.*
 
 In
          the
          normal course of business, CGI is also party to contracts with Innovapost,
          a
          joint venture, pursuant to which CGI is its preferred IT supplier. CGI
          exercises
          significant influence over Innovapost’s operating, financing and investing
          activities through its 49% ownership interest.
 
 *Lease
          of an Aircraft*
 
 In
          December 2005, the Company leased a private aircraft for use on company
          business
          pursuant to a transaction in which Serge Godin, CGI’s Founder and Executive
          Chairman of the Board, had an indirect interest. See “Interest of Management and
          Others in Material Transactions” below.
 
 **Commercial
          Alliances**
 CGI
          currently has commercial alliance agreements with various business partners.
          These non-exclusive commercial agreements with hardware and software providers
          allow the Company to provide its clients with best of breed technology,
          often on
          the best commercial terms available. The following is a chronological list
          of
          CGI’s primary commercial alliances:
 
 ·
                in
                    1996, CGI entered into a procurement relationship with*IBM
                    Canada*;·
                in
                    1998, CGI signed commercial agreements with ERP program developers*SAP*,*PeopleSoft*and*Oracle*;·
                in
                    September 1999, CGI entered into a non-exclusive alliance with*Microsoft*that led to Partner Agreements;·
                in
                    October 1999, CGI signed a non-exclusive direct commercial systems
                    integrator agreement with*Sun
                    Microsystems*;·
                in
                    December 2000, CGI signed a non-exclusive systems integration
                    agreement
                    with*Siebel*;
                    and·
                in
                    July 2002, CGI signed a non-exclusive systems integration agreement
                    with*BEA
                    Systems*.
 
 **Significant
          developments of the most recent three fiscal years**
 
 *Fiscal
          Year ended September 30, 2006*
 
 *Significant
          Developments*
 
 In
          fiscal
          2006 CGI signed approximately $4.0 billion in new contracts, extensions
          and
          renewals. The most significant transaction was a contract extension worth
          $1.1
          billion in value over a term of ten years in which CGI extended the outsourcing
          agreement with the BCE group of companies on January 12, 2006, providing
          the
          Company with an important source of recurring revenues. The remaining new
          contracts, extensions and renewals span the Company’s targeted vertical markets.
          Overall, while fiscal 2006 was not without its successes, it was, nonetheless,
          a
          year marked by two over-arching challenges. First, lower than expected
          revenue
          and work volumes from our largest client, BCE, which impacted our revenue
          by  -4-
 $114.7
          million in fiscal 2006. Second, the strengthening Canadian dollar had a
          negative
          impact of $106.4 million on our fiscal 2006 revenue compared with fiscal
          2005. 
 *Program
            to Strengthen CGI’s Competitive Position*
 
 On
            March
            29, 2006 CGI announced that it was taking measures to reduce its overall
            cost
            structure and to accelerate the expansion of its *Global
            Delivery Model* .
            The
            measures were partly in response to the lower than expected revenue from
            BCE. In
            line with this plan, approximately 1,000 positions were eliminated during
            fiscal
            2006, primarily located in Montreal and Toronto, of which half were related
            to
            BCE. The remaining headcount
            reduction stemmed from other adjustments to CGI’s cost base and included
            reductions in global and corporate functions. CGI’s strategic intent to increase
            the scale of CGI’s *Global
            Delivery Model* created
            new positions in our centres of excellence in Atlantic Canada, southwest
            Virginia, and India which partially offset the headcount reductions.
            This
            exercise allowed the Company to further reduce its overhead and increase
            the
            overall utilization rate of its workforce. A pre-tax provision of $67.3
            million
            was taken in fiscal 2006, comprised of $51.5 million for severance and
            $15.8
            million for consolidation and closure of facilities. The remaining estimated
            provision of $22.7 million will be taken over the remainder of calendar
            2006.
            The Company continues to expect a one-year payback.
 
 *Adjustments
          to Senior Management*
 
 Serge
          Godin, previously Chairman of the Board and Chief Executive Officer (“CEO”) took
          the position of Executive Chairman of CGI in January, 2006, and the Board
          appointed Michael E. Roach, previously President and Chief Operating Officer,
          as
          President and Chief Executive Officer of CGI, reporting to the Executive
          Chairman.
 
 In
          July
          of 2006, André Imbeau, previously Executive Vice-President and Chief Financial
          Officer (“CFO”), was appointed Executive Vice-Chairman of CGI. In September of
          2006, Mr. Imbeau was also appointed Corporate Secretary. In his new role,
          Mr.
          Imbeau works closely with Serge Godin and focuses on strategic initiatives
          leading to value creation, such as major transactions and financing as
          well as
          key client relationships. Concurrently, David Anderson, previously CGI’s Senior
          Vice-President and Corporate Controller was appointed to the role of Executive
          Vice-President and Chief Financial Officer. In this capacity, Mr. Anderson
          also
          joined the CGI Executive Committee, which consists of Serge Godin, André Imbeau,
          and Michael E. Roach.
 
 *BCE
          Share Buyback and Normal Course Issuer Bid*
 
 On
          December 16, 2005, the Company reached an agreement with BCE to purchase
          for
          cancellation 100 million of its Class A subordinate voting shares held
          by BCE at
          a price of $8.59 per share. The transaction was completed on January 12,
          2006
          and the shares were cancelled. The purchase price was equal to the
          volume-weighted average price of the Class A subordinate voting shares
          on the
          Toronto Stock Exchange for the 20 trading days preceding December 16, 2005.
          Subsequent to the repurchase of shares, the shareholders agreement with
          BCE was
          terminated, and its representation on the CGI Board of Directors was
          relinquished. As at September 30, 2006, BCE’s share ownership represented
          approximately 2% of CGI’s issued and outstanding Class A subordinate voting
          shares and Class B shares, compared to 30% at the end of fiscal 2005. CGI
          financed the acquisition price of $859.2 million plus associated costs
          of $6.8
          million through cash on hand and the utilization of its credit facilities.
          Following this transaction, through an agreement with a bank syndicate,
          the
          Company’s current bank facilities were increased by $200 million to stand at $1
          billion. The agreement is currently comprised of a Canadian tranche with
          a limit
          of $850 million and a U.S. tranche equivalent to $150 million.
 
 On
          January 31, 2006, the Company’s Board of Directors authorized the renewal of its *Normal
          Course Issuer Bid* and the
          purchase of up to 10% of the public float of the Company’s Class A subordinate
          voting shares during the ensuing year and the Toronto Stock Exchange
          subsequently approved the Company’s request for approval. The *Normal
          Course Issuer Bid* enables
          CGI to purchase on the open market through the Toronto Stock Exchange up
          to
          29,288,443 Class A subordinate voting shares for cancellation. The Class
          A
          subordinate voting shares may be purchased under the Issuer Bid commencing
          February 3, 2006 and ending no later than February 2, 2007, or on such
          earlier
          date when -5-
 the
          Company completes its purchases or elects to terminate the bid. As of December
          12, 2006,  the Company had purchased 9,041,200 Class A subordinate
          voting shares under the Issuer Bid for an average market price plus commission
          of $7.1736, representing an aggregate consideration of $64.7 million. 
 *Exercise
            of Share Purchase Warrants*
 
 On
            March
            22, 2006, La Fédération des caisses Desjardins du Québec (“Desjardins”)
            exercised a warrant for 4,000,000 Class A subordinate voting shares at
            a price
            of $6.55 each. This warrant was originally issued by CGI in connection
            with a
            10-year outsourcing agreement signed with Desjardins in 2001. On April
            6,
            2006, BCE
            exercised warrants for 3,021,096 Class A subordinate voting shares and
            110,140
            Class B shares at a price of $6.55 each. Similarly, on April 28, 2006,
            the Class
            B shareholders of CGI exercised warrants for 435,991 Class B shares at
            a price
            of $6.55 each. The warrants exercised by BCE and the Class B shareholders
            had
            been issued to them pursuant to their pre-emptive rights at the time
            of the
            issuance of the Desjardins warrants. On June 13, 2006, 1,118,210 warrants
            held by another third party, which had not been exercised, expired. No
            further
            warrants are outstanding as of December 12, 2006.
 
 *Fiscal
          Year ended September 30, 2005*
 
 *Significant
          Acquisitions*
 
 On
          December 1, 2004, the Company purchased for $47,196,000 the remaining
          outstanding shares of AGTI Services Conseils Inc. (“AGTI”) a Montreal-based
          information technology consulting enterprise specializing in business and
          IT
          consulting, project and change management and productivity improvement.
          The
          Company previously held 49% of the outstanding shares of AGTI.
 
 *Other
          Significant Developments*
 
 On
          February 1, 2005 the Board of Directors authorized the purchase of up to
          10% of
          the public float of the Company’s Class A subordinate voting shares through a
          Normal Course Issuer Bid (the “Issuer Bid”). The Issuer Bid enabled the Company
          to purchase on the open market through the facilities of the *Toronto
          Stock Exchange* up to
          27,834,417 Class A subordinate voting shares for cancellation. As at January
          28,
          2005, there were 410,902,202 Class A subordinate voting shares of the Company
          outstanding of which approximately 68% were widely held. The Company was
          authorized to purchase Class A subordinate voting shares under the Issuer
          Bid
          commencing on February 3, 2005 and was authorized to continue to do so
          until
          February 2, 2006. As of December 16, 2005, the Company had purchased
          14,896,200 Class A subordinate voting shares under the Issuer Bid for an
          average
          market price plus commission of $7.82, representing an aggregate consideration
          of $116.4 million.
 
 On
          December 20, 2004 CGI announced that it had concluded a five-year unsecured
          revolving credit facility, which replaced its previous syndicated bank
          facilities. The new credit facilities of an aggregate amount of $800 million
          were comprised of a US tranche worth the equivalent of $300 million and
          a
          Canadian tranche worth $500 million. The credit facilities were concluded
          with a
          banking syndicate in which the *National
          Bank of Canada* acted
          as
          administrative agent and lead arranger; *JPMorgan
          Chase Bank* and *Caisse
          centrale Desjardins* acted
          as
          syndication agents and lead arrangers; *The*  *Toronto
          Dominion Bank* , *Bank
          of America* , *KeyBank* and *Caisse
          de dépôt et placement du Québec* acted
          as
          documentation agents; *ABN
          AMRO* , *Bank
          of Montreal* , *Canadian
          Imperial Bank of Commerce* ,
          the *Royal
          Bank of Canada* , *United
          Overseas Bank* and *Société
          Générale* acted
          as
          managing agents and *Citibank* acted
          as
          a participant.
 
  -6-
 *Fiscal
            Year ended September 30, 2004*
 
 *Significant
            Acquisitions*
 
 *In
            fiscal 2004 CGI acquired American Management Systems, Incorporated* (“AMS”),
            a premier business and IT consulting firm to the government, healthcare,
            financial services and communications industries. CGI acquired AMS’ business
            with associated revenue of more than $900 million for a net cash consideration
            of $584 million.
 
 *Other
            Significant Developments*
 
 On
            October 21, 2003, *Nexxlink
            Technologies Inc.* (“Nexxlink”)
            purchased various non-core CGI assets generating approximately $40 million
            in
            annual revenue for a price of $21 million payable to CGI in cash, a convertible
            note and shares of Nexxlink. This transaction provided CGI initially
            with a 32%
            equity interest in Nexxlink. On December 9, 2004, *Bell
            Canada* announced
            that it was making an offer to acquire all of the outstanding shares
            of Nexxlink
            at a price of $6.05 per share for an equity value of approximately $67
            million.
            CGI agreed with *Bell
            Canada* to
            support *Bell
            Canada* ’s
            offer
            and therefore tendered the Nexxlink shares that it or
            its
            wholly-owned subsidiaries owned in response to *Bell
            Canada* ’s
            bid.
            The bid closed successfully on January 25, 2005 with the result that
            the Company
            disposed on that date of all of its interest in Nexxlink.
 
 On
          January 30, 2004, we announced that CGI had completed a US$192 million
          private
          debt placement financing with US institutional investors. The private placement
          was comprised of three tranches of guaranteed senior unsecured notes, with
          a
          weighted average maturity of 6.4 years and a weighted average fixed coupon
          of
          4.97%. The proceeds were used to reimburse the drawn-down portion of the
          Company’s existing credit facilities, as well as for general corporate
          purposes.
 
 On
          March
          19, 2004, we completed (i) a firm underwritten private placement in Canada
          and
          the US of approximately 33.1 million subscription receipts at a price of
          $8.00
          per subscription receipt for gross proceeds of $264.6 million and (ii)
          a private
          placement of approximately 8.3 million subscription receipts with BCE at
          a
          price of $8.00 per subscription receipt for proceeds of approximately $66.1
          million, on the same terms and conditions as the firm underwritten private
          placement offering. The private placements were undertaken in connection
          with
          the acquisition of AMS. On May 3, 2004, upon the satisfaction of certain
          conditions related to the acquisition of AMS, each subscription receipt
          was
          automatically exchanged for one Class A subordinate voting share without
          payment
          of additional consideration.
 
 **DESCRIPTION
          OF CGI’S BUSINESS**
  **Business
          Structure**
  CGI’s
          business operations are structured in two key lines of business (“LOB”): The IT
          Services LOB and the Business Process Services (“BPS”) LOB. CGI’s remaining
          business activities are in the nature of corporate services that are carried
          on
          primarily by CGI’s head office staff.
 
 Corporate
          services - Head Office
 (Montreal)
 ·
                Administrative
                    and financial functions·
                Communications
                    and investor relations·
                Corporate
                    and strategic development·
                Corporate
                    affairs·
                Human
                    resources·
                Internal
                    Audit·
                Legal·
                Marketing·
                Mergers
                    & Acquisitions·
                Planning
                    and corporate development
  -7-
 ·
                Quality·
                Research
                    & Development·
                Professional
                    development programs·
                Support
                    to large outsourcing projects·
                Knowledge
                    management·
                Project
                    performance
 ***IT
            Services LOB***
 
 The
            IT
            services LOB provides a full-range of IT services, including systems
            integration, consulting and outsourcing to clients worldwide. The professionals
            and facilities in India and Canada also serve the United States and
            foreign-based clients as an integral part of our off-shore and nearshore
            delivery model.
 
 ***BPS
            LOB***
 
 The
            BPS
            LOB provides a full spectrum of business process outsourcing services
            to its
            client base. Its services include business processing for the financial
            services
            sector, as well as payroll services and document management
            services.
 **Principal
            Offices**
  CGI
          is
          one of the largest information technology and business process services
          firms.
          CGI and its affiliated companies employ approximately 24,500 professionals.
          CGI
          provides end-to-end IT and business process services to clients worldwide
          from
          offices in Canada, the United States of America (“US”), Europe, Asia Pacific as
          well as from centers of excellence in North America, Europe and India.
          Its main
          locations are listed on the inside back cover of volume 1 of CGI’s *Annual
          Report* for
          fiscal 2006 entitled *We’re
          in your community* which
          information is incorporated by reference. The *2006*  *Annual
          Report* was
          filed
          with the Canadian securities regulatory authorities and is available at
          www.sedar.com and on CGI’s web site at www.cgi.com. A copy of volumes 1
          and 2 of the *2006*  *Annual
          Report* will
          be
          provided promptly to shareholders upon request.
 
 **Main
          Services Offered by CGI**
  CGI
          provides the full range of IT services including the management of IT and
          business processes on an outsourced basis, as well as systems integration
          and
          consulting. The Company’s primary focus is large scale systems integration and
          outsourcing contracts. CGI provides the consulting, implementation and
          operations services that companies need to turn their corporate strategy
          into
          reality.
 
 *Outsourced
          Management of IT and Business Processes*
 
 Outsourcing
          is one of the fastest growing segments of the IT industry. CGI has been
          active
          in outsourcing since 1986, which makes it a pioneer in this segment. Through
          a
          series of acquisitions completed since 1996, including the acquisition
          on July
          1, 1998 of *Bell
          Sygma* and *Bell
          Sygma International* ,
          the
          Company is now the largest independent provider of IT and BPO services
          in
          Canada, and continues to strengthen its position in the US outsourcing
          market.
 
 Outsourcing
          contracts are signed for periods ranging from five to ten years and are
          generally renewable. They are paid for according to a formula of monthly
          payments.
 
 As
          part
          of outsourcing contracts, clients delegate entire or partial responsibility
          for
          their IT operations or a business process in order to achieve significant
          savings and access the best IT, while retaining control over strategic
          functions. These contracts provide revenue visibility and support performance
          stability.
 
 Services
          provided as part of an outsourcing contract may include facilities management
          (data centres, call centres, network and desktop services), application
          maintenance and support, development and integration of new projects and
          applications, as well as BPS including functions such as document management
          and
          payroll services or insurance policy administration.
 
 -8-
 *Consulting
            and Systems Integration*
 
 When
            providing consulting services, CGI acts as a trusted advisor to its clients,
            offering a full range of IT and management consulting services, including
            IT
            strategic planning, business process engineering and systems architecture.
            In
            addition to their technical expertise, CGI professionals understand the
            business
            issues in a particular industry or sector.
 
 In
            terms
            of systems integration, CGI provides implementation services covering
            the full
            scope of today’s enterprise IT environment, integrating different technologies
            to create IT systems that respond to clients’ strategic needs. In addition to
            its expertise at working with leading technologies and software applications,
            CGI provides customized application development services leveraging its
            ISO and
            SEI CMM certified methodologies and the option of economies from offshore
            development.
 
 **Research**
  Information
            technologies are abundant, complex and rapidly changing. In this context,
            CGI’s
            success depends on its ability to remain at the forefront of its field,
            as well
            as to adapt its service approach to suit each client’s specific needs. This
            situation requires the ongoing development of cutting edge expertise,
            tools and
            methodology.
 The
          combined gross research and development spending incurred in 2006 was $68.6
          million compared with $78.2 million in 2005 and $64.5 million in 2004.
          The
          decrease in research and development spending in 2006 is mainly related
          to the
          acceleration of CGI’s *Global
          Delivery Model* which
          allows the Company to carry out its research and development at a lower
          cost.
 
 **Human
          and Material Resources**
  As
          of
          December 12, 2006, CGI had approximately 24,500 employees. In order to
          encourage
          the high degree of commitment necessary to ensure the quality and continuity
          of
          client service, CGI has had an employee share purchase plan in place for
          several
          years. From the beginning, the Company has had a profit sharing program
          which,
          from 1990 onwards, has been based on the performance of its business units.
          These measures, together with the Company’s ongoing training programs, are based
          on the concepts of intrapreneurship and total quality that form the core
          of
          CGI’s corporate culture.
 
 As
          for
          facilities, the vast majority of CGI’s offices are located in rented premises.
          As of September 30, 2006, the net value of CGI’s capital assets was $120
          million. Capital leases related to these fixed assets amounted to $2.6
          million.
 
 **Client
          Base**
  CGI
          works
          with large and medium sized businesses in the private and public sectors
          worldwide. The Company’s clientele is well balanced in terms of quality,
          quantity, stability and diversity. The BCE group of companies’ (including *Bell
          Canada* )
          domestic operations accounted for 11.9% of CGI’s revenue in fiscal 2006,
          compared with 14.3% of CGI’s revenue in fiscal 2005 and 16.4% of CGI’s revenue
          in fiscal 2004. With the exception of BCE,
          none
          of CGI’s clients accounted for more than 10% of its business.
 
 **The
          North American IT Services Industry**
 
 **Size,
          Structure and Recent Developments**
 
 Looking
          ahead, we expect that market demand for systems integration and consulting
          services will increase, in line with improving economic conditions. With
          respect
          to information technology and business process services outsourcing, we
          believe
          that the potential remains enormous. CGI has from time to time commissioned
          a
          study from *International
          Data Corp.* (“IDC”)
          which provides CGI with insight as to spending on information technology
          and
          business process services in Canada, the United States and Western
          Europe.
 
 -9-
 According
            to IDC’s research, the potential business opportunity for information technology
            outsourcing was estimated to be US$682 billion in the US, US$476 billion
            in
            Western Europe and US$60 billion in Canada. For business process services,
            the
            opportunity is even greater, amounting to US$1.4 trillion in the US,
            US$480
            billion in Europe, and US$80 billion in Canada. These numbers exclude
            the value
            of services already outsourced and indicate a large untapped potential
            market.
 
 Another
            study CGI commissioned by IDC ** surveyed
            Fortune 2000 business line executives ** and
            identified a trend to full information technology outsourcing. 13% of
            companies
            surveyed have plans to outsource all their information technology operations
            within the next three years. CGI therefore believes that the Canadian
            IT
            services market offers significant growth opportunities. In the US market,
            where
            the size of the market is about 11 times larger, the opportunities for CGI
            are many times greater.
 
 **Industry
            Trends and Outlook**
  Our
            industry continues to evolve rapidly. In the early to mid 1990s, 75%
            of the
            industry’s revenue came from per diem services, i.e. from specialized assistance
            within specific projects. Such services did not require a large or complex
            organization nor did they allow for much differentiation between firms,
            which
            resulted in fierce competition.
 Today,
          a
          large IT firm’s revenues are generated by systems integration or outsourcing
          projects aimed at comprehensive business solutions. Both public and private
          sector organizations are looking for new ways to provide better services
          at
          lower cost. For organizations, the emergence of internet applications and
          web
          based business models have shortened implementation time for solutions
          while
          increasing pressure to retain scarce professional resources. Their need
          to
          concentrate on core competencies and to increase flexibility explains why
          companies increasingly turn to externally sourced professionals for the
          development and management of some of their specialized functions, including
          information systems. They are demanding proven technological solutions
          implemented rapidly at a lower total cost of ownership and
          operation.
 
 Prospective
          clients continue to place significant emphasis on cost reductions and are
          therefore inclined to consider outsourcing part or all of their IT services.
          These factors help to explain the growing popularity of global outsourcing
          services.
  **CGI’s
          Growth and Positioning Strategy**
 
 CGI
          has
          major competitive advantages to address the current demand for services
          and the
          potential market for global outsourcing services. The Company benefits
          from a
          strong financial position and offers the full range of IT services.
 
 CGI’s
          independence from hardware manufacturers is also a differentiating factor,
          allowing the Company to focus on developing the best solution for our client’s
          needs.
 
 CGI
          benefits from a highly flexible delivery model. U.S. clients are served
          using a
          mix of domestic (U.S.), Canadian and Indian-based service centres. This
          flexible
          service offering provides clients with high quality services on very competitive
          terms, while protecting CGI’s margins.
 
 CGI’s
          client base represents all of the main economic sectors. In order to develop
          services adapted to the specific needs of each market, the Company’s
          professionals are grouped according to targeted client segments, which
          provide
          the Company with a deeper understanding of the trends specific to each
          industry,
          as well as a better understanding of the clients’ competitive and technological
          challenges. This market expertise is a key factor in a company’s ability to
          develop comprehensive business solutions.
 
 With
          the
          addition of the operations acquired when CGI purchased AMS in May of 2004
          (see
“Fiscal Year ended September 30, 2004 - Significant Acquitions” above), our
          presence in the US market today is roughly at the same stage we had reached
          several years ago in Canada. With this platform in the U.S., CGI is replicating
          the same formula for success it used in Canada, emphasizing a metro market
          proximity model, end-to-end IT services, and positioning itself for large
          outsourcing contracts.
 -10-
 CGI
            utilizes a strategy founded on four pillars of growth that combines organic
            growth and acquisitions.
 
 ·
                  The
                      first growth pillar, focused on organic growth, is comprised
                      of
                      outsourcing, systems integration and consulting (“SI&C”) contract
                      wins, renewals and extensions, at the regional level of our
                      operations.
                      CGI is growing its sales funnel of contract proposals across
                      all of the
                      Company’s geographic markets.·
                  The
                      second pillar of growth the pursuit of new large outsourcing
                      contracts.
                      These contracts can use a blend of onshore, nearshore or offshore
                      expertise to leverage our full, end-to-end global delivery
                      capabilities.
                      Given the Company’s growth rate over the last several years, CGI has the
                      greater critical mass required to bid on large, complex opportunities
                      in
                      North America and in Europe.
 
 The
            third
            and fourth pillars of our growth strategy focus on acquisitions of smaller
            firms
            or niche players and of large companies, respectively. In North America,
            we will
            continue to be an IT domain consolidator of both small and large IT services
            companies.
 
 ·
                  Small
                      acquisitions: We identify niche company acquisitions through
                      our strategic
                      mapping program that systematically searches for companies
                      that could
                      strengthen our geographic presence, vertical market
                      knowledge or increase the richness of our service offerings.
                      Currently, we
                      are focused on acquisitions in our targeted verticals and metro
                      markets in
                      the US, as well as on expanding our BPO capabilities.
 ·
                Large
                    acquisitions: Through large acquisitions, we are seeking targets
                    in Europe
                    and the US that will increase our geographical presence and critical
                    mass
                    in order to further qualify us for larger outsourcing deals.
 
 **Quality
          Processes**
  CGI’s
          ISO
          9001 certified management frameworks ensure that its clients’ objectives are
          clearly defined, that projects are properly scoped and that the necessary
          resources are applied to meet objectives. These processes ensure that clients’
requirements drive CGI’s solutions. Clients are constantly kept informed; their
          degree of satisfaction is constantly measured and part of the incentive
          remuneration of CGI managers is linked to the results.
 
 In
          1993,
          the Company began working towards obtaining ISO 9001 certification for
          its
          Project Management Framework. CGI’s Quebec City office was granted ISO 9001
          certification in June 1994, which allowed CGI to become North America’s first
          organization in the IT consulting field to receive ISO 9001 certification
          for
          the way in which it managed projects. Since 1995 CGI has expanded the ISO
          9001
          certification throughout its Canadian, US and international offices as
          well as
          its corporate headquarters. Over the past several years, in the context
          of CGI’s
          high growth rate, its ISO certified quality system has been a key ingredient
          in
          spreading its culture, in part because it helps to integrate new members
          successfully.
 
 As
          clients grow and IT projects become increasingly complex, CGI strives to
          further
          refine its quality processes while allowing them to branch out across all
          its
          activities. CGI’s enhanced quality system referred to as the *Client
          Partnership Management Framework* (“CPMF”)
          is simpler and provides the Company’s business units with greater autonomy in a
          context of decentralized activities. One of CGI’s key focus areas remains the
          successful management of client relationships, leading to long-term
          partnerships. Following its merger with *IMRglobal* in
          July
          2001, CGI gained applications development centres in Mumbai and Bangalore
          which
          have now achieved SEI CMMi Level 5 quality certification.
 
 CGI
          strives to ensure that clients benefit from a seamless offering of consistently
          high quality. Regardless of which CGI business unit they deal with, clients
          know
          that CGI will provide the same quality services, while delivering projects
          on
          time and on budget by a margin that far exceeds industry standards.
 
 CGI
          also
          obtained ISO 9001 certification for the application of its *Member
          Partnership Management Framework* in
          its
          operations, and most recently, in 2004, similarly obtained ISO 9001
          certification for its  -11-
 *Shareholder
          Partnership Management Framework*(“SPMF”).
          The SPMF structures the processes and information flows between CGI and
          its
          shareholders as well as with the investment community. 
 CGI
            now
            holds ISO quality certification for the management of its partnerships
            with each
            of its three major stakeholder groups, namely customers, members and
            shareholders.
 
 **RISK
            FACTORS**
  The
            Company incorporates by reference the disclosure contained in the section
            entitled “Risks and Uncertainties” describing the risk factors to which the
            Company’s business is exposed, which is contained in its *Management’s
            Discussion and Analysis* for
            the
            year ended September 30, 2006 on pages 4 to 24 of volume 2 of CGI’s *2006
            Annual Report* entitled *Our
            numbers* which
            was
            filed with the Canadian securities regulatory authorities and which is
            available
            at www.sedar.com and on CGI’s web site at www.cgi.com. A copy of the *Management’s
            Discussion and Analysis* will
            be
            provided promptly to shareholders upon request.
  **DIRECTORS
          AND OFFICERS**
 
 **Directors**
 
 The
          Company incorporates by reference the disclosure under the heading “Nominees for
          Election as Directors” relating to the Company’s directors contained on pages 8
          to 14 of CGI’s *Management
          Proxy Circular* dated
          December 12, 2006 which was filed with the Canadian securities regulatory
          authorities and which is available at www.sedar.com and on CGI’s web site at
          www.cgi.com. A copy of the *Management
          Proxy Circular* will be
          provided promptly to shareholders upon request.
  **Officers**
  The
          following table states the names of CGI’s Senior Officers, their place of
          residence and their principal occupation:
 **Name
                    and place of residence**
                **Principal
                    occupation**Serge
                    Godin
                  Westmount,
                    Quebec
                  Canada
                Founder
                    and Executive Chairman of the BoardR.
                    David Anderson
                  Haliburton,
                    Ontario
                  Canada
                Executive
                    Vice-President and Chief Financial OfficerFrançois
                    Boulanger
                  Longueuil,
                    Québec
                  Canada
                Vice-President
                    and Corporate ControllerAndré
                    J. Bourque
                  Outremont,
                    Quebec
                  Canada
                Executive
                    Vice-President and Chief Legal OfficerMichael
                    Denham
                  Montreal,
                    Quebec
                  Canada
                President,
                    Business Process Services (BPS)André
                    Imbeau
                  Beloeil,
                    Quebec
                  Canada
                Founder,
                    Executive Vice-Chairman of the Board and Corporate
                    SecretaryDonna
                    Morea
                  Falls
                    Church, Virginia
                  USA
                President
                    US Operations and IndiaLuc
                    Pinard
                  St-Lambert,
                    Quebec
                  Canada
                Executive
                    Vice-President and Chief Technology OfficerMichael
                    E. Roach
                  Outremont,
                    Quebec
                  Canada
                President
                    and Chief Executive OfficerDaniel
                    Rocheleau
                  Longueuil,
                    Quebec
                  Canada
                Executive
                    Vice-President and
                  Chief
                    Business Engineering Officer
  -12-
  Jacques
                    Roy
                  Bourcherville,
                    Quebec
                  Canada
                Senior
                    Vice-President, Finance and TreasuryJoseph
                    Saliba
                  London
                  England
                President
                    Europe and AustraliaClaude
                    Séguin
                  Montreal,
                    Quebec
                  Canada
                Senior
                    Vice-President Finance and Strategic
                    Investments
  All
          of
          the above-mentioned persons have held the position set out opposite their
          names,
          or other executive or equivalent management functions in the Company or
          its
          subsidiaries during the last five years, except Donna Morea who prior to
          May 3,
          2004 served as *Executive
          Vice-President - Public Sector Group* of
          American Management Systems, Incorporated (“AMS”) and in other equivalent
          executive positions at AMS prior to its acquisition by CGI on May 3, 2004;
          and
          Michael Denham, who prior to August 2005 was with Bombardier Inc. where
          he spent
          four years as Senior Vice-President, Strategy reporting to the CEO. Prior
          to
          that position, Mr. Denham was a partner with McKinsey and Company, where
          he held
          key leadership roles and worked extensively in the United States and
          Europe.
  **Ownership
          of Securities on the Part of Directors and Officers**
  The
          Company incorporates by reference the disclosure under the heading “Principal
          holders of Class A subordinate voting shares and Class B shares” on page 5
          of CGI’s *Management
          Proxy Circular* dated
          December 12, 2006 which was filed with the Canadian securities regulatory
          authorities and which is available at www.sedar.com and on CGI’s web site at
          www.cgi.com. A copy of the *Management
          Proxy Circular* will be
          provided promptly to shareholders upon request.
 
 **INTEREST
          OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**
 
 The
          charter of the Audit and Risk Management Committee requires that the committee
          review all related party transactions.
 
 In
          January of 2006 CGI entered into agreements with BCE pursuant to which
          it
          repurchased 100 million of its Class A subordinate voting shares and extended
          the outsourcing agreement with the BCE group of companies (See “Significant
          developments of the most recent three fiscal years - Fiscal Year ended
          September
          30, 2006 - Significant Developments” above). In addition to the review carried
          out by the Audit and Risk Management Committee, a special committee of
          the Board
          of Directors composed of independent directors reviewed the transaction.
          The
          special committee received independent advice as well as a fairness opinion
          in
          support of its recommendation to the Board of Directors in favour of the
          transaction.
 
 In
          accordance with its mandate, the Audit and Risk Management Committee also
          reviewed and recommended the approval of a transaction in which the Company
          leased a private aircraft for use on Company business from a leasing company
          which had acquired it from a limited partnership of which Serge Godin,
          CGI’s *Founder
          and Executive*  *Chairman
          of the Board* ,
          was the
          sole limited partner. Following approval by the Board of Directors on
          September 26, 2005, a financial lease was entered into on
          December 5, 2005.
 
  -13-
 **TRANSFER
            AGENT AND REGISTRAR**
 
 The
            Company's transfer agent for the Company's Class A subordinate voting
            shares and Class B shares is Computershare Trust Company of Canada whose
            head office is situated in Toronto (Ontario). Share transfer service
            is
            available at Computershare's Montreal (Quebec) and Toronto (Ontario)
            offices as
            well as at the principal office of Computershare Trust Company, Inc.
            in Denver
            (Colorado), and New York (New York).
 
 **MATERIAL
            CONTRACTS**
 
 The
            only
            contract the Company entered into during the year ended on September
            30, 2006
            that was material to the Company was the agreement pursuant to which
            CGI
            repurchased 100 million of its Class A subordinate voting shares from, and
            extended its commercial agreements with, BCE. See “Significant developments of
            the most recent three fiscal years - Fiscal Year ended September 30,
            2006 -
            Significant Developments” above.
  **ADDITIONAL
          INFORMATION**
 
 The
          Company will provide to any person, upon request to the corporate secretary
          of
          the Company, (i) a copy of the *Annual
          Information Form* of
          the
          Company, together with one copy of any document, or the pertinent pages
          of any
          document incorporated by reference in the *Annual
          Information Form* ,
          (ii) a copy of the comparative financial statements of the Company for the
          year ended September 30, 2006 together with the accompanying report of the
          auditor and one copy of any subsequent interim financial statements,
          (iii) a copy of the *Management
          Proxy Circular* dated
          December 12, 2006 and (iv) a copy of volumes 1 and 2 of the *2006
          Annual Report* of
          the
          Company.
 
 Additional
          information including directors’ and officers’ remuneration and indebtedness,
          securities authorized for issuance under equity compensation plans and
          principal
          holders of the Company’s shares is included in the *Management
          Proxy Circular* dated
          December 12, 2006.
 
 Additional
          financial information in relation to the last fiscal year ended
          September 30, 2006, is presented in the audited financial statements
          (pages 25 to 59) and under the title *Management’s
          Discussion and Analysis* (pages 4
          to 24), in volume 2 of the *2006
          Annual Report* entitled *Our
          numbers* .
 
 The
          documents mentioned above are available on www.sedar.com and on the Company’s
          web site at www.cgi.com as well as at the Company’s head office:
 
 1130
          Sherbrooke Street West
 7th
          Floor
 Montreal,
          Quebec
 H3A
          2M8
 Telephone:
          (514) 841-3200
 Fax:
          (514) 841-3299
 
 -14-
  **APPENDIX
        A**
 **CGI
        GROUP INC.**
 
 **FUNDAMENTAL
        TEXTS**
 
 The
        following documents form part of CGI’s *Fundamental
        Texts* and may
        be found on the pages of Appendix A indicated:
 
 Mission,
                  Vision, Dream and Values
              2CGI
                  Management Foundation
              12Charter
                  of the Board of Directors
              18Charter
                  of the Corporate Governance Committee
              27Charter
                  of the Human Resources Committee
              33Charter
                  of the Audit and Risk Management Committee
              38Code
                  of Ethics and Business Conduct
              49Executive
                  Code of Conduct
              67Guidelines
                  on Timely Disclosure of MaterialInformation
                  and Transactions in Securities ofCGI
                  Group Inc. by Insiders
              69
   -15-




**Fundamental
        Texts**
  **of
        CGI Group Inc.**
 ©
          CGI Group Inc.
 December
          2006
 CGI
          proprietary
  
  **Presentation**
  This
        set
        of documents presents the fundamental texts that define CGI and its management
        approach. The fundamental texts address not only members of the board of
        directors, CGI's executive team and the company's shareholders, but also
        all CGI
        members as well as anyone who wishes to consult them. Their main objective
        is to
        provide a better understanding of the most essential aspects of the company.
        It
        is our hope that this understanding will generate a shared vision of what
        constitutes CGI and of the community of thought that is essential to the
        company's success. The document will also provide all CGI members with an
        understanding that will allow them to participate fully in the life of the
        company and to better represent CGI.
  THE
        FUNDAMENTAL TEXTS INCLUDE:
  **1.
                    Dream, Mission, Vision and Values**
                **2****2.
                    CGI Management Foundation**
                **12****3.
                    Documents and Policies Pertaining to Corporate Governance**
                **17**3.1
                    Charter of the Board of Directors
                183.2
                    Charter of the Corporate Governance Committee
                273.3
                    Charter of the Human Resources Committee
                333.4
                    Charter of the Audit and Risk Management Committee
                38**4
                    Codes of Ethics**
                **48**4.1
                    Code of Ethics and Business Conduct for members, officers and
                    directors of
                    CGI
                494.2
                    Executive Code of Conduct
                494.3
                    Guidelines on Timely Disclosure of Material Information and Transactions
                    in Securities of CGI by Insiders
                69**Appendix**
                **95**
  1
   
  **1.**
  **Dream,
        Mission, Vision and Values**
  2
  **Dream,
        Mission, Vision and Values**
  This
        document constitutes Chapter 1 of the Fundamental Texts of CGI Group Inc.
        It
        begins with the mission statement of the company and is followed by the vision,
        the dream and the values of CGI. By "dream," we essentially mean the intent
        or
        initial desire that led to the creation of our company and continues to drive
        its operation and growth. It also extends to the main principles and governing
        ideas that define the company's philosophy in its important cultural and
        organic
        aspects. This presentation of CGI's dream and values is therefore intended
        to
        impart in a succinct manner the company's character, essence, dynamism, values
        and culture, and the creative impulse that culminated in its creation and
        of
        which it is an extension.
  3
   
  **A.**
              **THE
                  CGI DREAM**
  A
        number
        of governing ideas inspired the creation of CGI and continue to drive its
        development. These ideas constitute what we call the CGI "dream." It is a
        dream
        based on a set of values to which we are profoundly attached.
  The
        dream
        has allowed us to assemble, all around the world, a team of extraordinary
        men
        and women who share it and are building a company that reflects their
        aspirations - who are, in fact, building their "own" company. Over the years,
        our team has built a clientele we are extremely proud of and whom we are
        dedicated to serving with the utmost skill.
  This
        dream has its roots in the original and simple idea that first motivated
        CGI's
        founders when they created the company:
  **"To
        create an environment in which we enjoy working together and, as owners,
        contribute to building a company we can be proud of."**
  From
        this
        very basic idea grew an entire business philosophy.
  It
        goes
        without saying that creating this type of environment is particularly
        challenging in consulting companies such as ours. Personnel generally work
        at
        client locations, making it difficult to develop a sense of belonging through
        a
        shared workplace. There is the risk of certain people being "forgotten" when
        they spend long periods at a client site, and this risk is amplified when
        these
        individuals have few CGI colleagues working on the same engagement.
  **B.**
              **THE
                  CGI MISSION AND VISION**
  The
        mission of CGI is to help our clients with professional services of outstanding
        quality, competence and objectivity, delivering the best solutions to fully
        satisfy client objectives in information technology, business processes and
        management.
  In
        all we
        do, we foster a culture of partnership, intrapreneurship, teamwork and
        integrity, building a world class IT and business process services
        company.
  With
        this
        mission statement, we are endeavouring to describe not only the company's
        purpose, but also our ambition and values. In doing so, we hope, in a few
        words,
        to advance an overall understanding of these essential aspects of
        CGI.
  Our
        vision is to be a world class IT and business process services leader helping
        our clients win and grow.
   4
   The
        following section will foster a more thorough comprehension of the dream
        associated with this mission and the values referred to in the mission
        statement.
  **C.**  **THE
        CGI CULTURE AND VALUES**
 
 To
        succeed in creating a highly favourable environment within such a context,
        CGI
        has fostered a corporate culture rooted in participation in the company and
        focused on each of its members. Developing a corporate culture, despite members
        often working at a distance, began with explicitly defining and then sharing
        common values. Our fundamental belief is that a company with an inspiring
        dream,
        unparalleled integrity, a caring, humane management philosophy and solid
        values
        is better able to attract and respond to the profound aspirations of remarkably
        high-calibre, competent people. These people in turn will seek out a select
        clientele, one aware of the company's values, and will deliver high-quality
        services at a competitive price, while meeting the company's profitability
        objectives. The growth and profitability generated as a result will allow
        CGI to
        offer its shareholders a superior and sustained return on their investment.
  To
        support our dream and to create such an environment, we have adhered to a
        number
        of principles or governing ideas:
  1.
              Sharing
                  the same values
  2.
              Embracing
                  the objectives of our clients
  3.
              Adopting
                  a caring, humane approach towards our
                  members
  4.
              Focusing
                  on synergy and the strength of
                  teamwork
  5.
              Participating
                  in the development of our company as its owner-shareholders, and
                  sharing
                  in its wealth
  6.
              Promoting
                  robust, healthy and sustainable growth to the benefit of all
                  stakeholders
  7.
              Implementing
                  a management model aligned with our dream and
                  values
  
 **1.**
              **SHARING
                  THE SAME VALUES**
  Sharing
        the same values allows us to enjoy considerable autonomy and swiftness of
        action
        without compromising our cohesiveness. It also allows us to mobilize teams
        more
        rapidly and bring together the most experienced individuals from across the
        company, who are able to quickly work as one to address a given challenge.
        And,
        of course, these values also guide our decisions and actions.
  PARTNERSHIP
        AND QUALITY
  5
   For
        us,
        partnership and quality are both a philosophy and a way of life. We develop
        and
        follow the best management practices and we entrench these approaches into
        client relationships and service delivery frameworks in order to foster long
        term and strong partnerships with our clients. We listen to our clients and
        we
        are committed to their total satisfaction in everything we do.
 
 OBJECTIVITY
        AND INTEGRITY
  We
        exercise the highest degree of independent thinking in selecting the products,
        services and solutions we recommend to clients. In doing so, we adhere to
        the
        highest values of quality, objectivity and integrity. Consequently, strict
        rules
        of business and professional conduct are applied. We do not accept any
        remuneration from suppliers.
  INTRAPRENEURSHIP
        AND SHARING
  Our
        success is based on the competence, commitment and enthusiasm of our members.
        Therefore, we promote a climate of innovation and initiative where we are
        empowered with a sense of ownership in supporting clients, thus ensuring
        the
        firm’s profitable growth. Through teamwork, sharing our know-how and expertise,
        we bring the best of CGI to our clients. As members, we share in the value
        we
        create through equity ownership and profit participation.
  RESPECT
  As
        a
        global company, we recognize the richness that diversity brings to the company
        and welcome this diversity while embracing the overall CGI culture. In all
        we
        do, we are respectful of our fellow members, clients, business partners and
        competitors.
  FINANCIAL
        STRENGTH
  We
        strive
        to deliver strong, consistent financial performance which sustains long term
        growth and rewards our members and shareholders. Financial strength enables
        us
        to continuously invest and improve services and business solutions to the
        benefit of our clients. To this end, we manage our business to generate industry
        superior returns.
  CORPORATE
        SOCIAL RESPONSIBILITY
  Our
        business model is designed to ensure that we are close to our clients and
        communities. We embrace our social responsibilities and contribute to the
        continuous development of the communities in which we live and
        work.
  **2.**
              **EMBRACING
                  THE OBJECTIVES OF OUR
                  CLIENTS**
   6
 At
        CGI,
        we believe that accomplishing outstanding work provides one with a strong
        sense
        of fulfilment. Our high-quality work allows us to forge rewarding relationships
        with our colleagues and clients and to experience the pleasure of our own
        creativity when we find an ideal solution to address our clients' needs.
 
 To
        this
        end, we strongly encourage our members to develop a listening attitude to
        ensure
        that an understanding of the client's particular situation and needs takes
        priority in all that we do. For this reason, we foster a culture of
        independence, objectivity and integrity. We want our clients to know that
        we
        understand their objectives and are committed to finding the solution that
        is
        right for them. Our flexibility in establishing customized business
        relationships demonstrates our keen interest in our clients' objectives,
        cultural environment and values.
  This
        in-depth understanding of our clients' objectives is one of the keys to our
        success and is as present in our short-term engagements as it is in our
        outsourcing contracts extending over multiple years.
  However,
        embracing the objectives of our clients goes far beyond simply understanding
        them. It demands, for example, that we sincerely commit to offering the very
        best of ourselves in order to demonstrate to clients that we support them
        as
        completely as if we were their own employees. It is essential that they
        "experience our commitment."
  **3.**
              **ADOPTING
                  A CARING, HUMANE APPROACH TOWARDS OUR
                  MEMBERS**
  Although
        the demands of our industry are considerable, CGI has always believed that
        this
        in no way conflicts with the very humane and caring approach we take in all
        of
        the relationships we foster. And while our human resources policies and Member
        Partnership Management Framework embody this concern and commitment, for
        CGI,
        this is also an issue of maturity and genuine leadership. It is a question
        of
        the quality of "being." To foster this attitude of caring and sensitivity
        towards others, CGI has led by example. Since the inception of the company,
        this
        approach has been transmitted, most notably through the example set by our
        founders as well as by teamwork and the CGI Leadership Institute, and is
        today
        an integral component of CGI's spirit and culture.
  **4.**
              **FOCUSING
                  ON SYNERGY AND THE STRENGTH OF
                  TEAMWORK**
  CGI
        favours the accomplishment of work through synergy, which refers to the pooling
        of our members' skills, experience and creative abilities in all aspects
        of
        corporate life. Whether deciding on the direction to take in a service proposal
        or determining the best solution for a client, we incorporate synergy into
        everything we do.
  Normally,
        a synergy group will hold meetings at key milestones throughout the entire
        lifespan of a given engagement. The group not only includes
  7
  subject
        matter experts, but also less experienced members, who gain knowledge from
        their
        colleagues and are therefore able to more rapidly hone their own expertise.
        The
        objective is always to find appropriate and proven solutions for our clients.
        This practice is entrenched in our Quality System, which has earned ISO 9001
        certification.
 
 The
        practice of synergy underscores an outstanding cultural trait: at CGI, we
        believe that we are stronger and that everyone benefits when we work as a
        team.
        Our clients receive services of higher quality, and our members constantly
        learn
        from one another through concrete achievements.
  **5.**
              **PARTICIPATING
                  IN THE DEVELOPMENT OF OUR COMPANY AS ITS
                  OWNER-SHAREHOLDERS**
  It
        is
        important that our members consider CGI as "their" company and that they
        participate in its growth and development. Involvement in professional groups
        that help maintain CGI's leadership position is just one of the many such
        forms
        of participation.
  However,
        for this involvement in the company to be complete and rewarding, we feel
        it
        necessary that all CGI members be able to also share in the benefits generated
        by their activities. For this reason, since its founding, CGI has offered
        all of
        its members the opportunity to be shareholders and owners of their company.
        To
        this end, CGI has implemented a Share Purchase Plan, through which it pays
        half
        the cost of shares up to a certain amount. Members also qualify for a portion
        of
        the company's annual profits when objectives are met (Profit Participation
        Plan). This capital sharing opportunity has existed since CGI was established.
  **It
        is an approach that incorporates many advantages:**
  FOR
        OUR CLIENTS
  **Because
        of this approach, CGI has very few freelance or contract employees. This
        helps
        assure our clients that the experience we acquire through working with them
        is
        more likely to remain in the company. Moreover, the people they deal with
        at CGI
        are also owners of the company and are therefore completely committed to
        producing high-quality, dependable work in order to strengthen the client
        relationship.**
  FOR
          OUR SHAREHOLDERS
  Our
        external shareholders can rest assured that, as fellow owners, all of CGI's
        members have their mutual interests at heart, i.e. a desire to see the company
        grow and the drive to execute each contract in a way that will yield the
        targeted profit margin. This also impacts business development, for, as
        shareholders, our members strive to promote the company's growth, but will
        not
        sacrifice profitability by submitting counter-
  8
   productive
        bids. And finally, shareholders are also assured that all of our members
        will
        manage the company's costs as if they were their own.
 
 FOR
        OUR MEMBERS
  As
        members and shareholders, we feel above all that the growth in value, which
        we
        are contributing to, does provide us with a lucrative return over the long
        term.
        It is indeed more stimulating to work for a company that values the sharing
        of
        wealth. This also guarantees greater transparency in the management of the
        company. Because we must communicate our financial results to everyone, all
        of
        CGI's managers are more accountable to the people they lead and are more
        likely
        to involve them in the decision process. We believe that our approach to
        corporate ownership fosters greater overall dynamism and cohesiveness of
        action.
        This also allows us to attract and retain individuals with a genuine desire
        to
        build and develop the company.
  **6.**
              **PROMOTING
                  ROBUST, HEALTHY AND SUSTAINED GROWTH TO THE BENEFIT OF ALL
                  STAKEHOLDERS**
  Robust,
        healthy and sustained growth is vital to the company's success. Much of our
        clientele consists of large companies with operations extending over many
        countries. We are committed to serving these clients well, often through
        long-term relationships that require us to deploy professionals in sufficient
        numbers where clients operate. The growth of our clients' business requires
        that
        we grow with them. Also, as a result of our success, an increasing number
        of
        clients call upon us to provide them with services. Robust growth is therefore
        intrinsic to the nature of the business we are in.
  Growth
        is
        not only a vital component of our activities and essential to our clients,
        it
        also benefits our members. It provides them with an opportunity to embark
        upon
        new and stimulating challenges and develop their own potential. And growth,
        when
        financially healthy and profitable, clearly benefits all of our shareholders
        (including our member shareholders) through the value it generates.
 
 To
        maintain healthy and sustained growth, it is important that the companies
        or
        groups that join our ranks be welcomed and well integrated into our operations.
        In order to succeed in its growth strategy, CGI has developed its integration
        capability into a core competency. This capacity to integrate is based on
        three
        main axes. The first axis is aimed primarily at welcoming newcomers, answering
        their legitimate questions, confirming their new conditions of employment
        and,
        above all, allowing them to discover CGI by sharing its dream and values.
        The
        second axis is directed towards establishing the various synergy goals linked
        to
        an acquisition or an outsourcing deal. This encourages all parties to understand
        that this combination of strengths offers new, stimulating opportunities.
        The
        third axis is aimed at assuring the organizational
  9
  transition
        and a rapid transfer to the CGI Management Foundation, especially with regards
        to the Quality System.
  It
        follows that there ought to be an equilibrium of interests among all of the
        company's core stakeholders: clients, members and shareholders.
  
  It
        is of
        course also essential that, as it grows, our company continues to act as
        a
        responsible corporate citizen by respecting and supporting the communities
        in
        which it operates and by respecting the environment.
  The
        following are a few concrete examples of how this balanced approach promotes
        the
        healthy and sustained growth of CGI:
  w
              We
                  must ensure, at every step of our growth, that we preserve the
                  quality of
                  the services we offer to our current and future
                  clients.
  w
              We
                    must also ensure that our members are adequately prepared to
                    face the new
                    challenges we offer them and that they have the resources needed
                    to
                    accomplish their work.
  w
              Growth
                  must not come at the expense of the communities where we do business,
                  or
                  of the environment in general. In fact, we are committed to participating
                  in the development of these communities and the protection of the
                  environment.
  w
              We
                  strive to ensure that our growth and development efforts provide
                  short-term benefits without negatively impacting our long-term
                  performance. We believe this also to be in the best interests of
                  our
                  shareholders.
  When
        the
        above conditions are met, robust, healthy, balanced and sustainable growth
        will
        follow.
  **7.**
              **IMPLEMENTING
                  A MANAGEMENT MODEL ALIGNED WITH OUR DREAM AND
                  VALUES**
  CGI's
        dream is being fulfilled every day through the constant efforts of our members
        who share and believe in this dream. It is also achieved through a disciplined
        management approach that is based on the company's
  10
  objectives
        to produce high quality work for its clients, promote the development of
        its
        members and provide high value to its shareholders.
             11
        
  **2.**
  **CGI
        Management Foundation**
  12
 
 **CGI
        Management Foundation**
  INTRODUCTION
  
  In
        the
        above diagram, we have assembled the key elements that define and guide the
        management of CGI. For this reason, these elements have been called the CGI
        Management "Foundation." They reflect our collective experience and have
        been
        developed to make our actions as efficient as possible. This efficiency must
        first and foremost respect a number of principles, which are themselves
        integrated into the CGI Management Foundation and deserve to be emphasized:
  1)
              the
                  primacy of the dream, the mission, the vision and the values of
                  the
                  company;
 
 2)
              the
                  equilibrium between the legitimate interests of our clients, members
                  and
                  shareholders;
 
 3)
              the
                  balance between the need to assure cohesiveness and rigour in the
                  management of the company and the commitment to promote autonomy,
                  initiative and entrepreneurship.
  The
        CGI
        Management Foundation intends to guide rather than prescribe.
  Thus,
        it
        offers a certain amount of freedom in order to remain focused on our essential
        goal: to provide high-quality services truly adapted to our clients' needs.
  13
  We
        will
        now examine the individual elements of the Foundation.
  DREAM,
        MISSION, VISION, VALUES, QUALITY POLICIES, STRATEGIC DIRECTIONS AND
        PLANS
  
  The
        first
        section of the diagram aims at ensuring that all decisions are well aligned
        on
        the dream, mission, vision and values of the company. These are described
        in the
        first section of this document.
  The
        next
        component is our Quality Policy. It has earned ISO 9001 certification, which
        requires that CGI demonstrate every year to external evaluators that its
        Quality
        Policy is applied across all of its operations.
  The
        final
        component of this uppermost section focuses on Strategic Directions and Plans.
        These are established on an annual and triennial basis according to a rigorous
        process that includes extensive participation from within the company as
        well as
        from our clients and our shareholders. The emphasis placed on involving all
        business units and corporate services in the planning process helps ensure
        that
        the objectives established and methods selected are shared by all to the
        fullest
        extent possible and that they generate enthusiastic commitment in their
        implementation.
  GOVERNANCE
        POLICIES AND FRAMEWORKS, HUMAN RESOURCES POLICIES, FINANCIAL POLICIES AND
        ORGANIZATIONAL MODEL
  
  The
        first
        component of the second section refers to the company's governance policies
        and
        frameworks. These policies and frameworks are comprised of the following
        documents:
  1)
              The
                  Charters of the Board of Director and its
                  committees;
  2)
              the
                  Codes of Ethics, to which members, officers and directors of the
                  company
                  must adhere;
  3)
              the
                  Operations Management Framework, which outlines the delegation
                  framework
                  with respect to decision making (e.g. who may authorize and sign
                  a million
                  dollar proposal; who may authorize promotion to a vice-president's
                  position).
  The
        second component involves human resources policies. All new members of the
        CGI
        team are asked to read You and CGI, which outlines all of the company's human
        resources policies, from compensation and training to career
        development.
  14
  The
        third
        component focuses on financial policies. It covers how we determine our
        profitability objectives, target ratios (e.g. profit margins, maximum percentage
        allotted to certain expenses), how and when our financial results are prepared,
        the rules governing disclosure of results, etc. These policies and rules
        are
        outlined in a document under the responsibility of the Chief Financial Officer,
        and the most pertinent elements are communicated to all of our
        members.
  Finally,
        the organizational model favoured by CGI is one that provides considerable
        autonomy to our business units. This model consists of creating business
        units
        in major cities in the regions that we serve. We also put a high priority
        on
        establishing solid business relationships within these regions, particularly
        with the decision makers from the companies operating in these cities. Each
        of
        these "metropolitan" business units is structured according to the key economic
        sectors served by CGI (finance, telecommunications, etc.). The implementation
        of
        a service offering for clients which have operations in multiple regions
        or
        countries is achieved through collaboration among business units, which,
        in the
        case of large contracts and particularly those involving outsourcing, can
        result
        in entire business units being dedicated to our major clients or to groups
        of
        clients who share the same needs. Consulting services and centres of expertise
        throughout CGI ensure that knowledge, strategies and leading-edge solutions
        are
        shared within the entire company.
  BUSINESS
        UNIT PROCESSES AND PARTNERSHIP MANAGEMENT FRAMEWORKS
  
  The
        Business Unit Processes explain how the Client Partnership Management Framework
        and the Member Partnership Management Framework are applied locally in each
        business unit. They also describe how business development activities and
        other
        initiatives crucial to the smooth operation of each business unit should
        be
        managed.
  The
        activities at the core of the operational management of CGI are aligned onto
        three management frameworks: the Client Partnership Management Framework,
        the
        Member Partnership Management Framework and the Shareholder Partnership
        Management Framework. These frameworks are the cornerstones of a continuous
        improvement process that is supported by the documentation and the systematic,
        audited application of our best
  15
   practices.
        The process is also constantly fuelled by client, member and shareholder
        evaluations of our activities and performance.
 
