<PAGE>


      As filed with the Securities and Exchange Commission on May 15, 2000
================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                               AMENDMENT NO. 1 TO


                                    FORM 20-F

[ ]  Registration statement pursuant to Section 12(b) or (g) of the Securities
     Exchange Act of 1934

                                       OR

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

         For the fiscal year ended September 30, 1999

                                       OR

[ ]  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 0-30082

                         ENVOY COMMUNICATIONS GROUP INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                         ENVOY COMMUNICATIONS GROUP INC.
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

                                 Ontario, Canada
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

               26 Duncan Street, Toronto, Ontario, Canada M5V 2B9
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

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

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

                                  COMMON SHARES
--------------------------------------------------------------------------------
                                (Title of Class)

                                      NONE
--------------------------------------------------------------------------------
                   (Name of each exchange on which registered)

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: At September 30, 1999 there were 17,898,965 common shares outstanding.


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.  YES  X   NO
                                               ---    ---


Indicate by check mark which financial statement item the Registrant has elected
to follow:   Item 17            Item 18  X
                     ------             ----


Currency and Exchange Rates
---------------------------

All monetary amounts contained in this Form 20-F are, unless otherwise
indicated, expressed in Canadian dollars. On February 9, 2000 the noon buying
rate for Canadian Dollars as reported by the Federal Reserve Bank of New York
was $1.00 U.S. to $1.443 Cdn. (see Item 8 for further exchange rate information
to U.S. currency.)
================================================================================


<PAGE>


                                TABLE OF CONTENTS

                                     PART I

Item 1.               Description of Business

Item 2.               Description of Property

Item 3.               Legal Proceedings

Item 4.               Control of Registrant

Item 5.               Nature of Trading Market

Item 6.               Exchange Controls and Other Limitations Affecting Security
                      Holders

Item 7.               Taxation

Item 8.               Selected Financial Data

Item 9.               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Item 9A.              Quantitative and Qualitative Disclosures About Market Risk

Item 10.              Directors and Officers of Registrant
Item 11.              Compensation of Directors and Officers
Item 12.              Options to Purchase Securities from Registrant or
                      Subsidiaries
Item 13.              Interest of Management in Certain Transactions

                                     PART II

Item 14.              Description of Securities to be Registered

                                    PART III

Item 15.              Defaults upon Senior Securities
Item 16.              Changes in Securities, Changes in Security for Registered
                      Securities and Use of Proceeds

                                     PART IV

Item 17.              Financial Statements
Item 18.              Financial Statements
Item 19.              Financial Statements and Exhibits



<PAGE>



                                     PART I

Item 1.  Description of Business

                  The following Description of Business contains forward-looking
statements, which involve risks and uncertainties. Envoy's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "--Risk Factors"
and elsewhere in this Form 20-F.

                         ENVOY COMMUNICATIONS GROUP INC.

General

                  Envoy Communications Group Inc. ("Envoy") is an integrated
marketing communications company which is focusing upon its rapidly growing
integrated e-marketing communications services business./1 Envoy's objective is
to be a leading provider of integrated e-marketing communications services and
is committed to building brands both on and off-line. Envoy estimates that
e-marketing communications services represented 32% ($13.4 million) of Envoy's
gross margin in fiscal 1999, a 28% increase over 25% ($3.4 million) of Envoy's
gross margin in fiscal 1998. A substantial majority of these services are
provided by means other than interactive digital services. Envoy's advertising
services include creative concept development, branding, print and broadcast
production and media planning and buying. In addition, Envoy provides event
marketing, corporate identity, branding, public relations and website
development and packaging design services. Historically, substantially all of
Envoy's services have been rendered in the Canadian marketplace. Envoy's clients
include major Canadian businesses and the Canadian operations of international
corporations. Envoy's strategy is to continue to grow organically and by
additional strategic acquisitions in Canada and the U.S. and ultimately in
Europe. Envoy began offering its services in the U.S. effective as of October 1,
1998 through its acquisition of Hampel Stefanides, Inc. ("Hampel Stefanides"),
an e-marketing communications services and advertising company based in New York
City.

                  The principal place of business of Envoy is located at 26
Duncan Street, Toronto, Canada M5V 2B9. Envoy may be reached by telephone: (416)
593-1212; or facsimile: (416) 593-4434. Envoy's website is www.envoygrp.com.
Information contained in Envoy's website does not constitute a part of this Form
20-F.

Development of the Business

                  Envoy was incorporated under the laws of the Province of
British Columbia, Canada as "Potential Mines Ltd." in December 1973 and was
continued under the laws of the Province of Ontario, Canada in December 1997.
Since Envoy's acquisition in July 1991 of The Incentive Design Company Ltd.
("IDC"), Envoy has shifted the nature of its business to providing marketing
communications services for promoting clients' products, services and business
messages utilizing such media as print, broadcast and the Internet. Envoy has
grown, in


--------

         /1 "e-marketing communications services" refers to Envoy's services,
whether on or off-line, performed for its clients' Internet businesses and
businesses related to the Internet, together with Envoy's on-line services
performed for its other clients.


<PAGE>

large part, through strategic acquisitions. Certain material acquisitions by
Envoy are described below.

                  In July 1991, Envoy acquired IDC, a group of companies engaged
in business and marketing communications, corporate incentive planning and
corporate travel from Geoffrey Genovese and Christine Genovese, his wife.
Geoffrey B. Genovese was the President and Chief Executive Officer of IDC at the
time of such acquisition and has served in such capacities for Envoy since
October 1993.

                  Envoy acquired The Communique Group Inc. (the "Communique
Group") in October 1992. The Communique Group is the primary Canadian operating
subsidiary of Envoy . It performs advertising services, including creative
concept development, branding, print, broadcast and on-line advertising
production, media planning and buying of space and airtime in off-line and
on-line media and research and strategic planning regarding e-marketing.

                  In October 1997, Envoy effected an amalgamation of the
Communique Group and three other subsidiaries of Envoy through which Envoy's
business communications and product design services were provided, with the
Communique Group being the continuing entity. Effective as of June 1, 1998,
Envoy acquired Promanad Communications Inc. ("Promanad"), an advertising and
public relations agency, of which Edwin B. Matthews was President. Promanad's
operations also were combined with those of the Communique Group and Mr.
Matthews serves as Vice President, Integration of Envoy.

                  Envoy expanded its geographic reach into the U.S. marketplace
through its acquisition of Hampel Stefanides, effective as of October 1, 1998.
Effective as of January 1, 1999, Envoy acquired Devlin Multimedia Inc.
("Devlin"), a Toronto-based website design and development company. Effective as
of May 1, 1999, Envoy acquired The Watt Group Inc. (the "Watt Group"), through
which Envoy acquired the operations, substantially all of the assets and certain
of the liabilities of The Watt Design Group Inc. ("Watt Design"), a
Toronto-based provider of design, packaging and marketing identity services to
retailers. Donald G. Watt was Chairman of Watt Design prior to such acquisition
by Envoy and now serves as Chairman of the Watt Group and a Director of Envoy.


                                BUSINESS OF ENVOY

Integrated Services Strategy

                  Envoy offers clients a strategy that delivers integrated
marketing communications services through seven separate but complementary
operating divisions providing cohesive services:

                  Communique Advertising - advertising utilizing traditional
                                           media, primarily television, radio
                                           and print, as well as on-line
                                           advertising.

                  Devlin -                 website development and design and
                                           other interactive digital
                                           communications services.

                                       2
<PAGE>

                  Communique Live -        event marketing, including corporate
                                           meeting and conference planning
                                           services and incentive travel
                                           programs.

                  Fusion -                 corporate identity and branding
                                           services.

                  Communique
                  Public Relations -       strategic communications.

                  Hampel Stefanides -      U.S. based e-marketing communications
                                           services and advertising.

                  Watt Group -             design, packaging and marketing
                                           identity services to retailers.


                  Envoy delivers cohesive marketing communications solutions to
its clients utilizing the services of one or more of its operating divisions. By
using the integrated services of several Envoy operating divisions, its clients
can communicate in one clear voice executed through a range of media channels.
Envoy's employees have expertise in a broad range of disciplines including
business strategy, marketing, branding, information technology and creative
design. Envoy works with a client from the analysis of its business objectives
to the implementation of an appropriate solution. As a result, clients benefit
not only from the time and cost savings of working with a single firm, but also
from the integrated marketing communications strategy made possible by Envoy's
integrated and coordinated range of marketing communications services. Based
upon various competitor's public information and management's dealings with
clients and prospective clients, management believes that this differentiates it
from advertising or Internet service providers that focus on a single aspect of
the range of marketing communications services.


