UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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AMENDMENT NO. 1 TOFORM 20-F/A

(Mark One)

|o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------
|  |                                                                                               
|  | OR                                                                                            
|  |                                                                                               
|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|  | For the fiscal year ended: December 31, 2004                                                  
|  |                                                                                               
|  | OR                                                                                            
|  |                                                                                               
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|  | For the transition period from                to                                              

Commission file number 333-107620

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SR TELECOM INC.(Exact name of Registrant as specified in its charter)

(Translation of Registrant's name into English)

CANADA(Jurisdiction of incorporation or organization)

8150 Trans-Canada Hwy
Montreal, QC H4S 1M5
Canada
514-335-1210(Address of principal executive offices)

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

Title of each class

Name of each exchange on which registeredNone

None


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

Common Shares(Title of Class)

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

None(Title of Class)

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.

17,610,132

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 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.

ý  Yes                        o  No

Indicate by check mark which financial statement item the registrant has elected to follow.

o  Item 17                        ý  Item 18



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TABLE OF CONTENTSEXPLANATORY NOTES  EXCHANGE RATE INFORMATION

|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  | 4 
|------------------------------------------------------------------------------------- |  | --
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  | 4 
|ITEM 3. KEY INFORMATION                                                               |  | 4 
|ITEM 4. INFORMATION ON THE COMPANY                                                    |  | 12
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 24
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 42
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  | 52
|ITEM 8. FINANCIAL INFORMATION                                                         |  | 53
|ITEM 9. THE OFFER AND LISTING                                                         |  | 56
|ITEM 10. ADDITIONAL INFORMATION                                                       |  | 57
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 64
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 65
|ITEM 13. DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES                             |  | 65
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 65
|ITEM 15. CONTROLS AND PROCEDURES                                                      |  | 65
|ITEM 16. [RESERVED]                                                                   |  | 66
|ITEM 17. FINANCIAL STATEMENTS                                                         |  | 67
|ITEM 18. FINANCIAL STATEMENTS                                                         |  | 67
|ITEM 19. EXHIBITS                                                                     |  | 67

2

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EXPLANATORY NOTES

References herein to the "Corporation", "we", "us" and "our" are references to SR Telecom Inc., a Canadian corporation, and its consolidated
subsidiaries unless the context indicates otherwise.

All
references herein to "dollars" and "$" refer to the lawful currency of Canada, unless otherwise expressly stated. All references herein to "US dollars" and "US$" refer to the lawful
currency of the United States of America. All financial statements and financial information derived therefrom presented herein have been prepared in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP"). For a discussion of the principal differences between Canadian GAAP and United States generally accepted accounting principles ("U.S. GAAP"), see
Note 32 to the consolidated financial statements.

Information
contained in this document concerning the wireless telecommunications industry, our general expectations concerning this industry and our market positions and market shares
are based on estimates we prepared using data from publicly available industry sources as well as from various research analysts' reports, market research and industry analyses, and on assumptions
made, based on our knowledge of this industry, which we believe to be reasonable. We believe, however, that this data is inherently imprecise, although generally indicative of relative market
positions and market shares.

Unless
otherwise indicated, all operating data presented herein is as of December 31, 2004.

EXCHANGE RATE INFORMATION

The following table sets forth the exchange rates for one US dollar in effect at the end of the periods noted and the average of the exchange rates on the last
day of each month during such periods. The exchange rates below are based on the noon buying rate as reported by the Federal Reserve Bank of New York.

|                |  | 2004   |  | 2003   |  | 2002   |  | 2001   |  | 2000  
|--------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|
|Canadian Dollar |  | 1.2020 |  | 1.2191 |  | 1.2923 |  | 1.3911 |  | 1.5718

On
April 14, 2005, the exchange rate for one US dollar was 1.2419.

The
following table sets out the high and low rates for one US dollar for each month during the previous six months:

High

LowOctober 2004

1.2755

1.2158November 2004

1.2274

1.1746December 2004

1.2467

1.1796January 2005

1.2470

1.1948February 2005

1.2584

1.2241March 2005

1.2494

1.1978


FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements concerning our future operations, economic performances, financial conditions and financing plans,
including such things as business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of the wireless telecommunications industry and our business and
operations and references to future success. Forward-looking statements may be identified by use of forward-looking terminology such as "believe", "intend", "may", "will", "expect", "estimate",
"anticipate", "continue", or similar terms, variations of those terms or the negative of those terms. These statements are based on certain assumptions and analyses made by us in light of our
experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether
actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including, among other things, the risk factors discussed in
Item 3. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results or
developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us and our subsidiaries or their businesses or
operations.

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PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.    KEY INFORMATION

SELECTED FINANCIAL DATA

SR Telecom Selected Consolidated Financial Data

The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of
Operations", the section entitled "Risk Factors", and the consolidated financial statements and related notes thereto. The following selected consolidated financial information as of and for the
fiscal years ended December 31, 2004, 2003, 2002, 2001, and 2000, which was derived from our audited consolidated financial statements, was prepared in accordance with Canadian GAAP and is
presented in Canadian dollars. The principles of Canadian GAAP used in the preparation of our financial statements for the years ended December 31, 2004, 2003 and 2002 conform in all material
respects with U.S. GAAP, except as disclosed in note 32 to the consolidated financial statements for the years ended December 31, 2004 and 2003 included in this
Form 20-F. As permitted by SEC rules, our financial statements for the years ended December 31, 2001 and 2000 have not been reconciled to U.S. GAAP, because such
reconciliation cannot be provided without unreasonable effort and expense.

|                                                                |  | Year Ended December 31, |  
|--------------------------------------------------------------- |  | ----------------------- | -
|
|
|Consolidated Statement of Operations Data:                      |  |                         |  
|Revenues                                                        |  | 123,936                 |  
|Restructuring, asset impairment and other charges               |  | (15,907                 | )
|Operating (loss) earnings                                       |  | (65,825                 | )
|Net loss from continuing operations                             |  | (86,134                 | )
|Net loss                                                        |  | (86,134                 | )
|Basic and diluted net loss per share from continuing operations |  | (5.17                   | )
|Basic and diluted net loss per share                            |  | (5.17                   | )
|Net loss (U.S. GAAP)                                            |  | (84,786                 | )
|Basic and diluted net loss per share (U.S. GAAP)                |  | (5.09                   | )

|
|

|                                 |                            | As of December 31,
|-------------------------------- | -------------------------- | ------------------
|
|
|Consolidated Balance Sheet Data: |                            |                   
|Total Assets                     |                            | 227,624           
|Long-term Debt(1)                |                            | 117,370           
|Capital Stock                    |                            | 219,653           
|Shareholders' Equity             |                            | 52,640            
|Shareholders' Equity (U.S. GAAP) |                            | 33,207            
|Other Data:                      |                            |                   
|Number of Shares Issued:         |                            |                   
|                                 | Common shares              |                   
|                                 | Dividends per common share |                   

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Exchange Rate Data

Please refer to the Section entitled "Exchange Rate Information" on page 3.

CAPITALIZATION AND INDEBTEDNESS

Not applicable.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

RISK FACTORS

The Conditions Required to close our proposed recapitalization plan may not be met.

We have entered into an agreement in principle with a group representing the required majority of our outstanding 8.15% Debentures due April 22, 2005,
regarding a proposed recapitalization plan. Under the terms of the agreement in principle, we would exchange the outstanding $71 million in principal amount of our 8.15% Debentures, due
April 22, 2005 and all accrued interest of approximately $2.9 million into 47,266,512 common shares and approximately $63.9 million new 10% Convertible Redeemable Secured
Debentures, due 2010. The restricted group of Debenture holders has also agreed, subject to execution of final documentation, to provide us with a five-year $50 million secured
Credit Facility of which $20 million would be available as soon as loan documentation and registrations are in place, with the balance to be available over the next three quarters, subject to
certain conditions.

The
Debenture exchange and the Credit Facility are subject to numerous conditions, including the execution of definitive documentation satisfactory to the lenders under the Credit
Facility, the approval by the holders of at least 662/3% of the outstanding Debentures, and regulatory approval. Debenture holders representing approximately 75% of the outstanding
Debentures have indicated in writing their support for the Debenture exchange. The Credit Facility is expected to close as soon as loan documentation and registrations are in place and the Debenture
exchange is expected to close on or about May 9, 2005 although there can be no assurance that such conditions will be satisfied by such date.

Additionally,
it is a condition of the recapitalization that the lenders to our Chilean subsidiary, CTR, will restructure CTR's outstanding debt and amortization schedule and provide an
extended waiver of at least three years, subject to final negotiations and the receipt of credit approvals. CTR's lenders had previously waived compliance with certain financial and operational
covenants of CTR until April 22, 2005. Failure to achieve these conditions would cause us to seek protection from our creditors under applicable bankruptcy or insolvency legislation.

Lenders to our Chilean Subsidiary May Elect Not to Renew Covenant Waivers That Expire in May 2005.

Our wholly-owned subsidiary in Chile, Comunicacion y Telefonia Rural, or CTR, is party to credit facilities under which US$29.5 million of debt is
outstanding at December 31, 2004. The loan documents provide the lenders with full recourse to our assets if certain financial and operational covenants are not satisfied. The lenders waived
compliance with these covenants through May 1, 2005. CTR does not expect to satisfy all of these covenants for the foreseeable future. If the lenders do not extend these waivers, CTR will be in
default and all amounts due under the credit facilities could be declared due and immediately payable. There is no assurance that we will obtain the necessary waivers or that the lenders will agree to
the conditions of the proposed recapitalization. In such an event, CTR's debt would be accelerated and would have material and adverse consequences for our business, financial position and results of
operations, and would cause us to seek protection from our creditors under applicable bankruptcy or insolvency legislation.

We are Substantially Leveraged, Which Could Impair our Ability to Gain Access to Necessary Additional Funding.

In addition to the CTR debt, we had $71 million of public debt outstanding as of December 31, 2004.

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Under
the terms of the proposed recapitalization, we would continue to be substantially leveraged and limited in our ability to secure new financing until after the Credit facility is
repaid on or before 2010.

Our
operations are by their nature capital intensive. We will therefore require continuing access to financing to fund additional development and acquisition opportunities, the
retirement of maturing debt, working capital needs, capital expenditures and other cash requirements. If we are unable to obtain such additional financing or refinance our existing debt, we may be
unable to repay our existing debt or meet our capital needs. If we were unable to repay our existing debt or meet our capital needs using our cash and cashflow from operations, we could be forced to
sell other assets needed for our business. A substantial portion of cash flow from operations would need to be dedicated to repayment of debt, thereby reducing the availability of cash flow to fund
our working capital, capital expenditures, research and development efforts, potential acquisition opportunities and other general corporate purposes. This could reduce our flexibility in planning for
or reacting to changes in our business, or leave us unable to make strategic acquisitions, introduce new products or exploit new business opportunities.

We have a Long Sales Cycle, Which Could Cause our Results of Operations and Stock Price to Fluctuate.

Our sales cycles are long and unpredictable. As a result, our revenues may fluctuate from quarter to quarter and we may be unable to adjust our expenses
accordingly. This would cause our operating results and stock price to fluctuate. OEMs and service providers typically perform numerous tests and extensively evaluate products before
incorporating them into networks. Some additional factors that are likely to affect the length of our sales cycle include:



In
addition, we expect that the delays which are inherent in our sales cycle could raise additional risks of service providers deciding to cancel or change their product plans. Our
business would be adversely affected if a significant customer reduces or delays orders during our sales cycle or chooses not to deploy networks incorporating our products.

We are Subject to the Risks of Doing Business in Developing Countries.

We market and sell our telecommunications products and services to customers around the world, with a focus on developing countries. Accordingly, we are subject
to all the risks of doing business with customers in such countries, including dealing with:



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We
believe that the change of the geographic focus of our business over the past few years reduces our exposure to developing countries. Our exposure to developing countries declined to
75% in 2004 from 80% in 2003 and 2002. Although we have political risk insurance, force majeure clauses and currency strategies covering some of the events listed above, insurance proceeds and other
measures would likely not cover all losses and insurance may not be available on commercially reasonable terms, or at all.

We May Not be Able to Compete Effectively With Other Leading Providers of Equipment and Systems in the Wireless Communications Industry, Many of Whom Have Greater Financial
Resources Than us, as a Result of Which our Revenues and Results of Operations May be Impaired.

We
face competition in the following markets:

Enterprise Access.In the enterprise access market, our point-to-multipoint
fixed wireless solutions compete with wire-based solutions, such as fiber optic cable and leased T1 and E1 lines and wireless solutions, such as point-to-point
radios. We compete against large OEMs, such as Alcatel, NEC, Ericsson, Lucent, Nortel Networks, Marconi, Intracom and Siemens as well as with smaller wireless-only companies, such as
Alvarion and AirSpan.

Residential and Small Business Access.In the residential and small business access market,
point-to-multipoint fixed wireless solutions compete with wire-based solutions, such as DSL and cable modems, and against established wireless local loop vendors,
such as Alvarion, and AirSpan, as well as with numerous startup companies that are developing products for the industry.

Mobile Infrastructure.In the market for mobile infrastructure technologies connecting cellular base
stations to the core telecommunications network, point-to-multipoint fixed wireless solutions compete with wire-based solutions such as leased T1 and E1 lines and
wireless solutions such as point-to-point radios. We compete principally with large OEMs, such as Alcatel, Ericsson, Lucent, Nortel Networks, and Marconi.

Competition
is likely to persist and intensify in the future. Many of our competitors are substantially larger and have significantly greater financial, sales, marketing, technical,
manufacturing and other resources and more extensive distribution channels than we do. These competitors may be able to respond more rapidly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion, sale and financing of their products than we will be able to. Our competitors may also attempt to influence the adoption of
standards that are not compatible with our current architecture. This may require us to incur additional development and integration costs and may delay our sales efforts.

Some
of our competitors may make strategic acquisitions or establish cooperative relationships to increase their ability to gain customer market share rapidly. These competitors may
enter our existing or future markets with solutions that may be less expensive, provide higher performance or additional features or be introduced earlier than our solutions. If any technology that is
competing with our technology is more reliable, faster, less expensive or has other advantages over our technology, then the demand for our products and services would decrease, which would seriously
harm our business.

To
be competitive, we must invest significant resources in research and development, sales and marketing and customer support. We may not have sufficient resources to make these
investments or be able to make the technological advances necessary to be competitive. As a result, we may not be able to compete effectively against our competitors.

If we do Not Meet Product Introduction Deadlines, or our Products do Not Contain Key Enhancements, we May Not be Competitive and Revenues and Results of Operations May be
Impaired.

Our inability to develop new products or product features on a timely basis, or the failure of new products or product features to achieve market acceptance,
could adversely affect our revenues and revenue growth. In the past, we have experienced design and manufacturing difficulties that delayed the development, introduction or marketing of new products
and enhancements, which caused us to incur unexpected expenses. In addition, some of our customers have conditioned their future product purchases on the addition of new product features. Furthermore,
in order to compete in additional markets, we will have to develop different versions of our existing products that operate at different frequencies and comply with diverse, new or varying
governmental regulations in each market, which could also delay the introduction of new products.

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We have a History of Net Losses and May Not Achieve or Maintain Profitability, Which Would Impair our Share Price and Liquidity.

We have incurred a loss from operations in our last three fiscal years. As of December 31, 2004, our accumulated deficit was approximately
$179.7 million. While we cannot predict whether we will have losses in 2005, failure to return to profitability in 2005 could have a material adverse effect on our business and prospects.

Our
ability to achieve and maintain profitability will depend on, among other things, the ability to secure new business, the ability to timely develop new products and features, the
market acceptance of our products and the ability to reduce product and other costs sufficiently.

Acquisitions of Companies or Technologies May Result In Disruptions to our Business.

As part of our business strategy, we may acquire assets and businesses principally relating or complementary to our current operations. Any acquisitions or
mergers by us will be accompanied by the risks commonly encountered in acquisitions of companies. These risks include, among other things:



We
may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions.

Further,
your ownership interest in us will be diluted if equity securities are issued in connection with any acquisition. If acquisitions are made for cash consideration, we may be
required to use a substantial portion of our available cash, cash equivalents and short-term investments. Acquisition financing may not be available on acceptable terms, if at all and our
ability to make acquisitions will be limited by our current debt obligations.

Our Products Could Become Obsolete as a Result of Rapid Technological Change, Limiting our Ability to Generate Continuing Revenues and Achieve Profitability.

The telecommunications industry is subject to rapid and substantial technological change. We may not be able to keep pace with technological developments or
developments by other companies that could render our products or technologies non-competitive. Other companies have developed, and will continue to develop, technologies that could be the
basis for competitive products. Some of these technologies and products could be more effective and less costly than our products or technologies, thereby eroding our market share.

8

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We May Encounter Continued Competitive Pressures to Lower Selling Prices. If we Cannot Successfully Reduce our Product Costs, our Results of Operations and Earnings Will
Suffer.

The market for fixed wireless access telecommunications equipment is rapidly evolving and highly competitive. Increased competition may result in price
reductions, shorter product life cycles, longer sales cycles and loss of market share, any of which could adversely affect our business. If we cannot reduce the cost of our products enough to keep
pace with the required price reductions, then our product sales or our gross margins, and consequently our results of operations, will suffer.

Our
ability to implement cost reductions will also be dependent on factors outside of our control. For example, our cost for contract manufacturing may be largely impacted by the level
and volume of our orders which will be driven by our customers' demand. Also, our contract manufacturers must correctly implement cost reductions that we design into the products. Our cost projections
are based upon assumptions regarding the ability of our contract manufacturers to achieve volume-related cost reductions. Some of our design cost reductions will depend on the emergence of
low-cost components which are likely to be developed by third parties. We will not control these third parties. To the extent these third parties are unable or unwilling to cooperate with
us in reducing product cost, or their efforts in this regard are not timely, our product costs will exceed our internal projections.

In
addition, the price for wireless telecommunications equipment is driven by the prevailing price for other connection technologies, such as the cost of obtaining digital subscriber
line service or leasing a T1 connection from the traditional telecommunications service provider in a given locale. The price of these connections has declined significantly in many countries in the
recent past, and could decline significantly in the future. If this trend continues, service providers might be more likely to use these kinds of connections than to introduce new technology such as
our products, which would adversely affect our revenues and earnings.

Because we Must Sell our Products in Many Countries that Have Different Regulatory Schemes, if we Cannot Develop Products that Work with Different Standards, our Opportunities
for Growth will be Limited.

We
must sell our products in many different countries in order to grow. Many countries require communications equipment used in their country to comply with unique regulations, including
safety regulations, radio frequency allocation schemes and standards. If we are unable to develop products that work with different standards, we will be unable to sell our products. If compliance
proves to be more expensive or time consuming than we anticipate, our business would be adversely affected. Some countries have not completed their radio frequency allocation process and therefore the
standards with which we will be forced to comply are unknown. Furthermore, standards and regulatory requirements are subject to change. If we fail to anticipate or comply with these new standards, our
revenues and results of operations will be adversely affected.

Because Some of our Key Components Are from Sole Source Suppliers or Require Long Lead Times, our Business will be Subject to Unexpected Interruptions, which Could Cause our
Operating Results to Suffer.

Some of the key components to be used in our products are complex to manufacture and have long lead times. They are supplied by sole source vendors for which
alternative sources are not currently available. In the event of a reduction or interruption of supply, or a degradation in quality, as many as six months could be required before we would begin
receiving adequate supplies from alternative suppliers, if any. As a result, product shipments could be delayed and our revenues and results of operations would suffer. If we receive a smaller
allocation of component parts than is necessary to manufacture products in quantities sufficient to meet customer demand, customers could choose to purchase competing products and we could lose market
share.

Our Products May Contain Defects that Could Harm our Reputation, be Costly to Correct, Expose us to Litigation and Harm our Operating Results and Profits.

We and our customers have from time to time discovered defects in our products and additional defects may be found in the future. If defects are discovered, we
may not be able to correct them in a timely manner or at all. Defects and failures in our products could result in a loss of, or a delay in, market acceptance of our products. In addition, defects in
our products could cause adverse publicity, damage our reputation and impair our ability to acquire new customers. In addition, we may need to make significant expenditures to eliminate defects from
our products.

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Moreover,
because our products are used in critical telecommunications networks, we may be subject to significant liability claims if our products do not work properly. The provisions in
our agreements with customers that are intended to limit our exposure to liability claims may not preclude all potential claims. In addition, our insurance policies may not adequately limit our
exposure with respect to such claims. We warrant to our current customers that our products will operate in accordance with product specifications. If these or our future products fail to conform to
such specifications, our customers could require us to remedy the failure or could assert claims for damages. Liability claims could require us to spend significant time and money in litigation or to
pay significant damages. Any such claims, whether or not successful, would be costly and time-consuming to defend and could seriously damage our reputation and business.

Our Operating Results and Liquidity May be Adversely Affected if we do Not Successfully Resolve Pending Commercial Disputes.

In connection with a Haitian project dispute, we have filed a statement of claim for US$4.86 million against MCI International in MCI's bankruptcy. On
October 15, 2004, MCI objected to the claim. We filed a notice of objection and are continuing to pursue our claim with MCI. The parties are currently entering the discovery process.
Concurrently, we are in discussions with Teleco de Haiti to accelerate the collection outside of the court process. If we fail to recover a substantial amount from MCI International, our results of
operations and liquidity may be adversely affected.

We May Have to Acquire Significant Inventory to Support Future Sales and for Long-Term Product Support.

We have acquired and may continue to acquire significant inventory in order to support contractual obligations in relation to discontinued product lines and
discontinued components in existing products. If sales of such products or components do not materialize, we could end up with inventory levels that are significantly in excess of our needs, which
could diminish our working capital or cause significant losses.

We have Exposure to Currency Risk. Significant Fluctuations in Exchange Rates Could Reduce Revenues, Earnings, Investments and Liquidity.

Our reporting currency is the Canadian dollar, while the majority of our sales contracts are in other currencies. Fluctuations between currencies will affect the
reported values of revenues and eventual collections. While we engage in hedging activities to the extent possible to protect us from fluctuations, there can be no assurance that these practices will
be adequate to eliminate potential negative effects.

The
value of our investment in our foreign subsidiaries is partially a function of the currency exchange rate between the Canadian dollar and the applicable local currency. The
devaluation of a foreign subsidiary's local currency would result in a reduction in our carrying value of our investment in such foreign subsidiary. As a result, we may experience economic losses with
respect to our investments in foreign subsidiaries and fluctuations in our results of operations solely as a result of currency exchange rate fluctuations. Many of the currencies of developing
countries have experienced steady, and at times significant, devaluations relative to the Canadian dollar, and significant exchange rate fluctuations have occurred in the past and may again occur in
the future, any of which could impair the recoverability of our long-term assets.

In
many circumstances, revenues generated by foreign subsidiaries will generally be paid to the foreign subsidiaries in the local currency. By contrast, some significant liabilities of
the foreign subsidiaries, such as liabilities for the financing of telecommunications equipment, may be payable in U.S. dollars or in currencies other than the local currency. As a result, any
devaluation in the local currency relative to the currencies in which such liabilities are payable could increase the Canadian dollar amounts payable and negatively impact liquidity and earnings.
Moreover, we will record revenues and expenses of our foreign subsidiaries in their home currencies and translate these amounts into Canadian dollars. As a result, fluctuations in foreign currency
exchange rates in markets where we derive significant revenues or have significant operations may adversely affect our revenues, expenses and results of operations, as well as the value of our assets
and liabilities.

Our Ability to Operate Could be Hindered by the Proprietary Rights of Others and our Inability to Adequately Protect our Intellectual Property Rights.

A number of telecommunication companies have developed technologies, filed patent applications or received patents on various technologies that may be related to
our business. Some of these technologies, applications or patents may conflict with our technologies or intellectual property rights. Such conflicts could limit the scope of the patents, if any, that
we may be able to obtain or result in the denial of our patent applications altogether.

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If
patents that cover our activities are issued to other persons or companies, we could be charged with infringement. In the event that other parties' patents cover any portion of our
activities, we may be forced to develop alternatives or negotiate a license for such technology. We may not be successful in either developing alternative technologies or acquiring licenses upon
reasonable terms, if at all. Any such license could require the expenditure of substantial time and other resources and could harm our business and decrease our earnings. If we do not obtain such
licenses, we could encounter delays in the introduction of our products or could find that the development, manufacture or sale of products requiring such licenses is prohibited.

Despite
efforts to protect proprietary rights, existing copyright, trademark, patent and trade secret laws only afford limited protection. Third parties may attempt to copy or reverse
engineer aspects of our products or proprietary information. Accordingly, we may not be able to adequately protect our intellectual property.

We May Incur Substantial Costs as a Result of Litigation or Other Proceedings Relating to Patent and Other Intellectual Property Rights.

Our future success and competitive position depends in part on our ability to obtain and maintain certain proprietary intellectual property rights used in our
principal products. Any such success may be achieved in part by prosecuting claims against others who we believe are infringing our rights and by defending claims of intellectual property infringement
brought by our competitors and others. Our involvement in intellectual property litigation could result in significant expense, adversely affecting sales of the challenged product or intellectual
property and diverting the efforts of our technical and management personnel, whether or not such litigation is resolved in our favor. In addition, in our sales agreements, we have agreed to indemnify
our customers for any expenses or liabilities resulting from claimed infringements of patents, trademarks or copyrights of third parties, which obligations will continue to be binding on us and could
expose us to additional costs. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively because they have substantially greater resources. Uncertainties
resulting from the initiation and continuation of any litigation could affect our ability to continue our operations. In the event of an adverse outcome in any such litigation, we may, among other
things, be required to:



Should
third parties file patent applications, or be issued patents claiming technology also claimed by us in pending applications, we may be required to participate in interference
proceedings with the Canadian Intellectual Property Office, U.S. Patent and Trademark Office, or other proceedings outside Canada or the United States, including oppositions, to
determine priority of invention or patentability, which could result in substantial cost to us even if the eventual outcome were in our favour.

Our Share Price Has Been Volatile, and is Likely to Continue to be Volatile and Could Decline Substantially.

The price of our Common Shares has been, and is likely to continue to be, highly volatile. For example, in the last 24 months, our Common Shares traded on
the Toronto Stock Exchange have closed at a high of $15.00 and at a low of $0.36. Some of the factors that could cause our stock price to fluctuate significantly in the future include:



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In
addition, stock markets in general, and the market for shares of telecommunications companies in particular, have experienced extreme price and volume fluctuations in recent years
that may be unrelated to the operating performance of the affected companies. These broad market fluctuations may cause the market price of our Common Shares to decline. The market price of our Common
Shares could decline below the current price and may fluctuate significantly in the future. These fluctuations may or may not be related to our performance or prospects.

Due
in part to factors such as the timing of product release dates, purchase orders and product availability, significant volume shipments of products could occur at the end of our
fiscal quarters. Failure to ship products by the end of a quarter may adversely affect our operating results. In the future, our customers may delay delivery schedules or cancel their orders without
notice. Due to these and other factors, quarterly revenue, expenses and results of operations could vary significantly, and period-to-period comparisons should not be relied
upon as indications of future performance.

In
the past, shareholders have often instituted securities class action litigation after periods of volatility in the market price of a corporation's securities. If a shareholder
files a securities class action suit, we could incur substantial legal fees and our management's attention and resources could be diverted from operating the business of the Corporation in
order to respond to the litigation.

ITEM 4.    INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

SR Telecom was incorporated under the Canada Business Corporations Act in 1981, and has been a public reporting company in Canada since 1986, when it
completed an initial public offering of its Common Shares in Canada. Our legal name is SR Telecom Inc.

Our
registered head office and principal place of business is located at 8150 Trans-Canada Highway, Montreal, Quebec, Canada, H4S 1M5 and our telephone number is
(514) 335-1210. Our website is www.srtelecom.com.

Our
agent for service in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, NY    10011.

SR Telecom
began operations in 1975 as a division of Harris Canada Inc., which was then known as Farinon Electric of Canada Ltd. In 1981, the division was purchased
in a management-led buyout from Farinon and became SR Telecom Inc. In 1986, SR Telecom Inc. completed an initial public offering in Canada.