 The
        first
        is the Client Partnership Management Framework. CGI's leadership position
        in its
        industry is contingent upon its ability to deliver services of the highest
        quality to its clients at competitive prices and within the established time
        frames. The Client Partnership Management Framework is the basis of how we
        manage our relationships with our clients. For each of type of mandates
        (outsourcing, projects, and consulting services), this framework guides our
        teams in the achievement of all phases of their work, from the proposal to
        its
        completion of the mandate. It is based not only on our best practices, but
        also
        relies on the industry's best standards and practices. A rigorous, regular
        program to evaluate the satisfaction of our clients allows us to measure
        our
        progress and continuously improve our practices. This evaluation is conducted
        on
        a face-to-face basis with the client, who must sign the evaluation. Each
        year,
        CGI establishes improvement objectives based on the results obtained the
        previous year.
  The
        Member Partnership Management Framework guides all of our managers through
        the
        communications and dialogue activities they have with their teams. This cycle
        begins with welcoming activities and is followed by informal meetings, team
        meetings at various levels, career planning and performance reviews. We measure
        the satisfaction of our members annually through a survey conducted by an
        outside firm. Members can also use the survey to communicate their observations
        and suggestions to the head of their business unit or the CGI executive team.
        The results are published, and commitments are made by the leaders of both
        the
        business units and the company itself to address the comments submitted and
        make
        needed improvements.
  The
        Shareholder Partnership Management Framework describes our information and
        relationship program with our investors beyond the prescribed activities
        associated with corporate governance, transparency and the disclosure of
        results.
  
  The
        final
        section refers to the way we measure our results. First and foremost, we
        systematically measure the satisfaction levels of active clients regularly.
        We
        also measure member satisfaction annually, and we are currently developing
        a
        shareholder satisfaction measurement tool.
  
  16
      
  **3.**
  **Documents
        and Policies Pertaining to Corporate Governance**
  17
   
 **Documents
        and Policies Pertaining to Corporate Governance**
  **3.1
        Charter of the Board of Directors**
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Charter. This Charter should
        therefore be read in conjunction with Chapter 1.
  **1.**
              **INTERPRETATION**
  "Accounting
        or Related Financial Experience" means the ability to analyse and interpret
        a
        full set of financial statements, including the notes attached thereto, in
        accordance with Canadian generally accepted accounting principles.
  "Financially
        Literate" means the ability to read and understand a balance sheet, an income
        statement, a cash-flow statement and the notes attached thereto.
  "Independent
        Director" means a director who meets the independence criteria set out in
        section 1.4 of Multilateral Instrument 52-110 Audit Committees adopted by
        the
        Canadian Securities Administrators and as amended and in effect as of June
        30,
        2005, which is reproduced in Appendix A.
  **2.**
              **OBJECTIVES**
  CGI’s
        shareholders are the first and most important element in the Company’s
        governance structures and processes. At each annual general meeting, the
        Company’s shareholders elect the members of the Company’s Board of Directors and
        give them a mandate to manage and oversee the management of the Company’s
        affairs for the coming year.
  In
        the
        normal course of operations, certain corporate actions which may be material
        to
        CGI are initiated from time to time by the Company’s senior management and, at
        the appropriate time, are submitted to CGI’s Board of Directors for
        consideration and approval. When appropriate, such matters are also submitted
        for consideration and approval by CGI’s shareholders. All such approvals are
        sought in accordance with the charters of the Board of Directors and standing
        committees, CGI’s corporate governance practices and applicable corporate and
        securities legislation.
  18
   The
        overall stewardship of the Company is the responsibility of the Board of
        Directors. In accomplishing the mandate it receives from the Company’s
        shareholders, the Board of Directors may delegate certain of its authority
        and
        responsibilities to committees and management and reserve certain powers
        to
        itself. Nonetheless, it will retain full effective control over the
        Company.
  **3.**
              **COMPOSITION**
  3.1
              The
                  majority of the Board of Directors shall be comprised of Independent
                  Directors. The application of the definition of Independent Director
                  to
                  the circumstances of each individual director is the responsibility
                  of the
                  Board of Directors which will disclose on an annual basis whether
                  it is
                  constituted with the appropriate number of directors which are
                  Independent
                  Directors and the basis for its analysis. The Board of Directors
                  will also
                  disclose which directors are Independent Directors or not and provide
                  a
                  description of the business, family, direct and indirect shareholding
                  or
                  other relationship between each director and the
                  Company.
 
 3.2
              The
                  Company expects and requires directors to be and remain free of
                  conflictual interests or relationships and to refrain from acting
                  in ways
                  which are actually or potentially harmful, conflictual or detrimental
                  to
                  the Company's best interests. Each director shall comply with the
                  Company's formal code of ethics and business conduct that governs
                  the
                  behaviour of members, directors and officers and shall complete
                  and file
                  annually with the Company any and all documents required pursuant
                  to such
                  formal code of ethics and business conduct with respect to conflict
                  of
                  interests. This matter will also be reviewed annually by the Corporate
                  Governance Committee. The Board of Directors will monitor compliance
                  with
                  said code as well as with the Company's executive code of conduct
                  applicable to its principal executive officer, principal financial
                  officer, principal accounting officer or controller, or other persons
                  performing similar functions within the Company. The Board will
                  also be
                  responsible for the granting of any waivers from compliance with
                  the codes
                  for directors and officers. The Board of Directors will disclose
                  in due
                  time the adoption of such codes as well as all waivers and specify
                  the
                  circumstances and rationale for granting the
                  waiver.
  3.3
              The Board of Directors, following advice of its
                Corporate
                Governance Committee, is responsible for evaluating its size and
                composition and establishing a Board comprised of members who facilitate
                effective decision-making. The Board of Directors has the ability
                to
                increase or decrease its size.
  3.4
              It
                  is a general requirement under the Company’s corporate governance
                  practices that all directors possess both financial and operational
                  literacy. In addition, the membership of the Board of Directors
                  will
                  include a sufficient number of individuals who are
                  who
   19
   have
        Accounting or Related Financial Experience to ensure that at least one member
        of
        its Audit Committee has Accounting or Related Financial Experience within
        the
        meaning of the applicable corporate governance rules imposed by regulatory
        bodies.
  3.5
              A
                  director who makes a major change in principal occupation will
                  forthwith
                  disclose this fact to the Board of Directors and will offer his
                  or her
                  resignation to the Board of Directors for consideration. It is
                  not
                  intended that directors who retire or whose professional positions
                  change
                  should necessarily leave the Board of Directors. However, there
                  should be
                  an opportunity for the Board of Directors to review the continued
                  appropriateness of the Board of Directors membership under such
                  circumstances.
 
 3.6
              The
                  Board of Directors is responsible for approving new nominees to
                  the Board.
                  New directors will be provided with an orientation and education
                  program
                  which will include written information about the duties and obligations
                  of
                  directors, the business and operations of the Company, documents
                  from
                  recent Board of Directors meetings and opportunities for meetings
                  and
                  discussion with senior management and other directors. The details
                  of the
                  orientation of each new director will be tailored to that director's
                  individual needs and areas of interest. The prospective candidates
                  should
                  fully understand the role of the Board of Directors and its committees
                  and
                  the contribution expected from individual directors and the Board
                  of
                  Directors will ensure that they are provided with the appropriate
                  information to that effect. In addition, the Board of Directors
                  will
                  ascertain and make available to its members, when required, continuing
                  education as per the business and operations of the
                  Company.
  **4.**
              **RESOURCES**
  4.1
              The
                  Board of Directors will implement structures and procedures to
                  ensure that
                  it functions independently of management.
  4.2
              The
                  Board of Directors appreciates the value of having certain members
                  of
                  senior management attend each Board of Directors meeting to provide
                  information and opinion to assist the directors in their deliberations.
                  The Executive Chairman of the Board will seek the Board of Directors'
                  concurrence in the event of any proposed change to the management
                  attendees at Board of Directors meetings. Management attendees
                  will be
                  excused for any agenda items which are reserved for discussion
                  among
                  directors only.
  **5.**
              **RESPONSIBILITIES
                  AND DUTIES**
  The
        principal responsibilities and duties of the Board of Directors include the
        following, it being understood that in carrying out their responsibilities
        and
        duties, directors may consult with management and may retain external advisors
        at the expense of the Company in appropriate
  20
   circumstances.
        Any engagement of external advisors shall be subject to the approval of the
        Chairof the Corporate Governance Committee.
  5.1
              General
                  Responsibilities
  5.1.1
              The
                  Board of Directors will oversee the management of the Company.
                  In doing
                  so, the Board of Directors will establish a productive working
                  relationship with the Executive Chairman of the Board and the Chief
                  Executive Officer and other members of senior management.
  5.1.2
              The
                  Board of Directors will oversee the formulation of long-term strategic,
                  financial and organizational goals for the Company. It shall approve
                  the
                  Company's strategic plan and review same on at least an annual
                  basis. This
                  plan will take into account the opportunity and risks of the Company's
                  business.
 
 5.1.3
              As
                  part of the responsibility of the Board of Directors to oversee
                  management
                  of the Company, the Board of Directors will engage in active monitoring
                  of
                  the Company and its affairs in its stewardship
                  capacity.
  5.1.4
              The
                  Board of Directors will engage in a review of short and long-term
                  performance of the Company in accordance with approved
                  plans.
  5.1.5
              The
                  officers of the Company, headed by the Executive Chairman of the
                  Board and
                  the Chief Executive Officer, shall be responsible for general day
                  to day
                  management of the Company and for making recommendations to the
                  Board of
                  Directors with respect to long term strategic, financial, organizational
                  and related objectives.
  5.1.6
              The
                  Board of Directors will periodically review the significant risks
                  and
                  opportunities affecting the Company and its business and oversee
                  the
                  actions, systems and controls in place to manage and monitor risks
                  and
                  opportunities. The Board of Directors may impose such limits as
                  may be in
                  the interests of the Company and its
                  shareholders.
  5.1.7
              The
                  Board of Directors will oversee how the Company communicates its
                  goals and
                  objectives to its shareholders and other relevant
                  constituencies.
  5.1.8
              The
                  Board of Directors will oversee the succession planning including
                  appointing, training and monitoring senior management and the Executive
                  Chairman of the Board in
                  particular.
  5.1.9
              The
                  Board of Directors is responsible for overseeing a Communication
                  Policy
                  for the Company. In doing so, the Board of Directors will ensure
                  that the
                  policy (i) addresses
  21
   how
        the
        Company interacts with analysts, investors, other key stakeholders and the
        public, (ii) contains measures for the Company to comply with its continuous
        and
        timely disclosure obligations and to avoid selective disclosure, and (iii)
        is
        reviewed at least annually.
  5.1.10
              The
                  Board of Directors will oversee the integrity of the Company's
                  internal
                  control and management information systems.
  5.1.11
              The
                  Board of Directors will make sure that the Company adopt prudent
                  financial
                  standards with respect to the business of the Company and prudent
                  levels
                  of debt in relation to the Company's consolidated capitalization.
 
 5.1.12
              The
                  Board of Directors will also consider and
                  approve:
  i)
              transactions
                  out of the ordinary course of business including, without limitation,
                  proposals on mergers, acquisitions or other major investments or
                  divestitures;
  ii)
              all
                  matters that would be expected to have a major impact on
                  shareholders;
  iii)
              the
                  appointment of any person to any position that would qualify such
                  person
                  as an officer of the Company; and
  iv)
              any
                  proposed changes in compensation to be paid to members of the Board
                  of
                  Directors on the recommendation of the Human Resources Committee.
  5.1.13
              The
                  Board of Directors will also receive reports and
                  consider:
  i)
              The
                  quality of relationships between the Company and its key
                  customers;
  ii)
              Changes
                  in the shareholder base of the Company from time to time and relationships
                  between the Company and its significant
                  shareholders;
  iii)
              Periodic
                  reports from Board of Directors' committees with respect to matters
                  considered by such committees;
  iv)
              Health,
                  safety and environmental matters as they affect the Company and
                  its
                  business; and
  v)
              Such
                  other matters as the Board of Directors may, from time to time,
                  determine.
  22
   5.1.14
              The
                  Board of Directors will oversee management through an ongoing review
                  process.
  5.1.15
              The
                  Board of Directors will, together with the Executive Chairman of
                  the Board
                  develop a position descriptions for the Executive Chairman of the
                  Board
                  and the Chief Executive Officer. The Board of Directors will also
                  approve
                  the corporate objectives that the Executive Chairman of the Board
                  is
                  responsible for meeting and assess management’s performance in relation to
                  such objectives. The Board of Directors will raise any concerns
                  related to
                  the performance of the Chief Executive Officer with the Executive
                  Chairman
                  of the Board as appropriate.
  5.1.16
              The
                  Board of Directors will receive a report from its Human Resources
                  Committee on succession planning as set forth in such committee's
                  mandate.
  5.2  Annual
        Assessment of the Board of Directors
  The
        Board
        of Directors will annually review the assessment of the Board of Directors'
        performance and recommendation provided by the Corporate Governance Committee.
        The objective of this review is to increase the effectiveness of the Board
        of
        Directors and contribute to a process of continuous improvement in the Board
        of
        Directors' execution of its responsibilities. It is expected that the result
        of
        such reviews will be to identify any areas where the directors and/or management
        believe that the Board of Directors and/or the directors individually could
        make
        a better contribution to the affairs of the Company. The Board of Directors
        will
        take appropriate action based upon the results of the review process.
  5.3  Committees
  5.3.1
              The
                  Board of Directors shall appoint committees to assist it in performing
                  its
                  duties and processing the quantity of information it
                  receives.
  5.3.2
              Each
                  committee operates according to a Board of Directors approved written
                  mandate outlining its duties and responsibilities. This structure
                  may be
                  subject to change as the Board of Directors considers from time
                  to time
                  which of its responsibilities can best be fulfilled through more
                  detailed
                  review of matters in committee.
  5.3.3
              The
                  Board of Directors will review annually the work undertaken by
                  each
                  committee and the responsibilities
                  thereof.
  5.3.4
              The
                  Board of Directors will annually evaluate the performance and review
                  the
                  work of its committees,
  23
   including
        their respective mandates and the sufficiency of such mandates.
  5.3.5
              The
                  Board of Directors will annually appoint a Lead Director as well
                  as a
                  member of each of its committees to act as Chair of the
                  committee.
  5.3.6
              Subject
                  to subsection 5.3.8, committees of the Board of Directors shall
                  be
                  composed of a majority of Independent
                  Directors.
  5.3.7
              The
                  Board of Directors shall appoint members of committees after considering
                  the recommendations of the Corporate Governance Committee and the
                  Executive Chairman of the Board as well as the skills and desires
                  of
                  individual Board members, all in accordance with the mandates of
                  such
                  committees approved by the Board.
  5.3.8
              The
                  Audit Committee shall be composed only of Independent Directors.
                  All
                  members of the Audit Committee shall be Financially Literate and
                  at least
                  one member shall have Accounting or Related Financial
                  Experience.
 
 5.4  Lead
        Director
  5.4.1
              The
                  Lead Director shall be an Independent Director. He will oversee
                  that the
                  Board of Directors discharges its responsibilities, ensure that
                  the Board
                  of Directors evaluates the performance of management objectively
                  and that
                  the Board of Directors understands the boundaries between the Board
                  of
                  Directors and management responsibilities.
  5.4.2
              The
                  Lead Director will chair periodic meetings of the Independent Directors
                  and assume other responsibilities which the Independent Directors
                  as a
                  whole might designate from time to
                  time.
  5.4.3
              The
                  Lead Director should be able to stand sufficiently back from the
                  day-to-day running of the business to ensure that the Board of
                  Directors
                  is in full control of the Company's affairs and alert to its obligations
                  to the shareholders.
  5.4.4
              The
                  Lead Director shall provide input to the Executive Chairman of
                  the Board
                  on preparation of agendas for Board and committee
                  meetings.
  5.4.5
              The
                  Lead Director shall chair the Corporate Governance Committee and
                  shall
                  chair Board meetings when the Executive Chairman of the Board is
                  not in
                  attendance, subject to the provisions of the by-laws of the
                  Company.
  24
  5.4.6
              The
                  Lead Director shall provide leadership for the independent directors
                  and
                  ensure that the effectiveness of the Board is assessed on a regular
                  basis.
  5.4.7
              The
                  Lead Director shall set the agenda for the meetings of the Independent
                  Directors.
  5.4.8
              The
                  Lead Director shall report to the Board concerning the deliberations
                  of
                  the independent directors as
                  required.
  5.4.9
              The
                  Lead Director shall, in conjunction with the Executive Chairman
                  of the
                  Board, facilitate the effective and transparent interaction of
                  Board
                  members and management;
  5.4.10
              The
                  Lead Director shall provide feedback to the Executive Chairman
                  of the
                  Board and act as a sounding board with respect to strategies,
                  accountability, relationships and other
                  issues.
 
 5.5  Review
        of
        the Board Mandate
  In
        order
        to ensure that this mandate is kept current in the light of changes which
        may
        occur in corporate practice or the structure of the Company, the Board of
        Directors will annually reconfirm this mandate or initiate a review to revise
        it.
  5.6  Board
        of
        Directors Compensation
  The
        Human
        Resources Committee will review the adequacy and form of compensation of
        the
        senior management and directors each year. The Committee shall make
        recommendations to the Board of Directors for consideration when it believes
        changes in compensation are warranted. Furthermore, the Board of Directors
        will
        ensure the compensation realistically reflects the responsibility and risk
        involved in being a director.
  **6.**
              **COMMUNICATIONS
                  POLICY**
  6.1
                The
                    Board of Directors will consider and review the means by which
                    shareholders can communicate with the Company including the opportunity
                    to
                    do so at the annual meeting, communications interfaces through
                    the
                    Company's website and the adequacy of resources available within
                    the
                    Company to respond to shareholders through the office of the
                    Corporate
                    Secretary and otherwise. However, the Board of Directors believes
                    that it
                    is the function of the management to speak for the Company in
                    its
                    communications with the investment community, the media, customers,
                    suppliers, employees, governments and the general public. It
                    is understood
                    that individual directors may from time to time be requested
                    by management
                    to assist with such communications. It is expected, if communications
                    from
                    stakeholders are made to individual directors,
  25
  management
                    will be informed and consulted to determine any appropriate
                    response.6.2
                The
                    Board of Directors has the responsibility for monitoring compliance
                    by the
                    Company with the corporate governance requirements and guidelines
                    of the
                    Toronto Stock Exchange and the New York Stock Exchange. The Board
                    of
                    Directors will approve the disclosure of the Company's system
                    of
                    governance and the operation of such system.
           26
   **3.2
        Charter of the Corporate Governance Committee**
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Charter. This Charter should
        therefore be read in conjunction with Chapter 1.
  **1.**  **INTERPRETATION**
  "Committee"
        means the Corporate Governance Committee of the Board of Directors of the
        Company.
  "Independent
        Director" means a director who meets the independence criteria set out in
        section 1.4 of Multilateral Instrument 52-110 Audit Committees adopted by
        the
        Canadian Securities Administrators and as amended and in effect as of June
        30,
        2005, which is reproduced in Appendix A.
  **2.**
              **OBJECTIVES**
  The
        Committee is responsible for: (a) developing the Company's approach to Board
        governance issues and the Company's response to the corporate governance
        guidelines; (b) reviewing the composition and contribution of the Board and
        its
        members and recommending Board nominees; (c) overseeing the orientation program
        for new directors; and (d) helping to maintain an effective working relationship
        between the Board of Directors of the Company and management.
  **3.**
              **COMPOSITION**
 3.1
                The
                    Committee shall be composed of a majority of Independent
                    Directors.3.2
                The
                    Board of Directors shall appoint the Lead Director as the Chair
                    of the
                    Committee. If the Chair is absent from a meeting, the members
                    shall select
                    a Chair from those in attendance to act as Chair of the
                    meeting.
  **4.**
              **MEETINGS**
  4.1
                Meetings
                    of the Committee shall be held at the call of the Chair, but
                    not less than
                    twice annually. Meetings of the Committee may be called by the
                    Chair of
                    the Committee, the Executive Chairman of the Board or the Chief
                    Executive
                    Officer.
  27
  4.2
                The
                    powers of the Committee shall be exercisable by a meeting at
                    which a
                    quorum is present. A quorum shall be not less than two members
                    of the
                    Committee from time to time. Subject to the foregoing requirement,
                    unless
                    otherwise determined by the Board of Directors, the Committee
                    shall have
                    the power to fix its quorum and to regulate its procedure. Matters
                    decided
                    by the Committee shall be decided by majority vote.4.3
                Notice
                    of each meeting shall be given to each member, to the Executive
                    Chairman
                    of the Board, to the Chief Executive Officer and to the Corporate
                    Secretary of the Company.4.4
                The
                    Committee may invite from time to time such persons as it may
                    see fit to
                    attend its meetings and to take part in discussion and consideration
                    of
                    the affairs of the Committee, including in particular the Chief
                    Executive
                    Officer.4.5
                The
                    Committee shall appoint a secretary to be the secretary of all
                    meetings of
                    the Committee and to maintain minutes of all meetings and deliberations
                    of
                    the Committee.
 **5.**
              **RESPONSIBILITIES
                  AND DUTIES**
  5.1  Role
        and
        responsibilities of the Committee Chair:
  5.1.1
              The
                  Chair of the Committee:
  5.1.1.1
              Provides
                  leadership for the committee by ensuring
                  that:
  (i)
              The
                  responsibilities of the committee are well understood by committee
                  members
                  and management.
  (ii)
              The
                  committee works as a cohesive team.
  (iii)
              Adequate
                  resources and timely and relevant information are available to
                  the
                  committee to support its work.
  (iv)
              The
                  effectiveness of the committee is assessed on a regular
                  basis.
  (v)
              The
                  committee's structure and mandate is appropriate and adequate to
                  support
                  the discharge of the committee's
                  responsibilities.
  (vi)
              The
                  scheduling, organization and procedures of committee meetings provide
                  adequate time for the consideration and discussion of relevant
                  issues.
  28
   5.1.1.2
              Works
                  with the Executive Chairman of the Board and Corporate Secretary
                  to set
                  the calendar of the committee's regular
                  meetings.
  5.1.1.3
              Has
                  the authority to convene special meetings as
                  required.
  5.1.1.4
              Sets
                  the agenda in collaboration with the Executive Chairman of the
                  Board and
                  the Corporate Secretary.
  5.1.1.5
              Presides
                  at meetings.
  5.1.1.6
              Acts
                  as liaison with management with regard to the work of the
                  committee.
  5.1.1.7
              Reports
                  to the Board concerning the work of the
                  committee.
 
 5.1.1.8
              Exercises
                  the authority specifically delegated to the Chair by the Committee,
                  if
                  any.
  5.2  General
        Responsibilities
  Board
        Members
  5.2.1
              Review
                  criteria regarding the composition of the Board of Directors and
                  committees of the Board of Directors, such as size, proportion
                  of
                  Independent Directors and as to criteria to determine "relatedness"
                  as
                  well as profile of the Board of Directors (age, geographical
                  representation, disciplines, etc.) and establish a Board of Directors
                  comprised of members who facilitate effective
                  decision-making.
  5.2.2
              Review
                  criteria relating to tenure as a director, such as limitations
                  on the
                  number of times a director may stand for re-election, and the continuation
                  of directors in an honorary or similar capacity.
  5.2.3
              Review
                  criteria for retention of directors unrelated to age or tenure,
                  such as
                  attendance at Board of Directors and committee meetings, health
                  or the
                  assumption of responsibilities which are incompatible with effective
                  Board
                  of Directors membership; and assess the effectiveness of the Board
                  of
                  Directors as a whole, the committees of the Board of Directors,
                  the
                  contribution of individual directors on an ongoing basis and establish
                  in
                  light of the opportunities and risks facing the Company, what
                  competencies, skills and personal qualities it seeks in new Board
                  members
                  in order to add value to the
                  Company.
  29
   5.2.4
              Recommend
                  to the Board of Directors the list of candidates for directors
                  to be
                  nominated for election by shareholders at annual meetings of shareholders.
  5.2.5
              Recommend
                  to the Board of Directors candidates to fill vacancies on the Board
                  of
                  Directors occurring between annual meetings of shareholders.
  5.2.6
              Recommend
                  to the Board of Directors the removal of a director in exceptional
                  circumstances, for example (a) such director is in a position of
                  conflict
                  of interest or (b) the criteria underlying the appointment of such
                  director change.
  5.2.7
              Ensure
                  that the Board of Directors can function independently of management.
                  To
                  this end, arrange for meetings on a regular basis of the Independent
                  Directors without management present. In such cases, meetings will
                  be
                  chaired by the Chair of the Committee.
  Director
        Orientation
  5.2.8
              As
                  an integral element of the process for appointing new directors,
                  put in
                  place an orientation and education program for new recruits to
                  the Board
                  of Directors and review from time to time the value and benefit
                  of such
                  program.
  Compliance ****
  5.2.9
              Ensure
                  corporate compliance with applicable legislation including director
                  and
                  officer compliance.
  5.2.10
              Review
                  proposed amendments to the Company's by-laws before making recommendations
                  to the Board of Directors.
  Codes
        of Business Conduct
  5.2.11
              Periodically
                  review and make recommendations to the Board of Directors with
                  respect to
                  the Company's formal code of ethics and business conduct for its
                  members,
                  directors and officers and its executive code of conduct applicable
                  to the
                  Company's principal executive officer, principal financing officer,
                  principal accounting officer or controller, or other persons performing
                  similar functions within the Company; including the disclosure
                  of the
                  adoption of such codes.
  5.2.12
              Monitor
                  adherence to the codes and review potential situations related
                  thereto
                  brought to the attention of the Committee by the Corporate Secretary
                  of
                  the Company in order to recommend or not in certain circumstances
                  to the
                  Board of Directors to grant or not waivers from compliance
  30
   with
        the
        codes for directors and officers. The Committee shall also ensure that when
        such
        waivers are granted, the Board of Directors shall disclose same in due time
        and
        specify the circumstances and rationale for granting the waiver.
  Corporate
        Governance Principles
  5.2.13
              Make
                  recommendations to the Board of Directors as deemed appropriate
                  in the
                  context of adherence to corporate governance guidelines in effect
                  from
                  time to time.
  5.2.14
              In
                  conjunction with the Executive Chairman of the Board of Directors,
                  recommend to the Board of Directors the membership and chairs of
                  the
                  committees of the Board of Directors.
  5.2.15
              Review
                  annually the Board/management relationship.
 
 5.2.16
              Advise
                  the Board of Directors on the disclosure to be contained in the
                  Company's
                  public disclosure documents, such as the Company's annual management
                  proxy
                  circular or annual report, on matters of corporate governance as
                  required
                  by the Toronto Stock Exchange, the New York Stock Exchange or any
                  other
                  applicable exchange or regulator.
  5.2.17
              Generally
                  advise the Board of Directors on all other matters of corporate
                  governance.
  External
        and Internal Resources
  5.2.18
              Retain
                  such independent external advisors as it may deem necessary and
                  advisable
                  for its purposes.
  5.2.19
              Report
                  to the Board of Directors on its proceedings, reviews undertaken,
                  and any
                  associated recommendations.
  5.2.20
              Have
                adequate resources to discharge its
                responsibilities;
  5.2.21
              Have the right, for the purposes of discharging
                the
                powers and responsibilities of the Committee, to inspect any relevant
                records of the Company and its subsidiaries.
  5.2.22
              The Chair of the Committee shall review the opportunity
                for the Board of Directors of the Company or individual directors
                to
                retain external advisors at the expense of the Company in certain
                appropriate circumstances in carrying out their responsibilities.
   31
  Shareholder
        Proposals
  5.2.23
              Review and make recommendations on shareholder
                proposals
                to the Board of Directors or refer them to the Executive Chairman
                of the
                Board as appropriate.
  5.3  Other
        Responsibilities
  The
        Committee shall carry out such other mandates as the Board of Directors may
        request from time to time.
  5.4  Review
        of
        Mandate of the Committee
  The
        Board
        of Directors should review and reassess the adequacy of themandate on an
        annual
        basis.
  5.5  Compensation
  Members
        of the Committee shall be entitled to receive such remuneration for acting
        as
        members of the Committee as the Board of Directors may determine from time
        to
        time.
 
 
  32
  **3.3
        Charter of the Human Resources Committee**
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Charter. This Charter should
        therefore be read in conjunction with Chapter 1.
  **1.**
              **INTERPRETATION**
  "Committee"
        means the Human Resources Committee of the Board of Directors of the
        Company.
  "Independent
        Director" means a director who meets the independence criteria set out in
        section 1.4 of Multilateral Instrument 52-110 Audit Committees adopted by
        the
        Canadian Securities Administrators and as amended and in effect as of June
        30,
        2005, which is reproduced in Appendix A.
  **2.**
              **OBJECTIVES**
  The
        Committee is responsible for reviewing and making recommendations to the
        Board
        of Directors of the Company for the appointment of Senior Executives of the
        Company and for determining terms of employment of Senior Executives. It
        shall
        also perform functions such as reviewing succession planning and matters
        of
        compensation as well as such other matters the Committee may consider suitable
        with respect to compensation or as may be specifically directed by the Board
        of
        Directors of the Company from time to time.
  **3.**
              **COMPOSITION**
  3.1  The
        Committee shall be composed of a majority of Independent Directors.
  3.2  The
        Board
        of Directors shall appoint one of the Independent Directors as the Chair
        of the
        Committee. If the Chair is absent from a meeting, the members shall select
        a
        Chair from those in attendance to act as Chair of the meeting.
  **4.**
              **MEETINGS**
  4.1
              Meetings
                  of the Committee shall be held at the call of the Chair, but not
                  less than
                  three times annually. Meetings of the Committee may be called by
                  the Chair
                  of the Committee, the Executive Chairman of the Board or the Chief
                  Executive Officer.
  4.2
              The
                  powers of the Committee shall be exercisable by a meeting at which
                  a
                  quorum is present. A quorum shall be not less than two members
                  of the
                  Committee from time to time. Subject to
                  the
   33
 foregoing
                    requirement, unless otherwise determined by the Board of Directors,
                    the
                    Committee shall have the power to fix its quorum and to regulate
                    its
                    procedure. Matters decided by the Committee shall be decided
                    by majority
                    vote.
  4.3
              Notice
                  of each meeting shall be given to each
                  member, to the Executive Chairman of the Board, to the Chief Executive
                  Officer and to the Corporate Secretary of the
                  Company.
  4.4
              The Committee
                may
                invite from time to time such persons as it may see fit to attend
                its
                meetings and to take part in discussion and consideration of the
                affairs
                of the Committee, including in particular the Executive Chairman
                of the
                Board.
  4.5
              The Committee
                shall
                appoint a secretary to be the secretary of all meetings of the Committee
                and to maintain minutes of all meetings and deliberations of the
                Committee.
  **5.**
              **RESPONSIBILITIES
                  AND DUTIES**
  5.1  Role
        and
        responsibilities of the Committee Chair:
  5.1.1  The
        Chair
        of the Committee:
  5.1.1.1
              Provides
                  leadership for the committee by ensuring
                  that:
  (i)
              The
                  responsibilities of the committee are well understood by committee
                  members
                  and management.
  (ii)
              The
                  committee works as a cohesive team.
  (iii)
              Adequate
                  resources and timely and relevant information are available to
                  the
                  committee to support its work.
  (iv)
              The
                  effectiveness of the committee is assessed on a regular
                  basis.
  (v)
              The
                  committee's structure and mandate is appropriate and adequate to
                  support
                  the discharge of the committee's
                  responsibilities.
  (vi)
              The
                  scheduling, organization and procedures of committee meetings provide
                  adequate time for the consideration and discussion of relevant
                  issues.
  5.1.1.2
              Works
                  with the Executive Chairman of the Board and Corporate Secretary
                  to set
                  the calendar of the committee's regular
                  meetings.
  34
   5.1.1.3
              Has
                  the authority to convene special meetings as
                  required.
  5.1.1.4
              Sets
                  the agenda in collaboration with the Executive Chairman of the
                  Board and
                  the Corporate Secretary.
  5.1.1.5
              Presides
                  at meetings.
  5.1.1.6
              Acts
                  as liaison with management with regard to the work of the
                  committee.
  5.1.1.7
              Reports
                  to the Board concerning the work of the
                  committee.
  5.1.1.8
              Exercises
                  the authority specifically delegated to the Chair by the Committee,
                  if
                  any.
  5.2  General
        Responsibilities
  5.2.1
              The
                  Committee shall, among other things, have responsibility to advise
                  the
                  Board of Directors on human resources planning, compensation of
                  members of
                  the Board of Directors, Executive Officers and other employees,
                  short and
                  long-term incentive plans, benefit plans, and Executive Officer
                  appointments.
 
 5.2.2
              The
                  Committee shall review and report to the Board of Directors
                  on:
  5.2.2.1
              Management's
                  succession plans for Executive Officers, with special emphasis
                  on the
                  Executive Chairman of the Board and Chief Executive Officer
                  succession;
  5.2.2.2
              Compensation
                  philosophy of the organization, including a remuneration strategy
                  and
                  remuneration policies for the Executive Officer level, as proposed
                  by the
                  Executive Chairman of the Board and the Chief Executive
                  Officer;
  5.2.2.3
              Recommendations
                  to the Board of Directors for the appointment of the Executive
                  Chairman of
                  the Board, the Chief Executive Officer and other Executive Officers,
                  corporate objectives which the Executive Chairman of the Board
                  and such
                  other Executive Officers, as the case may be, are responsible for
                  meeting,
                  assessment of the Executive Chairman of the Board and of the Chief
                  Executive Officer against these objectives, monitoring of the Executive
                  Chairman of the
  35
   Board's
        performance and providing advice and counsel in the execution of his
        duties;
  5.2.2.4
              Total
                  remuneration plan including adequacy and form of compensation
                  realistically reflecting the responsibilities and risks of the
                  position
                  for the Executive Chairman of the Board and for the Chief Executive
                  Officer of the Company and, in connection therewith, consider appropriate
                  information, including information from the Board of Directors
                  with
                  respect to the overall performance of the Executive Chairman of
                  the Board
                  and of the Chief Executive Officer;
  5.2.2.5
              Remuneration
                  for Executive Officers, annual adjustment
                  to executive salaries, and the design and administration of short
                  and
                  long-term incentive plans, stock options, benefits and perquisites
                  as
                  proposed by the Executive Chairman of the Board and the Chief Executive
                  Officer;
  5.2.2.6
              Employment and termination arrangements for senior
                management;
  5.2.2.7
              Adoption of new, or significant modifications
                to, pay and
                benefit plans;
  5.2.2.8
              Appointment
                  of new officers as appropriate;
  5.2.2.9
              Significant
                  organizational changes;
  5.2.2.10
              The
                  Committee's proposed executive compensation report to be contained
                  in the
                  Company's annual proxy circular;
  5.2.2.11
              Management
                  development programs for the
                  Company;
  5.2.2.12
              Any
                  special employment contracts or arrangements with officers of the
                  Company
                  including any contracts relating to change of control;
                  and
  5.2.2.13
              Remuneration
                  for members of the Board of Directors and committees thereof, including
                  adequacy and form of compensation realistically reflecting the
                  responsibilities and risks of the positions and recommend changes
                  where
                  applicable
  5.2.3  The
        Committee shall perform such other duties as may from time to time be assigned
        to it by the Board of Directors
  36
  including
        those relating to compensation of officers and senior employees and the manpower
        resources of the Company.
 
 5.3  Other
        Responsibilities
 
 5.3.1  The
        Committee shall have the right to retain such independent external advisors
        as
        it may deem necessary and advisable for its purposes.
 
 5.3.2  The
        Committee shall report to the Board of Directors on its proceedings, reviews
        undertaken, and any associated recommendations.
 
 5.3.3  The
        Committee shall have adequate resources to discharge its
        responsibilities.
 
 5.3.4  The
        Committee shall have the right, for the purposes of discharging the powers
        and
        responsibilities of the Committee, to inspect any relevant records of the
        Company and its subsidiaries.
 
 5.4  Review
        of
        Mandate of the Committee
 
 The
        Board
        of Directors should review and reassess the adequacy of this mandate on an
        annual basis.
 
 5.5  Compensation
 
 Members
        of the Committee shall be entitled to receive such remuneration for acting
        as
        members of the Committee as the Board of Directors may determine from time
        to
        time.
 
  37
  **3.4**  **Charter
        of the Audit and Risk Management Committee**
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Charter. This Charter should
        therefore be read in conjunction with Chapter 1.
  **1.**
              **INTERPRETATION**
  "Accounting
        or Related Financial Experience" means the ability to analyze and interpret
        a
        full set of financial statements, including the notes attached thereto, in
        accordance with Canadian generally accepted accounting principles.
  "Committee"
        means the Audit and Risk Management Committee of the Board of Directors of
        the
        Company.
  "Financially
        Literate" means the ability to read and understand a balance sheet, an income
        statement, a cash-flow statement and the notes attached thereto.
  "Independent
        Director" means a director who meets the independence criteria set out in
        section 1.4 of Multilateral Instrument 52-110 Audit Committees adopted by
        the
        Canadian Securities Administrators and as amended and in effect as of June
        30,
        2005, which is reproduced in Appendix A.
  **2.**
              **OBJECTIVES**
  The
        Committee will assist the Board of Directors in fulfilling its oversight
        responsibilities. In performing its duties, the Committee will maintain
        effective working relationships with the Board of Directors, management,
        the
        internal auditors and the external auditors.
  **3.**
              **COMPOSITION**
  3.1
              The
                  Committee shall consist solely of Independent Directors, all of
                  whom shall
                  be Financially Literate and at least one of whom shall have Accounting
                  or
                  Related Financial Experience.
   38
 3.2
              Following
                  each annual meeting of shareholders, the Board of Directors shall
                  elect
                  three or more directors, who shall meet the independence and experience
                  requirements of the New York Stock Exchange and the Toronto Stock
                  Exchange
                  as well as the other similar requirements under applicable securities
                  regulations, to serve on the Committee until the close of the next
                  annual
                  meeting of shareholders of the Company or until the member ceases
                  to be a
                  director, resigns or is replaced, whichever first occurs. Any member
                  may
                  be removed from office or replaced at any time by the Board of
                  Directors.
  3.3
              The
                  Board of Directors shall appoint one of the members of the Committee
                  as
                  the Chair of the Committee. If the Chair is absent from a meeting,
                  the
                  members shall select a Chair from those in attendance to act as
                  Chair of
                  the meeting.
  **4.**
              **MEETINGS
                  AND RESOURCES**
  4.1
              Regular
                  meetings of the Committee shall be held quarterly. Special meetings
                  of the
                  Committee may be called by the Chair of the Committee, the external
                  auditors, the Executive Chairman of the Board, the Chief Executive
                  Officer
                  or the Chief Financial Officer of the Company.
 
 4.2
              The
                  powers of the Committee shall be exercisable by a meeting at which
                  a
                  quorum is present. A quorum shall be not less than two members
                  of the
                  Committee from time to time. Subject to the foregoing requirement,
                  unless
                  otherwise determined by the Board of Directors, the Committee shall
                  have
                  the power to fix its quorum and to regulate its procedure. Matters
                  decided
                  by the Committee shall be decided by majority
                  vote.
  4.3
              Notice of each meeting shall be given to each
                member, the
                external auditors, the Executive Chairman of the Board, the Chief
                Executive Officer and the Chief Financial Officer of the Company,
                any or
                all of whom shall be entitled to attend. Notice of each meeting shall
                also
                be given, as the case may be, to the internal auditor who shall also
                attend whenever requested to do so by the Chair of the Committee
                or the
                Corporate Secretary.
  4.4
              Notice
                  of meeting may be given orally or by letter, telephone facsimile
                  transmission, telephone or electronic device not less than 24 hours
                  before
                  the time fixed for the meeting. Members may waive notice of any
                  meeting.
                  The notice need not state the purpose or purposes for which the
                  meeting is
                  being held.
  39
  4.5
              Opportunities
                  should be afforded periodically to the external auditors and, as
                  the case
                  may be, to the internal auditor and the senior management to meet
                  separately with the Committee. In addition, the Committee may meet
                  in
                  camera, with only members of the Committee present, whenever the
                  Committee
                  determines that it is appropriate to do
                  so.
  4.6
              The
                  Committee shall have the authority to retain special legal counselling,
                  accounting or other consultants as it may see fit to attend its
                  meetings
                  and to take part in discussion and consideration of the affairs
                  of the
                  Committee at the Company's expense.
  4.7
              The
                  Corporate Secretary of the Company or designate of the Corporate
                  Secretary
                  shall be the Secretary of all meetings of the Committee and shall
                  maintain
                  minutes of all meetings and deliberations of the
                  Committee.
  **5.**
              **RESPONSIBILITIES
                  AND DUTIES**
  5.1  Role
        and
        responsibilities of the Committee Chair:
  5.1.1  The
        Chair
        of the Committee:
  5.1.1.1
              Provides
                  leadership for the committee by ensuring
                  that:
  (i)
              The
                  responsibilities of the committee are well understood by committee
                  members
                  and management.
  (ii)
              The
                  committee works as a cohesive team.
  (iii)
              Adequate
                  resources and timely and relevant information are available to
                  the
                  committee to support its work.
  (iv)
              The
                  effectiveness of the committee is assessed on a regular
                  basis.
  (v)
              The
                  committee's structure and mandate is appropriate and adequate to
                  support
                  the discharge of the committee's
                  responsibilities.
  (vi)
              The
                  scheduling, organization and procedures of committee meetings provide
                  adequate time for the consideration and discussion of relevant
                  issues.
  5.1.1.2
              Works
                  with the Executive Chairman of the Board, the Chief Financial Officer
                  and
                  the Corporate
  40
   Secretary
        to set the calendar of the committee's regular meetings.
  5.1.1.3
              Has
                  the authority to convene special meetings as
                  required.
  5.1.1.4
              Sets
                  the agenda in collaboration with the Executive Chairman of the
                  Board, the
                  Chief Financial Officer and the Corporate
                  Secretary.
 
 5.1.1.5
              Presides
                  at meetings.
  5.1.1.6
              Acts
                  as liaison with management with regard to the work of the
                  committee.
  5.1.1.7
              Reports
                  to the Board concerning the work of the
                  committee.
  5.1.1.8
              Exercises
                  the authority specifically delegated to the Chair by the Committee,
                  if
                  any.
  5.2  General
        Responsibilities
  While
        the
        Committee has the responsibilities and powers set forth below, it is not
        the
        duty of the Committee to plan or conduct audits or to determine that the
        Company's financial statements are complete and accurate. This is the
        responsibility of management and the external auditors. Nor is it the duty
        of
        the Committee to conduct investigations, or to assure compliance with laws
        and
        regulations. The Committee shall review disagreements, if any, between
        management and the external auditors and shall make recommendations to resolve
        such disagreements. In the event that any such disagreement persists, the
        matter
        will be referred by the Committee to the Board of Directors for a final
        determination.
  5.3  Review
        of
        Mandate of the Committee
  The
        Board
        of Directors and the Committee shall review and reassess the adequacy of
        this
        mandate on an annual basis.
  5.4  Publicly
        Disclosed Financial Information
  5.4.1
              The
                  Committee shall review and recommend for approval by the Board
                  of
                  Directors, before release to the
                  public:
  5.4.1.1
              interim
                  unaudited financial statements;
  5.4.1.2
              audited
                  annual financial statements, in conjunction with the report of
                  the
                  external auditors;
  5.4.1.3
              all
                  public disclosure documents containing audited or unaudited financial
                  information, including any prospectus, the annual information form
                  and
                  management's discussion and analysis of financial condition and
                  results of
                  operations, as well as related press releases, including earnings
                  guidance; and
  41
 5.4.1.4
              the
                  compliance of management certification of financial reports with
                  applicable legislation and attestation of the Company's disclosure
                  controls and procedures.
  5.4.2
              The
                  Committee shall review any report which accompanies published financial
                  statements (to the extent such a report discusses financial condition
                  or
                  operating results) for consistency of disclosure with the financial
                  statements themselves.
  5.4.3
              In
                  its review of financial statements, the Committee should obtain
                  an
                  explanation from management of all significant variances between
                  comparative reporting periods and an explanation from management
                  for items
                  which vary from expected or budgeted amounts as well as from previous
                  reporting periods.
  5.4.4
              In
                  its review of financial statements, the Committee should review
                  unusual or
                  extraordinary items, transactions with related parties, and adequacy
                  of
                  disclosures, asset and liability carrying values, income tax status
                  and
                  related reserves, qualifications, if any, contained in letters
                  of
                  representation and business risks, uncertainties, commitments and
                  contingent liabilities.
  5.4.5
              In its review of financial statements, the Committee
                shall review the appropriateness of the Company's significant accounting
                principles and practices, including acceptable alternatives, and
                the
                appropriateness of any significant changes in accounting principles
                and
                practices.
 
 5.5  Financial
        Reporting and Accounting Trends
  The
        Committee shall:
  5.5.1
              Review and assess the effectiveness of accounting
                policies and practices concerning financial
                reporting;
  5.5.2
              Review with management and with the external auditors
                any
                proposed changes in major accounting policies, the presentation and
                impact
                of significant risks and uncertainties, and key estimates and judgments
                of
                management that may be material to financial
                reporting;
  42
  5.5.3
              Question management and the external auditors
                regarding
                significant financial reporting issues discussed and the method of
                resolution; and
  5.5.4
              Review general accounting trends and issues of
                accounting
                policy, standards and practices which affect or may affect the
                Company.
  5.6  Internal
        Controls
  5.6.1
              The Committee shall review and monitor the Company's
                internal control procedures, programs and policies, and assess the
                adequacy and effectiveness of internal controls over the accounting
                and
                financial reporting systems, with particular emphasis on controls
                over
                computerized systems.
  5.6.2
              The Committee shall
                review:
  5.6.2.1
              The
                  evaluation of internal controls by the external auditors, together
                  with
                  management's response;
  5.6.2.2
              The
                  report issued by the internal auditor and management's response
                  and
                  subsequent follow-up to any identified
                  weakness;
  5.6.2.3
              The
                  working relationship between management and external
                  auditors;
  5.6.2.4
              The
                  appointments of the Chief Financial Officer and any key financial
                  executives involved in the financial reporting
                  process;
  5.6.2.5
              Any
                  decisions related to the need for internal auditing, including
                  whether
                  this function should be outsourced and, in such case, approving
                  the
                  supplier which shall not be the external auditors; and
  5.6.2.6
              Internal
                  control procedures to ensure compliance with the law and avoidance
                  of
                  conflicts of interest.
  5.6.3
              The Committee shall undertake private discussions
                with
                staff of the internal audit function to establish internal audit
                independence, the level of co-operation received from management,
                the
                degree of interaction with the external auditors, and any unresolved
                material differences of opinion or
                disputes.
  5.7  Internal
        Auditor
  The
        Committee shall:
  43
  5.7.1
              Review the mandate and annual objectives of the
                internal
                auditor, if the appointment of an internal auditor is deemed
                appropriate;
  5.7.2
              Review the adequacy of the Company's internal
                audit
                resources; and
  5.7.3
              Ensure the internal auditor has ongoing access
                to the
                Chair of the Committee as well as all officers of the Company,
                particularly the Executive Chairman of the Board and the Chief Executive
                Officer.
 
 5.8  External
        Auditors
  5.8.1
              The Committee shall recommend to the Board of
                Directors
                the appointment of the external auditors, which firm is ultimately
                accountable to the Committee and the Board of Directors.
  5.8.2
              The Committee shall receive periodic reports from
                the
                external auditors regarding the auditors independence, discuss such
                reports with the auditors, and if so determined by the Committee,
                recommend that the Board of Directors take appropriate action to
                satisfy
                itself as to the independence of the
                auditors.
  5.8.3
              The Committee shall take appropriate steps to
                assure
                itself that the external auditors are satisfied with the quality
                of the
                Company's accounting principles and that the accounting estimates
                and
                judgments made by management reflect an appropriate application of
                generally accepted accounting principles.
  5.8.4
              The Committee shall undertake private discussions
                on a
                regular basis with the external auditors to review, among other matters,
                the quality of financial personnel, the level of co-operation received
                from management, any unresolved material differences of opinion or
                disputes with management regarding financial reporting and the
                effectiveness of the work of the internal audit
                function.
  5.8.5
              The Committee shall review the terms of the external
                auditors' engagement and the appropriateness and reasonableness of
                the
                proposed audit fees as well as the compensation of any advisors retained
                by the Committee.
  5.8.6
              The Committee shall review any engagements for
                material
                non-audit services provided by the external auditors or their affiliates,
                together with the fees for such services, and consider the impact
                of this
                on the independence of the external auditors. The Committee shall
                determine which non-
  44
  audit services the external auditors are prohibited
                    from
                    providing.
 5.8.7
              When a change of auditors is proposed, the Committee
                shall review all issues related to the change, including the information
                required to be disclosed by regulations and the planned steps for
                an
                orderly transition.
  5.8.8
              The Committee shall review all reportable events,
                including disagreements, unresolved issues and consultations on a
                routine
                basis whether or not there is to be a change of
                auditors.
  5.8.9
              When discussing auditor independence, the Committee
                will
                consider both rotating the lead audit partner or audit partner responsible
                for reviewing the audit after a number of years and establishing
                hiring
                policies for employees or former employees of its external auditor.
 
 5.9  Audit
        Procedures
  5.9.1
              The Committee shall review the audit plans of
                the
                internal and external audits, including the degree of co-ordination
                in
                those plans, and shall inquire as to the extent to which the planned
                audit
                scope can be relied upon to detect weaknesses in internal control
                or fraud
                or other illegal acts. The audit plans should be reviewed with the
                external auditors and with management, and the Committee should recommend
                to the Board of Directors the scope of the external audit as stated
                in the
                audit plan.
  5.9.2
              The Committee shall review any problems experienced
                by
                the external auditors in performing the audit, including any restrictions
                imposed by management or significant accounting issues on which there
                was
                a disagreement with management.
  5.9.3
              The Committee shall review the post-audit or management
                letter containing the recommendations of the external auditors, and
                management's response and subsequent follow-up to any identified
                weakness.
 
 5.10  Risk
        Management and Other Responsibilities
  5.10.1
              The
                  Committee shall put in place procedures to receive and handle complaints
                  or concerns received by the Company about accounting or audit matters
                  including the anonymous submission by employees of concerns respecting
                  accounting or auditing matters.
  5.10.2
              The
                  Committee shall review such litigation, claims, transactions or
                  other
                  contingencies as the internal auditor,
  45
  external
                  auditors or any officer of the Company may bring to its attention,
                  and
                  shall periodically review the Company's risk management programs
                  and
                  comprehensive computer disaster recovery
                  plans.
  5.10.3
              The
                  Committee shall review the policy on use of derivatives and monitor
                  the
                  risk.
  5.10.4
              The
                  Committee shall review the related party transactions in line with
                  the New
                  York Stock Exchange rules and regulations and those of any other
                  applicable exchange or regulator.
  5.10.5
              The
                  Committee shall review assurances of compliance with covenants
                  in trust
                  deeds or loan agreements.
  5.10.6
              The
                  Committee shall review business risks that could affect the ability
                  of the
                  Company to achieve its business plan.
  5.10.7
              The
                  Committee shall review uncertainties, commitments, and contingent
                  liabilities material to financial
                  reporting.
  5.10.8
              The
                  Committee shall review the effectiveness of control and control
                  systems
                  utilized by the Company in connection with financial reporting
                  and other
                  identified business risks.
  5.10.9
              The
                  Committee shall review incidents of fraud, illegal acts, conflicts
                  of
                  interest and related-party transactions.
  5.10.10
              The
                  Committee shall review material valuation
                  issues.
  5.10.11
              The
                  Committee shall review the quality and accuracy of computerized
                  accounting
                  systems, the adequacy of the protections against damage and disruption,
                  and security of confidential information through information systems
                  reporting.
  5.10.12
              The
                  Committee shall review material matters relating to audits of
                  subsidiaries.
  5.10.13
              The
                  Committee shall review cases where management has sought accounting
                  advice
                  on a specific issue from an accounting firm other than the one
                  appointed
                  as auditor.
  5.10.14
              The
                  Committee shall review any legal matters that could have a significant
                  impact on the financial statements.
  5.10.15
              The
                  Committee shall consider other matters of a financial nature it
                  feels are
                  important to its mandate or as directed by the Board of
                  Directors.
  5.10.16
              The
                  Committee shall report regularly to the Board of Directors on its
                  proceedings, reviews undertaken and any associated
                  recommendations.
  46
   5.10.17
              The
                  Committee shall have the right, for the purpose of discharging
                  the powers
                  and responsibilities of the Committee, to inspect any relevant
                  records of
                  the Company and its subsidiaries.
  5.11  Compensation
  Members
        of the Committee shall be entitled to receive such remuneration for acting
        as
        members of the Committee as the Board of Directors may determine from time
        to
        time.
  47
          
  **4.**
  **Codes
        of Ethics**
  48
  **Codes
        of Ethics**
  **4.1
        Code of Ethics and Business Conduct** ****
  for
        members, officers and directors of CGI
  To
        the CGI Team
  This
        Code
        of Ethics and Business Conduct is based on the values and philosophy that
        have
        guided CGI successfully since the Company's inception in 1976. It constitutes
        a
        unique repository where the combination of CGI policies, guidelines, principles
        of conduct and best practices have been regrouped under one umbrella document,
        for the benefit of our members, officers and directors.
  CGI's
        operations have grown significantly and now extend worldwide, and our business
        environment has become increasingly competitive and complex. The scope and
        pace
        of our business requires us to make quick and informed decisions, in a manner
        consistent with our values.
  This
        Code
        provides guidance - and a global view - for CGI members, officers and directors
        to consistently achieve the professionalism that has earned our Company an
        enviable reputation among our clients and within our industry. It also provides
        guidance for CGI directors when acting for the Company.
  This
        Code
        is not meant to be a complete list of ethics and business conduct covering
        every
        eventuality. It highlights situations that CGI's members, officers and directors
        may face in their duties and provides the basic principles to guide their
        actions. CGI recognizes the importance of supporting these individuals as
        ethical issues arise, and has an open door policy for resolving such issues
        with
        integrity.
  Upon
        joining CGI, all members, as part of their employment contract, undertake
        to
        observe this Code in all aspects of their work. Furthermore, annually, all
        members shall renew such undertaking.
  We
        must
        always behave responsibly and in line with the Company's core values when
        working on behalf of CGI for its clients and other stakeholders. By preserving
        our personal integrity and the professional reputation of CGI, I am confident
        that together we will succeed in achieving the Company's mission and vision.
 
 
 Serge
        Godin
 **Founder
        and Executive Chairman of the Board**
  49
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Code of Ethics and Business
        Conduct. This Code should therefore be read in conjunction with Chapter 1.
  **1.**
              **VALUES,
                  PHILOSOPHY, MISSION AND
                  VISION**
  VALUES
  CGI
        has
        always believed in investing in the future to ensure continued success. From
        the
        beginning, the Company has invested in developing a strong corporate culture,
        based on six core values that reflect its approach to business. These values
        are: quality and partnership, intrapreneurship and sharing, respect, objectivity
        and integrity, financial strength and corporate social responsibility. These
        values are at the heart of CGI's success. They ensure that CGI takes a long-term
        view on business issues, and it builds long-lasting partnerships with its
        clients.
  PHILOSOPHY
  The
        success of CGI Group Inc. and its subsidiaries is based on the knowledge,
        creativity and commitment of its members. CGI ensures this success by recruiting
        the most qualified people available. CGI's members share in the risks and
        rewards of CGI's business as partners of CGI and are committed to its
        objectives. They take a disciplined approach to their work and constantly
        strive
        for excellence to achieve the best results for every client. In exchange,
        CGI
        strives to recognize the value of its members by offering them a stimulating
        work environment that fosters their personal and professional development.
  MISSION
  The
        mission of CGI is to help our clients with professional services of outstanding
        quality, competence and objectivity, delivering the best solutions to fully
        satisfy client objectives in information technology, business processes and
        management.
  In
        all we
        do, we foster a culture of partnership, intrapreneurship, teamwork and
        integrity, building a world class IT and business process services company.
  VISION
  Our
        vision is to be a world class IT and business process services leader helping
        our clients win and grow.
  50
  **2.**  **PURPOSE
        AND SCOPE OF THE CODE**
  This
        Code
        of Ethics and Business Conduct (the "Code") defines CGI's character and guides
        the actions and decisions of the salaried employees ("members"), officers
        and
        directors of CGI. Compliance with the Code is essential for many reasons
        and
        notably to preserve and enhance CGI's reputation and maximize shareholder
        value.
        In keeping with CGI's values, the Code outlines the essential rules and
        guidelines necessary to preserve CGI's enviable reputation among its clients
        and
        within its industry. The Code is not meant to be a complete list of ethics
        and
        business conduct covering every eventuality. It highlights situations that
        CGI
        members, officers and directors may face in their duties. The code is meant
        to
        give them a broad and clear understanding of the conduct expected of them,
        wherever CGI does business. While the specific illustrations are primarily
        addressed to members, they should be read as being equally applicable to
        the
        members of CGI’s Board of Directors to the extent that they may be applicable in
        the circumstances.
  Should
        a
        member be confronted with a situation where further guidance is required,
        the
        matter should be discussed with the member's manager. CGI recognizes its
        obligation to support its members, officers and directors as ethical issues
        arise.
  **3.**  **MEMBERS'
        CONDUCT AND BEHAVIOUR**
  GENERAL
        CONDUCT
  Upon
        joining CGI, and annually thereafter, all members undertake, by signing the
        "Member Commitment to the Code of Ethics and Business Conduct," to abide
        by the
        Company Code of Ethics and Business Conduct and related policies and guidelines.
  If
        a
        member ceases to be employed by CGI for any reason, the Member Commitment
        specifies which elements continue to apply, namely those related to the
        confidentiality obligations.
  RESPECT
        AND INTEGRITY
  All
        members of CGI support the Company's philosophy and contribute to CGI's
        development and good reputation by promoting synergy and teamwork, by expressing
        their ideas and by adopting the highest standards of service quality and
        integrity. The members of CGI are its ambassadors. They must always behave
        responsibly and demonstrate courtesy, honesty, civility and respect for other
        members of CGI, for its clients and for its suppliers.
  LOYALTY
  51
   Members
        are expected to act at all times with diligence and loyalty towards CGI and
        in
        such a way as to safeguard CGI's interests. Members should not act in a way
        or
        publicly hold a position that might harm the image or reputation of CGI.
 