                  For example, Benjamin Moore & Co. Limited ("Benjamin Moore"),
Canada's premiere paint manufacturer, utilized Communique Advertising to create
print, radio and television advertising campaigns emphasizing stylish colors,
decorative painting techniques and the expertise of the client's retailers;
Fusion to design logo, packaging and new retail environments to build strong
brand awareness; Devlin to develop a digital CD with promotion themes to provide
the client's sales representatives and independent retailers with product
information; Communique Public Relations to produce "do-it-yourself" and
"how-to" consumer education seminars in local markets; and Communique Live to
plan theme events and an awards ceremony at annual dealer symposiums.


                  Envoy utilized four different operating divisions to deliver a
fully integrated campaign to the Oxford Properties Group Incorporated ("Oxford
Properties"). For 25 year old Oxford Properties, Fusion developed a new
corporate identity program to be used in every facet of Oxford Properties'
business, from its buildings, letterhead and uniforms to its parking garage
tickets. Devlin created a web site to demonstrate Oxford Properties' vision to
be the best tenant service provider in its industry, while the Watt Group
designed a retail store front which houses Oxford Properties' tenant services
center. Communique Public Relations coordinated a media relations campaign to
inform all of Oxford Properties equityholders of the exciting changes taking
place.


                                       3
<PAGE>


                  Another example of Envoy's delivery of cohesive integrated
marketing communications services was its advertising campaign for Microsoft
Network ("MSN") designed to increase awareness and trials of its website and
understanding of the website's programming features. MSN, one of Canada's
leading portals, is Microsoft Canada Co.'s ("Microsoft Canada") commercial
on-line service providing entertainment programming and Internet services to its
subscriber base. The Communique Group developed an integrated marketing
communications strategy for MSN involving print, outdoor and the Internet. This
strategy designed to pull Internet users to the MSN trial page rather than MSN's
previous strategy to push users to the site through distribution of CD-ROMs, led
to an increase in traffic to the MSN website from 500 to 5,500 visits per day.
Envoy has decided not to rebid for the Microsoft Canada account primarily
because the conflict of interest created by this client precluded Envoy from
pursuing many other attractive client opportunities in related industry
segments. Envoy's contract with Microsoft Canada ended on April 3, 2000.


                  Not all clients use the services of more than one of Envoy's
operating divisions and Envoy provides such services on a stand-alone basis as
well as part of an integrated model.

e-marketing Communications Services

                  Envoy provides integrated e-marketing communications services,
including digital interactive new media communication services. Envoy defines
its integrated e-marketing communications services as its services, whether on
or off-line, performed for its clients' Internet businesses and businesses
related to the Internet, together with its on-line services performed for its
other clients. These activities include on-line advertising and promotions,
branding, the design, development and maintenance of its clients' websites,
research and strategic consulting regarding e-marketing, creating advertising
and other promotional programs, whether or not on-line, designed to drive
traffic to its clients' websites, to sell goods and services on the clients'
websites or to promote its clients' Internet related business, the development
of proprietary interactive software and on-line media planning and buying.

                  Envoy designs and produces on-line advertisements including
banners and interstitials, which are advertisements that flash for several
seconds while a selected website downloads. It designs, develops, implements,
maintains, supports and promotes its clients' websites through on-line contests,
on-line incentive programs, electronic coupons, electronic mail and loyalty
promotions.

                  Examples of Envoy's e-marketing communications services
activities include:

                  o                 Developing websites for BASF Canada
                           Incorporated, Clublink Corporation, Federal Express
                           Canada Inc., Lante Corporation, Lucent Technologies
                           Incorporated (Canada) ("Lucent Canada"), Make-Up
                           Artists Co. (d/b/a MAC), Microsoft Canada, Ontario
                           Hydro, Oxford Properties, Public Works and Government
                           Services Canada and Toshiba of Canada Limited
                           ("Toshiba Canada")./1


----------
         1 None of these clients contributed 10% or more to Envoy's gross margin
during the fiscal year ended September 30, 1999. Envoy has decided not to rebid
for the Microsoft Canada account primarily because the conflict of interest
created by this client precluded Envoy from pursuing many other attractive
client opportunities in related industry segments. Envoy's contract with
Microsoft Canada ended on April 3, 2000.



                                       4
<PAGE>


                 o                  Print advertising and television commercials
                           for Triakk Services Inc. (d/b/a National Discount
                           Brokerage), an on-line brokerage company ("National
                           Discount Brokerage").

                 o                  Print, outdoor and on-line advertising for
                           Microsoft hotmail.

                 o                  On-line strategy and creative for CIBC
                           (Canadian Imperial Bank of Commerce).

                 o                  Network television commercials for CDNow,
                           Inc. ("CDNow") an on-line retailer of music CDs and
                           other products, including original airing of
                           commercials on the 1999 Grammys(C) television award
                           show.

                  Based on interaction with its own clients and publicly
available information regarding the industry, management believes that
traditional advertising designed to generate traffic to, and commerce over, its
clients' websites and promote its clients' Internet related businesses will
continue to increase in importance. The building of brand awareness among target
audiences requires that they be exposed repeatedly and continuously to a
marketed message. Notwithstanding the increasing popularity of the Internet, the
majority of Internet users do not as yet spend enough time on-line to be reached
effectively solely by an on-line marketing communications campaign.

                  Envoy's integrated e-marketing communications services are
rendered through the coordinated efforts of one or more of its operating
divisions.

                  Communique Advertising. Communique Advertising provides
advertising services, including creative concept development, branding, off-line
and on-line advertising production, the planning and buying of space and airtime
in off-line and on-line media and research and strategic consulting regarding
e-marketing. Envoy believes it is one of the largest purchasers of Internet
advertising in Canada based upon publicly available industry data as well as
Envoy's own dealings with Canadian sellers of Internet advertising space. The
Communique Group carries out Envoy's Agency of Record advertising services
through its Communique Advertising division. One of the clients for which the
Communique Group is Agency of Record in Canada is Toshiba Canada. Agency of
Record status generally means that all of a client's advertising business,
including creative concept development, branding, print and broadcast
advertising production and media planning and buying, is contracted through the
Communique Group. The Communique Advertising division then coordinates the
overall provision of advertising services to the client, including through other
Envoy divisions although, in certain cases, it may subcontract elements of such
services to unaffiliated third parties. With the addition of Promanad in June
1998, Communique Advertising also provides an expanded base of clients and
advertising services. Advertising is the core competency that integrates Envoy's
cohesive marketing communications solutions.

                  Devlin. Devlin, an interactive multimedia agency acquired by
Envoy effective in January 1999, provides interactive digital communication
services. These activities include on-



                                       5
<PAGE>

line digital interactive services such as the design, development and
maintenance of its clients' websites, and research and strategic consulting
regarding the Internet.

                  Devlin designs and produces on-line advertisements including
banners and interstitials. It designs, develops, implements, maintains, supports
and promotes its clients' websites through on-line contests, on-line incentive
programs, electronic coupons, electronic mail and loyalty promotions.

                  Devlin developed a web-based communications tool referred to
as "Decision Room." Decision Room is an on-line "meeting room" that allows users
to easily exchange graphic or text files through password-protected access and
enables review, feedback and approval in virtual business meetings. Originally
developed for Devlin's own use, this tool can reduce communications and courier
costs, streamline the project management process and document all decisions in
an on-line database for review by relevant parties. In January 2000, Envoy
launched a marketing effort for Decision Room as an on-line software application
available for rental. Devlin has established an in-house "usability lab" to use
in the design and development of clients' websites which enables Devlin to
analyze interfaces, test navigation and apply research to optimize the usability
by endusers of its clients' websites.

                  Communique Live. Communique Live provides event marketing
services such as corporate meeting and conference planning services whereby its
clients can reach out to the various communities with whom they wish to
establish or enhance relationships such as employees, shareholders, dealers or
the media. It creates live corporate events drawing upon theatre, music, video,
multimedia and other disciplines. Communique Live arranges for client events
such as product launches, car shows and other product presentations, national or
regional sales staff and other employee meetings, annual shareholder or other
investor meetings and corporate video presentations, including designing the
sets and stages, providing the presenters and other talent and writing the
scripts.

                  Communique Live also creates travel incentive programs, and
arranges for group travel and accommodations therefor. It develops and
implements themed travel packages designed to incentivize corporate sales and
other employees. It develops the incentive reward program and promotes it to the
target employees. Communique Live often then executes the travel reward
including arranging all transportation, accommodations, meals, tours and other
on-site entertainment and activities.