In
1987, we introduced the world's first high-capacity digital time division multiple access system, theSR500. Upgraded and
enhanced versions of this product still generate a significant amount of our current revenue, especially from rural applications. Over time we have added products to our portfolio to cover the
applications, features and frequencies that our global customer base is interested in, as well as new markets for fixed wireless access, such as applications for small and medium-sized enterprises in
urban environments.

In
1994, the Chilean government deregulated telecommunication services. In response to this business opportunity, in 1996, we partnered with a group of Chileans and Canadians to form
Comunicación y Telefonía Rural S.A. (CTR). CTR provides local telephone service, payphone service, and Internet access to users in rural areas using the SR500. In 2004, CTR began
expanding its service area to include urban centers in small cities using our angelproduct line

During
the 1990s, the increasing availability of new telecommunications products led many telecommunications service providers to rely on outside vendors and manufacturers to install and
maintain their equipment, rather than their own in-house technical staff. In response to this, we increased the services we provided to our customers, from merely providing equipment to
providing full turnkey solutions.

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In
2001, we acquired the French assets of the Wireless Access Solutions division of Lucent Technologies for $2.9 million. The acquisition, which added the swingproduct line to our product portfolio,
had an immediate positive impact on our revenues and significantly increased our installed base.

In
2002, we acquired certain product-related assets from Nera Telecommunications Inc. These assets formed the basis of a product that we commercially launched as stride2400. This product delivers
carrier-grade voice capabilities, and broadband Internet access using the 2.4 GHz unlicensed band. It is
ideally suited for small U.S. operators that intend to deliver universal access to rural areas. However, recent U.S. regulatory impediments have made it unprofitable for us to pursue
this market with this product at this time.

In
early 2003, we acquired from the receiver of Comdev Broadband Inc. (Comdev) the assets and intellectual property associated with Comdev's CDMA2000 1xEV-DO product
line. The product, which we branded asshift, added standards based, non-line-of-sight (NLOS) technology that was
capable of broadband Internet access in the cellular frequency band. We discontinued the development ofshiftin September 2003 as the additional
cost of development, changing customer demands and the addition of theangelproduct renderedshiftno
longer cost-effective.

In
September 2003, we acquired Netro Corporation ("Netro"), which addedangeland airstarto our product portfolio.angel, and its successor symmetry, are high-capacity systems that deliver carrier-class voice and broadband packet data services using
non-line-of-sight technology.airstaris a high-capacity system that delivers high-speed,
broadband data.

Netro
operated out of San Jose, California and Redmond, Washington. Shortly after the acquisition, we consolidated the software development activities in Redmond and renamed the entity
"SR Telecom USA, Inc.". Substantially all of the remaining activities were repatriated to Montreal. SR Telecom USA Inc, was primarily an R&D center, developing and maintaining
both theangelandairstarproduct lines. In July 2004, we closed the Redmond facility and
consolidated all R&D activities in Montreal. A core group of technology and product experts relocated to Montreal to support the evolution and maintenance of the angelandairstarproduct lines, and to develop a WiMAX standard-based product using Orthogonal
Frequency Division Multiplex (OFDM) technology.

In
June 2004, we finalized the restructuring of our French operations, which included closing the research and development (R&D) facilities, but maintaining a sales, project
management and after-sales support facility in France for our European, Middle Eastern and African (EMEA) clients.

BUSINESS OVERVIEW

Our core business is the design, production and sales of Fixed Wireless Access (FWA) products and the services related to their installation and maintenance. Our
customers are located in over 110 countries worldwide, where they use our technologies to deliver voice, data, and Internet services to their subscribers. For a complete description of our core
business, refer to the section entitled "Fixed Wireless Access Business" below.

We
also provide local telephone service, payphone service, and Internet access to subscribers in rural and urban areas of Chile through our majority-owned subsidiary,
Comunicación y Telefonía Rural S.A. (CTR). For a description of these operations, refer to the section entitled "Telecommunications Service Provider
Business  CTR".

Fixed Wireless Access Business

We design and manufacture point-to-multipoint, fixed-wireless-access systems that our customers use to connect telephone, Internet and
data users to a telephone exchange or data access point. We also provide our customers with complete turnkey services, including: project management; network planning, design and installation;
technical support and training; system maintenance and upgrades.

Typically,
governments allocate particular radio frequencies for telecommunication services to either promote competition or to encourage delivery of services in underserved regions. Our
products support the frequencies commonly allocated for broadband access and rural access networks, which helps our customers gain government approval for their use. For our key customers, we may also
adapt to their requirements by developing specific frequencies for them.

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Most
of our sales are international, with an installed base of almost 2 million lines in over 110 countries worldwide. Our customers include incumbent local exchange carriers,
competitive local exchange carriers, private operators of telecommunications systems, operators of Supervisory Control And Data Acquisition (SCADA) systems, and wireless Internet service providers.

Our
products and services provide a wide range of applications, such as:



SR500

SR500 was developed by SR Telecom and introduced to the market in 1987. The system offers a single wireless platform for the
distribution of voice and data services. TheSR500 achieved considerable market success as a rural communications system. Today, it has almost
1 million lines in service.

TheSR500 system is used primarily by incumbent local operators to provide rural telephone networks. A significant secondary application
ofSR500 is with industrial organizations, such as gas pipeline companies, who use the sameSR500
technology to deploy private voice and data networks. Additionally, service providers and private operators use theSR500 to deploy
long-range, national data networks.

The SR500 is deployed in a point-to-multipoint, line-of-sight configuration. The SR500
central station, repeaters and outstations provide wireless connectivity to the local telephone switch. In a typical SR500 rural application, the physical distance from the user's phone to the exchange
is between ten and several hundred kilometers. Repeaters extend
service to sites that are beyond the base station's line-of-site due to distance or obstructions. In most cases, the final link from the outstation to the user's telephone are
made by wire, although we can provide wireless connectivity using theWL500 wireless local loop subsystem. The SR500 is based on traditional
circuit-switched, time-division-multiplex technology. It is available in the 1.3 to 2.7 GHz,
3.5 GHz, and 10.5 GHz frequency bands.

TheSR500 system can also be configured to serve the small and medium-sized enterprise market. Marketed as
metropol,this system links business customers to a service provider's point of presence and provides integrated voice and data services. The
metropolversion of theSR500 offers bandwidth-on-demand in the 3.5 GHz
and 10.5 GHz bands. With metropol, operators can provide businesses in urban and suburban areas with multiple voice lines, data links for
LAN-to-LAN connections, and Internet access. metropolis deployed in a hub-and-spoke configuration,
usually with few or no repeaters, due to the small geographical areas it covers.

SR500ip

SR500ipis the evolution of the SR500 to an
Internet-Protocol-based, wireless-access platform that is suitable for distributing service to large numbers of voice and broadband Internet
subscribers.SR500ipwas developed by SR Telecom and introduced to the market in 2004. The first
systems became operational in the second half of 2004.

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TheSR500ipis intended primarily for incumbent local exchange carriers worldwide, who
have mandates to offer both voice and broadband Internet service in rural and remote areas.SR500ipenables operators to offer residential, small business, and institutional users carrier-class voice services, payphone service, dial-up Internet access, and asymmetric digital subscriber
line (ADSL) for access to the Internet at speeds up to 2.0 Mbps.

Like
theSR500, theSR500ipis deployed in
a point-to-multipoint, line-of-sight configuration that connects users to the local telephone switch or data exchange using wireless base stations,
network repeater nodes and network terminal nodes. In a typicalSR500iprural application, the physical
distance from the user's phone to the exchange is between ten and several hundred kilometers. Repeaters connect sites that are beyond the base station's line-of-sight. At this
time, theSR500iponly supports copper loop subscriber interfaces, such that in all cases, the final
link from the outstation to the user's telephone is by wire. TheSR500ipairlink is a hybrid of
circuit-switched and packet-switched technology. The circuit-switched portion of the airlink delivers carrier-class voice services, while the packet-switched portion is suitable for carrying large
numbers of ADSL connections. TheSR500ipis available in the 1.5 GHz, 2.4 GHz,
3.5 GHz, and 10.5 GHz frequency bands.

TheSR500ipsystem can also be configured to serve the small and medium-sized enterprise
market. Marketed as metroflex,this system links business customers to a service provider's point of presence and provides integrated voice and data
services. The metroflexversion of theSR500ipoffers
voice services, traditional circuit-switched data, and packet-switched data services with statistical multiplexing. metroflexoperates in the
3.5 GHz and 10.5 GHz bands. With metroflex, operators can provide businesses in urban and suburban areas with multiple voice lines, data
links for LAN-to-LAN connections, and Internet access. The system's statistical multiplexing capability enables over-subscription of the system's bandwidth, which
permits operators to improve system utilization and spectrum efficiency, and results in increased profitability. metroflexis deployed in a
hub-and-spoke configuration, usually with few or no repeaters, due to the small geographical areas it covers.

swing

swingwas developed by Lucent Technologies and introduced to market in 1996. The system offers an efficient wireless platform for the
distribution of voice and dial-up data services.swingachieved considerable market success as a rural communications system, with over
400,000 lines in service to date.SR500 andswingdominated the market for rural wireless
telecommunications systems. Since the addition ofswingto our product line, we have gained a presence in markets (such as Australia) that Lucent had
previously dominated.

swingis deployed in a point-to-multipoint configuration. The swingnetwork access controller (NAC), repeaters and terminal stations provide wireless connectivity to
the local telephone switch. In a typical swingrural application, the physical distance from the user's phone to the exchange is between ten and several hundred kilometers. Repeaters connect
sites that are beyond the NAC's line-of-sight. In most cases, the final link from the outstation to the user's telephone has been by wire, although we can provide wireless
connectivity through a cost-effective, DECT (Digital Enhanced Cordless Telephone) wireless local loop subsystem. Theswingsystem is based
on traditional circuit-switched, time-division-multiplex technology.swingis available in the 0.5 GHz, 1.5 GHz,
1.9 GHz, 2.5 GHz and 3.5 GHz frequency bands.

airstar

Launched
in 1998 by Netro,airstaris installed in over forty countries worldwide, and has an impressive track record of performance and
reliability. The system can simultaneously transport video, voice and data at exceptionally high rates, such that it is an alternative to optical fiber in many applications.

airstaris used primarily by incumbent and competitive local operators to provide metropolitan data networks, such as IP LANs. Mobile
operators and other carriers useairstarto connect second-generation (2G) and third-generation (3G) mobile base stations to the core mobile network.
Some operators useairstarto interconnect a PBX (switch) to the public switched telecommunications network (PSTN). As well, service providers can use airstarto offer video, voice and data services (including Frame Relay, Ethernet LAN and ATM) to enterprise customers.

airstaris deployed in a point-to-multipoint configuration using line-of-sight technology.
Theairstarbase station and customer premises equipment (CPE) provide wireless connectivity to a nearby data node, such as an ATM switch. In a typical airstarmetropolitan application, the maximum distance from the customer premises to the data node is between three and ten kilometers. An airstarnetwork is typically deployed in a cellular
configuration, using multiple adjacent base stations to achieve the capacity and citywide coverage
that operators require. The system is based on ATM cell-switching technology that allows it to carry any type of traffic while offering quality of services guarantees. airstaris available in the
3.5 GHz, 10.5 GHz, 26 GHz, and 28 GHz frequency bands.

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angel

Theangelsystem was developed by AT&T Wireless Services. AT&T deployed over 100,000 lines of angelequipment in the United States.angelwas the first OFDM,
non-line-of-sight, broadband solution to be deployed anywhere in the world.

angelis used primarily by incumbent and competitive local operators to provide broadband and telephone services to residential users in
the suburbs and city outskirts. It is also used by wireless internet service providers (WISPs) to offer broadband, ADSL-class data networks, in competition with the local wireline or cable
Internet providers, or in areas where no high-speed solutions exist.

angelis deployed in a point-to-multipoint, non-line-of-sight configuration.
Theangelbase station and customer premise equipment (CPE) provide wireless connectivity to the local telephone switch and/or data access node. In a
typicalangelsuburban application, the maximum distance from the user's premises to the exchange or data node is between ten and thirty kilometers. The angelnetwork is typically deployed in a cellular configuration, which uses multiple, adjacent base stations to achieve the capacity required for
metropolitan and national coverage. Theangelairlink is a hybrid that combines a circuit-switched portion for carrier-class voice services, and a
packet-switched portion suitable for carrying large numbers of Internet connections. The air interface is based on OFDM technology, which delivers exceptional range, frequency efficiency, and
non-line-of-site coverage.angelis available in 2.3 GHz, 2.4 GHz, and 3.5 GHz frequency bands.

symmetry

symmetryis the evolution ofangelto a WiMAX-ready platform. symmetryincludes the fourth generation ofangel's airlink technology, which increases the CPE
throughput up to 2Mbps and improves grade-of-service. Thesymmetrywireless access platform combines the most advanced
modulation (OFDM) with key WiMAX technologies (such as Antenna Diversity, Dynamic Phase Adjustment, Hybrid-ARQ, and Sub-Channelling) that are outlined in the
802.16-2004 and 802.16e standards. We launchedsymmetryin November 2004.

symmetryis suitable for operators providing carrier-class voice and broadband data services in suburban and exurban areas for residential
users, small and medium-sized enterprises (SME), small office and home office (SOHO) users, and WISPs. Withsymmetrysystems installed and operational,
operators can later roll-out WiMAX services quickly and cost-effectively, without changing their hardware platform, operational support systems, or network management system.

Likeangel,symmetryis deployed in a point-to-multipoint,
non-line-of-sight configuration. Thesymmetrybase station and customer premise equipment (CPE) provide wireless
connectivity to the local telephone switch and/or data access node. In a typicalsymmetrysuburban application, the maximum distance from the user's
premises to the exchange or data node is between ten and thirty kilometers. Thesymmetrynetwork is typically deployed in a cellular configuration,
which uses multiple, adjacent base stations to achieve the capacity required for metropolitan and national coverage. Thesymmetryairlink is a hybrid
that combines a circuit-switched portion for carrier-class voice services, and a packet-switched portion suitable for carrying large numbers of Internet connections. The air interface is based on OFDM
technology, which delivers exceptional range, frequency efficiency, and non-line-of-site coverage.symmetryis
available in the 3.5 GHz frequency band.

Research and Development

As of December 31, 2004, we had a full-time staff of 150 engineers and technicians dedicated to research and development. The combined
experience, expertise, talent, and drive of our R&D team ensures the successful execution of our mid- and long-term development plans and the completion of mission-critical
deliverables. Members of the R&D team possess strong expertise in the development of advanced wireless systems. They are equipped with the necessary resources (such as tools, laboratory facilities and
test equipment) to properly develop, evolve, maintain, and test new features and product releases.

The
research and development efforts are devoted exclusively to the development of our products. Activities include developing new products, improving existing products, introducing new
technologies into existing products to improve performance and reduce manufacturing costs and making design changes that will further increase the product's flexibility and the number of customer
applications that our products can effectively serve.

An
important feature of our research and development activities are the field trials it conducts with key customers to examine and confirm the ability of our products to operate in new
configurations and carry new types of telecommunications traffic.

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Expenditures
on research and development over the five years ended December 31, 2004 are as follows:

|                                             |  | 2004   |  | 2003   |  | 2002   |  | 2001   |  | 2000  
|-------------------------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|
|Gross expenditure                            |  | 32,272 |  | 31,499 |  | 28,555 |  | 26,048 |  | 28,255
|Government grants and investment tax credits |  | 2,113  |  | 4,329  |  | 7,219  |  | 7,009  |  | 9,166 
|                                             |  |        |  |        |  |        |  |        |  |       
|Net expense                                  |  | 30,159 |  | 27,170 |  | 21,336 |  | 19,039 |  | 19,089
|                                             |  |        |  |        |  |        |  |        |  |       

The
gross amount spent in recent years on research and development is typically within the range of 10 to 15% of sales. In some years, including the last four years, it was necessary to
exceed this range to complete key research and development activities to achieve and maintain our market position. We consider that these percentage figures are appropriate to maintain our
technological competitiveness. Research and development expenditures are expensed in the year in which they occur.

We
emphasize product performance in our customer systems for the commercial success for each of our customers. Our R&D team members regularly participate in customer field trials for new
product introductions and in the scheduled maintenance of commercial deployments. Keeping the R&D team involved with customer deployments ensures quick resolution of technical issues and generates
innovative solutions for product evolution.

In
recognition that standardization is a rapidly growing trend in the Fixed Wireless Access (FWA) and Broadband Wireless Access (BWA) markets, members of the R&D team are active in key
international standards bodies, including:



OurNew Product Introductionbusiness process drives our R&D program with input not only from departments within the company but
also from key customers and suppliers. The goal of this process is to focus our resources on the most promising product opportunities, and ultimately, to improve our time to market for new product
ideas. The process also reconciles the competing interests of short-to-mid-term market needs, industry trends, and long-term strategic vision. This plan
provides a clear roadmap for the evolution of our products.

Services

To better serve our customers worldwide, our Center of Excellence offers our customers with a full range of services that help them select, plan, commission,
operate and maintain trouble-free networks. These services include:



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Our
training programs cover network design, system installation, operations and maintenance. These courses are provided by a team of professional instructors at our headquarters,
regional offices or, when appropriate, at the customer's premises.

Our
project management services offer flexible, multi-level support programs including network design, installation and network construction by experienced field technicians on location.
We also provide 24-hour technical support by email, fax, and telephone as well as onsite technical assistance and troubleshooting.

Sales and Marketing

We employ a professional sales force to sell our equipment and services directly to operators and service providers, often in conjunction with local
representatives or distributors. Our sales to carriers either involve a sale of equipment to be installed by the telecommunications carrier or an in-country contractor, or a project
contract pursuant to which we undertake responsibility for commissioning, installing, project management and buildout of the fixed wireless network. Our sales are made on a variety of terms, depending
on the customer and the project, with common terms including payments due upon completion milestones for turnkey projects, monthly invoices as products or services are provided and payments secured by
letters of credit.

A
typical sales cycle for a first-time major customer may take several years and includes activities such as:



In
some cases, a customer may choose to conduct a field or technical trial of our products before deciding to purchase. Typically, once a customer has installed our products on a
full-scale committed basis, we can expect network expansions resulting in additional business. These expansions may include adding new networks, extending existing networks to reach new
sites, or upgrading existing sites with additional subscriber lines or other services. Approximately two-thirds of our sales in the three-year period from 2001 to 2004 were
repeat orders from existing customers. We provide project management and installation services to execute the larger, more complex projects that are contracted to us. We are able to undertake turnkey,
fixed-wireless-access telecommunications projects virtually anywhere in the world, either independently or through our associated contractors and partners.

Key
targeted markets for our sales and marketing activities are certain regions within the Asia-Pacific, Latin America, Europe and Africa, and Middle East regions. Since a
substantial part of our business is repeat business, we give a high priority to maintaining good relations with our customers and providing a high level of after-sales service. To this end, regional
sales, service or project offices are opened at strategically selected locations around the world to provide our customers with sales and technical support, as well as to develop new markets.
Worldwide office locations include Australia, Brazil, France, Mexico, the Philippines, and Thailand.

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Wireless
revenue by geographic area based on the location of our customers is as follows for the years ended December 31, 2004, 2003, and 2002:

|                               |  | Revenue (in $000's) |  | Percent of Wireless Revenue
|------------------------------ |  | ------------------- |  | ---------------------------
|
|Europe, Middle East and Africa |  | 50,519              |  | 51,468                     
|Asia                           |  | 31,722              |  | 41,293                     
|Latin America                  |  | 11,648              |  | 11,712                     
|Other                          |  | 11,463              |  | 9,344                      
|                               |  |                     |  |                            
|                               |  | 105,352             |  | 113,817                    
|                               |  |                     |  |                            

Customers

We sell either directly to our customers or through equipment re-sellers and integrators. Our systems have been purchased for use in over 110
countries and serve almost 2 million subscriber lines.

We
have five types of customers:

Our
products require the use of certain radio frequencies that are generally licensed by governmental agencies to the carrier. The vast majority of our products are designed to use
frequencies which governments have previously allocated to its customers, which minimizes the need to seek additional governmental approvals. Governments typically allocate these radio frequencies to
promote competition or to support the provision of telephony services in underserved regions.

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Competition

There are three main methods for delivering voice service, broadband data service, and mobile backhaul capabilities that compete with our wireless solutions:



We
compete for contracts in the following market segments:

Universal Access.In the universal access market, our point-to-multipoint,
fixed-wireless solutions compete with wire-based solutions, mobile solutions, and other long-range access solutions. We compete with wire-based product vendors,
such as Intracom, and with cellular vendors, such as Ericsson, Huawei and ZTE (China).

Enterprise Access.In the enterprise access market, our point-to-multipoint
fixed wireless solutions compete with wire-based solutions, such as fiber optic cable and leased T1 and E1 lines and wireless solutions, such as point-to-point
radios. We compete against large OEMs, such as Marconi, and Hughes, and with smaller wireless-only companies, such as Alvarion and AirSpan.

Residential and Small Business Access.In the residential and small business access market,
point-to-multipoint fixed wireless solutions compete with wire-based solutions, such as DSL and cable modems. We also compete with broadband wireless access
vendors, such as Alvarion, and AirSpan.

Mobile Infrastructure.The mobile market requires an infrastructure to connect cellular base stations
to the core telecommunications network. In this market, our point-to-multipoint, fixed wireless solutions compete with wire-based solutions such as leased T1 and E1
lines and wireless solutions such as point-to-point radios. We compete with large OEMs, such as Alcatel, Ericsson, Siemens, Harris and Marconi, and with smaller wireless
companies like Alvarion

Private Networks.In the private networks market, industrial companies require support for voice and
data services as well as support for SCADA. In this market, our principal competition comes from fiber or point-to-point microwave solutions. Most of the technologies we
compete with are not intended for mobile backhaul, rural telecommunications or local private networks, whereas our products are specifically designed for these market segments.

Emerging Technologies as Competition

As new technologies emerge, we evaluate how they compete with our products. The technologies that have emerged recently are digital 3G mobile systems,
Wi-Fi, and WiMAX.

New
third-generation (3G) cellular mobile systems, which offer cellular phones bundled with services like paging, caller ID and e-mail, can be adapted to provide fixed
subscriber service. Competition from such technologies exists especially in situations where subscriber density is relatively high or located near an urban area or existing mobile infrastructure.
Although 3G mobile systems provide better data capabilities than second-generation (2G) mobile systems do, they offer significantly lower data capabilities than newer, fixed-wireless technologies like
WiMAX.

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Wi-Fi
has emerged as a high-volume, wireless technology that is primarily used for indoor, wireless Local Area Networks (LAN). However, Wi-Fi has
significant shortcomings when used for outdoor, non-line-of-sight applications, such as last-mile connectivity for networks. For example, having been
optimized for indoor communications, Wi-Fi radio technology does not offer the performance required to operate over longer distances  particularly
when non-line-of-sight operation is important.

WiMAX
is a new standardized technology that overcomes many of the shortcomings of Wi-Fi for outdoor applications. WiMAX is well-suited for fixed wireless and we
are investing heavily in this technology. As the market evolves toward standardized WiMAX products, we expect the competition to increase, which could result in reduced market share.

We
believe that we have several advantages over our competitors. We have an established, 20-year track record with companies all over the world, and our established customer
base brings us repeat business. In contrast, newcomers to our markets face severe barriers to entry, including high initial research and development costs, a long product development phase and sales
cycle, and the existence of an installed base of current manufacturers' products. Since the current manufacturers' products are not compatible with one another and all are based on proprietary
designs, network expansion is normally done with the manufacturer whose product has been installed first.

Another
advantage that we have is the wide variety of features that our products provide, including::



Most
competitors do not provide all these services, which are often requested by customers.

We
suffer from the following competitive disadvantages:



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Regulatory Environment

Our products may require standardization in accordance with established government regulations in the countries to which we export. The standardization process
varies from country to country. In some countries the products must pass a formal set of tests and examinations that are performed by an accredited laboratory in that country. In other countries there
is no
standardization requirement at all. Working with these different procedures and obtaining appropriate standardization is part of the normal course of our business.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and licensing arrangements, to establish and
protect our proprietary rights.

We
presently have sixteen issued United States patents, with additional applications in process. Several related patents have also been granted and patent applications filed in
other countries. We also have an agreement with AT&T Wireless that provides a license to numerous patents and patent applications associated with the angelplatform. Although AT&T Wireless has
agreed not to license these patents to our competitors for a period of five years from February 2002,
the date of acquisition, we cannot assure that they will enforce their rights against potential infringers. Despite our efforts to protect our proprietary rights, existing copyright, trademark and
trade secret laws afford only limited protection.

We
have also acquired from Lucent Technologies certain of its intellectual property rights in, and to, theswingproducts, including the
object code and the source code relating exclusively to Lucent'sswingbusiness. Although SR Telecom has been granted a license to every patent
that was issued to Lucent or a related company for the technology needed to manufacture and sell theswingproducts, we cannot ensure that Lucent
Technologies would enforce its rights against potential infringers.

Notwithstanding
our efforts to protect our proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection. In addition, the laws of some foreign
countries do not protect our proprietary rights to the same extent as do the laws of the United States or Canada. Attempts may be made to copy or reverse engineer aspects of our products or to
obtain and use information that we regard as proprietary. Accordingly, we may not be able to protect our proprietary rights against unauthorized third-party copying or use. Furthermore, policing the
unauthorized use of our products is difficult. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others.

Telecommunications Service Provider Business  CTR

In 1995, we identified a new business opportunity to provide local telephone service and Internet access in a large area of Chile that is predominantly rural and
was without fixed phone service. The former state owned local phone company Cia. Telefonos de Chile had a monopoly on local and long distance service until 1994. Since deregulation, competition has
increased significantly in the highly populated areas such as Santiago. However, the vast rural regions remained generally unserved. CTR was created to address this opportunity, and is currently
managed by a team of Canadian and Chilean personnel, supervised by SR Telecom.

For
the year ended December 31, 2004, CTR contributed CDN$18.6 million in revenues, or approximately 15% of SR Telecom's consolidated revenues.

Since
1996, CTR has been awarded 53 concessions to provide service in selected rural areas along with a concession to provide service to the city of Curico. These concessions allow for
an exclusive right of coverage over a 30-year period in the 370 to 380 MHz, 1.5 GHz, and 2.4 GHz radio bands. The concessions were awarded through the Fondo de
Desarrollo de las Telecommunicaciones of the Ministry of Transport and Telecommunications obligate CTR to provide telephone service by means of public telephones for a minimum 10-year
period. These concessions will require ongoing maintenance until the year 2010.

22

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At
the end of 2004, CTR operated 5,269 commercial payphones and provided private telephone services to 22,362 residential, commercial and institutional subscribers. In addition, CTR is
providing other services including Internet access, prepaid cards, dedicated data services and complementary services including voice mail, toll-free and 800 numbering.

Other
than as stated above, the concessions are non-exclusive in that others are free to apply for similar concessions. However there is no assurance for any applicant that
spectrum will be available. A number of other carriers, including Cia. de Telefonos de Chile, the Chilean incumbent local exchange carrier, offer telephone service in larger towns within the ten zones
and currently use conventional wire and cable technology. The cellular network in Chile represents CTR's principal competition.

The
capital required by CTR for completion of its network has been provided by equity investments and corporate loans from SR Telecom of approximately US$68 million in the
aggregate. Export Development Canada, a Canadian governmental agency, and the Inter-American Development Bank of Washington also provided US$50 million in term debt financing. As of
December 31, 2004, a principal amount of US$29.5 million was outstanding. CTR's term loans rankpari passuand are secured by a
pledge of all of the assets of CTR and a pledge of the shares in the share capital of CTR and intermediate holding companies. We have also agreed to provide CTR with the necessary funds and resources
to complete the network as well as maintain our initial equity investment in CTR. The Inter-American Development Bank and Export Development Canada have been provided with full recourse against
SR Telecom in certain circumstances.