 RELATIONS
        WITH CLIENTS
  CGI's
        services often involve visiting or working at a client's place of business.
        A
        member working at a client's site must comply with the client's practices
        and
        procedures and treat the client's facilities with respect. The member must
        work
        as efficiently and meticulously as possible and leave the client's premises
        and
        property as he or she found them. As well, members must use the client's
        information and systems infrastructures for the sole purpose of the client's
        contract and protect those infrastructures and information at all
        times.
  RELATIONS
        WITH COMPETITORS
 
 If
        a
        member is working with a competitor of CGI on a joint project for a client,
        the
        member must avoid any situations that could cause conflicts. The member must
        respect the roles that the client has assigned to each party and work as
        a team
        in the client's best interests. CGI's members also have both an ethical and
        a
        legal responsibility to portray the Company's competitors fairly and accurately.
        CGI does not tolerate its members using improper means for gathering information
        about its competitors.
  MAINTENANCE
        OF ASSETS
  All
        members of CGI have a responsibility to protect CGI's assets against loss,
        theft, abuse and unauthorized use or disposal. If, in the course of his or
        her
        work, a member of CGI is supplied with any property belonging to CGI or to
        a
        third party, the member must use said property solely for work-related purposes
        as specified in the binding agreement he or she signed upon joining CGI.
        More
        specifically, the members must use CGI's systems infrastructures in a manner
        consistent with legal requirements, professional ethics, the policies
        established by the administrators of CGI's network and of any external networks
        that the member uses, and must respect the copyrights protecting any software
        that the member also uses. As well, members must never use the clients' systems
        infrastructures, including the clients' software, for any purpose that is
        not
        work-related. CGI applies a zero-tolerance policy to any abuse of its systems
        infrastructures or those of its clients.
  At
        the
        end of employment, members are required to return all CGI property and assets
        in
        their possession to their manager or to a designated CGI
        representative.
  52
   **4.**
              **INTEGRITY
                  OF BOOKS AND RECORDS AND COMPLIANCE WITH SOUND ACCOUNTING
                  PRACTICES**
  PREPARATION
        OF BOOKS AND RECORDS
  Accuracy
        and reliability in the preparation of all business records is of critical
        importance to the decision-making process and to the proper discharge of
        financial, legal and reporting obligations. All business records, expense
        accounts, invoices, bills, payroll and member records and other reports are
        to
        be prepared with care and honesty. False or misleading entries are not permitted
        in CGI's books and records.
  FINANCIAL
        TRANSACTIONS
  All
        financial transactions are to be properly recorded in the books of account
        and
        accounting procedures are to be supported by the necessary internal controls.
        In
        turn, all books and records of CGI must be available for audit.
  MEMBER
        RESPONSIBILITIES
  **In
        relation to CGI's books and records, members must:**
  i)
              not
                  intentionally cause Company documents to be incorrect in any
                  way;
  ii)
              not
                  create or participate in the creation of any records that are intended
                  to
                  conceal anything that is improper;
  iii)
              properly
                  and promptly record all disbursements of
                  funds;
  iv)
              co-operate
                  with internal and external
                  auditors;
  v)
              report
                  any knowledge of any untruthful or inaccurate statements or records
                  or
                  transactions that do not seem to serve a legitimate commercial
                  purpose;
                  and
  vi)
              not
                  make unusual financial arrangements with a client or a supplier
                  (such as,
                  over-invoicing or under-invoicing) for payments on their behalf
                  to a party
                  not related to the transaction.
  BREACHES
  Suspected
        breaches of the Code which directly or indirectly affect CGI's business must
        be
        reported to the Chief Financial Officer, the Chief Executive Officer or the
        Chair of the Audit and Risk Management Committee and to CGI's Corporate
        Secretary.
  In
        addition, CGI has established a policy for incident reporting (often referred
        to
        as a “whistleblower policy”) as well as a process under that
  53
   policy
        which allows any person who has direct knowledge of specific facts to report
        incidents where the Company is exposed to a serious risk in matters of
        accounting, auditing, internal accounting controls, finance, banking or
        financial corruption. The process in place protects the incident reporter
        and
        ensures the confidentiality of the report. See the heading “Compliance with the
        Code” below.
 
 **5.**  **CONFIDENTIAL
        INFORMATION AND INTELLECTUAL PROPERTY**
  DEFINITION
  **Confidential
        Information**
  "Confidential
        Information" means information about the Company's business dealings,
        development strategies and financial results; products or processes; client
        lists; vendor lists or purchase prices; cost, pricing, marketing or service
        strategies; results of research and development work, technical know-how,
        manufacturing processes, computer software; reports and information related
        to
        mergers, acquisitions and divestitures. "Confidential Information" also includes
        information that relates to intellectual property and may include, but is
        not
        limited to: business strategies, product marketing and costing information
        and
        information provided by suppliers and competitors. In addition, the way the
        Company puts publicly-known information together, to achieve a particular
        result, is often a valuable trade secret.
  The
        following information and documents constitute confidential information or
        documents of CGI or its clients, as the case may be:
  i)
              methodologies;
  ii)
              all
                  information related to: processes, formulas, research and development,
                  products, financials, marketing; names and lists of customers,
                  employees
                  and suppliers as well as related data; computer programs, all software
                  developed or to be developed including flow charts, source and
                  object
                  codes;
  iii)
        all
        information related to projects undertaken by the Company whether they are
        merger and acquisition or divestiture projects or projects related to large
        client contracts, including all information obtained in due diligence
        initiatives, whether such information pertains to CGI or to any third party;
        and
  iv)
              all
                  other information or documents that, if disclosed, could be prejudicial
                  to
                  CGI or its clients.
  **Intellectual
        Property**
  54
   "Intellectual
        Property" (IP) means patents, copyrights, trademarks, trade secrets and
        industrial designs of CGI.
 
 NON-DISCLOSURE
        UNDERTAKING
  **CGI
        Confidential Information**
  During
        the normal course of business, members will have access to confidential
        information about CGI. In some cases, the information may affect the value
        of
        CGI shares. Each member must protect the confidentiality of all confidential
        CGI
        information and documents. Members cannot discuss them away from work, and
        cannot divulge any confidential CGI information or any information that could
        harm CGI. Confidential CGI information could include information from other
        members or information acquired from outside sources, sometimes under
        obligations of secrecy. Members are expected to use such information exclusively
        for business purposes and this information must not be disclosed externally
        without the approval of a member's manager.
  **Third
        Party Agreements**
  In
        cases
        where information or records are obtained under an agreement with a third
        party,
        such as software licenses or technology purchases, members must ensure that
        the
        provisions of such agreements are strictly adhered to so that CGI will not
        be
        deemed to be in default. Unauthorized disclosure or use of information or
        records associated with these agreements could expose the member involved
        and/or
        CGI to serious consequences.
  DISCLOSURE
        GUIDELINES
  **Insider
        Information**
  Confidential
        information about CGI or other public companies may not be used as a basis
        for
        trading in CGI securities, or the securities of any other company in respect
        of
        which CGI or its members, consultants or advisers are in possession of insider
        information. For this purpose, CGI has an established policy regarding the
        use
        of insider information and trading in securities. This policy is entitled
        "Guidelines on Timely Disclosure of Material Information and Transactions
        in
        Securities by Insiders" which extends to all directors, officers and, when
        in
        possession of Confidential Information, members, those authorized to speak
        on
        behalf of CGI and all other insiders. It is designed to protect the integrity
        of
        the Company and its directors, officers and members while ensuring compliance
        with all applicable securities legislation in Canada, the United States and
        other countries. The law stipulates that insiders may not take advantage
        of
        inside information to trade in the securities of a company. Likewise, employees
        must not provide third parties with any information that would give them
        an
        unfair advantage when trading in securities of the company, including client
        companies or any other company that is the subject of an acquisition,
        divestiture or client related project.
  55
   **Material
        Information**
  CGI's
        guidelines on disclosure also cover the disclosure of information with a
        material impact, defined as any information that, if disclosed to a potential
        investor, could affect his or her perception of the value of the Company
        as an
        investment. Because CGI is a publicly traded company, any information that
        may
        have a material impact on CGI's results or on the perception of the value
        of the
        stock must be communicated in accordance with CGI's "Guidelines on Timely
        Disclosure of Material Information and Transactions in Securities of CGI
        by
        Insiders." If a member thinks that he or she is in possession of a piece
        of
        information that is not known to management and may have a material impact
        on
        the Company, the member must communicate it immediately to either the Executive
        Chairman of the Board, the Chief Executive Officer, the Corporate Secretary,
        or
        the Chief Financial Officer, without divulging it to anyone else.
  **Client
        Information**
  Just
        as
        CGI's members must protect confidential information about CGI, they must
        also
        show discretion at all times with regard to the client's business affairs.
        Unless a member has the client's express authorization, he or she should
        never
        reveal any information that could harm the client's interests and should
        never
        use any information that he or she obtains in the course of a project or
        assignment for any purpose other than that project or assignment. If the
        client
        restricts the distribution of certain information within its own organization,
        the member must comply with those restrictions as well.
  **Member
        Information**
  CGI
        collects and maintains personal information relating to its members, including
        medical and benefits information. Access to such information is restricted
        to
        CGI personnel on a need-to-know basis. They must ensure that this information
        is
        not disclosed in violation of CGI's policies and practices. Personal information
        is released to outside parties only with the member's approval, except to
        satisfy the requirements considered by CGI to be appropriate for legal
        reasons.
  **Intellectual
        Property**
  
 In
        the
        course of their duties, members may develop or create new designs, inventions,
        systems or processes, products or documents. When these achievements have
        been
        made as a direct result of a member's employment with the Company and through
        use of CGI's resources, they belong to CGI. Moreover, CGI is free to use
        this
        work as it so wishes and members cannot use nor divulge, publish or otherwise
        disseminate it without prior written consent from CGI. Upon request, members
        will execute documents made necessary to confirm or complete the assignment
        of
        rights to CGI. Upon joining CGI, and in Canada only, members agree, by signing
        the Member Commitment to the Code of Ethics and Business Conduct, to waive
        their
        moral rights in favour of CGI.
 
 **Suppliers
        and Partners Information**
  56
   All
        information on CGI suppliers and partners is also confidential and must not
        be
        disclosed without the express consent of the persons concerned.
  **6.**  **CONFLICTS
        OF INTEREST**
  DEFINITION
  The
        members of CGI must avoid any actual or apparent conflicts of interest and
        should never engage in any conduct which is harmful to CGI or its reputation.
        A
        conflict of interest exists when a member favours his or her personal interests
        over those of CGI or its clients or when an obligation or situation arising
        from
        a member's personal activities or financial affairs may adversely influence
        the
        member's judgement in the performance of his or her duties at CGI.
  GUIDELINES
  The
        following guidelines provide guidance for members to avoid situations which
        are
        or may appear to be in conflict with their responsibility to act in the best
        interest of the Company.
  **Financial
        Interests** - A
        conflict of interest exists when a member who is able to influence business
        with
        CGI owns, directly or indirectly, a beneficial interest in an organization
        which
        is a competitor of CGI, or which has current or prospective business as a
        supplier, customer or contractor with CGI. This does not include the situation
        where the financial interest in question consists of shares, bonds or other
        securities of a company listed on a securities exchange and where the amount
        of
        this interest is less than one percent of the value of the class of security
        involved.
  **Outside
        Work** - When a
        member, directly or indirectly, acts as a director, officer, employee,
        consultant or agent of an organization that is a competitor of CGI, or which
        has
        current or prospective business as a supplier, customer or contractor with
        CGI,
        there is a conflict of interest. Similarly, a conflict of interest may exist
        when a member undertakes to engage in an independent business venture or
        to
        perform work or services for another entity should that activity prevent
        such
        member from devoting the time and effort to the conduct of CGI's business,
        which
        his or her position requires.
  **Gifts
        or Favours** - A
        conflict of interest will arise when a member, either directly or indirectly,
        solicits or accepts any gift or favour from any person or organization which
        is
        a competitor of CGI, or which has current or prospective business with CGI
        as a
        customer, supplier, partner or contractor.
  For
        this
        purpose, a "gift" or "favour" includes any gratuitous service, loan, discount,
        money or article of value. It does not include articles of nominal
  57
   value
        normally used for sales promotion purposes, ordinary business meals or
        reasonable entertainment consistent with local, social or business customs
        if
        received in a sporadic manner.
  **Commissions** - CGI or
        its members will never accept any commissions from a third-party vendor when
        recommending software, hardware or any equipment to a client as part of a
        service agreement.
  **Trading
        with CGI** - A
        conflict of interest may exist when a member is directly or indirectly a
        party
        to a transaction with CGI.
  **Misappropriation
        of Business Opportunities** - A
        conflict of interest will exist when a member, without the knowledge and
        consent
        of CGI, appropriates for his or her own use, or that of another person or
        organization, the benefit of any business venture, opportunity or potential
        opportunity about which the member may have learned or that he or she may
        have
        developed during the course of his or her employment.
  **Bribes** -
        Neither CGI nor its members will pay bribes to clients or client representatives
        to obtain business from them.
  REPORTING
  If
        a
        member thinks that he or she has been placed in a conflict of interest, the
        member must inform his or her manager and work with him or her to determine
        how
        the situation may be corrected.
  **7.**  **LAWS,
        STATUTES AND REGULATIONS**
  COMPLIANCE
        WITH THE LAW
  It
        is
        CGI's policy to comply, not merely with the letter, but also with the spirit
        of
        the law. CGI is required to maintain compliance with various acts, statutes
        and
        regulations governing activities in the jurisdictions in which it carries
        on
        business and expects members acting on its behalf to do likewise. Members
        are
        also expected to report any situation of concern to CGI's Corporate
        Secretary.
  GUIDELINES
        FOR COMPLIANCE
  This
        Code
        does not seek to provide legal guidance for all laws, statutes and regulations
        that impact CGI's activities. Specialized resources - legal, tax, environmental,
        government relations, personnel - are available within CGI for that purpose.
        There are, however, several items of legislation that warrant specific mention.
        These are listed below along with some general guidelines for
        compliance.
  HEALTH
        AND SAFETY LAWS
  58
   CGI
        is
        committed to creating and maintaining healthy and safe workplaces for its
        members. Members are expected to comply with all safety laws, regulations
        and
        directives from their managers (which may not necessarily be a law or
        regulation).
  ENVIRONMENTAL
        LAWS
  CGI
        is
        committed to preserving and enhancing the environment in the communities
        where
        its various businesses operate through responsible and environmentally-oriented
        operating practices. Members are encouraged to participate in undertakings
        geared to improving the environment in both their workplace and their
        community.
  HUMAN
        RIGHTS LEGISLATION
  Every
        person has the right to equal treatment with respect to employment and the
        right
        to be free of discrimination because of race, ancestry, place of origin,
        colour,
        ethnic origin, citizenship, creed, sex, sexual orientation, age, pregnancy,
        record of offences, marital status, social conditions, political beliefs,
        language, veteran status (U.S. only), family status, disability or means
        used to
        overcome a disability. The following are CGI's policies on equal employment
        opportunity, anti-discrimination and anti-harassment as well as the procedure
        for reporting any breach or violation of these policies:
  i)
              **Equal
                  Employment Opportunity**-
                  CGI is committed to treating all people fairly and equitably, without
                  discrimination. The company has established a program to ensure
                  that
                  groups which are often subject to discrimination are equitably
                  represented
                  within CGI and to eliminate any employment rules and practices
                  that could
                  be discriminatory. CGI regards diversity among its members as a
                  priceless
                  resource and one which enables the Company to work harmoniously
                  with
                  clients from around the world.
  ii)
              **Anti-Harassment
                  and Anti-Discrimination Policies**-
                  CGI recognizes that everyone has the right to work in an environment
                  free
                  of sexual, psychological and racial harassment. CGI will do everything
                  in
                  its power to prevent its members from becoming victims of such
                  harassment.
                  CGI defines sexual, psychological or racial harassment as any behaviour,
                  in the form of words, gestures, or actions, generally repeated,
                  that has
                  undesired sexual, psychological or racial connotations, that has
                  a
                  negative impact on a person's dignity or physical or psychological
                  integrity, or that results in that person being subjected to unfavourable
                  working conditions or dismissal.
  CGI
        will
        prevent any form of harassment or discrimination against job candidates and
        members on any of the grounds mentioned above, whether during the hiring
        process
        or during employment. This commitment applies to such areas as training,
        performance assessment, promotions, transfers, layoffs, remuneration and
        all
        other employment practices and working conditions.
 
  59
  All
        CGI
        managers are personally accountable for enforcing this policy and must make
        every effort to prevent discriminatory or harassing behaviour and to intervene
        immediately if they observe a problem or if a problem is reported to
        them.
  CGI
        requires that all members refrain from any form of harassment or discrimination
        against anyone else. CGI will not tolerate any violations of this policy
        whatsoever.
  iii)
              **Procedure
                  for Reporting Discrimination or Harassment**-
                  Any member of CGI who feels discriminated against or harassed can
                  and
                  should, in all confidence and without fear of reprisal, personally
                  report
                  the facts to the vice-president of his or her business unit and
                  to the
                  human resources leader either in that business unit, in the country
                  or at
                  the corporate head office. The facts will be examined carefully
                  by these
                  two individuals. Neither the name of the person reporting the facts
                  nor
                  the circumstances surrounding them will be disclosed to anyone
                  whatsoever,
                  unless such disclosure is necessary for an investigation or disciplinary
                  action. Any disciplinary action will be determined by these same
                  two
                  people and will be proportional to the seriousness of the behaviour
                  concerned. CGI will also provide appropriate assistance to any
                  member who
                  is a victim of discrimination or harassment. In addition, retaliation
                  against persons who make complaints of harassment, witness harassment,
                  offer testimony or are otherwise involved in the investigation
                  of
                  harassment complaints will not be
                  tolerated.
  COMPETITION
        ACT
  CGI
        is
        required to make its own decisions on the basis of its best interest and
        must do
        so independent of agreements or understandings with competitors. The Competition
        Act (Canada) or corresponding provisions of foreign legislation in matters
        of
        competition prohibit certain arrangements or agreements with others regarding
        product prices, terms of sale, division of markets, allocation of customers
        or
        other practices that restrain competition. It is the responsibility of each
        manager to comply with the letter and spirit of all competition laws as they
        apply to CGI.
  Should
        a
        question or doubt arise with respect to competition-sensitive issues, they
        must
        immediately be brought to the attention of CGI's Corporate
        Secretary.
  SECURITIES
        LAWS AND INSIDER TRADING
  Members
        who possess material non-public information may not buy or sell CGI securities
        while such information remains non-public and must refrain from passing such
        information on to others, including family and friends. These trading
        prohibitions apply to members at all levels - not just officers or managers.
        The
        prohibition on such trading is based on such information potentially providing
        an unfair advantage to the member.
 
  60
  "Material
        non-public information" is non-public information that is significant enough
        that, if publicly known, is likely to affect the market price of any of CGI's
        securities. CGI has adopted "Guidelines on Timely Disclosure of Material
        Information and Transactions in Securities of CGI by Insiders". Each member,
        officer and director must abide by the provisions of these guidelines, when
        applicable.
  **8.**  **MEMBER,
        CLIENT, INVESTOR AND MEDIA RELATIONS**
  COMMUNICATIONS
        IN GENERAL
  **Communications
        Policy**
  i)
              **Within
                  CGI**-
                  CGI's management philosophy demonstrates the value it places on
                  its
                  members' participation in the Company's activities. Communication
                  is a key
                  responsibility of all members. CGI encourages open communication
                  and the
                  sharing of information because it believes its members are its
                  most
                  valuable ambassadors.
  ii)
              **Outside
                  of CGI**-
                  CGI also believes in maintaining open communication with its clients,
                  shareholders, the investment community, industry analysts, regulators,
                  the
                  media and other interested parties. Clear and professional communication
                  enables CGI to promote its services and solutions to its various
                  audiences.
  **Communications
        within CGI**
  i)
              **Member
                  Input**-
                  CGI encourages its members to share their opinions and ideas, both
                  at
                  scheduled meetings and in the member surveys circulated for this
                  purpose.
                  Regular team meetings are held in all of CGI's business units,
                  providing
                  opportunities for its members to get to know their colleagues better,
                  to
                  discuss topics of common interest and to receive information about
                  developments both in their business unit and in the company. During
                  the
                  annual tour of all business units, the senior managers of CGI provide
                  a
                  review for the members of the past year's performance and discuss
                  CGI's
                  strategies for the coming year.
  ii)
              **Member
                  Satisfaction Assessment Process**-
                  Each year, all members of CGI are asked to participate in the Member
                  Satisfaction Assessment Process (MSAP) by filling out a survey
                  questionnaire. The answers provided in this questionnaire and the
                  comments
                  made in the "Message to the Senior Management" section enable CGI
                  corporate and operational management to improve policies and programs
                  and
                  develop action plans to achieve CGI's objective of becoming the
                  best
                  employer in the industry. Members of CGI can rest assured that
                  their
                  answers and comments on this questionnaire are kept entirely
                  confidential.
 
  61
  iii)
              **Newsletter,
                  Other Communications and the Intranet site**-
                  The purpose of internal communications is to fulfill CGI's promise
                  to
                  provide all members with complete, meaningful, up-to-date information
                  about CGI's activities on an ongoing basis. Examples of ongoing
                  communications initiatives include the member newsletter, Perspectives;
                  quarterly (audio) webcasts, Ontrack, and CGI's enterprise Intranet
                  site,
                  all of which keep the members informed about CGI's current projects
                  and
                  recent successes. CGI's Intranet site is intended to implement
                  an
                  infrastructure that allows CGI to share information and corporate
                  policies
                  with all of its members more
                  rapidly.
  **Corporate
        Communications Department**
  The
        Corporate Communications department of CGI is responsible for developing
        and
        managing the policies and programs for CGI's communications activities both
        within and outside of the company. The Corporate Communications team's mandate
        includes the establishment of a corporate identity that includes not only
        the
        visual branding, but also how to describe and talk about CGI. CGI's Corporate
        Communications Program has been designed to focus on three key audiences:
        members, clients and investors.
  **World
        Wide Web site**
  As
        a key
        component of the corporate communications program, the CGI Web site is designed
        to ensure a flow of information to current and future members, current and
        prospective clients and investors. CGI's Web site is constantly changing
        and
        evolving to achieve CGI's worldwide communication strategy. CGI encourages
        its
        members and shareholders to keep up with the latest news on CGI and its
        activities through CGI's Website at www.cgi.com .
  COMMUNICATIONS
        WITH CLIENTS
  i)
              **Initiatives
                  with Clients**-
                  CGI is successful because it works hard at communicating effectively
                  with
                  its clients around the world. A Corporate Identity Manual is available
                  in
                  each of the business units. This manual provides guidelines which
                  must be
                  followed by all members for all external communications. A 'branding'
                  section is posted on the Intranet that supports the overall branding
                  effort, educating members on how best to manage the brand. It also
                  provides rules, as well as tools, for sales collaterals and presentations,
                  advertising, and trade show and conference
                  participation.
  ii)
              **Marketing
                  Materials**-
                  A range of marketing materials has been developed in collaboration
                  with
                  leaders across CGI, representing its various business units, industry
                  sectors and areas of expertise. Included are computer-based presentations
                  and brochures about CGI. These materials are available to all members
                  who
                  work directly with the company's clients, and can be located on
                  the
                  company's Intranet site.
 
  62
  COMMUNICATIONS
        WITH INVESTORS AND MEDIA
  CGI
        strives to maintain strong relations with its shareholders and has developed
        an
        integrated program to manage communications with its shareholders as well
        as
        with others in the investment community and with the media. As a publicly
        traded
        company, CGI must demonstrate discipline in dealing with external audiences.
        CGI
        has therefore adopted "Guidelines on Timely Disclosure of Material Information
        and Transactions in Securities of CGI by Insiders." Such guidelines include
        (i)
        Timely Disclosure and Prohibition Against Selective Disclosure and (ii) CGI's
        Corporate Disclosure Policy.
  **Release
        of Information**
  CGI
        regularly issues news releases in North America, Europe and around the world
        when it concludes major agreements, signs important contracts or has any
        other
        news of general interest or material information. CGI also provides financial
        information to institutional investors and financial analysts and other
        interested parties by issuing quarterly financial news releases, quarterly
        shareholders' reports, annual reports, annual notices and corporate and
        financial profiles. These documents are distributed through newswires and/or
        posted on SEDAR and EDGAR, as well as on the CGI Web site. CGI also holds
        meetings with the investment community and hosts special events, such as
        its
        annual "Investor Day" and the annual general meeting of shareholders, where
        CGI
        communicates directly with the investment community and shareholders.
  **Internet
        Broadcasts**
  CGI
        strives to share information democratically by using Internet technology
        to
        broadcast its major communication events to all of its shareholders, other
        investors, analysts and the media. CGI broadcasts live and also archives
        its
        annual shareholders' meeting for replay via its Web site. It also broadcasts
        live and archives its regular and special telephone conferences with investors
        and analysts to disclose its quarterly financial results and major news.
        Where
        possible, it also broadcasts presentations at brokerage-sponsored conferences.
        CGI strives to give current and prospective shareholders and analysts a
        transparent picture of CGI. This information helps investors better understand
        CGI's strategy and strengths, so that its shares will trade on the market
        at
        their fair value.
  63
   **Authorized
        Spokespersons**
  Media
        and
        investor interaction is the responsibility of authorized CGI spokespersons,
        who
        ensure the timely and informed communication of relevant information. All
        authorized spokespersons must demonstrate high standards of integrity and
        transparency, while refraining from unauthorized disclosure of proprietary
        or
        non-public material information.
  **Initiatives**
  All
        initiatives related to investor and media communications must be directed
        through CGI's Chief Executive Officer. Furthermore, members should make sure
        that CGI's authorized spokespersons know about any relevant issue of local
        or
        national interest that relates to CGI's business, of which they may not be
        aware.
  **9.**
              **COMMUNITY
                  ACTIVITIES AND POLITICAL AND PUBLIC
                  CONTRIBUTIONS**
  CGI
        respects and supports the right of its members as individuals to participate
        in
        both community and political activities outside of work hours. No contributions
        of any kind may be made by a member to any political party, candidate or
        campaign on behalf of CGI without the approval of CGI's Chief Executive Officer.
        However, CGI may itself make contributions to political parties as permitted
        by
        law.
  **10.**
              **COMPLIANCE
                  WITH THE CODE**
  MANAGEMENT
        RESPONSIBILITIES
  CGI's
        managers have a special duty to be role models of appropriate business conduct
        and to see that the principles and policies of this Code and of other CGI
        guidelines and policies referred to in this Code are upheld. This
        means:
  i)
              **Copy
                  of the Code**-
                  Ensuring that all members have a copy of the Code, and that they
                  understand and comply with its
                  provisions.
  ii)
              **Assistance**-
                  Offering assistance and explanations to any member who has questions,
                  doubts or is in a difficult situation. Managers are also required
                  to
                  counsel members promptly when their conduct or behaviour is inconsistent
                  with the Code.
  iii)
              **Enforcement**-
                  Taking prompt and decisive action when a violation of the Code
                  has
                  occurred, in consultation with CGI's Corporate Secretary . If a
                  manager
                  knows a member is contemplating a prohibited action and does nothing,
                  the
                  manager will be held responsible along with the
                  member.
 
 MEMBER
        RESPONSIBILITIES
  64
   Each
        member is accountable for observing the rules of conduct that are normally
        accepted as standard in a business enterprise. In addition they must abide
        by
        the following:
  i)
              **Compliance**-
                  CGI's members are expected to comply with the Code and all policies
                  and
                  procedures of the company as well as to actively promote and support
                  CGI's
                  values.
  ii)
              **Preventing**-
                  Members should take all necessary steps to prevent a Code
                  violation.
  iii)
              **Reporting**-
                  Members must immediately report to their manager (i) situations
                  of
                  non-compliance with respect to this Code of which they become aware
                  and
                  (ii) suspected violations of the Code. All information will, to
                  the extent
                  possible, be received in confidence. It is corporate policy not
                  to take
                  action against a member who reports in good faith unless unusual
                  circumstances warrant such action.
  In
        addition, CGI has established a policy for incident reporting (often referred
        to
        as a “whistleblower policy”) as well as a process under that policy which allows
        any person who has direct knowledge of specific facts to report incidents
        in
        which the Company is exposed to a serious risk in matters of accounting,
        auditing, internal accounting controls, finance, banking or financial
        corruption. The process in place protects the incident reporter and ensures
        the
        confidentiality of the report.
  Incident
        reports may be submitted either by telephone by dialing 1-800-422-3076 toll
        free, by dialing (503) 352-7942 and reversing the long distance charges,
        or by
        submitting an incident report online. For telephone reports, all long distances
        charges will be at the expense of CGI. For those who wish to submit incident
        reports online, a link to the incident reporting web site is provided on
        CGI’s
        Enterprise Portal or members may access the incident reporting system directly
        at www.ethicspoint.com .
  CGI’s
        incident reporting system is managed by EthicsPoint, Inc., a company unrelated
        to CGI which has undertaken to ensure the confidentiality of all incident
        reporters as well as the confidentiality of the reports they
        submit.
  CGI’s
        policy on incident reporting is entitled the *Serious
        Ethical Incidents Reporting Policy* and is
        available on the CGI Enterprise Portal on the policies page.
  iv)
              **Consequences**-
                  Unethical behaviour, violations of this Code and of CGI's other
                  guidelines
                  and policies, as well as withholding information during the course
                  of an
                  investigation regarding a possible violation of the Code, may result
                  in
                  disciplinary action which will be
  65
   commensurate
        with the seriousness of the behaviour. Such action could include termination
        as
        well as civil or criminal action.
  **11.**
              **ADMINISTRATION
                  OF THE CODE**
  PERIODIC
        REVIEW
  Responsibility
        for the periodic review and revision of the Code lies with CGI's Corporate
        Governance Committee.
  MONITORING
        COMPLIANCE
  The
        Board
        of Directors of CGI will monitor compliance with the Code and will be
        responsible for the granting of any waivers from compliance with the Code
        for
        directors and officers of CGI. These waivers will be disclosed publicly in
        due
        course by the Board of Directors of CGI who shall also specify the circumstances
        and rationale for granting the waivers, as the case may be. The Corporate
        Secretary of CGI shall, when deemed appropriate, make reports to the Board
        of
        Directors of CGI with respect to compliance with this Code.
 
 QUESTIONS
  Questions
        concerning this Code should be referred to a member's manager who, when
        warranted, shall report to CGI's Corporate Secretary.
  66
  **4.2
        Executive Code of Conduct**
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of this Executive Code of Conduct.
        This
        Code should therefore be read in conjunction with Chapter 1.
  This
        Executive Code of Conduct (the "Code") is part of the commitment of CGI Group
        Inc. ("CGI") to ethical business conduct and practices. This Code reflects
        CGI's
        firm commitment, not only to adherence to the law, but also to the highest
        standards of ethical conduct.
  This
        Code
        specifically covers CGI's principal executive officer, principal financial
        officer, principal accounting officer or controller, or other persons performing
        similar functions (collectively, the "officers").
  **1.**
              **HONEST
                  AND ETHICAL CONDUCT**
  RESPECT
        AND INTEGRITY
  The
        officers of CGI are its ambassadors. They must always behave responsibly
        and
        demonstrate courtesy, honesty, civility and respect for all other employees
        of
        CGI, for its clients and for its suppliers.
  ETHICS
  Supporting
        CGI's objectives, officers in performing their duties will carry out their
        responsibilities at all times in a way that promotes ethics in their leadership.
        The officers will:
  (i)
              Undertake
                  their responsibilities in a vigilant manner in the interests of
                  CGI and to
                  avoid any real or perceived impression of personal
                  advantage;
  (ii)
              Advance
                  CGI's legitimate interests when the opportunity arises at all times
                  ahead
                  of their own interests;
  (iii)
              Proactively
                  promote ethical behavior among subordinates and peers;
                  and
  (iv)
              Use
                  corporate assets and resources in a responsible and fair manner,
                  having
                  regard for the interests of CGI.
 
 AVOIDANCE
        OF CONFLICT OF INTEREST
  Officers
        must avoid any actual or apparent conflicts of interest and should never
        engage
        in any conduct that is harmful to CGI or its reputation. Such a conflict
        would
        exist when an officer favours his or her personal interests
  67
   over
        those of CGI or its clients or when an obligation or situation arising from
        an
        officer's personal activities or financial affairs may adversely influence
        the
        officer's judgment in the performance of his or her duties to CGI.
  Officers
        will not knowingly do business with any parties related to CGI, any of CGI's
        clients or any firms with which CGI does business if such business would
        be
        material or would be outside of normal client related activity.
  Officers
        shall not solicit or accept gifts or favours from related parties, clients
        or
        firms with which CGI does business beyond customary courtesies. For this
        purpose, a "gift" or "favour" includes any gratuitous service, loan, discount,
        money or article of value. It does not include articles of nominal value
        normally used for sales promotion purposes, ordinary business meals or
        reasonable entertainment consistent with local, social or business customs
        if
        received in a sporadic manner.
  Officers
        will not perform work or render services for, or knowingly make a material
        investment in, organizations that compete with CGI or with which CGI does
        business without appropriate approval from CGI's Corporate
        Secretary.
  If
        an
        officer thinks that he has been placed in a conflict of interest, the Officer
        must inform CGI's Corporate Secretary.
  **2.**
              **FULL,
                  FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE
                  DISCLOSURE**
  ANNUAL
        AND QUARTERLY REPORTS
  Each
        officer shall read each annual or quarterly report filed or submitted under
        the
        applicable securities laws and satisfy himself or herself that the report
        does
        not contain any untrue statement of a material fact or omit to state a material
        fact that is necessary in order for the statements made not to be misleading,
        in
        light of the circumstances in which such statements were made.
  FINANCIAL
        STATEMENTS
  Each
        officer shall satisfy himself or herself that the financial statements, and
        other financial information included in the report, fairly present in all
        material respects the financial condition and results of operations of CGI
        as
        of, and for, the periods presented in the report.
 
 REPORTS
        TO SECURITIES REGULATORS
  68
  Officers
        shall perform their responsibilities with a view to causing periodic reports
        filed with securities regulators to contain information which is accurate,
        complete, fair and understandable and to be filed in a timely
        fashion.
  REPORTING
        CONCERNS AND COMPLAINTS
  An
        officer who believes it is necessary or appropriate to do so can refer concerns
        about the quality and scope of financial or related reporting requirements
        to
        the Chair of the Audit Committee. Any officer who receives a bona fide material
        complaint about financial reporting from any employee shall report such
        complaints to the Audit Committee. Any officer who has disclosed such concerns
        in good faith shall not face any form of retribution.
  **3.**
              **COMPLIANCE
                  WITH LAWS, RULES AND
                  REGULATIONS**
  The
        officers are cognizant of their leadership roles within the organization
        and the
        importance of compliance with the letter and spirit of applicable laws, rules
        and regulations relating to financial and related reporting.
  **4.**
              **COMPLIANCE
                  WITH THE CODE**
  GENERAL
        RESPONSIBILITIES
  Officers
        have a special duty to be role models of appropriate business conduct and
        see
        that the principles and policies of this Code and other CGI guidelines and
        policies are upheld.
  REPORTING
  Any
        violation or suspected violation of the Code should be personally reported
        by an
        officer to CGI's Corporate Secretary.
  ACCOUNTABILITY
  Non-compliance
        with this Code in every respect by an officer will be a matter for consideration
        and review by the Board of Directors of CGI.
  
 **4.3**
              **Guidelines
                  on Timely Disclosure of Material Information and Transactions in
                  Securities of CGI by
                  Insiders**
  The
        present document is divided into three sections. The first section is a summary
        of the applicable legislation and policies regarding timely disclosure and
        prohibitions against selective disclosure. The second section is CGI's corporate
        disclosure policy which is destined to ensure compliance by CGI of the timely
        disclosure requirements and avoid selective disclosure of material information.
        Finally, the third section refers to restrictions applicable to transactions
        in
        securities of CGI by insiders.
  IMPORTANT
        NOTE
  Chapter
        1, Dream, Mission, Vision and Values of the CGI Group Inc. Fundamental Texts
        constitutes the fundamental principles of these Guidelines on timely
  69
   disclosure
        of material information and transactions in securities of CGI by insiders.
        These
        Guidelines should therefore be read in conjunction with Chapter 1.
  **I.**
              **TIMELY
                  DISCLOSURE AND PROHIBITIONS AGAINST SELECTIVE
                  DISCLOSURE****1**
  It
        is
        fundamental that all persons investing in securities have equal access to
        information that may influence their investment decisions, therefore placing
        all
        participants in the market on an equal footing. The timely disclosure policies
        of the Toronto Stock Exchange (the "TSX") 2 and the
        New York Stock Exchange (the "NYSE") (collectively, the "Exchanges") and
        of the
        Canadian Securities Administrators (the "CSA") (individually, a "Timely
        Disclosure Policy" and collectively, the "Timely Disclosure Policies") elaborate
        upon the provisions of the Securities Act (Québec), and the securities
        legislation of all of the provinces of Canada (collectively, the "Legislation")
        which require that when a material change occurs which is not generally known,
        a
        press release disclosing the substance of the change must be issued.
  DEFINITION
        OF MATERIAL INFORMATION
  Material
        information is any information relating to the business and affairs of CGI
        that
        results in or would reasonably be expected to result in a significant change
        in
        the market price or value of CGI securities (the "CGI Securities"). Material
        information consists of both "material changes" 3 and
        "material facts" 4 relating
        to the business and affairs of CGI. A material change includes a decision
        to
        implement such a change made by the board of directors or by senior management
        who believe that confirmation of the decision by the board of directors is
        probable.
 
 1
              Definitions
                  provided in Sections I and II apply only to those
                  Sections.2
              Respectively,
                  the Toronto Stock Exchange Policy Statement on Timely Disclosure,
                  the
                  Listed Company Manual of the New York Stock Exchange (both available
                  on
                  the TSX website) and National Policy 51-201 on disclosure standards
                  and
                  which provide guidance on best disclosure practices.3
              A
                  material change is a change in the business, operations or capital
                  of the
                  issuer that would reasonably be expected to have a significant
                  effect on
                  the market price or value of any of the securities of the issuer
                  and
                  includes a decision to implement a change made by the board of
                  directors
                  of the issuer or by senior management of the issuer who believe
                  that
                  confirmation of the decision by the board of directors is
                  probable.4
              A
                  material fact is a fact that significantly affects, or would reasonably
                  be
                  expected to have a significant effect on, the market price or value
                  of a
                  security of the issuer. The Securities Act (Québec) refers to "privileged
                  information" which is defined as "any information that has not
                  been
                  disclosed to the public and that could affect the decision of a
                  reasonable
                  investor". (Refer to Section III of this
                  document).
 
  70
  It
        is the
        responsibility of CGI to determine the materiality of information, as it
        relates
        to CGI. When making materiality judgments, CGI should consider factors such
        as
        the nature of the information, the volatility of CGI Securities and prevailing
        market conditions. Ongoing monitoring and assessment of market reaction by
        CGI
        to different disclosures will be helpful when making materiality judgments
        in
        the future. As a guiding principle, if there is any doubt about whether
        particular information is material 5 ,
        the CSA
        encourage companies to err on the side of caution and release information
        publicly.
  Pursuant
        to the Timely Disclosure Policy of the TSX, the following examples of corporate
        developments are likely to constitute material information requiring prompt
        disclosure:
  w
              a
                  change in share ownership that may affect the control of the
                  company;
  w
              a
                  change in the corporate structure such as a merger, an amalgamation
                  or a
                  reorganization;
  w
              a
                  take-over bid or issuer bid;
  w
              a
                  major corporate acquisition, disposition or joint
                  venture;
  w
              a
                  stock split, consolidation, stock dividend or other change in capital
                  structure;
  w
              the
                  borrowing of a significant amount of
                  funds;
  w
              the
                  public or private sale of additional
                  securities;
  w
              the
                  development of a new product and/or a development affecting the
                  company's
                  resources, technology, products or
                  markets;
  w
              entering
                  into or loss of a significant
                  contract;
  w
              firm
                  evidence of a significant increase or decrease in near term earnings
                  prospects;
  w
              an
                  important change in capital investment plans or corporate
                  objectives;
  w
              a
                  significant change in management;
  w
              significant
                  litigation;
  w
              a
                  major labour dispute or a dispute with a major contractor or
                  supplier;
  w
              an
                    event of default under a financing or other agreement;
  w
              a
                  declaration or omission of
                  dividends;
  w
              a
                  call of securities for redemption;
                  and
  
 5
              U.S.
                  case law has interpreted information to be material if "there is
                  a
                  substantial likelihood that a reasonable shareholder would consider
                  it
                  important" in making an investment decision. Also, according to
                  the U.S.
                  case law, information will be considered material if there is a
                  substantial likelihood that a fact "would have been viewed by the
                  reasonable investor as having significantly altered the "total
                  mix" of
                  information available".
  
  71
  w
              any
                  other development relating to the business and affairs of a company
                  that
                  would reasonably be expected to significantly affect the market
                  price or
                  value of any of the Company's securities or that would reasonably
                  be
                  expected to have a significant influence on an informed investor's
                  investment decisions.
  TIMING
        OF PUBLIC ANNOUNCEMENT
  Pursuant
        to Timely Disclosure Policies and Legislation, CGI is required to disclose
        material information concerning its business and affairs immediately upon
        the
        information becoming known to management or a development being approved
        by the
        Board of Directors, or in the case of information previously known, immediately
        upon it becoming apparent that the information is material 6 .
        Immediate release of material information is necessary to ensure that it
        is
        promptly available to all investors and to reduce the risk that persons with
        access to that information will act upon undisclosed information. The disclosure
        of material change must be made by way of a broadly disseminated news release
        that is followed by a material change report filed with the appropriate CSA
        members.
  The
        announcement of an intention to proceed with a transaction or activity should
        be
        made when a decision has been taken to proceed with it by CGI's board of
        directors or by senior management with the expectation in that case of such
        decision being further agreed to by CGI's board of directors. However, as
        discussed below, a corporate development in CGI's affairs in respect of which
        no
        firm decision has yet been made, may require immediate disclosure if leaks
        or
        rumours of such corporate development are reflected in the market
        place.
  Disclosure
        of corporate developments must be managed with care and judgment by company
        officials as to the timing of an announcement of material information whether
        late or premature may affect the credibility and reputation of the company
        and
        of the securities market.
  In
        limited circumstances, disclosure of material information may be delayed
        for
        reasons of corporate confidentiality.
  
  
 6
              Where
                  the material information constitutes a material change, such disclosure
                  must be followed by a material change report filed within ten days
                  of the
                  date on which the change occurred with the relevant securities
                  commissions.
  
 
  72
  DEALING
        WITH RUMOURS
  Except
        in
        certain circumstances, CGI is not required to respond to market rumours.
        It may
        choose a "no comment" response to market rumours. An effective way of saying
        "no
        comment" is to say, "We do not respond to market rumours". To maintain a
        consistent "no comment" policy, a company should not selectively comment,
        even
        if no significant corporate developments are taking place or the company
        knows
        of no reason for unusual market activity. For example, it is an inconsistent
        (and likely ineffective) use of a "no comment" policy if a company were to
        say,
        "There are no significant corporate developments at this time," when such
        is the
        case, but respond, "no comment" when material developments or transactions
        are
        under consideration. Using a "no comment" policy in this fashion may act
        as a
        signal to the market and defeats the purpose of the policy.
  If,
        however, the rumour is about a material change in the company's business,
        operations or capital or other material information that the company has
        withheld from general disclosure under its confidentiality privilege, the
        company's obligation to make immediate disclosure of that change or information
        will be triggered. In the face of a rumour regarding undisclosed material
        information, it is impossible for a company to continue a request for
        confidentiality. In addition, CSA members or stock exchanges may request
        that a
        company respond to a rumour if it is the source of the rumour or if market
        activity indicates that trading is being affected by the rumour.
  Upon
        such
        a request, prompt clarification or denial of the rumour through a news release
        will be necessary and, if the rumour is correct in whole or in part, immediate
        disclosure of the relevant material information should be made. Pending
        dissemination of a response to such a request, the relevant stock exchanges,
        or
        less frequently, the CSA member, may decide to halt trading in securities
        of the
        company.
  Companies
        are often asked to respond to rumours or inquiries regarding possible
        differences in earnings from current Street estimates. When a company has
        provided no guidance on analysts' earnings estimates, except in certain
        circumstances, the company is under no obligation to respond to such rumours
        or
        inquiries. If it is a company's policy not to comment on analysts' earnings
        estimates, the company should state this policy in response to any such
        questions it receives.
  If
        earnings rumours are affecting the company's share price, the company may
        wish
        to consider issuing a full news release if it believes earnings will be
        significantly different than Street expectations, or if it believes the rumours
        to be false and wants to counter them.
  73
   MAINTAINING
        CONFIDENTIALITY
  Pursuant
        to Timely Disclosure Policies, the withholding of material information may
        only
        be justified where the potential harm to CGI or to its investors caused by
        immediate disclosure may reasonably be considered to exceed the negative
        consequences of delaying disclosure. Pursuant to the Legislation, CGI will
        not
        be required to prepare a press release if senior management has reasonable
        ground to believe that disclosure would be seriously prejudicial to the
        interests of CGI and that no transaction in CGI Securities has been or will
        be
        carried out on the basis of the information not generally known 7 .
        In any
        case, confidentiality may not be maintained beyond the short term. Furthermore,
        in any situation where material information is being kept confidential because
        disclosure would be unduly detrimental to CGI's best interests, CGI's management
        is responsible for taking every possible precaution to ensure that no trading
        whatsoever takes place by any insider or any employee of CGI in possession
        of
        such information before it is generally disclosed to the public.
  If
        the
        information that CGI wants to keep confidential is a "material change" in
        its
        business, operations or capital, CGI must file a report of that change with
        the
        appropriate CSA members on a confidential basis, together with an explanation
        of
        the reasons for the non-disclosure. To maintain the confidentiality of the
        filing, CGI must renew its confidential filing every 10 days in certain
        jurisdictions.
  The
        Timely Disclosure Policy of the TSX enumerates as follows situations where
        prompt disclosure might be unduly detrimental to CGI's interests:
  w
              release
                  of the information would prejudice CGI's ability to pursue specific
                  and
                  limited objectives or complete a transaction or series of transactions
                  that are underway. For instance, premature disclosure of the fact
                  that CGI
                  intends to purchase a significant asset may increase the cost of
                  the
                  acquisition;
  w
              disclosure
                  of the information would provide competitors with confidential
                  corporate
                  information that would significantly benefit them. Such information
                  may be
                  kept confidential if CGI is of the opinion that the detriment to
                  it
                  resulting from disclosure would exceed the detriment to the market
                  in not
                  having access to the information. A decision to release a new product,
                  or
                  details on the features of a new product, may be withheld for competitive
                  reasons, but such information should not be withheld if it is available
                  to
                  competitors from other sources;
   
 
 7
              However,
                  in such circumstances CGI is nonetheless required to file a "confidential"
                  material change report indicating the reasons why disclosure is
                  being
                  delayed must be provided in writing. If CGI wishes to keep the
                  material
                  information confidential, it must renew the confidential filing
                  every 10
                  days following such filing.
 
  74
  w
              disclosure
                  of information concerning the status of ongoing negotiations would
                  prejudice the successful completion of these negotiations. It is
                  unnecessary to make a series of announcements concerning the status
                  of
                  negotiations with another party concerning a particular transaction.
                  If it
                  seems that the situation is going to stabilize within a short period,
                  public disclosure may be delayed until a definitive announcement
                  can be
                  made. Disclosure should be made once "concrete information" is
                  available,
                  such as a final decision to proceed with the transaction or, at
                  a later
                  point in time, finalization of the terms of the
                  transaction.
  Again,
        when the disclosure of material information is to be delayed, complete
        confidentiality must be maintained. In the event that such information has
        leaked or appears to be impacting the market, CGI must then take immediate
        steps
        to ensure that full disclosure to the public is made and contact the Exchanges
        immediately and ask that trading be halted pending the issuance of a news
        release.
  PROHIBITIONS
        AGAINST SELECTIVE DISCLOSURE
  The
        Legislation prohibits CGI or any person or company in a special
        relationship 8 with CGI
        from informing anyone, other than in the necessary course of business, of
        a
        material information before it has been generally disclosed. This prohibition
        is
        commonly known as "tipping". Tipping is prohibited in order to ensure equal
        access to, and opportunity to act upon, material information.
  The
        tipping prohibition is very broad. It covers disclosure made by any person
        in a
        special relationship with CGI to anyone (other than in the "necessary course
        of
        business" as discussed below) and is not limited to communications made to
        securities market professionals, analysts and institutional
        investors 9 .
  The
        tipping provisions however permit an issuer to make a selective disclosure
        in
        the necessary course of business. This exception exists so as not to interfere
        with a company's everyday business. However, whether a particular disclosure
        has
        been made in the necessary course of business is dependent on the facts of
        each
        case. The CSA set out a list of parties that the necessary course of business
        exception would generally permit communication to, including:
  w
              vendors,
                  suppliers, or strategic partners on issues such as research and
                  development, sales and marketing and supply
                  contracts;
  w
              employees,
                  officers and board members;
  w
              lenders,
                    legal counsel, auditors, financial advisors and
                    underwriters;
  
  
 8
              Persons
                  in a special relationship with CGI, include, but are not limited
                  to: (a)
                  insiders of CGI; (b) directors, officers and employees of CGI;
                  (c) persons
                  engaging in professional or business activities for or on behalf
                  of CGI;
                  and (d) anyone who learns of material information from someone
                  that is
                  known or should be known to be in a special relationship with
                  CGI.9
              The
                  CSA point out that although selective disclosure most often occurs
                  in
                  one-on-one discussions and private meetings, it can occur in a
                  variety of
                  situations including annual
                  meetings.
 
  75
  
 w
              parties
                  to negotiations;
  w
              labour
                  unions and industry associations;
                  and
  w
              government
                  agencies and non-governmental regulators;
                  and
  w
              credit
                  rating agencies (provided that the information is disclosed for
                  the
                  purpose of assisting the agency to formulate a credit rating and
                  the
                  ratings are or will be publicly
                  available).
  The
        CSA
        advise however that the necessary course of business exception would not
        generally allow selective disclosure to analysts, the media or institutional
        investors.
  In
        relying on the necessary course of business exception when disclosing material
        information, CGI must ensure that those receiving the information are aware
        that
        they cannot disclose the information to any other party, other than in the
        necessary course of business, or trade on the information, until it has been
        generally disclosed.
  The
        selective disclosure prohibition continues until material information has
        been
        "generally disclosed" 10 .
  The
        CSA
        encourage issuers to satisfy the general disclosure requirement under the
        tipping provisions by using one or a combination of news releases through
        a
        widely circulated service, press conferences and conference calls where the
        public is given appropriate notice by news release and may attend or listen.
        Although issuers are encouraged to file news releases on SEDAR and post
        information on their website, the CSA point out that currently neither of
        these
        methods alone will constitute general disclosure.
  If
        CGI
        makes an unintentional selective disclosure, it must take immediate steps
        to
        ensure that a full public announcement is made. The CSA suggest that, pending
        issuance of a news release, a company which has made an unintentional selective
        disclosure shall request a halt trading of its securities and advise anyone
        with
        knowledge of the information that it is material and has not been generally
        disclosed.
  Although
        the Legislation does not provide for a safe harbour for unintentional selective
        disclosure 11 ,
        the CSA
        will look at all of the surrounding circumstances in a selective disclosure
        enforcement proceeding. Factors that will be considered include:
  w
              whether
                    and to what extent an issuer has implemented, maintained and
                    followed
                    reasonable selective disclosure policies and
                    procedures;
  
  
 10
              The
                  Legislation does not define the term "generally disclosed". Insider
                  trading jurisprudence however states that information has been
                  generally
                  disclosed when it has been disseminated in a manner calculated
                  to
                  effectively reach the market place and public investors have been
                  given a
                  reasonable amount of time to analyze the information. What constitutes
                  a
                  "reasonable amount of time" will depend on a number of factors
                  including
                  the circumstances in which the event arises, the particulars of
                  the
                  information, the nature of the market for the issuer's securities
                  and the
                  disclosure method used.11
              Unlike
                  Regulation FD which will be discussed
                  below.
 
  76
  w
              whether
                  any selective disclosure was intentional;
                  and
  w
              what
                  steps were taken to disseminate information that had been unintentionally
                  disclosed, including how quickly the information was
                  disclosed.
  ANNOUNCEMENT
        AND ISSUANCE OF A PRESS RELEASE
  As
        discussed above, the Timely Disclosure Policies, as well as the Legislation,
        require that when a material change in CGI's affairs occurs that is likely
        to
        have a significant influence on the value or the market price of CGI Securities,
        and is not generally known, CGI shall immediately prepare and distribute
        a press
        release disclosing the substance of the change. The press release should
        be
        factual and balanced and avoid unnecessary details, exaggerated reports or
        promotional commentary. When a press release is to be issued during the trading
        hours, it is essential that CGI officials notify the Market Surveillance
        Division of the TSX (which will normally coordinate with the NYSE) prior
        to the
        issuance of such press release, in order to permit the Market Surveillance
        Staff
        to determine whether trading in any of CGI Securities should be temporarily
        halted. Normally, a trading halt in a security will only be justified if
        the
        announcement of the material information is imminent.
  The
        NYSE
        Company Manual requires that when an announcement of news of a material event
        or
        a statement dealing with a rumour which calls for immediate release is made
        shortly before the opening or during the market hours, the company's NYSE
        representative be notified by telephone at least ten minutes prior to the
        release of the announcement to the news media. To ensure adequate coverage,
        the
        news release requiring immediate publicity should be given to Dow Jones &
Company, Inc., Reuters Economic Services and Bloomberg Business
        News.
  CGI
        is
        also required to release material information to the media by the quickest
        possible method and by one which provides the widest possible dissemination.
        Because dissemination of news is essential to ensure that all investors trade
        on
        equal information, the responsibility of ensuring appropriate dissemination
        of
        news releases belongs to CGI.
  DISSEMINATION
        OF MATERIAL INFORMATION THROUGH WEBSITES
  The
        dissemination of information through a website 12 is also
        subject to the Legislation and Timely Disclosure Policies and the information
        to
        be issued through electronic communications must be guided by the same rules
        as
        the information disseminated by traditional forms, such as a press release.
        Consequently, electronic information cannot be misleading to investors (by
        being
        incomplete, out of date or by omitting facts) nor of a promotional nature
        and
        cannot be used to disseminate material information not yet disclosed to the
        general public. CGI must regularly review, update or correct, if need be,
        the
        information posted on the website. CGI should date all material information
        posted on its website and should disclaim any duty to update.
  
 12
              The
                  dissemination of information through a website is governed by the
                  TSX
                  Electronic Communications Disclosure Guidelines (which may be found
                  on the
                  TSX website).
  
  77
  In
        addition, CGI should either delete outdated information or move it to an
        archive. If CGI updates or corrects material information on its website,
        it
        should take steps to ensure that it properly disseminates that information
        to
        the public on a timely basis. No material information is to be disseminated
        through electronic communications prior to being disseminated on a news wire
        service.
  REGULATION
        FD
  The
        Securities and Exchange Commission's Regulation FD (Fair
        Disclosure) 13 requires
        that reporting companies disclose material information through broad public
        means and not selectively to securities analysts and other market professionals.
        However, it is to be noted that Regulation FD does not impose an obligation
        to
        disclose material non-public information but rather mandates that if such
        information is disclosed voluntarily, it must be done on a broad non-exclusive
        basis. Essentially, if an issuer, or any person acting on its behalf discloses
        material non-public information to specified persons, Regulation FD requires
        that the issuer must simultaneously (for intentional disclosures) or promptly
        (for non-intentional disclosures) make public disclosure of that information.
  Since
        CGI
        is considered under U.S. securities laws to be a foreign private issuer,
        Regulation FD will not technically apply to it. It is however important to
        note
        that Regulation FD is, to some extent, simply a codification of the U.S.
        Securities and Exchange Commission's (the "SEC") previous position and that
        selective disclosure of material non-public information about CGI could,
        in
        certain circumstances, even if not technically in violation of Regulation
        FD,
        expose the person making the disclosure to liability under the SEC's anti-fraud
        rules under the Exchange Act 14 .
  **II.**
              **CGI
                  CORPORATE DISCLOSURE POLICY**
  CGI's
        management believes that the implementation and maintenance of a written
        corporate disclosure policy will promote consistent, appropriate, timely
        and
        broadly disseminated disclosure of its material information and reinforce
        compliance with the Legislation and the Timely Disclosure Policies.
  This
        disclosure policy confirms in writing our existing disclosure policies and
        practices. Its goal is to raise awareness of the Company's approach to
        disclosure among the board of directors, senior management and
        employees.
  