                  Fusion. Fusion provides corporate identity and branding as
well as graphic design services. Fusion also devises creative packaging for its
clients' products and their promotional and presentation materials and produces
corporate brochures and annual reports. Its clients include businesses in the
retail, manufacturing, service, communication and packaged goods industries.

                  Communique Public Relations. Communique Public Relations
specializes in strategic communications with employees, the media and external
audiences, including planning, media relations, internal communication and
social marketing.

                  Hampel Stefanides. Hampel Stefanides provides a full range of
e-marketing communications and advertising services to clients in the U.S.
marketplace and is committed to building brands both on and off-line. Hampel
Stefanides has begun performing advertising services for clients of Envoy's
Canadian operations doing business in the U.S. marketplace.


                                       6
<PAGE>

Hampel Stefanides was awarded the on-line advertising, media planning and
placement for Toshiba America Inc. ("Toshiba America"). Toshiba Canada is a
client of Envoy in Canada.

                  Watt Group. As the successor to Watt Design, the Watt Group
was acquired by Envoy effective in May 1999 and is one of North America's
leading packaging and retail environment design businesses. Its graphic designs
are represented in stores and households in various locations around the world.
The Watt Group has created retail environments in many major North American
cities. The Watt Group has worked with clients to develop retail concepts in
food, restaurant, hardware, general merchandise and specialty stores.


<TABLE>
<S>                             <C>
                                |--------------------------------------------------------|
                                |           Envoy Communications Group Inc.              |
                                |--------------------------------------------------------|
                                                            |
            --------------------------------------------------------------------------------------------------
            |                           |                                      |                              |
|--------------------|         |------------------|                   |------------------|         |------------------|
|  The Communique    |         |     Hampel       |                   |     Devlin       |         |    The Watt      |
|    Group Inc.      |         |Stefanides, Inc.  |                   | Multimedia Inc.  |         |   Group Inc.     |
|--------------------|         |------------------|                   |------------------|         |------------------|
            |
            |-------------------------------------------------------------------------------------------
            |                           |                              |                                |
|--------------------|         |------------------|           |------------------|           |-------------------|
|                    |         |                  |           |                  |           |                   |
|    Communique      |         | Communique Live  |           |     Fusion       |           |    Communique     |
|   Advertising      |         |                  |           |                  |           |  Public Relations |
|--------------------|         |------------------|           |------------------|           |-------------------|
</TABLE>

Clients

                  Envoy's clients include both large Canadian companies and the
Canadian subsidiaries of international companies including Adidas (Canada)
Limited, Armstrong World Industries, Inc., Bank of Montreal, Benjamin Moore,
Bermuda Telephone Company, Bridgestone/Firestone Canada, The Canada Life
Assurance Co, CIBC, Cognos Incorporated, Japan Camera Centre Limited, Lexus (a
division of Toyota Canada Inc.), Lucent Canada, Parmalat Canada Limited, Rogers
Group of Companies, Safeway Inc., Sprint Canada Inc., Steelcase Canada
Incorporated Ltd., Toshiba Canada, United Distilleries & Vintners, and Wal-mart
Stores Inc. Hampel Stefanides' clients include Aer Lingus, BASF Corporation,
Castrol North America, CDNow and National Discount Brokerage.


                  Castrol North America accounted for approximately 10.3% of
Envoy's gross margin in fiscal 1999. Microsoft Canada accounted for
approximately 18% of Envoy's gross margin in fiscal 1998 and fiscal 1997.
Envoy's contract with Microsoft Canada ended on April 3, 2000. Envoy has decided
not to rebid for the Microsoft Canada account primarily because the conflict of
interest created by this client precluded Envoy from pursuing many other
attractive client opportunities in related industry segments. No other clients
accounted for 10% or more of Envoy's gross margin in fiscal 1999, 1998 or 1997.
Envoy's five largest clients accounted for approximately 38%, 41% and 41% of
Envoy's gross margin in fiscal 1999, 1998 and 1997, respectively.




                                       7
<PAGE>

Employees

                  As of January 31, 2000, Envoy had 250 full time employees
based in Toronto, Canada, plus 56 based in New York City. Of this total, 93
employees were engaged in client services, 87 in creative services, 15 in
interactive media services, 12 in other media services, 32 in production, 5 in
public relations, 3 in research, 44 in finance and administration, 6 in new
business development and 9 in management.

Strategy

                  Envoy's strategy emphasizes long term relationships as a way
to build business. Management believes that the combination of this strategy
with its ability to be a one-stop agency serving all aspects of customers'
marketing, advertising and communications needs furthers Envoy's ability to
compete.

                  One of Envoy's competitive advantages is its ability to
provide an integrated marketing communications solution to its clients. Envoy
plans to continue to sell new products and services to existing and future
clients. For instance, many of Envoy's traditional advertising clients now
utilize Envoy's website design and development or event marketing services.
Similarly, many clients who initially retained Envoy for website design and
development or event marketing services ultimately have become advertising
clients of Envoy.

                  Envoy believes that the effectiveness of its fully integrated
service strategy is enhanced by its client service model. Each client is
serviced by a single account service team which is comprised of representatives
from each of Envoy's principal divisions. In this way, clients are assured that
they receive the appropriate strategic marketing communications solution based
on their needs.

                  With the acquisition of Hampel Stefanides, Envoy expanded its
geographic base to include the U.S. Envoy intends to further expand
geographically by way of acquisitions, including into the U.S. west coast and
the United Kingdom.


                  As its geographic expansion continues, Envoy will seek to
cross-sell its services to clients in these new regions. Envoy believes that
there is significant opportunity to sell its fully-integrated service strategy
to the clients of newly acquired businesses. During fiscal year 1999, Hampel
Stefanides was successful in securing an on-line advertising account from
Toshiba America. Toshiba Canada is a significant client of Envoy in Canada and
the addition of its affiliate's U.S. based on-line advertising business
represents one example of the new business opportunities available to Envoy from
geographic cross-selling of its services. Similarly, Envoy's Canadian operations
have begun to provide marketing communications services in Canada to some of
Hampel Stefanides' U.S. clients who carry on business in Canada. Devlin
developed a website for BASF Canada Incorporated. Its U.S. affiliate, BASF
Corporation, is a client of Hampel Stefanides. Envoy has created the senior
management position of Vice President, Integration to leverage the resources
within Envoy in order to realize these opportunities.


                  Envoy intends to expand its existing operations, service
offerings, client list and geographic coverage through both organic growth and
strategic acquisitions of marketing communications companies. Envoy's objective
is to be a leading provider of integrated e-marketing communications services
and is committed to building brands both on and off-line.

                                       8
<PAGE>

Risk Factors

                  Envoy's business, financial condition and results of
operations could be materially adversely affected by any of the following risks.

                  This Form 20-F contains forward-looking statements that
involve risks and uncertainties. Envoy's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including the risks faced by Envoy described below and
elsewhere in this form.

                  The marketing communications industry is highly competitive.
Envoy has competition in each of the markets in which it operates. Envoy
competes with Canadian branches of large international marketing communications
holding companies such as Cordiant Communications Group PLC, Interpublic Group
of Companies Inc., Omnicom Group Inc., True North Communications Inc., and WPP
Group PLC. Envoy also faces competition from Canadian national and regional
advertising agencies as well as numerous specialized and integrated marketing
communications firms and firms that specialize in or otherwise provide
e-marketing communications services.

                  There can be no assurance that Envoy will be profitable.
Although Envoy has had positive gross margin and net income and experienced
revenue growth in recent periods, these gross margin and revenue growth rates
may not be sustainable or indicative of future operating results. In addition,
Envoy has incurred substantial costs to expand and integrate its operations and
it intends to continue to invest heavily in ongoing expansion. Envoy's ongoing
integration costs will include the combination of the financial, information and
communications systems of the various acquired companies. Envoy's ongoing
expansion costs will include the costs of acquiring new businesses, leasing of
additional office space, hiring new employees and purchasing new computer and
communications equipment. As a result of these and other costs, Envoy may incur
future operating losses, and there can be no assurance that Envoy will sustain
profitability.

                  Clients may not accept an integrated e-marketing strategy. The
success of Envoy's integrated e-marketing strategy is dependent upon its
clients' use of the services of Envoy for provision of many or all of their
e-marketing communications needs. If Envoy's clients choose to utilize multiple
firms, including various firms focusing on different aspects of e-marketing
communications, including specialized website development or other Internet
companies, Envoy's integrated e-marketing strategy will be adversely affected.