On
June 30, 2001 Rural Telecommunications Chile S.A., an indirect wholly-owned subsidiary of CTR, acquired network assets from Gilat-To-Home
Chile S.A. in exchange for 13% of CTR's total issued and outstanding common shares. In that same year, the resulting non-controlling interest was allocated losses to the extent of
their equity. As a result of failing to meet certain performance requirements contained in the asset purchase agreement, Gilat-To-Home Chile S.A.'s shareholding in Rural
Telecommunications Chile decreased by 8.9% to 4.1%. Fifty-six concessions of public telephone service and one data transmission concession have been transferred from
Gilat-To-Home Chile to Rural Telecommunications Chile. These telephone concessions include or cover virtually all of the country's land mass and will be in force, in favor of
Rural Telecommunications Chile, for 30 years. The terms of all payphone concessions run until 2009.

In
2004, CTR successfully completed negotiations for the right to use the 2.3 GHz frequency band from Subtel. With this right, CTR has deployed the angelproduct in urban centers within its existing
service regions to provide a high-speed Internet service offering as well as carrier
class voice services, utilizing the excess capacity in its existing network infrastructure. As at December 31, 2004, 2,534 urban lines have been deployed and a further 2,820 are expected to be
deployed in 2005.

In
2004, CTR completed the renegotiation of its tariff regime with the Chilean regulator, Subtel. The regulator has approved an increase in access charges to CTR of approximately 67%
effective February 26, 2004 which has been extended to the satellite network in 2005.

ORGANIZATIONAL STRUCTURE

Except as described below, our business is conducted directly, or indirectly through wholly-owned subsidiaries. In addition, through our 96% owned subsidiary CTR,
we provide local telephone service and Internet access to residential, commercial and institutional customers, and operate a network of payphones in a large, predominantly rural area of Chile.

The
following chart summarizes our organizational structure and percentage ownership of each subsidiary as at December 31, 2004. This chart is a simplification and omits certain
holding companies and non-material subsidiaries.

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GRAPHIC

In
addition, we have three currently wholly-owned inactive subsidiaries. The total combined assets of our subsidiaries, excluding CTR, constituted 14.9% of the consolidated assets at
December 31, 2004, and the total combined revenues of such subsidiaries, excluding CTR, constituted approximately 30.6% of the consolidated revenues for the fiscal year ended
December 31, 2004. There are no restrictions under Canadian law or within the organizational documents of any of our subsidiaries that restrict distributions from the subsidiaries. Restrictions
under our CTR financing arrangements limit distributions therefrom and restrictions under Delaware law may restrict distributions from SR Telecom USA under certain circumstances.

PROPERTY, PLANT AND EQUIPMENT

We own a modern 125,000 sq. ft. building located on 332,000 sq. ft. of land in Montreal, Quebec, Canada, that serves as our head office. The facility includes
printed circuit board assembly, manufacturing, research and development and offices. In addition, we lease a 60,099 sq. ft. facility in Montreal, Quebec, Canada, used for receiving, final assembly,
system testing and shipping of the products we manufacture. We sub-contract for the assembly of all of ourswingproduct and varying
elements of our other product lines.

In
1996, we obtained ISO 9001 certification for our Montreal facilities and in 2003 received our ISO 9001:2000 certification update. We passed the surveillance audit in
2004.

SR Telecom
USA leases an approximately 100,000 square foot facility in San Jose, California, which is currently vacant. The lease for this facility expires in
September 2006.

We
also have leases for buildings and land for our sales and services offices worldwide, the principal offices of which are located in France, Mexico, Thailand and Chile. We do not
believe that any of these leases are material to our operations or represent material financial obligations.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SR Telecom's Management Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis, which follows, is provided to assist readers in their assessment and understanding of the consolidated results of operations, the
financial position and changes in cash flows of SR Telecom Inc. ("SR Telecom" or "the Corporation") for the years ended December 31, 2004, 2003 and 2002. The discussion contains
forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. The forward-looking statements in this report, which includes
this MD&A describes our expectations on March 30, 2005. The reader is cautioned not to rely on these forward-looking statements. The Corporation disclaims any obligation to update these
forward-looking statements even if new information becomes available as a result of future events or for any other reason. The following management discussion and analysis of financial condition, cash
flows and results of operations should be read in conjunction with SR Telecom's annual audited consolidated financial statements contained elsewhere in this report.

24

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The
Corporation has restated its second quarter interim financial statements and MD&A for the three and six months ended June 30, 2004, and its third quarter interim financial
statements and MD&A for the three and nine months ended September 30, 2004 to reflect adjustments made during those related periods. Refer to note 13 of the restated third quarter
interim financial statements as at September 30, 2004 for a complete explanation of the amendments. These restatements had no bearing on the financial results of the Corporation for the years
ended December 31, 2004 and 2003.

SR Telecom's
consolidated financial statements have been prepared in accordance with Canadian GAAP (Generally Accepted Accounting Principles). There are several differences
between US GAAP and Canadian GAAP, some of which can yield material differences in reported data. For the US GAAP reconciliation, see note 32 to the accompanying audited consolidated
financial statements.

Overview

SR Telecom provides fixed wireless access solutions for voice, data and Internet access applications. SR Telecom designs, markets and sells fixed
wireless products to telecommunications service providers, who in turn use the products to provide their subscribers with a full range of telecommunications services. SR Telecom also provides
full turnkey services to its customers. Most of SR Telecom's sales are international, with its fixed wireless systems currently being used by telecommunications service providers in over 120
countries worldwide. These customers include large incumbent local exchange carriers as well as competitive local exchange carriers and private operators of telecommunications systems. In addition,
through its majority-owned subsidiary, Comunicacion y Telefonia Rural ("CTR"), SR Telecom provides local telephone service and Internet access to residential, commercial and institutional
customers, and operates a network of payphones in a large, predominantly rural area of Chile.

Critical Accounting Policies

SR Telecom's consolidated financial statements are based on the selection and application of accounting policies, which require SR Telecom's
management to make significant estimates and assumptions. These estimates and assumptions are developed based on the best available information and are believed by management to be reasonable under
existing circumstances. New events or additional information may result in the revision of these estimates over time. SR Telecom believes that the following accounting policies may involve a
higher degree of judgment and complexity in their application, and represent SR Telecom's critical accounting policies.

Going Concern Uncertainty

The Corporation's $71.0 million debentures become due and payable on April 22, 2005. Currently the Corporation is involved in activities aimed at
refinancing these debentures in whole or in part or extending their maturity date. If these negotiations are unsuccessful, the Corporation would need to look at alternative methods to
re-capitalize its balance sheet. SR Telecom is also attempting to raise additional working capital to operate the business. If the Corporation cannot successfully negotiate a refinancing
transaction and can find no alternative means to refinance its balance sheet, the Corporation may have no choice but to seek protection from its creditors.

The
accompanying consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Coporation will continue in
operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. There is substantial doubt about the
appropriateness of the use of the going concern assumption because of the Corporation's losses for the current and prior years, negative cash flows, significant deficiency in working capital, reduced
availability of supplier credit, and the breach of a number of its long-term debt covenants and undertakings and lack of operating credit facilities. As such, the realization of assets and
the discharge of liabilities in the ordinary course of business are subject to significant uncertainty.

The
consolidated financial statements do not reflect any adjustments that would be necessary if the going concern basis was not appropriate. If the going concern basis was not
appropriate for these consolidated financial statements, significant adjustments would be necessary in the carrying value of assets and liabilities, the reported revenues and expenses, and the balance
sheet classifications used.

Management's
on-going plans with respect to the significant uncertainties described above are as follows:



25

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Management
believes that with the above plans and the support of the Corporation's current shareholders, lenders, trade creditors and its customers, it will be able to continue operating
as a going concern. There can, however, be no assurance that the plans described above will result in sufficient funds being generated.

The
Corporation's continuation as a going concern is dependent upon, amongst other things, the continuing support of the Corporation's lenders (including the deferral of scheduled
principal repayments), attaining a satisfactory sales level, the support of its customers, continued sales to the Corporation's customers, a return to profitable operations and the ability to generate
sufficient cash from operations, financing arrangements and new capital to meet its obligations as they become due. These matters are dependent on a number of items outside of the Corporation's
control and there is substantial uncertainty about the Corporation's ability to successfully conclude on the matters.

Adoption of New Accounting Policies

Asset Retirement Obligation

Effective January 1, 2004, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3110, "Asset Retirement
Obligations". The new recommendation focuses on the recognition and measurement of liabilities for legal obligations associated with the retirement of property, plant and equipment when those
obligations result from the acquisition, construction, development or normal operation of the assets. The adoption of this recommendation did not have an impact on the Corporation's results of
operations or financial position.

Stock-Based Compensation and Other Stock-Based Payments

Effective January 1, 2004, the Corporation adopted the transitional provisions of CICA Handbook Section 3870, "Stock-Based Compensation and Other
Stock-Based Payments". Under the transitional provisions of this recommendation, compensation expense is recognized on all issued and outstanding stock options granted to employees after
January 1, 2002 in accordance with the fair value method of accounting. This provision was applied retroactively, without restatement of prior periods.

REVENUE RECOGNITION

Revenue is recognized when persuasive evidence of an agreement exists, delivery has occurred or the service has been performed, the fee is fixed and determinable,
and collection of the resulting receivable is probable.

SR Telecom
recognizes revenue through two primary revenue streams: revenue from the sale of equipment and service revenue. Service revenue is comprised of site survey and
engineering prior to installation, as well as installation of the equipment, training of customer personnel and repair contracts. Revenue for equipment sold separately is recognized upon delivery and
when all significant contractual obligations have been satisfied and collection is probable. SR Telecom also enters into contracts involving multiple elements or "turnkey" contracts. Turnkey
contracts generally include the sale of equipment as well as site survey and engineering, which involves the assessment of the locations to be installed and the requirements of the equipment to be
installed, as well as installation of the equipment at the site. The service elements are not essential to the functionality of the delivered equipment. Recognition of revenue in turnkey contracts on
the sale of manufactured equipment is recognized upon delivery. Recognition of revenue on the performance of site survey and engineering, and installation of the equipment is recognized when the
services are performed. The establishment of the selling prices of services and equipment in these contracts is determined by reference to similar contracts whereby these elements are offered on a
stand-alone basis and are incorporated in the contract details. For contracts involving multiple elements, SR Telecom allocates revenue to each element based on relative fair values.
Telecommunication service revenue is recognized as the services are rendered.

SR Telecom
products and services are generally sold as part of a contract or purchase order, of which some are for periods extending beyond one year. Revenue and cost estimates on
long-term contracts are revised periodically based on changes in circumstance; any losses are recognized in the period that such losses become known.

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WARRANTY OBLIGATIONS

Accruals for warranty costs are established at the time of shipment and are based on contract terms and experience from prior claims. SR Telecom's usual
warranty terms are one year, with two-year warranty periods in certain limited circumstances. SR Telecom evaluates its obligations related to product warranty on an ongoing basis.
If warranty costs change substantially, SR Telecom's warranty accrual could change significantly. SR Telecom tracks historical warranty cost, including labor and replacement parts, and
uses this information as the basis for the establishment of its warranty provision. With respect to the introduction of new products, warranty accruals are determined based on SR Telecom's
historical experience with similar products.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

SR Telecom performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers and on-going project risks. Wherever practical, SR Telecom requires accounts receivable to be insured by an export credit agency or
by confirmed irrevocable letters of credit. SR Telecom believes that it has sufficient allowances for doubtful accounts to address the risk associated with its outstanding accounts receivable.

PROVISION FOR EXCESS OR OBSOLETE INVENTORY

Inventories are valued at the lower of cost and net realizable value or replacement cost, with cost computed at standard, which approximates actual cost computed
on a first in, first-out basis. SR Telecom maintains a reserve for estimated obsolescence based upon assumptions regarding future demand for its products and the conditions of the
markets in which its products are sold. This provision to reduce inventory to net realizable value is reflected as a reduction to inventory in the consolidated balance sheets. Management judgments and
estimates must be made and used in connection with establishing these reserves. If actual market conditions are less favorable than SR Telecom's assumptions, additional reserves may be required.

ASSESSMENT OF IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, including property and equipment and intangibles assets subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used, is measured by management on an ongoing basis, by comparing
the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset in the period incurred. Assets to be disposed of would be separately
presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposal group
classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

FOREIGN CURRENCIES

Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates in effect at the balance sheet dates. Non-monetary
assets and liabilities are translated at historical rates. Translation gains and losses are reflected in the statement of operations. Revenue and expenses are translated at average exchange rates
prevailing during the period.

All
of SR Telecom's subsidiaries are financially and/or operationally dependent on SR Telecom and are accounted for using the temporal method. Under this method, monetary
assets and liabilities are translated at exchange rates in effect at the balance sheet dates. Non-monetary assets and liabilities are translated at historical rates. Revenue and expenses
are translated at average rates for the period. Translation exchange gains or losses of such subsidiaries' accounts are reflected in the statement of operations.

FUTURE INCOME TAXES

Future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates which will be in effect when the differences are expected to reverse. A valuation allowance is provided for the amount of future income tax assets that are not
considered more likely than not to be realized.

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Results of Operations

SR Telecom operates in two business segments. The first is the Wireless Telecommunications Products Business Segment ("Wireless") and the second is the
Telecommunications Service Provider Business Segment ("CTR").

For the years ended December 31, 2004 versus December 31, 2003 and 2002

The following table outlines the breakdown of revenues by segments:

|                                                     |  | Years Ended December 31,
|---------------------------------------------------- |  | ------------------------
|
|Wireless Telecommunication Products Business Segment |  | 85.0%                   
|Telecommunications Service Provider Business Segment |  | 15.0%                   

In
2004, Wireless Telecommunications Products revenue ("wireless revenue") decreased as a percentage of total revenue to 85.0% from 89.0% in 2003. This decrease results from an overall
decline in wireless products revenue related to services in 2004 compared to an increase experienced in Telecommunications Service Provider revenue due to increased access tariffs approved in 2004.
The decline in wireless revenue to 89.0% of total revenue in 2003 from 91.9% of total revenue in 2002 resulted from a sharper decline in wireless products revenue compared to a more modest decline in
Telecommunications Service provider revenue. The Telecommunications Service Provider revenue as a percentage of total revenue increased to 15.0% in 2004 from 11.0% in 2003 and 8.1% in 2002.

WIRELESS TELECOMMUNICATIONS PRODUCTS BUSINESS SEGMENT

|                        |  | 2004    |   | 2003    |   | 2002    |  
|----------------------- |  | ------- | - | ------- | - | ------- | -
|
|Revenue                 |  | 21,600  |   | 31,559  |   | 31,717  |  
|Cost of revenue         |  | 13,882  |   | 18,348  |   | 20,831  |  
|Gross profit            |  | 7,718   |   | 13,211  |   | 10,886  |  
|Gross profit percentage |  | 36%     |   | 42%     |   | 34%     |  
|Operating (loss) income |  | (13,324 | ) | (21,283 | ) | (10,373 | )
|Net loss (income)       |  | (15,106 | ) | (21,414 | ) | (5,477  | )

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|                                                  |                                              | Percent of Revenue |    
|------------------------------------------------- | -------------------------------------------- | ------------------ | ---
|
|Revenue                                           |                                              | 100%               |    
|Cost of revenue                                   |                                              | 66%                |    
|                                                  |                                              |                    |    
|Gross profit                                      |                                              | 34%                |    
|                                                  | Agents commissions                           |                    | 5% 
|                                                  | Selling, general and administrative expenses |                    | 47%
|Research and development expenses, net            |                                              | 29%                |    
|Restructuring, asset impairment and other charges |                                              | 15%                |    
|                                                  |                                              |                    |    
|Total operating expenses                          |                                              | 96%                |    
|                                                  |                                              |                    |    
|Operating (loss) income                           |                                              | (62%               | )  
|Interest expense, net                             |                                              | (5%                | )  
|Gain on repurchase of debentures                  |                                              |                   |    
|Gain on sale of long-term investment              |                                              | 3%                 |    
|Gain on settlement of claim                       |                                              | 4%                 |    
|Loss on foreign exchange                          |                                              |                   |    
|Income tax (expense) recovery                     |                                              | (13%               | )  
|                                                  |                                              |                    |    
|Net loss                                          |                                              | (73%               | )  
|                                                  |                                              |                    |    

Revenue

Revenue
by geographic area based on the location of SR Telecom's customers is as follows for the years ended December 31, 2004, 2003 and 2002:

|                               |  | Revenue (in 000's) |  | Percent of Wireless Revenue
|------------------------------ |  | ------------------ |  | ---------------------------
|
|Europe, Middle East and Africa |  | 50,519             |  | 51,468                     
|Asia                           |  | 31,722             |  | 41,293                     
|Latin America                  |  | 11,648             |  | 11,712                     
|Other                          |  | 11,463             |  | 9,344                      
|                               |  |                    |  |                            
|                               |  | 105,352            |  | 113,817                    
|                               |  |                    |  |                            

Revenue
in Europe, Middle East and Africa in percentage terms increased to 48% in 2004 in comparison to 45% in 2003 and 2002. In dollar terms, 2004 revenue declined slightly from that
experienced in 2003. In 2003, as compared to 2002, revenue decreased in dollar terms due to a decline in shipments for large turnkey projects to the region, where the Corporation had signed two new
contracts in Saudi Arabia in 2002. Sales to Asia also declined in 2004 as compared to 2003 and 2002, due to the result of large contracts with Telstra Corporation Limited, the Department of Transport
and Communications of the Philippines and Rural Telephone Services of Thailand that were substantially completed in 2003. Revenue in Latin America as a percentage of wireless revenue slightly
increased to 11% in 2004 as compared to 10% in 2003 and increased from 4% in 2002. This increase in dollar and percentage terms, for the twelve-month period ended December 31, 2004 and 2003 as
compared to the twelve-month period ended December 31, 2002 is a result of sales of SR Telecom's newly acquiredairstarproduct line to
the region.

For
the year ended December 31, 2004, there are no customers whose revenue comprised more than 10% of wireless revenue.

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Revenue
from customers that comprised more than 10% of wireless revenue for the year ended December 31, 2003 is as follows:

Revenue
(in 000's)

Percent of
Wireless Revenue2003

2003Telstra Corporation Limited

15,766

14%


Revenue
from customers that comprised more than 10% of wireless revenue for the year ended December 31, 2002 is as follows:

Revenue
(in 000's)

Percent of
Wireless Revenue2002

2002Saudi Telecom Company

31,295

17%Telstra Corporation Limited

32,881

18%64,176

35%


Revenue

For
the year ended December 31, 2004, revenue decreased to $105.4 million from the $113.8 million for the year ended December 31, 2003. This decline is
primarily the result of a $7.9 million decrease in service revenue in 2004 compared to 2003. This decline resulted from the fact that there were significant service revenues resulting from a
turnkey project in Asia in the prior year. Equipment revenues showed only a modest decline with $85.1 million in equipment revenue in 2004 as compared to $85.7 million in equipment
revenue in 2003. For the year ended December 31, 2003, revenue decreased to $113.8 million from $181.0 million for the year ended December 31, 2002. This resulted from a
decline in both equipment revenue and service revenue. Equipment sales decreased by 41% to $85.7 million in 2003 from $146.1 million in 2002. This decrease in annual revenue is primarily
due to the substantial completion of major contracts including Saudi Telecom Company, Rural Telephone Services of Thailand and Department of Transport and Communications of the Philippines during
2003. During 2004, there were delays in securing purchase orders under large frame contracts that the Corporation has in place with its longstanding customers. The Corporation believes that these
frame contracts will result in significant additional revenue in 2005, but does not expect revenue to improve substantially in the first half of 2005. The Corporation expects that revenue in the first
quarter of 2005 will be less than the revenue levels experienced in the fourth quarter of 2004, due to decreased availability of supplier credit and delays in receiving purchase orders caused by the
uncertainty associated with the Corporation's financial position.

Gross
Profit

Gross
profit represents total revenue less the cost of revenue. Cost of revenue with respect to equipment revenue consists of manufacturing costs, material costs, labor costs,
manufacturing overhead, warranty reserves and other direct product costs. Cost of revenue with respect to service revenue consists of labor costs, travel, telephone, vehicles and other costs that are
directly attributable to the revenue recognized.

Gross
profit as a percentage of revenue decreased to 34% for the year ended December 31, 2004, from 46% for the year ended December 31, 2003 and from 51% for the year ended
December 31, 2002. The principal drivers of the fluctuations in equipment gross profit are the level of revenue and the product and customer sales mix. Equipment gross profit declined to 33% in
2004 from 48% in 2003. Equipment gross profit also declined in dollar terms from $40.7 million in 2003 to $28.3 million in 2004. The decrease in equipment gross profit percentage was the
result of increased sales ofangelandairstar,which have lower margins than our traditional SR500andswingproduct lines. Further, fluctuations in the timing of orders resulted in increased
under-absorbed overhead costs in 2004. Services gross profit decreased to 35% for 2004 compared to 43% in 2003.

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Equipment
gross profit declined to 48% in 2003, from the 59% levels experienced in 2002. This decrease resulted from variations in sales mix including sales of lower margin products such
asangelandairstar,and is also due to an increase in under-absorbed overhead costs in 2003. Services
gross profit increased to 43% in 2003 from 14% in 2002 as better margins were experienced on product repairs as well as positive contributions from renegotiations of certain services on turnkey
projects.

The
Corporation does not expect to see an improvement in gross profit in the first quarter of 2005 due to expected lower manufacturing volumes that will occur in this period.

Agent
Commissions

Agent
commissions consist of payments to agents and representatives who act as an extension of SR Telecom's international sales and marketing organization. SR Telecom has
agents and representatives in several countries globally and uses this network in many cases in lieu of having to maintain a permanent presence in countries where the level, uncertainty and timing of
orders do not justify a permanent presence or where the local custom and practice requires the use of local partners.

Agent
commissions as a percentage of revenue increased to 5% of revenue or $5.5 million in 2004 from 3% or $3.3 million in 2003. This increase is a function of a change in
sales mix. The jurisdiction and equipment mix changed significantly since 2003 with the addition of theairstarand angelproduct lines. Agent commissions
as a percentage of revenue decreased to 3% or $3.3 million in the twelve-months ended December 31,
2003 from 8% or $13.9 million in the twelve-months ended December 31, 2002. The decrease in commissions as a percentage of revenue is commensurate with the decrease in revenue recognized
under large turnkey contracts which traditionally have higher commissions. Commissions as a percentage of revenue are expected to remain stable in the first quarter of 2005 compared to the current
quarter.

Selling,
General and Administrative Expenses

Selling,
general and administrative (SG&A) expenses consist primarily of compensation costs, travel and related expenses for marketing, sales, human resources, finance, executive and
management and professional service fees and expenses.

Selling,
general and administrative expenses decreased to $49.7 million for the year ended December 31, 2004, compared to $52.2 million in 2003. Selling, general and
administrative expenses increased to $52.2 million for the year ended December 31, 2003, compared to $47.1 million for the year ended December 31, 2002. SG&A decreased
during 2004 due to cost reduction efforts put in place by the Corporation along with the restructuring that took place in the second and third quarters of 2004. The Corporation's restructuring plan
was completed in the fourth quarter of 2004. The benefits of the restructuring were partially offset by a provision of $1.9 million related to an account receivable in the Middle East, the
effect of eliminating the expected sub-lease revenue of $1.6 million on the US operating lease and a provision of $0.9 million related to an offer of settlement of a
litigation.

The
increase in 2003 and in the early part of 2004 was due to the inclusion of Netro, which resulted in an approximate increase of $6.1 million in SG&A expense in the
four-month period from its acquisition in September of 2003 to December of 2003. The increase during this period was partially offset by cost reductions achieved as a direct result of
restructuring efforts implemented in 2003.

In
the first quarter of 2005, the Corporation expects that SG&A expenses will be lower than the levels realized in the fourth quarter of 2004 due to the cost cutting measures the
Corporation implemented in January of 2005 and the non-recurring charges effected in the fourth quarter of 2004.

Research
and Development Expenses

Research
and development expenses consist of compensation costs, the cost of software development tools, consultant fees and prototype expenses related to the design, development and
testing of SR Telecom's products, net of government investment tax credits associated with these activities.

Research
and development expenses increased to $30.2 million for the year ended December 31, 2004, from $27.2 million for the year ended December 31, 2003.
The increase is primarily due to a $4.2 million adjustment to the utilization of the federal investment tax credits (a write-down of the carrying value of the investment tax credit
balance) as management has determined that there is insufficient evidence of reasonable assurance that this amount will be realized within the remaining life of the investment tax credits. The
increase is offset by the realization of cost reductions from the closure of the research facility in France and the closure of the Redmond, Washington facility in the second and third quarters of
2004. The Corporation's restructuring plan was completed in the fourth quarter of 2004.

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Research
and development expenses on a comparable basis increased to $27.2 million in 2003 from $21.3 million in 2002. The increase is due to additional research and
development costs of $3.6 million incurred as a result of the acquisition of Netro and a reduction in the amount of investment tax credits being recognized that offset research and development
expense. As of July 1, 2003, the Corporation has ceased the recognition of further federal investment tax credits since there is limited assurance that these credits would be realized in the
near term.

In
the first quarter of 2005, the Corporation expects that research and development expenses will be lower than the levels realized in the fourth quarter of 2004 due to the completion of
certain projects, coupled with the cost cutting measures the Corporation implemented in January of 2005.

Restructuring,
Asset impairment and Other Charges

For
the year ended December 31, 2004, restructuring, asset impairment and other charges of $15.9 million were recorded. The restructuring charges were undertaken by the
Corporation to reduce its cost structure in line with current and projected revenue levels. The costs are comprised primarily of severance and termination benefits, the write off of specific inventory
and other assets, accrued lease charges and operating costs related to redundant facilities in the US as well as losses on the sale of redundant equipment. In total, 86 employees were terminated
including 59 research and development employees, 6 project and service management employees, 10 sales and marketing employees, 4 operation employees and 7 administration employees.

Management
decided that it would no longer pursue the development and sale of thestride 2400product line. As a result, the Corporation
recorded the write-off of certain inventory of $1.1 million and deferred charges of $0.3 million in the second quarter of 2004.

For
the year ended December 31, 2003, restructuring, asset impairment and other charges of $3.1 million were recorded. The restructuring charges were undertaken by the
Corporation to reduce its cost structure, and are comprised primarily of severance and termination benefits. In total, 42 employees were terminated including 12 research and development employees, 13
project and service management employees, and 17 sales and marketing employees. The write off of the assets of $1.4 million relates to the discontinuation of research and development on the shiftproduct line.

For
the year ended December 31, 2002, restructuring charges of $4.9 million were accrued. These charges were also composed primarily of severance and termination benefits,
as well as the elimination of inventory balances in certain specified locations and lease cancellation costs relating to the closure of a research and development site in Montreal. In total, 90
employees were terminated including 39 research and development employees, 31 project management employees, 8 sales and marketing employees, and 12 general and administrative employees.

Interest
Expense

Interest
expense was $5.3 million for the year ended December 31, 2004 compared to $5.7 million for the year ended December 31, 2003, and $6.2 million
for the same period in 2002. The decrease in interest expense in 2004 as compared to 2003 relates primarily to the repayment of bank indebtedness in 2004 and 2003, and the effect of interest income
generated from investments made with the proceeds of the public offering and private placement in 2004. The decrease in interest expense in 2003 as compared to 2002 is mainly due to the forgiveness of
interest payable relating to a government program. Going forward, in the first quarter of 2005, the Corporation expects interest expense to be similar to that experienced in the fourth quarter of 2004
and subsequently dependent on the results of the current refinancing activities.

Gain
on Sale of Long-Term Investment

In
September of 2004, the Corporation sold a long-term investment acquired as part of the acquisition of Netro Corporation, to various investors for cash proceeds of
$3.4 million (US$2.7 million). The long-term investment had been recorded at an estimated fair value of $nil at the time of acquisition.