 13
              Which
                  became effective on October 23, 2000.14
              The
                  Securities Act of 1934, as amended.
 
  78
  This
        disclosure policy extends to all employees of the Company, its board of
        directors, those authorized to speak on its behalf and all other insiders.
        It
        covers disclosures in documents filed with the securities regulators, financial
        disclosure, including management's discussion and analysis (MD&A) and
        written statements made in the Company's annual and quarterly reports, news
        releases, letters to shareholders, presentations by senior management and
        information contained on the Company's Web site and other electronic
        communications. It extends to oral statements made in meetings and telephone
        conversations with analysts and investors, interviews with the media as well
        as
        speeches, press conferences and conference calls.
  DISCLOSURE
        POLICY COMMITTEE
  The
        board
        of directors has established a disclosure policy committee (the "Committee")
        responsible for all regulatory disclosure requirements and overseeing the
        Company's disclosure practices. The Committee consists of the Executive Chairman
        of the Board, Chief Executive Officer, the Corporate Secretary, the Chief
        Financial Officer and the Executive Vice-President and Chief Legal Officer.
  It
        is
        essential that the Committee be kept fully apprised of all pending material
        Company developments in order to evaluate and discuss those events and to
        determine the appropriateness and timing for public release of information.
        If
        it is deemed that material information should remain confidential, the Committee
        will determine how that inside information will be controlled.
  The
        Committee will identify appropriate industry and Company benchmarks for a
        preliminary assessment of materiality. Guided by these benchmarks the Committee
        will use experience and judgement to determine the appropriateness and timing
        for public release of material information. The Committee will review all
        core
        disclosure documents prior to their release or filing, including the Company's
        MD&A. The Committee will meet quarterly or as conditions dictate and the
        Vice-President, Corporate Communications & Investor Relations will keep
        records of these meetings.
  The
        Committee will review and update, if necessary, this disclosure policy annually
        or as needed to ensure compliance with changing regulatory requirements.
        The
        Committee will report to the board of directors quarterly. The Committee
        is also
        responsible for ensuring that Company spokespersons receive adequate
        training.
  NEWS
        RELEASES
  Once
        the
        Committee determines that a development is material, it will authorize the
        issuance of a news release unless the Committee determines that such
        developments must remain confidential for the time being. If developments
        are to
        remain confidential, appropriate confidential filings must be made and control
        of the inside information must be instituted. Should a material statement
        inadvertently be made in a selective forum, the Company will immediately
        issue a
        news release to
  79
   fully
        disclose that information.
 
 If
        the
        stock exchanges upon which shares of the Company are listed are open for
        trading
        at the time of a proposed announcement, prior notice of a news release
        announcing material information must be provided to the exchanges' market
        surveillance departments to enable a trading halt, if deemed necessary by
        the
        stock exchanges. If a news release announcing material information is issued
        outside of trading hours, market surveillance must be notified before the
        market
        opens.
  Annual
        and interim financial results will be publicly released immediately following
        audit committee or board approval of the MD&A, financial statements and
        notes.
  The
        Vice-President, Corporate Communications & Investor Relations must ensure
        that the material information disclosed in the press release is factual,
        balanced and complete and avoid including unnecessary details, exaggerated
        reports or promotional commentaries. The disclosure must allow a reasonable
        and
        objective valuation of the information (i.e. nature of the agreement, length,
        costs and revenues involved, etc.) and comments on future events concerning
        the
        affairs of CGI should be limited to the strict minimum.
  News
        releases will be disseminated through an approved news wire service that
        provides simultaneous national and/or international distribution. News releases
        will be transmitted to all stock exchange members, relevant regulatory bodies,
        major business wires, national financial media, and the local media in areas
        where the Company has its headquarters and operations. As a general rule,
        procedure for dissemination of material information shall be applied
        consistently.
  DISSEMINATION
        OF THE MATERIAL INFORMATION
  Once
        the
        information has been qualified as material, the responsibility of its immediate
        disclosure by the issuance of a press release belongs to the Vice-President,
        Corporate Communications & Investor Relations.
  A
        pre-notice of such press release must be sent to the TSX and NYSE before
        its
        issuance in order to allow the Market Surveillance Staff to determine whether
        it
        is necessary to temporarily halt trading in CGI Securities pending the
        announcement.
  The
        press
        release shall be distributed through a widely circulated news or wire service.
        Refer to heading below "Investor Conference Calls", if an investor conference
        call is scheduled in connection with the information announced in the press
        release.
  News
        releases will be posted on the Company's Web site immediately after release
        over
        the news wire. The news release page of the Web site will include a notice
        that
        advises the reader that the information posted
  80
  was
        accurate at the time of posting, but may be superseded by subsequent news
        releases.
  PRINCIPLES
        OF DISCLOSURE OF MATERIAL INFORMATION
  Material
        information is any information relating to the business and affairs of the
        Company that results in, or would reasonably be expected to result in, a
        significant change in the market price or value of the Company's securities
        or
        that would reasonably be expected to have a significant influence on a
        reasonable investor's investment decisions. In complying with the requirement
        to
        immediately disclose all material information under applicable laws and stock
        exchange rules, the Company will adhere to the following basic disclosure
        principles:
  w
              Material
                  information will be publicly disclosed immediately via news
                  release.
  w
              In
                  certain circumstances, the Committee may determine that such disclosure
                  would be unduly detrimental to the Company (for example if release
                  of the
                  information would prejudice negotiations in a corporate transaction),
                  in
                  which case the information will be kept confidential until the
                  Committee
                  determines it is appropriate to publicly disclose. In these circumstances,
                  the Committee will cause a confidential material change report
                  to be filed
                  with the applicable securities regulators, and will periodically
                  (at least
                  every 10 days) review its decision to keep the information confidential
                  (also see 'Dealing with Rumours').
  w
              Disclosure
                  must include any information the omission of which would make the
                  rest of
                  the disclosure misleading (half truths are
                  misleading).
  w
              Unfavourable
                  material information must be disclosed as promptly and completely
                  as
                  favourable information.
  w
              There
                  must be no selective disclosure. Previously undisclosed material
                  information must not be disclosed to selected individuals (for
                  example, in
                  an interview with an analyst or in a telephone conversation with
                  an
                  investor). If previously undisclosed material information has been
                  inadvertently disclosed to an analyst or any other person not bound
                  by an
                  express confidentiality obligation, this information must be broadly
                  disclosed immediately via news
                  release.
  w
              Disclosure
                  on the Company's Web site alone does not constitute adequate disclosure
                  of
                  material information.
  w
              Disclosure
                  must be corrected immediately if the Company subsequently learns
                  that
                  earlier disclosure contained a material error at the time it was
                  given.
  81
  DESIGNATED
        SPOKEPERSONS
  The
        Company designates a limited number of spokespersons with authority for
        communication with the investment community, regulators or the media. The
        Chief
        Executive Officer, Chief Financial Officer and Vice-President, Corporate
        Communications & Investor Relations shall be the official spokespersons for
        the Company. Individuals holding these offices may, from time to time, designate
        others within the Company with authority to speak on behalf of the Company
        as
        back-ups or to respond to specific inquiries.
  Employees
        who are not authorized spokespersons must not respond under any circumstances
        to
        inquiries from the investment community, the media or others, unless
        specifically asked to do so by an authorized spokesperson. All such inquiries
        are to be referred to the Vice-President, Corporate Communications &
Investor Relations.
  All
        external information requests from the investment community regarding CGI
        will
        be initially directed to the Vice-President, Corporate Communications &
Investor Relations, who is responsible for communications with the investment
        community and securities analysts. However, in certain circumstances such
        requests shall be directed to the Executive Chairman of the Board, the Corporate
        Secretary, the Chief Financial Officer or the Senior Vice-President, Finance
        and
        Treasury (collectively, the "Authorized Spokespersons").
  All
        employees who are not Authorized Spokespersons must refer calls to the
        Authorized Spokespersons or to the Vice-President, Corporate Communications
        & Investor Relations or to the media relations managers, depending on the
        particular call.
  It
        is
        very important that any comment made by the Authorized Spokespersons reflects
        only material information already generally disclosed. To that effect, all
        relevant public information regarding CGI (news releases, financial analyst
        reports, notes following communication with analysts, etc.) will be kept
        in a
        specific file in order to ensure complete compilation of the public information
        and to assist the Vice-President, Corporate Communications & Investor
        Relations in his or her functions.
  Information
        relating to CGI in the market place and reactions by the market place to
        such
        information shall be closely monitored by the Vice-President, Corporate
        Communications & Investor Relations to ensure a prompt reaction to
        non-intentional selective disclosures. All employees shall report any such
        disclosure to the Vice-President, Corporate Communications & Investor
        Relations.
  82
  CONFIDENTIALITY
        OF THE INFORMATION
  The
        Disclosure Policies and the Legislation allow material information to be
        kept
        confidential when immediate disclosure of such information would be unduly
        detrimental to CGI (to that effect, refer to heading "Maintaining
        Confidentiality" of Section I above).
  In
        order
        to ensure the confidential nature of the information, CGI establishes the
        following rules:
  a)
              the
                  number of CGI employees with access to confidential information
                  must be
                  limited, to the extent possible;
  b)
              appropriate
                  measures are to be taken in order to avoid unauthorized access
                  to the
                  confidential documents through technology or
                  otherwise;
  Moreover,
        any CGI employee in possession of material information will not disclose
        the
        information to anyone (including financial analysts and institutional investors)
        except in the necessary course of business (as discussed above) and when
        disclosed in such manner, all parties involved will be reminded that such
        information is to be kept confidential.
  During
        the period when the material information is being kept confidential, the
        Vice-President, Corporate Communications & Investor Relations will carefully
        monitor the market activity in CGI Securities. In some cases, he or she may
        request the market surveillance department of one or both stock exchanges
        where
        it is listed to place the company's securities on 'stock watch' to monitor
        trading activity.
  If
        the
        confidential material information, or rumours about it, has leaked or appears
        to
        be impacting the market, the Vice-President, Corporate Communications &
Investor Relations, on the direction of the Disclosure Policy Committee will
        have to take immediate steps to ensure that a full public announcement is
        made.
        This includes contacting the Exchanges and asking that trading be halted
        pending
        the issuance of a news release. Furthermore, pending the public release of
        the
        material information, those who have knowledge of the information shall be
        told
        that the information is material and that it has not been generally disclosed.
  DEALING
        WITH RUMOURS
  The
        Company does not comment, affirmatively or negatively, on rumours. This also
        applies to rumours on the Internet. The Company's spokespersons will respond
        consistently to any rumours, saying, "It is our policy not to comment on
        market
        rumours or speculation."
  Should
        the stock exchange request that the Company make a definitive statement in
        response to a market rumour that is causing significant volatility in the
        stock,
        the Committee will consider the matter and decide whether to make a policy
        exception. If the rumour is true in whole or in part,
  83
   this
        may
        be evidence of a leak, and the Company then will immediately issue a news
        release disclosing the relevant material information.
 
 TRADING
        RESTRICTIONS AND BLACKOUT PERIODS
  It
        is
        illegal for anyone with knowledge of material information affecting a public
        company that has not been publicly disclosed to purchase or sell securities
        of
        that company. It is also illegal for anyone to inform any other person of
        material non-public information, except in the necessary course of business.
        Therefore, insiders and employees with knowledge of confidential or material
        information about the Company or information about counter-parties in
        negotiations of transactions that are potentially material to the Company
        or to
        such counterparty, are prohibited from trading securities of the Company
        or any
        counter-party until the information has been fully disclosed and a reasonable
        period has passed for the information to be widely disseminated.
  Insiders
        are personally responsible for filing accurate and timely insider trading
        reports. Insiders are required to provide a copy of all insider reports to
        the
        Corporate Secretary or other designated person concurrent with their filing
        to
        regulatory authorities. For trading blackouts for designated employees in
        possession of privileged information, please refer to Section III below
        "Restrictions Applicable to Transactions in Securities by
        Insiders".
  Quarterly
        trading blackout periods will apply to all insiders during periods when
        financial statements are being prepared but results have not yet been publicly
        disclosed. Employees may only trade in CGI Securities within the period
        beginning on the third business day and ending on the fortieth calendar day
        following the publication of quarterly financial statements and the fiscal
        year
        end results of CGI.
  Blackout
        periods may be prescribed from time to time by the Disclosure Policy Committee
        as a result of special circumstances relating to the Company when insiders
        would
        be precluded from trading in its securities. All parties with knowledge of
        such
        special circumstances should be covered by the blackout. These parties may
        include external advisors such as legal counsel, investment bankers, investor
        relations consultants and other professional advisors, and counter-parties
        in
        negotiations of material potential transactions.
  To
        protect the reputation of the Company and avoid the appearance of impropriety,
        all directors, officers, members who are part of due diligence teams or other
        sensitive project related work, and other insiders are required to pre clear
        with the Corporate Secretary or other designated officer of the Company all
        proposed trades i) in the Company's securities (including the exercise of
        stock
        options), or ii) in the securities of any other public company that is the
        subject of or is involved in an acquisition, divestiture or client related
        project.
 
 CONTACTS
        WITH ANALYSTS, INVESTORS AND THE MEDIA
  84
   Disclosure
        in individual or group meetings does not constitute adequate disclosure of
        information that is considered material non-public information. If the Company
        intends to announce material information at an analyst or shareholder meeting
        or
        a press conference or conference call, the announcement must be preceded
        by a
        news release.
  The
        Company recognizes that meetings with analysts and significant investors
        are an
        important element of its investor relations program. The Company will meet
        with
        analysts and investors individually or in small groups as needed and will
        initiate contacts or respond to analyst and investor calls in a timely,
        consistent and accurate fashion in accordance with this disclosure policy.
        All
        analysts will receive fair treatment regardless of whether they are recommending
        buying or selling the Company's securities.
  The
        Company will provide only non-material information through individual and
        group
        meetings, in addition to publicly disclosed information, recognizing that
        an
        analyst or investor may construct this information into a mosaic that could
        result in material information. The Company cannot alter the materiality
        of
        information by breaking down the information into smaller, non-material
        components.
  CGI
        representatives meeting privately with financial analysts and investors will
        carry out research on the people they are meeting in order to prepare for
        their
        expected line of questioning. Statements and responses to anticipated questions
        will be discussed with the Vice-President, Corporate Communications &
Investor Relations prior to the meeting. The Vice-President, Corporate
        Communications & Investor Relations will be present at each private meeting
        to ensure consistency of corporate answers and to determine whether any
        unintentional selective disclosure occurred during the meeting.
  The
        Company will provide the same sort of detailed, non-material information
        to
        individual investors or reporters that it has provided to analysts and
        institutional investors and may post this information on its Web
        site.
  Spokespersons
        will keep notes of telephone conversations with analysts and investors and
        where
        practicable more than one Company representative will be present at all
        individual and group meetings. A debriefing will be held after these meetings
        and if it determines that selective disclosure of previously undisclosed
        material information has occurred, the Company will immediately disclose
        the
        information broadly via news release.
 
 INVESTOR
        CONFERENCE CALLS
  The
        following steps shall be followed when holding investor conference calls
        to
        disclose material information:
  85
   i)
              a
                  press release containing the material information shall have been
                  previously released through a widely circulated news or wire service.
                  Such
                  press release shall contain the date and time of the call, the
                  subject
                  matter and the means for accessing
                  it;
  ii)
              CGI
                  representatives participating in the analyst conference call will
                  meet
                  before the call to prepare for anticipated questions. Statements
                  and
                  responses to anticipated questions will be discussed and scripted
                  in
                  advance and reviewed by the Company's executive
                  management.
  iii)
              the
                  conference call shall be held in an open manner, permitting investors
                  to
                  listen either by telephone or through Internet
                  Webcasting;
  iv)
              a
                  dial-in replay will be provided for a period of at least one week
                  after
                  the investor conference call and a web replay will be provided
                  for a
                  period of at least 90 days after the call.
  v)
              a
                  detailed transcript of the conference call will be kept and reviewed
                  to
                  determine whether any unintentional selective disclosure occurred
                  during
                  the conference call. If so, immediate steps to ensure full public
                  announcement shall be made including contacting the Exchanges and
                  asking
                  that trading be halted pending the issuance of a news
                  release.
  REVIEWING
        ANALYST REPORTS AND FINANCIAL MODELS
  Upon
        request, the Company may review analysts' draft research reports or financial
        models for factual accuracy based on publicly disclosed information. The
        Company
        will not confirm, or attempt to influence, an analyst's opinions or conclusions
        and will not express comfort with the analyst's financial model and earnings
        estimates.
  To
        avoid
        appearing to endorse an analyst's report or model, the Company will provide
        its
        comments orally or will attach a disclaimer to written comments to indicate
        the
        report was reviewed only for factual accuracy.
  QUIET
        PERIODS
  To
        avoid
        the potential for selective disclosure or even the perception or appearance
        of
        selective disclosure, the Company will observe quiet periods prior to quarterly
        earnings announcements or when material changes are pending. Regular quiet
        periods will commence two days before the end of a quarter and end on the
        date
        of a news release disclosing results for the quarter just ended.
 
 During
        a
        quiet period, the Company will not initiate any meetings or telephone contacts
        with analysts and investors, but will respond to unsolicited inquiries
        concerning factual matters. However, the Company may accept invitations to
        participate in investment meetings and conferences organized by others, as
        long
        as material, non-public information is not selectively disclosed.
  86
   FORWARD-LOOKING
        INFORMATION
  When
        CGI
        elects to disclose forward-looking information in continuous disclosure
        documents, speeches, conference calls, etc., the following guidelines will
        be
        observed.
  w
              All
                  material forward-looking information will be broadly disseminated
                  via news
                  release and included in the Company's annual and quarterly MD&A. The
                  Committee will assess whether an update is required on a quarterly
                  basis
                  or as circumstances warrant.
  w
              The
                  information will be clearly identified as forward
                  looking.
  w
              The
                  Company will identify all material assumptions used in the preparation
                  of
                  the forward-looking information.
  w
              The
                  information will be accompanied by a statement that identifies,
                  in
                  specific terms, the risks and uncertainties that may cause the
                  actual
                  results to differ materially from those projected in the
                  statement.
  w
              The
                  information may be accompanied by supplementary information such
                  as a
                  range of reasonably possible outcomes or a sensitivity analysis
                  to
                  indicate the extent to which different business conditions may
                  affect the
                  actual outcome.
  w
              The
                  information will be accompanied by a statement that the information
                  is as
                  of the current date and subject to change after that date and the
                  Company
                  disclaims any intention to update or revise the forward-looking
                  information, whether as a result of new information, future events
                  or
                  otherwise.
  w
              Once
                  forward looking information has been disclosed, CGI will regularly
                  assess
                  whether an update is required and ensure that past disclosure of
                  forward-looking information is accurately reflected in current
                  MD&A.
  w
              Forward-looking
                  statements shall be updated, if necessary, by issuing a press release
                  and
                  filing a material change report.
  DISCLOSURE
        RECORD
  The
        Vice-President, Corporate Communications & Investor Relations will maintain
        a five-year record of all public information about the Company, including
        continuous disclosure documents, news releases, analysts' reports, transcripts
        or tape recordings of conference calls, debriefing notes, notes from meetings
        and telephone conversations with analysts and investors, and newspaper
        articles.
 
 ELECTRONIC
        COMMUNICATIONS
 
 Employees
        must not use electronic communications to leak or discuss in any way undisclosed
        material information regarding CGI's affairs and business.
  87
   a)
              Officers
                  responsible for monitoring CGI's electronic communications:
  i)
              The
                  Vice-President, Corporate Communications & Investor Relations, under
                  the authority of the Disclosure Policy Committee,
                  and
  ii)
              Such
                  officers will be responsible for monitoring CGI's electronic
                  communications and enforcing compliance with CGI's guidelines.
                  Moreover,
                  in order to ensure the integrity and security of CGI's electronic
                  communications, regular review and update of its security systems
                  will be
                  executed. The Vice-President, Corporate Communications & Investor
                  Relations will maintain a log indicating the date that material
                  information is posted and/or removed from the IR section of the
                  Web site.
                  Documents filed with securities regulators will be maintained on
                  the web
                  site for a minimum of two years.
  b)
              CGI's
                  website:
  i)
              The
                  Vice-President, Corporate Communications & Investor Relations, under
                  the authority of the Disclosure Policy Committee shall be responsible
                  for
                  maintaining CGI's website up-to-date and accurate. All material
                  information shall be dated when posted or modified and outdated
                  information shall be archived, and
  ii)
              All
                  CGI corporate "timely disclosure" documents as well as any other
                  public
                  documents filed with the Exchanges and the Canadian securities
                  commissions
                  or required to be posted on the website shall be posted in their
                  entirety
                  on CGI's website. Such documents
                  include:
  w
              the
                  annual and interim financial statements and related auditors report
                  and
                  MD&A;
  w
              the
                  annual report;
  w
              interim
                  shareholder reports;
  w
              the
                  annual information form;
  w
              press
                  releases (whether or not
                  favourable);
  w
              management
                  proxy circulars;
  w
              CEO
                  and CFO financial statements
                  certifications;
  w
              Corporate
                  governance Guidelines;
  w
              Board
                  and Board Committee Charters;
  w
              Code
                  of Business Conduct and Ethics;
  w
              Insider
                    trading reports; and
  w
              any
                    other communications transmitted to
                    shareholders.
  No
        material information shall be posted on CGI's website before it has been
        widely
        disseminated.
  88
   The
        Vice-President, Corporate Communications & Investor Relations must approve
        all links from the Company Web site to a third party web site. The Web site
        will
        include a notice that advises readers they are leaving the Company's Web
        site
        and that the Company is not responsible for the contents of the other site.
  The
        Vice-President, Corporate Communications & Investor Relations will be
        responsible for the responses to electronic inquiries. Only public information
        or information that could otherwise be disclosed in accordance with this
        disclosure policy shall be used to respond to electronic inquiries.
  c)
              Rumours
                  on the Internet:
  Rumours
        about CGI on the Internet through chat-rooms, web logs, news groups or otherwise
        shall be handled similarly to rumours spread in a traditional way (refer
        to
        heading "Dealing with Rumours" of Section I).
  d)
              Supplemental
                  information:
  It
        is
        understood that any non material information disseminated to third parties
        (including private investors, financial analysts, institutional investors)
        should also be available to all investors. Consequently, such information
        will
        be posted on CGI's website unless the volume or format makes it unduly
        complicated. In such case, CGI will provide a contact name on its website
        so
        that investors may have access to such information, if requested. The
        supplemental information includes data books, fact sheets, slides of investor
        presentations and other materials distributed at analyst or industry
        presentations.
  e)
              Investor
                  Relations contact information:
  CGI
        will
        maintain an e-mail link on its website allowing investors to communicate
        directly with CGI's Investor Relations representatives. Such representatives
        shall ensure that any risk of selective disclosure is avoided when responding
        to
        investor e-mails. When possible, they will respond to investor enquiries
        by
        telephone.
  CGI
        will
        maintain a phone number for the media, to assist them in receiving responses
        to
        questions in a timely manner in order to meet their print deadlines.
 
 f)
              Utilization
                  and exclusion of certain
                  information:
  i)
              Employee
                  use of electronic information:
  w
              CGI
                  employees are hereby reminded that all correspondence received
                  and sent
                  via e-mail is to be considered corporate correspondence and therefore
                  must
                  not transmit confidential
  89
  information
        externally unless protected by appropriate encryption technology;
 
 w
              CGI
                  employees are prohibited from participating in, hosting or linking
                  to any
                  Internet chat-rooms, bulletin boards, web logs or news groups in
                  communications involving CGI or its securities (even if the intention
                  of
                  CGI employees is to correct rumours or defend
                  CGI);
 
 w
              CGI
                  employees are encouraged to report to the Vice-President, Corporate
                  Communications & Investor Relations any discussion pertaining to CGI
                  which they find on the Internet.
  ii)
              Analyst
                  reports and third party
                  information:
  Analyst
        reports are proprietary products of the analyst's firm. Distributing analyst
        reports or providing links to them may be viewed as an endorsement by the
        Company of the reports. For these reasons, the Company will not provide analyst
        reports through any means to persons outside of the Company or generally
        to
        employees of the Company, including posting such information on its Web site.
        The Company will post on its Web site a complete list, regardless of the
        recommendation, of all the investment firms and analysts who provide research
        coverage on the Company. This list will not include links to the analysts'
        or
        any other third party Web sites or publications.
  Notwithstanding
        the foregoing, the Company will distribute analyst reports to its directors
        and
        senior officers to assist them in understanding how the marketplace values
        the
        company and what corporate developments analysts typically consider important.
        This information is useful in monitoring the communications of the company,
        and
        in developing messages to better guide investor expectations.
  g)
              Legal
                  disclaimer:
 
 A
        legal
        disclaimer regarding the accuracy, timeliness and completeness of the
        information posted on the website must be included on CGI's website at all
        times.
 
 COMMUNICATION,
        EDUCATION AND ENFORCEMENT
 
 This
        disclosure policy extends to all employees of the Company, its board of
        directors and authorized spokespersons. New directors, officers
        and
  90
  employees
        will be provided with a copy of this disclosure policy and educated
        about its importance. This disclosure policy will be posted on the Company's
        internal Web site and changes will be communicated to all employees.
 
 Any
        employee who violates this disclosure policy may face disciplinary action
        up
        to and including termination of employment with the Company without
        notice. The violation of this disclosure policy may also violate certain
        securities laws, which could expose directors, officers or employees to personal
        liability. If it appears that an employee may have violated such securities
        laws, the Company may refer the matter to the appropriate regulatory
        authorities, which could lead to fines or other penalties.
 
 **III.
        RESTRICTIONS APPLICABLE TO TRANSACTIONS IN SECURITIES** **BY
        INSIDERS**
 
 The
        acquisition or the sale of CGI securities (the "CGI Securities") by its senior
        executives (which means under Canadian securities legislation (the
        "Legislation")), a person exercising the functions of a director or of a
        president, vice-president, secretary, treasurer, controller or similar
        functions) entails under the terms of the Legislation, civil, penal and criminal
        liability if they carry out these operations while they have at their disposal
        information which has not been disclosed to the public and which information
        may
        be susceptible of affecting the decision of a reasonable investor, as well
        as
        any information that may affect the value or market price of CGI Securities.
        All
        insiders of CGI are subject to the Legislation. These insiders include CGI,
        its
        senior executives and the senior executives of its subsidiaries as well as
        any
        person or company who exercises control over 10% or more of outstanding CGI
        Securities.
 
 The
        Legislation also provides for civil, penal and criminal liability for any person
        who trades in the securities of any public company if they carry out these
        operations while they have at their disposal information which they have
        reason
        to believe has not been disclosed to the public and that may be susceptible
        of
        affecting the decision of a reasonable investor, as well as any information
        that
        may affect the value or market price of such securities.
 
 Any
        such
        information, whether it relates to CGI or to any other public company, is
        hereafter referred to as "Privileged Information".
 
 The
        underlying principle of the Legislation in respect to insider restrictions
        is
        that all persons investing in securities should have access to information
        that
        may affect their investment decisions. Consequently, no insider having
        Privileged Information relating to CGI Securities may trade in such securities,
        except if such insider is justified in believing that the information is
        generally known or known to the other party or, as the case may be, he avails
        himself of an automatic subscription plan or any other automatic plan
        established by CGI, according to conditions set down in writing, before he
        learned of the information. Furthermore, no insider may disclose such Privileged
        Information unless he is justified in believing that
  91
  the
        information is generally known or known to the other party or such insider
        must
        disclose the information in the necessary course of business, having no ground
        to believe it will be used or disclosed contrary to the guidelines set out
        herein.
 
 The
        Legislation extends the prohibition in engaging in transactions with CGI
        Securities at the time when a person possesses Privileged Information to:
 
 (i)
              any
                  person who possesses Privileged Information as a result of any
                  relationship he may have with CGI in the performance of his duties,
                  or
                  within the scope of commercial or professional
                  activities
 
 (ii)
              any
                  person who possesses Privileged Information coming from, to his
                  knowledge,
                  an insider or another person targeted by this prohibition
                  and
 
 (iii)
              any
                  person who possesses Privileged Information which he knows to be
                  such,
                  with respect to CGI.
 
 TRANSACTIONS
        BY SENIOR EXECUTIVES OF CGI
 
 CGI
        believes that it is important to establish rules of conduct in order to ensure
        the respect of all Legislation pertaining to senior executives' transactions
        in
        CGI Securities as well as in the securities of other public companies. These
        rules of conduct are the following, their application being cumulative and
        not
        exclusive:
 
 a)
              Directors,
                  senior executives, insiders and CGI employees who have access to
                  Privileged Information regarding CGI or any other public company
                  may not
                  carry out any transaction with CGI Securities when in possession
                  of
                  Privileged Information.
 
 b)
              Subject
                  to the restrictions provided for in the Legislation, these persons
                  may
                  only trade in CGI Securities within the period beginning on the
                  third
                  business day and ending on the 40th calendar day following the
                  publication
                  of quarterly financial statements and the fiscal year end results
                  of CGI
                  and the publication of any material information regarding
                  CGI.
 
 c)
              The
                  directors may not carry out any transaction with CGI Securities
                  from the
                  date of receipt of any notice concerning a meeting of the Board
                  of
                  Directors, or of any other notice, whether or not this notice discloses
                  any Privileged Information.
 
 d)
              To
                  protect the reputation of the company and avoid the appearance
                  of
                  impropriety, all directors, senior executives, insiders and CGI
                  employees
                  who have access to Privileged Information regarding CGI or any
                  other
                  public company are required to pre clear with the Corporate Secretary
                  or
                  other designated officer of the Company all proposed trades i)
                  in the
                  Company's securities (including the exercise
  92
  of
        stock
        options), or ii) in the securities of any other public company that is the
        subject of or is involved in an acquisition, divestiture or client related
        project.
 
 e)
              Directors
                  and senior executives shall avoid frequent transactions in the
                  market in
                  order to avoid the appearance of
                  speculation.
 
 f)
              Directors
                  and senior executives shall not engage in short selling in respect
                  of CGI
                  Securities and shall not sell a call or buy a put in respect of
                  CGI
                  Securities.
 
 The
        above
        rules exist in order to help the directors and senior executives of CGI satisfy
        themselves and all third parties, that they only carry out transactions in
        CGI
        Securities at times when it is reasonable for them to believe that all
        Privileged Information regarding CGI has been publicly disclosed.
 
 DISCLOSURE
        OF PRIVILEGED INFORMATION
 
 As
        mentioned above, the Legislation prohibits the disclosure of Privileged Information.
        This prohibition extends to the same persons who are not
 permitted
        to carry out transactions when in possession of Privileged Information.
 
 CGI
        believes it is important to establish the following additional rules of conduct
        concerning the disclosure of Privileged Information:
 
 g)
              Material
                  information regarding the activities and affairs of CGI will be
                  disclosed
                  in a timely manner, in accordance with the requirements of the
                  timely
                  disclosure policies of the TSX and the NYSE and applicable securities
                  legislation (as discussed in Section
                  I).
 
 h)
              It
                  is forbidden for management, insiders and employees of CGI to onvey
                  to any
                  person whatsoever, any and all material information elated to the
                  activities and affairs of CGI before CGI's shareholders and the
                  general
                  public have been notified (by way of media or other means), except
                  in the
                  necessary course of business and subject to an obligation of
                  confidentiality.
 
 INSIDER
        REPORTS
 
 Any
        person who becomes an insider of CGI shall file an electronic profile in
        the
        System for Electronic Disclosure by Insiders ("SEDI")
        (www.sedi.ca).
 
 In
        addition, CGI insiders are required to declare any modifications or changes
        (whatever the percentage) to their holdings in CGI Securities within 10 days
        of
        such a change, except in certain limited exceptions. In this regard, an insider
        report must be completed and filed in SEDI. The insider of CGI who registers
        or
        causes to be registered any CGI
  93
  Securities
        in the name of a third person shall file an insider report, except in the
        case
        of a bona fide transfer in guarantee. In such case and where the insider
        fails
        to file the report provided for by the Legislation, the third person shall
        file
        the report himself on becoming aware of the failure.
 
 The
        obligation to complete insider reports shall continue for as long as the person
        qualifies as an insider.
 
 An
        insider is required to file an amended insider profile within ten days of a
        change
        in the insider's name or relationship to CGI. If there is a change in any
        other
        information in the insider profile, an amended insider profile is only required
        at the time of the insider's next SEDI filing.
  As
        a
        matter of law, the responsibility for filing and updating an electronic profile
        and for filing insider reports in SEDI lies solely with the insider. However,
        CGI's secretariat staff will send three days prior to the end of each month
        to
        each insider of the Company a reminder to complete an insider report, if
        necessary. It is recommended that each insider inform the Company's Corporate
        Secretary prior to completion of any transaction on CGI
        Securities.
  94
              
  **Appendix**
  95
   
 **APPENDIX
        A**
  **Definition
        of Independence in effect as of June 30, 2005 under CSA Multilateral Instrument
        52-110**
  1.4  Meaning
        of independence
  (1)
              An
                  audit committee member is independent if he or she has no direct
                  or
                  indirect material relationship with the
                  issuer.
  (2)
              For
                  the purposes of subsection (1), a "material relationship" is a
                  relationship which could, in the view of the issuer's board of
                  directors,
                  be reasonably expected to interfere with the exercise of a member's
                  independent judgement.
  (3)
              Despite
                  subsection (2), the following individuals are considered to have
                  a
                  material relationship withan
                  issuer:
  (a)
              an
                  individual who is, or has been within the last three years, an
                  employee or
                  executive officer of the issuer;
  (b)
              an
                  individual whose immediate family member is, or has been within
                  the last
                  three years, an executive officer of the
                  issuer;
  (c)
              an
                  individual who:
  (i)
              is
                  a partner of a firm that is the issuer's internal or external
                  auditor,
  (ii)
              is
                  an employee of that firm, or
  (iii)
              was
                  within the last three years a partner or employee of that firm
                  and
                  personally worked on the issuer's audit within that
                  time;
  (d)
              an
                  individual whose spouse, minor child or stepchild, or child or
                  stepchild
                  who shares a home with the
                  individual:
  (i)
              is
                  a partner of a firm that is the issuer's internal or external
                  auditor,
  (ii)
              is
                  an employee of that firm and participates in its audit, assurance
                  or tax
                  compliance (but not tax planning) practice,
                  or
  (iii)
              was
                  within the last three years a partner or employee of that firmand
                  personally worked on the issuer's audit within that
                  time;
  96
  (e)
              an
                  individual who, or whose immediate family member, is or has been
                  within
                  the last three years, an executive officer of an entity if any
                  of the
                  issuer's current executive officers serves or served at that same
                  time on
                  the entity's compensation committee;
                  and
  (f)
              an
                  individual who received, or whose immediate family member who is
                  employed
                  as an executive officer of the issuer received, more than $75,000
                  in
                  direct compensation from the issuer during any 12 month period
                  within the
                  last three years.
  (4)
              Despite
                  subsection (3), an individual will not be considered to have a
                  material
                  relationship with the issuer solely
                  because
  (a)
              he
                  or she had a relationship identified in subsection (3) if that
                  relationship ended before March 30, 2004;
                  or
  (b)
              he
                  or she had a relationship identified in subsection (3) by virtue
                  of
                  subsection (8) if that relationship ended before June 30,
                  2005.
  (5)
              For
                  the purposes of clauses (3)(c) and (3)(d), a partner does not include
                  a
                  fixed income partner whose interest in the firm that is the internal
                  or
                  external auditor is limited to the receipt of fixed amounts of
                  compensation (including deferred compensation) for prior service
                  with that
                  firm if the compensation is not contingent in any way on continued
                  service.
  (6)
              For
                  the purposes of clause (3)(f), direct compensation does not
                  include:
  (a)
              remuneration
                  for acting as a member of the board of directors or of any board
                  committee
                  of the issuer, and
  (b)
              the
                  receipt of fixed amounts of compensation under a retirement plan
                  (including deferred compensation) for prior service with the issuer
                  if the
                  compensation is not contingent in any way on continued
                  service.
  (7)
              Despite
                  subsection (3), an individual will not be considered to have a
                  material
                  relationship with the issuer solely because the individual or his
                  or her
                  immediate family member
  (a)
              has
                  previously acted as an interim chief executive officer of the issuer,
                  or
  (b)
              acts,
                  or has previously acted, as a chair or vice-chair of the board
                  of
                  directors or of any board committee of the issuer on a part-time
                  basis.
  97
  (8)
              For
                  the purpose of section 1.4, an issuer includes a subsidiary entity
                  of the
                  issuer and a parent of the issuer.
  1.5  additional
        independence requirements
  (1)
              Despite
                  any determination made under section 1.4, an individual
                  who
  (a)
              accepts,
                  directly or indirectly, any consulting, advisory or other compensatory
                  fee
                  from the issuer or any subsidiary entity of the issuer, other than
                  as
                  remuneration for acting in his or her capacity as a member of the
                  board of
                  directors or any board committee, or as a part time chair or vice-chair
                  of
                  the board or any board committee;
                  or
  (b)
              is
                  an affiliated entity of the issuer or any of its subsidiary entities,
                  is
                  considered to have a material relationship with the
                  issuer.
  (2)
              For
                  the purposes of subsection (1), the indirect acceptance by an individual
                  of any consulting, advisory or other compensatory fee includes
                  acceptance
                  of a fee by
  (a)
              an
                  individual's spouse, minor child or stepchild, or a child or stepchild
                  who
                  shares the individual's home; or
  (b)
              an
                  entity in which such individual is a partner, member, an officer
                  such as a
                  managing director occupying a comparable position or executive
                  officer, or
                  occupies a similar position (except limited partners, non-managing
                  members
                  and those occupying similar positions who, in each case, have no
                  active
                  role in providing services to the entity) and which provides accounting,
                  consulting, legal, investment banking or financial advisory services
                  to
                  the issuer or any subsidiary entity of the
                  issuer.
  (3)
              For
                  the purposes of subsection (1), compensatory fees do not include
                  the
                  receipt of fixed amounts of compensation under a retirement plan
                  (including deferred compensation) for prior service with the issuer
                  if the
                  compensation is not contingent in any way on continued
                  service.
   98
 
 Management’s
              and Auditors’ reports
  MANAGEMENT’S
              STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING
 The
              management of CGI Group Inc. (“the Company”) is responsible for the preparation
              and integrity of the consolidated financial statements and the Management’s
              Discussion and Analysis (“MD&A”). The consolidated financial statements have
              been prepared in accordance with accounting principles generally accepted
              in
              Canada and necessarily include some amounts that are based on management’s best
              estimates and judgment. Financial and operating data elsewhere in the
              MD&A
              are consistent with that contained in the accompanying consolidated
              financial
              statements.
 To
              fulfill its responsibility, management has developed, and continues
              to maintain,
              systems of internal controls reinforced by the Company’s standards of conduct
              and ethics set out in written policies to ensure the reliability of
              the
              financial information and to safeguard its assets. The internal control
              systems
              and financial records are subject to audit by the independent auditors,
              Deloitte
& Touche LLP, whose report follows. They were appointed as independent
              auditors, by a vote of the Company’s shareholders, to audit the consolidated
              financial statements. In addition, the Management Committee of the
              Company
              reviews the disclosure of corporate information and oversees the functioning
              of
              the Company’s disclosure controls and procedures.
 Members
              of the Audit and Risk Management Committee of the Board of Directors,
              all of
              whom are independent of the Company, meet regularly with the independent
              auditors and with management to discuss internal controls in the financial
              reporting process, auditing matters and financial reporting issues
              and
              formulates the appropriate recommendations to the Board of Directors.
              The
              independent auditors have unrestricted access to the Audit and Risk
              Management
              Committee. The financial statements and MD&A have been reviewed and approved
              by the Board of Directors.
  (signed)
                    (signed)
                    (signed)NOVEMBER
                      13, 2006
                    **MICHAEL
                        E. ROACH**
                      PRESIDENT
                        AND CHIEF EXECUTIVE OFFICER
                    **R.
                        DAVID ANDERSON**
                      EXECUTIVE
                        VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
                    **ANDRÉ
                        IMBEAU**
                      FOUNDER,
                        EXECUTIVE VICE-CHAIRMAN AND CORPORATE
                        SECRETARY
 
 MANAGEMENT
              REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 The
              management of the Company is responsible for establishing and maintaining
              adequate internal control over financial reporting. The Company’s internal
              control over financial reporting is a process designed to provide reasonable
              assurance regarding the reliability of financial reporting and the
              preparation
              of the Company’s consolidated financial statements for external reporting
              purposes in accordance with accounting principles generally accepted
              in the
              Canada.
 The
              Company’s internal control over financial reporting includes policies and
              procedures that:
 -
                    pertain
                        to the maintenance of records that, in reasonable detail,
                        accurately and
                        fairly reflect transactions and dispositions of assets;-
                    provide
                        reasonable assurance that transactions are recorded as necessary
                        to permit
                        preparation of consolidated financial statements in accordance
                        with
                        accounting principles generally accepted in Canada, and that
                        receipts and
                        expenditures are being made only in accordance with authorizations
                        of
                        management and the directors of the Company; and,-
                    provide
                        reasonable assurance regarding prevention or timely detection
                        of
                        unauthorized acquisition, use or disposition of the Company’s assets that
                        could have a material effect on the Company’s consolidated financial
                        statements.
 
 All
              internal controls have inherent limitations; therefore, even where
              internal
              control over financial reporting is determined to be effective, it
              can provide
              only reasonable assurance. Projections of any evaluation of effectiveness
              to
              future periods are subject to the risk that the controls may become
              inadequate
              because of changes in conditions, or that the degree of compliance
              with the
              policies or procedures may deteriorate.
 There
              was one exclusion from our assessment. Our interest in the joint ventures
              were
              excluded from our assessment as we do not have the ability to dictate
              or modify
              the entities’ internal control over financial reporting, and we do not have the
              practical ability to assess those controls. Our interests in the joint
              ventures
              represent 1.6% of our consolidated total assets and 2.6% of our consolidated
              revenue as at and for the year ended September 30, 2006. Despite this
              exclusion,
              we have assessed our internal control over financial reporting with
              respect to
              the inclusion of our share of the joint ventures and its results for
              the year in
              our consolidated financial statements. Further financial information
              with
              respect to the joint ventures is presented in Note 19 to the consolidated
              financial statements.
 As
              of the end of the Company’s 2006 fiscal year, management conducted an assessment
              of the effectiveness of the Company’s internal control over financial reporting
              based on the framework established in Internal Control - Integrated
              Framework
              issued by the Committee of Sponsoring Organizations of the Treadway
              Commission.
              Based on this assessment, management has determined the Company’s internal
              control over financial reporting as of September 30, 2006 was
              effective.
 Management’s
              assessment of the effectiveness of the Company’s internal control over financial
              reporting as of September 30, 2006 has been audited by the Company’s independent
              registered chartered accountants, as stated in their report appearing
              on page 3.
 
 (signed)
                    (signed)
                    (signed)NOVEMBER
                      13, 2006
                    **MICHAEL
                        E. ROACH**
                      PRESIDENT
                        AND CHIEF EXECUTIVE OFFICER
                    **R.
                        DAVID ANDERSON**
                      EXECUTIVE
                        VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
                    **ANDRÉ 
                        IMBEAU**
                      FOUNDER,
                        EXECUTIVE VICE-CHAIRMAN AND CORPORATE SECRETARY
  2006
                  Annual Report CGI Group Inc.
 25
  REPORT
              OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 To
              the Board of Directors and Shareholders of CGI Group Inc.
 We have audited management’s assessment, included in the accompanying Management
              Report on Internal Control over Financial Reporting, that CGI Group
              Inc. and
              subsidiaries (the “Company”) maintained effective internal control over
              financial reporting as of September 30, 2006, based on the criteria
              established
              in Internal Control - Integrated Framework issued by the Committee
              of Sponsoring
              Organizations of the Treadway Commission. As described in Management’s Report on
              Internal Control over Financial Reporting, management excluded from
              their
              assessment the internal control over financial reporting on its joint
              ventures
              because the Company does not have the ability to dictate or modify
              controls at
              these entities and does not have the ability to assess, in practice,
              the
              controls at these entities. The interest in the joint ventures constitutes
              total
              assets and revenues of 1.6% and 2.6%, respectively, of the related
              consolidated
              financial statement amounts as at and for the year ended September
              30, 2006.
              Accordingly, our audit did not include the internal control over financial
              reporting of the joint ventures. The Company’s management is responsible for
              maintaining effective internal control over financial reporting and
              for its
              assessment of the effectiveness of internal control over financial
              reporting.
              Our responsibility is to express an opinion on management’s assessment and an
              opinion on the effectiveness of the Company’s internal control over financial
              reporting based on our audit.
 We
              conducted our audit in accordance with the standards of the Public
              Company
              Accounting Oversight Board (United States). Those standards require
              that we plan
              and perform the audit to obtain reasonable assurance about whether
              effective
              internal control over financial reporting was maintained in all material
              respects. Our audit included obtaining an understanding of internal
              control over
              financial reporting, evaluating management’s assessment, testing and evaluating
              the design and operating effectiveness of internal control, and performing
              such
              other procedures as we considered necessary in the circumstances. We
              believe
              that our audit provides a reasonable basis for our opinions.
 A
              company’s internal control over financial reporting is a process designed by,
              or
              under the supervision of, the company’s principal executive and principal
              financial officers, or persons performing similar functions, and effected
              by the
              company’s board of directors, management and other personnel to provide
              reasonable assurance regarding the reliability of financial reporting
              and the
              preparation of financial statements for external purposes in accordance
              with
              generally accepted accounting principles. A company’s internal control over
              financial reporting includes those policies and procedures that (1)
              pertain to
              the maintenance of records that, in reasonable detail, accurately and
              fairly
              reflect the transactions and dispositions of the assets of the company;
              (2)
              provide reasonable assurance that transactions are recorded as necessary
              to
              permit preparation of financial statements in accordance with generally
              accepted
              accounting principles, and that receipts and expenditures of the company
              are
              being made only in accordance with authorizations of management and
              directors of
              the company; and (3) provide reasonable assurance regarding prevention
              or timely
              detection of unauthorized acquisition, use or disposition of the company’s
              assets that could have a material effect on the financial
              statements.
 Because
              of the inherent limitations of internal control over financial reporting,
              including the possibility of collusion or improper management override
              of
              controls, material misstatements due to error or fraud may not be prevented
              or
              detected on a timely basis. Also, projections of any evaluation of
              the
              effectiveness of the internal control over financial reporting to future
              periods
              are subject to the risk that the controls may become inadequate because
              of
              changes in conditions, or that the degree of compliance with the policies
              or
              procedures may deteriorate.
 In
              our opinion, management’s assessment that the Company maintained effective
              internal control over financial reporting as of September
              30, 2006, is fairly stated, in all material respects, based on the
              criteria
              established in Internal Control - Integrated Framework issued by the
              Committee
              of Sponsoring Organizations of the Treadway Commission. Also, in our
              opinion,
              the Company maintained, in all material respects, effective internal
              control
              over financial reporting as of September 30, 2006, based on the criteria
              established in Internal Control - Integrated Framework issued by the
              Committee
              of Sponsoring Organizations of the Treadway Commission.
 We
              have also audited, in accordance with the standards of the Public Company
              Accounting Oversight Board (United States), the consolidated financial
              statements of the Company as of and for the year ended September 30,
              2006, and
              our report dated November 13, 2006 expressed an unqualified opinion
              on those
              financial statements.
 
 (signed)
 **Deloitte
              & Touche LLP**
 INDEPENDENT
              REGISTERED CHARTERED ACCOUNTANTS
  MONTRÉAL,
              QUÉBEC
 NOVEMBER
              13, 2006
 
  2006
                  Annual Report CGI Group Inc.
 26
  REPORT
              OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 To
              the Board of Directors and Shareholders of CGI Group Inc.
 We
              have audited the consolidated balance sheets of CGI Group Inc. and
              subsidiaries
              (the “Company”) as at September 30, 2006 and 2005 and the related
              consolidated statements of earnings, retained earnings and cash flows
              for each
              of the years in the three-year period ended September 30, 2006. These
              financial statements are the responsibility of the Company’s management. Our
              responsibility is to express an opinion on these financial statements
              based on
              our audits.
 With
              respect to the consolidated financial statements for the year ended
              September
              30, 2006, we conducted our audits in accordance with the standards
              of the Public
              Company Accounting Oversight Board (United States). With respect to
              the
              consolidated financial statements for the year ended September 30,
              2005 and
              September 30, 2004, we conducted our audits in accordance with Canadian
              generally accepted auditing standards. Those standards require that
              we plan and
              perform the audit to obtain reasonable assurance about whether the
              financial
              statements are free of material misstatement. An audit includes examining,
              on a
              test basis, evidence supporting the amounts and disclosures in the
              financial
              statements. An audit also includes assessing the accounting principles
              used and
              significant estimates made by management, as well as evaluating the
              overall
              financial statement presentation. We believe that our audits provide
              a
              reasonable basis for our opinion.
 In
              our opinion, such consolidated financial statements present fairly,
              in all
              material respects, the financial position of the Company as at
              September 30, 2006 and 2005 and the results of their operations and their
              cash flows for each of the years in the three-year period ended
              September 30, 2006, in accordance with Canadian generally accepted
              accounting principles.
 We
              have also audited, in accordance with the standards of the Public Company
              Accounting Oversight Board (United States), the effectiveness of the
              Company’s
              internal control over financial reporting as of September 30, 2006,
              based on the
              criteria established in Internal Control - Integrated Framework issued
              by the
              Committee of Sponsoring Organizations of the Treadway Commission, and
              our
              report, dated November 13, 2006, expressed an unqualified opinion on
              management’s assessment of the effectiveness of the Company’s internal control
              over financial reporting and an unqualified opinion on the effectiveness
              of the
              Company’s internal control over financial reporting.
 
 (signed)
 **Deloitte
              & Touche LLP**
 INDEPENDENT
              REGISTERED CHARTERED ACCOUNTANTS
  MONTRÉAL,
              QUÉBEC
 NOVEMBER
              13, 2006
 
 COMMENTS
              BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS FOR U.S. READERS ON
              CANADA-U.S.
              REPORTING DIFFERENCES
 In
              the United States of America, reporting standards for auditors require
              the
              addition of an explanatory paragraph (following the opinion paragraph)
              when
              there are changes in accounting principles that have a material effect
              on the
              comparability of the Company’s financial statements, such as the changes
              described in Note 2 to the financial statements. Our report to the
              shareholders,
              dated November 13, 2006, is expressed in accordance with Canadian reporting
              standards, which do not require a reference to such changes in accounting
              principles in the auditors’ report when the change is properly accounted for and
              adequately disclosed in the financial statements.
 
 (signed)
 **Deloitte
              & Touche LLP**
 INDEPENDENT
              REGISTERED CHARTERED ACCOUNTANTS
  MONTRÉAL,
              QUÉBEC
 NOVEMBER
              13, 2006
  2006
                  Annual Report CGI Group Inc.
 27
  Consolidated
              Financial Statements
  Consolidated
              statements of earnings
 YEARSENDEDSEPTEMBER30
                      
                      **200****6**
                      
                      2005
                      
                      2004*(i**n**thousand**s**o**f**Canadia**n**dollars**,**excep**t**shar**e**data**)*
                      
                      $
                      
                      $
                      
                      $REVENUE
                      
                      
                      **3,477,623**
                      
                      
                      3,685,986
                      
                      
                      3,150,070Operating
                          expensesCosts
                          of services, selling and administrative (note 16)
                      
                      
                      **2,996,521**
                      
                      
                      3,151,558
                      
                      
                      2,677,396Amortization
                          (note 12)
                      
                      
                      **170,766**
                      
                      
                      199,283
                      
                      
                      162,591Restructuring
                          costsrelated
                          to specific items(note 13)
                      
                      
                      **67,266**
                      
                      
                      -
                      
                      
                      -Interest
                          on long-term debt
                      
                      
                      **43,291**
                      
                      
                      24,014
                      
                      
                      20,672Other
                          income, net
                      
                      
                      **(7,252**
                      **)**
                      
                      (7,156
                      )
                      
                      (8,728
                      )Gain
                          on sale of assets (note 17)
                      
                      
                      **(10,475**
                      **)**
                      
                      -
                      
                      
                      -Gain
                          on sale and earnings from an investment in an entity
                        subject
                          to signiӿcant inӾuence(note
                          17)
                      
                      
                      **-**
                      
                      
                      (4,537
                      )
                      
                      (488
                      )Sale
                          of right (note 14)
                      
                      
                      **-**
                      
                      
                      (11,000
                      )
                      
                      -**3,260,117**
                      
                      
                      3,352,162
                      
                      
                      2,851,443Earnings
                          from continuing operations before income taxes
                        Income
                          taxes (note 15)
                      
                      
                      **217,506**
                        **70,973**
                      
                      
                      333,824
                        114,126
                      
                      
                      298,627
                          113,241Net
                          earnings from continuing operations
                      
                      
                      **146,533**
                      
                      
                      219,698
                      
                      
                      185,386Net
                          (loss) gain from discontinued operations (note 18)
                      
                      
                      **-**
                      
                      
                      (3,210
                      )
                      
                      8,655NET
                          EARNINGS
                      
                      
                      **146,533**
                      
                      
                      216,488
                      
                      
                      194,041BASIC
                          AND DILUTED EARNINGS (LOSS) PER SHARE (note 11)Continuing
                          operations
                      
                      
                      **0.40**
                      
                      
                      0.50
                      
                      
                      0.44Discontinued
                          operations
                      
                      
                      **-**
                      
                      
                      (0.01
                      )
                      
                      0.02**0.40**
                      
                      
                      0.49
                      
                      
                      0.46See
                          Notes to the consolidated financial statements.
 