                  Envoy's results of operations and its business depend on its
relationship with a limited number of large clients. Set forth below is the
percentage of gross margin during the fiscal year ended September 30, 1999 for
each of Envoy's clients that accounted for 10% or more of its gross margin and
for Envoy's five largest clients combined:

                                                     Year Ended
Client                                           September 30, 1999
------                                           ------------------

Castrol North America....................              10.3%

Five largest clients combined............               38%

                                       9
<PAGE>

There can be no assurance that Envoy will be able to maintain its historical
rate of growth or its current level of gross margin derived from any client in
the future.

                  As is customary in the industry, Envoy does not have long-term
contracts with any of its clients. Envoy's clients generally have the right to
terminate their relationships with Envoy without penalty and with relatively
short or no notice. The termination of Envoy's business relationships with any
significant client, or a material reduction in the use of Envoy's services by
any significant client, could adversely affect Envoy's future financial
performance.

                  Envoy's operating results may vary from period to period.
Envoy's operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, many of which are
outside of Envoy's control, including:

               o    timing of new projects;

               o    reductions, cancellations or completions of major projects;

               o    the loss of one or more significant clients;

               o    the opening or closing of an office;

               o    Envoy's relative mix of business;

               o    changes in pricing by Envoy or competitors;

               o    employee utilization rates;

               o    changes in personnel;

               o    costs related to expansion of Envoy's business, including by
                    acquisition;

               o    increased competition; and

               o    marketing budget decisions by Envoy's clients.

As a result of these fluctuations, period-to-period comparisons of Envoy's
operating results cannot necessarily be relied upon as indicators of future
performance. In some fiscal quarters Envoy's operating results may fall below
the expectations of securities analysts and investors due to any of the factors
described above.

                  The integration of acquired businesses may adversely affect
Envoy's operating results. Envoy expects that the integration of businesses
recently acquired by it as well as future acquisitions, if any, will place a
significant burden on Envoy's management. Such integration is subject to risks
and uncertainties, including:

               o    the inability to effectively assimilate the operations,
                    services, technologies, personnel and cultures of the
                    acquired entities;

               o    the potential disruption of Envoy's business; and

               o    the impairment or loss of relationships with employees and
                    clients.

If in connection with Envoy's business acquisitions Envoy fails to integrate
Envoy's operations successfully or on a timely basis, or if Envoy incurs
unforeseen expenses, Envoy's financial performance could be materially and
adversely affected. In addition, if Envoy is unable to


                                       10
<PAGE>


identify complementary businesses to acquire or is unable to consummate
acquisitions on acceptable terms, Envoy's expansion plans may be materially and
adversely affected.

                  Continued growth of Envoy's business will place increased
demands on its systems and resources and may impact Envoy's operating results.
The expansion of Envoy's business and customer base has placed increased demands
on Envoy's management, operating systems, internal controls and financial and
physical resources. Envoy's continued growth, if any, may strain existing
management and human resources, in particular, affecting Envoy's ability to
attract and retain talented personnel. Consequently, Envoy may be required to
increase expenditures to hire new employees, open new offices and invest in new
equipment or make other capital expenditures. Any failure to expand any of the
foregoing areas in an efficient manner could adversely affect Envoy's business.
There also can be no assurance that Envoy will be able to sustain the rates of
growth that Envoy has experienced in the past.

                  Envoy depends on its key management personnel for its future
success. Envoy relies on its key management personnel including Geoffrey B.
Genovese, Envoy's President and Chief Executive Officer. Envoy's future success
will depend upon its ability to attract and retain additional highly skilled
personnel. If any of Envoy's officers or key employees leave Envoy, the
relationships that they have with Envoy's clients could be lost. In addition,
Envoy's ability to generate revenues directly relates to Envoy's personnel, both
in terms of the number and expertise of the personnel Envoy has available to
work on its projects and the mix of full time employees, temporary employees and
contract service providers Envoy utilizes. The competition for employees at all
levels of the marketing communications industry, especially the digital
interactive marketing industry, is intense and is increasing. As a result, if
Envoy fails to retain existing employees or hire new employees when necessary,
Envoy's business, financial condition and operating results could be materially
and adversely affected.

                  Conflicts of interest and exclusivity arrangements with
Envoy's clients may limit Envoy's ability to provide services to others.
Conflicts of interest between clients and potential clients are inherent in the
marketing communications industry. Moreover, as is customary in the marketing
communications industry, Envoy has entered into exclusivity arrangements with
many of Envoy's largest clients that restrict Envoy's ability to provide
services to their competitors. Envoy has in the past been, and may in the future
be, unable to take on new clients because such opportunities would require it to
provide services to direct competitors of its existing clients. In addition,
Envoy risks harming relationships with existing clients when it agrees to
provide services to indirect competitors of existing clients. Prospective
clients also may choose not to retain Envoy for reasons of actual or perceived
conflicts of interest.

                  The developing market for certain of Envoy's e-marketing
communications services is subject to uncertainties. The market for digital
interactive services has only recently begun to develop, is evolving rapidly and
is characterized by an increasing number of market entrants. Demand for and
market acceptance of recently introduced services are subject to a high level of
uncertainty and are dependent on a number of factors, including:

                  o                 the growth in consumer access to and
                           acceptance of new interactive technologies, such as
                           the Internet, online services and corporate
                           intranets;

                  o                 the development of technologies that
                           facilitate interactive communication between
                           organizations and targeted audiences; and

                                       11
<PAGE>

                  o                 Envoy's ability to anticipate such
                           technologies and incorporate them into Envoy's
                           services in a timely fashion.

                  Significant issues concerning the commercial use of these
technologies remain unresolved, and may have a negative impact on the growth of
marketing activities that utilize these technologies. Such significant issues
include security, privacy, reliability, cost, ease of use and quality of
service. In addition, no standards have yet been widely accepted for the
measurement of the effectiveness of interactive marketing, and there can be no
assurance that such standards will develop sufficiently to support interactive
marketing as a significant marketing medium. There can be no assurance that the
market for interactive marketing services will continue to grow, that demand for
these services of Envoy will continue or that individual personal computer users
in business or at home will continue to use the Internet or other interactive
media for commerce and communication. If the market for digital interactive
marketing services develops more slowly than Envoy expects, or if Envoy's
services do not continue to achieve market acceptance, Envoy's future operating
performance could be materially adversely affected.

                  Envoy's e-marketing communications services depend on
continued growth in use and improvement of the Internet. Because Envoy provides
e-marketing communications services, Envoy's future success significantly
depends on the continued expansion of, and reliance of consumers and businesses
on, the Internet. The Internet may not be able to support an increased number of
users or an increase in the volume of data transmitted over it. As a result, the
performance or reliability of the Internet may be adversely affected as use
increases. The improvement of the Internet in response to increased demands will
require timely improvement of the high speed modems and other communications
equipment that form the Internet infrastructure. The Internet has already
experienced certain outages and delays as a result of damage to portions of its
infrastructure. The effectiveness of the Internet may also decline due to delays
in the development of adoption of new technical standards and protocols designed
to support increased levels of activity. There can be no assurance that the
infrastructure, products or services necessary to maintain and expand the
Internet will be developed, or that the Internet will be a viable commercial
medium for advertisers.

                  Changes in government regulation could adversely affect
Envoy's business. The marketing communications industry is subject to extensive
government regulation, both domestic and foreign, with respect to the truth in
and fairness of advertising. There are also a number of Canadian federal and
provincial laws and regulations directed at specific audiences or products
relating, for example, to advertising of food and drugs and advertising directed
at children. In addition, there has been an increasing tendency on the part of
businesses to resort to the judicial system to challenge comparative advertising
of their competitors on the grounds that the advertising is false and deceptive.
There can be no assurance that Envoy will not be subject to claims against it or
Envoy's clients by other companies or governmental agencies or that any such
claims, regardless of merit, would not have a material adverse effect on Envoy's
future operating performance.

                  The Canadian Radio-Television and Telecommunications
Commission and Industry Canada are involved in the regulation of advertising.
Relevant legislation includes the Competition Act which prohibits false or
misleading advertising. In addition to the various laws and regulation, the
advertising industry in Canada, as in most countries, has devised a
sophisticated system of self-regulation. The Canadian Code of Advertising
Standards forms the basis of this system, supplemented by the standards set by
individual media and by other


                                       12
<PAGE>


advertising-related associations. Canadian national television networks and
various other media have also adopted strict and extensive standards governing
the advertisements that they will accept for broadcast or publication.