32

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Gain on Settlement of Claim

On
December 19, 2002, Solectron California Corporation filed for arbitration against Netro Corporation for disputes arising under its 1998 "Manufacturing Agreement". Solectron
claimed that in 2000, it purchased materials on the basis of Netro's forecasts which were not supported by sales orders. The arbitration with Solectron resulted in the purchase of
US$4.0 million of inventory by SR Telecom, where US$2.0 million was paid on August 27, 2004. The remainder will be paid in three instalments in 2005, without any interest
accruing. As a result of the settlement with Solectron, the Corporation realized a gain of $4.6 million (US$3.5 million) in the third quarter of 2004. The Corporation has not met its
February 2005 payment obligation. Solectron has served a judicial citation for US$1.45 million on March 11, 2005. The Corporation has thirty days to appeal and is currently
exploring its options with legal counsel.

Gain
on Repurchase of Debentures

For
the year ended December 31, 2003, SR Telecom realized a gain of $1.2 million on the repurchase of $4.0 million of its outstanding debentures. There were
no debentures repurchased in 2004.

Foreign
Exchange

The
Corporation had a foreign exchange loss of $nil for the year ended December 31, 2004, compared to a foreign exchange loss of $10.0 million for the year ended
December 31, 2003. In 2004, the Corporation realized losses on the fluctuation in the value of its US dollar receivables. These losses were reduced when the Corporation collected a significant
portion of its US dollar receivables in the third quarter of 2004. The losses were further offset by an increase in the Corporation's outstanding US dollar payables. For the year ended
December 31, 2003, the Corporation experienced foreign exchange losses of $10.0 million compared to $2.0 million for the year ended December 31, 2002. This resulted from
the fluctuation in the value of the Canadian dollar compared to the US dollar and the Euro. The revaluation of the Corporation's US dollar denominated accounts receivable and cash balances is the main
reason for the increase.

Income
Taxes

The
income tax provision includes tax loss carry forward benefits and other future income tax assets and liabilities based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the tax rates
which will be in effect when the differences are expected to reverse. The tax loss carry-forwards recognized relate primarily to losses incurred in Canada. In the beginning of the third quarter of
2003, the Corporation ceased to recognize additional tax loss carry-forward benefits, resulting in no tax recovery in 2004 compared to 2003 and 2002. During the fourth quarter of 2004, management
determined that an increase in the valuation allowance in the amount of $13.2 million for the future income tax assets was appropriate, as a result of the continued losses and the significant
uncertainties surrounding the future prospects of the Corporation.

Backlog

Backlog
at the end of 2004 stood at $9.5 million, the majority of which was delivered in the first quarter of 2005, down from $27 million at the end of 2003 and from
$82 million at the end of 2002. Backlog at March 30, 2005 stood at $10.7 million. SR Telecom's backlog has decreased over the prior periods in that it previously reflected
large turnkey operations that would be recognized over long-term periods. The Corporation's current backlog is now comprised of many short-term orders that turn over more
quickly than in the past and only includes purchase orders received for committed deliveries. Currently, significant orders are expected to be generated under certain large frame contracts as well as
increased activity in a number of SR Telecom's markets. However, the timing of these orders cannot be identified with certainty.

TELECOMMUNICATION SERVICE PROVIDER BUSINESS SEGMENT

CTR is a rural telephone service provider in Chile. CTR provides local telephone services to residential, commercial and institutional customers and operates a
network of payphones throughout Chile.

CTR's
management is currently focused on reducing costs and increasing revenues with the objective of maximizing operating cash flow. SR Telecom believes that increased revenue
from the installation of more lines using theangelinventory and the access charge increases will also contribute to this objective.

33

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|                        |  | 2004   |   | 2003   |   | 2002  | 
|----------------------- |  | ------ | - | ------ | - | ----- | 
|
|Revenue                 |  | 4,607  |   | 5,039  |   | 4,660 | 
|Operating expenses      |  | 4,866  |   | 4,760  |   | 4,646 | 
|Operating (loss) income |  | (259   | ) | 279    |   | 14    | 
|Net (loss) income       |  | (1,779 | ) | (1,966 | ) | 1,494 | 

Revenue

CTR
revenue for the year ended December 31, 2004, increased to $18.6 million from $14.1 million for the year ended December 31, 2003. In peso terms, revenue
increased to 8,738 million pesos in 2004 from 6,917 million pesos in 2003. The increase is attributable to the increase in access tariffs approved by the Chilean regulator, Subtel, which
took effect March 1, 2004 as well as the roll out of the new urban initiative. CTR experienced a decline in revenue to $14.1 million in the year ended December 31, 2003, from
$15.9 million in the year ended December 31, 2002. Revenue had been affected by the decline in the value of the Chilean peso compared to the Canadian dollar. Net revenue in Chilean peso
terms in 2003, was 6,917 million pesos compared to 6,951 million pesos in 2002. In peso terms, revenues are expected to increase in the first quarter of 2005 due to the effect of the
increase in access charges and the continuing rollout of the Corporation's new urban initiative and an application of the increased tariffs to the company's satellite network.

Operating
Expenses

Operating
expenses consist of compensation costs, travel and related expenses, as well as wire support and maintenance, and professional service fees and expenses. Operating expenses,
net of restructuring asset impairment and other charges, decreased to $18.7 million in 2004 from $21.6 million in 2003. In Chilean pesos, operating expenses decreased to
8,132 million pesos from 9,175 million pesos in 2003. The decrease in operating expenses relates to continued operational efficiencies and cost reductions enacted in CTR. Operating
expenses decreased to $21.6 million in 2003 from $22.5 million in 2002. Operating expenses actually increased to 9,175 million pesos for the twelve-months ended
December 31, 2003, from 8,616 million pesos in the twelve-months ended December 31 2002. The amount decreased in Canadian dollar terms due to the decline in the value of the
Chilean peso relative to the Canadian dollar. Also, operational efficiencies and cost reductions enacted in 2003 by CTR were offset by non-recurring consulting expenses. CTR will continue
to manage their operating expenses while focusing on revenue growth. In peso terms, operating expenses are expected to remain at approximately the same level in the first quarter of 2005 as was
experienced in the fourth quarter of 2004.

Restructuring,
Asset Impairment and Other Charges

For
the year ended December 31, 2003, asset impairment charges of $0.6 million were accrued. These charges were related to the write down of certain satellite related
assets to their estimated fair market value.

Interest
Expense

Interest
expense for the year ended December 31, 2004, has decreased to $2.7 million from $3.2 million in 2003 and from $5.9 million for the same period in
2002. The decline is due to a reduction in the amount of long-term debt outstanding as well as a general decrease in interest rates and the effect of a decline in the US dollar relative to
the Canadian dollar on the US dollar interest payments. Assuming U.S. rates and exchange rates remain stable, the Corporation expects that interest expense will decrease in 2005 due to lower
amounts of debt outstanding, and subsequently dependent on the results of the current refinancing activities.

Loss
on Change in Ownership in Subsidiary Company

On
June 30, 2001, CTR acquired VSAT-based telecommunications assets totaling $14.6 million from Gilat-To-Home Chile in exchange for 13%
of CTR's issued and outstanding common shares. The reduction in ownership of CTR resulted in a gain on dilution of $9.4 million. During 2002, SR Telecom increased its shareholding in CTR
by 8.9% to 95.9%. The increase in shareholding was a function of the degree to which certain performance requirements of the acquired assets were not met. This increase in the direct and indirect
ownership in CTR resulted in an estimated non-cash charge to earnings of $4.0 million in the fourth quarter of 2002, subject to final negotiations. The charge was determined using
management's best estimate of the increase of the holding of CTR. The final negotiations have not yet concluded.

34

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Foreign
Exchange

The
foreign exchange gain of $2.3 million in 2004 and $11.1 million in 2003, compared to the foreign exchange loss of $0.5 million in 2002, is a function of the
effect of fluctuations in the Canadian dollar, US dollar and Chilean peso on the assets and liabilities of CTR, in particular the US dollar denominated debt.

Income
Taxes

During
the fourth quarter of 2004, management determined that an increase in the valuation allowance in the amount of $8.5 million of the future income tax assets of CTR was
appropriate, as a result of the significant uncertainties surrounding the future prospects of the Corporation.

CONSOLIDATED BASIC AND DILUTED LOSS PER SHARE

|                                     |  | 2004  |   | 2003  |   | 2002  |  
|------------------------------------ |  | ----- | - | ----- | - | ----- | -
|
|Basic and diluted net loss per share |  | (1.23 | ) | (1.33 | ) | (0.23 | )

|
|

CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES

|(in $000's)                 |  | December 31, 2004 |  | December 31, 2003 |  | December 31, 2002
|--------------------------- |  | ----------------- |  | ----------------- |  | -----------------
|Total assets                |  | 227,624           |  | 289,775           |  | 320,805          
|Bank indebtedness           |  |                  |  | 3,000             |  | 10,000           
|Long-term liability         |  | 1,810             |  | 1,939             |  |                 
|Lease liability             |  | 8,620             |  | 12,808            |  |                 
|Debentures                  |  | 71,000            |  | 71,000            |  | 75,000           
|Long-term project financing |  | 35,585            |  | 45,232            |  | 64,760           
|Shareholders' equity        |  | 52,640            |  | 91,740            |  | 102,326          

|
|

Cash and Short-Term Investments

The
consolidated cash and short-term investment position including restricted cash, decreased to $6.4 million at December 31, 2004, compared to
$18.7 million at December 31, 2003. During the year ended December 31, 2004, the Corporation raised $46.8 million in equity, net of share issue costs. The decrease in the
outstanding cash balance resulted from the repayment of outstanding debt in the amount of $15.5 million in 2004 as well as the use of cash to fund operations in excess of that generated from
sales. The Corporation is in the process of attempting to raise additional funds for working capital purposes.

SR Telecom
currently does not have sufficient cash and cash equivalents, short-term investments, and cash from operations going forward to satisfy its cash
requirements. Accordingly, the Corporation will have to refinance or roll over all or part of its existing debt on or prior to April 22, 2005. SR Telecom intends to raise additional
working capital in conjunction with its plan to refinance its existing debt. If the Corporation is unable to obtain additional working capital to fund operations, it could significantly impact its
ability to continue as a going concern and the Corporation may be obliged to seek protection from its creditors. Please refer to Item 3 under Risk Factors and Item 8. Significan Changes
for more detailed information concerning the negotiations currently in place with our Debenture holders.

35

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Accounts
Receivable

The
trade receivables decrease of $25.6 million during the year to $53.1 million at December 31, 2004 from $78.7 million at December 31, 2003, results
substantially from the collection of outstanding receivables in Asia during the year as well as a decline in value of the US dollar receivables due to the strengthening of the Canadian dollar. Also,
contributing to the decrease is a decline in sales volume during the year.

In
December 2001, SR Telecom filed a statement of claim in New York for US$4.86 million against MCI International and Telecommunications
d'Haiti, S.A.M., or Teleco de Haiti. The claim was filed pursuant to a clause mandating three party arbitration before the International Court of Arbitration in respect of funds, which ceased
flowing to SR Telecom under a Tripartite Agreement between Teleco de Haiti, MCI International and SR Telecom. The agreement provided for the financing of a contract between SR Telecom and
Teleco de Haiti pursuant to which SR Telecom was to supply and install certain telecommunications equipment for Teleco de Haiti for approximately US$12.88 million.

In
July 2002, MCI International filed for bankruptcy and the United States Bankruptcy Court issued an order staying all collateral litigation against MCI International,
including this arbitration. As a result, MCI International continued in the proceeding as an observer. In February 2002, Teleco de Haiti filed a counter-claim for US$1.2 million in
respect of funds transferred to SR Telecom since the execution of a Termination Agreement between SR Telecom and Teleco de Haiti, alleging that such Termination Agreement ended their
obligations under the Tripartite Agreement.

On
April 24, 2003, the arbitration tribunal rendered a decision, denying both the claim by SR Telecom against Teleco de Haiti and the counterclaim by Teleco de Haiti
against SR Telecom. However, the arbitration tribunal also held that the Termination Agreement preserved and did not extinguish SR Telecom's right to continue to receive payments from
MCI under the Tripartite Agreement. Prior to the decision, SR Telecom filed a claim for US$4.86 million against MCI International with the United States Bankruptcy Court. If MCI
accepts the Tripartite Agreement then SR Telecom would have claims on both pre-petition amounts and post-petition amounts up to the full amount still due. Such
post-petition and future flows of funds would be paid from the MCI/Teleco de Haiti Voice Settlement Account.

On
April 27, 2004, MCI's Bankruptcy Plan was made effective. The court approved date for filing of objections is six months from the effective date of the Plan which means that
MCI had until October 2004 to object to any claims filed. On October 15, 2004, MCI objected to the claim. SR Telecom filed a notice of objection and is pursuing its claim with
MCI. The parties are currently entering the discovery process. Concurrently, SR Telecom is in discussions with Teleco de Haiti to accelerate the collection outside of the court process.
SR Telecom has a reasonable expectation that its claim will be upheld by the court, and therefore no provision for loss has been recorded with respect to this amount receivable. If
SR Telecom cannot recover a substantial amount from MCI International, it could have a material impact on SR Telecom's results of operations.

Inventory

The
inventory balance increased by $11.5 million to $59.5 million at December 31, 2004, from $48.0 million at December 31, 2003. This increase was
partially due to the inclusion of a US$4.0 million purchase of inventory on the settlement with Solectron in the latter part of 2004. Also, in anticipation of upcoming sales orders that were
expected in the fourth quarter, the Corporation acquired materials to be able to deliver on these orders. However, due to delays in the receipt of orders and delays in shipments, such orders were not
shipped or did not arrive at their destinations by December 31, 2004. The Corporation expects that the inventory balance will decrease as orders are received and revenues recognized on the
delayed shipments. The Corporation further expects to continue to reduce inventory balances as orders are received on the large frame contracts which are still pending.

Investment
Tax Credits and Future Income Tax Assets

Investment
tax credits are created from eligible research and development expenditures. Future income tax assets are determined based on differences between the financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates which will be in effect when the differences are expected to reverse. As of July 1, 2003, the Corporation
stopped recognizing future income tax assets and non-refundable federal investment tax credits in its Canadian operations as the Corporation could no longer support the addition of tax
related assets on its balance sheet. During the fourth quarter of 2004, as a result of the Corporation's determination that there is insufficient evidence of reasonable assurance with respect to the
utilization of the federal investment tax credits, it was determined that investment tax credits in the amount of $4.2 million may not be realized within the remaining life, resulting in a
charge to research and development expenses.

36

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To
use the recorded investment tax credits of $13.1 million at December 31, 2004, future taxable income from operations or tax planning strategies of approximately
$42.0 million is required. Investment tax credits have an initial expiration period of 10 years. SR Telecom's existing credits have an average remaining life of 5 to
9 years.

As
a result of the continued losses and significant uncertainties surrounding the future prospects of the Corporation, management determined that a valuation allowance in the amount of
$21.8 million on all the future income tax assets was appropriate.

Restricted
Cash

Both
the long-term and short-term portions of restricted cash relate to U.S. dollar letters of credit that are pledged against the US operating lease,
performance and bid bonds that support the Corporation's contracting activities and portion of interest on the US notes payable.

Intangible
Assets

The
intangible assets included on the balance sheet relate to theangelandairstartechnology obtained through the Netro acquisition in September of 2003. A value was derived to reflect the future use of this technology. The Corporation is amortizing the intangible assets over their
estimated useful lives, which is 5 years for theairstartechnology and 7 years for the angeltechnology.

Capital
Expenditures

Capital
expenditures are being kept to the minimum level required to execute SR Telecom's business plan. CTR's property, plant and equipment additions were $3.2 million for
the year ended December 31, 2004, compared to $1.0 million for the year ended December 31, 2003. These relate principally to existing network upgrades and enhancements. The
Corporation is also progressing with the urban line initiative in Chile. Wireless Products additions were $3.0 million in 2004, which related to ongoing capital requirements. Wireless Products
additions were $4.7 million in 2003, excluding the assets acquired in the Netro acquisition, and were related predominantly to theshiftasset
purchase in the first quarter of 2003. SR Telecom presently has no material commitments for capital expenditures.

Bank
Indebtedness

During
the twelve-month period ended December 31, 2004, SR Telecom's operating line of credit was renewed at a reduced amount of $3.0 million. The Corporation repaid
its operating line of credit in full and cancelled the facility in 2004.

Liabilities

Trade
payables and accrued liabilities decreased to $55.7 million at December 31, 2004, from $59.4 million at December 31, 2003. The amount of trade payables
is higher than normal in relation to SR Telecom's current level of operations.

Customer
advances decreased to $1.9 million as at December 31, 2004, from $4.2 million at December 31, 2003. The decrease is largely attributable to reduced
sales in the current year and the finalization of several existing turnkey contracts.

Long-Term Debt and Shareholders' Equity

Long-Term Liability

As
at December 31, 2004, the long-term liability was $1.8 million, which reflects the fair value of the indemnification provided to the former directors and
officers of Netro Corporation as part of the purchase agreement. The change in the long-term liability is a reflection of the effects of foreign exchange.

37

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Lease Liability

The lease liability decreased to $8.6 million at December 31, 2004, from $12.8 million at December 31, 2003. The liability, composed
of a long-term portion of $3.6 million and a short-term portion of $5.0 million, arose on the assumption of Netro's operating lease for its San Jose, California
office, which is vacant. The lease obligation was originally recorded in the financial statements at its fair market value, determined by the present value of future lease payments, reduced by the
expected sub-lease revenue. At the end of 2004, the Corporation does not expect to be able to sub-lease these premises in the near term, and as a result, increased the
liability by $1.6 million by eliminating the effect of the expected sub-lease revenue. The decrease in the liability during the year relates to the monthly payments under the
operating lease offset by the increase that occurred with the elimination of the sub-lease revenue.

Long-Term Debt

The Corporation has not complied with a covenant included in both the debenture trust indenture and the notes payable agreements, which requires the maintenance
of a minimum shareholder's equity of $90 million, unless a waiver is received from the debenture holders and the lenders or the breach of covenant is cured within 30 days following the
receipt of a notice of the event of default from the trustees and the lenders, the debentures and the notes payable would be immediately due and payable.

SR Telecom's
debentures are unsecured and bear interest at 8.15%, payable semi-annually. The balance of the debentures is due in a bullet payment at maturity on
April 22, 2005. The Corporation is considering its options for the refinancing of these debentures. If SR Telecom is unable to repay or refinance this debt when it becomes due, there
will be material and adverse consequences for our financial position and results of operations. During the end of 2003, the Corporation repurchased $4.0 million of the debentures as a means to
reduce the debt.

The
long-term project financing relates to outstanding notes with Export Development Canada ("EDC") and the Inter-American Development Bank ("IADB") that are obligations of
CTR. As of December 31, 2004, a principal amount of US$29.5 million was outstanding. Payments of principal and interest are due in semi-annual installments until maturity in
2008. Currently, the lenders would have full recourse against SR Telecom for the complete amount of the loans, if performance, financial performance and financial position covenants were not
met. While CTR and SR Telecom have not met all of these covenants, default on the covenants has been waived by the lenders until March 31, 2005. Subsequently, on March 30, 2005,
CTR's lenders agreed to extend the waiver until April 22, 2005. As the waiver period does not extend for a full year subsequent to December 31, 2004, the total amount of the notes has
been recorded as a current liability in the consolidated financial statements as at December 31, 2004. These covenants were waived in previous years and SR Telecom believes that these
covenants will continue to be waived until the balance of the amounts outstanding is either repaid or refinanced, provided that the debentures are repaid, refinanced or that the maturity date is
extended. If the lenders decline to waive the defaults, all amounts due under the loans, including principal and interest and other fees, could be declared due and immediately payable. In addition, if
Export Development Canada and Inter-American Development Bank accelerated the loans, a default would be triggered under SR Telecom's public debentures, which means that all amounts could be
declared due and immediately payable.

Counterparts
for both long-term project financing facilities are governmental export or development financing organizations. Both tranches rank pari passu and are
secured by a pledge of all of the assets of CTR and a pledge of the shares in the share capital of CTR and intermediate holding companies. SR Telecom has also agreed to provide CTR with the
necessary funds and resources to complete the network as well as maintain its initial equity investment in CTR.

The
following table outlines the cash payments due with respect to SR Telecom's contractual cash obligations:

Payments
due by:

|Contractual Obligations     |  | 2005    |  | 2006  |  | 2007  |  | 2008  |  | 2009 |  | Thereafter |  | Total  
|--------------------------- |  | ------- |  | ----- |  | ----- |  | ----- |  | ---- |  | ---------- |  | -------
|Debentures                  |  | 71,000  |  |      |  |      |  |      |  |     |  |           |  | 71,000 
|Long-term debt              |  | 35,585  |  |      |  |      |  |      |  |     |  |           |  | 35,585 
|Lease liability             |  | 5,043   |  | 3,577 |  |      |  |      |  |     |  |           |  | 8,620  
|Capital lease obligations   |  | 95      |  | 79    |  | 78    |  | 78    |  | 25   |  |           |  | 355    
|Purchase commitments        |  | 14,774  |  |      |  |      |  |      |  |     |  |           |  | 14,774 
|Operating lease obligations |  | 4,636   |  | 2,602 |  | 2,083 |  | 1,316 |  | 725  |  | 152        |  | 11,514 
|                            |  |         |  |       |  |       |  |       |  |      |  |            |  |        
|Total                       |  | 131,133 |  | 6,258 |  | 2,161 |  | 1,394 |  | 750  |  | 152        |  | 141,848
|                            |  |         |  |       |  |       |  |       |  |      |  |            |  |        

38

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The
purchase commitments as at December 31, 2004 relate primarily to open purchase orders with suppliers for components, for current and expected sales in 2005.

Shareholder's Equity

|(in 000's)                                    |                                                            | December 31, 2004 |  | December 31, 2003
|--------------------------------------------- | ---------------------------------------------------------- | ----------------- |  | -----------------
|Authorized                                    |                                                            |                   |  |                  
|                                              | An unlimited number of common shares                       |                   |  |                  
|                                              | An unlimited number of preferred shares issuable in series |                   |  |                  
|17,610,132 common shares (10,467,283 in 2003) |                                                            | 219,653           |  | 180,866          
|3,924,406 warrants (352,941 in 2003)          |                                                            | 13,029            |  | 1,815            
|Contributed Surplus                           |                                                            | 519               |  |                 

On
September 2, 2003, the Board of Directors of the Corporation approved a one-for-ten share consolidation. All per share amounts in the MD&A have been
restated to reflect the share consolidation on a retroactive basis.

On
February 18, 2004, the Corporation completed a public offering of 5,714,287 units for gross cash proceeds of $40.0 million. Concurrently with the closing of the public
offering, the Corporation completed a private placement of 571,500 units for aggregate gross proceeds of $4.0 million. Each unit is comprised of one common share and one-half of one
common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of $9.00 per share until February 2006.

On
February 24, 2004, the over-allotment option related to the public offering was exercised where an additional 857,142 units were purchased for gross cash proceeds
of $6.0 million. These units hold the same terms and conditions as those of the public and private offerings.

The
gross proceeds of $50.0 million were allocated between common shares and warrants based on their fair values. Accordingly, $38.8 million was allocated to the common
shares and $11.2 million to the warrants. The fair value of the warrants was determined using the Black-Scholes Option pricing model, assuming a weighted-average risk-free rate of
4.3%, a dividend yield of 0%, expected volatility of 72.5% and expected life of the warrants of 2 years.

The
underwriting commissions and other expenses amounted to $3.2 million relating to the public offering and private placement. These share issue costs were charged to deficit.

On
September 4, 2003, the Corporation acquired all of the common shares of Netro, which resulted in an issuance of 4,149,893 common shares at a price of $6.75 per share, which was
the fair value of the shares on the date the acquisition was announced.

In
2003, the Corporation also closed a private placement whereby 705,882 units were issued at $8.50 per share for gross proceeds of $6.0 million. Each unit consists of one common
share and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to acquire one common share in the capital of SR Telecom at a price of $10.00 per
share until July 2008. The securities were subject to a four-month hold period under the applicable securities law. The private placement was offered in order to obtain funds to be
used in working capital.

The
gross proceeds of $6.0 million were allocated between common shares and warrants based on their fair values. Accordingly, $4.2 million was allocated to the common
shares and $1.8 million to the warrants.

39

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SR Telecom
had an Employee Stock Purchase Plan, a Directors' Share Compensation Plan and an Employee Stock Option Plan that provides stock options to key employees, where the
options vest over a period of four to five years. During the year ended December 31, 2004, no common shares were issued under the Directors' Share Compensation Plan. The Corporation effectively
terminated its Employee Stock Purchase Plan as of January 1, 2004. For the year ended December 31, 2003, stock issued under the first two plans totaled 88,710 for consideration of
$0.7 million.

As
at December 31, 2004, the Corporation's outstanding number of stock options is 406,580 where 168,940 stock options are exercisable.

Effective
January 1, 2004, the Corporation adopted the transitional provisions of the Canadian Institute of Chartered Accountants ("CICA") section 3870, "Stock-Based
Compensation and Other Stock-Based Payments", where compensation expense is now recognized on all issued and outstanding stock options issued after January 1, 2002, in accordance with the fair
value method of accounting. This amendment has been applied retroactively without restatement of prior periods. This resulted in a charge to opening deficit of $0.3 million with a corresponding
credit to contributed surplus at January 1, 2004. For the year ended December 31, 2004, compensation expense of $0.2 million was included in operating expense in the statement of
operations.

Contingencies

Refer to note 24 to the accompanying annual audited consolidated financial statements for a full description of the Corporation's outstanding
contingencies.

Off-Balance Sheet Arrangements

The Corporation has currency exposures arising from significant operations and contracts in multiple jurisdictions. The Corporation also has currency exposure to
freely tradable and liquid currencies of first world countries and communities. As a result, the Corporation entered into forward contracts in 2003 as a partial economic hedge against fluctuations in
the US dollar with respect to its US dollar receivables. During the current year, SR Telecom sold its US $2.0 million forward contract. The change in market value of this contract from the date
of purchase to expiry date in March 2004 resulted in a realized foreign exchange gain of $0.2 million recorded in the consolidated statement of operations. The Corporation had not
entered into other forward contracts in 2004.

The
Corporation has provided its customers with product warranties that generally extend for one year, as part of the normal sale of products. The Corporation also indemnifies its
customers against any actions from third parties related to intellectual property claims arising from use of the Corporation's products. In the Corporation's experience, claims under such
indemnifications are rare, and the associated fair value of the liability is not material.

Pursuant
to the acquisition of Netro Corporation, the Corporation has agreed to indemnify and hold harmless, the former directors and officers of Netro, for a period of six years, and to
obtain directors and officers insurance in this regard for a period of three years.

Refer
also to note 24 and 27 to the accompanying annual audited consolidated financial statements for a full description of the Corporation's guarantees and derivative
financial instruments, respectively.

Related Party Transactions

SR Telecom has entered into various transactions with members of the Board of Directors of the Corporation and their affiliated companies as well as a
shareholder company exercising significant influence. The affiliated companies and the shareholder company have provided primarily professional services to the Corporation.

In
July 2001, the Corporation issued 8,000 common shares to senior officers. These common shares were purchased through company loans amounting to $128,000 due in
July 2006, bearing interest at 5% per annum.

Cash Flows

For the year ended December 31, 2004, cash flows used in operations totaled $41.2 million as compared to $44.0 million for the year ended
December 31, 2003. This is primarily the result of lower revenues resulting in increased operating losses offset by the gain on sale of a long-term investment and a gain on the
settlement of the claim with Solectron along with a decrease in non-cash working capital items, in particular the outstanding accounts receivable.

40

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For
the year ended December 31, 2004, cash flows from financing activities totaled $31.3 million as compared to a use of $14.1 million for the year ended
December 31, 2003. The cash inflows reflect $46.8 million in net proceeds from the issue of shares and warrants, offset by $15.5 million in debt repayments. For 2003, the cash
outflow reflects debt repayments offset by the proceeds on the private placement.

For
the year ended December 31, 2004, cash inflows from investing activities totaled $6.1 million as compared to $46.2 million for the year ended December 31,
2003. The decrease in the cash inflow in 2004 resulted from the net cash acquired on acquisition of Netro Corporation in 2003 and the sale of short-term investments during the year to fund
operations.