 Consolidated
              statements of retained earnings
 YEARSENDEDSEPTEMBER30
                        
                        **2006**
                        
                        2005
                        
                        2004*(i**n**thousand**s**o**f**Canadia**n**dollars**)*
                        
                        $
                        
                        $
                        
                        $BALANCE,
                            BEGINNING OF YEAR
                        
                        
                        **895,267**
                        
                        
                        730,757
                        
                        
                        542,205Net
                            earnings
                        
                        
                        **146,533**
                        
                        
                        216,488
                        
                        
                        194,041Share
                            repurchase costs (note9)
                        
                        
                        **(6,760**
                        **)**
                        
                        -
                        
                        
                        -Share
                            issue costs, net of income taxes (note9)
                        
                        
                        **-**
                        
                        
                        -
                        
                        
                        (5,489
                        )Excess
                            of purchase price over carrying value of Class A
                          subordinate
                            shares acquired (note9)
                        
                        
                        **(447,839**
                        **)**
                        
                        (51,978
                        )
                        
                        -BALANCE,
                            END OF YEAR
                        
                        
                        **587,201**
                        
                        
                        895,267
                        
                        
                        730,757
 See
                  Notes to the consolidated financial statements.
  2006
                  Annual Report CGI Group Inc.
 28
  Consolidated
              balance sheets
  ASATSEPTEMBER30
                    
                    **2006**
                    
                    2005*(i**n**thousand**s**o**f**Canadia**n**dollars**)*
                    
                    $
                    
                    $ASSETSCurrent
                        assetsCash
                        and cash equivalents
                    
                    
                    **115,729**
                    
                    
                    240,459Accounts
                        receivable (note 3)
                    
                    
                    **479,767**
                    
                    
                    487,731Work
                        in progress
                    
                    
                    **197,381**
                    
                    
                    214,470Prepaid
                        expenses and other current assets
                    
                    
                    **89,639**
                    
                    
                    75,281Future
                        income taxes (note 15)
                    
                    
                    **33,728**
                    
                    
                    22,118**916,244**
                    
                    
                    1,040,059Capital
                        assets (note 4)
                    
                    
                    **120,032**
                    
                    
                    116,388Contract
                        costs (note 5)
                    
                    
                    **212,115**
                    
                    
                    223,122Finite-life
                        intangibles and other long-term assets (note 6)
                    
                    
                    **525,905**
                    
                    
                    586,416Future
                        income taxes (note 15)
                    
                    
                    **25,127**
                    
                    
                    46,601Goodwill
                        (note 7)
                    
                    
                    **1,737,886**
                    
                    
                    1,773,370Total
                        assets before funds held for clients
                    
                    
                    **3,537,309**
                    
                    
                    3,785,956Funds
                        held for clients (note 2)
                    
                    
                    **154,723**
                    
                    
                    200,703**3,692,032**
                    
                    
                    3,986,659LIABILITIESCurrent
                        liabilitiesAccounts
                        payable and accrued liabilities
                    
                    
                    **367,127**
                    
                    
                    378,691Accrued
                        compensation
                    
                    
                    **108,331**
                    
                    
                    107,014Deferred
                        revenue
                    
                    
                    **111,759**
                    
                    
                    127,950Income
                        taxes
                    
                    
                    **41,707**
                    
                    
                    31,955Future
                        income taxes (note 15)
                    
                    
                    **30,384**
                    
                    
                    47,163Current
                        portion of long-term debt (note 8)
                    
                    
                    **8,242**
                    
                    
                    14,899**667,550**
                    
                    
                    707,672Future
                        income taxes (note15)
                    
                    
                    **213,512**
                    
                    
                    238,983Long-term
                        debt (note8)
                    
                    
                    **805,017**
                    
                    
                    234,801Accrued
                        integration charges (note17)
                        and other long-term liabilities
                    
                    
                    **103,210**
                    
                    
                    109,810Total
                        liabilities before clients’ funds obligations
                    
                    
                    **1,789,289**
                    
                    
                    1,291,266Clients’
                        funds obligations (note2)
                    
                    
                    **154,723**
                    
                    
                    200,703**1,944,012**
                    
                    
                    1,491,969Commitments,
                        contingencies and guarantees (note24)SHAREHOLDERS’
                        EQUITYCapital
                        stock (note9)
                    
                    
                    **1,367,606**
                    
                    
                    1,762,973Contributed
                        surplus (note10)
                    
                    
                    **82,436**
                    
                    
                    67,578Warrants
                        (note10)
                    
                    
                    **-**
                    
                    
                    19,655Retained
                        earnings
                    
                    
                    **587,201**
                    
                    
                    895,267Foreign
                        currency translation adjustment
                    
                    
                    **(289,223**
                    **)**
                    
                    (250,783
                    )**1,748,020**
                    
                    
                    2,494,690**3,692,032**
                    
                    
                    3,986,659See
                        Notes to the consolidated financial statements.Approved
                        by the Board
                    
                    
                    (signed
                    )
                    
                    (signed
                    )DIRECTOR
                      **MICHAEL
                        E. ROACH**
                    
                    
                    DIRECTOR
                      **ANDRÉ
                        IMBEAU**
 
   2006
                  Annual Report CGI Group Inc.
 29
  Consolidated
              statements of cash flows
  YEARSENDEDSEPTEMBER30
                      
                      **2006**
                      
                      2005
                      
                      2004*(i**n**thousand**s**o**f**Canadia**n**dollars**)*
                      
                      $
                      
                      $
                      
                      $OPERATING
                          ACTIVITIESNet
                          earnings from continuing operations
                      
                      
                      **146,533**
                      
                      
                      219,698
                      
                      
                      185,386Adjustments
                          for:Amortization
                          (note 12)
                      
                      
                      **199,760**
                      
                      
                      231,965
                      
                      
                      192,718Non-cash
                          portion of restructuring costs related to specific items
                          (note 13)
                      
                      
                      **1,311**
                      
                      
                      -
                      
                      
                      -Deferred
                          credits
                      
                      
                      **(781**
                      **)**
                      
                      (3,038
                      )
                      
                      (16,439
                      )Future
                          income taxes (note15)
                      
                      
                      **(34,225**
                      **)**
                      
                      35,650
                      
                      
                      55,626Foreign
                          exchange loss (gain)
                      
                      
                      **1,914**
                      
                      
                      1,993
                      
                      
                      (789
                      )Stock-based
                          compensation (note 10)
                      
                      
                      **12,895**
                      
                      
                      20,554
                      
                      
                      25,559Sale
                          of right (note14)
                      
                      
                      **-**
                      
                      
                      (11,000
                      )
                      
                      -Gain
                          on sale of assets (note17)
                      
                      
                      **(10,475**
                      **)**
                      
                      -
                      
                      
                      -Gain
                          on sale and earnings from an investment in an entity subject
                          tosignificant
                          influence (note 17)
                      
                      
                      **-**
                      
                      
                      (4,537
                      )
                      
                      (488
                      )Net
                          change in non-cash working capital items (note20)
                      
                      
                      **(7,371**
                      **)**
                      
                      (10,576
                      )
                      
                      (211,376
                      )Cash
                          provided by continuing operating activities
                      
                      
                      **309,561**
                      
                      
                      480,709
                      
                      
                      230,197INVESTING
                          ACTIVITIESBusiness
                          acquisitions (net of cash acquired) (note17)
                      
                      
                      **(25,620**
                      **)**
                      
                      (66,229
                      )
                      
                      (589,678
                      )Proceeds
                          from sale of assets and businesses (net of cash disposed)
                          (note17)
                      
                      
                      **30,114**
                      
                      
                      29,521
                      
                      
                      87,503Proceeds
                          from sale of investment in an entity subject to significant
                          influence
                        (note17)
                      
                      
                      **-**
                      
                      
                      20,849
                      
                      
                      -Proceeds
                          from sale of right (note14)
                      
                      
                      **-**
                      
                      
                      11,000
                      
                      
                      -Purchase
                          of capital assets
                      
                      
                      **(41,105**
                      **)**
                      
                      (25,314
                      )
                      
                      (59,829
                      )Proceeds
                          from disposal of capital assets
                      
                      
                      **562**
                      
                      
                      6,663
                      
                      
                      4,738Payment
                          of contract costs
                      
                      
                      **(31,417**
                      **)**
                      
                      (25,057
                      )
                      
                      (75,142
                      )Reimbursement
                          of contract costs upon termination of a contract
                      
                      
                      **-**
                      
                      
                      15,300
                      
                      
                      -Additions
                          to ӿnite-life intangibles and other long-term assets
                      
                      
                      **(74,568**
                      **)**
                      
                      (90,674
                      )
                      
                      (85,814
                      )Proceeds
                          from disposal of ӿnite-life intangibles
                      
                      
                      **-**
                      
                      
                      5,251
                      
                      
                      -Decrease
                          in other long-term assets
                      
                      
                      **2,677**
                      
                      
                      12,413
                      
                      
                      17,202Cash
                          used in continuing investing activities
                      
                      
                      **(139,357**
                      **)**
                      
                      (106,277
                      )
                      
                      (701,020
                      )FINANCING
                          ACTIVITIESIncrease
                          in credit facilities (note8)
                      
                      
                      **746,170**
                      
                      
                      190,000
                      
                      
                      240,534Repayment
                          of credit facilities
                      
                      
                      **(158,944**
                      **)**
                      
                      (397,578
                      )
                      
                      (219,000
                      )Increase
                          in long-term debt
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      257,604Repayment
                          of long-term debt
                      
                      
                      **(13,124**
                      **)**
                      
                      (16,705
                      )
                      
                      (26,451
                      )Repurchase
                          of Class A subordinate shares (net of share repurchase
                          costs)
                          (note9)
                      
                      
                      **(926,145**
                      **)**
                      
                      (109,456
                      )
                      
                      -Issuance
                          of shares (net of share issue costs) (note9)
                      
                      
                      **57,963**
                      
                      
                      4,551
                      
                      
                      330,996Cash
                          (used in) provided by continuing financing activities
                      
                      
                      **(294,080**
                      **)**
                      
                      (329,188
                      )
                      
                      583,683Effect
                          of foreign exchange rate changes on cash and cash equivalents
                          of
                          continuing operations
                      
                      
                      **(854**
                      **)**
                      
                      (6,167
                      )
                      
                      186Net
                          (decrease) increase in cash and cash equivalents of continuing
                          operations
                      
                      
                      **(124,730**
                      **)**
                      
                      39,077
                      
                      
                      113,046Net
                          cash and cash equivalents provided by discontinued operations
                          (note18)
                      
                      
                      **-**
                      
                      
                      759
                      
                      
                      4,068Cash
                          and cash equivalents, beginning of year
                      
                      
                      **240,459**
                      
                      
                      200,623
                      
                      
                      83,509CASH
                          AND CASH EQUIVALENTS, END OF YEAR
                      
                      
                      **115,729**
                      
                      
                      240,459
                      
                      
                      200,623
 Supplementary
              cash flow information (note 20)
 See
              Notes to the consolidated financial statements.
  2006
                  Annual Report CGI Group Inc.
 30
 Notes
              to the Consolidated Financial Statements
 YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data)*
 
 
 1.
              Description of business
 
 CGI
              Group Inc. (the “Company”), directly or through its subsidiaries, manages
              information technology (“IT services”), including outsourcing, systems
              integration and consulting, software licenses and maintenance, as well
              as
              business process services (“BPS”) to help clients cost effectively realize their
              strategies and create added value.
  2.
              Summary of significant accounting policies
 
 The
              consolidated financial statements are prepared in accordance with Canadian
              generally accepted accounting principles (“GAAP”), which differ in certain
              material respects from U.S. GAAP. A reconciliation between Canadian
              and U.S.
              GAAP can be found in Note 26.
  Certain
              comparative figures have been reclassified in order to conform to the
              presentation adopted in 2006.
  CHANGES
              IN ACCOUNTING POLICIES
 i)
                    The
                        Canadian Institute of Chartered Accountants (“CICA”)
                        amended Handbook Section 3831, “Non-Monetary Transactions”, effective
                        for fiscal years beginning on or after January 1, 2006. The
                        amendment of
                        the section requires that non-monetary transactions be recorded
                        at fair
                        value unless the transaction has no commercial substance,
                        it is an
                        exchange of inventory, it is a non-monetary, non-reciprocal
                        transfer to
                        owners or it’s not reliably measurable. The adoption of this section did
                        not have any impact on the consolidated financial statements.ii)
                    The
                        CICA issued Emerging Issue Committee (“EIC”) Abstract 156, “Accounting by
                        a Vendor for Consideration Given to a Customer (Including
                        a Reseller of
                        the Vendor’s Products)”, which provides guidance to companies that give
                        incentives to customers or resellers in the form of cash,
                        equity, free
                        gifts, coupons and others. The adoption of EIC 156 did not
                        have any impact
                        on the consolidated financial statements since the Company
                        already adopted
                        the U.S. equivalent, Emerging Issues Task Force 01-9, “Accounting for
                        Consideration Given by a Vendor to a Customer”, issued in 2001.iii)
                    The
                        CICA issued EIC 157, “Implicit variable interests under AcG 15’’, which
                        requires consideration of whether the reporting enterprise
                        holds an
                        implicit variable interest in a variable interest entity
                        or potential
                        variable interest entity when applyingAccountingGuideline 15 “Consolidation of Variable Interest Entities’’. The adoption
                        of this abstract did not have any impact on the consolidated
                        financial
                        statements.iv)
                    The
                        CICA issued EIC 159, “Conditional Asset Retirement Obligations’’, which
                        provides guidance when a conditional asset retirement obligation
                        should be
                        recognized. The adoption of this abstract did not have any
                        impact on the
                        consolidated financial statements.
  USE
              OF ESTIMATES
 The
              preparation of the consolidated financial statements in conformity
              with Canadian
              GAAP requires management to make estimates and assumptions that affect
              the
              reported amounts of assets and liabilities and disclosure of contingent
              assets
              and liabilities at the date of the consolidated financial statements
              and the
              reported amounts of revenue and expenses during the reporting period.
              Because of
              the use of estimates inherent in the financial reporting process, actual
              results
              could differ from those estimates. Significant estimates include, but
              are not
              limited to, the measurement of allowance for doubtful accounts, tax
              credits,
              long-term asset valuations and impairment assessments, income taxes,
              provisions
              and contingencies, as well as revenue recognition.
  BASIS
              OF CONSOLIDATION
 The
              consolidated financial statements include the accounts of the Company
              and its
              subsidiaries. All intercompany transactions and balances have been
              eliminated.
              The Company accounts for its jointly-controlled investments using the
              proportionate consolidation method. The Company accounts for investments
              where
              it has the ability to exercise significant influence under the equity
              method. In
              situations where the Company does not exercise significant influence,
              the
              investments are recorded at cost. The carrying amount of the investments
              is
              reviewed for decline, other than temporary fluctuations, whenever events
              or
              changes in circumstances indicate that the carrying amount of the investments
              may not be recoverable.
   2006
                  Annual Report CGI Group Inc.
 31
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data)*
 
 2.
              Summary of significant accounting policies (continued)
 
 REVENUE
              RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE
 The
              Company generates revenue principally through the provision of IT services
              and
              BPS.
 The
              IT services include a full range of information technology services,
              namely: i)
              outsourcing ii) systems integration and consulting
  iii)
              software licenses and iv) maintenance. The BPS unit provides business
              processing
              for the financial services segments, as well as other services, such
              as payroll
              and document management services.
  The
              Company provides services under contracts that contain various pricing
              mechanisms. The Company recognizes revenue when persuasive evidence
              of an
              arrangement exists, services or products have been provided to the
              client, the
              fee is fixed or determinable, and collectibility is reasonably assured.
              If an
              arrangement involves the provision of multiple elements, the total
              arrangement
              value is allocated to each element as a separate unit of accounting
              if: 1) the
              delivered item has value to the client on a stand-alone basis; 2) there
              is
              objective and reliable evidence of the fair value of the undelivered
              item; and
              3) the arrangement includes a general right of return relative to the
              delivered
              item and delivery or performance of the undelivered item is considered
              probable
              and substantially in the control of the vendor. If these criteria are
              met, then
              the total consideration of the arrangement is allocated among the separate
              units
              of accounting based on their fair values.
 Provisions
              for estimated contract losses, if any, are recognized in the period
              in which the
              loss is determined. Contract losses are measured at the amount by which
              the
              estimated total costs exceed the estimated total revenue from the contract.
  OUTSOURCING
              AND BPS ARRANGEMENTS
 Revenue
              from outsourcing and BPS arrangements under time and materials and
              unit-priced
              arrangements are recognized as the services are provided at the contractual
              stated price. If the contractual per-unit prices within a unit-priced
              contract
              change during the term of the arrangement, the Company evaluates whether
              it is
              more appropriate to record revenue based on the average per-unit price
              during
              the term of the contract or based on the actual amounts billed.
 Revenue
              from outsourcing and BPS arrangements under fixed-fee arrangements
              is recognized
              on a straight-line basis over the term of the arrangement, regardless
              of the
              amounts billed, unless there is a better measure of performance or
              delivery.
  SYSTEMS
              INTEGRATION AND CONSULTING SERVICES
 Revenue
              from systems integration and consulting services under time and material
              arrangements is recognized as the services are rendered, and revenue
              under
              cost-based arrangements is recognized as reimbursable costs are incurred.
 Revenue
              from systems integration and consulting services under fixed-fee arrangements
              is
              recognized using the percentage-of-completion method over the implementation
              period. The Company uses the labour costs or labour hours incurred
              to date to
              measure the progress towards completion. This method relies on estimates
              of
              total expected labour costs or total expected labour hours to complete
              the
              service, which are compared to labour costs or labour hours incurred
              to date, to
              arrive at an estimate of the percentage of revenue earned to date.
              Management
              regularly reviews underlying estimates of total expected labour costs
              or hours.
              Revisions to estimates are reflected in the statement of earnings in
              the period
              in which the facts that gave rise to the revision became known.
 Revenue
              from systems integration and consulting services under benefits-funded
              arrangements is recognized only to the extent it can be predicted,
              with
              reasonable certainty, that the benefit stream will generate amounts
              sufficient
              to fund the value on which revenue recognition is based.
  SOFTWARE
              LICENSES AND MAINTENANCE ARRANGEMENTS
 Revenue
              from software license arrangements is recognized upon delivery of software
              if
              persuasive evidence of an arrangement exists, collection is probable,
              the fee is
              fixed or determinable and vendor-specific evidence of an arrangement
              exists to
              allocate the total fee to the different elements of an arrangement.
              Vendor-specific objective evidence is typically based on the price
              charged when
              an element is sold separately.
 In
              circumstances where the implementation services are essential to the
              functionality of the software or where the software requires significant
              customization, the Company recognizes software license revenue using
              the
              percentage-of-completion method over the implementation period as previously
              described.
 Revenue
              from maintenance services for licenses sold and implemented is recognized
              ratably over the term of the contract.
  WORK
              IN PROGRESS AND DEFERRED REVENUE
 Amounts
              recognized as revenue in excess of billings are classified as work
              in progress.
              Amounts received in advance of the delivery of products or performances
              of
              services are classified as deferred revenue.
  REIMBURSEMENTS
 Reimbursements,
              including those relating to travel and other out-of-pocket expenses,
              and other
              similar third party costs, such as the cost of hardware and software
              resales,
              are included in revenue, and the corresponding expense is included
              in costs of
              services.
  CASH
              AND CASH EQUIVALENTS
 Cash
              and cash equivalents consist primarily of unrestricted cash and short-term
              investments having an initial maturity of three months or less.
  CAPITAL
              ASSETS
 Capital
              assets are recorded at cost and are amortized over the following estimated
              useful lives of the assets, using the straight-line method:
 
 Buildings
                    10
                        to 40 yearsLeasehold
                        improvements
                    Lesser
                        of the useful life or lease term plus ӿrst renewal optionFurniture
                        and fixtures
                    3
                        to 10 yearsComputer
                        equipment
                    3
                        to 5 years
  2006
                  Annual Report CGI Group Inc.
 32
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data)*
 
  FUNDS
              HELD FOR CLIENTS AND CLIENTS’ FUNDS OBLIGATIONS
 In
              connection with the Company’s payroll and tax filing services, the Company
              collects funds for payment of payroll and taxes, temporarily holds
              such funds
              until payment is due, remits the funds to the clients’ employees and appropriate
              tax authorities, files federal and local tax returns, and handles related
              regulatory correspondence and amendments. The Company presents the
              funds held
              for clients and related obligations separately.
  CONTRACT
              COSTS
 Contract
              costs are mainly incurred when acquiring or implementing long-term
              IT services
              and BPS contracts. These assets are recorded at cost and amortized
              using the
              straight-line method over the term of the respective contracts. Contract
              costs
              are comprised primarily of incentives and transition costs.
 Occasionally,
              incentives are granted to clients upon signing of outsourcing contracts.
              These
              incentives can be granted either in the form of cash payments, issuance
              of
              equity instruments, or discounts awarded principally over a transition
              period,
              as negotiated in the contract. In the case of equity instruments, cost
              is
              measured at the estimated fair value at the time they are issued. For
              discounts,
              cost is measured at the value of the granted financial commitment and
              a
              corresponding amount is recorded in other long-term liabilities. As
              services are
              provided to the client, the amount is amortized and recorded as a reduction
              of
              revenue.
 Capital
              assets acquired from a client in connection with outsourcing contracts
              are
              capitalized as such and amortized consistent with the amortization
              policies
              described previously. The excess of the amount paid over the fair value
              of
              capital assets acquired in connection with outsourcing contracts is
              considered
              as an incentive granted to the client, and is recorded as described
              in the
              preceding paragraph.
 Transition
              costs consist of expenses associated with the installation of systems
              and
              processes incurred after the award of outsourcing contracts, relocation
              of
              transitioned employees and exit from client facilities. Under BPS contracts,
              the
              costs consist primarily of expenses related to activities such as the
              conversion
              of the customer’s applications to the Company’s platforms. These incremental
              costs are comprised essentially of labour costs, including compensation
              and
              related fringe benefits, as well as subcontractor costs.
  FINITE-LIFE
              INTANGIBLE ASSETS
 Finite-life
              intangible assets consist mainly of internal software, business solutions,
              software licenses and customer relationships.
 Internal
              software, business solutions and software licenses are recorded at
              cost.
              Business solutions developed internally and marketed for distribution
              are
              capitalized when they meet specific capitalization criteria related
              to
              technical, market and financial feasibility. Business solutions and
              software
              licenses acquired through a business combination are initially recorded
              at fair
              value based on the estimated net future income-producing capabilities
              of the
              software products. Customer relationships are acquired through business
              combinations and are initially recorded at their fair value based on
              the present
              value of expected future cash flows.
 The
              Company amortizes its finite-life intangible assets using the straight-line
              method over the following estimated useful lives:
 
 Internal
                        software
                    2
                        to 7 yearsBusiness
                        solutions
                    2
                        to 10 yearsSoftware
                        licenses
                    3
                        to 8 yearsCustomer
                        relationships and other
                    2
                        to 15 years
  IMPAIRMENT
              OF LONG-LIVED ASSETS
 When
              events or changes in circumstances indicate that the carrying amount
              of
              long-lived assets may not be recoverable, undiscounted estimated cash
              flows are
              projected over their remaining term and compared to the carrying amount.
              To the
              extent such projections indicate that future undiscounted cash flows
              are not
              sufficient to recover the carrying amounts of related assets, a charge
              is
              recorded to reduce the carrying amount to equal projected future discounted
              cash
              flows.
 
 BUSINESS
              COMBINATIONS AND GOODWILL
 The
              Company accounts for its business combinations using the purchase method
              of
              accounting. Under this method, the Company allocates the purchase price
              to
              tangible and intangible assets acquired and liabilities assumed based
              on
              estimated fair values at the date of acquisition, with the excess of
              the
              purchase price amount being allocated to goodwill. Goodwill for each
              reporting
              unit is assessed for impairment at least annually, or when an event
              or
              circumstance occurs that more likely than not reduces the fair value
              of a
              reporting unit below its carrying amount. An impairment charge is recorded
              when
              the goodwill carrying amount of the reporting unit exceeds its fair
              value.
  ACCRUED
              INTEGRATION CHARGES
 Accrued
              integration charges are comprised of liabilities for costs incurred
              on business
              combinations, such as severance payments related to the termination
              of certain
              employees of the acquired business performing functions already available
              through the Company’s existing structure and provisions related to leases for
              premises occupied by the acquired businesses that the Company plans
              to vacate.
  EARNINGS
              PER SHARE
 Basic
              earnings per share are based on the weighted average number of shares
              outstanding during the period. The dilutive effect of stock options
              is
              determined using the treasury stock method.
  RESEARCH
              AND SOFTWARE DEVELOPMENT COSTS
 Research
              costs are charged to earnings in the period in which they are incurred,
              net of
              related tax credits. Included in costs of services, selling and administrative
              expenses are research expenses in the amount of $25,728,000 ($21,869,000
              in 2005
              and $26,710,000 in 2004). During the year, the Company incurred direct
              research
              and software development costs of $68,905,000 ($78,200,000 in 2005
              and
              $64,500,000 in 2004).
  2006
                  Annual Report CGI Group Inc.
 33
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data)*
 
 2.
              Summary of significant accounting policies (continued)
 
 Software
              development costs are charged to earnings in the year they are incurred,
              net of
              related tax credits unless they meet specific capitalization criteria
              related to
              technical, market and financial feasibility. Deferred development costs
              are
              included as part of finite-life intangibles. Tax credits amounting
              to $925,000
              were recorded against these assets for the year ended September 30,
              2006 (nil in
              2005 and $1,408,000 in 2004).
  INCOME
              TAXES
 Income
              taxes are accounted for using the asset and liability method of accounting
              for
              income taxes. Future income tax assets and liabilities are determined
              based on
              deductible or taxable temporary differences between the amounts reported
              for
              financial statement purposes and tax values of assets and liabilities
              using
              enacted or substantively enacted income tax rates expected to be in
              effect for
              the year in which the differences are expected to reverse. A valuation
              allowance
              is recorded for the portion of the future income tax assets when its
              realization
              is not considered more likely than not.
  TRANSLATION
              OF FOREIGN CURRENCIES
 Revenue
              and expenses denominated in foreign currencies are recorded at the
              rate of
              exchange prevailing at the transaction date. Monetary assets and liabilities
              denominated in foreign currencies are translated at exchange rates
              prevailing at
              the balance sheet date. Unrealized translation gains and losses are
              reflected in
              net earnings.
 
 Self-sustaining
              subsidiaries, with economic activities largely independent of the parent
              company, are accounted for using the current rate method. Under this
              method,
              assets and liabilities of subsidiaries denominated in a foreign currency
              are
              translated into Canadian dollars at exchange rates in effect at the
              balance
              sheet date. Revenue and expenses are translated at average exchange
              rates
              prevailing during the period. Resulting unrealized gains or losses
              are
              accumulated and reported as foreign currency translation adjustment
              in
              shareholders’ equity. As a result of differences in the translation of the
              financial statements of foreign subsidiaries, the foreign currency
              translation
              adjustment varied by $38,440,000 and $92,124,000 in 2006 and 2005,
              respectively.
              These variations resulted principally from translating U.S. dollar
              denominated
              goodwill.
 
 The
              accounts of foreign subsidiaries, which are financially or operationally
              dependent on the parent company, are accounted for using the temporal
              method.
              Under this method, monetary assets and liabilities are translated at
              the
              exchange rates in effect at the balance sheet date, and non-monetary
              assets and
              liabilities are translated at historical exchange rates. Revenue and
              expenses
              are translated at average rates for the period. Translation exchange
              gains or
              losses of such subsidiaries are reflected in net earnings.
  STOCK-BASED
              COMPENSATION
 Stock-based
              compensation cost is recorded using the fair value based method. This
              method
              consists of recording compensation cost to earnings over the vesting
              period of
              options granted. When stock options are exercised, any consideration
              paid by
              employees is credited to capital stock and the recorded fair value
              of the option
              is removed from contributed surplus and credited to capital stock.
  FINANCIAL
              INSTRUMENTS
 The
              Company uses various financial instruments to manage its exposure to
              fluctuations in foreign currency exchange rates. The Company does not
              hold or
              use any derivative instruments for trading purposes.
 The
              Company enters into financial instrument contracts to hedge its net
              investment
              in foreign subsidiaries. Foreign exchange translation gains or losses
              on the net
              investment are recorded under the foreign currency translation adjustment.
              Any
              realized or unrealized gains or losses on instruments covering the
              net
              investment are also recognized in the foreign currency translation
              adjustment.
 The
              Company also enters, from time to time, into forward contracts to hedge
              forecasted cash flows denominated in currencies other than the functional
              currency of its subsidiaries. Gains and losses on foreign exchange
              contracts
              designated as hedges for firm commitments or forecasted transactions
              are
              recorded in costs of services, selling and administrative expenses
              when the
              related transaction is realized.
 Periodic
              assessments of each hedge’s effectiveness are performed during the year.
  FUTURE
              ACCOUNTING CHANGES
 The
              CICA has issued the following new Handbook Sections:
 a)
                    Section
                        3855, “Financial Instruments - Recognition and Measurement”, effective for
                        interim periods beginning on or after October 1, 2006. This
                        section
                        describes the standards for recognizing and measuring financial
                        assets,
                        financial liabilities and non-financial derivatives. All
                        financial assets,
                        except for those classified as held-to-maturity, and derivative
                        financial
                        instruments must be measured at their fair value. All financial
                        liabilities must be measured at their fair value if they
                        are classified as
                        held for trading purposes, and if not, they are measured
                        at their carrying
                        value. The impact of the adoption of this new section on
                        the consolidated
                        financial statements is not expected to be material.b)
                    Section
                        1530, “Comprehensive Income”, and Section 3251, “Equity”, effective for
                        interim periods beginning on or after October 1, 2006. Comprehensive
                        income is the change in equity of an enterprise during a
                        period arising
                        from transactions and other events and circumstances from
                        non-owner
                        sources. It includes items that would normally not be included
                        in net
                        income, such as changes in the foreign currency translation
                        adjustment
                        relating to self-sustaining foreign operations and unrealized
                        gains or
                        losses on available-for-sale financial
  2006
                  Annual Report CGI Group Inc.
 34
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data* *)*
 
 instruments.
                        These sections describe how to report and disclose comprehensive
                        income
                        and its components. Section 3251, “Equity”, replaces Section 3250,
                        “Surplus”, and describes the changes in how to report and disclose
                        equity
                        and changes in equity as a result of the new requirements
                        of Section 1530,
                        “Comprehensive Income”. Upon adoption of this section, the consolidated
                        financial statements will include a statement of comprehensive
                        income.c)
                    Section
                        3865, “Hedges”, effective for interim periods beginning on or after
                        October 1, 2006. This section describes when hedge accounting
                        is
                        appropriate. Hedge accounting ensures that all gains, losses,
                        revenue and
                        expenses from the derivative, and the item it hedges, are
                        recorded in the
                        statement of earnings in the same period. The impact of the
                        adoption of
                        this new section on the consolidated financial statements
                        is not expected
                        to be material.
 
 3.
              Accounts receivable
 
 **200****6**
                    
                    2005$
                    
                    $Trade
                    
                    
                    **376,383**
                    
                    
                    357,679Other(1)
                    
                    
                    **103,384**
                    
                    
                    130,052**479,767**
                    
                    
                    487,731
 
 (1)
                    Other
                        accounts receivable include refundable tax credits on salaries
                        related to
                        the E-Commerce Place, Cité
                        du
                        multimEdia, New Economy Centre, SR&ED and other tax credit programs,
                        of approximately $80,943,000 and $93,287,000, in 2006 and
                        2005,
                        respectively.The
                        Company is defined as an eligible company and operates “eligible
                        activities” under the terms of various Québec
                        government tax credit programs on salaries for eligible employees
                        located
                        mainly in designated locations in the province of Québec,
                        Canada.
                        The Company must obtain an eligibility certificate from the
                        Québec
                        government annually. These programs are designed to support
                        job creation
                        and revitalization efforts in certain urban areas.In
                        order to be eligible for a majority of the tax credits, the
                        Company
                        relocated some of its employees to designated locations.
                        Real estate costs
                        for these designated locations are significantly higher than
                        they were at
                        the previous facilities. Initially, the Company’s ӿnancial commitments for
                        these real estate locations represented $618,800,000. As
                        at September 30,
                        2006, the balance outstanding for these commitments was $487,819,000,
                        ranging between two and 17 years.The
                        refundable tax credits, under the various programs, are calculated
                        at
                        rates varying from 35% to 40% on salaries paid in Québec,
                        to a
                        maximum range of $12,500 to $15,000 per year per eligible
                        employee. For
                        the E-Commerce Place, the rate can vary depending on the
                        creation of a
                        sufficient number of jobs in the province of Québec.
                        The
                        rate is established using a predetermined formula and may
                        not exceed 35%
                        or $12,500. As at September 30, 2006, the Company is eligible
                        to be
                        refunded using the rate of 35%.
  4.
              Capital assets
 **2006**
                      
                      
                      
                      
                      
                      2005**ACCUMULATED**
                      
                      **NE****T**
                        **BOO****K**
                      
                      
                      
                      ACCUMULATED
                      
                      NETBOOK**COST**
                      
                      **AMORTIZATION**
                      
                      **VALUE**
                      
                      COST
                      
                      AMORTIZATION
                      
                      VALUE$
                      
                      $
                      
                      $
                      
                      $
                      
                      $
                      
                      $Land
                          and building
                      
                      
                      **5,766**
                      
                      
                      **1,372**
                      
                      
                      **4,394**
                      
                      
                      5,113
                      
                      
                      907
                      
                      
                      4,206Leasehold
                          improvements
                      
                      
                      **124,031**
                      
                      
                      **40,811**
                      
                      
                      **83,220**
                      
                      
                      105,779
                      
                      
                      26,858
                      
                      
                      78,921Furniture
                          and fixtures
                      
                      
                      **28,596**
                      
                      
                      **16,315**
                      
                      
                      **12,281**
                      
                      
                      24,979
                      
                      
                      13,286
                      
                      
                      11,693Computer
                          equipment
                      
                      
                      **69,253**
                      
                      
                      **49,116**
                      
                      
                      **20,137**
                      
                      
                      60,330
                      
                      
                      38,762
                      
                      
                      21,568**227,646**
                      
                      
                      **107,614**
                      
                      
                      **120,032**
                      
                      
                      196,201
                      
                      
                      79,813
                      
                      
                      116,388
 
 Capital
              assets include assets acquired under capital leases totaling $2,589,000
              ($3,461,000 in 2005), net of accumulated amortization of $3,520,000
              ($2,975,000
              in 2005).
 
 The
              asset retirement obligations pertain to operating leases of office
              buildings in
              different locations where certain clauses require premises to be returned
              to
              their original state at the end of the lease term. The cost of the
              asset
              retirement obligations of $2,364,000 ($2,469,000 in 2005), which is
              recorded in
              accrued integration charges and other long-term liabilities, was based
              on the
              undiscounted expected cash flows of $3,400,000 ($3,600,000 in 2005)
              using a
              discount rate of 5.50% (5.78% in 2005). The timing of the settlement
              of these
              obligations varies between one and 17 years.
   2006
                  Annual Report CGI Group Inc.
 35
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 5.
              Contract costs
 
 **200****6**
                    
                    
                    
                    
                    
                    2005**ACCUMULATED**
                    
                    **NE****T**
                      **BOOK******
                    
                    
                    
                    ACCUMULATED
                    
                    NET
                        BOOK**COST**
                    
                    **AMORTIZATION**
                    
                    **VALUE**
                    
                    COST
                    
                    AMORTIZATION
                    
                    VALUE$
                    
                    $
                    
                    $
                    
                    $
                    
                    $
                    
                    $Incentives
                    
                    
                    **250,691**
                    
                    
                    **130,167**
                    
                    
                    **120,524**
                    
                    
                    247,449
                    
                    
                    103,846
                    
                    
                    143,603Transition
                        costs
                    
                    
                    **124,784**
                    
                    
                    **33,193**
                    
                    
                    **91,591**
                    
                    
                    107,218
                    
                    
                    27,699
                    
                    
                    79,519**375,475**
                    
                    
                    **163,360**
                    
                    
                    **212,115**
                    
                    
                    354,667
                    
                    
                    131,545
                    
                    
                    223,122
 
 6.
              Finite-life intangibles and other long-term assets
 
 **200****6****ACCUMULATE****D**
                    
                    **NE****T****BOO****K****COS****T**
                    
                    **AMORTIZATIO****N**
                    
                    **VALU****E**$
                    
                    $
                    
                    **$**Internal
                        software
                    
                    
                    **77,874**
                    
                    
                    **34,724**
                    
                    
                    **43,150**Business
                        solutions
                    
                    
                    **258,566**
                    
                    
                    **80,103**
                    
                    
                    **178,463**Software
                        licenses
                    
                    
                    **120,557**
                    
                    
                    **78,373**
                    
                    
                    **42,184**Customer
                        relationships and other
                    
                    
                    **367,404**
                    
                    
                    **131,596**
                    
                    
                    **235,808**Finite-life
                        intangibles
                    
                    
                    **824,401**
                    
                    
                    **324,796**
                    
                    
                    **499,605**Deferred
                        financing fees
                      Deferred
                        compensation plan (note 23)
                      Other
                    
                    
                    
                    
                    
                    
                    
                    
                    **6,475**
                      **9,943**
                      **9,882**Other
                        long-term assets
                    
                    
                    
                    
                    
                    
                    
                    
                    **26,300**Total
                        finite-life intangibles and other long-term assets
                    
                    
                    
                    
                    
                    
                    
                    
                    **525,905**2005COST
                    
                    
                    ACCUMULATED
                      AMORTIZATION
                    
                    
                    NETBOOK
                      VALUE$
                    
                    
                    $
                    
                    
                    $Internal
                        software
                    
                    
                    75,088
                    
                    
                    31,056
                    
                    
                    44,032Business
                        solutions
                    
                    
                    230,854
                    
                    
                    51,160
                    
                    
                    179,694Software
                        licenses
                    
                    
                    135,991
                    
                    
                    69,644
                    
                    
                    66,347Customer
                        relationships and other
                    
                    
                    382,111
                    
                    
                    103,819
                    
                    
                    278,292Finite-life
                        intangibles
                    
                    
                    824,044
                    
                    
                    255,679
                    
                    
                    568,365Financing
                        lease (note19)
                      Deferred
                        financing fees
                      Deferred
                        compensation plan (note 23)
                      Other
                    
                    
                    
                    
                    
                    
                    
                    
                    1,788
                      3,633
                      7,861
                      4,769Other
                        long-term assets
                    
                    
                    
                    
                    
                    
                    
                    
                    18,051Total
                        finite-life intangibles and other long-term assets
                    
                    
                    
                    
                    
                    
                    
                    
                    586,416Amortization
                        expense of finite-life intangibles included in the consolidated
                        statements
                        of earnings is as follows:**2006**
                    
                    
                    2005
                    
                    
                    2004$
                    
                    
                    $
                    
                    
                    $Internal
                        software
                    
                    
                    **10,839**
                    
                    
                    16,731
                    
                    
                    15,003Business
                        solutions
                    
                    
                    **35,298**
                    
                    
                    29,175
                    
                    
                    23,054Software
                        licenses
                    
                    
                    **29,983**
                    
                    
                    31,653
                    
                    
                    33,905Customer
                        relationships and other
                    
                    
                    **43,597**
                    
                    
                    47,536
                    
                    
                    30,158**119,717**
                    
                    
                    125,095
                    
                    
                    102,120
 
 
  2006
                  Annual Report CGI Group Inc.
 36
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 7.
              Goodwill
 
 The
              Company has designated September 30 as the date for the annual impairment
              test.
              The Company completed its annual goodwill impairment test as of September
              30,
              2006. Based on the results of this test, no impairment loss was identified.
 
 The
              variations in goodwill are as follows:
  **200****6**
                    
                    
                    
                    
                    
                    2005**IT
                        SERVICES**
                    
                    **BPS**
                    
                    **TOTAL**
                    
                    IT
                        SERVICES
                    
                    BPS
                    
                    TOTAL$
                    
                    $
                    
                    $
                    
                    $
                    
                    $
                    
                    $Balance,
                        beginning of year
                    
                    
                    **1,494,133**
                    
                    
                    **279,237**
                    
                    
                    **1,773,37****0**
                    
                    
                    1,532,413
                    
                    
                    295,191
                    
                    
                    1,827,604Acquisitions
                        (note17)
                    
                    
                    **18,070**
                    
                    
                    **-**
                    
                    
                    **18,070**
                    
                    
                    51,557
                    
                    
                    619
                    
                    
                    52,176Purchase
                        price adjustments (note17)
                    
                    
                    **(6,611**
                    **)**
                    
                    **119**
                    
                    
                    **(6,492**
                    **)**
                    
                    (13,775
                    )
                    
                    12,269
                    
                    
                    (1,506
                    )Disposal
                        of assets (subsidiaries in 2005) (note17)
                    
                    
                    **-**
                    
                    
                    **(13,172**
                    **)**
                    
                    **(13,172**
                    **)**
                    
                    -
                    
                    
                    (16,152
                    )
                    
                    (16,152
                    )Foreign
                        currency translation adjustment
                    
                    
                    **(28,533**
                    **)**
                    
                    **(5,357**
                    **)**
                    
                    **(33,890**
                    **)**
                    
                    (76,062
                    )
                    
                    (12,690
                    )
                    
                    (88,752
                    )Balance,
                        end of year
                    
                    
                    **1,477,059**
                    
                    
                    **260,827**
                    
                    
                    **1,737,886**
                    
                    
                    1,494,133
                    
                    
                    279,237
                    
                    
                    1,773,370
 
 8.
              Long-term debt
 
 **2006**
                    
                    2005$
                    
                    $Senior
                        U.S. unsecured notes, bearing a weighted average interest
                        rate of 5.14%
                        and repayableby
                        payments of $94,863,000 in 2009, of $97,004,300 in 2011 and
                        $22,270,300 in
                        2014(1)
                    
                    
                    **214,138**
                    
                    
                    222,931Unsecured
                        committed revolving term facility bearing interest at LIBOR
                        rate plus
                        1.375%
                      or
                        bankers’ acceptance rate plus 1.375%, maturing in
                        2009(2)
                    
                    
                    **587,226**
                    
                    
                    -Obligation
                        bearing interest at 1.60% and repayable in blended monthlyinstalments
                        maturing in 2008
                    
                    
                    **5,777**
                    
                    
                    9,214Balances
                        of purchase price related to business acquisitions, non-interest
                        bearing,repayable
                        in various instalments through 2008. These balances were
                        recorded attheir
                        discounted value using a 7% interest rate
                    
                    
                    **4,399**
                    
                    
                    7,241Obligations
                        under capital leases, bearing a weighted average interest
                        rate of 8.28%and
                        repayable in blended monthly instalments maturing at various
                        dates until
                        2008
                    
                    
                    **781**
                    
                    
                    2,005Share
                        of joint venture’s long-term debtSecured
                        term loan repayable in blended monthly payments of $540,249,bearing
                        interest of 5.71%, maturing in 2007
                    
                    
                    **539**
                    
                    
                    6,965Other
                        loans bearing interest at a rate of prime plus 1.75%, repaid
                        during the
                        year
                    
                    
                    -
                    
                    
                    684Other
                    
                    
                    **399**
                    
                    
                    660Current
                        portion
                    
                    
                    **813,259**
                      **8,242**
                    
                    
                    249,700
                      14,899**805,017**
                    
                    
                    234,801
  (1)
                    The
                        US$192,000,000 private placement financings with U.S. institutional
                        investors is comprised of three tranches of senior unsecured
                        notes
                        maturing in January 2009, 2011 and 2014, and was issued on
                        January 29,
                        2004 with a weighted average maturity of 6.4 years. The Senior
                        U.S.
                        unsecured notes contain covenants that require the Company
                        to maintain
                        certain financial ratios. On June 9, 2006, the Company obtained
                        certain
                        amendments to the definition and calculations of the ratios
                        of
                        theSenior U.S. unsecured notes.
                        The initial weighted average fixed coupon rate was 4.97%.
                        As a result of
                        the amendments, the rate increased to 5.14%. At September
                        30, 2006, the
                        Company is in compliance with these covenants.(2)
                    The
                        Company has a five-year unsecured revolving credit facility
                        available for
                        an amount of $1,000,000,000 maturing in December 2009. This
                        agreement is
                        comprised of a Canadian tranche with a limit of $850,000,000
                        and a U.S.
                        tranche equivalent to $150,000,000. The interest rate charged
                        is
                        determined by the denomination of the amount drawn. As at
                        September 30,
                        2006, an amount of $590,000,000 has been drawn upon this
                        facility. Also,
                        an amount of $27,975,400 has been committed against this
                        facility to cover
                        various letters of credit issued for clients and other parties.
                        Financing
                        fees of $3,572,000 were incurred during the year and were
                        recorded in
                        finite-life intangibles and other long-term assets. In addition
                        to the
                        revolving credit facility, the Company has demand lines of
                        credit in the
                        amounts of $25,000,000 and £2,000,000 available. At September 30, 2006, no
                        amount had been drawn upon these facilities. The revolving credit
                        facility contains covenants that require the Company to maintain
                        certain
                        financial ratios. On April 21, 2006, the Company obtained
                        certain
                        amendments to the definition and calculations of the ratios
                        that take into
                        account the impact of the restructuring activities on the
                        unsecured
                        revolving credit facility. At September 30, 2006, the Company
                        is in
                        compliance with these covenants.
 
  2006
                  Annual Report CGI Group Inc.
 37
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 8.
              Long-term debt (continued)
 
 Principal
                        repayments on long-term debt over the forthcoming years are
                        as
                        follows:
                    
                    $2007
                      2008
                      2009
                      2010
                      2011
                      Thereafter
                    
                    
                    7,626
                      3,488
                      94,863
                      587,226
                      97,005
                      22,270Total
                        principal payments on long-term debt
                    
                    
                    812,478
 
 Minimum
                        capital lease payments are as follows:
                    
                    PRINCIPAL
                    
                    INTEREST
                    
                    PAYMENT2007
                      2008
                    
                    $
                    616
                      165
                    
                    $
                    29
                      5
                    
                    $
                    645
                      170Total
                        minimum capital lease payments
                    
                    
                    781
                    
                    
                    34
                    
                    
                    815
 
 9.
              Capital stock
 
 Authorized,
              an unlimited number without par value:
 
 First
              preferred shares, carrying one vote per share, ranking prior to second
              preferred
              shares, Class A subordinate shares and Class B shares with respect
              to the
              payment of dividends;
 
 Second
              preferred shares, non-voting, ranking prior to Class A subordinate
              shares and
              Class B shares with respect to the payment of dividends;
 
 Class
              A subordinate shares, carrying one vote per share, participating equally
              with
              Class B shares with respect to the payment of dividends and convertible
              into
              Class B shares under certain conditions in the event of certain takeover
              bids on
              Class B shares;
 
 Class
              B shares, carrying ten votes per share, participating equally with
              Class A
              subordinate shares with respect to the payment of dividends, convertible
              at any
              time at the option of the holder into Class A subordinate shares.
 
  2006
                  Annual Report CGI Group Inc.
 38
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 For
              2006,
              2005 and 2004, the Class A subordinate and the Class B shares changed
              as
              follows:
 CLASS
                          ASUBORDINATESHARES
                      
                      CLASS
                          BSHARES
                      
                      TOTALNUMBER
                      
                      CARRYINGVALUE
                      
                      NUMBER
                      
                      CARRYINGVALUE
                      
                      NUMBER
                      
                      CARRYINGVALUE$
                      
                      
                      
                      $
                      
                      
                      
                      $Balance,
                          September 30, 2003
                      
                      
                      368,236,503
                      
                      
                      1,435,763
                      
                      
                      33,772,168
                      
                      
                      44,868
                      
                      
                      402,008,671
                      
                      
                      1,480,631Issued
                          for cash(1)
                      
                      
                      41,340,625
                      
                      
                      330,725
                      
                      
                      -
                      
                      
                      -
                      
                      
                      41,340,625
                      
                      
                      330,725Issued
                          as consideration for business acquisitions
                        (note17)
                      
                      
                      136,112
                      
                      
                      1,020
                      
                      
                      -
                      
                      
                      -
                      
                      
                      136,112
                      
                      
                      1,020Issued
                          upon exercise of options
                      
                      
                      1,007,651
                      
                      
                      7,854
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,007,651
                      
                      
                      7,854Balance,
                          September 30, 2004
                      
                      
                      410,720,891
                      
                      
                      1,775,362
                      
                      
                      33,772,168
                      
                      
                      44,868
                      
                      
                      444,493,059
                      
                      
                      1,820,230Repurchased
                          and cancelled(2)
                      
                      
                      (14,078,360
                      )
                      
                      (60,998
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      (14,078,360
                      )
                      
                      (60,998
                      )Repurchased
                          and not cancelled(2)
                      
                      
                      -
                      
                      
                      (3,665
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (3,665
                      )Issued
                          upon exercise of options(3)
                      
                      
                      805,798
                      
                      
                      7,406
                      
                      
                      -
                      
                      
                      -
                      
                      
                      805,798
                      
                      
                      7,406Balance,
                          September 30, 2005
                      
                      
                      397,448,329
                      
                      
                      1,718,105
                      
                      
                      33,772,168
                      
                      
                      44,868
                      
                      
                      431,220,497
                      
                      
                      1,762,973Repurchased
                          and cancelled(2)
                      
                      
                      (108,315,500
                      )
                      
                      (466,994
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      (108,315,500
                      )
                      
                      (466,994
                      )Repurchased
                          and not cancelled(2)
                      
                      
                      -
                      
                      
                      (4,028
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (4,028
                      )Issued
                          upon exercise of options(3)
                      
                      
                      1,220,820
                      
                      
                      11,818
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,220,820
                      
                      
                      11,818Issued
                          upon exercise of warrants(4)
                      
                      
                      7,021,096
                      
                      
                      60,260
                      
                      
                      546,131
                      
                      
                      3,577
                      
                      
                      7,567,227
                      
                      
                      63,837Converted
                          upon exercise of warrants(4)
                      
                      
                      110,140
                      
                      
                      721
                      
                      
                      (110,140
                      )
                      
                      (721
                      )
                      
                      -
                      
                      
                      -**Balance****,
                          S****eptembe****r****30****,****200****6**
                      
                      
                      **297,484,885**
                      
                      
                      **1,319,882**
                      
                      
                      **34,208,159**
                      
                      
                      **47,724**
                      
                      
                      **331,693,044**
                      
                      
                      **1,367,606**
  (1)
                    On
                        May 3, 2004, the Company issued 41,340,625 Class A subordinate
                        shares to
                        the public and to BCE Inc. (“BCE”) for cash proceeds of $330,725,000
                        before share issue costs of $5,489,000 (net of income tax
                        recoveries of
                        $2,466,000).(2)
                    On
                        January 31, 2006, the Company’s Board of Directors authorized the renewal
                        of a Normal Course Issuer Bid and the purchase of up to 10%
                        of the public
                        float of the Company’s Class A subordinate shares during the next year.
                        The Toronto Stock Exchange subsequently approved the Company
                        request for
                        approval. The Issuer Bid enables the Company to purchase
                        up to 29,288,443
                        Class A subordinate shares for cancellation on the open market
                        through the
                        Toronto Stock Exchange. The Class A subordinate shares may
                        be purchased
                        under the Issuer Bid commencing February 3, 2006 and ending
                        no later than
                        February 2, 2007, or on such earlier date when the Company
                        completes its
                        purchases or elects to terminate the bid. Under a similar
                        program in 2005,
                        27,834,417 Class A subordinate shares could have been repurchased
                        between
                        February 3, 2005 and February 2, 2006. During 2006, the Company
                        repurchased 8,374,400 Class A subordinate shares (14,896,200
                        in 2005) for
                        cash consideration of $59,631,000 ($116,439,000 in 2005).
                        The excess of
                        the purchase price over the carrying value of Class A subordinate
                        shares
                        repurchased, in the amount of $22,364,000 ($51,978,000 in
                        2005), was
                        charged to retained earnings. As of September 30, 2006, 905,100
                        of the
                        repurchased Class A subordinate shares (846,200 in 2005)
                        with a carrying
                        value of $4,028,000 ($3,665,000 in 2005) and a purchase value
                        of
                        $6,661,000 ($7,185,000 in 2005) were held by the Company
                        and had been paid
                        and cancelled subsequent to the year-end.On
                        January 12, 2006, the Company concluded a transaction whereby
                        the Company
                        repurchased from BCE for cancellation 100,000,000 of its
                        Class A
                        subordinate shares at a price of $8.5923 per share for consideration
                        of
                        $859,230,000. The excess of the purchase price over the carrying
                        value of
                        Class A subordinate shares repurchased, in the amount of
                        $425,475,000, as
                        well as share repurchase costs in the amount of $6,760,000,
                        were charged
                        to retained earnings.During
                        2005, the Company received and cancelled 28,360 Class A subordinate
                        shares
                        for consideration of $202,000 as a settlement of an account
                        receivable
                        accounted for as part of a 2003 business acquisition.(3)
                    The
                        carrying value of Class A subordinate shares includes $3,421,000
                        ($2,855,000 in 2005), which corresponds to a reduction in
                        contributed
                        surplus representing the value of compensation cost associated
                        with the
                        options exercised since inception and the value of exercised
                        options
                        assumed in connection with acquisitions.(4)
                    On
                        March 22, 2006, a warrant was exercised by one holder to
                        purchase
                        4,000,000 Class A subordinate shares of the Company at a
                        price of $6.55
                        each for an aggregate amount of $26,200,000. The carrying
                        value of these
                        Class A subordinate shares includes $14,271,000, which was
                        previously
                        recorded under the Warrants caption. On April 6, 2006, warrants were
                        exercised by another holder resulting in the issuance of
                        3,021,096 Class A
                        subordinate shares and 110,140 Class B shares of the Company
                        at a price of
                        $6.55 each for an aggregate amount of $20,510,000. At the
                        same time, this
                        holder converted the 110,140 Class B shares to 110,140 Class
                        A subordinate
                        shares at a price of $6.55 each for an aggregate amount of
                        $721,000. In
                        addition, on April 28, 2006, the Company’s Class B shareholders exercised
                        their warrants totalling 435,991 Class B shares at a price
                        of $6.55 each
                        for an aggregate amount of $2,856,000.
 
  2006
                  Annual Report CGI Group Inc.
 39
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 10.
              Stock options, contributed surplus and warrants
 
 A)
              STOCK OPTIONS
 Under
              the
              Company’s stock option plan, the Board of Directors may grant, at its
              discretion, options to purchase Class A subordinate shares to certain
              employees,
              officers, directors and consultants of the Company and its subsidiaries.
              The
              exercise price is established by the Board of Directors and is equal
              to the
              closing price of the Class A subordinate shares on the Toronto Stock
              Exchange
              (“TSX”) on the day preceding the date of the grant. Options generally vest
              one
              year from the date of grant conditionally upon the achievement of objectives
              and
              must be exercised within a ten-year period, except in the event of
              retirement,
              termination of employment or death. As at September 30, 2006, 39,923,069
              Class A
              subordinate shares have been reserved for issuance under the Stock
              option plan.
 
 The
              following table presents information concerning all outstanding stock
              options
              granted by the Company for the years ended September 30:
  **200****6**
                      
                      
                      
                      2005
                      
                      
                      
                      2004**NUMBE****R****O****F**
                        **OPTION****S**
                      
                      **WEIGHTE****D****AVERAG****E****EXERCIS****E****PRIC****E****PE****R****SHAR****E**
                      
                      NUMBEROFOPTIONS
                      
                      WEIGHTEDAVERAGEEXERCISEPRICEPERSHARE
                      
                      NUMBEROFOPTIONS
                      
                      WEIGHTEDAVERAGEEXERCISEPRICEPERSHARE$
                      
                      
                      
                      $
                      
                      
                      
                      $Outstanding,
                          beginning of year
                        Granted
                      
                      
                      **26,538,654**
                        **8,738,601**
                      
                      
                      **8.79**
                        **8.06**
                      
                      
                      25,537,300
                        5,079,636
                      
                      
                      9.20
                        8.48
                      
                      
                      20,459,515
                          7,577,166
                      
                      
                      9.69
                        7.90Exercised
                        Forfeited
                          and expired
                      
                      
                      **(1,220,820)
                          (4,099,724**
                      **)**
                      
                      **6.87**
                        **9.27**
                      
                      
                      (805,798)
                          (3,272,484
                      )
                      
                      5.61
                        11.60
                      
                      
                      (1,007,651)
                          (1,491,730
                      )
                      
                      5.61
                        9.71Outstanding,
                          end of year
                      
                      
                      **29,956,711**
                      
                      
                      **8.57**
                      
                      
                      26,538,654
                      
                      
                      8.79
                      
                      
                      25,537,300
                      
                      
                      9.20Exercisable,
                          end of year
                      
                      
                      **21,588,443**
                      
                      
                      **8.80**
                      
                      
                      21,308,252
                      
                      
                      8.89
                      
                      
                      16,492,063
                      
                      
                      9.93
  The
              following table summarizes information about outstanding
              stock options granted by the Company as at September 30, 2006 :
  **OPTIONS****OUTSTANDIN****G**
                    
                    **OPTION****S****EXERCISABL****E****WEIGHTED**
                      **AVERAGE**
                      **REMAINING**
                    
                    **WEIGHTED
                        AVERAGE**
                    
                    
                    
                    **WEIGHTED
                        AVERAGE****RANG****E****O****F****EXERCIS****E****PRIC****E**
                    
                    **NUMBER
                        OF OPTIONS**
                    
                    **CONTRACTUAL
                        LIF**E**(YEARS**)
                    
                    **EXERCIS**E
                      **PRIC**E
                    
                    **NUMBER
                        OF OPTIONS**
                    
                    **EXERCIS**E**PRIC**E$
                    
                    
                    
                    
                    
                    $
                    
                    
                    
                    **$****1.64
                        to 2.32**
                    
                    
                    **151,487**
                    
                    
                    **4**
                    
                    
                    **2.23**
                    
                    
                    **151,487**
                    
                    
                    **2.23****4.19
                        to 6.98**
                    
                    
                    **5,537,899**
                    
                    
                    **7**
                    
                    
                    **6.40**
                    
                    
                    **3,003,220**
                    
                    
                    **6.20****7.00
                        to 7.87**
                    
                    
                    **5,756,590**
                    
                    
                    **7**
                    
                    
                    **7.74**
                    
                    
                    **5,719,755**
                    
                    
                    **7.74****8.00
                        to 8.99**
                    
                    
                    **14,537,769**
                    
                    
                    **7**
                    
                    
                    **8.62**
                    
                    
                    **8,831,015**
                    
                    
                    **8.67****9.05
                        to 10.53**
                    
                    
                    **1,752,228**
                    
                    
                    **4**
                    
                    
                    **9.85**
                    
                    
                    **1,662,228**
                    
                    
                    **9.87****11.34
                        to 14.85**
                    
                    
                    **910,163**
                    
                    
                    **2**
                    
                    
                    **13.45**
                    
                    
                    **910,163**
                    
                    
                    **13.45****15.01
                        to 20.60**
                    
                    
                    **1,287,435**
                    
                    
                    **3**
                    
                    
                    **16.24**
                    
                    
                    **1,287,435**
                    
                    
                    **16.24****24.51
                        to 26.03**
                    
                    
                    **23,140**
                    
                    
                    **3**
                    
                    
                    **25.99**
                    
                    
                    **23,140**
                    
                    
                    **25.99****29,956,711**
                    
                    
                    **7**
                    
                    
                    **8.57**
                    
                    
                    **21,588,443**
                    
                    
                    **8.80**
 
  2006
                  Annual Report CGI Group Inc.
 40
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 The
              following table presents the weighted average assumptions used to determine
              the
              stock-based compensation expense recorded in cost of services, selling
              and
              administrative expenses using the Black-Scholes option pricing model
              for the
              years ended September 30:
  **2006**
                    
                    2005
                    
                    2004Compensation
                        expense ($)
                    
                    
                    **12,895**
                    
                    
                    20,554
                    
                    
                    25,559Dividend
                        yield (%)
                    
                    
                    **0.00**
                    
                    
                    0.00
                    
                    
                    0.00Expected
                        volatility (%)
                    
                    
                    **36.13**
                    
                    
                    45.80
                    
                    
                    47.40Risk-free
                        interest rate (%)
                    
                    
                    **3.97**
                    
                    
                    3.92
                    
                    
                    3.93Expected
                        life (years)
                    
                    
                    **5**
                    
                    
                    5
                    
                    
                    5Weighted
                        average grant date fair value ($)
                    
                    
                    **3.13**
                    
                    
                    3.85
                    
                    
                    3.68
  B)
              CONTRIBUTED SURPLUS
 The
              following table summarizes the contributed surplus activity since September
              30,
              2003:
  $Balance,
                        September 30, 2003
                    
                    
                    26,414Compensation
                        cost of exercised options assumed in connection with
                        acquisitions
                    
                    
                    (2,094
                    )Fair
                        value of options granted
                    
                    
                    25,559Balance,
                        September 30, 2004
                    
                    
                    49,879Compensation
                        cost of exercised options assumed in connection with acquisitions
                    
                    
                    (1,136
                    )Compensation
                        cost associated with exercised options
                    
                    
                    (1,719
                    )Fair
                        value of options granted
                    
                    
                    20,554Balance,
                        September 30, 2005
                    
                    
                    67,578Compensation
                        cost of exercised options assumed in connection with acquisitions
                    
                    
                    (152
                    )Compensation
                        cost associated with exercised options
                    
                    
                    (3,269
                    )Fair
                        value of options granted
                    
                    
                    12,895Carrying
                        value of warrants expired(1)
                    
                    
                    5,384**Balance,
                        September 30, 2006**
                    
                    
                    **82,436**
  (1)On June 13, 2006, 1,118,210 warrants of one of the holders expired,
              resulting in a transfer of their carrying value of $5,384,000 from
              the Warrants
              to the Contributed surplus caption.
  C)
              WARRANTS
 In
              connection with the signing of a strategic outsourcing contract and
              of a
              business acquisition in 2001, the Company granted warrants entitling
              the holders
              to subscribe to up to 5,118,210 Class A subordinate shares. The exercise
              prices
              were determined using the average closing price for Class A subordinate
              shares
              at a date and for a number of days around the respective transaction
              dates.
 