                  Due to the increasing popularity and use of the Internet, any
number of Canadian federal or provincial or foreign international laws and
regulations may be adopted regarding libel, pricing, acceptable content,
intellectual property ownership, taxation and quality of products and services.
The U.S. Congress has recently passed legislation that regulates certain aspects
of the Internet, including on-line content, copyright infringement, user
privacy, taxation, access charges, liability for third-party activities and
jurisdiction. Any new legislation could inhibit the growth in use of the
Internet and decrease the acceptance of the Internet as a communications and
commercial medium, or could in turn decrease the demand for Envoy's services or
otherwise have a material adverse effect on Envoy's future operating
performance.

                  Problems related to the "Year 2000 Issue" could adversely
affect Envoy's business. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of Envoy's computer programs or hardware that have date-sensitive software
or embedded chips may recognize a date using "00" as the year 1900 rather than
the year 2000. The failure to correct any such programs or hardware could result
in system failures or miscalculations causing disruptions of Envoy's operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. Envoy retained a
consultant to implement an assessment, remediation and testing program to ensure
that its information processing and other ancillary systems properly utilize
dates beyond December 31, 1999. Envoy has finished its remediation and
contingency planning and believes that its systems are year 2000 compliant.
Envoy has not experienced any material year 2000 related problems with its
systems to date. See Item 9 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - The Year 2000 Computer Risks."


                      THE MARKETING COMMUNICATIONS INDUSTRY

Industry Overview


                  The annual market for worldwide advertising expenditure for
1999 was estimated at U.S.$420 billion by Zenith Media Worldwide. The annual
Canadian advertising expenditure was estimated at $8.8 billion Cdn. in 1997 and
$9.5 billion Cdn. in 1998 by the Television Bureau of Canada. Due to media
clutter, companies are looking outside traditional media for creative ways to
market and advertise their products. The newer forms of communication include
Internet marketing, event marketing, database and direct marketing, public
relations packaging, and point-of-purchase advertising. With the growth in the
use of the Internet, companies are increasingly seeking to improve their
business practices through digital communications solutions. Today, digital
communications solutions are largely Internet-based. Internet-based solutions
include websites which present an opportunity for electronic or "e-commerce,"
Internet branding and the delivery of information and entertainment services.


                  Advertising expenditure is strongly influenced by economic
conditions in local markets. Periods of high consumer spending create conditions
for higher corporate profitability. As corporate profitability improves, this
increases the resources available to clients for


                                       13
<PAGE>


promoting their brands. Furthermore, companies are encouraged to increase levels
of advertising during periods of higher consumer spending with the expectation
that it is likely to be more effective. As a result of these factors,
advertising expenditure tends to be strongly related to changes in gross
domestic product.

                  There are certain non-economic factors which can influence
advertising expenditure. These include government deregulation of media,
particularly television, and the development of new media channels, the
Internet, and new out-of-home opportunities including electronic displays and
wall murals, all of which have created new opportunities for advertising and
increased total advertising expenditure.

Client Relationships

                  Advertising agencies act on behalf of their clients on a wide
range of products and services. The relationship between client and agency
usually lasts for a number of years and contracts normally have three-month
termination clauses. Clients in a particular product category may restrict
agencies from working with competitors of the client in a country or region in
order to avoid possible conflicts of interest. Agencies are frequently required
to manage and avoid potential conflicts between competing clients and brands.
This can involve the formation of independent operating units to ensure that
client interests are not compromised.

Agency Remuneration

                  The traditional role of an advertising agency has been to
provide both creative and media services. Agencies have customarily been
remunerated by commissions based on a percentage of the total cost of an
advertising campaign. This total cost is generally known in the industry as
billings. Commissions, also known as income or revenue, were traditionally at a
level of 15% of billings. Over the last 25 years, clients have increasingly
sought accountability and value from their advertising agencies. This has
resulted in a reduction in the level of commissions and a move towards fee based
remuneration which is more closely based on the resources supplied by the
agency. There has also been an increasing use of performance-related elements in
remuneration.

Industry Trends

Separation of Media Services. As part of the process of demonstrating value and
accountability to clients, there has been a trend towards separation of media
services from creative services. Media planning and buying has become more
complex as a result of the wider choice of media, the increased availability of
audience measurement data and advances in information technology. This has
required increased investment in staff training, systems and software to analyze
media opportunities so as to provide maximum impact and lowest cost media buying
for clients. The trend towards media separation varies according to geographic
regions and client requirements.

Globalization and Industry Consolidation. Although the majority of advertising
expenditure is dedicated to local advertising campaigns, many advertisers have
expanded their brands internationally. To ensure consistent development of
brands around the world, some clients are choosing to align their brands with a
smaller number of advertising networks with greater international capabilities.
Furthermore, to improve the efficiency of the relationship with their agencies,
some clients are placing the advertising campaigns for a larger number of their
brands with fewer networks. Many industry observers expect that this trend will
continue and that there


                                       14
<PAGE>


will be further concentration in market share among the worldwide advertising
networks. These factors demonstrate the importance of a worldwide capability in
the advertising industry. As a result, there is a process of consolidation among
medium-sized agencies seeking to increase international coverage.

Integrated Marketing Services. Advertising is one part of the promotional
marketing mix and is supported by a number of other marketing activities
including sales promotion, direct and interactive marketing, event marketing,
sponsorship, packaging design, point-of-sale display and public relations
activity. Many clients continue to seek out agencies that utilize an integrated
approach to developing marketing solutions because of their ability to deliver a
unified message across all media resulting in greater consumer impact and better
sales results.

Corporate Outsourcing. The drive for greater productivity within the North
American business community has led many corporations to downsize their internal
marketing departments and to outsource more of their marketing needs. In the
past, these internal marketing departments would oversee and control the overall
direction of a company's marketing messages and retain specialist firms such as
advertising agencies, corporate identity firms, product packaging designers,
direct mail specialists and others, to assemble components of the overall
marketing campaign. As a result of the reduction of internal marketing personnel
it has become increasingly difficult for many corporations to coordinate the
work of a large number of individual contractors and to ensure the production of
uniform and consistent marketing messages. This trend has and may continue to
result in the increased use of firms supplying integrated marketing
communications solutions.

Interactive Media. The emergence of new advertising vehicles such as Internet
websites provide real time, one-to-one communication with the consumer. This
process allows the consumer, as a result of the interactive process, to shape
the advertising messages that they receive and become more engaged by the
messages. Because the Internet enables advertisers to reach well-defined
audiences without paying the higher cost of traditional mass media, it may
increasingly become a cost-effective medium through which marketers can
establish a personal, two-way relationship with consumers.

The Emergence of the Internet as an Advertising Medium

         The Internet has emerged as an important mass medium for advertising,
direct marketing, communication and electronic commerce. International Data
Corporation ("IDC"), a firm specializing in on-line research and analysis,
estimates that Worldwide Web users numbered approximately 142 million in 1998
and will grow to more than 400 million in 2002. The rapid expansion of the
Internet has led to significant growth in electronic commerce. IDC estimates
that purchases of goods and services over the Internet will increase from
U.S.$50 billion in 1998 to U.S.$734 billion in 2002. The growth of the Internet
generally and of electronic commerce in particular has spurred traditional
businesses to devote larger portions of their marketing budgets to Internet
advertising, and has prompted Internet and electronic commerce companies to
increase their spending on Internet advertising. Jupiter Communications, another
on-line research firm, projects that on-line advertising revenues in the United
States (excluding direct marketing) will grow from U.S.$1.9 billion in 1998 to
U.S.$7.7 billion in 2002. Simba Information Inc. ("Simba"), a web advertising
analyst, reported that on-line advertisers spent U.S.$1.3 billion on on-line
advertising during the first three quarters of 1998 based upon data from the
Internet Advertising Bureau, a trade association. In addition, Simba reported
that consumer products companies spent more money on on-line advertising than
computer industry


                                       15
<PAGE>


companies for the first time during the third quarter of 1998. It opined that
one reason for such growth in on-line advertising is the changing nature of
Internet users to more accurately reflect the demographics of the general
public. For example, significantly higher percentages of women and middle income
users are accessing the Internet. Simba estimates that on-line advertising will
grow to U.S.$7.1 billion in 2002.

Item 2. Description of Property

                  Envoy's principal executive offices consist of a five-story
office building of approximately 36,000 square feet located at 26-28 Duncan
Street, Toronto, Ontario, Canada. The offices are leased pursuant to a lease
with an initial term of five years expiring on September 30, 2002 and an initial
rent of $180,000 Cdn. per annum. The lease may be renewed by Envoy on six months
prior written notice for a first option term of three years, a second option
term of two years and a third option term of five years at specified increased
rents per each renewal period. In connection with the lease negotiation, the
landlord advanced to Envoy $400,000 Cdn. as a loan, with an interest rate of
0.925% per annum, for leasehold improvements, to be repaid over five years which
repayment commenced October 1, 1997. The leasehold improvements involved
modernization of the facilities and other modifications expected to benefit both
Envoy and the landlord. The principal balance of such loan at September 30, 1999
was $260,380 Cdn.