New accounting recommendations

Financial
Instruments  Disclosure and Presentation

The
CICA recently issued revisions to section 3860 of the CICA Handbook, "Financial Instruments  Disclosure and
Presentation". The revisions change the accounting for certain financial instruments that have liability and equity characteristics. It requires
instruments that meet specific criteria to be classified as liabilities on the balance sheet. Some of these financial instruments were previously classified as equities. These revisions come into
effect on January 1, 2005. The Corporation does not have any instruments with these characteristics at this time.

Financial
Instruments  Recognition and Measurement

The
CICA recently issued section 3855 of the CICA Handbook,"Financial
Instruments  Recognition and Measurement". The section is effective for years beginning on or after
October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that
1) all financial assets be measured at fair value, with some exceptions like loans and investments that are classified as held-to-maturity, 2) all financial
liabilities be measured at fair value when they are derivatives or classified as held for trading purposes (other financial liabilities are measured at their carrying value), and 3) all
derivative financial instruments be measured at fair value, even when they are part of a hedging relationship. The Corporation will evaluate the impact of this section on consolidated financial
statements on January 1, 2007.

Hedges

The
CICA recently issued section 3865 of the CICA Handbook, "Hedges". The section is effective for years beginning on or after
October 1, 2006. It describes when and how hedge accounting may be applied. Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between
changes in the fair value of a hedged item and a hedging item, changes in the cash flows attributable to a hedged item and a hedging item, or changes resulting from a risk exposure relating to a
hedged item and a hedging item. Hedge accounting changes the normal basis for recording the gains, losses, revenues and expenses associated with a hedged item or a hedging item in a company's
statement of operations. It makes sure that all offsetting gains, losses, revenues and expenses are recorded in the same period. The Corporation will evaluate the impact of this section on
consolidated financial statements on January 1, 2007.

Consolidation
of Variable Interest Entities

Accounting
Guideline 15, "Consolidation of Variable Interest Entities": This guideline presents the views of the Accounting Standards Board on the application of consolidation principles
to certain entities that are subject to control on a basis other than ownership of voting interests. The Guideline is to provide guidance for determining when an enterprise includes the assets,
liabilities and results of activities of such an entity (a "variable interest entity") in its consolidated financial statements. This Guideline is to be applied for years beginning on or after
November 1, 2004. The adoption of AcG 15 is not expected to have an impact on the Corporation's results from operations or financial position.

41

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ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

Directors

Each director is elected by shareholders to serve until the next annual meeting or until a successor is elected or appointed.

The
following table sets out the name of each of the individuals who are directors of the Corporation as of April 9, 2005, the municipality of residence and other principal board
and committee positions.

Name

Other Positions with the Corporation

Director SinceJohn C. Charles(1)
(Toronto, Ontario)



2001Constance L. Crosby
(Toronto, Ontario)



1986J.V. Raymond Cyr(2)(3)
(Montreal, Quebec)



1996Lionel P. Hurtubise(1)(2)
(Montreal, Quebec)

Chairman of the Board of Directors

1999Peter L. Jones(3)
(Toronto, Ontario)



2004Paul E. Labbé(1)
(Ottawa, Ontario)



1999Robert E. Lamoureux(3)
(Toronto, Ontario)



2004Nancy E. McGee(3)
(Mississauga, Ontario)



1984Pierre St-Arnaud
(Montreal, Quebec)

President and Chief Executive Officer

2001Louis A. Tanguay(1)
(Montreal, Quebec)



2004


---

The following are brief biographies of the members of the board of directors.

JOHN
C. CHARLES has served on the board of SR Telecom since 2001 and is a Managing Director of LeBlanc & Royle Enterprises Inc., one or our major shareholders, see
"Major Shareholders and Related Party Transactions". He is also a Director of Prism Equities Inc., a publicly traded Canadian medical products investment corporation, and a Director of Northern
Property Real Estate Investment Trust, which is listed on the Toronto Stock Exchange. From 1997 to 2001, Mr. Charles was President, CEO and a Director of LeBlanc Ltd., a Canadian based
wireless infrastructure services company, which operated throughout North America and, through subsidiaries, in Australia, Southeast Asia and the Middle East. He is a chartered accountant and from
1995 to 1997, Mr. Charles was a Senior Vice President and a Director of Midland Walwyn Inc. (now Merrill Lynch Canada Inc.). Mr. Charles is a graduate of Queen's
University.

CONSTANCE
L. CROSBY has served on the board of SR Telecom since 1986 and is Vice-President and General Counsel of Psion Teklogix Inc., a Canadian company that
is a leading supplier of wireless data communications systems. Prior to joining Psion Teklogix Inc., she was a Partner of Byrne, Crosby in Toronto engaged primarily in the field of commercial
law. She serves on the board of Norcom Telecommunications Inc., a cable television company, and on the boards of several private companies and charities. She graduated from Osgoode Hall Law
School and is a member of the Canadian and American Bar Associations.

42

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J.V.
RAYMOND CYR has served on the board of SR Telecom since 1996 and is Chair of Polyvalor Inc. A former Chairman of BCE, Bell Canada, Telesat Canada and TMI
Communications, Mr. Cyr also serves on the boards of Canadian National, G.T.C. Transcontinental Ltd., ART Advanced Research and Technologies, the Old Port of Montreal
Corporation Inc., IsacSoft Technologies Inc., Triton Electronik Inc. andFonds-Groupe Investissements Technologiques. He is also a
member of the Canadian Academy of Engineering and a Director Emeritus ofÉcole Polytechnique de Montréal.

LIONEL
P. HURTUBISE has served on the board of SR Telecom since 1999 and is the Chairman of the Board of Ericsson Canada Inc., a corporation which he has also served as
President and Chief Executive Officer. Mr. Hurtubise has been in the forefront of telecommunications and computer science technology in Canada for many years. Prior to joining Ericsson in 1986,
he served as President of International Systcoms Ltd., then a leader in the field of mobile radio telephony. He was also a principal in the formation of Westech Systems Ltd., a joint
venture in which Alberta Government Telephones was a participant, in developing Canada's first cellular mobile telephone network. Mr. Hurtubise is active in private and governmental
organizations dedicated to the advancement of telecommunications research and development.

PETER
L. JONES is the President and Chief Executive Officer of Diligent Capital Inc, a private equity and financial consulting company, which he founded. He is an experienced financial
executive, having served in various management positions over a twenty-eight-year career in investment banking. Most recently, Mr. Jones was Vice Chairman of National Bank
Financial Inc. in Toronto from 1999 to 2000 and Executive Vice President and Head of Investment Banking of First Marathon Securities Limited from 1995 to 1999. From 1989 to 1995, he was
President and Chief Executive Officer of Salomon Brothers Canada Inc., which he joined following a seventeen-year career at Wood Gundy Inc. in Toronto, Calgary and London,
England, latterly as Global Head of Corporate Finance. Mr. Jones has a B.A.Sc. degree in Industrial Engineering from the University of Toronto and an M.B.A. degree from the Harvard Graduate
School of Business.

PAUL
E. LABBÉ has served on the board of SR Telecom since 1999 and is a Corporate Director and Consultant. Mr. Labbé is the former Chairman of
the Board and Chief Executive Officer of Citibank Canada. Prior to joining Citibank, he served for over five and a half years as President and CEO of the Export Development Corporation, following six
years as President of Investment Canada. Mr. Labbé has spent most of his career in the field of international trade and finance, having started in 1966 as a Canadian Trade
Commissioner in Paris, France, serving as Executive Assistant to the Minister of International Trade until 1973, when he became a founding partner of Interimco Ltd., an international trading
company. Mr. Labbé studied Political Science and Economics at the University of Ottawa and obtained a law degree from McGill University. He also studied at the École nationale
d'administrationin Paris and attended the ISMP Program at the Harvard Business School.

ROBERT
E. LAMOUREUX was appointed to SR Telecom's Board of Directors in 2004. Currently, Mr Lamoureux is a Director of the Institute of Corporate Directors. He has served on
numerous industry and professional committees and boards, including the CICA's Auditing Standards Board, IFIC's Accounting Advisory Committee and OSFI's Trust Company Advisory Committee.
Mr. Lamoureux is Lead Director, of Royal Group Technologies Limited. He has an Honours Bachelor of Commerce from the University of Windsor, and is a chartered accountant.

NANCY
E. MCGEE has served on the board of SR Telecom since 1984 and is a Managing Director of LeBlanc & Royle Enterprises Inc. Ms. McGee is a chartered
accountant. She joined LeBlanc in 1978 and was involved in the growth of that company's various communications infrastructure businesses throughout the world. Ms. McGee also serves on the
boards of several non-profit organizations.

PIERRE
ST-ARNAUD was appointed President in June 2000 and Chief Executive Officer of the Corporation in April 2001 and has served on the board of
SR Telecom since 2001. Mr. St-Arnaud also sits on the Board of Electro Composites Inc. From 1981 to 1995 he was employed in the national and international operations
of the Asea Brown Boveri (ABB) group of companies. In 1993, he became President of Power Transmission and Distribution Segment, ABB Canada. In 1996, he served Hydro Québec as Executive
Vice President, Technology and Development. From 1997 to 1999 he was engaged as President and Chief Executive Officer at Geomat International Inc., a leader in the global geomatics industry.

LOUIS
A. TANGUAY joined the board of SR Telecom in 2004. Retired from Bell Canada after a career spanning over four decades and during which he held a number of executive
positions, including President of Bell Canada International from 1998 - 2001, Mr. Tanguay possesses a deep understanding of the management of telecommunications
operations. He currently serves as a director of several public companies including Aéroports de Montréal, Canbras Communications (Chairman), Bell Nordiq,
Medysis Inc., Rona Inc., Simpler Networks, and Saputo Group Inc. He holds a Bachelor of Commerce degree from Concordia University.

43

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Executive Officers

Executive officers are appointed annually and serve at the discretion of the board of directors.

The
following table sets out information concerning our corporate officers, including name and position with us.

|Pierre St-Arnaud       |  | President and Chief Executive Officer                     
|---------------------- |  | ----------------------------------------------------------
|David L. Adams         |  | Senior Vice-President, Finance and Chief Financial Officer
|Marie-France Desnoyers |  | Vice-President, Human Resources                           
|Charles Immendorf      |  | Vice-President, Research and Development                  
|Albert Israel          |  | Vice-President, Products and Technology                   
|Allan Klein            |  | Vice-President, Systems and Technology                    
|Michael J. Morris      |  | Senior Vice-President                                     
|Christophe Padiou      |  | General Manager, SR Telecom SAS, France                   
|Benoit Pinsonnault     |  | Senior Vice-President, Operations                         

The
following are brief biographies of our corporate officers other than Mr. Pierre St-Arnaud whose biography appears under the heading "Directors".

DAVID
L. ADAMS, SR Telecom's Senior Vice President Finance and Chief Financial Officer, joined SR Telecom in March 1999. He is responsible for executive management
and oversight of all financial operations for the company. Prior to joining SR Telecom, Mr. Adams had spent ten years with CAE Inc., where he was Vice President, Finance and
Administration of CAE Electronics Ltd. and Treasurer of CAE Inc. Mr. Adams earned his Bachelor's degree in Commerce and Finance from the University of Toronto in 1979. He began
his career at Clarkson Gordon, a Canadian affiliate of Ernst & Young, where he gained his chartered accountant designation. In 1984, he joined The Bank of Nova Scotia. As Senior Manager, he was
responsible for the corporate finance and account management activities of the bank's largest corporate banking unit in Canada.

MARIE-FRANCE
DESNOYERS joined SR Telecom in December 1998, as Vice President, Human Resources. In this capacity she leads the company's effort to attract, retain and direct
the career development of SR Telecom's top talent. Ms. Desnoyers has accumulated 12 years of experience in compensation & benefits, organizational development and
international human resources. Prior to joining SR Telecom she worked for four years in a high technology environment as Manager, Human Resources with CAE Electronics and before that at Avon
Canada. Ms. Desnoyers has a bachelor degree in Sciences from the Universite de Montreal.

CHARLES
IMMENDORF is the Vice President, Research and Development of SR Telecom. Mr. Immendorf is responsible for leading our overall research and development activities and
managing the product development teams. Mr. Immendorf joined SR Telecom in September 2003 with the acquisition of Netro where he was Vice President, Software Development. Prior to
joining Netro he was Director, Software Development at AT&T Wireless where he led the development team for Project Angel from 1995 to 2002. Mr. Immendorf has a B.Sc. in Electrical Engineering
with highest honours from Rutgers University College of Engineering.

ALBERT
ISRAEL is Vice President, Products and Technology of SR Telecom. Mr. Israel joined SR Telecom in September 1999 as Director of Research and Development
and was promoted to Vice President, Engineering in
December 2001. Mr. Israel is responsible product strategy and product line management. Mr. Israel has more than 15 years of management experience in the telecommunications
industry. Before joining SR Telecom, Mr. Israel was Vice President of Strategy and Technology at Positron Industries Inc., a leading provider of 911 communication systems, which
he joined in 1986 after completing a bachelor's degree in Electrical Engineering at McGill University.

ALAN
KLEIN is Vice President, Systems and Technology of SR Telecom, where he leads the effort of SR Telecom's development organization focusing on strategic research and
development and emerging technologies. Under his direction, SR Telecom continues to focus significant resources on technology innovation and execution. Mr. Klein joined SR Telecom
in 1987 and has held several management positions in the areas of product and technology development.

MICHAEL
J. MORRIS is Senior Vice President. He is responsible for all legal aspects of commercial contracts as well as sales in the Middle-East, Africa, Australia,
New Zealand and Fiji. Mr. Morris is a graduate of Imperial College in London, England, where he received his Bachelor's of Science (Honours) degree in Physics. Mr. Morris joined
SR Telecom in 1984, as Vice President Engineering.

44

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CHRISTOPHE
PADIOU is General Manager, SR Telecom SAS in France. In this role, Mr. Padiou manages all operational aspects of the EMEA regions including production support
and maintenance, project management, sales support, human resources and administration. Mr. Padiou was previously Vice President, Sales EMEA at SR Telecom. He joined SR Telecom in
September 2001 with the acquisition of the FWA group of Lucent Technologies. He is a graduate of engineering from Sup Telecom Paris.

BENOIT
PINSONNAULT is Senior Vice President, Operations of SR Telecom. Mr. Pinsonnault is responsible for the development of SR Telecom's manufacturing and
supply-chain strategy. Additionally, Mr. Pinsonnault oversees the day-to-day operations of the company's manufacturing organization, including all product fulfillment
and logistics to meet SR Telecom's goal of total customer satisfaction. Mr. Pinsonnault joined SR Telecom in December 1992 as Director of Manufacturing Engineering. He subsequently held
the positions of Director  Production, and Director  Manufacturing, and was promoted to Vice President Customer
Satisfaction and Operations in September 2000.

COMPENSATION OF DIRECTORS AND OFFICERS

For the year ended December 31, 2004, an aggregate amount of $2,301,650 was paid to the members of the board of directors of the Corporation and to the
executive officers of the Corporation and its subsidiaries, including compensation for salary, bonuses and benefits. In 2004, 148,000 options were granted to executive officers of the Corporation. As
of December 31, 2004, no amounts had been set aside for pension and retirement benefits for directors and executive officers.

Compensation of Named Executive Officers

The following Summary Compensation Table summarises the compensation during the three fiscal years ended December 1, 2004, for our Chief Executive Officer
and our four most highly compensated executive officers, other than the CEO, of which were serving the Corporation at the end of the financial year (collectively, the "Named Executive Officers"). The
determination of the most highly compensated executive officers is made on the basis of the total annual salary and annual incentive bonuses earned during the fiscal year ended December 1,
2004.

Summary Compensation Table

|                                                                       
|-----------------------------------------------------------------------
|
|
|                                                                       
|Pierre St-Arnaud
President & Chief Executive Officer                   
|                                                                       
|David L. Adams
Senior Vice President, Finance & Chief Financial Officer
|                                                                       
|Benoit Pinsonnault
Senior Vice President Operations                    
|                                                                       
|Charles Immendorf(3)
Vice President, R & D                             
|                                                                       
|Michael J. Morris
Senior Vice President                                
|                                                                       

---

45

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NAMED EXECUTIVE NOT IN THE EMPLOY OF THE CORPORATION AT YEAR END

|                                                                                
|--------------------------------------------------------------------------------
|
|
|                                                                                
|Claude Giguère(1)
Senior Vice President, Sales
Terminated November 5th, 2004    
|                                                                                
|Marc St-Onge(2)
Vice President, Product Line Management
Terminated May 7th, 2004
|                                                                                

---

Share Compensation Arrangements

We have put into place the Restated 1998 Key Employee Stock Option Plan (the "KESOP"), the Directors' Share Compensation Plan (the "DSCP") and the Restated 1998
Employee Share Purchase Plan (the "ESPP"). These plans are all incentive based plans, designed to increase performance of employees, senior management, officers and directors, as the case may be, and
further align the interests of each of these participants with shareholder interests.

KESOP

The KESOP serves as a tool to retain talented individuals within the Corporation. As of April 6, 2005, there were options to purchase 402,880 Common Shares
outstanding under the KESOP, from a total authorized reserve amount still available under this plan of 446,550, leaving 43,670 Common Shares available for further option grants.

DSCP

Since implementation, a total of 44,925 Common Shares have been issued to directors, at the then current market price, in lieu of cash compensation. The aggregate
number of shares of Common Shares reserved for issuance under this plan is 45,000 and, at present, a current reserve of 75 Common Shares is available under this plan for future issuances.

46

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Management Incentive Plans

We have put in place management incentive plans for members of our management team pursuant to which the amount of additional cash compensation, or bonuses, is
determined. The plans are based on the performance of the Corporation and the individual. The individual's performance will be evaluated based on the level of achievement of pre-set
objectives for the year and the Corporation's performance will be established by comparing year-end results vs. plan in terms of the "Net Earnings after Tax Results" of its core business.
Individuals become eligible to receive a bonus ranging from 0% to 10% of the individual's base salary when the Corporation exceeds 80% of its budgeted performance, 0% to 30% when the Corporation
exceeds 100% of its budgeted performance and 0% to 50% when the Corporation exceeds 120% of its budgeted performance. The amount any given person receives within the available range depends, in turn,
on that person's achievement of individual goals.

Option Grants During 2004

The following table provides summary information regarding stock options granted to the Named Executive Officers under our Restated 1998 Key Employee Stock Option
Plan during the fiscal year ended December 31, 2004.

|Name and Principal Position                                            |  | Options Granted in 2004(1) |  | % of Total Options Granted to Employees in 2004 |  | Exercise or Base Price
($/Security) |  | Market Value of Securities Underlying Options on the date of grant
($/Security) |  | Date of Expiration
|---------------------------------------------------------------------- |  | -------------------------- |  | ----------------------------------------------- |  | ----------------------------------- |  | ------------------------------------------------------------------------------- |  | ------------------
|Pierre St-ArnaudPresident & Chief Executive Officer                    |  | 50,000                     |  | 33.5%                                           |  | 7.47                                |  | 7.45                                                                            |  | April 15, 2014    
|David L. AdamsSenior Vice President, Finance & Chief Financial Officer |  | 28,000                     |  | 18.8%                                           |  | 7.47                                |  | 7.45                                                                            |  | April 15, 2014    
|Benoit PinsonnaultSenior Vice President Operations                     |  | 28,000                     |  | 18.8%                                           |  | 7.47                                |  | 7.45                                                                            |  | April 15, 2014    
|Charles ImmendorfVice President, R & D                                 |  | 0                          |  |                                                |  |                                    |  |                                                                                |  | n/a               
|Michael J. MorrisSenior Vice President                                 |  | 14,000                     |  | 9.4%                                            |  | 7.47                                |  | 7.45                                                                            |  | April 15, 2014    
|NAMED EXECUTIVE NOT IN THE EMPLOY OF THE CORPORATION AT YEAR END      
|Claude Giguère(2)Senior Vice President, Sales                          |  |                           |  |                                                |  |                                    |  |                                                                                |  |                  

---

Notes:

47

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Aggregated Option Exercises During 2004 and Financial Year-End Option Values

The following table provides summary information concerning the exercise of options by each of our Named Executive Officers during the fiscal year ended
December 31, 2004 and the total number of options to acquire Common Shares held by each of them as of December 31, 2004. The value realized upon exercise is the difference between the
market value of the underlying Common Shares on the date of exercise and the exercise price. The value of unexercised in-the-money options is calculated based on the difference
between the exercise price of the option and the market value of our Common Shares at December 31, 2004. The market value of a Common Share on the Toronto Stock Exchange was $3.80 on
December 31, 2004.

|Name and Principal Position                                            |  | Securities Acquired on Exercise
(#) |  | Aggregate Value Realized
($) |  | Number of Unexercised
Options at Year End
Exercisable/Unexercisable |  | Value of Unexercised in-the-Money
Options at Year End
($)
Exercisable/Unexercisable
|---------------------------------------------------------------------- |  | ----------------------------------- |  | ---------------------------- |  | ------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------
|Pierre St-ArnaudPresident & Chief Executive Officer                    |  | 0                                   |  |                             |  | 16,200/60,800                                                       |  | /                                                                                
|David L. AdamsSenior Vice President, Finance & Chief Financial Officer |  | 0                                   |  |                             |  | 9,800/32,700                                                        |  | /                                                                                
|Benoit PinsonnaultSenior Vice President Operations                     |  | 0                                   |  |                             |  | 7,700/33,200                                                        |  | /                                                                                
|Michael J. MorrisSenior Vice President                                 |  | 0                                   |  |                             |  | 8,800/17,700                                                        |  |                                                                                    
|NAMED EXECUTIVE NOT IN THE EMPLOY OF THE CORPORATION AT YEAR END      
|Claude Giguère(1)Senior Vice President, Sales                          |  | 0                                   |  |                             |  | 700/0                                                               |  |                                                                                   

---

Note:

Termination of Employment and Employment Contracts

The employment agreement of Mr. Pierre St-Arnaud, our Chief Executive Officer of the Corporation, provides for continuance of salary for a
period of up to twenty-four months, as well as full vesting of all options then held, in the event of termination of employment for any reason other than cause. Full vesting of options
will also occur in the event of a change of control of the Corporation.

The
employment agreement of Mr. David Adams, Senior Vice President Finance and Chief Financial Officer of the Corporation, provides for continuance of salary for a period of
eighteen months, as well as full vesting of all options then held, in the event of termination of employment for any reason other than cause. Salary continuance and full vesting of options will also
occur in the event of a change of control of the Corporation.

48

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The
employment agreement of Mr. Benoit Pinsonnault, Senior Vice President Operations of the Corporation, provides for continuance of salary for a period of eighteen months, as
well as full vesting of all options then held, in the event of termination of employment for any reason other than cause.

Retention Bonus

Mr. Pierre St-Arnaud, Chief Executive Officer of the Corporation and Mr. David Adams, Senior Vice President Finance and Chief Financial
Officer of the Corporation have entered into an agreement with the Board of Directors by which their personal loans, described in theShare Purchase Loan
receivableandOther Receivablesections below, will be forgiven provided they remain employed by the corporation for a ten week
period starting March 1st, 2005. Similarly, Mr. Benoit Pinsonnault, Senior Vice President, Operations, will be entitled to receive the equivalent of 100% of his base salary
earned, with normal payroll, for the same period.

Directors' Compensation

The board of directors has adopted a compensation policy for its directors who are not officers or employees of the Corporation. The Chairman of the Board
receives an annual fee of $37,000. The Chairman of a Committee receive an annual fee of $3,000 and members of a Committee receive and annual fee of $2,000. Directors receive an annual fee of $12,000
and an attendance fee for board meetings, corporate governance committee meetings and audit committee meetings of $1,000 per director.

The
following table sets forth the aggregate compensation paid to directors in 2004.(1)

|Name of Director       |  | Retainer
($) |  | Attendance at Regularly Held Board Meetings
($) |  | Attendance At Committee Meetings Held Other Than On Board Meeting Day
($) |  | Attendance At Board Meetings Held Telephonically
($)
|---------------------- |  | ------------ |  | ----------------------------------------------- |  | ------------------------------------------------------------------------- |  | ----------------------------------------------------
|John C. Charles        |  | 13,000       |  | 9,000                                           |  | 0                                                                         |  | 2,500                                               
|Constance L. Crosby(3) |  | 11,500       |  | 9,000                                           |  | 0                                                                         |  | 2,000                                               
|J.V. Raymond Cyr       |  | 15,250       |  | 10,000                                          |  | 11,500                                                                    |  | 2,500                                               
|Paul A. Dickie(2)      |  | 5,500        |  | 6,000                                           |  | 500                                                                       |  | 1,500                                               
|Lionel P. Hurtubise    |  | 35,500       |  | 10,000                                          |  | 7,500                                                                     |  | 2,500                                               
|Peter L. Jones         |  | 10,500       |  | 4,000                                           |  | 5,000                                                                     |  | 1,000                                               
|Paul E. Labbé          |  | 13,000       |  | 9,000                                           |  | 0                                                                         |  | 2,500                                               
|Robert E. Lamoureux    |  | 7,000        |  | 2,000                                           |  | 4,000                                                                     |  | 1,000                                               
|Nancy E. McGee         |  | 15,250       |  | 10,000                                          |  | 9,000                                                                     |  | 2,500                                               
|Louis A. Tanguay       |  | 10,500       |  | 6,000                                           |  | 1,000                                                                     |  | 1,000                                               

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Notes:

Under the DSCP, directors are entitled to fix in advance, at the start of each fiscal year, a percentage of their directors' compensation between
10% and 100% to be paid quarterly in Common Shares, at the market price at the time of acquisition. In the year 2004, no Common Shares were issued to directors under the Directors' Share Compensation
Plan.

49

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BOARD PRACTICES

Role and Responsibilities of the Board

Our board of directors believes that sound corporate governance practices are essential to the sustained growth and performance of the Corporation and
consequently maintaining shareholder value. In the past year, considerable attention has been given to publicly traded companies, their board of directors and corporate governance practices. Our board
of directors is committed to ensuring and maintaining the integrity of its practices and thereby promoting investor and shareholder confidence.

Board Mandate

The mandate of our board of directors is to supervise the management of the business and affairs of the Corporation and to act with a view to the best interests
of the Corporation and its shareholders.

There
were ten meetings of the board of directors in 2004, exclusive of meetings held by teleconference, and nine meetings are scheduled for 2005. Additional meetings will be held as
required.

Board Composition and Unrelated Directors

The Board is composed of a majority of unrelated directors, as that term is defined in the Corporate Governance Guidelines in the Toronto Stock Exchange Company
Manual. The board of directors has engaged in an exercise to analyse each director and their relationship with the Corporation to determine whether, in their circumstances, they are related or
unrelated directors.

Further
to its analysis, the board of directors concluded that seven of the ten directors currently comprising the Board are unrelated, namely: Messrs. John C. Charles, J.V.
Raymond Cyr, Lionel P. Hurtubise, Peter L. Jones, Robert E. Lamoureux,
Louis A. Tanguay and Ms. Nancy E. McGee. Mr. Pierre St-Arnaud is the Chief Executive Officer of the Corporation and is, as the Corporation's most senior officer, considered
related. Ms. Constance L. Crosby and Mr. Paul E. Labbé, given their minor business dealings with the Corporation, as more particularly described in "Related Party
Transactions", are also determined to be related directors. The board of directors believes that each of its members acts independently and, in every case, in what they believe to be the best
interests of the shareholders of the Corporation.

Committees of the Board of Directors

The board of directors has established three standing committees, namely the Compensation and Nominating Committee, the Audit Committee and the Corporate
Governance Committee. The board of directors has delegated various functions to each of its Committees, and has designated specific mandates, on which the respective Committees are to perform an
oversight responsibility and ultimately report to the board of directors. Practically speaking, the Committees assess, review, advise and make recommendations to the board of directors, where most
matters receive formal and final approval.