 In
              addition to the warrants to purchase up to 5,118,210 Class A subordinate
              shares
              referred to above (the “Initial Warrants”), the Company issued to the majority
              shareholders and BCE, warrants to subscribe in the aggregate up to
              3,865,014
              Class A subordinate shares and 697,044 Class B shares pursuant to their
              pre-emptive rights contained in the articles of incorporation of the
              Company,
              with substantially similar terms and conditions as those of the Initial
              Warrants.
 
 As
              at September 30, 2006, all of these warrants expired or have been exercised.
 
  2006
                  Annual Report CGI Group Inc.
 41
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 11.
              Earnings per share
 
 The
              following table sets forth the computation of basic and diluted earnings
              per
              share for the years ended September 30:
  **2006**
                      
                      
                      
                      
                      
                      2005
                      
                      
                      
                      
                      
                      2004**NE****T****EARNING****S**
                        **(NUMERATOR****)**
                      
                      **WEIGHTE****D**
                        **AVERAG****E****NUMBE****R**
                        **O****F****SHAR****ES**
                        **OUTSTANDIN****G(1)**
                        **(DENOMINATOR****)**
                      
                      **EARNING****S**
                        **PE****R****SHAR****E**
                      
                      NETEARNINGS
                        (NUMERATOR)
                      
                      WEIGHTED
                        AVERAGENUMBER
                        OFSHARES
                        OUTSTANDING
                        (DENOMINATOR)
                      
                      EARNINGS
                        PERSHARE
                      
                      NETEARNINGS
                        (NUMERATOR)
                      
                      WEIGHTED
                        AVERAGENUMBER
                        OFSHARES
                        OUTSTANDING
                        (DENOMINATOR)
                      
                      EARNINGS
                        PER
                          SHARE$
                      
                      
                      
                      $
                      
                      $
                      
                      
                      
                      $
                      
                      $
                      
                      
                      
                      $**146,533**
                      
                      
                      **362,783,618**
                      
                      
                      **0.4****0**
                      
                      
                      216,488
                      
                      
                      439,349,210
                      
                      
                      0.49
                      
                      
                      194,041
                      
                      
                      419,510,503
                      
                      
                      0.46Dilutive
                          options2
                      
                      
                      **-**
                      
                      
                      **1,224,463**
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,077,743
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,994,835
                      
                      
                      -Dilutive
                          warrants2
                      
                      
                      **-**
                      
                      
                      **698,575**
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,146,559
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,595,014
                      
                      
                      -**146,533**
                      
                      
                      **364,706,656**
                      
                      
                      **0.40**
                      
                      
                      216,488
                      
                      
                      441,573,512
                      
                      
                      0.49
                      
                      
                      194,041
                      
                      
                      423,100,352
                      
                      
                      0.46
   (1)
                    The
                        108,374,400 Class A subordinate shares repurchased during
                        the year
                        (14,924,560 in 2005 and nil in 2004) were excluded from the
                        calculation of
                        earnings per share as of the date of repurchase.(2)
                    The
                        calculation of the dilutive effects excludes all anti-dilutive
                        options and
                        warrants that would not be exercised because their exercise
                        price is
                        higher than the average market value of a Class A subordinate
                        share of the
                        Company for each of the periods shown in the table. The number
                        of excluded
                        options was 18,255,009, 22,140,883 and 13,194,520 for the
                        years ended
                        September 30, 2006, 2005 and 2004, respectively. The number
                        of excluded
                        warrants was nil for the year ended September 30, 2006 and
                        was 2,113,041
                        for both years ended September 30, 2005 and 2004.
 12.
              Amortization
 
 **200****6**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Amortization
                        of capital assets
                    
                    
                    **35,138**
                    
                    
                    41,420
                    
                    
                    46,804Amortization
                        of contract costs related to transition costs
                    
                    
                    **14,914**
                    
                    
                    14,502
                    
                    
                    9,633Amortization
                        of ӿnite-life intangibles (note6)
                    
                    
                    **119,717**
                    
                    
                    125,095
                    
                    
                    102,120Impairment
                        of contract costs and finite-life
                        intangibles(1)
                    
                    
                    **997**
                    
                    
                    18,266
                    
                    
                    4,034**170,766**
                    
                    
                    199,283
                    
                    
                    162,591Amortization
                        of contract costs related to incentives (presented as reduction
                        of
                        revenue)
                    
                    
                    **24,294**
                    
                    
                    28,314
                    
                    
                    29,734Impairment
                        of contract costs related to incentives (presented as reduction
                        of
                        revenue)1
                    
                    
                    **2,308**
                    
                    
                    3,336
                    
                    
                    -**197,368**
                    
                    
                    230,933
                    
                    
                    192,325Amortization
                        of other long-term assets (presented in costs of services,
                        selling and
                        administrative and interest on long-term debt)
                    
                    
                    **2,392**
                    
                    
                    1,032393
                    
                    
                    **393****199,760**
                    
                    
                    231,965
                    
                    
                    192,718
  (1) The
              impairment of contract costs and finite-life intangibles relate to
              certain
              non-performing assets that are no longer expected to provide future
              value.
   2006
                  Annual Report CGI Group Inc.
 42
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 13.
              Restructuring costs related to specific items
 
 On
              March 29, 2006, the
              Company announced a restructuring plan impacting members located primarily
              in
              MontrÉal
              and
              Toronto, of which a significant portion was related to lower than expected
              BCE
              work volumes. Approximately 1,000 positions were eliminated as of September
              30, 2006. Under
              the terms of the contract agreement signed on January 12, 2006 between
              BCE and
              the Company, BCE agreed to share in severance costs applicable to head
              count
              reductions in excess of 100 positions, up to a maximum of $10,000,000.
 
 Total
              restructuring costs related to specific items to be incurred will approximate
              $90,000,000, of which $57,000,000 (net of the BCE contribution) will
              be for
              severance and $33,000,000 for the consolidation and closure of facilities.
              The
              amount of $90,000,000 will be split by segments as follows: $70,300,000
              for IT
              services, $8,000,000 for BPS and $11,700,000 for Corporate.
 
 The
              following table shows the details of the restructuring costs related
              to specific
              items recorded in the statement of earnings during the year ended September
              30,
              2006:
  **SEVERANCE**
                    
                    **CONSOLIDATION
                        AND CLOSURE OF FACILITIES**
                    
                    **TOTAL**$
                    
                    $
                    
                    $IT
                        services
                    
                    
                    **50,734**
                    
                    
                    **12,747**
                    
                    
                    **63,481**BPS
                    
                    
                    **2,343**
                    
                    
                    **315**
                    
                    
                    **2,658**Corporate
                    
                    
                    **7,894**
                    
                    
                    **2,754**
                    
                    
                    **10,648**Restructuring
                        costs related to specific items
                    
                    
                    **60,971**
                    
                    
                    **15,816**
                    
                    
                    **76,787**BCE
                        contribution(1)
                    
                    
                    **(9,521**
                    **)**
                    
                    **-**
                    
                    
                    **(9,521**
                    **)**Total
                        restructuring costs related to specific items
                    
                    
                    **51,450**
                    
                    
                    **15,816**
                    
                    
                    **67,266**
  (1) The
              amount receivable from BCE at September 30, 2006 amounts to
              $2,177,000.
  The
              following table shows the components of the restructuring provision,
              included in
              accrued compensation, in accounts payable and accrued liabilities as
              well as in
              accrued integration charges and other long-term liabilities:
  **SEVERANCE**
                    
                    **CONSOLIDATION
                        AND CLOSURE OF FACILITIES**
                    
                    **TOTAL**$
                    
                    $
                    
                    $Balance,
                        October 1, 2005
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -New
                        restructuring costs related to specific items
                    
                    
                    **60,971**
                    
                    
                    **15,816**
                    
                    
                    **76,787**Foreign
                        currency translation adjustment
                    
                    
                    **60**
                    
                    
                    **(33**
                    **)**
                    
                    **27**Payments
                        during 2006
                    
                    
                    **(52,429**
                    **)**
                    
                    **(9,027**
                    **)**
                    
                    **(61,456**
                    **)**Non-cash
                        portion of restructuring costs related to
                      specific
                        items
                    
                    
                    **-**
                    
                    
                    **(1,311**
                    **)**
                    
                    **(1,311**
                    **)****Balance,
                        September 30, 2006(1)**
                    
                    
                    **8,602**
                    
                    
                    **5,445**
                    
                    
                    **14,047**
 (1)
                    Of
                        the total balance remaining, $8,602,000 is included in accrued
                        compensation, $3,855,000 is included in accounts payable
                        and accrued
                        liabilities and $1,590,000 is included in accrued integration
                        charges and
                        other long-term liabilities.
   2006
                  Annual Report CGI Group Inc.
 43
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 14.
              Sale of right
 
 On
              June 15, 2005, the Company entered into an arrangement with a financial
              institution. Under this arrangement, in exchange for cash consideration
              of
              $13,500,000, the Company sold a right to access the Company’s Canadian Credit
              Union (“Credit Union”) clients allowing the financial institution to offer them
              its business solutions. A portion of this consideration in the amount
              of
              $2,500,000 has been recorded as long-term deferred revenue, included
              in accrued
              integration charges and other long-term liabilities, and will be reversed
              to
              earnings upon certain conditions being met. Additional consideration,
              up to a
              maximum of $10,000,000, may be received by the Company based on the
              number of
              Credit Union clients transitioning to the financial institution’s business
              solutions. The Company will continue to support or provide services
              to the
              Credit Unions with its current solutions and methodologies until this
              transition
              is completed. As a result of the above transaction, contract costs
              and business
              solutions relating to the Credit Unions in the amount of $5,106,000
              and
              $4,495,000, respectively, were impaired and included in amortization
              expense.
  15.
              Income taxes
 
 The
                        income tax provision is as follows:**2006**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Current
                    
                    
                    **105,198**
                    
                    
                    78,476
                    
                    
                    57,615Future
                    
                    
                    **(34,225**
                    **)**
                    
                    35,650
                    
                    
                    55,626**70,973**
                    
                    
                    114,126
                    
                    
                    113,241
  The
              Company’s effective income tax rate differs from the combined Federal and
              Provincial Canadian statutory tax rate as follows:
  **200****6**
                    
                    2005
                    
                    2004%
                    
                    %
                    
                    %Canadian
                        statutory tax rate
                    
                    
                    **31.****7**
                    
                    
                    31.0
                    
                    
                    31.5Effect
                        of provincial and foreign tax rate differences
                    
                    
                    **2.5**
                    
                    
                    3.7
                    
                    
                    2.1Benefit
                        arising from investment in subsidiaries
                    
                    
                    **(4.0**
                    **)**
                    
                    (3.1
                    )
                    
                    (1.9
                    )Non-deductible
                        stock options
                    
                    
                    **1.9**
                    
                    
                    1.9
                    
                    
                    2.9Other
                        non-deductible items
                    
                    
                    **1.0**
                    
                    
                    0.3
                    
                    
                    0.8Impact
                        on future tax assets and liabilities resulting from tax rate
                        changes
                    
                    
                    **(0.9**
                    **)**
                    
                    -
                    
                    
                    -Valuation
                        allowance relating to tax benefits on losses
                    
                    
                    **-**
                    
                    
                    0.1
                    
                    
                    0.9Other
                    
                    
                    **0.4**
                    
                    
                    0.3
                    
                    
                    1.6Effective
                        income tax rate
                    
                    
                    **32.6**
                    
                    
                    34.2
                    
                    
                    37.9
 
  2006
                  Annual Report CGI Group Inc.
 44
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
  Future
                            income tax assets and liabilities are as follows at September
                            30:**2006**
                        
                        2005$
                        
                        $Future
                            income tax assets:Accrued
                            integration charges and accounts payable and accrued
                            liabilities
                        
                        
                        **29,676**
                        
                        
                        37,373Tax
                            benefits on losses carried forward
                        
                        
                        **78,901**
                        
                        
                        82,132Capital
                            assets, contract costs and finite-life intangibles and
                            other long-term
                            assets
                        
                        
                        **2,194**
                        
                        
                        946Accrued
                            compensation
                        
                        
                        **21,516**
                        
                        
                        19,263Allowance
                            for doubtful accounts
                        
                        
                        **1,359**
                        
                        
                        2,241Share
                            issue costs
                        
                        
                        **1,394**
                        
                        
                        2,865Other
                        
                        
                        **5,766**
                        
                        
                        4,628**140,806**
                        
                        
                        149,448Future
                            income tax liabilities:Capital
                            assets, contract costs and finite-life intangibles and
                            other long-term
                            assets
                        
                        
                        **240,552**
                        
                        
                        253,134Work
                            in progress
                        
                        
                        **14,536**
                        
                        
                        28,092Goodwill
                        
                        
                        **15,577**
                        
                        
                        10,699Refundable
                            tax credits on salaries
                        
                        
                        **26,545**
                        
                        
                        32,400Other
                        
                        
                        **3,996**
                        
                        
                        15,043**301,206**
                        
                        
                        339,368Valuation
                            allowance
                        
                        
                        **24,641**
                        
                        
                        27,507Future
                            income taxes, net
                        
                        
                        **(185,041**
                        **)**
                        
                        (217,427
                        )Future
                            income taxes are classfied as follows:$
                        
                        
                        $Current
                            future income tax assets
                        
                        
                        **33,728**
                        
                        
                        22,118Long-term
                            future income tax assets
                        
                        
                        **25,127**
                        
                        
                        46,601Current
                            future income tax liabilities
                        
                        
                        **(30,384**
                        **)**
                        
                        (47,163
                        )Long-term
                            future income tax liabilities
                        
                        
                        **(213,512**
                        **)**
                        
                        (238,983
                        )Future
                            income tax liabilities, net
                        
                        
                        **(185,041**
                        **)**
                        
                        (217,427
                        )
 
 At
              September 30, 2006, the Company had $213,614,000 in non-capital losses
              carried
              forward, which expire at various dates to 2022. The Company recognized
              a future
              tax asset of $78,901,000 on the non-capital losses carried forward
              and
              recognized a valuation allowance of $24,641,000 in relation to these
              losses
              where their realization is unlikely. Should this valuation allowance
              be
              reversed, goodwill would be reduced by approximately $23,356,000 and
              income tax
              expense would be reduced by approximately $1,285,000.
 
 Foreign
              earnings of certain of the Company’s subsidiaries would be taxed only upon their
              repatriation to Canada. The Company has not recognized a future income
              tax
              liability for these retained earnings as management does not expect
              them to be
              repatriated. A future income tax liability will be recognized when
              the Company
              expects that it will recover those undistributed earnings in a taxable
              matter,
              such as the sale of the investment or through the receipt of dividends.
              On
              remittance, certain countries impose withholding taxes that, subject
              to certain
              limitations, are then available for use as tax credits against a federal
              or
              provincial income tax liability, if any.
   2006
                  Annual Report CGI Group Inc.
 45
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 16.
              Costs of services, selling and administrative
 
 Tax
              credits netted against costs of services, selling and administrative
              are as
              follows:
  ******200****6**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Costs
                        of services, selling and administrative
                    
                    
                    **3,059,424**
                    
                    
                    3,218,668
                    
                    
                    2,739,927Tax
                        credits (note3)
                    
                    
                    **(62,903**
                    **)**
                    
                    (67,110
                    )
                    
                    (62,531
                    )**2,996,521**
                    
                    
                    3,151,558
                    
                    
                    2,677,396
 
 17.
              Investments in subsidiaries and joint ventures
 
 For
              all business acquisitions, the Company began recording the results
              of operations
              of the acquired entities as of their respective effective acquisition
              dates.
  2006
              TRANSACTIONS
 **A)
              ACQUISITIONS**
 The
              Company made the following acquisitions:
 -
                    Plaut
                        Consulting SAS (“Plaut”) - On June 1, 2006, the Company acquired all of
                        the outstanding shares of a French management and technology
                        consulting
                        firm. Recognized for its expertise in implementing SAP solutions,
                        Plaut
                        guides its worldwide clients through organizational and information
                        systems transformation projects.-
                    Pangaea
                        Systems Inc. (“Pangaea”) - On March 1, 2006, the Company acquired all of
                        the outstanding shares of an information technology services
                        company based
                        in Alberta, Canada. Pangaea specializes in development of
                        internet-based
                        solutions and related services mostly in the public sector,
                        as well as in
                        the energy and financial services sectors.-
                    ERS
                        Informatique Inc. (“ERS”) - On April 7, 2006, one of the Company’s joint
                        ventures acquired all outstanding shares of an information
                        technology
                        services company based in Québec,
                        Canada.
                        ERS specializes in software development of applications mostly
                        in the
                        public sector.
 The
              acquisitions were accounted for using the purchase method. The purchase
              price
              allocations shown below are preliminary and based on the Company’s management’s
              best estimates. The final purchase price allocations are expected to
              be
              completed as soon as the Company’s management has gathered all the significant
              information believed to be available and considered necessary in order
              to
              finalize these allocations.
  **PLAUT**
                      
                      **OTHER**
                      
                      **TOTAL**$
                      
                      $
                      
                      $Non-cash
                          working capital items
                      
                      
                      (**580**
                      **)**
                      
                      **(2,298**
                      **)**
                      
                      **(2,878**
                      **)**Capital
                          assets
                      
                      
                      **28**
                      
                      
                      **656**
                      
                      
                      **684**Customer
                          relationships and other
                      
                      
                      **5,565**
                      
                      
                      **358**
                      
                      
                      **5,923**Goodwill(1)
                      
                      
                      **11,328**
                      
                      
                      **6,742**
                      
                      
                      **18,070**Assumption
                          of long-term debt
                      
                      
                      **-**
                      
                      
                      **(80**
                      **)**
                      
                      **(80**
                      **)**Future
                          income taxes
                      
                      
                      **1,698**
                      
                      
                      **738**
                      
                      
                      **2,436**d
                      
                      
                      **18,039**
                      
                      
                      **6,116**
                      
                      
                      **24,155**Assumption
                          of bank indebtedness
                      
                      
                      (**300**
                      **)**
                      
                      **(49**
                      **)**
                      
                      **(349**
                      **)**Net
                          assets acquired
                      
                      
                      **17,739**
                      
                      
                      **6,067**
                      
                      
                      **23,806**ConsiderationCash
                      
                      
                      **16,052**
                      
                      
                      **5,161**
                      
                      
                      **21,213**Holdback
                          payable
                      
                      
                      **1,242**
                      
                      
                      **516**
                      
                      
                      **1,758**Acquisition
                          costs****
                      
                      
                      **445**
                      
                      
                      **390**
                      
                      
                      **835****17,739**
                      
                      
                      **6,067**
                      
                      
                      **23,806**
  (1)
              Goodwill is not deductible for tax purposes.
  In
              connection with the acquisitions completed in 2006, the Company has
              adopted
              certain plans to restructure and integrate the acquired businesses.
              Consequently, the Company established provisions related to leases
              for premises
              occupied by the acquired businesses, which the Company plans to vacate,
              in the
              amount of $936,000, as well as costs related to the planned termination
              of
              certain employees of the acquired businesses performing functions already
              available through its existing structure, in the amount of $1,518,000.
  **B)
              DISPOSALS**
 On
              December 31, 2005, the Company disposed of its electronic switching
              assets to
              Everlink Payment Services Inc. for cash consideration of $27,559,000.
              The net
              assets disposed of included goodwill of $13,172,000 and the transaction
              resulted
              in a gain of $10,475,000.
   2006
                  Annual Report CGI Group Inc.
 46
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 **C)
              BALANCE OF INTEGRATION CHARGES**
 For
              American Management Systems, Incorporated (“AMS”) and COGNICASE Inc.
              (“Cognicase”), the components of the integration charges related to business
              acquisitions included in accounts payable and accrued liabilities and
              accrued
              integration charges and other long-term liabilities are as follows:
  **CONSOLIDATIO****N****AN****D**
                        **CLOSUR****E****O****F****FACILITIE****S**
                      
                      **SEVERANC****E**
                      
                      **TOTA****L**$
                      
                      $
                      
                      $Balance,October1,2005
                      
                      
                      **57,118**
                      
                      
                      **5,194**
                      
                      
                      **62,312**Adjustments
                          to initial provision(1)
                      
                      
                      **(10,188**
                      **)**
                      
                      **(1,688**
                      **)**
                      
                      **(11,876**
                      **)**Foreign
                          currency translation adjustment
                      
                      
                      **(998**
                      **)**
                      
                      **152**
                      
                      
                      **(846**
                      **)**Paid
                          during 2006
                      
                      
                      **(10,922**
                      **)**
                      
                      **(1,371**
                      **)**
                      
                      **(12,293**
                      **)****Balance****,****Septembe****r****30****,****2006(2)**
                      
                      
                      **35,010**
                      
                      
                      **2,287**
                      
                      
                      **37,297**
  (1)
              Have been recorded as a decrease of goodwill.
 (2)
              Of the total balance remaining, $8,212,000 is included in accounts
              payable and
              accrued liabilities and $29,085,000 is included in accrued integration
              charges
              and other long-term liabilities.
  **D)
              MODIFICATIONS TO PURCHASE PRICE ALLOCATIONS**
 The
              Company modified the purchase price allocations and made adjustments
              relating to
              certain business acquisitions resulting in a net decrease of future
              income tax
              assets, integration charges and cash of $4,477,000, $8,661,000 and
              $1,087,000,
              respectively, and a net increase of customer relationships, long-term
              debt and
              non-cash working capital items of $325,000, $463,000 and $3,533,000,
              respectively, whereas goodwill decreased by $6,492,000.
  **E)
              CONSIDERATION OF PURCHASE PRICE**
 During
              the year 2006, the Company paid balances of purchase price relating
              to certain
              business acquisitions resulting in a net decrease of long-term debt
              by
              $2,136,000.
  2005
              TRANSACTIONS
 **A)
              ACQUISITIONS**
 The
              Company increased its interest in one of its joint ventures and made
              five
              acquisitions of which the most significant were the following:
 -
                    AGTI
                        Services Conseils Inc. (“AGTI”) - On December 1, 2004, the Company
                        purchased the remaining outstanding shares of a Montréal-based
                        information technology consulting enterprise specializing
                        in business and
                        IT consulting, project and change management and productivity
                        improvement.
                        The acquisition was accounted for as a step-by-step purchase.
                        The Company
                        previously held 49% of the outstanding shares of AGTI and
                        accounted for
                        its investment using proportionate consolidation.-
                    MPI
                        Professionals (“MPI”) - On August 10, 2005, the Company acquired
                        substantially all of the assets of MPI. MPI provides management
                        solutions
                        for the financial services sector.-
                    Silver
                        Oak Partners Inc. (“Silver Oak”) - On September 2, 2005, the Company
                        acquired all outstanding shares of Silver Oak. Silver Oak
                        is a leading
                        provider of spend management solutions to both the government
                        and
                        commercial sectors.
   2006
                  Annual Report CGI Group Inc.
 47
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 17.
              Investments in subsidiaries and joint ventures (continued)
 
 The
              acquisitions were accounted for using the purchase method. The purchase
              price
              allocations shown below are preliminary and based on the Company’s management’s
              best estimates. The Company has subsequently completed its purchase
              price
              allocations and these modifications are presented in Note d of the
              year
              subsequent to the acquisition.
  AGTI
                      
                      OTHER
                      
                      TOTAL$
                      
                      $
                      
                      $Non-cash
                          working capital items
                      
                      
                      (1,302
                      )
                      
                      (397
                      )
                      
                      (1,699
                      )Capital
                          assets
                      
                      
                      368
                      
                      
                      521
                      
                      
                      889Internal
                          software
                      
                      
                      9
                      
                      
                      17
                      
                      
                      26Business
                          solutions
                      
                      
                      -
                      
                      
                      7,315
                      
                      
                      7,315Customer
                          relationships and other
                      
                      
                      17,493
                      
                      
                      7,918
                      
                      
                      25,411Goodwill(1)
                      
                      
                      32,471
                      
                      
                      19,705
                      
                      
                      52,176Future
                          income taxes
                      
                      
                      (4,561
                      )
                      
                      (2,272
                      )
                      
                      (6,833
                      )44,478
                      
                      
                      32,807
                      
                      
                      77,285Cash
                          acquired
                      
                      
                      2,702
                      
                      
                      2,569
                      
                      
                      5,271Net
                          assets acquired
                      
                      
                      47,180
                      
                      
                      35,376
                      
                      
                      82,556ConsiderationCash
                      
                      
                      47,067
                      
                      
                      26,707
                      
                      
                      73,774Holdback
                          payable
                      
                      
                      -
                      
                      
                      8,450
                      
                      
                      8,450Acquisition
                          costs
                      
                      
                      113
                      
                      
                      219
                      
                      
                      33247,180
                      
                      
                      35,376
                      
                      
                      82,556
  (1)
              Includes $5,649,000 of goodwill deductible for tax purposes.
  In
              connection with the acquisitions completed in 2005, the Company has
              adopted
              certain plans to restructure and integrate the acquired businesses.
              Consequently, the Company established provisions related to leases
              for premises
              occupied by the acquired businesses, which the Company plans to vacate,
              in the
              amount of $2,736,000, as well as costs related to the planned termination
              of
              certain employees of the acquired businesses performing functions already
              available through its existing structure, in the amount of $1,637,000.
  **B)
              DISPOSALS**
 On
              January 25, 2005, the Company disposed of its investment in Nexxlink
              Technologies Inc. at a price of $6.05 per share for total proceeds
              of
              $20,849,000, resulting in a pre-tax gain of $4,216,000. This investment
              had
              previously been accounted for using the equity method resulting in
              an investment
              income of $321,000 and $488,000 in 2005 and 2004, respectively.
 On
              March 8, 2005, the Company disposed of the principal assets of Keyfacts
              Entreprises Canada Inc. (“Keyfacts”), a wholly-owned subsidiary of the Company,
              for proceeds of $3,524,000 of which an outstanding balance of sale
              of $1,000,000
              was received in 2006. The net assets disposed of included goodwill
              of
              $2,082,000. The transaction resulted in a net loss of $1,580,000.
 On
              March 10, 2005, the Company disposed of its U.S. Services to Credit
              Unions
              business and its CyberSuite product line for proceeds of $29,186,000
              (US$24,000,000) for which there is a balance of sale of $2,189,000
              (US$1,800,000). The net assets disposed of, including goodwill of $14,070,000,
              resulted in a net loss of $1,419,000. During the year ended September
              30, 2005,
              a sale price adjustment was made that increased the net loss by $296,000
              (US$239,000) after $174,000 (US$140,000) of tax effect, and reduced
              the balance
              of sale by $470,000 (US$379,000). The balance of sale was received
              in
              2006.
   2006
                  Annual Report CGI Group Inc.
 48
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 **C)
              BALANCE OF INTEGRATION CHARGES**
 For
              AMS and Cognicase, the components of the integration charges related
              to business
              acquisitions included in accounts payable and accrued liabilities and
              accrued
              integration charges and other long-term liabilities are as follows:
  CONSOLIDATIONAND
                        CLOSUREOFFACILITIES
                      
                      SEVERANCE
                      
                      TOTAL$
                      
                      $
                      
                      $Balance,October1,2004
                      
                      
                      68,977
                      
                      
                      20,250
                      
                      
                      89,227Adjustments
                          to initial provision(1)
                      
                      
                      7,091
                      
                      
                      3,230
                      
                      
                      10,321Foreign
                          currency translation adjustment
                      
                      
                      (4,458
                      )
                      
                      (1,096
                      )
                      
                      (5,554
                      )Paid
                          during 2005
                      
                      
                      (14,492
                      )
                      
                      (17,190
                      )
                      
                      (31,682
                      )Balance,September30,2005(2)
                      
                      
                      57,118
                      
                      
                      5,194
                      
                      
                      62,312
  (1)
                    Have
                        been recorded as an increase of goodwill.(2)
                    Of
                        the total balance remaining, $21,596,000 is included in accounts
                        payable
                        and accrued liabilities and $40,716,000 is included in accrued
                        integration
                        charges and other long-term liabilities.
 
 **D)
              MODIFICATIONS TO PURCHASE PRICE ALLOCATIONS**
 The
              Company modified the purchase price allocations and made adjustments
              relating to
              certain business acquisitions resulting in a net decrease of non-cash
              working
              capital items and capital assets of $23,080,000 and $1,895,000, respectively,
              and a net increase of future income tax assets, finite-life intangibles
              and
              other long-term assets and cash of $6,227,000, $17,648,000 and $2,606,000,
              respectively, whereas goodwill decreased by $1,506,000. Also, $12,500,000
              of
              goodwill, arising from the acquisition of AMS, was reallocated from
              the IT
              services line of business to the BPS line of business.
  2004
              TRANSACTIONS
 **A)
              ACQUISITIONS**
 The
              Company made the following acquisitions:
 -
                    AMS
                        - On May 3, 2004, the Company acquired all outstanding shares
                        of AMS, a
                        business services and IT consulting firm to the government,
                        healthcare,
                        financial services and communications industries.-
                    Other
                        - On October 28, 2003, the Company acquired all outstanding
                        shares of Apex
                        Consulting Group Inc, a business service, that provides systems
                        integration and consulting with a focus on business process
                        improvement
                        and new technologies. On January 14, 2004, it also acquired
                        certain assets
                        of GDS & Associates Systems Ltd., which provides systems integration
                        and consulting services to clients primarily within the government
                        sector.
 
  2006
                  Annual Report CGI Group Inc.
 49
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 17.
              Investments in subsidiaries and joint ventures (continued)
 
 The
              acquisitions were accounted for using the purchase method. The purchase
              price
              allocations shown below are preliminary and based on the Company’s management’s
              best estimates. The Company has subsequently completed its purchase
              price
              allocations and these modifications are presented in Note d of the
              year
              subsequent to the acquisition.
  AMS
                            
                            OTHER
                            
                            TOTAL$
                            
                            $
                            
                            $Non-cash
                                working capital items
                            
                            
                            (200,439
                            )
                            
                            (936
                            )
                            
                            (201,375
                            )Capital
                                assets
                            
                            
                            13,475
                            
                            
                            459
                            
                            
                            13,934Internal
                                software
                            
                            
                            7,129
                            
                            
                            -
                            
                            
                            7,129Business
                                solutions
                            
                            
                            83,814
                            
                            
                            -
                            
                            
                            83,814Software
                                licenses
                            
                            
                            7,916
                            
                            
                            -
                            
                            
                            7,916Customer
                                relationships and other
                            
                            
                            177,800
                            
                            
                            3,452
                            
                            
                            181,252Other
                                long-term assets
                            
                            
                            3,881
                            
                            
                            -
                            
                            
                            3,881Future
                                income taxes
                            
                            
                            13,659
                            
                            
                            12
                            
                            
                            13,671Goodwill(1)
                            
                            
                            549,519
                            
                            
                            6,940
                            
                            
                            556,459Assumption
                                of long-term debt
                            
                            
                            -
                            
                            
                            (70
                            )
                            
                            (70
                            )Accrued
                                integration charges and other long-term liabilities
                            
                            
                            (72,760
                            )
                            
                            -
                            
                            
                            (72,760
                            )583,994
                            
                            
                            9,857
                            
                            
                            593,851Cash
                                acquired
                            
                            
                            616,237
                            
                            
                            224
                            
                            
                            616,461Net
                                assets acquired
                            
                            
                            1,200,231
                            
                            
                            10,081
                            
                            
                            1,210,312ConsiderationCash
                            
                            
                            1,179,156
                            
                            
                            8,449
                            
                            
                            1,187,605Acquisition
                                costs
                            
                            
                            21,075
                            
                            
                            612
                            
                            
                            21,687Issuance
                                of 136,112 Class A subordinate shares(2)
                            
                            
                            -
                            
                            
                            1,020
                            
                            
                            1,0201,200,231
                            
                            
                            10,081
                            
                            
                            1,210,312
  (1)
                    Includes
                        $35,749,000 of goodwill deductible for tax purposes.(2)
                    The
                        value of the shares issued as consideration for the business
                        acquisition
                        was determined using the average closing share price on the
                        TSX over a
                        reasonable period before and after the date the terms of
                        the business
                        combination were agreed to and announced.
 
 In
              connection with the acquisitions completed in 2004, the Company has
              adopted
              certain plans to restructure and integrate the acquired businesses.
              Consequently, the Company established provisions related to leases
              for premises
              occupied by the acquired businesses, which the Company plans to vacate,
              in the
              amount of $43,290,000, as well as costs related to the planned termination
              of
              certain employees of the acquired businesses performing functions already
              available through its existing structure, in the amount of $96,981,000.
  **B)
              DISPOSALS**
 The
              Company sold the assets related to the information services of the
              banking and
              investment group, one of the divisions presented in the discontinued
              operations,
              for cash consideration of $47,000,000, which resulted in a gain on
              sale of
              $11,217,000 after tax and a goodwill reduction of $20,355,000.
 The
              Company sold three other divisions that were classified as discontinued
              operations for a total consideration of $40,350,000, which is comprised
              of cash
              consideration of $17,560,000, a balance of sale of $6,000,000, an
              interest-bearing note of $2,750,000, an assumption of liabilities of
              $540,000
              and $13,500,000 of shares of Nexxlink Technologies Inc. These transactions
              resulted in a loss of approximately $1,400,000.
 The
              Company sold its interest in a joint venture and non-significant assets
              for cash
              consideration of $4,260,000, net of $4,235,000 of cash disposed. These
              transactions resulted in a nominal gain.
   2006
                  Annual Report CGI Group Inc.
 50
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 **C)
              BALANCE OF INTEGRATION CHARGES**
 For
              AMS and Cognicase, the components of the integration charges related
              to business
              acquisitions included in accounts payable and accrued liabilities and
              accrued
              integration charges and other long-term liabilities are as follows:
  CONSOLIDATIONAND
                      CLOSUREOFFACILITIES
                    
                    SEVERANCE
                    
                    TOTAL$
                    
                    $
                    
                    $Balance,October1,2003
                    
                    
                    41,029
                    
                    
                    9,580
                    
                    
                    50,609New
                        integration charges
                    
                    
                    43,102
                    
                    
                    96,360
                    
                    
                    139,462Adjustments
                        to initial provision(1)
                    
                    
                    678
                    
                    
                    (5,963
                    )
                    
                    (5,285
                    )Foreign
                        currency translation adjustment
                    
                    
                    (3,028
                    )
                    
                    (6,817
                    )
                    
                    (9,845
                    )Paid
                        during 2004
                    
                    
                    (12,804
                    )
                    
                    (72,910
                    )
                    
                    (85,714
                    )Balance,September30,2004(2)
                    
                    
                    68,977
                    
                    
                    20,250
                    
                    
                    89,227
  (1)
              Have been recorded as a reduction of goodwill.
 (2)
              Of the total balance remaining, $37,631,000 is included in accounts
              payable and
              accrued liabilities and $51,596,000 is included in accrued integration
              charges
              and other long-term liabilities.
  **D)
              MODIFICATIONS TO PURCHASE PRICE ALLOCATIONS**
 The
              Company modified the purchase price allocations and made adjustments
              relating to
              certain business acquisitions resulting in a net decrease of goodwill
              of
              $11,326,000 and a net increase of non-cash working capital items, future
              income
              taxes and cash of $8,058,000, $115,000 and $3,153,000, respectively.
  18.
              Discontinued operations
 
 There
              were no operations discontinued in 2006.
 On
              March 8, 2005, the Company disposed of the principal assets of Keyfacts,
              a
              wholly-owned subsidiary of the Company. Keyfacts is a provider of information
              search and retrieval services for investigative purposes.
 Also,
              on March 10, 2005, the Company disposed of its U.S. Services to Credit
              Unions
              business and its CyberSuite product line. U.S. Services to Credit Unions
              was a
              provider of back-office banking processing services for credit unions
              in the
              United States.
 
 The
              following table presents summarized financial information related to
              discontinued operations:
  **2006**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Revenue
                    
                    
                    -
                    
                    
                    17,495
                    
                    
                    77,930Operating
                        expenses
                    
                    
                    -
                    
                    
                    12,585
                    
                    
                    56,955Amortization
                    
                    
                    -
                    
                    
                    610
                    
                    
                    3,708Earnings
                        before income taxes
                    
                    
                    -
                    
                    
                    4,300
                    
                    
                    17,267Income
                        taxes
                    
                    
                    -
                    
                    
                    7,510
                    
                    
                    8,612Net
                        (loss) gain from discontinued operations
                    
                    
                    -
                    
                    
                    (3,210
                    )
                    
                    8,655Net
                        cash provided by operating activities
                    
                    
                    -
                    
                    
                    759
                    
                    
                    2,924Net
                        cash provided by investing activities
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,174Net
                        cash used in financing activities
                    
                    
                    **-**
                    
                    
                    -
                    
                    
                    (30
                    )Net
                        cash and cash equivalents provided by discontinued operations
                    
                    
                    -
                    
                    
                    759
                    
                    
                    4,068
  Discontinued
              operations were included in the BPS segment in 2005 and in both BPS
              and IT
              segments in 2004. As at September 30, 2005, operating expenses from
              discontinued
              operations were reduced by pre-tax gains from disposal of $5,012,000
              ($17,267,000 in 2004). Also, the income tax expense does not bear a
              normal
              relation to earnings before income taxes since the sale included goodwill
              of
              $16,152,000, which had no tax basis ($23,658,000 in 2004).
  2006
                  Annual Report CGI Group Inc.
 51
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 19.
              Joint ventures: supplementary information
 
 The
              Company’s proportionate share of its joint venture investees’ operations
              included in the consolidated financial statements is as follows:
  **200****6**
                      
                      2005$
                      
                      $BALANCE
                          SHEETS
                        Current
                          assets
                        Non-current
                          assets
                        Current
                          liabilities
                        Non-current
                          liabilities
                      
                      
                      
                      
                      
                      **41,646**
                        **16,407**
                        **18,285**
                        **2,029**
                      
                      
                      53,559
                        19,429
                        29,069
                        7,226**2006**
                      
                      
                      2005
                      
                      
                      2004$
                      
                      
                      $
                      
                      
                      $STATEMENTS
                          OF EARNINGSRevenue
                      
                      
                      **90,122**
                      
                      
                      86,916
                      
                      
                      138,570Expenses
                      
                      
                      **82,191**
                      
                      
                      78,011
                      
                      
                      129,923Net
                          earnings
                      
                      
                      **7,931**
                      
                      
                      8,905
                      
                      
                      8,647STATEMENTS
                          OF CASH FLOWSCash
                          provided by (used in):Operating
                          activities
                      
                      
                      **1,578**
                      
                      
                      28,634
                      
                      
                      5,247Investing
                          activities
                      
                      
                      **(13,955**
                      **)**
                      
                      (23,205
                      )
                      
                      (17,008
                      )Financing
                          activities
                      
                      
                      **1,430**
                      
                      
                      8,147
                      
                      
                      599
  FINANCING
              LEASE
 On
              November 1, 2002, one of the Company’s joint ventures, acting as the lessor,
              entered into a 50-month lease agreement for information, system and
              technology
              assets, as part of an existing outsourcing contract with one of its
              major
              clients. This agreement was accounted for as a direct financing lease.
              As at
              September 30, 2006, the remaining balance of $1,796,000 is included
              in prepaid
              expenses and other current assets. As at September 30, 2005, $12,434,000
              was
              included in prepaid expenses and other current assets and $1,788,000
              was
              included in finite-life intangibles and other long-term assets. The
              effective
              interest rate of the lease agreement is 5.02%.
  20.
              Supplementary cash flow information
 
 a)
              Net change in non-cash working capital items is as follows for the
              years ended
              September 30:
  **200****6**
                      
                      2005
                      
                      2004$
                      
                      $
                      
                      $Accounts
                          receivable
                      
                      
                      **6,771**
                      
                      
                      62,687
                      
                      
                      41,151Work
                          in progress
                      
                      
                      **14,659**
                      
                      
                      (1,150
                      )
                      
                      (25,211
                      )Prepaid
                          expenses and other current assets
                      
                      
                      **(12,010**
                      **)**
                      
                      13,921
                      
                      
                      1,238Accounts
                          payable and accrued liabilities
                      
                      
                      **(16,956**
                      **)**
                      
                      (89,503
                      )
                      
                      (96,537
                      )Accrued
                          compensation
                      
                      
                      **3,699**
                      
                      
                      (3,601
                      )
                      
                      (39,143
                      )Deferred
                          revenue
                      
                      
                      **(14,848**
                      **)**
                      
                      13,519
                      
                      
                      16,892Income
                          taxes
                      
                      
                      **11,314**
                      
                      
                      (6,449
                      )
                      
                      (109,766
                      )**(7,371**
                      **)**
                      
                      (10,576
                      )
                      
                      (211,376
                      )
   2006
                  Annual Report CGI Group Inc.
 52
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
  b)
              Non-cash operating, investing and financing activities related to continuing
              operations are as follows for the years ended September 30:
  **2006**
                      
                      2005
                      
                      2004$
                      
                      $
                      
                      $Operating
                          activitiesPrepaid
                          expenses and other current assets
                      
                      
                      **(3,006**
                      **)**
                      
                      -
                      
                      
                      -Accounts
                          payable and accrued liabilities
                      
                      
                      **(524**
                      **)**
                      
                      7,185
                      
                      
                      -Accrued
                          integration charges and other long-term liabilities
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      7,583**(3,530**
                      **)**
                      
                      7,185
                      
                      
                      7,583Investing
                          activitiesBusiness
                          acquisitions
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      (1,020
                      )Proceeds
                          from sale of assets and businesses
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      13,500Purchase
                          of capital assets
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      (1,393
                      )Payment
                          of contract costs
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      (7,583
                      )Proceeds
                          from disposal of finite-life intangibles
                      
                      
                      **3,006**
                      
                      
                      (11,050
                      )
                      
                      (13,500
                      )**3,006**
                      
                      
                      (11,050
                      )
                      
                      (9,996
                      )Financing
                          activitiesIncrease
                          in obligations under capital leases
                      
                      
                      **-**
                      
                      
                      11,050
                      
                      
                      1,393Issuance
                          of shares
                      
                      
                      **-**
                      
                      
                      **-**
                      
                      
                      1,020Repurchase
                          of Class A subordinate shares
                      
                      
                      **524**
                      
                      
                      (7,185
                      )
                      
                      **-****524**
                      
                      
                      3,865
                      
                      
                      2,413
  c)
              Interest paid and income taxes paid are as follows for the years ended
              September
              30:
 **200****6**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Interest
                        paid
                    
                    
                    **40,255**
                    
                    
                    17,965
                    
                    
                    21,477Income
                        taxes paid
                    
                    
                    **61,365**
                    
                    
                    66,534
                    
                    
                    143,405
 
 21.
              Segmented information
 
 The
              Company has two lines of business (“LOB”), IT services and BPS’, in addition to
              Corporate services. The focus of these LOBs is as follows:
 -
                    The
                        IT services LOB provides a full-range of IT services, including
                        systems
                        integration, consulting and outsourcing to clients located
                        in North
                        America, Europe and Asia Pacific. The Company professionals
                        and centers of
                        excellence facilities in North America, Europe and India
                        also provide IT
                        and BPS services to clients as an integral part of our homeshore,
                        nearshore and offshore delivery model..-
                    Services
                        provided by the BPS LOB include business processing for the
                        financial
                        services sector, as well as other services such as payroll
                        and document
                        management services.
 
  2006
                  Annual Report CGI Group Inc.
 53
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 21.
              Segmented information (continued)
 
 The
              following presents information on the Company’s operations based on its
              management structure:
  **2006****I****T****SERVICE****S**
                      
                      **BPS**
                      
                      **CORPORATE**
                      
                      **TOTAL**$
                      
                      $
                      
                      $
                      
                      $Revenue
                      
                      
                      **3,061,513**
                      
                      
                      **416,110**
                      
                      
                      **-**
                      
                      
                      **3,477,623**Earnings
                          (loss) before interest on long-term debt, other income,
                          gain on sale of
                          assets, restructuring costs related to specific items and
                          income
                          taxes(1)
                      
                      
                      **334,044**
                      
                      
                      **55,207**
                      
                      
                      **(78,915**
                      **)**
                      
                      **310,336**Total
                          assets
                      
                      
                      **2,861,325**
                      
                      
                      **599,021**
                      
                      
                      **231,686**
                      
                      
                      **3,692,032**
 (1)
              Amortization included in IT services, BPS and Corporate is $165,522,000,
              $22,556,000 and $11,682,000, respectively, as at September 30, 2006.
  2005ITSERVICES
                    
                    BPS
                    
                    CORPORATE
                    
                    TOTALRevenue
                    
                    $
                    3,239,656
                    
                    $
                    446,330
                    
                    $
                    -
                    
                    $
                    3,685,986Earnings
                        (loss) before interest on long-term debt, other income, gain
                        on sale and
                        earnings from an investment in an entity subject to significant
                        influence,
                        income taxes and discontinued operations(1)
                    
                    
                    360,379
                    
                    
                    70,401
                    
                    
                    (84,635
                    )
                    
                    346,145Total
                        assets
                    
                    
                    2,938,386
                    
                    
                    676,626
                    
                    
                    371,647
                    
                    
                    3,986,659
 (1)
              Amortization included in IT services, BPS and Corporate is $191,002,000,
              $30,921,000 and $10,042,000, respectively, as at September 30, 2005.
  2004ITSERVICES
                    
                    BPS
                    
                    CORPORATE
                    
                    TOTAL$$
                    
                    
                    
                    $$Revenue
                    
                    
                    2,721,306
                    
                    
                    428,764
                    
                    
                    -
                    
                    
                    3,150,070Earnings
                        (loss) before interest on long-term debt, other income, gain
                        on sale and
                        earnings from an investment in an entity subject to significant
                        influence,
                        income taxes and discontinued operations(1)
                    
                    
                    326,043
                    
                    
                    72,394
                    
                    
                    (88,354
                    )
                    
                    310,083Total
                        assets
                    
                    
                    3,283,949
                    
                    
                    708,649
                    
                    
                    323,917
                    
                    
                    4,316,515
 (1)
              Amortization included in IT services, BPS and Corporate is $168,931,000,
              $15,904,000 and $7,883,000, respectively, as at September 30, 2004.
  The
              following table provides information for capital assets based on the
              LOBs:
  **2006**
                    
                    2005$
                    
                    $Capital
                        assetsIT
                        services
                    
                    
                    **77,155**
                    
                    
                    70,693BPS
                    
                    
                    **12,584**
                    
                    
                    15,595Corporate
                    
                    
                    **30,293**
                    
                    
                    30,100**120,032**
                    
                    
                    116,388
  The
              accounting policies of each segment are the same as those described
              in the
              summary of significant accounting policies (see Note 2). The figures
              are
              presented net of intersegment sales and transfers, which are priced
              as if the
              sales or transfers were to third parties.
 
  2006
                  Annual Report CGI Group Inc.
 54
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 GEOGRAPHIC
              INFORMATION
 The
              following table sets out certain geographic market information based
              on the
              client’s location:
 
  **2006**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $RevenueCanada
                    
                    
                    **2,092,026**
                    
                    
                    2,211,191
                    
                    
                    2,161,818United
                        States
                    
                    
                    **1,151,260**
                    
                    
                    1,195,346
                    
                    
                    797,411Europe
                        and Asia Pacific
                    
                    
                    **234,337**
                    
                    
                    279,449
                    
                    
                    190,841**3,477,623**
                    
                    
                    3,685,986
                    
                    
                    3,150,070
  Capital
              assets and goodwill are not disclosed by geographic areas as this financial
              information is not used to produce the general purpose financial statements.
              All
              the Company’s business units share the capital asset infrastructure; therefore,
              providing geographic information for capital assets and goodwill is
              impracticable .
  22.
              Related party transactions
 
 At
              September 30, 2005, BCE exercised significant influence over the Company’s
              operating, financing and investing activities through its 29.75% ownership
              interest and through the business volume originating from BCE, together
              with its
              subsidiaries and affiliates. On December 16, 2005, the Company reached
              an
              agreement with BCE, which was finalized on January 12, 2006, to purchase
              100,000,000 of Class A subordinate shares of the Company. As a consequence,
              BCE
              lost its significant influence over the Company’s operating, financing and
              investing activities. During the period from October 1, 2005 to January
              12,
              2006, the Company generated revenue of $126,108,000 and purchased BCE’s services
              for $26,471,000. During 2006, the volume
              of business with that party, its subsidiaries and affiliatesrepresented
              11.9% of total Company revenue.
 Transactions
              and resulting balances for the previous years, which were measured
              at commercial
              rate (exchange amount), are presented below:
  2005
                    
                    2004$
                    
                    $Revenue
                    
                    
                    526,935
                    
                    
                    516,968Purchase
                        of services
                    
                    
                    121,184
                    
                    
                    99,881Accounts
                        receivable
                    
                    
                    21,632
                    
                    
                    16,730Work
                        in progress
                    
                    
                    14,209
                    
                    
                    5,894Contract
                        costs
                    
                    
                    14,103
                    
                    
                    17,916Accounts
                        payable and accrued liabilities
                    
                    
                    1,018
                    
                    
                    8,343Deferred
                        revenue
                    
                    
                    1,978
                    
                    
                    1,249
  In
              the normal course of business, the Company is party to contracts with
              Innovapost, a joint venture, pursuant to which the Company is its preferred
              IT
              supplier. The Company exercises significant influence over Innovapost’s
              operating, financing and investing activities through its 49% ownership
              interest.
 Transactions
              and resulting balances, which were measured at commercial rate (exchange
              amount), are presented below:
  **200****6**
                      
                      2005
                      
                      2004$
                      
                      $
                      
                      $Revenue
                      
                      
                      **100,994**
                      
                      
                      102,699
                      
                      
                      94,607Accounts
                          receivable
                      
                      
                      **9,490**
                      
                      
                      4,112
                      
                      
                      3,622Work
                          in progress
                      
                      
                      **1,528**
                      
                      
                      1,290
                      
                      
                      1,988Prepaid
                          expenses and other current assets
                      
                      
                      **-**
                      
                      
                      2,019
                      
                      
                      1,815Contract
                          costs
                      
                      
                      **16,239**
                      
                      
                      17,301
                      
                      
                      19,696Accounts
                          payable and accrued liabilities
                      
                      
                      **147**
                      
                      
                      1,254
                      
                      
                      1,113Deferred
                          revenue
                      
                      
                      **509**
                      
                      
                      **-**
                      
                      
                      946
 
  2006
                  Annual Report CGI Group Inc.
 55
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 22.
              Related party transactions (continued)
 
 On
              December 5, 2005, the Company leased a private aircraft for business
              purposes
              from a leasing company that had acquired it from a limited partnership
              of which
              a director of the Company is the sole limited partner. The transaction
              was
              measured at the exchange amount, which was supported by independent
              evidence at
              the date of the transaction.
  23.
              Employee future benefits
 
 Generally,
              the Company does not offer pension plan or post-retirement benefits
              to its
              employees with the exception of the following:
 Underwriters
              Adjustment Bureau Ltd. (“UAB”) maintained a post-employment benefits plan to
              cover the former UAB retired employees. The post-employment benefits
              liability
              totaled $6,117,000 and $6,584,000, as at September 30, 2006 and 2005.
              There was
              no related expense for the years ended September 30, 2006, 2005 and
              2004.
 With
              the acquisition of AMS, the Company assumed defined contribution pension
              plans.
              For the years ended September 30, 2006, 2005 and 2004, the plan expense
              was
              $4,076,000, $5,373,000 and $2,059,000, respectively.
 The
              Company maintains a 401(k) defined contribution plan covering substantially
              all
              U.S. employees. The Company matches employees’ contributions to a
              max imum
              of $1,000 per year. For the years ended September 30, 2006, 2005 and
              2004, the
              amounts of th e
              Company’s contributions were $4,697,000, $5,634,000 and $2,784,000,
              respectively.
 The
              Company maintains a non-qualified deferred compensation plan covering
              some of
              its U.S. management. A trust was established so that the plan assets
              could be
              segregated; however, the assets are subject to the Company's general
              creditors
              in the case of bankruptcy. The assets, composed of investments, vary
              with
              employees’ contributions and changes in the value of the investments. The change
              in liability associated with the plan is equal to the change of the
              assets.
  24.
              Commitments, contingencies and guarantees
 
 A)
              COMMITMENTS
 At
              September 30, 2006, the Company is committed under the terms of operating
              leases
              with various expiration dates, primarily for the rental of premises
              and computer
              equipment used in outsourcing contracts, in the aggregate amount of
              approximately $1,134,709,000. Minimum lease payments due in the next
              five years
              are as follows:
 
 $2007
                    
                    
                    205,1742008
                    
                    
                    155,2862009
                    
                    
                    117,8862010
                    
                    
                    94,9532011
                    
                    
                    73,025
  The
              Company entered into long-term service agreements representing a total
              commitment of $202,939,000. Minimum payments under these agreements
              due in each
              of the next five years are as follows:
 
 $2007
                    
                    
                    66,7142008
                    
                    
                    35,7492009
                    
                    
                    44,5192010
                    
                    
                    31,7162011
                    
                    
                    14,795
  2006
                  Annual Report CGI Group Inc.
 56
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
  B)
              CONTINGENCIES
 From
              time to time, the Company is involved in various litigation matters
              arising in
              the ordinary course of its business. The Company has no reason to believe
              that
              the disposition of any such current matter could reasonably be expected
              to have
              a materially adverse impact on the Company’s financial position, results of
              operations or the ability to carry on any of its business activities.
  C)
              GUARANTEES
 **SALE
              OF ASSETS AND BUSINESS DIVESTITURES**
 In
              connection with the sale of assets and business divestitures, the Company
              may be
              required to pay counterparties for costs and losses incurred as the
              result of
              breaches in representations and warranties, intellectual property right
              infringement and litigation against counterparties. While some of the
              agreements
              specify a maximum potential exposure of approximately $108,500,000
              in total,
              others do not specify a maximum amount or limited period. It is impossible
              to
              reasonably estimate the maximum amount that may have to be paid under
              such
              guarantees. The amounts are dependent upon the outcome of future contingent
              events, the nature and likelihood of which cannot be determined at
              this time. No
              amount has been accrued in the consolidated balance sheets relating
              to this type
              of indemnification as at September 30, 2006. The Company does not expect
              to
              incur any potential payment in connection with these guarantees that
              could have
              a materially adverse effect on its consolidated financial statements.
  **U.S.
              GOVERNMENT CONTRACTS**
 The
              Company is engaged to provide services under contracts with the U.S.
              Government.
              The contracts are subject to extensive legal and regulatory requirements
              and,
              from time to time, agencies of the U.S. Government investigate whether
              the
              Company’s operations are being conducted in accordance with these requirements.
              Generally, the Government has the right to change the scope of, or
              terminate,
              these projects at its convenience. The termination, or reduction in
              the scope,
              of a major government project could have a materially adverse effect
              on the
              results of operations and financial condition of the Company.
  **OTHER
              TRANSACTIONS**
 In
              the normal course of business, the Company may provide certain clients,
              principally governmental entities, with bid and performance bonds.
              In general,
              the Company would only be liable for the amount of the bid bonds if
              the Company
              refuses to perform the project once the bid is awarded. The Company
              would also
              be liable for the performance bonds in the event of default in the
              performance
              of its obligations. As at September 30, 2006, the Company provided
              for a total
              of $72,923,000 of these bonds. The Company believes it is in compliance
              with its
              performance obligations under all service contracts for which there
              is a
              performance or bid bond, and the ultimate liability, if any, incurred
              in
              connection with these guarantees would not have a materially adverse
              effect on
              the Company’s consolidated results of operations or financial
              condition.
 In
              addition, the Company provides a guarantee of $5,900,000 of the residual
              value
              of a leased property, accounted for as an operating lease, at the expiration
              of
              the lease term.
  25.
              Financial instruments
 
 The
              Company periodically uses various financial instruments to manage its
              exposure
              to foreign currency risk, but does not hold or issue such financial
              instruments
              for trading purposes.
  FAIR
              VALUE
 At
              September 30, 2006 and 2005, the estimated fair values of cash and
              cash
              equivalents, accounts receivable, work in progress and accounts payable
              and
              accrued liabilities approximate their respective carrying values.
 The
              estimated fair value of long-term debt, with the exception of Senior
              U.S.
              unsecured notes, is not significantly different from its respective
              carrying
              value at September 30, 2006 and 2005.
 The
              fair value of Senior U.S. unsecured notes, estimated by discounting
              expected
              cash flows at rates currently offered to the Company for debts of the
              same
              remaining maturities and conditions, is $204,593,000.
  INTEREST
              RATE RISK
 The
              Company is exposed to interest rate risk on a portion of its long-term
              debt and
              does not currently hold any financial instruments that mitigate this
              risk.
              Management does not believe that the impact of interest rate fluctuations
              will
              be significant.
  CREDIT
              RISK
 Financial
              instruments that potentially subject the Company to concentrations
              of credit
              risk consist of cash equivalents and accounts receivable. The cash
              equivalents
              consist mainly of short-term investments, such as money market deposits.
              The
              Company has deposited the cash equivalents with reputable financial
              institutions, from which management believes the risk of loss to be
              remote. The
              Company has accounts receivable from clients engaged in various industries
              including governmental agencies, finance, telecommunications, manufacturing
              and
              utilities, that are not concentrated in any specific geographic area.
              These
              specific industries may be affected by economic factors that may impact
              accounts
              receivable. Management does not believe that any single industry or
              geographic
              region represents significant credit risk. Credit risk concentration
              with
              respect to trade receivables is limited due to the Company’s large client base.
  CURRENCY
              RISK
 The
              Company operates internationally and is exposed to risk from changes
              in foreign
              currency rates. The Company mitigates this risk principally through
              foreign debt
              and forward contracts. During 2004, the Company designated its US$192,000,000
              Senior U.S. unsecured notes as the hedging instrument for a part of
              the
              Company’s net investment in self-sustaining foreign subsidiaries, for which
              foreign currency translation gains or losses have been recorded under
              the
              foreign currency
  2006
                  Annual Report CGI Group Inc.
 57
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 25.
              Financial instruments (continued)
 
 translation
              adjustment. Realized or unrealized gains or losses on financial instruments
              have
              also been recorded under the same caption, as they qualify for hedge
              accounting.
 There
              were no outstanding forward contracts as at September 30, 2006, 2005
              and 2004.
              Realized and unrealized foreign exchange gains and losses in relation
              to forward
              contracts for each of the years in the three-year period ended September
              30,
              2006, were not significant.
 The
              consolidated balance sheets include significant foreign financial assets,
              such
              as cash and cash equivalents and accounts receivable, as well as significant
              foreign financial liabilities, such as accounts payable and accrued
              liabilities
              of $114,449,000, $180,646,000 and $174,138,000, respectively, as of
              September
              30, 2006 ($116,238,000, $173,686,000 and $162,167,000, respectively,
              as of
              September 30, 2005). As at
  September
              30, 2006, the cash and cash equivalents, accounts receivable and accounts
              payable and accrued liabilities denominated in U.S. dollars amount
              to
              US$27,179,000, US$122,566,000 and US$114,812,500, respectively. For
              the same
              date, the cash and cash equivalents, accounts receivable and accounts
              payable
              and accrued liabilities denominated in euros amount to €25,990,000, € 19,330,000
              and €19,685,500, respectively.
  