                  The offices of Envoy's wholly-owned subsidiary Devlin are
currently located at 185 Fredrick Street, Ground 100, Toronto, Ontario, Canada.
The premises are leased pursuant to a lease with a current annual rent of
$56,976 Cdn. which expires in July 2002.

                  Envoy relocated its Fusion division as well as certain Watt
Group employees in December 1999 to a 20,000 square foot office space at 172
John Street, Toronto, Ontario. These premises have been leased pursuant to a
lease with a term which commenced on July 1, 1999 and expires in June 2002, and
an initial annual rent of $120,000 Cdn. which rent increases each year of the
lease term. The lease may be renewed by Envoy on six months prior written notice
for three further terms of two years for the first option and five years for the
second and third options at specified increased rents for each year of the
renewal terms. In connection with the lease negotiation, the landlord has agreed
to advance to Envoy $750,000 Cdn. as a loan, with an interest rate of 3.5% per
annum to be repaid over 10 years (or upon Envoy vacating the premises, if
earlier) and secured by all trade fixtures of Envoy located in the premises, to
finance a portion of the costs that Envoy anticipates incurring in connection
with moving to, and making improvements upon, the premises. The leasehold
improvements involve modernization of the facilities and other modifications
expected to benefit both Envoy and the landlord.

                  The executive offices of Envoy's wholly-owned subsidiary,
Hampel Stefanides, are located at 111 Fifth Avenue, New York, New York. The
offices consist primarily of (i) 16,000 square feet of office space leased
pursuant to a lease (the "HSI Lease") that expires in June 2004 with a current
annual rent of approximately U.S.$324,000 which annual rent increases each year
of the lease term; and (ii) 2,500 square feet of office space leased pursuant to
a sublease that expires in January 2001 with a current annual rent of
approximately U.S.$58,000 which annual rent increases each year of the sublease
term. The HSI Lease requires Hampel Stefanides to maintain a letter of credit in
the amount of U.S.$250,000, secured by a restricted cash deposit, to serve as a
security deposit.


                                       16
<PAGE>

Item 3. Legal Proceedings

                  Envoy is not a party, and its property is not subject, to any
material legal proceedings, and to the best of Envoy's knowledge, no material
legal proceedings involving Envoy or its property are contemplated by government
authorities.

Item 4. Control of Registrant

                  Ownership of Envoy's securities are recorded on the books of
its transfer agent in registered form, however the majority of such shares are
registered in the name of intermediaries such as brokerage firms and clearing
houses on behalf of their respective clients and in general Envoy does not have
knowledge of the beneficial owners thereof, except for the beneficial ownership
by officers and directors of Envoy. Envoy is not directly or indirectly owned or
controlled by another corporation or entity or by any foreign government. Envoy
is not a party to any arrangement, and does not know of any other arrangements,
the operation of which may at a subsequent date result in a change in control of
Envoy.

                  As of January 31, 2000, Envoy had an authorized share capital
of 50,000,000 common shares without par value, of which 18,456,505 shares were
issued and outstanding.

                  The following table sets forth certain information regarding
the ownership of outstanding common shares of Envoy as of January 31, 2000 with
respect to (1) each person known by Envoy to be the owner either of record or
beneficially of more than 10% of the issued and outstanding common shares of
Envoy, and (2) all executive officers and directors of Envoy as a group (8
persons). As used in this table, "beneficial ownership" refers to the sole or
shared power to vote or direct the voting or to dispose or direct the
disposition of any security. A person is deemed to be the beneficial owner of
securities that can be acquired within 60 days from the date of this Form 20-F
through the exercise of any option, warrant or right. Common shares subject to
options, warrants or rights which are currently exercisable or exercisable
within 60 days are deemed outstanding for computing the ownership percentage of
the person holding such options, warrants or rights, but are not deemed
outstanding for computing the ownership percentage of any other person.


<TABLE>
<CAPTION>
    Identity of Person or Group                   Amount Owned                       Percent of Class
    ---------------------------                   ------------                       ----------------
<S>                                               <C>                                <C>
CDS & Co1......................                     14,037,268
NCI Account                                                                                76.06%
P.O. Box 1038 Station A
25 The Esplanade
Toronto, Ontario  M5W 1G5

Cede & Co./1...................                      1,856,168                             10.06%
P.O. Box 20
Bowling Green Station
New York, NY  10274
USA
</TABLE>


                                       17
<PAGE>

<TABLE>
<S>                                               <C>                                <C>
All executive officers and
directors as a group (8 persons)2                    1,870,240                              9.87%
</TABLE>

-------------------------------------
/1      CDS & Co. and Cede & Co., respectively, are the record holders of these
shares and in general the ultimate beneficial owners of these shares are not
known to Envoy.

/2      Includes common shares held by certain family members or personal
companies of certain executive officers or directors of Envoy.

                  See Item 12 "Options to Purchase Securities from Registrant or
Subsidiaries" for information regarding outstanding options to purchase
1,902,667 common shares and certain other rights to purchase up to 2,295,184
common shares of Envoy.



                                       18
<PAGE>


                  Under the applicable Canadian provincial securities laws,
insiders (generally officers and directors of the Registrant and its
subsidiaries) are required to file individual insider reports of changes in
their ownership in the Registrant's securities within 10 days following any
trade in Envoy's securities. Copies of such reports are available for public
inspection at the offices of the British Columbia Securities Commission, Suite
1100, 865 Hornby Street Vancouver, British Columbia V6Z 21-14 (telephone
604/660-4800), at the offices of the Alberta Securities Commission, 410-300 5th
Avenue, S.W., Calgary, Alberta T2P 3C4 (telephone 403/297-6454), at the offices
of the Quebec Securities Commission, Stock Tower Exchange, 800 Victoria Square,
Montreal, Quebec M42 1G3 (telephone 514/940-2150) and at the offices of the
Ontario Securities Commission, 20 Queen Street West, 18th Floor, Toronto,
Ontario M5H 358 (telephone 416/597-0681).

Item 5. Nature of Trading Market

                  The principal trading market for Envoy's common shares is the
Toronto Stock Exchange (the "TSE"). The common shares are traded under the
symbol "ECG". The common shares began trading on the TSE on September 3, 1997.
From March 1984 until September 2, 1997 Envoy's shares traded on the Vancouver
Stock Exchange. The common shares are not traded on any U.S. exchange or in any
U.S. over-the-counter market.

                  The following tables set forth the reported high and low sale
prices in Canadian dollars and total volume of trading for the common shares on
the TSE for the quarterly periods indicated.


                                     High             Low         Vol (100's)
                                     ----             ---         -----------
Fiscal 1998

First Quarter                        4.40            3.37              1,865

Second Quarter                       4.68            3.50              3,009

Third Quarter                        4.67            3.35              2,224

Fourth Quarter                       4.05            3.50              1,537

Fiscal 1999

First Quarter                        4.50            3.85              3,006

Second Quarter                       4.35            3.40              3,348

Third Quarter                        8.70            4.10             11,754

Fourth Quarter                       9.20            5.65              7,666

Fiscal 2000

First Quarter                       10.00            4.80              8,549

                  On January 31, 2000, the closing price of the common shares as
reported on the TSE was $8.00 Cdn. As of January 31, 2000, there were 18,456,505
outstanding common shares of Envoy of which 16,563,272 were held of record by
Non-U.S. residents and 1,893,233 of


                                       19
<PAGE>


which were held of record by 94 U.S. residents. The foregoing information
regarding the number and the country of residence of Envoy's shareholders does
not reflect those shareholders whose shares are being held of record by
brokerage clearing houses and in general the ultimate beneficial owners of these
shares are not known to Envoy.

                  In connection with Envoy's acquisitions of Promanad and the
Watt Group, certain of the Envoy shares payable in consideration for such
acquisitions were deposited into, and remain in, escrow. The purpose of the
escrow arrangements is to restrict transferability of the shares pending certain
earn-out or other provisions discussed below.


                  99,946 shares are being held in escrow in connection with the
Promanad acquisition and will be released in part to the beneficial owners from
time to time until May 31, 2000 (or within 60 days thereafter) based upon
satisfaction of predetermined performance targets for the transferred client
relationships. Any shares not so released will be returned to Envoy. In
accordance with the escrow agreement, upon release from escrow to the beneficial
owners, the beneficial owners shall be entitled to receive all dividends or
distributions made with respect to the escrowed shares. These escrow shares are
not reflected as issued and outstanding share capital in the audited financial
statements of Envoy at September 30, 1999, but will be reflected in Envoy's
financial statements when earned and released from escrow.