Compensation and Nominating Committee

The Compensation and Nominating Committee is currently composed of three directors, Messrs. J.V. Raymond Cyr (Chair), Lionel P. Hurtubise and Louis A.
Tanguay. Mr. Paul A. Dickie served on the Compensation and Nominating Committee until his resignation from the board of directors on June 23, 2004. The Committee makes recommendations to
the board of directors on, among other things, the compensation of directors, senior executives and all significant compensation matters. The Committee also formulates or reviews succession plans,
stock incentive plans and training programs, and has responsibilities for the appointment, evaluation and remuneration of senior executives.

Audit Committee

During the year ended December 31, 2004, the Audit Committee was composed of four directors, being Messrs. J.V. Raymond Cyr, Peter L. Jones and
Robert E. Lamoureux and Ms. Nancy E. McGee (Chair). The audit committee has discussed with the independent auditors the matters required to be discussed in SAS 61, as may be modified or
supplemented. The audit committee has reviewed and discussed the audited consolidated financial statements with management. The audit committee has received the written disclosures and the letter from
the independent Chartered Accountants required by Independence Standards Board Standard No. 1, and has discussed with the independent Chartered Accountant the independent accountant's
independence. Based on this review and these discussions, the audit committee recommended to the board of directors that the audited financial statements be included in the Company's annual report on
Form 20-F/A for the last fiscal year for filing with the Commission

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Corporate Governance Committee

The Corporate Governance Committee is composed of three members, Messrs. John C. Charles, and Paul E. Labbé and Lionel P. Hurtubise (Chair).
Summarily, the Corporate Governance Committee is responsible for developing the Corporation's approach to governance issues, ensuring the appropriateness of its corporate governance policies and
practices, and responding to the Corporate Governance Guidelines of the Toronto Stock Exchange.

Management Responsibility And Board Independence From Management

The board of directors operates independently of management and periodically meets without management present. The functions of Chairman of the Board and Chief
Executive Officer are separate, distinct and carried out by two individuals: Mr. Lionel P. Hurtubise serves as Chairman and is a non-management and unrelated director, while
Mr. Pierre St-Arnaud, the most senior of all management officers, serves as President and Chief Executive Officer of the Corporation. In addition, the board of directors has put in
place mechanisms to ensure that an individual director may, if required, obtain external advice at the expense of the Corporation.

The
Corporation's objectives are set through the board of directors' approval and the continuing review of an Annual Budget and Strategic Plan put forward by the Chief Executive Officer.
Long-term commitments, senior management and organizational changes, acquisition of new businesses as well as any material action or significant contract not contemplated by the Annual
Budget and Strategic Plan require the prior approval of the board of directors.

EMPLOYEES

As at December 31, 2004, we had a total of 789 employees (987 at December 31, 2003 and 1,053 at December 31, 2002) of which 235 (233 at
December 31, 2003 and 244 at December 31, 2002) were employed by our subsidiary CTR in Chile. All employees are non-unionized except for 143 CTR employees in Chile. They are
predominantly technicians and are represented by one union. The collective bargaining agreement expires in March 2007. We consider relations with our employees to be good.

SHARE OWNERSHIP OF DIRECTORS AND OFFICERS

Ownership of Securities by Directors and Senior Officers

The following table provides information about the beneficial ownership of shares of SR Telecom's common stock as of April 9, 2005 by each of our
directors and senior officers:

|                                      |  | Outstanding Shares |     | Right to Acquire |  | Total Number |  | Percent Beneficially Owned
|------------------------------------- |  | ------------------ | --- | ---------------- |  | ------------ |  | --------------------------
|John C. Charles                       |  | 1,448,841          | (1) |                 |  | 1,448,841    |  | 8.2%                      
|Constance L. Crosby                   |  | 7,085              |     | 400              |  | 7,485        |  | *                         
|J.V. Raymond Cyr                      |  | 10,317             |     | 400              |  | 10,717       |  | *                         
|Peter Jones                           |  | 39,000             |     |                 |  | 39,000       |  | *                         
|Lionel P. Hurtubise                   |  | 3,348              |     | 400              |  | 3,748        |  | *                         
|Paul E. Labbé                         |  | 5,657              |     | 400              |  | 6,057        |  | *                         
|Robert Lamoureux                      |  | 3,800              |     |                 |  | 3,800        |  | *                         
|Nancy E. McGee                        |  | 1,490,841          | (1) | 400              |  | 1,491,241    |  | 8.5%                      
|Pierre St-Arnaud                      |  | 5,750              |     | 16,200           |  | 21,950       |  | *                         
|Louis Tanguay                         |  | 5,000              |     |                 |  | 5,000        |  | *                         
|David L. Adams                        |  | 4,000              |     | 9,800            |  | 13,800       |  | *                         
|Marie-France Desnoyers                |  | 749                |     | 4,700            |  | 5,449        |  | *                         
|Albert Israel                         |  | 960                |     | 5,200            |  | 6,160        |  | *                         
|Allan Klein                           |  | 2,573              |     | 5,250            |  | 7,823        |  | *                         
|Michael Morris                        |  |                   |     | 8,800            |  | 8,800        |  | *                         
|Benoit Pinsonnault                    |  | 1,200              |     | 7,700            |  | 8,900        |  | *                         
|Christophe Padiou                     |  |                   |     | 700              |  | 700          |  | *                         
|                                      |  |                    |     |                  |  |              |  |                           
|All directors and officers as a group |  | 1,600,280          |     | 60,350           |  | 1,660,630    |  | 9.4%                      
|                                      |  |                    |     |                  |  |              |  |                           

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Notes:

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ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth certain information regarding the beneficial ownership of our common shares as of April 9, 2005 based on information
provided to us by the holders or disclosed in public filings with the Securities and Exchange Commission. The voting rights of the shareholders listed below are not different from the voting rights of
our other shareholders. The percentage of outstanding ordinary shares is based on 17,610,132 Common Shares outstanding as of April 9, 2005. Common Shares deemed beneficially owned by virtue of
the right of any person or group to acquire such shares within 60 days of the date of this report are treated as outstanding only for the purpose of determining the percent owned by such person
or group. None of these shareholders has voting rights different from other holders of Common Shares.

|                                      |  | Number of Common Shares owned directly or indirectly |  | Number of Warrants owned directly or indirectly |  | Number of Common Shares Beneficially Owned |  | Percentage of outstanding common shares beneficially owned
|------------------------------------- |  | ---------------------------------------------------- |  | ----------------------------------------------- |  | ------------------------------------------ |  | ----------------------------------------------------------
|Howsen Tattersal Investment Counsel   |  | 1,768,645                                            |  |                                                |  | 1,768,645                                  |  | 10.0%                                                     
|Carso Global Telecom, S.A. de C.V.(1) |  | 1,760,000                                            |  |                                                |  | 1,760,000                                  |  | 10.0%                                                     
|LeBlanc & Royle Enterprises(2)        |  | 1,428,841                                            |  |                                                |  | 1,428,841                                  |  | 8.11%                                                     
|Courage Capital Management LLC        |  | 1,162,400                                            |  |                                                |  | 1,162,400                                  |  | 6.6%                                                      

---

Notes:

To the extent we are aware, no person directly or indirectly, jointly or severally has the ability to exert control over the corporation.

As
at March 31, 2005 there were 352 shareholders of record. Of that number, 156 were US holders representing a total of 27.5%our common shares then outstanding.

RELATED PARTY TRANSACTIONS

Consulting and Professional Services

John Charles and Nancy McGee are directors of SR Telecom and managing directors of LeBlanc & Royle Enterprises Inc., a shareholder of ours
that beneficially holds over 8% of our Common Shares. Constance Crosby is a director of SR Telecom as well as the secretary of LeBlanc & Royle Enterprises Inc. LeBlanc &
Royle occasionally performed consulting services for us. For the years ended December 31, 2003 and 2002, general consulting services amounted to $102,000 and $104,000, respectively. Paul Labbe,
a member of our board of directors, was paid $42,000 in consultant fees by the Corporation in 2002 relating to the financing and proposed sale of CTR. Ronald Couchman, a former board member, received
$40,000 in consultant fees in 2002.

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Constance
Crosby, a member of the board of directors, was a partner in Byrne, Crosby, a law firm, and performed certain professional work for us. For the years ended December 31,
2004, 2003 and 2002, legal professional expenses amounted to $72,000, $265,000 and $145,000, respectively.

Director's Fees

As part of compensation for services provided as members of our Board of Directors, we offer to our directors the option to receive our Common Shares in lieu of
cash payments for their services. For the years ended December 31 2003 and 2002, we issued 22,729 and 12,075 common shares under the Directors' Share Compensation Plan at an aggregate value of
$174,000 and $139,000 respectively.

Share Purchase Loan Receivable

The aggregate indebtedness outstanding to us or any of our subsidiaries, relating to the purchase of our Common Shares, of all directors, executive officers and
senior officers, as of December 31, 2004 is $128,000. The principal amount is due July 3, 2006, and bears interest at 5% per annum. These loans were made pursuant to Formal Loan
Agreements dated July 3, 2001.

|Name and Principal Position                                            |  | Involvement of Issuer                        |  | Amount outstanding at December 31, 2003 |        | Security for Debt
|---------------------------------------------------------------------- |  | -------------------------------------------- |  | --------------------------------------- | ------ | -----------------
|Pierre St-ArnaudPresident & Chief Executive Officer                    |  | Loan to purchase common shares of SR Telecom |  | $                                       | 70,000 |                  
|David L. AdamsSenior Vice President, Finance & Chief Financial Officer |  | Loan to purchase common shares of SR Telecom |  | $                                       | 58,000 |                  

Other Receivable

The following describes the nature of the other receivable from an executive officer as at December 31, 2004:

|Name and Principal Position                         |  | Involvement of Issuer                                  |  | Amount outstanding at December 31, 2003 |           | Security for Debt
|--------------------------------------------------- |  | ------------------------------------------------------ |  | --------------------------------------- | --------- | -----------------
|Pierre St-ArnaudPresident & Chief Executive Officer |  | Loan associated with relocation of principal residence |  | $                                       | 34,000(1) |                  

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Note:

Except as disclosed in this section, none of our directors, executive and senior officers, associates or affiliates had any material interest in
any transaction with us during the past three years or in any proposed transaction which has materially affected or could materially affect us.

ITEM 8.    FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Our consolidated financial statements for the fiscal years ended December 31, 2002, 2003 and 2004 and the auditors' report signed by Deloitte and
Touche LLP are presented at Item 18 of this report.

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LEGAL PROCEEDINGS

Solectron Arbitration

On December 19, 2002, Solectron California Corporation filed arbitration against Netro for disputes arising under its 1998 "Manufacturing Agreement". Prior
to arbitration proceedings, we settled the claim with Solectron and agreed to accept delivery of US$4,000,000 of inventory materials. Partial payment was made in 2004 and early 2005. We did not meet
our February 2005 payment obligation which resulted in Solectron serving a judicial citation of US$1,450,000 on March 11, 2005. We have reached an agreement by which Solectron will take
no further action until June 15, 2005 for which we have agreed to pay interest and fees as well as the overdue amount of US$550,000 on that date. The remaining US$ 900,000 is due on
August 26, 2005.

Future Communications Company ("FCC") Litigation

The dispute with FCC relates to the alleged improper draw down by Netro of a letter of credit, opened by FCC, with the Bank of Kuwait and the Middle East, and the
alleged refusal by Netro to accept return of inventory provided to FCC. On February 2, 2005, the Kuwait Commercial Court passed judgement in favour of the FCC claim. We filed an appeal on
March 2, 2005 and are awaiting a new court date to pursue the litigation. The results of this litigation are not determinable at this time. The amount in dispute is approximately US$1,013,000
plus interest from December 31, 1999.

Haiti

The long-term accounts receivable includes a receivable from Teleco de Haiti. We are currently involved in proceedings to collect these funds. The
results of the legal proceedings are not determinable at this time. The following discloses the details of the proceedings:

In
December 2001, we filed a statement of claim in New York for US$4.86 million against MCI International and Telecommunications d'Haiti, S.A.M., or Teleco de
Haiti. The claim was filed pursuant to a clause mandating three party arbitration before the International Court of Arbitration in respect of funds which ceased flowing to us under a Tripartite
Agreement between Teleco de Haiti, MCI International and ourselves. The agreement provides for the financing of a contract with Teleco de Haiti pursuant to which we were to supply and install certain
telecommunications equipment for Teleco de Haiti for approximately US$12.88 million.

In
July 2002, MCI International filed for bankruptcy and the United States Bankruptcy Court issued an order staying all collateral litigation against MCI International,
including this arbitration. As a result, MCI International continued in the proceedings as an observer. In February 2002, Teleco de Haiti filed a counter-claim for US$1.2 million in
respect of funds transferred to us since the execution of a Termination Agreement between ourselves and Teleco de Haiti, alleging that such Termination Agreement ended their obligations under the
Tripartite Agreement.

On
April 24, 2003, the arbitration tribunal rendered a decision, denying both the claim by us against Teleco de Haiti and the counterclaim by Teleco de Haiti against us. However,
the arbitration tribunal also held that the Termination Agreement preserved and did not extinguish SR Telecom's right to continue to receive payments from MCI under the Tripartite Agreement.
Prior to the decision, we filed a claim for US$4.86 million against MCI International with the United States Bankruptcy Court. If MCI accepts the Tripartite Agreement then we would have
claims on both pre-petition amounts and post-petition amounts up to the full amount still due. Such post-petition and future flows of funds would be paid from the
MCI/Teleco de Haiti Voice Settlement Account.

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On
April 27, 2004, MCI's Bankruptcy Plan was made effective and the Court approved date for filing of objections was six months from the effective date of the Plan. On
October 15, 2004, MCI objected to the claim. We filed a notice of objection and is continuing to pursue its claim with MCI. The parties are currently entering the discovery process.
Concurrently, we are in discussions with Teleco de Haiti to accelerate the collection outside of the court process. We have as a reasonable expectation that its claim will be upheld by the court, and
therefore no provision for loss has been recorded with respect to this amount receivable. If we cannot recover a substantial amount from MCI International, it could have a material impact on
SR Telecom's results of operations.

SIGNIFICANT CHANGES

Due to the maturity of our Debentures and our inability to fund their repayment from our existing cash resources as well our need for working capital to operate,
on April 18, 2005, we entered into an agreement in principle with a group representing the required majority of our outstanding 8.15% Debentures due April 22, 2005, regarding a proposed
recapitalization plan. On April 25, 2005, we announced that the date of maturity of the bonds was extended to June 30, 2005.

Under
the terms of the agreement in principle, we would exchange the outstanding $71 million in principal amount of our 8.15% Debentures, due April 22, 2005 and all accrued
interest of approximately $2.9 million into 47,266,512 common shares and approximately $63.9 million new 10% Convertible Redeemable Secured Debentures, due 2010. Interest on the new
Convertible Debentures would be payable in cash or in kind at our option. The common shares issued to the Debenture holders would represent approximately 73% of the issued and outstanding common
shares. In addition, each $1,000 in principal amount of new Convertible Debentures will be convertible into 4,727 (the "Conversion Rate") common shares, representing a conversion price at closing of
approximately $0.21 per common share. The Conversion Rate may be adjusted to account for interest accrued pending closing such that the aggregate equity holding represented by the common shares issued
together with the new Convertible Debentures would not exceed 95.2% of the issued and outstanding common shares of the Corporation on a fully diluted basis.

The
restricted group of Debenture holders has also agreed, subject to execution of final documentation, to provide us with a five-year $50 million secured Credit
Facility of which $20 million would be available as soon as loan documentation and registrations are in place, with the balance to be available over the next three quarters, subject to certain
conditions. Based on the current agreement in principle, the financial terms include the following: a 2% up-front facility fee (based on the full $50 million facility amount) and
interest paid partly in cash at a rate equal to the greater of 6.5% and the three-month Canadian Dollar LIBOR rate plus 3.85% and partly paid in kind at a rate equal to the greater of 7.5% and
three-month Canadian Dollar LIBOR plus 4.85%. In addition the facility contemplates a payout fee of 5% (based on $50 million facility amount) or 2% of distributable value at maturity.

The
Debenture exchange and the Credit Facility are subject to numerous conditions, including the execution of definitive documentation satisfactory to the lenders under the Credit
Facility, the approval by the holders of at least 662/3% of the outstanding Debentures, and regulatory approval. Debenture holders representing approximately 75% of the outstanding
Debentures have indicated in writing their support for the Debenture exchange. The Credit Facility is expected to close as soon as loan documentation and registrations are in place and the Debenture
exchange is expected to close on or about May 9, 2005 although there can be no assurance that such conditions will be satisfied by such date.

Additionally,
it is a condition of the recapitalization that the lenders to our Chilean subsidiary, CTR, will restructure CTR's outstanding debt and amortization schedule and provide an
extended waiver of at least three years, subject to final negotiations and the receipt of credit approvals. CTR's lenders have currently waived compliance with certain financial and operational
covenants of CTR until May 1, 2005.

We
are free to accept an alternative transaction, which must provide for the payment of all amounts due to the Debenture holders plus expenses, unless otherwise agreed to by the
Debenture holders. However, if we accept an alternative transaction after the later of two weeks from April 18, 2005 or the date on which the Credit Facility becomes binding, such acceptance
would result in the payment of $1 million to the lenders providing the Credit Facility.

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ITEM 9.    THE OFFER AND LISTING

OFFER AND LISTING DETAILS

The following table sets forth the high and low sales prices for our Common Shares as reported by the Toronto Stock Exchange, in Canadian dollars, for each full
financial year since 2000 and as reported by the Nasdaq National Market, in US dollars, since our common shares started trading in the Nasdaq in September 2003.

|     |  | Toronto Stock Exchange |  | Nasdaq National Market
|---- |  | ---------------------- |  | ----------------------
|
|2000 |  | 132.00                 |  | 27.00                 
|2001 |  | 44.00                  |  | 11.00                 
|2002 |  | 27.50                  |  | 7.00                  
|2003 |  | 15.00                  |  | 5.50                  
|2004 |  | 9.41                   |  | 1.56                  

The
following table sets forth the high and low sales prices for our common shares as reported by the Toronto Stock Exchange, in Canadian dollars, for each financial quarter in 2003 and
2004 and as reported by the Nasdaq National Market, in US dollars for each financial quarter, since our common shares started trading in the Nasdaq in September 2003.

|        |  | Toronto Stock Exchange |  | Nasdaq National Market
|------- |  | ---------------------- |  | ----------------------
|
|Q1 2003 |  | 12.10                  |  | 5.90                  
|Q2 2003 |  | 15.00                  |  | 5.50                  
|Q3 2003 |  | 11.40                  |  | 6.85                  
|Q4 2003 |  | 8.80                   |  | 6.00                  
|Q1 2004 |  | 9.41                   |  | 6.60                  
|Q2 2004 |  | 7.85                   |  | 3.53                  
|Q3 2004 |  | 4.76                   |  | 2.06                  
|Q4 2004 |  | 5.05                   |  | 1.56                  

The
following table sets forth the high and low sales prices for our common shares as reported by the Toronto Stock Exchange, in Canadian dollars, and as reported by the Nasdaq National
Market, in US dollars, for the most recent six months.

|              |  | Toronto Stock Exchange |  | Nasdaq National Market
|------------- |  | ---------------------- |  | ----------------------
|
|October 2004  |  | 3.10                   |  | 1.75                  
|November 2004 |  | 5.05                   |  | 1.56                  
|December 2004 |  | 4.40                   |  | 3.01                  
|January 2005  |  | 4.14                   |  | 1.17                  
|February 2005 |  | 1.32                   |  | 0.87                  
|March 2005    |  | 1.30                   |  | 0.61                  

PLAN OF DISTRIBUTION

Not applicable.

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MARKETS

Common Shares

Our Common Shares currently trade on the Toronto Stock Exchange under the symbol "SRX" and are quoted on the Nasdaq National Market under the symbol "SRXA".

Warrants

Our common share purchase warrants, or Warrants, currently trade on the Toronto Stock exchange under the symbol "SRX.W"

ITEM 10.    ADDITIONAL INFORMATION

SHARE CAPITAL

Not applicable

MEMORANDUM AND ARTICLES OF ASSOCIATION

Organization and Background

We are incorporated under and are governed by theCanada Business Corporations Act, or CBCA.

Board of Directors

Under the CBCA, a corporation whose securities are publicly traded must have at least three directors, including two who are not officers or employees of the
corporation or any of its affiliates, but the actual number of directors is governed by a corporation's articles. Our articles of incorporation, provide that the number of directors will consist of a
minimum of three and a maximum of twelve. Our bylaws provide that the actual number of directors will be determined from time to time by resolution of the directors. Currently, the number of directors
on our board is set at nine.

Under
the CBCA generally, 25% of the directors of the corporation and 25% of the directors present at a meeting must be Canadian residents.

Power to Determine Compensation

Under the CBCA the directors of a corporation may fix the remuneration to be paid to the directors, officers and employees of the corporation.

Director Share Ownership Requirements

The CBCA provides that unless the articles of a corporation otherwise provide, a director of a corporation is not required to hold shares issued by the
corporation. There is no provision in our articles of incorporation imposing a requirement that a director hold any of our shares.

Description of Share Capital

Common Shares

Our Common Shares entitle their holders to receive notice of all meetings of shareholders and to attend and vote at those meetings, except meetings at which only
holders of a specified class of shares (other than the Common Shares) or a specified series of shares are entitled to vote. Each Common Share entitles its holder to one vote at a meeting of
shareholders. The holders of Common Shares are entitled to dividends that our board of directors may declare, in its discretion, subject to any restriction as provided in the CBCA, on a proportionate
basis. The Common Shares are entitled upon bankruptcy, winding-up, dissolution or liquidation to receive the remaining assets of the Corporation, after payment to any other class of our
shares that is preferred to the Common Shares.

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Preferred Shares

Our Preferred Shares may be issued in one or more series. The directors have the ability to issue these series, subject to the sending of articles of amendment to
the "director" appointed under the CBCA for that purpose in prescribed form and the issuance of a certificate of amendment in respect of the articles of incorporation. The board of directors may fix,
before such issue, the number of shares which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of Preferred Shares. Except as
otherwise specifically provided in the CBCA, the holders of Preferred Shares shall not be entitled to vote for the election of directors or for any other purpose. The Preferred Shares of each series
shall, with respect to the payment of dividends and the distribution of assets or return of capital in the event of bankruptcy, winding-up, dissolution or liquidation of SR Telecom,
whether voluntary or involuntary, or any other return of capital or distribution of assets of SR Telecom among its shareholders for the purpose of winding-up its affairs, rank on a parity
with the preferred shares of every other series. Preferred Shares will also be entitled to preference over the Common Shares and over any other class of our shares ranking junior to the preferred
shares of any series.

Warrants

We have two series of warrants, the first series of warrants entitles each holder to purchase one Common Share at a price of $ 10.00 per share, subject to
adjustment in certain circumstances, at anytime prior to August 27, 2008. The second series of warrants entitles each holder to purchase one Common Share at a price of $9.00 per share, subject
to adjustment in certain circumstances, at any time prior to February 18, 2006. A warrant holder does not have any right as shareholder of the Corporation including the right to vote or attend
meetings of shareholders or to receive dividends or other distributions.

Amendment to Governing Documents

Under the CBCA, an amendment to a corporation's articles generally requires shareholder approval by special resolution. A "special resolution" is a resolution
passed by at least two-thirds of the votes cast by shareholders who are entitled to vote on the resolution. In addition, if an amendment to the articles of incorporation adversely affects
the rights of a particular class or series of shares, that class or series is entitled to vote separately as a class, whether or not that class or series otherwise carries a right to vote.

Under
the CBCA, unless the articles or bylaws otherwise provide, the directors may, by resolution, make, amend, or repeal any bylaw that regulates the business or affairs of a
corporation. Where the directors make, amend or repeal a bylaw, they are required to submit the bylaw, amendment or repeal to the shareholders at the next shareholders meeting, and the shareholders
may, by an "ordinary resolution" confirm, reject or amend the bylaw, amendment or repeal. An "ordinary resolution" is a resolution passed by a majority of the votes cast by shareholders who voted on
the resolution. If the directors of a corporation do not submit a bylaw, an amendment or a repeal to the shareholders at the next meeting of shareholders, the bylaw, amendment or repeal will cease to
be effective, and no subsequent resolution of the directors to adopt, amend or repeal a bylaw having substantially the same purpose and effect is effective until it is confirmed or confirmed as
amended by the shareholders.

Under
the CBCA, the holders of a majority of the shares entitled to vote at a meeting, present in person or represented by proxy, constitute a quorum for the transaction of business,
irrespective of the number of persons present at the meeting, unless the bylaws provide otherwise. Pour bylaws provide that a quorum at any shareholder meeting will be the holders present in person or
present by proxy of at least 25% of the outstanding shares entitled to be voted at the meeting.

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Annual Meeting of Shareholders

Under the CBCA, the directors of a corporation must call an annual meeting not later than 18 months after the corporation comes in to existence and
thereafter, not later than 15 months after holding the last preceding annual meeting and no later than six months after the end of the Corporation's preceding financial year.

Call of Special Shareholders Meeting

The CBCA provides that shareholder meetings may be called by the board of directors, and must be called by the board of directors when so requisitioned by holders
of not less than 5% of the issued shares of the corporation that carry the right to vote at the meeting sought. A court may also order, in its discretion and in certain circumstances, the calling of a
meeting upon the application of a director or shareholder entitled to vote at the meeting. Under our bylaws, the board of directors has the power to call a special meeting at any time.

Quorum Requirement for Any Meeting of the Holders of Common Stock

In connection with the listing of our common shares on the Nasdaq National Market, we requested, based upon current business practice in Canada, and obtained, a
waiver from Nasdaq Marketplace Rule 4350(f) regarding the quorum requirement. Pursuant to Rule 4350(f), a listed issuer shall provide for a quorum, as specified in its
by-laws, of no less than 331/3% of the outstanding shares of common stock for any meeting of the holders of common stock. Our by-laws provide for a quorum of no
less than 25% of our outstanding common shares.

Requirements for Extraordinary Corporate Transactions

Under the CBCA, extraordinary corporate actions, such as certain amalgamations, continuances, sales, leases or exchanges of all or substantially all of the
property of a corporation other than in the ordinary course of business, and other extraordinary actions such as liquidations or dissolutions are required to be approved by special resolution. For
such
approvals, each share of the corporation carries the right to vote, whether or not the shares are designated as voting shares in the corporation's articles. In some cases the special resolution to
approve an extraordinary corporate action must also be approved separately by the holders of a class or series of shares, including a class or series that does not otherwise have the right to vote.

A
corporation may also apply to a court for an order approving an arrangement which includes an amalgamation, a transfer of all or substantially all the property of a corporation to
another corporation in exchange for property, money or securities of the corporation, or liquidation and dissolution where it is not insolvent and where it is not practicable for the corporation to
make such fundamental change under other provisions of the Canada Business Corporations Act. The court may make any interim or final order it thinks fit with respect to the proposed arrangement.

Shareholder
approval is not required for an amalgamation between a parent corporation and one or more of its wholly owned subsidiaries or between two or more wholly owned subsidiaries

MATERIAL CONTRACTS

The following is a list of each material contract, other than contracts entered into in the ordinary course of business, to which we or our subsidiaries are a
party, for the two years preceding the date of this document.



59

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EXCHANGE CONTROLS

None

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain Canadian federal income tax considerations relating to an investment in the Common Shares or the Warrants.

The
summary is only applicable to a holder of Common Shares or Warrants who, for the purposes of theIncome Tax Act(Canada) (also
referred to as the "Tax Act") and theCanada-United States Tax Convention(also referred to as the "Convention"), is resident in the
United States and not resident in Canada, deals at arm's length with the Corporation, holds the Common Shares or Warrants as capital property and does not use or hold and is not deemed to use
or hold the Common Shares or the Warrants in carrying on business in Canada (also referred to as a "U.S. Holder").