 26.
              Reconciliation of results reported in accordance with Canadian GAAP
              to U.S.
              GAAP
 
 The
              material differences between Canadian and U.S. GAAP affecting the Company’s
              consolidated financial statements are detailed as follows:
  **2006**
                      
                      2005
                      
                      2004$
                      
                      $
                      
                      **$**Reconciliation
                          of net earnings:Net
                          earnings - Canadian GAAP
                      
                      
                      **146,533**
                      
                      
                      216,488
                      
                      
                      194,041Adjustments
                          for:Stock-based compensation (i)
                      
                      
                      **-**
                      
                      
                      20,554
                      
                      
                      25,559Warrants (ii)
                      
                      
                      **1,405**
                      
                      
                      1,405
                      
                      
                      1,405Unearned compensation (iii)
                      
                      
                      **-**
                      
                      
                      -
                      
                      
                      (794
                      )Other
                      
                      
                      **1,238**
                      
                      
                      (665
                      )
                      
                      (1,999
                      )Net
                          earnings - U.S. GAAP
                      
                      
                      **149,176**
                      
                      
                      237,782
                      
                      
                      218,212Basic
                          and diluted EPS - U.S. GAAP
                      
                      
                      **0.41**
                      
                      
                      0.54
                      
                      
                      0.52Reconciliation
                          of shareholders’ equity:Shareholders’
                          equity - Canadian GAAP
                      
                      
                      **1,748,020**
                      
                      
                      2,494,690
                      
                      
                      2,461,862Adjustments
                          for:Stock-based compensation (i)
                      
                      
                      **58,411**
                      
                      
                      58,411
                      
                      
                      37,857Warrants (ii)
                      
                      
                      **(5,075**
                      **)**
                      
                      (6,480
                      )
                      
                      (7,885
                      )Unearned compensation (iii)
                      
                      
                      **(3,694**
                      **)**
                      
                      (3,694
                      )
                      
                      (3,694
                      )Integration costs (iv)
                      
                      
                      **(6,606**
                      **)**
                      
                      (6,606
                      )
                      
                      (6,606
                      )Goodwill (v)
                      
                      
                      **28,078**
                      
                      
                      28,078
                      
                      
                      28,078Income taxes and adjustment for change in accounting policy
                          (vi)
                      
                      
                      **9,715**
                      
                      
                      9,715
                      
                      
                      9,715Other
                      
                      
                      **(8,225**
                      **)**
                      
                      (9,463
                      )
                      
                      (8,798
                      )Shareholders’
                          equity - U.S. GAAP
                      
                      
                      **1,820,624**
                      
                      
                      2,564,651
                      
                      
                      2,510,529
  **(i)
              Stock-based compensation**
 Under
              Canadian GAAP, stock-based compensation cost was accounted for using
              the fair
              value based method beginning October 1, 2004. Under U.S. GAAP, the
              Statement of
              Financial Accounting Standard (“SFAS”) No. 123 (revised 2004), “Share-Based
              Payment”, did not require adoption of this standard until fiscal years beginning
              on or after June 15, 2005. The 2005 and 2004 adjustments represent
              the charge to
              consolidated net earnings recorded for Canadian GAAP purposes as no
              such expense was recorded or required under U.S. GAAP. Beginning
              October 1, 2005, there is no difference between Canadian and U.S. GAAP
              in
              connection to stock-based compensation cost.
  **(ii)
              Warrants**
 Under
              Canadian GAAP, the fair value of warrants issued in connection with
              long-term
              outsourcing contracts is recorded as contract costs and amortized on
              a
              straight-line basis over the initial contract term. Under U.S. GAAP,
              the fair
              value of equity instruments issued was subtracted from the initial
              proceeds
              received in determining revenue. The 2006, 2005 and 2004 adjustments
              reflect the
              reversal of contract cost amortization, net of income taxes, which
              is included
              as a reduction to Canadian GAAP consolidated net earnings.
   2006
                  Annual Report CGI Group Inc.
 58
  YEARS
              ENDED SEPTEMBER 30, 2006, 2005 AND 2004
 *(tabular
              amounts only are in thousands of Canadian dollars, except share
              data*
 
 **(iii)
              Unearned compensation**
 Under
              Canadian GAAP, prior to July 1, 2001, unvested stock options granted
              as a result
              of a business combination were not recorded. The adjustment reflects
              the
              intrinsic value of unvested stock options (see (v) below) that would
              have been
              recorded as a separate component of shareholders’ equity for U.S. GAAP purposes.
              This unearned compensation was amortized over approximately three years,
              being
              the estimated remaining future vesting service period.
  **(iv)
              Integration costs**
 Under
              Canadian GAAP, prior to January 1, 2001, certain restructuring costs
              relating to
              the purchaser may be recognized in the purchase price allocation when
              accounting
              for business combinations, subject to certain conditions. Under U.S.
              GAAP, only
              costs relating directly to the acquired business may be considered
              in the
              purchase price allocation. This adjustment represents the charge to
              consolidated
              net earnings, net of goodwill amortization in 2001, recorded for Canadian
              GAAP
              purposes and net of income taxes.
  **(v)
              Goodwill**
 The
              goodwill adjustment to shareholders’ equity results principally from the
              difference in the value assigned to stock options issued to IMRglobal
              Corp.
              employees. Under Canadian GAAP, the fair value of the outstanding vested
              stock
              options is recorded as part of the purchase price allocation whereas
              under U.S.
              GAAP, the fair value of both vested and unvested outstanding stock
              options
              granted as a result of the business acquisition is recorded. See (iii)
              above for
              a further discussion relating to this item.
  **(vi)
              Income taxes and adjustment for change in accounting policy**
 On
              October 1, 1999, the Company adopted the recommendations of CICA Handbook
              Section 3465, “Income taxes”. The recommendations of Section 3465 are similar to
              the provisions of SFAS No. 109, “Accounting for Income Taxes”, issued by the
              Financial Accounting Standards Board (“FASB”). Upon the implementation of
              Section 3465, the Company recorded an adjustment to reflect the difference
              between the assigned value and the tax basis of assets acquired in
              a business
              combination, which resulted in future income tax liabilities. The Company
              recorded this amount through a reduction of retained earnings as part
              of the
              cumulative adjustment. Under U.S. GAAP, this amount would have been
              reflected as
              additional goodwill.
  **(vii)
              Comprehensive income**
 Cumulative
              other comprehensive income is comprised solely of foreign currency
              translation
              adjustments resulting from translating the financial statements of
              foreign
              subsidiaries.
  The
              following table represents comprehensive income in accordance with
              SFAS No. 130,
“Reporting Comprehensive Income”:
  **200****6**
                    
                    2005
                    
                    2004$
                    
                    $
                    
                    $Net
                        earnings - U.S. GAAP
                    
                    
                    **149,176**
                    
                    
                    237,782
                    
                    
                    218,212Other
                        comprehensive incomeForeign
                        currency translation adjustment
                    
                    
                    **(38,440**
                    **)**
                    
                    (92,124
                    )
                    
                    (69,157
                    )Comprehensive
                        income
                    
                    
                    **110,736**
                    
                    
                    145,658
                    
                    
                    149,055
 
 **(viii)
              Proportionate consolidation**
 The
              proportionate consolidation method is used to account for interests
              in joint
              ventures. Under U.S. GAAP, entities in which the Company owns a majority
              of the
              share capital would be fully consolidated, and those which are less
              than
              majority-owned, but over which the Company exercises significant influence,
              would be accounted for using the equity method. This would result in
              reclassifications in the consolidated balance sheets and statements
              of earnings
              as at September 30, 2006 and 2005, and for each of the years in the
              three-year
              period ended September 30, 2006. However, the differences in the case
              of
              majority-owned joint ventures were not considered material and have
              consequently
              not been presented (see Note 19). In accordance with practices prescribed
              by the
              U.S. Securities and Exchange Commission (“SEC”), the Company has elected, for
              the purpose of this reconciliation, to account for interests in joint
              ventures
              using the proportionate consolidation method.
  **(ix)
              Share issue costs**
 As
              permitted under Canadian GAAP, the Company’s share issue costs are charged to
              retained earnings. For U.S. GAAP purposes, share issue costs are recorded
              as a
              reduction of the proceeds raised from the issuance of capital stock.
  **(x)
              Recent and future accounting changes**
 In
              March 2005, the FASB issued FASB Interpretation No. 47, (“FIN 47”), “Accounting
              for Conditional Asset Retirement Obligations, an Interpretation of
              SFAS No.
              143”. FIN 47 requires an entity to recognize a liability for the fair value
              of a
              conditional asset retirement obligation in the period in which it is
              incurred if
              the liability’s fair value can be reasonably estimated. The adoption of FIN
              47 did not have any impact on the consolidated financial
              statements.
 
 In
              July 2006, the FASB issued FASB
              Interpretation No. 48, (“FIN 48”), “Accounting for Uncertainty in Income Taxes”,
              effective for fiscal years beginning after December 15, 2006. FIN
              48 describes the accounting for income taxes by prescribing the minimum
              recognition threshold a tax position must meet before being recognized
              in the
              financial statements. The Interpretation also provides guidance on
              derecognition, measurement, classification, interest and penalties,
              accounting
              in interim periods, disclosure and transition. The Company is currently
              evaluating the impact of the adoption of this new section on the consolidated
              financial statements, but does not expect the impact to be material.
  2006
                  Annual Report CGI Group Inc.
 59




Management’s
        Discussion and Analysis of
 Financial
        Position and Results of Operations
  FOR
        THE
        YEAR ENDED SEPTEMBER 30, 2006
 *November
        14, 2006*
 
 BASIS
        OF PRESENTATION
 Throughout
        this document, CGI Group Inc. is referred to as “CGI”, “we”, “our” or “Company”.
        This management’s discussion and analysis of financial position and results of
        operations (“MD&A”) should be read in conjunction with the audited
        consolidated financial statements for the years ended September 30, 2006,
        2005
        and 2004 and the notes to the financial statements of this annual report.
        CGI’s
        accounting policies are in accordance with Canadian generally accepted
        accounting principles (“GAAP”) of the Canadian Institute of Chartered
        Accountants (“CICA”). These differ in some respects from GAAP in the United
        States (“US GAAP”). All dollar amounts are in Canadian dollars unless otherwise
        indicated.
  FORWARD-LOOKING
        STATEMENTS
 All
        statements in this MD&A that do not directly and exclusively relate to
        historical facts constitute “forward-looking statements” within the meaning of
        that term in Section 27A of the United States Securities Act of 1933, as
        amended, and Section 21E of the United States Securities Exchange Act of
        1934,
        as amended, and are “forward-looking information” within the meaning of
        sections 138.3 and following of the Ontario Securities Act. These
        statements and this information represent CGI’s intentions, plans, expectations
        and beliefs, and are subject to risks, uncertainties and other factors, of
        which
        many are beyond the control of the Company. These factors could cause actual
        results to differ materially from such forward-looking statements or
        forward-looking information. These factors include and are not restricted
        to the
        timing and size of new contracts, acquisitions and other corporate developments;
        the ability to attract and retain qualified members; market competition in
        the
        rapidly-evolving information technology industry; general economic and business
        conditions, foreign exchange and other risks identified in the MD&A, in
        CGI’s Annual Report or Form 40-F filed with the U.S. Securities and
        Exchange Commission (filed on EDGAR at www.sec.gov), the Company’s Annual
        Information Form filed with the Canadian securities authorities (filed on
        SEDAR
        at www.sedar.com), as well as assumptions regarding the foregoing. The words
        “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan,” and
        similar expressions and variations thereof, identify certain of such
        forward-looking statements or forward-looking information, which speak only
        as
        of the date on which they are made. In particular, statements relating to
        future
        performance are forward-looking statements and forward-looking information.
        CGI
        disclaims any intention or obligation to publicly update or revise any
        forward-looking statements or forward-looking information, whether as a result
        of new information, future events or otherwise. Readers are cautioned not
        to
        place undue reliance on these forward-looking statements or on this
        forward-looking information. You will find more information about the risks
        that
        could cause our actual results to significantly differ from our current
        expectations in the Risks and Uncertainties section.
  NON-GAAP
        MEASURES
 The
        Company reports its financial results in accordance with GAAP. However, in
        this
        MD&A certain non-GAAP financial measures are used, which
        include:
 1.
              Earnings
                  before restructuring costs related to specific items, interest
                  on
                  long-term debt, other income-net, gain on sale and earnings from
                  an
                  investment in an entity subject to significant influence, gain
                  on sale of
                  assets, income taxes and net gain or (loss) from discontinued operations
                  (“adjusted EBIT”) and2.
              Net
                  earnings from continuing operations prior to restructuring costs
                  related
                  to specific items.
  Adjusted
        EBIT is used by our management as a measure of our operating performance
        as it
        provides information that can be used to evaluate the effectiveness of our
        business from an operational perspective. A reconciliation of this item to
        its
        closest GAAP measure can be found on page 8.
  Net
        earnings from continuing operations prior to restructuring costs related
        to
        specific items is used by our management as a measure of our operating
        performance excluding restructuring activities. A reconciliation of this
        item to
        its closest GAAP measure can be found on page 10.
  Management
        believes that these non-GAAP measures provide useful information to investors
        regarding the Company’s financial condition and results of operations as they
        provide additional measures of its performance. They also provide investors
        with
        measures of performance to compare our results between periods without regards
        to specified items. These non-GAAP measures do not have any standardized
        meaning
        prescribed by GAAP and are therefore unlikely to be comparable to similar
        measures presented by other issuers. They should be considered as supplemental
        in nature and not a substitute for the related financial information prepared
        in
        accordance with GAAP.
  CORPORATE
          OVERVIEW
 Headquartered
          in Montréal, Canada, CGI provides end-to-end information technology services
          (commonly referred to as IT services) and business process services (“BPS”) to
          clients worldwide, utilizing a highly
 
 2006
              Annual Report CGI Group Inc.
 4
  customized,
        cost efficient delivery model. The Company’s delivery model provides for work to
        be carried out onsite at client premises, or through one of its centers of
        excellence located in North America, Europe and India. We also have a number
        of
        leading business solutions that support long-term client relationships. Our
        services are generally broken down as:
 -
              Consulting
                  - CGI provides a full range of IT and management consulting services,
                  including business transformation, IT strategic planning, business
                  process
                  engineering and systems architecture.-
              Systems
                  integration - CGI integrates and customizes leading technologies
                  and
                  software applications to create IT systems that respond to clients’
                  strategic needs.-
              Management
                  of IT and business functions (outsourcing) - Clients delegate entire
                  or
                  partial responsibility for their IT or business functions to CGI
                  to
                  achieve significant savings and access the best information technology,
                  while retaining control over strategic IT and business functions.
                  As part
                  of such agreements, we implement our quality processes and best-of-breed
                  practices to improve the efficiency of the clients’ operations. We also
                  integrate clients’ operations into our technology network. Finally, we may
                  hire clients’ IT and specialized professionals, enabling them to focus on
                  mission critical operations. Services provided as part of an outsourcing
                  contract may include development and integration of new projects
                  and
                  applications; applications maintenance and support; technology
                  management
                  (enterprise and end-user computing and network services); transaction
                  and
                  business processing for the financial services sector, as well
                  as other
                  services such as payroll and document management services. Outsourcing
                  contracts typically have terms from five to ten years and are
                  renewable.
  Our
        operations are managed through two lines of business (“LOB”), in addition to
        Corporate services, namely: IT services and BPS. The focus of these LOB’s is as
        follows:
 -
              The
                  IT services LOB provides a full range of services, including systems
                  integration, consulting and outsourcing, to clients located in
                  North
                  America, Europe and Asia Pacific. Our professionals and centers
                  of
                  excellence facilities in North America, Europe and India also provide
                  IT
                  and BPS services to clients as an integral part of our homeshore,
                  nearshore and offshore delivery model.-
              Services
                  provided by the BPS LOB include business processing for the financial
                  services sector, as well as other services such as payroll and
                  document
                  management services.
  COMPETITIVE
        ENVIRONMENT
 CGI
        operates as a global end-to-end provider of information technology and business
        process services in a competitive and rapidly evolving global industry. As
        such,
        its competition is global in nature and comprise a variety of players, from
        the
        niche markets of specific industry work to other global players, mainly in
        the
        US, Europe and India, competing for some or all of the services we provide.
        Because of the rapid growth experienced by the Company over the last several
        years, particularly the successful acquisition and integration of American
        Management Systems (“AMS”), CGI is now invited to participate in larger,
        more complex deals than it had in the past.
  CGI
        combines a decentralized, metro markets business structure with a global
        delivery model, resulting in IT and business process services that are both
        highly responsive to client needs and highly cost competitive. As per CGI’s
        delivery model, work may be carried out onsite at client premises, or through
        one of CGI’s centers of excellence located in North America, Europe and India.
        CGI also has a number of leading business solutions that support long-term
        client relationships. However, all operations are carried out according to
        the
        same Management Foundation, thus ensuring consistency and cohesion.
  There
        are
        many factors in winning and retaining IT and business process services
        contracts. These include a service provider’s total cost of services, its
        ability to deliver, track record, vertical sector expertise, investment in
        business solutions, local presence, global delivery capability, and the strength
        of the client-provider relationship. We believe that we compare favorably
        based
        on these factors. Our value proposition includes our end-to-end IT and business
        process services capability, our expertise and proprietary business solutions
        in
        five industry sectors, our global delivery model which includes the industry’s
        leading nearshore services delivery capability, our disciplined management
        foundation, and our client focus which is supported by our metropolitan markets
        business model. We have built critical mass in our three main markets - Canada,
        the U.S. and Europe - which positions us to win large contracts.
  Our
        focus
        is on higher-end systems integration, consulting and outsourcing business
        where
        vertical industry knowledge and expertise is required. We are cost competitive
        in part through our global delivery model which provides clients with a blend
        of
        homeshore, nearshore and offshore delivery which meets their strategic and
        cost
        requirements.
  VISION,
        MISSION, AND STRATEGY
 CGI’s
        vision is to be a world-class IT and BPS leader helping its clients win and
        grow.
  Our
        mission is to help our clients with professional services of outstanding
        quality, competence and objectivity, delivering the best solutions to fully
        satisfy client objectives in information technology, business processes and
        management. In all we do, we foster a culture of partnership, intrapreneurship,
        teamwork and integrity, building a world-class IT and BPS company.
  CGI
          is a
          domain consolidator through its four-pillar growth strategy that combines
          organic growth and acquisitions. The first driver, focused on organic growth,
          is
          comprised of both outsourcing, systems integration and consulting (“SI&C”)
          contract wins, renewals and extensions, at the regional level of our operations.
          We are growing our sales funnel of contract proposals across all of our
          geographic markets.
  The
          second element of our growth strategy is the pursuit of new large outsourcing
          contracts. These contracts can use a blend of onshore, nearshore or offshore
          expertise to leverage our full, end-to-end global delivery capabilities.
          Given
          the Company’s growth rate over the last several years, we have the greater
          critical mass required to bid on large, complex opportunities in North
          America
          and in Europe.
  The
          third
          driver of our growth strategy focuses on acquisitions of smaller firms
          or niche
          players. We identify niche acquisitions through our strategic mapping program
          that systematically searches for targets that could
 
 2006
              Annual Report CGI Group Inc.
 5
 strengthen
        our vertical market knowledge or increase the richness of our service offering.
        Currently, we are focused on acquisitions in our targeted verticals, metro
        markets and expanding our BPS capabilities.
  The
        fourth pillar focuses on larger acquisitions to build geographic presence
        and
        critical mass in order to further qualify us for larger outsourcing deals.
        CGI
        has a disciplined approach to its growth strategy, focused on increasing
        shareholder value and earnings accretion. Currently, we are focusing on the
        U.S.
        and Western Europe.
  DEVELOPMENTS
        IN 2006
 Since
        the
        end of fiscal 2005, CGI has invested $926.1 million in repurchasing its own
        stock, and signed approximately $4.0 billion in new contracts, extensions
        and renewals. These ranged up to $1.1 billion in value and ten years in
        duration and span across our targeted verticals. So fiscal 2006 was not without
        its successes for our Company but it was, nonetheless, a year marked by two
        over-arching challenges. First, lower than expected revenue and work volumes
        from our largest client, BCE Inc. (“BCE”), which impacted our revenue by
        $114.7 million in fiscal 2006. Second, the strengthening Canadian dollar
        had a negative impact of $106.4 million on our fiscal 2006 revenue compared
        with fiscal 2005. Despite the combined year-over-year variance of
        $221.1 million on the top line of these two elements, we were able to
        offset the profitability impact and guard our bottom line with the acceleration
        of our global delivery model, cost reductions, and productivity improvements,
        as
        part of the plan announced in the second quarter of 2006. This program will
        be
        completed at the end of first quarter of 2007, when the Company expects to
        reach
        the annualized run rate of approximately $90 million in savings related to
        our plan.
  ADJUSTMENTS
        TO SENIOR MANAGEMENT
 Serge
        Godin, previously Chairman of the Board and Chief Executive Officer (“CEO”) took
        the position of Executive Chairman of CGI in January 2006, and the Board
        appointed Michael E. Roach, previously President and Chief Operating Officer,
        as
        President and Chief Executive Officer of CGI, reporting to the Executive
        Chairman.
  In
        July
        of 2006, André Imbeau, previously Executive Vice-President and Chief Financial
        Officer (“CFO”), was appointed Executive Vice-Chairman and Corporate Secretary
        of CGI. In his new role, André works closely with Serge Godin and focus on
        strategic initiatives leading to value creation, such as major transactions
        and
        financing as well as key client relationships. Concurrently, David Anderson,
        previously CGI’s Senior Vice-President and Corporate Controller, was appointed
        to the role of Executive Vice-President and Chief Financial Officer. In this
        capacity, David also joined the CGI Executive Committee, which consists of
        Serge
        Godin, André Imbeau and Michael E. Roach.
  NEW
        CONTRACTS, EXTENSIONS AND RENEWALS
 During
        fiscal 2006, CGI announced new contracts, extensions and renewals totalling
        $4.0 billion including, but not limited to, the following:
 -
              October
                  26, 2005: Two-year project valued at $20 million with the ministère
                  du Revenu du Québec (Québec Revenue Ministry) to adapt and integrate
                  information technology and accounting systems related to the Québec Goods
                  and Services Tax.-
              October
                  27, 2005: Four-year contract renewal valued at $60 million with
                  Alberta Health and Wellness Ministry. This contract extended and
                  expanded
                  upon an agreement announced on January 11, 2001.-
              November
                  22, 2005: Up to five-year business process services contract valued
                  at
                  US$44 million with the Housing Trust Fund Corporation of New York, a
                  division of Housing and Community Renewal, to serve the United
                  States
                  Department of Housing and Urban Development (“HUD”). CGI is the largest
                  HUD processor of its kind in the U.S.-
              December
                  30, 2005: Seven-year contract expected to be up to US$300 million,
                  with two optional three-year renewal periods, with the Commonwealth
                  of
                  Virginia as its private sector partner for a sweeping initiative
                  to
                  transform the state’s business and information technology
                  program.-
              January
                  5, 2006: Multi-year business process services contract valued at
                  US$30 million to $40 million with Medco Health
                  Solutions, Inc. to provide payment, reconciliation and enrollment
                  form processing services.-
              January
                  12, 2006: Extended outsourcing agreement with BCE through June
                  2016.
                  Adding $1.1 billion to the backlog, this extension provides CGI with
                  an important source of recurring revenues.-
              January
                  31, 2006: Seven-year contract valued at $90 million with Royal &
                  Sun Alliance Insurance Company of Canada for infrastructure management
                  services including mainframe and mid-range equipment, as well as
                  data
                  storage and recovery.-
              February
                  1, 2006: Six-year outsourcing agreement with Boston-based OneBeacon
                  Insurance Group. This multi-million dollar business process services
                  insurance contract will include policy administration and
                  CollaborativeEdge ̈,
                  a
                  front-end solution for Massachusetts personal lines agents to streamline
                  data-capture activities.-
              April
                5, 2006: Seven-year contract signings totaling US$100 million by
                leading local governments for its AMS Advantage ̈ERP Suite. The City of New York has committed to implement the latest
                version of AMS Advantage to serve as the foundation for its
                enterprise-wide financial management and budgetary control systems.
                In
                addition, Wake County, North Carolina, has chosen the AMS Advantage
                ERP
                Suite to support the county’s human resources, finance and budget
                systems.-
              April
                6, 2006: Ten-year IT outsourcing contract valued at $130 million with
                Cirque du Soleil to operate and support the evolution of Cirque du
                Soleil’s global technology infrastructure and applications.-
              April
                11, 2006: Seven-year agreement valued at between US$45 million to
                US$75 million to provide Universal Insurance of North America with
                policy and accounting business process services.-
              April
                24, 2006: Two-year IT contract renewal valued at $50 million with the
                Caisse de dépôt et placement du Québec. The services covered by this
                agreement include infrastructure management, production services,
                a
                “one-stop service” call center, office technology support, maintenance of
                a large number of business applications, and the development and
                integration of solutions.-
              June
                7, 2006: Two and a half year contract worth US$10 million with the
                City and County of Honolulu to integrate its web-based
                AMS Advantage ̈ERP Suite to centralize and support core financial and human resources
                processes and systems such as general ledger, accounts payable,
                purchasing, fixed assets, payroll and other related
                services.
  
 2006
              Annual Report CGI Group Inc.
 6
  -
              September
                  28, 2006: Three contract signings in Western Canada totaling more
                  than
                  $20 million including a three-year contract with an option for two
                  additional two year agreements with the City of Calgary, a five-year
                  contract to provide application and server management services
                  with the
                  British Columbia Ministry of Health and a four-year contract to
                  provide
                  Business Intelligence Environment services with the Alberta Ministry
                  of
                  Health and Wellness.
  ACQUISITIONS
 On
        March
        1, 2006, we completed the acquisition of Pangaea Systems Inc. (“Pangaea”)
        for an aggregate consideration of $4.6 million. Pangaea was a privately
        held corporation located in Western Canada, serving mostly public sector
        clients
        as well as clients in the utilities and the financial services
        verticals.
  On
        June
        1, 2006, CGI acquired Paris-based Plaut Consulting SAS (“Plaut”), a management
        and technology-consulting firm with approximately 120 professionals known
        for its SAP expertise serving clients in Europe, for an aggregate consideration
        of $17.7 million.
  DIVESTITURE
 On
        December 31, 2005, we completed the transaction with Everlink Payment Services
        Inc. (“Everlink”), previously announced on October 26, 2005, under which
        the Company divested its electronic switching assets for $27.6 million. As
        a result, a pre-tax gain of $10.5 million was booked in 2006.
  COMPETITIVE
        POSITION STRENGTHENING PROGRAM
 As
        announced on March 29, 2006, the Company has taken measures to reduce the
        overall cost structure and accelerate the expansion of its Global Delivery
        Model
        partially due to lower than expected revenue from BCE. In line with this
        plan,
        approximately 1,000 positions were eliminated this year, primarily located
        in Montreal and Toronto, of which half were related to BCE. The remaining
        headcount reduction stems from other adjustments to CGI’s cost base and includes
        reductions in global and corporate functions.
  The
        expansion of the Global Delivery Model created new positions in our centres
        of
        excellence in Atlantic Canada, southwest Virginia and India, which will
        partially offset the headcount reductions. This exercise allowed the Company
        to
        further reduce its overhead and increase the overall utilization rate of
        its
        workforce.
  A
        pre-tax
        provision of $67.3 million was taken in fiscal 2006, comprised of
        $51.5 million for severance and $15.8 million for consolidation and
        closure of facilities. The remaining estimated provision of $22.7 million
        will be taken over the remainder of calendar 2006. The Company continues
        to
        expect a one-year payback.
  BCE
        SHARE BUYBACK AND REPURCHASE PROGRAM
 On
        December 16, 2005, the Company reached an agreement with BCE to purchase
        for
        cancellation 100 million of its Class A subordinate shares held by BCE at a
        price of $8.59 per share. The transaction was completed on January 12, 2006
        and the shares were cancelled. The purchase price was equal to the
        volume-weighted average price of the Class A subordinate shares on the
        Toronto Stock Exchange for the 20 trading days preceding December 16,
        2005. CGI financed the acquisition price of $859.2 million plus associated
        costs of $6.8 million through cash on hand and utilization of its credit
        facilities. Following this transaction, through an agreement with a bank
        syndicate, our current bank facilities have been increased by
        $200.0 million to stand at $1.0 billion.
  Subsequent
        to the 100 million share repurchase, the Shareholders Agreement with BCE
        was terminated, and its representation on the CGI Board was relinquished.
        As at
        September 30, 2006, BCE’s share ownership represented approximately 2% of CGI’s
        issued and outstanding Class A subordinate voting shares and Class B shares,
        compared to 30% at the end of fiscal 2005.
  Also,
        on
        January 31, 2006, the Company’s Board of Directors authorized the renewal of a
        Normal Course Issuer Bid and the purchase of up to 10% of the public float
        of
        the Company’s Class A subordinate shares during the next year and the Toronto
        Stock Exchange subsequently approved the company request for approval. The
        Issuer Bid enables CGI to purchase on the open market through the Toronto
        Stock
        Exchange up to 29,288,443 Class A subordinate shares for cancellation. The
        Class A subordinate shares may be purchased under the Issuer Bid commencing
        February 3, 2006 and ending no later than February 2, 2007, or on such earlier
        date when the Company completes its purchases or elects to terminate the
        bid.
        Under the terms of the normal course issuer bid, the Company repurchased
        8,374,400 of its Class A subordinates shares for $59,631,507 during
        fiscal 2006 at an average price plus commissions of $7.12. The total Class
        A
        subordinate shares repurchased included 905,100 shares bought for
        cancellation at the end of the year, all of which were cancelled on October
        5,
        2006.
  WARRANTS
 On
          March
          22, 2006, La Fédération des caisses Desjardins du Québec (“Desjardins”)
          exercised a warrant for 4,000,000 Class A subordinate voting shares at a
          price of $6.55 each. This warrant was originally issued by CGI in
          connection with a 10-year outsourcing agreement signed with Desjardins
          in 2001.
          The carrying value of these Class A subordinate shares includes
          $14.3 million which was previously recorded in the Warrants
          caption.
  On
          April
          6, 2006, BCE exercised its warrant for 3,021,096 Class A subordinate
          voting shares and 110,140 Class B shares at a price of $6.55 each. BCE
          received its warrant in accordance with its pre-emptive rights under the
          former
          CGI Shareholders’ Agreement, which was terminated on January 12, 2006. On April
          28, 2006, the Class B shareholders of CGI exercised their warrants for
          435,991 Class B shares at a price of $6.55 each. These warrants were
          related to the same Desjardins warrants exercised during 2006.
  On
          June
          13, 2006, 1,118,210 warrants held by one party with a carrying value of
          $5,384,000 expired. At September 30, 2006, the Company had no further
          warrants outstanding.
 
 2006
              Annual Report CGI Group Inc.
 7
  OVERVIEW
        OF THE YEAR
 SELECTED
        ANNUAL INFORMATION
 CHANGE
              
              CHANGEYEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004
              
              2006/2005
              
              2005/2004Backlog(1)*(in
                  millions of dollars)*
              
              
              12,722
              
              
              12,863
              
              
              12,965
              
              
              -1.1
              %
              
              -0.8
              %Bookings*(in
                  millions of dollars)*
              
              
              3,997
              
              
              3,573
              
              
              3,041
              
              
              11.9
              %
              
              17.5
              %RevenueRevenue*(in
                  ’000 of dollars)*
              
              
              3,477,623
              
              
              3,685,986
              
              
              3,150,070
              
              
              -5.7
              %
              
              17.0
              %Year-over-year
                  revenue growth prior to foreign currency impact
              
              
              -2.8
              %
              
              20.5
              %
              
              23.7
              %ProfitabilityAdjusted
                  EBIT(2)margin
              
              
              8.9
              %
              
              9.4
              %
              
              9.8
              %Net
                  earnings margin prior to restructuring costs
                related
                  to specific items
              
              
              5.5
              %
              
              5.9
              %
              
              6.2
              %Net
                  earnings margin
              
              
              4.2
              %
              
              5.9
              %
              
              6.2
              %Basic
                  and diluted EPS from continuing operations*(in
                  dollars)*
              
              
              0.40
              
              
              0.50
              
              
              0.44
              
              
              (0.10
              )
              
              0.06Basic
                  and diluted EPS from continuing operations prior to
                restructuring
                  costs related to specific items*(in
                  dollars)*
              
              
              0.53
              
              
              0.50
              
              
              0.44
              
              
              0.03
              
              
              0.06Balance
                  sheet*(in
                  ’000 of dollars)*Total
                  assets
              
              
              3,692,032
              
              
              3,986,659
              
              
              4,316,515
              
              
              -7.4
              %
              
              -7.6
              %Total
                  long-term liabilities
              
              
              1,276,462
              
              
              784,297
              
              
              1,078,604
              
              
              62.8
              %
              
              -27.3
              %Cash
                  generation/Financial
                  structureCash
                  provided by continuing operating activities*(in
                  ’000 of dollars)*
              
              
              309,561
              
              
              480,709
              
              
              230,197
              
              
              -35.6
              %
              
              108.8
              %Days
                  sales outstanding(3)
              
              
              52
              
              
              48
              
              
              54
              
              
              4
              
              
              (6
              )Net
                  debt to capitalization ratio(4)
              
              
              27.2
              %
              
              0.3
              %
              
              9.8
              %
  (1)
              Backlog
                  includes new contract wins, extensions and renewals, partially
                  offset by
                  the backlog consumed during the year as a result of client work
                  performed
                  and adjustments related to the volume, cancellation and/or the
                  impact of
                  foreign currencies to our existing contracts. Backlog incorporates
                  estimates from management that are subject to change from time
                  to
                  time.(2)
              Adjusted
                  EBIT is a non-GAAP measure for which we provide a reconciliation
                  to its
                  closest GAAP measure on page 8.(3)
              Days
                  sales outstanding (“DSO”) is obtained by subtracting deferred revenue and
                  tax credits receivable from accounts receivable and work in progress;
                  the
                  result is divided by the fourth quarter revenue over
                  90 days.(4)
              The
                  net debt to capitalization ratio represents the proportion of long-term
                  debt net of cash and cash equivalents over the sum of shareholders’ equity
                  and long-term debt.
 
 FINANCIAL
        REVIEW OF 2006, 2005, AND 2004
 REVENUE
  **Revenue
        Variation**
 YEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004Revenue*(in
                  ’000 of dollars)*
              
              
              3,477,623
              
              
              3,685,986
              
              
              3,150,070Variation
                  prior to foreign currency impact
              
              
              -2.8
              %
              
              20.5
              %
              
              23.7
              %Foreign
                  currency impact
              
              
              -2.9
              %
              
              -3.5
              %
              
              -2.1
              %Variation
                  over previous year
              
              
              -5.7
              %
              
              17.0
              %
              
              21.6
              %
 
 For
        fiscal 2006, revenue was $3,477.6 million. On a constant currency basis,
        revenue declined by 2.8% ($102.0 million) compared with fiscal 2005. The
        variation resulted primarily from a decrease in revenue from BCE, as well
        as the
        ramping down and termination of isolated contracts not meeting our profitability
        standards. These were partially offset by business won from new and existing
        clients, and by the two acquisitions made during fiscal 2006. Revenue in
        the
        year was further impacted by -2.9% due to currency fluctuation with the
        resulting total revenue change for fiscal 2006 being -5.7%.
  For
        fiscal 2005, revenue was $3,686.0 million. On a constant currency basis,
        the growth between 2004 and 2005 was 20.5% ($645.1 million), mainly
        attributable to the full year impact of AMS acquired in May 2004. The
        growth was partially offset by the negative foreign currencies fluctuations
        of
        3.5%, resulting in net revenue growth of 17.0%
        ($535.9 million).
 
 2006
              Annual Report CGI Group Inc.
 8
 **Revenue
        by LOB**
 CHANGE
              
              CHANGEYEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004
              
              2006/2005
              
              2005/2004*(in
                  ’000 of dollars except for percentage)*IT
                  services prior to foreign currency impact
              
              
              3,156,994
              
              
              3,336,398
              
              
              2,721,306Foreign
                  currency impact
              
              
              (95,481
              )
              
              (96,742
              )
              
              -IT
                  services
              
              
              3,061,513
              
              
              3,239,656
              
              
              2,721,306
              
              
              -5.5
              %
              
              19.0
              %BPS
                  prior to foreign currency impact
              
              
              427,032
              
              
              458,793
              
              
              428,764Foreign
                  currency impact
              
              
              (10,922
              )
              
              (12,463
              )
              
              -BPS
              
              
              416,110
              
              
              446,330
              
              
              428,764
              
              
              -6.8
              %
              
              4.1
              %Revenue
              
              
              3,477,623
              
              
              3,685,986
              
              
              3,150,070
              
              
              -5.7
              %
              
              17.0
              %
 
 In
        fiscal
        2006, on a constant currency basis, the change in revenue from our IT services
        LOB reflected mainly lower work volumes from BCE and the ramping down and
        termination of isolated contracts not meeting our profitability standards.
        This
        change was partly offset by business won from new and existing clients as
        well
        as from the two niche acquisitions made during the year.
  In
        2005,
        on a constant currency basis, revenue from IT services increased resulting
        from
        the acquisitions of AMS and AGTI Consulting Services Inc. (“AGTI”) and new
        contracts.
  In
        fiscal
        2006, on a constant currency basis, the change in BPS revenue was primarily
        due
        to the sale of our electronic switching assets in December 2005 and the
        termination of a contract not meeting our profitability standards. These
        were
        partly offset by the ramping up of work in the insurance, government and
        healthcare sectors of the U.S. market.
  In
        2005,
        on a constant currency basis, revenue from BPS increased reflecting the
        acquisition of AMS and new business won in the government, healthcare and
        financial services verticals.
  **Revenue
          Distribution**
 The
          following tables provide additional information regarding our revenue
          mix:
 
  
  **CONTRACT
                    TYPES**
                  
                  **52%**Management
                    of IT and business functions (outsourcing)
                  *-
                    IT services 41%*
                  *-
                    Business process services 11%*
                  **48%**Systems
                    integration and consulting
                
                **GEOGRAPHIC
                    MARKETS**
                  
                  **60%**Canada
                  **33%**United
                    States
                  **7%**Europe
                    and Asia Pacific
                
                **TARGETED
                    VERTICALS**
                  
                  **35%**Financial
                    services
                  **32%**Government
                    and healthcare
                  **20%**Telecommunications
                    and utilities
                  **7%**Manufacturing
                  **6%**Retail
                    and distribution
 
  **BCE
          Revenue**
 In
          fiscal
          2006, BCE, our largest client, represented 11.9% of our revenue, compared
          to
          14.3% in fiscal 2005 and 16.4% in fiscal 2004.
 
 2006
              Annual Report CGI Group Inc.
 9
 OPERATING
        EXPENSES
 AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUE
              
              AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUE
              
              AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUEYEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004
              
              **2006**
              
              2005
              
              2004*(in
                  ’000 of dollars except for percentage)*Costs
                  of services, selling and administrative expenses
              
              
              2,996,521
              
              
              3,151,558
              
              
              2,677,396
              
              
              86.2
              %
              
              85.5
              %
              
              85.0
              %Sale
                  of right
              
              
              -
              
              
              (11,000
              )
              
              -
              
              
              0.0
              %
              
              -0.3
              %
              
              0.0
              %Amortization
                  expensesCapital
                  assets
              
              
              35,138
              
              
              41,420
              
              
              46,804
              
              
              1.0
              %
              
              1.1
              %
              
              1.5
              %Contract
                  costs related to transition costs
              
              
              14,914
              
              
              14,502
              
              
              9,633
              
              
              0.4
              %
              
              0.4
              %
              
              0.3
              %Finite-life
                  intangibles
              
              
              119,717
              
              
              125,095
              
              
              102,120
              
              
              3.4
              %
              
              3.4
              %
              
              3.2
              %Impairment
                  of contract costs and
                finite-life
                  intangibles
              
              
              997
              
              
              18,266
              
              
              4,034
              
              
              0.0
              %
              
              0.5
              %
              
              0.1
              %Total
                  amortization
              
              
              170,766
              
              
              199,283
              
              
              162,591
              
              
              4.9
              %
              
              5.4
              %
              
              5.2
              %
 
 During
        2006, the rapid reduction of the BCE work program adversely impacted our
        cost
        structure. As previously noted, we implemented an action plan to improve
        utilization rates and reduce overhead. For the year, the 86.2% of revenue
        represented by costs of services, selling and administrative expenses do
        not
        fully include the benefit of this action plan. Based on the fourth quarter
        run
        rate, these expenses were 84.4% of revenue, slightly below historical
        averages.
  The
        decrease in amortization expenses was mainly related to a $9.6 million
        impairment charge taken against contract costs and business solutions related
        to
        our Canadian credit unions business and to an impairment charge of
        $8.7 million taken on contract costs and finite-life intangibles in 2005.
        The decline in amortization of finite-life intangibles is due to certain
        software having been fully amortized, the favorable translation impact of
        currency fluctuations, partially offset by amortization of $6.5 million
        related to our new business solution for the brokerage industry. Additionally,
        the amortization of capital assets decreased, due to certain computer equipment
        having been fully amortized, and the non-recurring cost of disposed assets
        during 2005. These were partially offset by additional amortization related
        to
        contract costs associated with the transition of new clients and contracts
        started in 2006.
  The
        change in costs of services, selling and administrative expenses in fiscal
        2005,
        when compared with fiscal 2004, was mainly due to the acquisition of AMS
        operations and new outsourcing contracts.
  The
          increase in amortization expenses in 2005 versus the prior year reflected
          mainly
          the addition of finite-life intangible assets from acquisitions, impairment
          charges to contract costs and finite-life intangibles as noted above, and
          transition costs related to new outsourcing contracts. This was partially
          offset
          by a reduction of amortization related to certain computer equipment and the
          disposal of certain assets.
  ADJUSTED
          EBIT BY LOB
  YEARS
                    ENDED SEPTEMBER 30
                
                **2006**
                
                2005
                
                2004*(in
                    ’000 of dollars except for percentage)*IT
                    services
                
                
                334,044
                
                
                360,379
                
                
                326,043As
                    a percentage of IT services revenue
                
                
                10.9
                %
                
                11.1
                %
                
                12.0
                %BPS
                
                
                55,207
                
                
                70,401
                
                
                72,394As
                    a percentage of BPS services revenue
                
                
                13.3
                %
                
                15.8
                %
                
                16.9
                %Corporate
                
                
                (78,915
                )
                
                (84,635
                )
                
                (88,354
                )As
                    a percentage of total revenues
                
                
                -2.3
                %
                
                -2.3
                %
                
                -2.8
                %Adjusted
                    EBIT
                
                
                310,336
                
                
                346,145
                
                
                310,083Adjusted
                    EBIT margin
                
                
                8.9
                %
                
                9.4
                %
                
                9.8
                %
 
 For
          fiscal 2006, the variance in the adjusted EBIT of IT services resulted
          mainly
          from less than expected BCE work volumes over the last year, partly offset
          by
          additional work from the new and existing clients, savings yielded from
          the
          competitive position strengthening program initiated in March 2006, and
          improved
          profitability within our U.S. operations.
  For
          fiscal 2005, the drivers of adjusted EBIT growth were new contracts and
          acquisitions. The change in the adjusted EBIT margin was mainly a result
          of a
          nonrecurring license sale which was completed in fiscal 2004, an impairment
          charge related to an unprofitable contract and a higher cost structure
          inherited
          from the AMS acquisition.
  For
          fiscal 2006, the change in adjusted EBIT and
          adjusted EBIT margin of BPS reflected the decrease of $6.1 million of EBIT
          as a result of the sale of our electronic switching assets in December
          2005, and
          $11.6 million of amortization and the maintenance costs related to a
 
 2006
              Annual Report CGI Group Inc.
 10
  business
        solution developed for the brokerage industry which became commercially
        available at the beginning of the year.
  The
        change in adjusted EBIT and adjusted EBIT margin observed in 2005 resulted
        mainly from a decline in the volume of transactions processed in the insurance
        sector and the impairment charge related to contracts and business solutions,
        partially offset by new projects initiated in the government and healthcare
        and
        financial services verticals.
  For
        fiscal 2006, the decrease in corporate expenses is mainly due to the savings
        achieved as part of the Company’s on-going program to strengthen its competitive
        position. The savings in fiscal 2005 relates to synergies stemming from the
        AMS
        acquisition.
  EARNINGS
        FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 The
        following table provides, for the periods indicated, a reconciliation between
        our adjusted EBIT and earnings from continuing operations before income taxes
        which is reported in accordance with Canadian GAAP:
 AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUE
              
              AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUE
              
              AS
                  A
                PERCENTAGE
                OF
                  TOTAL REVENUEYEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004
              
              **2006**
              
              2005
              
              2004*(in
                  ’000 of dollars except for percentage)*Adjusted
                  EBIT
              
              
              310,336
              
              
              346,145
              
              
              310,083
              
              
              8.9
              %
              
              9.4
              %
              
              9.8
              %Restructuring
                  costs related to specific items
              
              
              (67,266
              )
              
              -
              
              
              -
              
              
              -1.9
              %
              
              0.0
              %
              
              0.0
              %Interest
                  expenseInterest
                  on long-term debt
              
              
              (43,291
              )
              
              (24,014
              )
              
              (20,672
              )
              
              -1.2
              %
              
              -0.7
              %
              
              -0.7
              %Other
                  income, net
              
              
              7,252
              
              
              7,156
              
              
              8,728
              
              
              0.2
              %
              
              0.2
              %
              
              0.3
              %Gain
                  on sale and earnings from an investment
                in
                  an entity subject to significant influence
              
              
              -
              
              
              4,537
              
              
              488
              
              
              0.0
              %
              
              0.1
              %
              
              0.0
              %Gain
                  on sale of assets
              
              
              10,475
              
              
              -
              
              
              -
              
              
              0.3
              %
              
              0.0
              %
              
              0.0
              %Earnings
                  from continuing operations before income taxes
              
              
              217,506
              
              
              333,824
              
              
              298,627
              
              
              6.3
              %
              
              9.1
              %
              
              9.5
              %
 
 RESTRUCTURING
        COSTS RELATED TO SPECIFIC ITEMS
 The
        company recorded a charge of $67.3 million in relation to the competitive
        position strengthening program. Further details of the program are discussed
        on
        page 4.
  The
        following table details the restructuring costs related to specific items
        recorded in the statement of earnings during the fiscal year ended September
        30,
        2006:
  SEVERANCE
              
              CONSOLIDATION
                  AND CLOSURE OF FACILITIES
              
              TOTAL*(in
                  ’000 of dollars)*
              
              $
              
              $
              
              $IT
                  Services
              
              
              50,734
              
              
              12,747
              
              
              63,481BPS
              
              
              2,343
              
              
              315
              
              
              2,658Corporate
              
              
              7,894
              
              
              2,754
              
              
              10,648BCE
                  contribution
              
              
              (9,521
              )
              
              -
              
              
              (9,521
              )**Restructuring
                  costs related to specific items**
              
              
              **51,450**
              
              
              **15,816**
              
              
              **67,266**
  INTEREST
        EXPENSE
 The
        increase in interest expense during fiscal 2006 reflected the associated
        increase in long-term debt. This debt was drawn from the Company’s credit
        facility to finance the purchase of 100,000,000 Class A subordinate
        voting shares from BCE during the first quarter of 2006.
  In
        fiscal
        2005, the variance resulted mainly from the additional debt issued to partially
        finance the AMS acquisition, which has since been repaid.
  GAIN
        ON SALE OF ASSETS AND GAIN ON SALE AND EARNINGS FROM INVESTMENTS IN AN ENTITY
        SUBJECT TO SIGNIFICANT INFLUENCE
 In
        fiscal
        2006, we recorded a gain on the sale of our electronic switching assets of
        $10.5 million.
  The
        sale
        of our interest in Nexxlink Technologies Inc. (“Nexxlink”) had yielded a pre-tax
        gain in fiscal 2005 of $4.2 million.
 
 2006
              Annual Report CGI Group Inc.
 11
 INCOME
        TAXES
 The
        reduction in year-over-year income tax expense in fiscal 2006 resulted mainly
        from the restructuring charges related to specific items, part of the program
        announced in the second quarter.
  The
        income tax rate was 32.6% in fiscal 2006, compared to 34.2% in fiscal 2005.
        The
        newly enacted tax legislation in Canada that sets out lower tax rates beginning
        in 2008, was the primary driver for this change. In addition, the earnings
        from
        our non-Canadian operations improved allowing for the recovery of unbooked
        prior
        years’ losses. As well, the effect of the benefits arising from investments in
        subsidiaries contributed to the year-over-year improvement in the income
        tax
        rate.
  The
        decrease in fiscal 2005 in our tax rate compared with fiscal 2004 reflected
        the
        reduction in the Canadian combined federal and provincial statutory tax rates
        and a more balanced distribution of our earnings across our major geographic
        markets.
  EARNINGS
 The
          following table includes a reconciliation between net earnings from continuing
          operations prior to restructuring costs related to specific items and net
          earnings from continuing operations which is reported in accordance with
          Canadian GAAP:
 CHANGE
                
                CHANGEYEARS
                    ENDED SEPTEMBER 30
                
                **2006**
                
                2005
                
                2004
                
                2006/2005
                
                2005/2004*(in
                    ’000 of dollars unless otherwise indicated)*Net
                    earnings from continuing operations prior to restructuring costs
                    related
                    to specific items
                
                
                191,267
                
                
                219,698
                
                
                185,386
                
                
                -12.9
                %
                
                18.5
                %Net
                    earnings margin from continuing operations prior to
                  restructuring
                    costs related to specific items
                
                
                5.5
                %
                
                6.0
                %
                
                5.9
                %Restructuring
                    costs related to specific items
                
                
                67,266
                
                
                -
                
                
                -Tax
                    impact of restructuring costs related to specific items
                
                
                (22,532
                )
                
                -
                
                
                -Net
                    earnings from continuing operations
                
                
                146,533
                
                
                219,698
                
                
                185,386
                
                
                -33.3
                %
                
                18.5
                %Net
                    earnings margin from continuing operations
                
                
                4.2
                %
                
                6.0
                %
                
                5.9
                %Net
                    (loss) gain from discontinued operations
                
                
                -
                
                
                (3,210
                )
                
                8,655Net
                    earnings
                
                
                146,533
                
                
                216,488
                
                
                194,041
                
                
                -32.3
                %
                
                11.6
                %Net
                    earnings margin
                
                
                4.2
                %
                
                5.9
                %
                
                6.2
                %Weighted
                    average number of Class A subordinate shares
                  and
                    Class B shares (basic)
                
                
                362,783,618
                
                
                439,349,210
                
                
                419,510,503
                
                
                -17.4
                %
                
                4.7
                %Basic
                    and diluted earnings per share from continuing operations
                  prior
                    to restructuring costs related to specific items*(in
                    dollars)*
                
                
                0.53
                
                
                0.50
                
                
                0.44
                
                
                0.03
                
                
                0.06Basic
                    and diluted earnings per share from
                  continuing
                    operations*(in dollars)*
                
                
                0.40
                
                
                0.50
                
                
                0.44
                
                
                (0.10
                )
                
                0.06Basic
                    and diluted earnings per share*(in
                    dollars)*
                
                
                0.40
                
                
                0.49
                
                
                0.46
                
                
                (0.09
                )
                
                0.03
 For
          fiscal 2006, the decrease in net earnings from continuing operations, when
          compared to fiscal 2005, is primarily due to the additional charges related
          to
          the restructuring program, the interest on the long-term debt and the change
          in
          adjusted EBIT.
  The
          increase in fiscal 2005 net earnings from continuing operations, compared
          with
          fiscal 2004, resulted primarily from the full year impact of the acquisition
          of
          AMS in May 2004, the ramping up of new contracts and, to a lesser extent,
          from a
          reduction of our income tax rate.
  CGI’s
          basic weighted average number of shares outstanding at the end of fiscal
          2006
          was down 17.4% compared with fiscal 2005, due to the repurchase of shares
          from
          BCE and on the open market as part of the Normal Course Issuer Bid. The
          total
          number of shares outstanding at the end of fiscal 2006 is 331,693,044 which
          includes 905,100 shares repurchased at the end of the fourth quarter but
          not yet paid for nor cancelled at year end.
  There
          were no discontinued operations in fiscal 2006. The net loss
          from discontinued operations of $3.2 million in fiscal 2005 resulted
          from the sale of the U.S. Services to Credit Unions business and the sale
          of the
          principal assets of Keyfacts. In 2004, net earnings from discontinued operations
          of $8.7 million resulted from assets sold to Nexxlink and the sale of our
          Starquote market data services business.
  LIQUIDITY
 CGI’s
          growth is financed through our cash flow from operations, combined with
          the
          issuance of debt, borrowing under our existing credit facilities or the
          issuance
          of equity. One of our primary financial goals is to maintain an optimal
          level of
          liquidity through the active management of our assets and liabilities as
          well as
          our cash flows.
 