                  Effective as of May 1, 1999, Envoy purchased the shares in the
capital of the Watt Group in exchange for cash and 100,000 common shares of
Envoy. The 100,000 shares of Envoy are being held in escrow and will be released
in part to the beneficial owner from time to time until June 17, 2002. The
periodic release of the escrowed shares is conditioned on the performance of a
3-year strategic alliance agreement between the Watt Group and Deuteronomy Inc.,
a Toronto-based provider of retail and manufacturing consulting services, the
principal of which is Donald G. Watt, a Director of Envoy. The 100,000 escrow
shares are reflected as issued and outstanding share capital of Envoy from and
after the closing of the Watt Group acquisition.

                  Effective as of March 1, 1999, the TSE accepted Envoy's Notice
of Intention to make a normal course issuer bid. Envoy indicated its intention
to acquire, through the facilities of the TSE, up to 500,000 of its common
shares for cancellation during the 12-month period commencing March 3, 1999. As
of January 31, 2000, no common shares have been so acquired for cancellation.

                  See Item 12 "Options to Purchase Securities from Registrant or
Subsidiaries" for information regarding outstanding options to purchase
1,902,667 common shares and certain other rights to purchase up to 2,295,184
common shares of Envoy.

Item 6. Exchange Controls and Other Limitations Affecting Security Holders

                  There is no governmental law, decree or regulation in Canada
that restricts the export or import of capital, or that affects the remittance
of dividends, interest or other payments to a non-resident holder of common
shares of Envoy, other than withholding tax requirement. See Item 7 "Taxation."

                  There is no limitation imposed by the laws of Canada, the laws
of Ontario or British Columbia or by the charter or other constituent documents
of Envoy on the right of a non-resident to hold or vote common shares of Envoy,
other than as provided in the Investment


                                       20
<PAGE>


Canada Act (Canada) (the "Investment Act"). The following discussion summarizes
the material provisions of the Investment Act which relate to the acquisition by
a non-resident of common shares of Envoy. This summary is not a substitute for
independent advice from an investor's own advisor, and it does not take into
account any future statutory or regulatory amendments.

                  The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture that is not a "Canadian" as
defined in the Investment Act (a "non-Canadian"), unless after review the
minister responsible for the Investment Act (the "Minister') is satisfied that
the investment is likely to be of net benefit to Canada. An investment in common
shares of Envoy by a non-Canadian other than an "NAFTA Investor" (as that term
is defined in the Investment Act and which term generally means American and
Mexican nationals ("NAFTA" refers to the North American Free Trade Agreement of
1993)) at any time Envoy is not controlled by a NAFTA Investor, is reviewable
under the Investment Act if the investment is to acquire control of Envoy and
the value of the assets of Envoy is $5,000,000 or more, or if an order for
review is made by the Federal Cabinet on the grounds that the investment relates
to Canada's cultural heritage or national identity. An investment in common
shares of Envoy by a NAFTA Investor, or by a non-Canadian at any time Envoy is
controlled by a NAFTA Investor, is reviewable under the Investment Act if the
investment is to acquire control of Envoy and the value of the assets of Envoy
is not less than Cdn. $150,000,000 in terms of "constant 1991 dollars", which
for 1999 is Cdn. $184,000,000. A non-Canadian would acquire control of Envoy for
the purposes of the Investment Act if such investor acquired a majority of the
common shares of Envoy unless it could be established that, on the acquisition,
Envoy was not controlled in fact by the acquiror through the ownership of common
shares.

                  Certain transactions relating to common shares of Envoy would
be exempt from the Investment Act including:

         (a)               an acquisition of common shares of Envoy by a person
                  in the ordinary course of that person's business as a trader
                  or dealer in securities,

         (b)               an acquisition of control of Envoy in connection with
                  the realization of security granted for a loan or other
                  financial assistance and not for a purpose related to the
                  provision of the Investment Act,

         (c)               an acquisition of control of Envoy by reason of an
                  amalgamation, merger, consolidation or corporate
                  reorganization following which the ultimate direct or indirect
                  control in fact of Envoy through the ownership of common
                  shares, remained unchanged,

         (d)               an acquisition of voting interests by any person in
                  the ordinary course of a business carried on by that person
                  that consists of providing, in Canada, venture capital on
                  terms and conditions not inconsistent with such terms and
                  conditions as may be fixed by the Minister, and

         (e)               an acquisition of control of a Canadian business for
                  the purpose of facilitating its financing and not for any
                  purpose related to the provisions of the Investment Act on the
                  condition that the acquirer divest itself of control within
                  two years after it is acquired or within such longer period as
                  is approved by the Minister.


                                       21
<PAGE>

Item 7. Taxation

                  The following discussion is intended to be a general
description of the Canadian federal income tax considerations material to the
ownership of common shares to specified persons and entities and is not intended
to be, nor should it be construed to be, legal or tax advice, and no opinion or
representation with respect to the income tax consequences is made. It does not
take into account any particular party's individual circumstances and does not
address consequences peculiar to any party subject to special provisions of
Canadian income tax law. Therefore, individuals should consult their own tax
advisors with respect to the tax consequences of an investment in the common
shares.

                  The following summary is based upon the current provisions of
the Income Tax Act (Canada) (the "ITA") and the regulations thereunder, all
proposed amendments to the ITA and the regulations thereunder publicly announced
by the Department of Finance, Canada prior to the date hereof, the current
published administrative and assessing practices of Revenue Canada, the
Canada-United States Income Tax Convention (1980) (the "Convention") and
amendments thereto. Except for the foregoing, this summary does not take into
account or anticipate changes in the law or the administrative or assessing
practices of Revenue Canada whether by legislative, governmental or judicial
action and does not take into account or anticipate provincial, territorial or
foreign tax considerations.

                  The summary relates to the principal Canadian income tax
considerations under the ITA and the regulations thereunder generally applicable
to purchasers of common shares who: (i) for purposes of the ITA, are not, have
not been and will not be or be deemed to be resident in Canada at any time while
they held or hold common shares, deal at arm's length with Envoy, will hold
their common shares as capital property, do not use or hold, and will not and
will not be deemed to use or hold their common shares in, or in the course of
carrying on a business in Canada, and are not "financial institutions" for the
purposes of the mark-to-market rules, and (ii) for purposes of the Convention,
are residents of the U.S. and not residents of Canada and will not hold their
common shares as part of the business property of, or so that their common
shares are effectively connected with, a permanent establishment or in
connection with a fixed base in Canada (a "U.S. Holder").

                  Amounts in respect of common shares paid or credited or deemed
to be paid or credited as, on account or in lieu of payment of, or in
satisfaction of, dividends to a U.S. Holder will generally be subject to
Canadian non-resident withholding tax. Such withholding tax is levied at a rate
of 25%, which may be reduced pursuant to the terms of the Convention. Under the
Convention, the rate of Canadian non-resident withholding tax on the gross
amount of dividends beneficially owned by a U.S. Holder is 15%. However, where
such beneficial owner is a company which owns at least 10% of the voting stock
of Envoy, the rate of such withholding is 5%.

                  A U.S. Holder will not be subject to tax under the ITA in
respect of any disposition of common shares unless at the time of such
disposition such common shares constitute "taxable Canadian property" of the
holder for purposes of the ITA. If the common shares are listed on a prescribed
stock exchange, such as the TSE on which Envoy's shares are listed, for the
purposes of the ITA at the time they are disposed of, they will generally not
constitute "taxable Canadian property" of the U.S. Holder at the time of a
disposition of such shares unless at any time during the five year period
immediately preceding the disposition of the common shares, 25% or more of the
issued shares of any class or series of Envoy, or an interest


                                       22
<PAGE>


therein or an option in respect thereof, was owned by the U.S. Holder, by
persons with whom the U.S. Holder did not deal at arm's length or by the U.S.
Holder and persons with whom the U.S. Holder did not deal at arm's length. The
common shares may also be taxable Canadian property in certain other
circumstances. Under the Convention, gains derived by a U.S. Holder from the
disposition of common shares that constitute "taxable Canadian property" will
generally not be taxable in Canada unless the value of the common shares is
derived principally from real property situated in Canada.