The
summary is for general information only and does not take into account the individual circumstances of any particular investor. Therefore, investors are urged to consult their own
tax advisors with respect to the tax consequences of an investment in the Common Shares or Warrants based on their specific circumstances, including any consequences of an investment in the Common
Shares or Warrants arising under state, local or provincial tax laws of other jurisdictions, including the United States.

This
summary is based on the current provisions of the Convention and accompanying protocols, the Tax Act, the regulations under the Tax Act, specific proposals to amend
the Tax Act or the regulations thereunder announced by the Canadian Minister of Finance prior to the date of this report and counsel's understanding of the current administrative and assessing
practices of the Canada Revenue Agency (or CRA). This summary does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial action, nor does
it take into account income tax laws or considerations of any province or territory of Canada or any jurisdiction other than Canada.

Special
rules, which are not discussed in this summary, may apply to financial institutions (as defined by the Tax Act) and to non-resident insurers carrying on an
insurance business in Canada and elsewhere.

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The Common Shares

Assuming that the Common Shares will continue to be listed on the Toronto Stock Exchange and quoted on Nasdaq, capital gains realized on the disposition of Common
Shares by a U.S. holder will not be subject to tax under the Tax Act unless such Common Shares constitute taxable Canadian property.

Common
shares will generally not be taxable Canadian property of a U.S. holder unless, at any time during the five-year period immediately preceding a disposition, the
U.S. holder, persons with whom the U.S. holder did not deal at arm's length or the U.S. holder and persons with whom the U.S. holder did not deal at arm's length owned 25%
or more of the issued shares of any class or series of shares of the capital stock of the Corporation. Even if the Common Shares constitute taxable Canadian property to a particular
U.S. holder, an exemption from tax under the Tax Act may be available under the provisions of the Convention.

Dividends,
including deemed dividends and stock dividends, paid or credited to a U.S. holder on the Common Shares are subject to Canadian withholding tax under the Tax Act.
The Convention generally reduces the rate of withholding tax to 15% of the gross amount of the dividend where the beneficial owner is not a corporate entity that owns at least 10% of the voting stock
of the Corporation. Moreover, under the Convention, dividends paid to certain religious, scientific, literary, educational or charitable organizations and certain pension organizations that are
resident in, and generally exempt from tax in, the United States, are exempt from Canadian non-resident withholding tax. Provided that certain administrative procedures are observed
by such an organization, the Corporation would not be required to withhold such tax from dividends paid or credited to such organization. The withholding tax is reduced to 5% under the Convention
where the U.S. holder is a corporation that owns at least 10% of the voting stock of the Corporation.

The Warrants

Capital gains realized on the disposition of the Warrants by a U.S. holder will not be subject to tax under the Tax Act unless the underlying Common
Shares would be taxable Canadian property for the particular U.S. holder. For information
concerning when the Common Shares will be taxable Canadian property for a particular U.S. holder, see the summary under the heading "The Common
Shares". For the purposes of determining the number of Common Shares held by a particular person, the person will be considered to own Common Shares for which such person's
Warrants may be exchanged. Even if the Warrants constitute taxable Canadian property to a particular U.S. holder, an exemption from tax under the Tax Act may be available under the
provisions of the Convention.

Where
the Warrants are exercised, the amount paid to acquire or to exercise the Warrants will be added to the adjusted cost base of shares acquired pursuant to the exercise of the
Warrants. For the Canadian federal income tax consequences of holding Common Shares, see the description under the heading "The Common Shares".

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a discussion of the principal U.S. federal income tax consequences of owning and disposing of Common Shares or Warrants held by a
U.S. holder (as defined below) as capital assets within the meaning of section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the "Code").

This
discussion is based on the Code, Treasury regulations promulgated under the Code, and judicial and administrative interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, which change may be retroactive and may affect the U.S. federal income tax consequences described herein. This discussion does not address the
U.S. federal income tax consequences to any particular U.S. holder, and does not deal with persons that may be subject to special treatment under the U.S. federal income tax laws
(including, without limitation, insurance companies, tax-exempt organizations, individual retirement accounts and other tax-deferred accounts, regulated investment companies,
financial institutions, broker-dealers, certain U.S. expatriates, U.S. holders whose "functional currency" is not the U.S. dollar, U.S. holders that hold Common Shares or
Warrants as a position in a "straddle," "hedge," "constructive sale transaction," "conversion transaction" or other integrated transaction or persons who mark to market their securities).

For
purposes of this discussion, the term "U.S. holder" means a beneficial owner of Common Shares or Warrants that is, for U.S. federal income tax purposes:

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If
a partnership holds Common Shares or Warrants, the U.S. federal income tax consequences to a partner generally will depend upon the status of the partner and the activities of
the partnership.

U.S. holders should consult their own tax advisors with respect to the tax consequences to them of owning and disposing of Common Shares and Warrants in
light of their particular circumstances, including the tax consequences under state, local, non-U.S. and other tax laws and the possible effects of changes in U.S. federal and other
tax laws.

Warrants

Exercise of Warrants

Upon the exercise of Warrants, a U.S. holder will not recognize gain or loss and will have a tax basis in the Common Shares issued pursuant to the exercise
equal to the holder's tax basis in the exercised Warrants plus the exercise price. The holding period for Common Shares issued upon the exercise of Warrants will commence on the date of exercise.

Sale, Exchange or Other Disposition of Warrants

Upon the sale, exchange or other disposition of Warrants, a U.S. holder generally will recognize capital gain or loss equal to the difference between the
amount realized and the U.S. holder's adjusted tax basis in the Warrants. Such gain or loss will be long-term capital gain or loss if the Warrants have been held for more than one
year and otherwise will be short-term capital gain or loss. Long-term capital gains of individuals are eligible for preferential rates of taxation, and short-term
capital gains are taxed at the rates applicable to ordinary income, which, for gains recognized before January 1, 2009, may be higher than the rates applicable to dividends. The deductibility
of capital losses is subject to limitations.

Expiration of Warrants

Upon the expiration of Warrants, a U.S. holder will recognize a loss equal to the U.S. holder's tax basis in the Warrants. This loss will be a
capital loss and generally will be long-term if the Warrants have been held for more than one year. The deductibility of capital losses is subject to limitations.

Constructive Dividends

The adjustment, or failure to make an adjustment, of the exercise price or conversion ratio of the Warrants may be deemed to be a payment of a taxable dividend to
U.S. holders of Warrants to the extent of the Corporation's current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), regardless of whether there
is a distribution of cash or property.

Common Shares

Distributions on Common Shares

Distributions on Common Shares, whether in cash or in property, that are paid out of the Corporation's current or accumulated earnings and profits (as determined
for U.S. federal income tax purposes) will generally be includible in income by a U.S. holder as a dividend when actually or constructively received. The amount of the dividend will
equal the amount of cash and the fair market value of the property received. To the extent a U.S. holder receives a distribution that exceeds the Corporation's current and accumulated earnings
and profits, the distribution will be treated first as a non-taxable return of capital that reduces the holder's adjusted tax basis in the Common Shares (to the extent of such basis) and
thereafter as taxable gain from the sale or exchange of the Common Shares. Generally, the dividends received deduction applicable to corporate shareholders will not be available.

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For
taxable years beginning before January 1, 2009, dividends received by an individual from a "qualified foreign corporation" are eligible for preferential rates of taxation,
subject to minimum holding period and other requirements. The determination of whether a dividend qualifies for the preferential rates must be made at the time the dividend is paid.

Dividends
paid in Canadian dollars (including the amount of any Canadian taxes withheld) will be included in a U.S. holder's income in a U.S. dollar amount calculated by
reference to the exchange rate in effect on the day the dividends are actually or constructively received by the U.S. holder, regardless of whether the Canadian dollars are converted to
U.S. dollars at that time. U.S. holders should consult their own tax advisors regarding the possible effect and rate of any Canadian withholding tax and the reduction of such withholding
rate under the income tax treaty between the United States and Canada.

Sale, Exchange or Other Disposition of Common Shares

Upon the sale, exchange or other disposition of Common Shares, a U.S. holder generally will recognize capital gain or loss equal to the difference between
the amount realized and the U.S. holder's adjusted tax basis in the Common Shares. Such gain or loss will be long-term capital gain or loss if the Common Shares have been held for
more than one year and otherwise will be short-term capital gain or loss. Long-term capital gains of individuals are eligible for preferential rates of taxation, and
short-term capital gains are taxed at the rates applicable to ordinary income, which, for gains recognized before January 1, 2009, may be higher than the rates applicable to
dividends. The deductibility of capital losses is subject to limitations.

Foreign Tax Credit Considerations

For U.S. foreign tax credit limitation purposes, dividends on Common Shares generally will be treated as foreign source income, and gain or loss recognized
on the sale, exchange or other disposition of Common Shares and Warrants will be treated as from U.S. sources. To the extent Canadian withholding tax is payable in respect of a distribution or
payment to a U.S. holder, the holder may be eligible for a foreign tax credit or deduction. Further, foreign source income has an effect on a U.S. holder's ability to absorb foreign tax
credits. The rules relating to U.S. foreign tax credits are extremely complex, and U.S. holders should consult their tax advisors regarding the application of the U.S. foreign tax
credit rules to their particular situations.

Passive Foreign Investment Company Considerations

The Code provides special anti-deferral rules regarding certain distributions received by U.S. persons with respect to, and sales and other
dispositions (including pledges) of stock of, a "passive foreign investment company" ("PFIC"). A foreign corporation will be treated as a PFIC if 75% or more of its gross income is passive income for
a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year.

The
Corporation does not believe that it is currently a PFIC, and it anticipates that it will not become a PFIC in the future. A foreign corporation's status as a PFIC, however, is a
factual determination that is made annually and thus may be subject to change. If we become a PFIC, U.S. holders of Common Shares and Warrants may become subject to adverse U.S. federal
income tax consequences. U.S. holders should consult their tax advisors regarding those consequences and possible ameliorative actions.

Backup Withholding and Information Reporting

The payment within the United States of dividends on Common Shares, or the proceeds from a disposition of Common Shares or Warrants, held by certain
non-corporate holders may be subject to U.S. information reporting rules. Such payments may also be subject to U.S. backup withholding, unless a holder provides a taxpayer
identification number and satisfies certain other conditions or otherwise establishes an exemption under the Code. Backup withholding is not an additional tax, and may be credited against a holder's
U.S. federal income tax liability or refunded if the amounts so withheld exceed the holder's U.S. federal income tax liability.

DIVIDENDS AND PAYING AGENTS

Not applicable.

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STATEMENT BY EXPERTS

Not applicable.

DOCUMENTS ON DISPLAY

We are required to file reports under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other information with the
United States Securities and Exchange Commission, or the SEC. However, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act, nor are we required to comply with Regulation FD, which restricts the selective disclosure of material information.
Accordingly, there may be less information concerning us publicly available than there is for U.S. companies.

You
may review any reports, statements or other information we file with the SEC at the SEC's Public Reference Room at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You may call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our filings with the SEC are also available to the public from
commercial document retrieval services. In addition, any filings we make with the SEC are available on the SEC's website at http://www.sec.gov.

We
are subject to the filing requirements prescribed by the securities legislation of all Canadian provinces or territories. You are invited to read and copy any reports, statements or
other information that we file with the Canadian provincial securities commissions or other similar regulatory authorities at their respective public reference rooms. These filings are also
electronically available from the Canadian System for Electronic Document Analysis and Retrieval (http://www.sedar.com), which is commonly known by the acronym "SEDAR".
SEDAR is the Canadian equivalent of the SEC's Electronic document Gathering and Retrieval system, which is commonly known by the acronym "EDGAR".

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk

The Corporation operates internationally, giving rise to significant exposure to market risks from changes in interest rates and foreign exchange rates.

Interest rate risk

The Corporation has exposure to interest rate risk for both fixed interest rate and floating interest rate instruments. Fluctuations in interest rates will have
an effect on the valuation and collection or repayment of these instruments.

Currency risk

We have currency exposure arising from significant operations and contracts in multiple jurisdictions which is fundamentally limited to freely tradable and liquid
currencies of first world countries. We actively practice reducing our net exposure through operational hedging practices and occasionally use forward exchange contracts as partial economic hedges
against fluctuations in the US dollar.

Fair value of financial instruments

The following methods and assumptions have been used to estimate the fair value of the financial instruments:



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The fair value and carrying amount of these financial instruments as at December 31, are as follows:

|              |  | 2004   |  | 2003  
|------------- |  | ------ |  | ------
|
|
|Debentures    |  | 71,000 |  | 61,060
|Notes payable |  | 35,585 |  | 30,603

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.    DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

As of March 31, 2005, we were in default of a specific covenant of our Trust Indenture related to the $71,000,000 Debentures due April 22, 2005 and
in default of the same covenant in our CTR term debt. We are currently in the process of refinancing the debentures and of negotiating revised finance terms with the CTR lenders. The Debenture holders
have waived the default until June 30, 2005 and the CTR lenders have waived the default to May 1, 2005.

Further,
we were unable to meet our interest and principal payment obligations under the Debenture for April 22, 2005, such payment was waived on April 22, 2005 by the
Debenture holders to June 30, 2005 as part of the negotiations of the recapitalization of our balance sheet.

Export
Development Canada, a Canadian governmental agency and the Inter-American Development Bank of Washington have provided US$50 million in term debt financing for CTR. As of
December 31, 2004, a principal amount of US$29.5 million was outstanding. Payments of principal and interest are due in semi-annual installments until maturity in 2008.
Currently, the lenders would have full recourse against SR Telecom for the full amount of the loans, if performance, financial performance and financial position covenants are not met. While we
have not met all of these covenants, default of the covenants has been waived by the lenders until May 1, 2005.

The
covenants under the notes fall into two main categories: the financial covenants require the achievement of specific objectives for the current ratio, debt service coverage ratio,
debt to equity ratio, minimum earnings before income taxes, depreciation and amortization, minimum recurring revenues and receivable turnover. The performance covenants focus on timely completion of
the network and timely achievement of financial independence of the project. While the foregoing is not an exhaustive list of covenants, it includes the majority of non-reporting covenant
requirements.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

Not applicable

USE OF PROCEEDS

Not applicable

ITEM 15.    CONTROLS AND PROCEDURES

As of the end of the period covered by this Annual Report on Form 20-F/A, we conducted an evaluation (under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief Financial Officer), pursuant to Rule 13a-15 promulgated under the Exchange Act, of the effectiveness
of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that as of the evaluation date, such
disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

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ITEM 16.    [RESERVED]

Not
applicable.

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

The Board has determined that at least one audit committee financial expert serves on our Audit Committee. The named audit committee financial expert is Robert E.
Lamoureux. Mr Lamoureux is an independent director.

ITEM 16B.    CODE OF ETHICS

We have adopted a Code of Business Conduct that applies to all of our officers and employees, including the Chief Executive Officer, the Chief Financial Officer
and our principal accounting officer.

The
Code of Business Conduct is available free of charge by writing to the Corporate Secretary, SR Telecom Inc., 8150 Transcanada Hwy, Montreal, QC H4S 1M5, Canada

ITEM 16C.    AUDIT FEES

Deloitte & Touche LLP, Independent Chartered Accountants, served as our auditors for the years ended December 31, 2004 and 2003. The
following tables set forth the aggregate fees for professional services rendered by Deloitte & Touche LLP to us in 2004 and 2003.

|Deloitte & Touche LLP fees |                                                                 | 2004                |         | 2003     
|-------------------------- | --------------------------------------------------------------- | ------------------- | ------- | ---------
|
|Audit fees                 |                                                                 |                     |         |          
|                           | Audit services                                                  |                     | 636,500 |          
|                           | Services in connection with regulatory filings                  |                     | 129,500 |          
|Audit-related fees         |                                                                 | 36,000              |         | 42,000   
|Tax fees                   |                                                                 |                     |         |          
|                           | Preparation of income tax returns                               |                     | 82,600  |          
|                           |                                                                 | Consulting services |         | 40,600   
|Other fees                 |                                                                 |                     |         |          
|                           | Due diligence services in connection with the Netro acquisition |                     |        |          
|                           | Other services                                                  |                     | 11,300  |          
|                           |                                                                 |                     |         |          
|                           |                                                                 | 936,500             |         | 1,048,600
|                           |                                                                 |                     |         |          

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We have introduced procedures for the review and pre-approval of any services performed by Deloitte & Touche LLP. The procedures require that all proposed
engagements of Deloitte & Touche LLP for audit and permitted non-audit services are submitted to the audit committee for approval prior to the beginning of any such services.

During
2004, the audit committee approved 100% of the audit, non-audit and tax fees.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

PART III

ITEM 17.    FINANCIAL STATEMENTS

Not applicable.

ITEM 18.    FINANCIAL STATEMENTS

Financial Statements

Our audited comparative consolidated financial statements, including the notes thereto, as of December 31, 2004 and 2003 and for the years ended
December 31, 2004, 2003 and 2002, together with the auditor's report thereon which appear at page F-1 of this annual report, are incorporated herein by reference and form an
integral part hereof.

ITEM 19.    EXHIBITS

EXHIBITS

The following documents are filed as exhibits to this Form 20-F/A:

|Exhibit Number |  | Description                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1            |  | Certificate and Articles of Incorporation (incorporated by reference to Exhibit 3.1 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                                                                 
|1.2            |  | By-Laws 2003-1, General By-Laws (incorporated by reference to Exhibit 3.2 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                                                                           
|2.1            |  | Trust Indenture dated April 22, 1998 between SR Telecom Inc. and Montreal Trust Company (incorporated by reference to Exhibit 4 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                     
|2.2            |  | Form of Warrant issued July 18, 2003 and August 27, 2003 under a Private Placement (issued prior to the Common Share 10 for 1 consolidation on September 3, 2003.) (incorporated by reference to our annual report on Form 20-F filed
on April 23, 2004)      
|2.3            |  | Warrant Indenture dated February 2004 between SR Telecom Inc. and Computershare. (incorporated by reference to our annual report on Form 20-F filed on April 23, 2004)                                                                                        
|4.1            |  | Agreement and Plan of Merger dated as of March 27, 2003 by and among SR Telecom Inc., Netro Corporation and Norway Acquisition Corporation (incorporated by reference to Exhibit 2.1 of SR Telecom's Registration Statement on
Form F-4, File No. 333-107620).

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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.2            |  | Amendment No.1 to Agreement and Plan of Merger dated as of May 5, 2003 by and among SR Telecom Inc., Netro Corporation and Norway Acquisition Corporation (incorporated by reference to Exhibit 2.2 of
SR Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                                                                                                                             
|4.3            |  | Amendment No. 2 to Agreement and Plan of Merger dated as of July 17, 2003 by and among SR Telecom Inc., Netro Corporation and Norway Acquisition Corporation (incorporated by reference to Exhibit 2.3 of SR Telecom's
Registration Statement on Form F-4/A, File No. 333-107620).                                                                                                                                                        
|4.4            |  | Amendment No. 3 to Agreement and Plan of Merger dated as of August 5, 2003 by and among SR Telecom Inc., Netro Corporation and Norway Acquisition Corporation (incorporated by reference to Exhibit 2.4 of SR Telecom's
Registration Statement on Form F-4/A, File No. 333-107620).                                                                                                                                                       
|4.5            |  | Common Agreement dated as of December 22, 1999 among Comunicacion y Telefonia Rural S.A., Export Development Corporation and InterAmerican Development Bank. (incorporated by reference to Exhibit 10.9 of SR Telecom's Registration
Statement on Form F-4, File No. 333-107620).                                                                                                                                                         
|4.6            |  | Loan Agreement dated as of December 22, 1999 among Comunicacion y Telefonia Rural S.A., Export Development Corporation and InterAmerican Development Bank (incorporated by reference to Exhibit 10.10.1 of SR Telecom's Registration
Statement on Form F-4, File No. 333-107620).                                                                                                                                                         
|4.7            |  | Amended and Restated Loan Agreement dated as of December 22, 1999 between Comunicacion y Telefonia Rural S.A. and Export Development Corporation (incorporated by reference to Exhibit 10.10.2 of SR Telecom's Registration
Statement on Form F-4, File No. 333-107620).                                                                                                                                                                  
|4.8            |  | Amended and Restated Direct Agreement dated as of December 22, 1999 among Comunicacion y Telefonia Rural S.A., Export Development Corporation and InterAmerican Development Bank (incorporated by reference to Exhibit 10.11 of SR
Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                                                                                                    
|4.9            |  | Amended and Restated Transfer Restrictions Agreement dated as of December 22, 1999 among SR Telecom Inc., SR (BV) Holdings Limited, CTR Holdings Limited, Servicios Rurales de Telecomunicaciones S.A., Comunicacion y Telefonia
Rural S.A., Export Development Corporation and InterAmerican Development Bank (incorporated by reference to Exhibit 10.12 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620).      
|4.10           |  | Amended and Restated Performance Undertaking dated as of December 22, 1999 among SR Telecom Inc., Export Development Corporation and InterAmerican Development Bank (incorporated by reference to Exhibit 10.13 of SR Telecom's
Registration Statement on Form F-4, File No. 333-107620).                                                                                                                                                 
|4.11           |  | Amended and Restated Project Funds Agreement dated as of December 22, 1999 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A., Export Development Corporation and InterAmerican Development Bank (incorporated by reference to
Exhibit 10.14 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620).                                                                                                            
|4.12           |  | Sixth Amendment and Limited term Waiver Agreement dated as of February 20, 2002 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development Corporation) and InterAmerican
Development Bank (incorporated by reference to Exhibit 10.15 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620). (Portions omitted pursuant to a grant of confidential treatment). 
|4.13           |  | Seventh Amendment and Limited term Waiver Agreement dated as of February 17, 2003 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development Corporation) and InterAmerican
Development Bank (incorporated by reference to Exhibit 10.16 of SR Telecom's Registration Statement on Form F-4, File No. 333-107620) (Portions omitted pursuant to a grant of confidential treatment).

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|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.14           |  | Eighth Amendment and Limited term Waiver Agreement dated as of February 13, 2004 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development
Corporation) and InterAmerican Development Bank (Portions omitted pursuant to a request for confidential treatment). (incorporated by reference to our annual report on Form 20-F filed on April 23, 2004)
|4.15           |  | Formal Loan Agreement, dated July 3, 2001, between SR Telecom Inc. and Pierre St-Arnaud (incorporated by reference to Exhibit 10.17 of SR Telecom's Registration Statement on Form F-4, File
No. 333-107620).                                                                                                                                                                                                
|4.16           |  | Formal Loan Agreement, dated June 13, 2002, between SR Telecom Inc. and Pierre St-Arnaud (incorporated by reference to Exhibit 10.18 of SR Telecom's Registration Statement on Form F-4, File
No. 333-107620).                                                                                                                                                                                               
|4.17           |  | Formal Loan Agreement, dated July 3, 2001, between SR Telecom Inc. and Pierre St-Arnaud (incorporated by reference to Exhibit 10.19 of SR Telecom's Registration Statement on Form F-4, File
No. 333-107620).                                                                                                                                                                                                
|4.18           |  | Lease between North San Jose Interests and Netro Corporation dated April 20, 2001 (incorporated by reference to Exhibit 10.8 of the annual report of Netro Corporation on Form 10K for the year ended December 31,
2001).                                                                                                                                                                                    
|4.19           |  | Restated 1998 Key Employee Stock Option Plan dated February 12, 2003, in effect as of the 19th day of April 2001. (incorporated by reference to our annual report on Form 20-F filed on April 23, 2004)                                                                                                                                                                                                      
|4.20           |  | Restated Directors' Share Compensation Plan dated February 12, 2003. (incorporated by reference to our annual report on Form 20-F filed on April 23, 2004)                                                                                                                                                                                                                                                   
|4.21           |  | Employment Agreement for Pierre St-Arnaud dated June 22, 2000. (incorporated by reference to our annual report on Form 20-F filed on April 23, 2004)                                                                                                                                                                                                                                                         
|4.22           |  | Employment Agreement for Pierre St-Arnaud dated February 14, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                        
|4.23           |  | Employment Agreement for David L. Adams dated February 14, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                          
|4.24           |  | Employment Agreement for Benoit Pinsonnault dated February 18, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                      
|4.25           |  | Employment Agreement for Charles Immendorf dated April 28, 2004. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                          
|4.26           |  | Employment Agreement for Pierre St-Arnaud dated March 2, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                            
|4.27           |  | Employment Agreement for David L. Adams dated March 2, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                              
|4.28           |  | Employment Agreement for Benoit Pinsonnault dated February 28, 2005. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                                                                                                                                                                                      
|4.29           |  | Extension of Waiver Termination Date dated as of February 14, 2005 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development Corporation) and InterAmerican Development Bank.
(incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                     
|4.30           |  | Extension of Waiver Termination Date dated as of March 30, 2005 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development Corporation) and InterAmerican Development Bank.
(incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                        
|4.31           |  | Extension of Waiver Termination Date dated as of April 22, 2005 among SR Telecom Inc., Comunicacion y Telefonia Rural S.A. Export Development Canada (formerly Export Development Corporation) and InterAmerican Development Bank.
(incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                        
|4.32           |  | Principles of Restructuring dated as of April 18, 2005 among SR Telecom Inc., DDJ Capital Management, LLC, Guardian Capital LP, Greywolf Capital Management LP, Catalyst Fund General Partner I Inc, and Polar
Securities Inc. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)                                                                                            

69

---



|Exhibit Number |  | Description                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------
|8              |  | List of subsidiaries. (incorporated by reference to our annual report on Form 20-F filed on May 2, 2005)
|12.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.     
|12.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.     
|13.1           |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     
|13.2           |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     

70

---





Report of Independent Registered Chartered Accountants

To
the Shareholders and Board of Directors of
SR Telecom Inc.

We
have audited the accompanying consolidated balance sheets of SR Telecom Inc. (the "Corporation") as at December 31, 2004 and 2003 and the related consolidated statements
of operations, deficit and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). These
standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2004 and 2003 and
the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting
principles.

The
Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation's internal control over financial reporting. Accordingly
we express no such opinion.

SIGNATURE

Montreal,
Canada
March 30, 2005

Comments by Independent Registered Chartered Accountants for U.S. Readers on Canada-U.S. Reporting Differences

The standards of the Public Company Accounting Oversight Board (United States) 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 Corporation's consolidated financial statements as described in Notes 3b)
and l) to the consolidated financial statements as well as when the consolidated financial statements are affected by conditions and events that cast substantial doubt on the Corporation's
ability to continue as a going concern, such as those described in Note 2 to the consolidated financial statements. Although we conducted our audits in accordance with both Canadian
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders and Board of Directors dated
March 30, 2005 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such conditions and events in the report when these are adequately disclosed in
the financial statements.