 2006
              Annual Report CGI Group Inc.
 12
 As
        at
        September 30, 2006, cash and cash equivalents were $115.7 million. The
        following table illustrates the main activities over the last three fiscal
        years:
 VARIANCE
              
              VARIANCEYEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004
              
              2006/2005
              
              2005/2004*(in
                  ’000 of dollars)*Cash
                  provided by continuing operating activities
              
              
              309,561
              
              
              480,709
              
              
              230,197
              
              
              (171,148
              )
              
              250,513Cash
                  used in continuing investing activities
              
              
              (139,357
              )
              
              (106,277
              )
              
              (701,020
              )
              
              (33,080
              )
              
              594,743Cash
                  used in/provided by continuing financing activities
              
              
              (294,080
              )
              
              (329,188
              )
              
              583,683
              
              
              35,108
              
              
              (912,871
              )Effect
                  of foreign exchange rate changes on cash and cash equivalents of
                  continuing operations
              
              
              (854
              )
              
              (6,167
              )
              
              186
              
              
              5,313
              
              
              (6,353
              )Net
                  (decrease) increase in cash and cash equivalents
                of
                  continuing operations
              
              
              (124,730
              )
              
              39,077
              
              
              113,046
              
              
              (163,807
              )
              
              (73,969
              )Net
                  cash and cash equivalents from discontinued operations
              
              
              -
              
              
              759
              
              
              4,068
              
              
              (759
              )
              
              (3,309
              )Net
                  (decrease) increase in cash and cash equivalents
              
              
              (124,730
              )
              
              39,836
              
              
              117,114
              
              
              (164,566
              )
              
              (77,278
              )
  OPERATING
          ACTIVITIES
 The
          decline of $171.1 million in cash provided by continuing operating
          activities versus last year resulted mainly from this year’s lower earnings from
          operations as discussed above and the timing of large client payments which
          were
          partially offset by the decrease in integration payments related to
          acquisitions.
  INVESTING
          ACTIVITIES
 Cash
          used
          in investing activities was $139.4 million, an increase of
          $33.1 million compared with $106.3 million in 2005. The change was
          mainly driven by the one-time events of 2005 which include the sale of
          the
          investment in Nexxlink, the proceeds from the sale of a right to access
          clients,
          and the reimbursement following the early termination of a contract. In
          2006,
          the company increased its investment in capital assets. These items were
          partially offset by a reduction in business acquisition activities.
  The
          investment in capital assets was mainly comprised of leasehold improvements
          of
          $20 million, up $7.5 million over last year. These improvements are
          the result of the consolidation and optimization of office space in the
          Greater
          Toronto Area and Fairfax, following an initiative to consolidate and optimize
          our real estate space. In addition, we made computer equipment and office
          equipment purchases of $14.5 million and $5.4 million respectively to
          support new outsourcing contracts, an increase of $7.0 million over prior
          year.
  In
          fiscal
          2006, we spent $25.6 million in business acquisitions mainly related to
          Plaut and Pangaea. During fiscal 2005, we completed the acquisition of
          AGTI for
          a consideration of $47.2 million. We also acquired MPI Professionals
          (“MPI”) and Silver Oak Partners Inc. (“Silver Oak”) for $13.0 million and
          $21.8 million, respectively. In fiscal 2004, we made one major acquisition,
          AMS, purchased for a net cash consideration of $584.0 million, along with
          two niche acquisitions.
  Investments
          in finite-life intangibles and other long-term assets were $74.6 million in
          2006 compared to $90.7 in 2005. These investments were primarily comprised
          of business solutions of $40.1 million and software licenses and prepaid
          maintenance of $14.4 million which were purchased as part of the
          outsourcing services provided to our clients.
  We
          also
          incurred research expenses of $27.6 million within our costs of services,
          selling and administrative expenses, while seeking applications for new
          technology, or conceptually formulating and designing possible prototypes
          or
          process alternatives that could potentially lead to new solutions for either
          existing or new clients. The combined gross research and development spending
          incurred in 2006 was $68.6 million compared with $78.2 million last
          year.
  The
          investment of $31.4 million in contract costs was mainly related to
          transition costs for new outsourcing contracts and was consistent with
          last
          year’s investment.
  FINANCING
          ACTIVITIES
 Cash
          used
          by continuing financing activities was $294.1 million in 2006, a decrease
          of $35.1 million compared to $329.2 million in fiscal 2005. The
          primary financing transaction in 2006 related to the repurchase of
          100 million Class A shares from BCE for a consideration and related costs
          of $866.0 million which was partially financed through $738.6 million
          of debt, resulting in a net use of cash of $120.6 million. Financing
          activities also included the issuance of shares for $58.0 million mainly
          from the exercise of warrants by Desjardins, BCE and the majority shareholders,
          and the partial repayment of our credit facilities for $172.0 million, a
          decrease of $52.3 million versus 2005. Finally, the repurchase of shares
          under the Normal Course Issuer Bid program for $60.1 million represented a
          reduction of $49.3 million when compared to 2005.
 
 2006
              Annual Report CGI Group Inc.
 13
 CONTRACTUAL
        OBLIGATIONS
 PAYMENTS
                  DUE BY PERIODCOMMITMENT
                  TYPE
              
              **TOTAL**
              
              LESS
                  THAN
                1 YEAR
              
              2ND
                  AND 3RD YEARS
              
              4TH
                  AND 5TH YEARS
              
              YEARS
                6
                  TO 10
              
              AFTER
                10 YEARS*(in
                  ’000 of dollars)*Long-term
                  debt
              
              
              812,478
              
              
              7,626
              
              
              98,351
              
              
              684,231
              
              
              22,270
              
              
              -Capital
                  lease obligations
              
              
              781
              
              
              616
              
              
              165
              
              
              -
              
              
              -
              
              
              -Operating
                  leasesRental
                  of office space(1)
              
              
              1,017,528
              
              
              130,790
              
              
              219,356
              
              
              178,746
              
              
              284,905
              
              
              203,731Computer
                  equipment and other
              
              
              172,305
              
              
              84,516
              
              
              77,488
              
              
              7,996
              
              
              2,305
              
              
              -Automobiles
              
              
              4,969
              
              
              2,338
              
              
              2,402
              
              
              229
              
              
              -
              
              
              -Long-term
                  service agreements(1)
              
              
              209,652
              
              
              72,213
              
              
              81,482
              
              
              46,511
              
              
              9,446
              
              
              -**Total
                  contractual obligations**
              
              
              **2,217,713**
              
              
              **298,099**
              
              
              **479,244**
              
              
              **917,713**
              
              
              **318,926**
              
              
              **203,731**
 (1)  Included
        in these obligations are $60.1 million of office space leases from past
        acquisitions and $6.7 million of long-term service agreements which are
        accounted for under accounts payable and accrued liabilities, accrued
        integration charges and other long-term liabilities and long-term
        debt.
  We
        are
        committed under the terms of contractual obligations with various expiration
        dates, primarily for the rental of premises, long-term debt, computer equipment
        and long-term service agreements in the aggregate amount of
        $2,217.7 million. In 2006, total contractual obligations increased by
        $575.1 million, mainly due to an increase in long-term debt to finance the
        repurchase of shares from BCE.
  CAPITAL
          RESOURCES
 **TOTAL
                    COMMITMENT**
                
                AVAILABLE
                    AT SEPTEMBER 30, 2006
                
                OUTSTANDING
                    AT SEPTEMBER 30, 2006*(in
                    ’000 of dollars)*
                
                $
                
                $
                
                $Cash
                    and cash equivalents
                
                
                -
                
                
                115,729
                
                
                -Unsecured
                    committed revolving facilities(1)
                
                
                1,000,000
                
                
                382,025
                
                
                617,975(2
                )Lines
                    of credit and other facilities(1)
                
                
                29,175
                
                
                29,175
                
                
                -Total
                
                
                1,029,175
                
                
                526,929
                
                
                617,975(2
                )
 (1)  Excluding
          any existing credit facility under non-majority owned entities.
 (2)  Consists
          of drawn portion of $590.0 million and Letters of Credit for
          $28.0 million.
  Our
          cash
          position and bank lines are sufficient to support our growth strategy.
          At
          September 30, 2006, cash and cash equivalents were $115.7 million and the
          total credit facilities available amounted to $411.2 million. Cash
          equivalents typically include commercial paper, money market funds and
          term
          deposits as well as bankers’ acceptances and bearer deposit notes issued by
          major Canadian banks, all with an initial maturity of less than
          3 months.
  Total
          long-term debt increased by $563.6 million to $813.3 million at
          September 30, 2006, compared with $249.7 million at September 30,
          2005. The variation resulted primarily from a net increase of
          $587.2 million in our credit facilities and the impact from the
          fluctuations of foreign currencies against the Canadian dollar.
  On
          January 12, 2006, the Company amended its existing five-year unsecured
          credit
          facility to increase it to $1.0 billion. The $1.0 billion committed
          banking facilities are notably for our operating activity needs, working
          capital
          purposes and for the financing of acquisitions and outsourcing contracts.
          The
          agreement is currently comprised of a Canadian tranche with a limit of
          $850.0 million and a U.S. tranche equivalent to $150.0 million. As at
          September 30, 2006, an amount of $382.0 million was available under this
          agreement. The agreement has a five-year term, expiring in December 2009.
          We
          also have access to a $25.0 million demand line of credit for cash
          management purposes and $4.2 million of other facilities to cover other
          requirements. The long-term debt agreements contain covenants, which require
          us
          to maintain certain financial ratios. During the year, we have obtained
          certain
          amendments to the definition and calculations of the ratios which consider
          the
          impact of the competitive position strengthening program as well as share
          repurchases on our unsecured committed revolving facilities and notes.
          At
          September 30, 2006, CGI was in compliance with these covenants and maintains
          its
          financial flexibility.
  Considering
          the needs for reinvestment in our operations and the size of the investment
          projects, we did not pay a dividend. Annually our Board of Directors evaluates
          whether or not to pay a dividend as well as to continue with the share
          repurchase program.
 
 2006
              Annual Report CGI Group Inc.
 14
  SELECTED
        MEASURES OF LIQUIDITY AND CAPITAL RESOURCES
 **AS
                  AT SEPTEMBER 30, 2006**
              
              AS
                  AT SEPTEMBER 30, 2005
              
              AS
                  AT SEPTEMBER 30, 2004Net
                  debt to capitalization ratio
              
              
              27.2
              %
              
              0.3
              %
              
              9.8
              %Days
                  sales outstanding (in days)
              
              
              52
              
              
              48
              
              
              54Return
                  on invested capital(1)
              
              
              8.5
              %
              
              8.7
              %
              
              7.8
              %
 (1)  The
        return
        on invested capital ratio represents the proportion of the last four quarters’
after-tax adjusted EBIT net of restructuring costs related to specific items
        over the last four quarters’ average invested capital (sum of equity and debt
        less cash and cash equivalents).
  The
        net
        debt to capitalization ratio increased by 26.9% compared to last year
        mainly due to the additional debt issued in fiscal 2006 to purchase the
        100 million shares from BCE.
  Days
        sales outstanding increased by four days to 52 days when -compared with
        last
        year, mainly due to the timing of payments from large custom ers.
        In
        fiscal 2005, DSO was 48 days, down six days from 2004. In calculating DSOs,
        we subtract the deferred revenue balance and the tax credits receivable from
        the
        accounts receivable and work in progress. Payments from clients in advance
        of
        work being performed may fluctuate from year to year depending on the timing
        of
        payments received from outsourcing clients.
  Return
        on
        invested capital in fiscal 2006 was 8.5%, a decline of 0.2% from fiscal 2005.
        This is mainly due to restructuring charges and the reduction in work levels
        from BCE.
  OFF-BALANCE
        SHEET FINANCING AND GUARANTEES
 We
        do not
        engage in the practice of off-balance sheet financing, except for the use
        of
        operating leases for office space, computer equipment and vehicles. In
        accordance with GAAP, neither the lease liability nor the underlying asset
        is
        carried on the balance sheet as the terms of the leases do not meet the
        threshold for capitalization. We enter into agreements to provide financial
        or
        performance assurances to third parties on the sale of assets, business
        divestitures guarantees and U.S. Government contracts.
  In
        connection with sales of assets and business divestitures, we may be required
        to
        pay counterparties for costs and losses incurred as the result of breaches
        in
        representations and warranties, intellectual property right infringement
        and
        litigation against counterparties. While many of
        the
        agreements specify a maximum potential exposure of approximately
        $108.5 million in total, many do not specify a maximum amount or limited
        period. It is impossible to reasonably estimate the maximum amount that may
        have
        to be paid under such guarantees. The amounts are dependent upon the outcome
        of
        future contingent events, the nature and likelihood of which cannot be
        determined at this time. No amount has been accrued in the consolidated balance
        sheets relating to this type of indemnification as at September 30, 2006.
        The
        Company does not expect to incur any potential payment in connection with
        these
        guarantees which will have a materially adverse effect on its consolidated
        financial statements.
  We
          are
          also engaged to provide services under contracts with the U.S. Government.
          The
          contracts are subject to extensive legal and regulatory requirements and,
          from
          time to time, agencies of the U.S. Government investigate whether our operations
          are being conducted in accordance with these requirements. Generally, the
          Government has the right to change the scope of, or terminate, these projects
          at
          its convenience. The termination or a reduction in the scope of a major
          government project could have a material adverse effect on our results
          of
          operations and financial condition.
  In
          the
          normal course of business, we may provide certain clients, principally
          governmental entities, with bid and performance bonds. In general, we would
          only
          be liable for the amount of the bid bonds if we refuse to perform the project
          once the bid is awarded. We would also be liable for the performance bonds
          in
          the event of default in the performance of our obligations. As at
          September 30, 2006, we provided for a total of $72.9 million of these
          bonds. We believe we are in compliance with our performance obligations
          under
          all service contracts for which there is a performance or bid bond, and
          the
          ultimate liability, if any, incurred in connection with these guarantees
          would
          not have a material adverse effect on our consolidated results of operations
          or
          financial condition.
  In
          addition, we provided a guarantee of $5.9 million of the residual value of
          leased equipment, accounted for as an operating lease, at the expiration
          of the
          lease term.
  CAPABILITY
          TO DELIVER RESULTS
 We
          believe that we have the capital resources and liquidity necessary to meet
          our
          commitments and existing obligations as well as to support our operations
          and to
          finance our growth strategies. We also believe that we have the required
          non-capital resources necessary to achieve our goals for continued growth.
          These
          non-capital resources include a strong management team with a very low
          historical turnover rate, sophisticated management frameworks for a consistent
          high standard of client service and ongoing managerial training, as well
          as
          quality processes that help us integrate and retain new members as part
          of
          outsourcing contract wins or acquisitions.
  RELATED
          PARTY TRANSACTIONS
 As
          a
          result of the Company’s repurchase of its shares in fiscal 2006, BCE no longer
          held its significant influence over CGI’s operating, financing and investing
          activities. Please refer to Note 22 to the financial statements for details
          of 2005 and 2004 transaction history with BCE.
  In
          the
          normal course of business, CGI is party to contracts with Innovapost, a
          joint
          venture, pursuant to which CGI is its preferred IT supplier. The Company
          exercises significant influence over Innovapost’s operating, financing and
          investing activities through its 49% ownership interest.
 
 2006
              Annual Report CGI Group Inc.
 15
 The
        Company’s share of the transactions and resulting balances, which were measured
        at commercial rates, are presented below:
  INNOVAPOST
 YEARS
                  ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              2004*(in
                  ’000 of Canadian dollars)*
              
              $
              
              $
              
              $Revenue
              
              
              100,994
              
              
              102,699
              
              
              94,607Accounts
                  receivable
              
              
              9,490
              
              
              4,112
              
              
              3,622Work
                  in progress
              
              
              1,528
              
              
              1,290
              
              
              1,988Prepaid
                  expenses
              
              
              -
              
              
              2,019
              
              
              1,815Contract
                  costs
              
              
              16,239
              
              
              17,301
              
              
              19,696Accounts
                  payable and accrued liabilities
              
              
              147
              
              
              1,254
              
              
              1,113Deferred
                  revenue
              
              
              509
              
              
              -
              
              
              946
  FOURTH
        QUARTER RESULTS
 The
        fourth quarter of CGI’s fiscal 2006 was focused on improving profitability as
        outlined in the action plan announced on March 29, 2006. Accordingly, a
        pre-tax charge for severance and other related benefits and costs related
        to the
        consolidation and closure of facilities, totaling $20.9 million, was taken
        in the fourth quarter bringing the total charge of the program thus far to
        $67.3 million. The Company expects to incur the remaining charge of
        approximately $22.7 million over the course of this calendar year and
        continues to anticipate the full payback of its investment on an annualized
        basis at that time.
  REVENUE
          BY LOB
  FOR
                    THE 3 MONTHS ENDED SEPTEMBER 30
                
                **2006**
                
                2005
                
                CHANGE*(in
                    ’000 of dollars except for percentage)*
                
                $
                
                $
                
                %IT
                    services prior to foreign currency impact
                
                
                766,839
                
                
                792,149
                
                
                -3.2
                %Foreign
                    currency impact
                
                
                (20,134
                )
                
                -
                
                
                -2.5
                %IT
                    services
                
                
                746,705
                
                
                792,149
                
                
                -5.7
                %BPS
                    prior to foreign currency impact
                
                
                101,835
                
                
                112,691
                
                
                -9.6
                %Foreign
                    currency impact
                
                
                (2,720
                )
                
                -
                
                
                -2.4
                %BPS
                
                
                99,115
                
                
                112,691
                
                
                -12.0
                %Revenue
                
                
                845,820
                
                
                904,840
                
                
                -6.5
                %
 In
          the
          fourth quarter of 2006, on a constant currency basis, the revenue decrease
          versus prior year in our IT services segment was due to lower work volumes
          from
          BCE for $40.9 million, the ramping down of isolated contracts not meeting
          our profitability standards, offset by business won from new and existing
          clients and niche acquisitions made during the year, all for a net impact
          of
          $7.7 million.
  BPS
          revenue decreased in the quarter mainly due to the sale of our electronic
          switching assets in December 2005 which drove $6.1 million of the change
          and lower claims and inspections in our insurance business.
 
 2006
              Annual Report CGI Group Inc.
 16
 ADJUSTED
        EBIT BY LOB
  FOR
                  THE 3 MONTHS ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              CHANGE*(in
                  ’000 of dollars except for percentage)*
              
              $
              
              $
              
              %IT
                  services
              
              
              93,004
              
              
              93,789
              
              
              -0.8
              %As
                  a percentage of IT services revenue
              
              
              12.5
              %
              
              11.8
              %BPS
              
              
              16,609
              
              
              16,249
              
              
              2.2
              %As
                  a percentage of BPS services revenue
              
              
              16.8
              %
              
              14.4
              %Corporate
              
              
              (18,492
              )
              
              (20,611
              )
              
              10.3
              %As
                  a percentage of total revenues
              
              
              -2.2
              %
              
              -2.3
              %Adjusted
                  EBIT
              
              
              91,121
              
              
              89,427
              
              
              1.9
              %Adjusted
                  EBIT margin
              
              
              10.8
              %
              
              9.9
              %
 
 The
        variance in the adjusted EBIT of IT services for the quarter resulted mainly
        from less than anticipated BCE work volumes, partly offset by the gain from
        the
        sale of a license in our financial sector, the fiscal 2005 impairment charge
        related to a contract not meeting the Company’s profitability standards, and
        savings achieved from the program initiated in March 2006.
  For
        BPS,
        the improvement in adjusted EBIT is the result of winding down an unprofitable
        contract, business won from new and existing clients in the U.S., partially
        offset by the sale of our electronic switching assets and lower claims in
        the
        insurance business.
  For
        the
        quarter ended September 30, 2006, the decrease in corporate expenses is tied
        to
        the on-going action plan to strengthen the Company’s competitive
        position.
  NET
        EARNINGS FROM CONTINUING OPERATIONS
  FOR
                  THE 3 MONTHS ENDED SEPTEMBER 30
              
              **2006**
              
              2005
              
              CHANGE*(in
                  ’000 of dollars except for percentage)*
              
              $
              
              $
              
              %Adjusted
                  EBIT
              
              
              91,121
              
              
              89,427
              
              
              1.9
              %Adjusted
                  EBIT margin
              
              
              10.8
              %
              
              9.9
              %Restructuring
                  costs related to specific items
              
              
              20,931
              
              
              -Interest
                  on long-term debt
              
              
              13,439
              
              
              4,807
              
              
              179.6
              %Other
                  income, net
              
              
              (1,448
              )
              
              (1,510
              )
              
              -4.1
              %Earnings
                  from continuing operations before income taxes
              
              
              58,199
              
              
              86,130
              
              
              -32.4
              %Income
                  tax
              
              
              18,667
              
              
              29,715
              
              
              -37.2
              %Net
                  earnings from continuing operations
              
              
              39,532
              
              
              56,415
              
              
              -29.9
              %Basic
                  and diluted EPS from continuing operations*(in
                  dollars)*
              
              
              0.12
              
              
              0.13
              
              
              -9.7
              %Weighted
                  average number of outstanding Class A subordinate shares and Class
                  B
                  shares
              
              
              336,941,173
              
              
              433,788,490
              
              
              -22.3
              %
 
 The
          decline in net earnings from continuing operations is mainly the result
          of an
          improvement in adjusted EBIT driven by savings from our competitive
          strengthening program, which is offset by the associated restructuring
          costs for
          severance and facilities rationalization. Additionally, interest expense
          increased stemming from the additional long-term debt to finance the share
          repurchases made during the year. On a per share basis, the decline is
          minimized, demonstrating the benefit of the share repurchase program undertaken
          by the Company.
 2006
              Annual Report CGI Group Inc.
 17
 SUMMARY
        OF QUARTERLY RESULTS
 2006
              
              
              
              
              
              
              
              2005QUARTERLY
                  RESULTS
              
              **Q4**
              
              **Q3**
              
              **Q2**
              
              **Q1**
              
              Q4
              
              Q3
              
              Q2
              
              Q1Backlog*(in
                  millions of dollars)*
              
              
              12,722
              
              
              13,303
              
              
              13,686
              
              
              12,901
              
              
              12,863
              
              
              12,934
              
              
              12,929
              
              
              13,071Bookings*(in
                  millions of dollars)*
              
              
              462
              
              
              787
              
              
              1,746
              
              
              1,002
              
              
              666
              
              
              1,025
              
              
              844
              
              
              1,038RevenueRevenue*(in
                  ’000 of dollars)*
              
              
              845,820
              
              
              866,504
              
              
              866,836
              
              
              898,463
              
              
              904,840
              
              
              936,394
              
              
              915,662
              
              
              929,090Year-over-year
                  revenuegrowth
                  prior to foreigncurrency impact
              
              
              -4.0
              %
              
              -3.4
              %
              
              -2.4
              %
              
              -1.3
              %
              
              0.0
              %
              
              14.8
              %
              
              33.9
              %
              
              42.3
              %Cost
                  of services, selling and administrative expenses
              
              
              713,573
              
              
              746,395
              
              
              759,706
              
              
              776,847
              
              
              761,919
              
              
              802,312
              
              
              789,330
              
              
              797,997Margin
              
              
              84.4
              %
              
              86.1
              %
              
              87.6
              %
              
              86.5
              %
              
              84.2
              %
              
              85.7
              %
              
              86.2
              %
              
              85.9
              %ProfitabilityNet
                  earnings from continuingoperations*(in
                  ’000 of dollars)*
              
              
              39,532
              
              
              35,944
              
              
              14,149
              
              
              56,908
              
              
              56,415
              
              
              56,621
              
              
              53,591
              
              
              53,072Margin
              
              
              4.7
              %
              
              4.1
              %
              
              1.6
              %
              
              6.3
              %
              
              6.2
              %
              
              6.0
              %
              
              5.9
              %
              
              5.7
              %Basic
                  and diluted earningsper
                  share from continuingoperations*(in dollars)*
              
              
              0.12
              
              
              0.11
              
              
              0.04
              
              
              0.13
              
              
              0.13
              
              
              0.13
              
              
              0.12
              
              
              0.12Net
                  earnings from continuingoperations
                  prior torestructuring
                  costs related tospecific
                  items*(in
                  ’000 of dollars)*
              
              
              53,145
              
              
              46,392
              
              
              34,822
              
              
              56,908
              
              
              56,415
              
              
              56,621
              
              
              53,591
              
              
              53,072Margin
              
              
              6.3
              %
              
              5.4
              %
              
              4.0
              %
              
              6.3
              %
              
              6.2
              %
              
              6.0
              %
              
              5.9
              %
              
              5.7
              %Basic
                  and diluted earningsper
                  share from continuingoperations
                  prior torestructuring
                  costs relatedto specific
                  items*(in dollars)*
              
              
              0.16
              
              
              0.14
              
              
              0.10
              
              
              0.13
              
              
              0.13
              
              
              0.13
              
              
              0.12
              
              
              0.12Net
                  earnings
              
              
              39,532
              
              
              35,944
              
              
              14,149
              
              
              56,908
              
              
              55,792
              
              
              57,759
              
              
              49,594
              
              
              53,343Net earnings margin
              
              
              4.7
              %
              
              4.1
              %
              
              1.6
              %
              
              6.3
              %
              
              6.2
              %
              
              6.2
              %
              
              5.4
              %
              
              5.7
              %Basic
                  and diluted earningsper
                  share*(in dollars)*
              
              
              0.12
              
              
              0.11
              
              
              0.04
              
              
              0.13
              
              
              0.13
              
              
              0.13
              
              
              0.11
              
              
              0.12Weighted
                  average number of Class A subordinate shares and Class B shares
                  - basic*(in
                  ’000)*
              
              
              336,941
              
              
              338,714
              
              
              344,825
              
              
              430,487
              
              
              433,788
              
              
              436,592
              
              
              442,493
              
              
              444,562
 
 During
        the period, our revenues reached their peak in third quarter 2005 at
        $936.4 million, declining by $31.6 million during the fourth quarter,
        driven primarily by lower seasonal volumes as well as unfavourable foreign
        currency fluctuation against the Canadian dollar. Revenues for fourth quarter
        2006 were $845.8 million and show a further decline versus the same period
        last year as a result of lower BCE work volumes and continued unfavourable
        currency fluctuations.
  The
        decrease of work from BCE led the Company to undertake the competitive
        strengthening program, announced during the second quarter of 2006, to reduce
        its cost structure and gradually improve its profit margins.
  The
        cost
        savings generated by the program are the main driver of the reduction in
        the
        cost of services, selling and administrative expenses margin through the second
        half of 2006 when it reached 84.4% of revenues in the fourth quarter, compared
        to the peak of 87.6% during the second quarter of the year when the program
        was
        initiated.
  As
        a
        result of the efficiencies delivered by the program, net earnings from
        continuing operations prior to restructuring costs related to specific items
        margin improved from 4.0% in the second quarter, to 5.4% in the third, and
        6.3%
        in the fourth quarter. In 2005, there was a net loss from discontinued
        operations of $3.2 million, resulting from the sale of the U.S. Services to
        Credit unions business unit and the sale of the principal assets of
        Keyfacts.
  The
          share
          repurchase in January 2006 was financed with our credit facilities, which
          led to
          an increase of the net debt to capitalization ratio in the second quarter
          of
          2006.
  QUARTERLY
          VARIANCES
 There
          are
          factors causing quarterly variances which may not be reflective of the
          Company’s
          future performance. First, there is seasonality in SI&C work, and the
          quarterly performance of these operations is impacted by occurences such
          as
          vacations and the number of statutory holidays in
 
 2006
              Annual Report CGI Group Inc.
 18
 any
        given
        quarter. Outsourcing contracts including BPS are affected to a lesser extent
        by
        seasonality. Second, the workflow from some clients may fluctuate from quarter
        to quarter based on their business cycle and the seasonality of their own
        operations. Third, the savings that we generate for a client on a given
        outsourcing contract may temporarily reduce our revenue stream from this
        client,
        as these savings may not be immediately offset by additional work performed
        for
        this client.
  In
        general, cash flow from continuing operating activities could vary significantly
        from quarter to quarter depending on the timing of monthly payments received
        from large clients, cash requirements associated with large acquisitions
        and
        outsourcing contracts, the timing of the reimbursements for various tax credits
        as well as profit sharing payments to members and the timing of restructuring
        cost payments.
  Foreign
        exchange fluctuations also contribute to quarterly variances, and these
        variances are likely to increase as the percentage of revenue in foreign
        currencies increases. From a margin perspective, CGI benefits from a natural
        hedge against currency fluctuations driven by US dollar expenses incurred
        in
        Canada, such as licenses, maintenance, insurance, and interest
        expenses.
  In
        2006,
        we have purchased from BCE, 100 million Class A subordinate shares, as well
        as an additional 8,374,400 shares from the market. As a result, our number
        of outstanding shares have decreased sequentially since the second quarter
        and
        our debt has increased to fund part of the transaction, which has driven
        the
        increase in our debt to capitalization ratio.
  While
        cash flow provided by continuing operating activities has remained strong
        over
        the period, the main fluctuations resulted from our profitability and the
        timing
        of payments received from large customers and payments made to our vendors
        on
        multi-year license and maintenance agreements. The timing impact from payments
        received from our clients also explains the fluctuation of our DSO in the
        period.
  SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES
 The
        annual audited financial statements of the Company for the years ended September
        30, 2006, 2005 and 2004 include all adjustments that the management of CGI
        considers necessary for a fair presentation of the financial position, results
        of operations and cash flows.
  Certain
        comparative figures have been reclassified in order to conform to the current
        period presentation.
  CRITICAL
        ACCOUNTING ESTIMATES
 The
        Company’s significant accounting policies are described in Note 2 of the
        September 30, 2006 audited consolidated financial statements. The preparation
        of
        the consolidated financial statements in conformity with Canadian GAAP requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosure of contingent assets and liabilities
        at
        the date of the consolidated financial statements and the reported amounts
        of
        revenue and expenses during the reporting period. Because of the use of
        estimates inherent in the financial reporting process, actual results could
        differ from those estimates.
 
 **CONSOLIDATED
                  STATEMENTS OF EARNINGS****AREAS
                  IMPACTED BY ESTIMATES**
              
              **CONSOLIDATED
                  BALANCE SHEETS**
              
              REVENUE
              
              COSTS
                  OF SERVICES, SELLING AND ADMINISTRATIVE
              
              AMORTIZATION/
                IMPAIRMENT
              
              RESTRUCTURING
                  COSTS
                RELATED
                  TO SPECIFIC ITEMS
              
              INCOME
                TAXESAllowance
                  for doubtful accounts
              
              
              n
              
              
              
              
              
              nGoodwill
              
              
              n
              
              
              
              
              
              
              
              
              nIncome
                  taxes
              
              
              n
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              nAccounts
                  payable and accrued liabilities
              
              
              n
              
              
              
              
              
              nRevenue
                  recognition
              
              
              n
              (1)
              
              nContract
                  costs
              
              
              n
              
              
              n
              
              
              
              
              
              nInvestment
                  tax credits
              
              
              n
              
              
              
              
              
              nImpairment
                  of long-lived assets
              
              
              n
              
              
              
              
              
              
              
              
              nRestructuring
                  costs related to specific items
              
              
              n
              
              
              
              
              
              
              
              
              
              
              
              n
 (1)  Accounts
        receivable and work in progress
  ALLOWANCE
        FOR DOUBTFUL ACCOUNTS
 The
        allowance for doubtful trade receivables is established when collection of
        amounts due from clients is deemed improbable. The allowance is reviewed
        periodically and is based on an analysis of specific outstanding accounts,
        aging
        of trade receivables, historical collection experience and client
        creditworthiness. Indicators of improbable collection include client bankruptcy,
        client litigation, industry downturns, client cash flow difficulties or ongoing
        service or billing disputes.
  GOODWILL
 Goodwill
          is assessed for potential impairment, at the reporting unit level, at least
          annually or when events or changes in circumstances exist such that the
          carrying
          amount may not be recoverable. Such assessment requires a comparison of
          the fair
          value of the reporting unit to its carrying value. The estimate of fair
          value of
          a reporting unit is based on a discounted cash flow analysis using management
          approved key assumptions such as future cash flows, growth projections,
          terminal
 
 2006
              Annual Report CGI Group Inc.
 19
 values
        and discount rates. Significant changes in the estimates and assumptions
        used in
        goodwill impairment testing will not impact cash flows generated from our
        operations.
  INCOME
        TAXES
 The
        Company measures income tax assets and liabilities, both current and future,
        according to enacted or substantively enacted income tax legislation that
        is
        expected to apply when the asset is realized or the liability settled. The
        applicable income tax legislation and regulations are subject to the Company’s
        interpretation. An assessment of the ultimate realization of the future income
        taxes generated from temporary differences between the book and the tax value
        of
        assets and liabilities as well as tax losses carried forward is performed
        regularly. The conclusion of whether it is more likely than not that future
        assets will be realized includes making assessments of expectations of future
        taxable income. The ultimate amount of future income taxes and income tax
        provisions could be materially different from those recorded, as it is
        influenced by future operating results of the Company and its tax
        interpretations.
  ACCOUNTS
        PAYABLE AND ACCRUED LIABILITIES
 The
        Company accrued for costs incurred to restructure and integrate the acquired
        businesses and for other liabilities requiring significant judgment.
        Contingencies for pending or threatened litigation, guarantees and other
        possible liabilities involve uncertainty as to possible gain or loss to the
        Company that will ultimately be resolved when one or more future events occur
        or
        fail to occur. Resolution of the uncertainty may confirm the reduction of
        a
        liability or the occurrence of a liability. The accrued liabilities are based
        on
        historical experience, current trends and other assumptions that are believed
        to
        be reasonable under the circumstances.
  Accrued
        integration charges are comprised mostly of provisions related to leases
        for
        premises occupied by the acquired businesses which the Company plans to vacate.
        The costs of closure of facilities are estimated at the business acquisition
        date and the adjustments to initial provision are made as soon as the Company’s
        management has gathered all the significant information. Key assumptions
        include
        discount rate and the possibility to sublease vacated premises. The discount
        rate assumption used to calculate the present value of the Company’s projected
        payments was determined using the interest rate on the unsecured notes of
        the
        Company. The possibility to sublease vacated premises was determined using
        the
        experience of the Company’s management and the knowledge of the Company’s
        advisers regarding specific regions and characteristics of
        premises.
  Furthermore,
        there are various claims and pending actions against the Company arising
        in the
        ordinary course of its business as well as inherited from business acquisitions.
        Certain of these actions seek damages in significant amounts. Among other
        things, the Company considers the period in which the underlying cause of
        the
        claim occurred, the degree of probability of an unfavorable outcome and the
        ability to make a reasonable estimate of the loss to determine whether a
        loss
        accrual or disclosure in the consolidated financial statements is
        required.
  REVENUE
        RECOGNITION
 The
        determination of revenues and costs on arrangements that use the
        percentage-of-completion method requires judgment and estimation. The method
        requires estimates of costs and profits over the entire term of the arrangement,
        including estimates of resources and costs necessary to complete performance.
        Moreover, if total costs from a contract are estimated to exceed the estimated
        total revenue from the contract, then a provision for the estimated loss
        is made
        in the period in which the loss first becomes apparent. Another assessment,
        related to a contract which involves the provision of multiple service elements,
        is to determine whether the total estimated contract revenue that is allocated
        to each element is based on the relative fair value of each element. Revenue
        is
        then recognized for each element as for single-element contracts. Management
        regularly reviews arrangement profitability and the underlying
        estimates.
  CONTRACT
        COSTS
 Certain
        costs incurred upon initiation of an outsourcing contract are deferred and
        amortized over the contract life. These costs consist primarily of incentives
        and transition costs. Estimates and assumptions that the Company makes include
        projecting future cash flows in order to assess the recoverability of these
        contract costs when events or changes in circumstances exist such that the
        carrying amount may not be recoverable. To assess recoverability, undiscounted
        estimated cash flows of the contract are projected over its remaining life
        and
        compared to the contract costs carrying amount. Changes in the estimates
        and
        assumptions on one or more contracts will not impact the cash flows generated
        by
        the Company’s operations.
  INVESTMENT
        TAX CREDITS
 The
        Company receives refundable tax credits on salaries and tax credits on research
        and software development costs, which meet the criteria of investment tax
        credits. The Company is subject to annual audits to verify the amount for
        which
        it is entitled and whether it operates eligible activities under the terms
        of
        various government tax credit programs. An assessment of the proportion of
        eligible expenses and of the acceptability rate by these different governments
        are performed periodically.
  IMPAIRMENT
          OF LONG-LIVED ASSETS
 The
          Company tests the recoverability of long-lived assets, such as finite-life
          intangibles and capital assets, when events or changes in circumstances
          exist
          that the carrying amount may not be recoverable. For finite-life intangibles,
          such as business solutions, software licenses and customer relationships,
          estimates and assumptions include determining the appropriate period over
          which
          to amortize the capitalized costs based on the estimated useful lives and
          estimating the related future cash flows, and assessing these against the
          unamortized balances. For internal-use software included in finite-life
          intangibles and for capital assets, the appropriate amortization period
          is based
          on estimates of the Company’s ability to utilize these assets on an ongoing
          basis. To assess the recoverability of capitalized software costs, the
          Company
          must estimate future revenue, costs and future cash inflows and outflows.
          Changes in the estimates and assumptions used in long-lived assets impairment
          testing will not impact the cash flows generated by the Company’s
          operations.
  RESTRUCTURING
          COSTS RELATED TO SPECIFIC ITEMS
 The
          Company announced a plan to reduce its workforce and to close and consolidate
          certain facilities. The plan was initiated because of lower than expected
          BCE
          work volumes and in an effort to reduce costs and improve its profitability.
          The
          charge taken during the year is
 
 2006
              Annual Report CGI Group Inc.
 20
 comprised
        of severance costs and costs related to the consolidation and closure of
        facilities. The recognition of these charges requires management to make
        certain
        judgments and estimates regarding the nature, timing and amount associated
        with
        these plans. For leased facilities that have been abandoned or subleased,
        the
        estimated lease cost represents future lease payments subsequent to abandonment
        less estimated sublease income. At each reporting date, we will evaluate
        the
        accruals for closed facilities and employee severances to ensure that the
        accruals are still appropriate.
  CHANGE
        IN ACCOUNTING POLICIES
 The
        CICA
        has issued the following new Handbook Sections which were effective for interim
        periods beginning on or after January 1, 2006:
 a)
              Handbook
                  Section 3831, “Non-Monetary Transactions”, requires that non-monetary
                  transactions be recorded at fair value unless the transaction has
                  no
                  commercial substance, it is an exchange of inventory, it is non-monetary,
                  non-reciprocal transfer to owners or it is not reliably measurable.
                  The
                  adoption of this section did not have any impact on the consolidated
                  financials statements.b)
              EIC
                  156, “Accounting by a Vendor for Consideration Given to a Customer
                  (Including a Reseller of the Vendor’s Products)”, provides guidance to
                  companies that give incentives to customers or resellers in the
                  form of
                  cash, equity, free gifts, coupons and other. The adoption of EIC 156
                  did not have any impact on the consolidated financial statements
                  since the
                  Company already adopted the U.S. equivalent, Emerging Issues Task
                  Force
                  (“EITF”) 01-9 “Accounting for Consideration Given by a Vendor to a
                  Customer” issued in 2001.c)
              EIC
                  157, “Implicit variable interests under AcG 15”, requires to consider
                  whether the reporting enterprise holds an implicit variable interest
                  in a
                  variable interest entity or potential variable interest entity
                  in applying
                  Accounting Guideline 15, “Consolidation of Variable Interest Entities”.
                  The adoption of this abstract did not have any impact on the consolidated
                  financials statements.d)
              EIC
                  159, “Conditional Asset Retirement Obligations”, provides guidance when a
                  conditional asset retirement obligation should be recognized. The
                  adoption
                  of this abstract did not have any impact on the consolidated financials
                  statements.
  CHANGE
        IN FUTURE ACCOUNTING POLICIES
 The
        CICA
        has issued the following new Handbook Sections:
 a)
              Handbook
                  Section 3855, “Financial Instruments - Recognition and Measurement”,
                  effective for interim periods beginning on or after October 1, 2006.
                  The section describes the standards for recognizing and measuring
                  financial assets, financial liabilities and non-financial derivatives.
                  All
                  financial assets, except for those classified as held-to-maturity,
                  and
                  derivative financial instruments must be measured at their fair
                  value. All
                  financial liabilities must be measured at their fair value if they
                  are
                  classified as held for trading purposes, if not, they are measured
                  at
                  their carrying value. The impact of the adoption of this new section
                  on
                  the consolidated financial statements is not expected to be
                  material.b)
              Handbook
                  Section 1530, “Comprehensive Income”, and Section 3251, “Equity”,
                  effective for interim periods beginning on or after October 1, 2006.
                  Comprehensive income is the change in equity of an enterprise during
                  a
                  period arising from transactions and other events and circumstances
                  from
                  non-owner sources. It includes items that would normally not be
                  included
                  in net income such as changes in the foreign currency translation
                  adjustment relating to self-sustaining foreign operations and unrealized
                  gains or losses on available for sale financial instruments. This
                  section
                  describes how to report and disclose comprehensive income and its
                  components. Section 3251, “Equity”, replaces Section 3250, “Surplus”, and
                  describes the changes in how to report and disclose equity and
                  changes in
                  equity as a result of the new requirements of Section 1530, “Comprehensive
                  Income”. Upon adoption of this section, the consolidated financial
                  statements will include a statement of comprehensive
                  income.c)
              Handbook
                  Section 3865, “Hedges”, effective for interim periods beginning on or
                  after October 1, 2006. This section describes when hedge accounting
                  is appropriate. Hedge accounting ensures that all gains, losses,
                  revenues
                  and expenses from the derivative and the item it hedges are recorded
                  in
                  the statement of earnings in the same period. The impact of the
                  adoption
                  of this new section on the consolidated financial statements is
                  not
                  expected to be material.
 FINANCIAL
        INSTRUMENTS
 From
          time
          to time, the Company uses various financial instruments to manage its exposure
          to fluctuations of foreign currency exchange rates. The Company does not
          hold or
          use any derivative instruments for speculative trading purposes. The Company
          enters into financial instrument contracts to hedge its net investment
          in
          foreign subsidiaries. Foreign exchange translation gain or loss on the
          net
          investment is recorded under foreign currency translation adjustment. Any
          realized or unrealized gain or loss on instruments covering the net investment
          is also recognized in foreign currency translation adjustment.
  RISKS
          AND UNCERTAINTIES
 While
          we
          are confident about our long-term prospects, the following risks and
          uncertainties could affect our ability to achieve our strategic vision
          and
          objectives for growth and should be considered when evaluating our potential
          as
          an investment.
  RISKS
          RELATED TO OUR INDUSTRY
 **The
          competition for contracts** -
          We have
          a disciplined approach to the management of all aspects of our business,
          with an
          increasing proportion of our operations certified under ISO 9001. Our
          management processes were developed to help us ensure that our members
          consistently deliver services according to our high standards and they
          are based
          on strong values underlying our client-focused culture. These processes
          have
          contributed to our high contract win and renewal rates to date. Additionally,
          we
          have developed a deep strategic understanding of the five economic sectors
          we
          target, and this helps enhance our competitive position. CGI is a leading
          provider of IT and business process services in Canada, and through a
          combination of organic growth and acquisitions, we continue to strengthen
          our
          position in the U.S. market. We have made good progress in growing our
          revenue
          from
 
 2006
              Annual Report CGI Group Inc.
 21
 the
        U.S.
        and internationally over the past three years and expect this trend to continue.
        However, the market for new IT and BPS outsourcing contracts remains very
        competitive and there can be no assurances that we will continue to compete
        successfully.
  **The
        long sales cycle for major outsourcing contracts** -
        As
        outsourcing deals become larger and more complex, the Company is experiencing
        longer selling cycles. In the past, we experienced cycles lasting between
        six
        and 18 months, which now are between 12 and 24 months. The lengthening
        sales cycle could affect our ability to meet annual
        growth targets.
  **The
        availability and cost of qualified IT professionals** -
        There
        is strong demand for qualified individuals in the IT industry. Over the years,
        we have been able to successfully attract and retain qualified staff, thanks
        to
        our solid culture, strong values and emphasis on career development, as well
        as
        performance-driven remuneration. In addition, we have implemented a
        comprehensive program aimed at attracting and retaining qualified and dedicated
        professionals. We believe that we are a preferred employer in the IT services
        industry. We also secure access to additional qualified professionals through
        outsourcing contract wins and business acquisitions.
  **The
        ability to continue developing and expanding service offerings to address
        emerging business demands and technology trends** -
        We
        strive to remain at the forefront of developments in the IT services industry,
        thus ensuring that we can meet the evolving needs of our clients. We achieved
        this expertise as a result of our specialization in five targeted economic
        sectors; our non-exclusive commercial alliances with hardware and software
        vendors and strategic alliances with major partners; our development of
        proprietary IT solutions to meet the needs of our clients; regular training
        and
        sharing of professional expertise across our network of offices and
        professionals; and business acquisitions that provide specific knowledge
        or
        added geographic coverage.
  **Infringing
        on the intellectual property rights of others** -
        We
        cannot be sure that our services and offerings do not infringe on the
        intellectual property rights of third parties, and we may have infringement
        claims asserted against us. These claims may be costly, harm our reputation,
        and
        prevent us from providing some services and offerings. We enter into licensing
        agreements with our clients for the right to use intellectual property that
        includes a commitment to indemnify the licensee against liability and damages
        arising from any third-party claims of patent, copyright, trademark or trade
        secret infringement. In some instances, the amount of these indemnity claims
        could be greater than the revenue we receive from the client. Any claims
        or
        litigation in this area, whether we ultimately win or lose, could be
        time-consuming and costly, injure our reputation, or require us to enter
        into
        royalty or licensing arrangements. Any limitation on our ability to sell
        or use
        products or services that incorporate challenged software or technologies
        could
        cause us to lose revenue-generating opportunities or require us to incur
        additional expenses to modify solutions for future projects.
  **Limited
        ability to protect our intellectual property rights** -
        Our
        success depends, in part, on our ability to protect our proprietary
        methodologies and other intellectual property that we use to provide our
        services. Our general practice is to pursue patent or other appropriate
        intellectual property protection that is reasonable and necessary to protect
        and
        leverage our intellectual assets. We assert trademark rights in and to our
        name,
        product names, logos and other markings used to identify our goods and services
        in the marketplace. We routinely file for and have been granted trademark
        registrations from the U.S. Patent and Trademark Office and other trademark
        offices worldwide. However, the laws of some countries in which we conduct
        business may offer only limited protection of our intellectual property rights;
        and despite our efforts, the steps taken to protect our intellectual property
        may not be adequate to prevent or deter infringement or other misappropriation
        of intellectual property, and we may not be able to detect unauthorized use
        of
        our intellectual property, or take appropriate steps to enforce our intellectual
        property rights.
  RISKS
          RELATED TO OUR BUSINESS
 **Business
          mix variations** -
          The
          proportion of revenue that we generate from shorter-term SI&C projects,
          versus revenue from long-term outsourcing contracts, will fluctuate at
          times,
          affected by acquisitions or other transactions. An increased exposure to
          revenue
          from SI&C projects may result in greater quarterly revenue
          variations.
  **The
          financial and operational risks inherent in worldwide
          operations** -
          We manage operations in 16 countries worldwide, with less than 10% of
          revenue coming from outside North America. We believe that our Management
          Foundation, which includes management frameworks and processes that guide
          business unit leaders in managing our members and clients, helps ensure
          worldwide operational efficiency and consistency. However, the scope of
          our
          worldwide operations makes us subject to currency fluctuations; price controls
          or restrictions on the exchange of foreign currency; the burden of complying
          with a wide variety of national and local laws; differences in, and
          uncertainties arising from local business culture and practices; multiple
          and
          sometimes conflicting laws and regulations, including tax laws; operating
          losses
          incurred in certain countries as we develop our international service delivery
          capabilities and the non-deductibility of these losses for tax purposes;
          the
          absence in some jurisdictions of effective laws to protect our intellectual
          property rights; restrictions on the movement of cash and other assets;
          restrictions on the import and export of certain technologies; restrictions
          on
          the repatriation of earnings; and political, social and economic instability
          including the threats of terrorism and pandemic illnesses. We have a hedging
          strategy in place to protect ourselves, to the extent possible, against
          foreign
          currency exposure; but, other than the use of financial products to deliver
          on
          our hedging strategy, we do not trade derivative financial instruments.
          While we
          believe we have effective management processes in place in each office
          worldwide, any or all of these risks could impact our global business operations
          and cause our profitability to decline.
  **The
          ability to successfully integrate business acquisitions and the operations
          of IT
          outsourcing clients** -
          The
          integration of acquired operations has become a core competency for us
          as we
          have acquired a large number of companies since our inception. Our disciplined
          approach to management, largely based on our management frameworks, has
          been an
          important factor in the successful integration of human resources of
 
 2006
              Annual Report CGI Group Inc.
 22
 acquired
        companies and the IT operations of outsourcing clients. As at September 30,
        2006, the majority of our operations had received
        ISO 9001 certification.
  **Material
        developments regarding major commercial clients resulting from such causes
        as
        changes in financial condition, mergers or business acquisitions** -
        With
        the exception of BCE Inc., its subsidiaries and affiliates, no one company
        or
        group of related companies represents more than 10% of our total
        revenue.
  **Early
        termination risk** -
        If we
        should fail to deliver our services -according to contractual agreements,
        some
        of our clients could elect to terminate contracts before their agreed expiry
        date, which would result in a reduction of our earnings and cash flow and
        may
        impact the value or our backlog. We have a strong record of successfully
        meeting
        or exceeding our clients’ needs. We take a professional approach to business,
        and our contracts are written to clearly identify the scope of our
        responsibilities and minimize risks. In addition, a number of our outsourcing
        contractual agreements have termination for convenience and change of control
        clauses according to which a change in the client’s intentions or a change in
        control of CGI could lead to a termination of the said agreements.
  **Credit
        risk concentration with respect to trade receivables** -
        We
        generate a significant portion of our revenue (11.9% in the fiscal year 2006)
        from the subsidiaries and affiliates, namely BCE Inc. However, it is our
        belief
        that we are not subject to any significant credit risk, especially in view
        of
        our large and diversified client base.
  **Short-term,
        project-related contract risks** -
        With
        the acquisition of AMS, the percentage of revenue that CGI derives from
        shorter-term, project-oriented contracts increased substantially. We manage
        all
        client contracts utilizing the Client Partnership Management Framework (“CPMF”),
        a process framework which helps ensure that client projects are all managed
        according to the same high standards throughout the organization. As a result
        of
        the CPMF, there is a high degree of rigour and discipline used to accurately
        estimate the cost of client engagements. However, a significant portion of
        engagements acquired with AMS are performed on a fixed-price basis. Billing
        for
        fixed-price engagements is made in accordance with the contract terms agreed
        upon with our client, and revenue is recognized based on the percentage of
        effort incurred to date in relation to the total estimated costs to be incurred
        over the duration of the respective contract. When making proposals for these
        types of engagements, we rely on our estimates of costs and timing for
        completing the projects. These estimates reflect our best judgment regarding
        the
        efficiencies of our methodologies and professionals as we plan to apply them
        to
        the projects. Any increased or unexpected costs or unanticipated delays in
        connection with the performance of fixed-price contracts, including delays
        caused by factors outside our control, could make these contracts less
        profitable or unprofitable.
  **Guarantees
        risk** -
        In the
        normal course of business, we enter into agreements that may provide for
        indemnification and guarantees to counterparties in transactions such as
        consulting and outsourcing services, business divestitures, lease agreements
        and
        financial obligations. These indemnification undertakings and guarantees
        may
        require us to compensate counterparties for costs and losses incurred as
        a
        result of various events, including breaches of representations and warranties,
        intellectual property right infringement, claims that may arise while providing
        services or as a result of litigation that may be suffered by
        counterparties.
  **Government
        tax credits risk** -
        An
        acquisition of control of CGI could translate into a loss of provincial tax
        credits related to E-Commerce Place and the Cité Multimédia in Montréal, the
        Carrefour de la nouvelle économie in Saguenay and the Carrefour national des
        nouvelles techno-logies de Québec.
  **Government
          business risk** -
          Changes
          in federal, provincial or state government spending policies or budget
          priorities could directly affect our financial performance. Among the factors
          that could harm our government contracting business are the curtailment
          of the
          government’s use of consulting and technology services firms; a significant
          decline in spending by the governments, in general, or by specific departments
          or agencies in particular; the adoption of new laws or regulations that
          affect
          companies that provide services to governments; delays in the payment of
          our
          invoices by government payment offices; and general economic and political
          conditions. These or other factors could cause government agencies and
          departments to reduce their purchases under contracts, to exercise their
          right
          to terminate contracts, to issue temporary stop work orders, or not to
          exercise
          options to renew contracts, any of which would cause us to lose future
          revenue.
          Our client base in the government economic sector is very diversified with
          contracts from many different departments and agencies in the U.S. and
          Canada;
          however, government spending reductions or budget cutbacks at these departments
          or agencies could materially harm our continued performance under these
          contracts, or limit the awarding of additional contracts from these
          agencies.
  **Legal
          claims made against our work** -
          We
          create, implement and maintain IT solutions that are often critical to
          the
          operations of our clients’ business. Our ability to complete large projects as
          expected could be adversely affected by unanticipated delays, renegotiations,
          and changing client requirements or project delays. Such problems could
          subject
          us to legal liability, which could adversely impact our business, operating
          results and financial condition, and may negatively affect our professional
          reputation. We typically include provisions in our contracts which are
          designed
          to limit our exposure to legal claims relating to our services and the
          applications we develop. These provisions may not protect us or may not
          be
          enforceable under some circumstances or under the laws of some
          jurisdictions.
  RISKS
          RELATED TO BUSINESS ACQUISITIONS
 **Difficulties
          in executing our acquisition strategy** -
          A
          significant part of our growth strategy is dependent on our ability to
          continue
          making niche acquisitions to increase the breadth and depth of our service
          offerings as well as large acquisitions to specifically increase our critical
          mass in the U.S. and Europe. We cannot, however, make any assurances that
          we
          will be able to identify any potential acquisition candidates, consummate
          any
          additional acquisitions or that any future acquisitions will be successfully
          integrated into our operations and provide the tangible value that had
          been
          expected. Without additional acquisitions, we are unlikely to maintain
          our
          historic or expected growth rates.
 
 2006
              Annual Report CGI Group Inc.
 23
  Our
        management faces a complex and potentially time-consuming task in implementing
        uniform standards, controls, procedures and policies across our business
        units.
        Integrating businesses can result in unanticipated operational problems,
        expenses and liabilities. In addition, to the extent that management is required
        to devote significant time, attention and resources to the integration of
        operations, personnel and technology, our ability to service current clients
        may
        be reduced, which may adversely affect our revenue and
        profitability.
  RISKS
        RELATED TO THE MARKET
 **Economic
        risk** -
        An
        economic downturn may cause our revenue to decline. The level of business
        activity of our clients, which is affected by economic conditions, has a
        bearing
        upon the results of our operations. We can neither predict the impact that
        current economic conditions will have on our future revenue, nor predict
        when
        economic conditions will show meaningful improvement. During an economic
        downturn, our clients and potential clients often cancel, reduce or defer
        existing contracts and delay entering into new engagements. In general,
        companies also decide to undertake fewer IT systems projects during difficult
        economic times, resulting in limited implementation of new technology and
        smaller engagements. Because there are fewer engagements in a downturn,
        competition usually increases and pricing for services may decline as
        competitors, particularly companies with significant financial resources,
        decrease rates to maintain or increase their market share in our industry.
        Our
        pricing, revenue and profitability could be negatively impacted as a result
        of
        these factors.
  INTEGRITY
        OF DISCLOSURE
 Our
        management assumes the responsibility for the existence of appropriate
        information systems, procedures and controls to ensure that information used
        internally and disclosed externally is complete and reliable. The Board of
        Directors’ duties include the assessment of the integrity of the Company’s
        internal control and information system.
  CGI
        has a
        formal Corporate Disclosure Policy whose goal is to raise awareness of the
        Company’s approach to disclosure among the Board of Directors, senior
        management, and employees. The Board of Directors has established a Disclosure
        Policy Committee responsible for all regulatory disclosure requirements and
        overseeing the Company’s disclosure practices.
  The
        Audit
        and Risk Management Committee of CGI is composed entirely of unrelated directors
        who meet the independence and experience requirements of the New York Stock
        Exchange and the Toronto Stock Exchange. The responsibilities of our Audit
        and
        Risk Management Committee include: a) the review of all our public disclosure
        documents containing audited or unaudited financial information, b) the review
        and assessment of the effectiveness of our accounting policies and practices
        concerning financial reporting, c) the review and monitoring of our internal
        control procedures, programs and policies and assessment of the adequacy
        and
        effectiveness thereof, d) recommendation to the Board of Directors of CGI
        on the
        appointment of external auditors, assertion of the independence thereof,
        review
        of the terms of engagement thereof and ongoing discussions therewith, e)
        the
        review of the audit procedures, and f) such other responsibilities usually
        attributed to audit and risk committees or as directed by our Board of
        Directors.
  The
          Company evaluated the effectiveness of its disclosure controls, supervised
          by
          and with the participation of the Chief Executive Officer and the Chief
          Financial Officer as of September 30, 2006. The CEO and CFO concluded that,
          based on this evaluation, the Company’s disclosure controls and procedures were
          adequate and effective, at a reasonable level of assurance, to ensure that
          material information related to the Company and its consolidated subsidiaries
          would be made known to them by others within those entities.
  LEGAL
          PROCEEDINGS
 From
          time
          to time, the Company is involved in various litigation matters arising
          in the
          ordinary course of its business. As at September 30, 2006, the Company
          has no
          reason to believe that the disposition of any such current matters could
          reasonably be expected to have a material adverse impact on CGI’s financial
          position, results of operations, or the ability to carry on any of its
          business
          activities.
  2006
            Annual Report CGI Group Inc.
 24


**SIGNATURES**




Pursuant
      to the requirements of the Exchange Act, the registrant certifies that it meets
      all of the requirements for filing on Form 40-F and has duly caused this annual
      report to be signed on its behalf by the undersigned, thereto duly
      authorized.

















Groupe
                CGI Inc./CGI Group Inc.By:/s/
                André ImbeauDate:
                December 20, 2006
            Name:
                André ImbeauTitle:
                Founder, Executive Vice-Chairman and Corporate
                Secretary














**EXHIBIT
      INDEX**




23.1
            Consent
                of Deloitte & Touche LLP99.1
            Certification
                of the Registrant’s Chief Executive Officer required pursuant to Rule
                13a-14(a).99.2
            Certification
                of the Registrant’s Chief Financial Officer required pursuant to Rule
                13a-14(a).99.3
            Certification
                of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.99.4
            Certification
                of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.