SIGNATURE

Montreal,
Canada
March 30, 2005

F-1

---





SR TELECOM INC.        Consolidated balance sheetsAs at December 31        (in thousands of Canadian dollars)

|                                           |                                                  | Notes |    | 2004    |          | 2003    |        
|------------------------------------------ | ------------------------------------------------ | ----- | -- | ------- | -------- | ------- | -------
|
|Assets                                     |                                                  |       |    |         |          |         |        
|Current assets                             |                                                  |       |    |         |          |         |        
|                                           | Cash and cash equivalents                        |       |    |         | 4,549    |         | 8,434  
|                                           | Short-term investments                           |       | 5  |         |         |         | 3,231  
|                                           | Short-term restricted cash                       |       | 10 |         | 1,394    |         | 2,835  
|                                           | Accounts receivable, net                         |       | 6  |         | 47,500   |         | 55,395 
|                                           | Current portion of long-term accounts receivable |       | 7  |         |         |         | 21,687 
|                                           | Income taxes receivable                          |       |    |         | 911      |         | 1,889  
|                                           | Inventory                                        |       | 8  |         | 59,556   |         | 48,027 
|                                           | Prepaid expenses                                 |       |    |         | 3,504    |         | 5,253  
|                                           |                                                  |       |    |         |          |         |        
|Total current assets                       |                                                  |       |    | 117,414 |          | 146,751 |        
|Investment tax credits                     |                                                  | 18    |    | 13,150  |          | 18,145  |        
|Long-term accounts receivable, net         |                                                  | 7     |    | 5,644   |          | 1,571   |        
|Long-term restricted cash                  |                                                  | 10    |    | 493     |          | 4,243   |        
|Property, plant and equipment, net         |                                                  | 9     |    | 85,442  |          | 90,127  |        
|Future income taxes                        |                                                  | 21    |    |        |          | 21,821  |        
|Intangible assets, net                     |                                                  | 11    |    | 4,494   |          | 5,408   |        
|Other assets, net                          |                                                  | 12    |    | 987     |          | 1,709   |        
|                                           |                                                  |       |    |         |          |         |        
|Total assets                               |                                                  |       |    | 227,624 |          | 289,775 |        
|                                           |                                                  |       |    |         |          |         |        
|Liabilities                                |                                                  |       |    |         |          |         |        
|Current liabilities                        |                                                  |       |    |         |          |         |        
|                                           | Bank indebtedness                                |       | 13 |         |         |         | 3,000  
|                                           | Accounts payable and accrued liabilities         |       | 14 |         | 55,682   |         | 59,435 
|                                           | Customer advances                                |       |    |         | 1,932    |         | 4,163  
|                                           | Current portion of lease liability               |       | 16 |         | 5,043    |         | 5,591  
|                                           | Current portion of long-term debt                |       | 15 |         | 106,680  |         | 7,223  
|                                           |                                                  |       |    |         |          |         |        
|Total current liabilities                  |                                                  |       |    | 169,337 |          | 79,412  |        
|Long-term lease liability                  |                                                  | 16    |    | 3,577   |          | 7,217   |        
|Long-term liability                        |                                                  | 4     |    | 1,810   |          | 1,939   |        
|Long-term debt                             |                                                  | 15    |    | 260     |          | 109,467 |        
|                                           |                                                  |       |    |         |          |         |        
|Total liabilities                          |                                                  |       |    | 174,984 |          | 198,035 |        
|                                           |                                                  |       |    |         |          |         |        
|Commitments and contingencies              |                                                  | 24    |    |         |          |         |        
|Shareholders' equity                       |                                                  |       |    |         |          |         |        
|                                           | Capital stock                                    |       | 17 |         | 219,653  |         | 180,866
|                                           | Warrants                                         |       | 17 |         | 13,029   |         | 1,815  
|                                           | Contributed surplus                              |       |    |         | 519      |         |       
|                                           | Deficit                                          |       |    |         | (180,561 | )       | (90,941
|                                           |                                                  |       |    |         |          |         |        
|Total shareholders' equity                 |                                                  |       |    | 52,640  |          | 91,740  |        
|                                           |                                                  |       |    |         |          |         |        
|Total liabilities and shareholders' equity |                                                  |       |    | 227,624 |          | 289,775 |        
|                                           |                                                  |       |    |         |          |         |        

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

Approved by the Board

/s/ Lionel Hurtubise  Chairman/Director of the BOD

/s/
Pierre St-Arnaud  Director of the BOD

F-2

---



SR TELECOM INC.        Consolidated statements of operationsYears ended December 31        (in thousands of Canadian dollars, except per share information)

|                                                  |                                                      | Notes |  | 2004    |            | 2003    |           | 2002    |          
|------------------------------------------------- | ---------------------------------------------------- | ----- |  | ------- | ---------- | ------- | --------- | ------- | ---------
|
|Revenue                                           |                                                      |       |  |         |            |         |           |         |          
|Equipment                                         |                                                      |       |  | 85,079  |            | 85,655  |           | 146,118 |          
|Services                                          |                                                      |       |  | 20,273  |            | 28,162  |           | 34,911  |          
|Telecommunications                                |                                                      |       |  | 18,584  |            | 14,064  |           | 15,874  |          
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Total revenue                                     |                                                      |       |  | 123,936 |            | 127,881 |           | 196,903 |          
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Cost of revenue                                   |                                                      |       |  |         |            |         |           |         |          
|Equipment                                         |                                                      |       |  | 56,750  |            | 44,949  |           | 59,304  |          
|Services                                          |                                                      |       |  | 13,094  |            | 16,053  |           | 30,012  |          
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Total cost of revenue                             |                                                      |       |  | 69,844  |            | 61,002  |           | 89,316  |          
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Gross profit                                      |                                                      |       |  | 54,092  |            | 66,879  |           | 107,587 |          
|Agent commissions                                 |                                                      |       |  | 5,521   |            | 3,304   |           | 13,904  |          
|Selling, general and administrative expenses      |                                                      |       |  | 49,660  |            | 52,152  |           | 47,050  |          
|Research and development expenses, net            |                                                      | 18    |  | 30,159  |            | 27,170  |           | 21,336  |          
|Telecommunications operating expenses             |                                                      |       |  | 18,670  |            | 21,556  |           | 22,510  |          
|Restructuring, asset impairment and other charges |                                                      | 22    |  | 15,907  |            | 3,716   |           | 4,912   |          
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Operating loss                                    |                                                      |       |  | (65,825 | )          | (41,019 | )         | (2,125  | )        
|Loss on change in ownership in subsidiary company |                                                      | 23    |  |        |            |        |           | (3,974  | )        
|Interest expense, net                             |                                                      | 20    |  | (8,035  | )          | (8,811  | )         | (12,073 | )        
|Gain on sale of long-term investment              |                                                      | 19    |  | 3,444   |            |        |           |        |          
|Gain on settlement of claim                       |                                                      | 24    |  | 4,583   |            |        |           |        |          
|Gain on repurchase of debentures                  |                                                      | 15    |  |        |            | 1,199   |           |        |          
|Gain (loss) on foreign exchange                   |                                                      |       |  | 2,254   |            | 1,031   |           | (2,461  | )        
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Loss from operations before income taxes          |                                                      |       |  | (63,579 | )          | (47,600 | )         | (20,633 | )        
|Income tax (expense) recovery                     |                                                      | 21    |  | (22,555 | )          | 2,845   |           | (252    | )        
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Net loss                                          |                                                      |       |  | (86,134 | )          | (44,755 | )         | (20,885 | )        
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Basic and diluted loss per share                  |                                                      | 17    |  | (5.17   | )          | (6.21   | )         | (3.82   | )        
|                                                  |                                                      |       |  |         |            |         |           |         |          
|Basic and diluted                                 |                                                      |       |  |         |            |         |           |         |          
|                                                  | Weighted average number of common shares outstanding |       |  |         | 16,661,454 |         | 7,206,675 |         | 5,472,893
|                                                  |                                                      |       |  |         |            |         |           |         |          

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

F-3

---





SR TELECOM INC.        Consolidated statements of deficitYears ended December 31        (in thousands of Canadian dollars)

|                                                       |  | Notes |  | 2004     |   | 2003    |   | 2002    |  
|------------------------------------------------------ |  | ----- |  | -------- | - | ------- | - | ------- | -
|
|Deficit, beginning of year, as previously reported     |  |       |  | (90,941  | ) | (45,659 | ) | (21,668 | )
|Cumulative effect of adoption of new accounting policy |  | 3     |  | (272     | ) |        |   | (3,106  | )
|                                                       |  |       |  |          |   |         |   |         |  
|Deficit, beginning of year, as restated                |  |       |  | (91,213  | ) | (45,659 | ) | (24,774 | )
|Net loss                                               |  |       |  | (86,134  | ) | (44,755 | ) | (20,885 | )
|Share issue costs                                      |  | 17    |  | (3,214   | ) | (527    | ) |        |  
|                                                       |  |       |  |          |   |         |   |         |  
|Deficit, end of year                                   |  |       |  | (180,561 | ) | (90,941 | ) | (45,659 | )
|                                                       |  |       |  |          |   |         |   |         |  

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

F-4

---



SR TELECOM INC.        Consolidated statements of cash flowsYears ended December 31        (in thousands of Canadian dollars)

|                                                      |                                                                                           | Notes                                             |                                                       | 2004    |         | 2003    |         | 2002    |        
|----------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------------------------- | ------- | ------- | ------- | ------- | ------- | -------
|
|Cash flows (used in) provided by operating activities |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|                                                      | Net loss                                                                                  |                                                   |                                                       |         | (86,134 | )       | (44,755 | )       | (20,885
|                                                      | Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |                                                   |                                                       |         |         |         |         |         |        
|                                                      |                                                                                           | Depreciation and amortization                     |                                                       |         |         | 12,931  |         | 13,288  |        
|                                                      |                                                                                           | Asset impairment                                  |                                                       | 22      |         | 2,364   |         | 1,993   |        
|                                                      |                                                                                           | (Gain) loss on disposal of property,              |                                                       |         |         |         |         |         |        
|                                                      |                                                                                           |                                                   | plant and equipment                                   |         |         |         | (166    | )       | 58     
|                                                      |                                                                                           | Increase in lease liability                       |                                                       | 16      |         | 1,586   |         |        |        
|                                                      |                                                                                           | Loss on change in ownership in subsidiary company |                                                       | 23      |         |        |         |        |        
|                                                      |                                                                                           | Gain on sale of long-term investment              |                                                       | 19      |         | (3,444  | )       |        |        
|                                                      |                                                                                           | Gain on settlement of claim                       |                                                       | 24      |         | (4,583  | )       |        |        
|                                                      |                                                                                           | Gain on repurchase of debentures                  |                                                       | 15      |         |        |         | (1,199  | )      
|                                                      |                                                                                           | Stock-based compensation                          |                                                       | 17      |         | 247     |         |        |        
|                                                      |                                                                                           | Future income taxes                               |                                                       |         |         | 21,821  |         | (5,733  | )      
|                                                      |                                                                                           | Change in operating assets and liabilities:       |                                                       |         |         |         |         |         |        
|                                                      |                                                                                           |                                                   | (Increase) decrease in long-term accounts receivable  |         |         |         | (4,073  | )       | 21,832 
|                                                      |                                                                                           |                                                   | Decrease (increase) in non-cash working capital items |         | 25      |         | 21,496  |         | (18,106
|                                                      |                                                                                           |                                                   | Unrealized foreign exchange                           |         |         |         | (3,236  | )       | (11,393
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Net cash (used in) provided by operating activities   |                                                                                           |                                                   |                                                       | (41,191 | )       | (44,015 | )       | 33,305  |        
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Cash flows provided by (used in) financing activities |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|                                                      | Repayment of bank indebtedness                                                            |                                                   | 13                                                    |         | (3,000  | )       | (7,000  | )       |       
|                                                      | Repayment of long-term debt and lease liability                                           |                                                   |                                                       |         | (12,536 | )       | (10,429 | )       | (8,445 
|                                                      | Repurchase of debentures                                                                  |                                                   | 15                                                    |         |        |         | (2,801  | )       |       
|                                                      | Proceeds from issue of shares and warrants, net of share issue costs                      |                                                   | 17                                                    |         | 46,787  |         | 6,157   |         | 755    
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Net cash provided by (used in) financing activities   |                                                                                           |                                                   |                                                       | 31,251  |         | (14,073 | )       | (7,690  | )      
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Cash flows provided by (used in) investing activities |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|                                                      | Decrease (increase) in restricted cash                                                    |                                                   |                                                       |         | 5,191   |         | (616    | )       |       
|                                                      | Acquisition of Netro Corporation, net of cash acquired                                    |                                                   | 4                                                     |         |        |         | 21,498  |         |       
|                                                      | Purchase of short-term investments                                                        |                                                   | 5                                                     |         | (45,439 | )       | (3,231  | )       | (21,624
|                                                      | Proceeds on sale of short-term investments                                                |                                                   | 5                                                     |         | 48,796  |         | 34,276  |         |       
|                                                      | Purchase of property, plant and equipment                                                 |                                                   |                                                       |         | (6,217  | )       | (5,714  | )       | (3,590 
|                                                      | Proceeds on disposal of property, plant and equipment                                     |                                                   |                                                       |         | 859     |         |        |         |       
|                                                      | Proceeds on sale of long-term investment                                                  |                                                   | 19                                                    |         | 3,444   |         |        |         |       
|                                                      | Other assets                                                                              |                                                   |                                                       |         | (579    | )       |        |         | (468   
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Net cash provided by (used in) investing activities   |                                                                                           |                                                   |                                                       | 6,055   |         | 46,213  |         | (25,682 | )      
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Decrease in cash and cash equivalents                 |                                                                                           |                                                   |                                                       | (3,885  | )       | (11,875 | )       | (67     | )      
|Cash and cash equivalents, beginning of year          |                                                                                           |                                                   |                                                       | 8,434   |         | 20,309  |         | 20,376  |        
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        
|Cash and cash equivalents, end of year                |                                                                                           |                                                   |                                                       | 4,549   |         | 8,434   |         | 20,309  |        
|                                                      |                                                                                           |                                                   |                                                       |         |         |         |         |         |        

See
Note 25 for supplemental cash flow information.

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

F-5

---





SR TELECOM INC.        Notes to the consolidated financial statements(all tabular amounts are in thousands of Canadian dollars)





F-6

---









F-7

---







F-8

---









Telecommunication network equipment

straight-line over 20 yearsBuilding and improvements

straight-line over 20 and 10 yearsLeasehold improvements

straight-line over term of leaseMachinery, equipment and fixtures

20% diminishing balanceComputer equipment and licenses

30% diminishing balance and straight-line over 5 years






F-9

---













F-10

---





F-11

---











F-12

---





F-13

---







F-14

---





$Cash and cash equivalents

26,819Short-term investments

12,797Restricted cash (Note 10)

6,851Accounts receivable

1,611Prepaid expenses and deposits

2,011Inventory

7,409Property, plant and equipment

9,892Intangible assets (Note 11)

9,300Accounts payable and accrued liabilities (Note 24(d))

(20,364
)Net identifiable assets

56,326Purchase consideration:Share consideration (Note 17)

28,012Lease liability

15,555Acquisition costs

5,32148,888




F-15

---





December 31,2004

2003$

$Trade

47,866

50,561Other

3,020

6,701Allowance for doubtful accounts

(3,386
)
(1,867
)47,500

55,395


December 31,2004

2003$

$Long-term receivable (i)

5,644

6,046Holdbacks (ii)



17,277Allowance for doubtful accounts



(65
)5,644

23,258Current portion



21,6875,644

1,571






F-16

---





December 31,2004

2003$

$Raw materials

59,913

44,544Work-in-process

2,333

1,631Finished goods

4,742

6,815Reserve for obsolecence

(7,432
)
(4,963
)59,556

48,027


F-17

---



December 31,2004

2003Cost

Accumulated depreciation/
amortization

Net book value

Cost

Accumulated depreciation/
amortization

Net book value$

$

$

$

$

$Land

1,534



1,534

1,523



1,523Telecommunications network equipment

104,016

40,142

63,874

99,407

34,590

64,817Building, improvements and fixtures

21,870

16,301

5,569

21,444

15,410

6,034Machinery and equipment

39,671

27,826

11,845

39,971

25,483

14,488Computer equipment and licenses

18,537

15,917

2,620

18,294

15,029

3,265185,628

100,186

85,442

180,639

90,512

90,127




December 31,2004

2003$

$Guaranteed Investment Certificates pledged in support of letters of guarantee issued by a Canadian chartered bank, bearing interest at rates ranging from 1.1% to 2.0% (ranging from 1.1% to 2.3% in 2003), maturing through
December 2005

727

1,143Cash sweep accounts in Chile in trust to meet interest and principal on May 15, 2005

175

Deposit certificates to cover long-term lease obligations, US$817,000 (US$4,592,000 in 2003), bearing interest at 0.65%, maturing through October 2006

985

5,9351,887

7,078Current portion

1,394

2,835493

4,243


F-18

---



December 31,2004

2003$

$Intellectual property

5,696

5,696Accumulated amortization

(1,202
)
(288
)4,494

5,408




December 31,2004

2003Cost

Accumulated amortization

Net book value

Cost

Accumulated amortization

Net book value$

$

$

$

$

$Deferred charges and start-up costs

13,501

12,514

987

13,394

11,685

1,709




F-19

---





December 31,2004

2003$

$Trade accounts payable

34,966

27,392Commissions payable

6,268

9,355Accrued payroll and related expenses

6,413

6,818Restructuring provision (Note 22)

2,206

1,424Accrued interest

1,449

1,492Other

4,380

12,95455,682

59,435


December 31,2004

2003$

$Senior unsecured debentures issued by the Corporation, due April 22, 2005, bearing interest at 8.15% payable semi-annually, redeemable at the option of the Corporation at a price equal to the greater of i) 100%
of the principal amount and ii) the Canadian yield price (as defined in the trust indenture), together in each case with accrued interest, if any, to the date fixed for redemption. (ii)

71,000

71,000Notes payable (US$15,500,000, US$16,846,153 in 2003) issued by CTR, under a term loan facility, bearing interest at LIBOR plus 4.50% (i)

18,697

21,771Notes payable (US$14,000,000, US$18,153,847 in 2003) issued by CTR, under a term loan facility, bearing interest at LIBOR plus 4.50% (i)

16,888

23,461Obligations under capital leases, bearing interest at rates ranging from 8.8% to 12%, repayable at various dates to April 2009

355

458106,940

116,690Current portion

106,680

7,223260

109,467


F-20

---





F-21

---







$2005

106,6802006

792007

782008

782009

25Thereafter

106,940






December 31,2004

2003$

$Issued and outstanding17,610,132 common shares (10,467,283 in 2003)

219,653

180,8663,924,406 warrants (352,941 in 2003)

13,029

1,815


F-22

---





F-23

---





Range of exercise prices

Options outstanding

Weighted-
average remaining contractual life

Weighted-
average exercise prices

Options exercisable

Weighted-
average exercise prices$





$



$6.40 to 9.80

173,400

9.0 years

7.68

13,800

8.4716.30 to 24.50

123,550

6.7 years

18.58

62,450

18.2235.30 to 53.00

58,930

5.3 years

47.71

49,370

47.6656.60 to 85.30

40,500

5.0 years

64.91

33,120

64.7589.70 to 130.80

10,200

2.1 years

108.64

10,200

108.64406,580

7.2 years

25.03

168,940

40.61


F-24

---





Years ended December 31,2004

2003

2002Weighted-
average number of options

Weighted-
average exercise prices

Weighted-
average number of options

Weighted-
average exercise prices

Weighted-
average number of options

Weighted-
average exercise prices$



$



$Outstanding, beginning of year

306,310

32.96

328,730

33.10

270,930

47.00Granted

149,000

7.47

10,000

6.56

103,000

15.50Forfeited/expired

(48,730
)
21.17

(32,420
)
26.30

(45,200
)
39.20Outstanding, end of year

406,580

25.03

306,310

32.96

328,730

33.10Options exercisable, end of year

168,940

40.61

135,000

43.94

84,634

52.00




F-25

---





December 31,2004

2003

2002Dividend yield


0.0%


0.0%


0.0%Expected volatility


72.5%


65.0%


65.0%Weighted-average risk-free interest rate


4.1%


4.7%


4.7%Expected life


5 years


5 years


5 yearsWeighted-average fair value per option granted

$
6.33

$
8.56

$
9.00






F-26

---





December 31,2004

2003

2002$

$

$Interest on long-term debt

8,474

9,262

12,038Other interest

175

238

1,025Interest income

(614
)
(689
)
(990
)8,035

8,811

12,073


December 31,2004

2003

2002$

$

$Income tax recovery at statutory rates

19,443

15,616

6,616Decrease due to non-taxable loss on increase in ownership in subsidiary company





(618
)Decrease relating to non-deductible items

(830
)
(1,074
)
(50
)Reversal of temporary differences relating to subsidiaries

(994
)
(1,922
)
Decrease due to non-recognition of losses carried forward

(14,117
)
(10,245
)
(5,518
)Write-off of future tax assets

(26,543
)


Other

486

470

(682
)Income tax (expense) recovery

(22,555
)
2,845

(252
)


F-27

---





December 31,2004

2003$

$Investment tax credits

(4,079
)
(5,629
)Excess of tax value over book value of property, plant and equipment and intangible assets

13,222

30,341Holdbacks

(502
)
(2,593
)Unclaimed research and development expenditures

27,597

24,209Losses carried forward

45,038

44,108Other

1,406

899Valuation allowance

(82,682
)
(69,514
)

21,821




F-28

---





Amount

Expiry date$Canada

35,000

20102011Chile

52,000

IndefiniteUnited States

51,000

20232024




Amount

Expiry date$Canada

10,000

20122014United States

7,000

2018




December 31,2004

2003

2002$

$

$Current

(734
)
(511
)
(517
)Future

(21,821
)
3,356

265(22,555
)
2,845

(252
)


F-29

---





Restructuring charges

Amounts paid/
written off

Remaining liability at December 31, 2004$

$

$Severance and termination

10,616

(9,283
)
1,333Lease charges and other costs

2,927

(2,054
)
873Inventory and asset impairment

2,364

(2,364
)
15,907

(13,701
)
2,206




F-30

---





Restructuring charges

Amounts paid/
written off

Remaining liability at December 31, 2003$

$

$Severance and termination

1,723

(299
)
1,424Asset write-down

1,993

(1,993
)
3,716

(2,292
)
1,424




Restructuring charges

Amounts paid/
written off

Remaining liability at December 31, 2002$

$

$Severance and termination

2,564

(865
)
1,699Lease termination costs

135



135Inventory write-down

2,213

(2,213
)
4,912

(3,078
)
1,834




F-31

---





$2005

4,6362006

2,6022007

2,0832008

1,3162009

725Thereafter

152Total future minimum payments

11,514




F-32

---





December 31,2004

2003$

$Balance, beginning of year

750

2,216Payments made during the year

(1,318
)
(1,420
)Warranties accrued during the year

1,383

1,011Less: Reduction in provision



(1,057
)Balance, end of year

815

750




F-33

---





F-34

---







December 31,2004

2003

2002$

$

$Decrease in accounts receivable

29,582

11,446

16,214Decrease (increase) in income taxes receivable

978

(244
)
338(Increase) decrease in inventory

(9,825
)
(6,173
)
3,175Decrease (increase) in prepaid expenses

1,749

(291
)
(205
)Decrease (increase) in investment tax credits

4,995

163

(4,358
)(Decrease) increase in accounts payable and accrued liabilities

(3,752
)
(16,636
)
13,773Decrease in customer advances

(2,231
)
(6,371
)
(69
)21,496

(18,106
)
28,868Supplementary cash flow informationNon-cash financing and investing activitiesShares issued in connection with the acquisition of Netro



28,012



28,012

Cash paid for:Interest

8,461

9,850

12,012Income taxes

479

899

323


F-35

---





December 31,2004

2003

2002$

$

$Revenue (i)





101Purchases (ii)

199

367

448Directors' fees (ii)

260

217

196Accounts payable (ii)

19

84

20








F-36

---







Wireless Telecommunications Products

Telecommunications Service Provider

Inter-Segment Eliminations

Consolidated2004

2003

2002

2004

2003

2002

2004

2003

2002

2004

2003

2002$

$

$

$

$

$

$

$

$

$

$

$Balance sheetsProperty, plant and equipment, net

19,575

23,371



82,015

85,358



(16,148
)
(18,602
)


85,442

90,127Intangible assets, net

4,494

5,408















4,494

5,408Other assets, net

972

1,160



5,311

5,894



(5,296
)
(5,345
)


987

1,709Total assets

238,714

282,508



154,485

158,430



(165,575
)
(151,163
)


227,624

289,775Statements of operationsExternal revenue

105,352

113,817

181,029

18,584

14,064

15,874







123,936

127,881

196,903Inter-segment revenue

782

254









(782
)
(254
)






Gross profit

35,508

52,815

91,713

18,584

14,064

15,874







54,092

66,879

107,587Interest expense, net

5,293

5,653

6,153

2,742

3,158

5,920







8,035

8,811

12,073Amortization and depreciation of property, plant and equipment

5,058

4,691

4,888

6,875

7,125

8,716

(942
)
(954
)
(953
)
10,991

10,862

12,651Amortization of other assets

477

670

568

598

648

751

(49
)
820

943

1,026

2,138

2,262Amortization of intangible assets

914

288















914

288

Restructuring, asset impairment and other charges

15,907

3,086

4,912



630









15,907

3,716

4,912Gain on sale of long-term investments

3,444

















3,444



Gain on settlement of claim

4,583

















4,583



Gain on repurchase of debentures



1,199

















1,199

Loss on change in ownership in subsidiary











(3,974
)










(3,974
)Income tax (expense) recovery

(14,061
)
5,098

(252
)
(8,494
)
(2,253
)








(22,555
)
2,845

(252
)Net loss

(77,125
)
(42,288
)
(3,885
)
(9,009
)
(2,467
)
(17,000
)






(86,134
)
(44,755
)
(20,885
)Purchase of property, plant and equipment and other assets

3,531

4,704

3,600

2,253

1,061

458

1,012

(51
)


6,796

5,714

4,058


F-37

---







% of
Revenue

Revenue
$Canada

6.5%

8,026Chile

15.0%

18,622Other

78.5%

97,288100.0%

123,936




% of
Revenue

Revenue
$Canada

4.5%

5,812Chile

11.0%

14,064Australia

12.3%

15,766Other

72.2%

92,239100.0%

127,881




% of
Revenue

Revenue
$Canada

1.3%

2,611Australia

16.7%

32,881Thailand

18.4%

36,291Saudi Arabia

23.8%

46,935Other

39.8%

78,185100.0%

196,903


F-38

---





Revenue
($)

% of
RevenueTelstra Corporation Limited

15,766

12.3%




Revenue
($)

% of
RevenueSaudi Telecom Company

31,295

15.9%Telstra Corporation Limited

32,881

16.7%64,176

32.6%




December 31,2004

2003$

$Canada

16,628

16,029Chile

65,867

66,756Other

2,947

7,34285,442

90,127


F-39

---







2004

2003Carrying amount

Fair
value

Carrying amount

Fair
value$

$

$

$Debentures

71,000

61,060

71,000

49,700Notes payable

35,585

30,603

45,232

33,924


F-40

---







December 31,2004

2003

2002$

$

$Net loss  Canadian GAAP

(86,134
)
(44,755
)
(20,885
)AdjustmentsAsset impairment (i)

1,666

1,666

1,666Bid costs (ii)



97

27Deferred charges and start-up costs (ii)

722

2,041

1,767Derivative instruments (iii)

(380
)
(2,425
)
2,900Loss on change in ownership in subsidiary company (iv)





3,974Stock-based compensation (xii)

247



Tax effect of above adjustments (*)

(907
)
(324
)
(574
)Net loss  U.S. GAAP

(84,786
)
(43,700
)
(11,125
)Basic and diluted loss per share  U.S. GAAP

(5.09
)
(6.06
)
(2.03
)




December 31,2004

2003$

$Shareholders' equity  Canadian GAAP

52,640

91,740AdjustmentsAsset impairment (i)

(19,060
)
(20,726
)Deferred charges and start-up costs (ii)

(987
)
(1,709
)Derivative instruments (iii)

95

475Stock-based compensation (xii)

519

Tax effect of above adjustments (*)



907Shareholders' equity  U.S. GAAP

33,207

70,687




F-41

---















F-42

---















F-43

---







F-44

---







F-45

---





December 31,2003

2002$

$Revenue

136,870

219,010Net loss

(88,306
)
(117,510
)Net loss per share

(8.85
)
(12.21
)




December 31,2004

2003

2002$

$

$Net loss  U.S. GAAPAs reported

(84,786
)
(43,700
)
(11,125
)Fair value of stock-based compensation

(980
)
(1,044
)
(352
)Pro forma

(85,766
)
(44,744
)
(11,477
)Basic and diluted earnings per share  U.S. GAAPAs reported

(5.09
)
(6.06
)
(2.03
)Pro forma

(5.15
)
(6.21
)
(2.10
)Weighted average fair value of options granted by the Corporation

11.81

16.24

9.10




December 31,2004

2003

2002Dividend yield

0.0%

0.0%

0.0%Expected volatility

72.5%

65.0%

65.0%Risk-free interest rates

4.1%

4.7%

4.7%Expected life

5 years

5 years

5 years


F-46

---



SIGNATURE

SR Telecom Inc. hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.

| |  | SR TELECOM INC.
| |  | ---------------
| |  | By:            

Dated:
October 3, 2005

---



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