Item 8. Selected Financial Data/1

Selected Financial Data


                  The following table sets forth in Canadian dollars selected
financial data for Envoy for the fiscal years indicated below prepared in
accordance with Canadian generally accepted accounting principles unless
otherwise noted. The following selected financial data should be read in
conjunction with the more detailed financial statements and the related notes
thereto appearing elsewhere in this Form 20-F and the discussion under Item 9
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" herein. The statements of operations data of Envoy for the fiscal
years ended September 30, 1996 and 1995 and the balance sheet data of Envoy as
of September 30, 1996 and 1995 are derived from financial statements of Envoy
that have been audited by BDO Dunwoody LLP, independent public accountants,
which are not included in this Form 20-F. The selected financial data does not
include statements of operations data or balance sheet data of any acquired
operations prior to their respective acquisition effective dates.



<TABLE>
<CAPTION>
                                                                        September 30,
                                        ---------------------------------------------------------------------------
                                             1999/1          1998/2         1997          1996              1995
                                        ---------------------------------------------------------------------------
                                              (all amounts in 000s of Canadian dollars, except per share data)

<S>                                      <C>               <C>           <C>           <C>         <C>
Statement of Operations Data:

Revenue...............................   $138,331          $37,844       $23,444       $16,057     $  11,900

Gross Margin..........................     41,787           13,491         8,675         5,426         3,371

Net Income (Loss).....................      2,877            1,503         1,179           400          (343)

Net Income (Loss) per Share/3, /4.....      $0.20            $0.15         $0.12         $0.06         $(.09)
</TABLE>


----------
         1/ The financial statements of Envoy are prepared in accordance with
Canadian Generally Accepted Accounting Principles ("Canadian GAAP"), which
differs in certain significant respects from U.S. Generally Accepted Accounting
Principles ("U.S. GAAP"). Reconciliation to U.S. GAAP is set forth in Note 16 to
the Notes to the audited Financial Statements of Envoy as well as in Note 4 to
the following table. Envoy's results of operations under U.S. GAAP for the years
ended September 30, 1999, 1998 and 1997 are as disclosed in Note 16 to the Notes
to the audited Financial Statements of Envoy as well as in Note 4 below.



                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                        September 30,
                                        ---------------------------------------------------------------------------
                                             1999            1998            1997            1996            1995
                                        ---------------------------------------------------------------------------
                                                         (all amounts in 000s of Canadian dollars)

<S>                                      <C>               <C>           <C>           <C>         <C>
Balance Sheet Data:

Current Assets........................     47,233          15,684           6,352           3,129           1,912

Total Assets..........................     78,460          25,330           8,709           4,529           3,361

Long Term Debt5.......................      2,151             223               -               -             300

Shareholders' Equity..................     40,612          13,317           3,937           2,343             263

Retained Earnings (Deficit)/6.........     $5,493          $2,682          $1,179         $(9,887)       $(10,287)
</TABLE>



----------
/1       The Statement of Operations Data for the year ended September 30, 1999
includes the results of operations of Hampel Stefanides, acquired effective as
of October 1, 1998, for the entire twelve month period, the results of
operations of Devlin, acquired effective as of January 1, 1999, for the nine
month period from January 1, 1999 to September 30, 1999 and the results of
operations of the Watt Group, acquired effective as of May 1, 1999, for the five
month period from May 1, 1999 to September 30, 1999. See Item 1 "Description of
Business - Envoy - Development of the Business" for a description of such
acquisitions. The exchange rate utilized with respect to the Statement of
Operations Data of Hampel Stefanides is $1.00 U.S. to $1.5029 Cdn. and with
respect to the Balance Sheet Data of Hampel Stefanides is $1.00 U.S. to $1.4674
Cdn. Except as set forth in footnote 2, no other acquisitions by Envoy
materially affect the comparability of the information in the Selected Financial
Data.


/2       The Statement of Operations Data for the year ended September
30, 1998 includes the results of operations for the four month period from June
1, 1998 to September 30, 1998 of Promanad, acquired effective as of June 1,
1998. See Item 1 "Description of Business - Envoy - Development of the Business"
for a description of such acquisition. Except as set forth in footnote 1, no
other acquisitions by Envoy materially affect the comparability of the
information in the Selected Financial Data.

/3       Reflects a five-for-1 reverse stock split effected in December 1995.


/4       As reflected in Note 16 to the Notes to the audited Financial
Statements of Envoy, in accordance with the reconciliation to U.S. GAAP set
forth therein, the diluted net income per share for the years ended September
30, 1999, 1998 and 1997 was $0.12, $0.08 and $0.25, respectively.



/5       Long term debt represents only the long term portion of total debt.



/6       During 1997, the share capital of Envoy was reduced by $9,886,961
pursuant to a special resolution of the shareholders dated August 15, 1997. The
reduction in share capital was applied against the opening deficit of
$9,886,961. See Note 10 to the Notes to the audited Financial



                                       24
<PAGE>



Statements of Envoy. Retained earnings as at September, 1999 excludes the
cumulative foreign currency translation adjustment of $494,844. See Note 1(g) to
the Notes to the audited Financial Statements of Envoy.



                  Envoy has never paid any dividends on its common shares and
does not anticipate that it will pay any cash dividends on its common shares in
the foreseeable future.

Exchange Rates

                  On February 9, 2000, the noon buying rate for Canadian dollars
as reported by the Federal Reserve Bank of New York was $1.00 U.S. to 1.443 Cdn.
The following table sets forth for the periods indicated certain information
regarding the exchange rate into U.S. currency of Canadian dollars. The rate of
exchange means the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve Bank
of New York.

<TABLE>
<CAPTION>
                                                          September 30,
                          ---------------------------------------------------------------------------
                               1999            1998            1997            1996            1995
                          ---------------------------------------------------------------------------

<S>                           <C>             <C>             <C>             <C>              <C>
Period End                    1.3509          1.3694          1.3872          1.5176           1.4695

Average*                      1.3739          1.3641          1.3702          1.5265           1.5033

High                          1.4130          1.3752          1.3942          1.5452           1.5570

Low                           1.3503          1.3458          1.3381          1.4977           1.4512
</TABLE>

*        The average rate means the average of the exchange rates on the last
day of each month during the fiscal period.

Item 9. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

                  The following discussion should be read in conjunction with,
and is qualified in its entirety by, the financial statements of Envoy and notes
relating thereto included elsewhere in this Form 20-F. The information contained
in this Item 9 refers to financial statements of Envoy which are presented in
Canadian dollars and are prepared in accordance with Canadian GAAP. Canadian
GAAP differs in certain significant respects from U.S. GAAP. Reconciliation to
U.S. GAAP is set forth in Note 16 to the Notes to the audited Financial
Statements of Envoy. Historical results of operations, percentage relationships
and any trends that may be inferred therefrom are not necessarily indicative of
the operating results of any future period.

                  The following discussion contains forward-looking statements
that are subject to significant risks and uncertainties. There are a number of
important factors that could cause actual results to differ materially from
historical results and percentages and results anticipated by the
forward-looking statements contained in the following discussion. Statements in
this Form 20-F concerning Envoy's outlook or future economic performance,
anticipated profitability, revenues, commissions and fees, expenses or other
financial items and statements made with respect to any future events,
conditions, performance or other matters are "forward


                                       25
<PAGE>


looking statements" as that term is defined under the U.S. federal securities
laws. Forward-looking statements are subject to risks, uncertainties, and other
factors which could cause actual results to differ materially from those stated
in such statements. Such risks, uncertainties and factors include, but are not
limited to, (i) the uncertain acceptance of the Internet and Envoy's Internet
and other e-marketing communications services, (ii) that Envoy has grown rapidly
in the last several years and there can be no assurance that Envoy will continue
to be able to grow profitably or manage its growth, (iii) risks associated with
acquisitions, (iv) risks associated with competition, (v) that Envoy's quarterly
operating results have fluctuated in the past and are expected to fluctuate in
the future, and (vi) that the loss of services of certain key individuals could
have a material adverse effect on Envoy's business, financial condition or
operating results.

Overview

                  Envoy is an integrated marketing communications company which
is focusing upon its rapidly growing integrated e-marketing communications
services business. A significant percentage of Envoy's business is from
"e-marketing communications services". Based on information available to it,
management believes that this percentage increased in fiscal 1999 compared to
fiscal 1998 and in fiscal 1998 compared to fiscal 1997. "e-marketing
communications services" in this Form 20-F refers to Envoy's services, whether
on or off-line, performed for its clients' Internet businesses and businesses
related to the Internet, together with Envoy's on-line services performed for
its other clients. Such activities include on-line advertising and promotions,
branding, the design, development and maintenance of its clients' websites,
research and strategic consulting regarding e-marketing, creating advertising
and other promotional programs, whether or not on-line, designed to drive
traffic to its clients' websites, to sell goods and services on the clients'
websites or to promote its clients' Internet related businesses, the development
of proprietary interactive software and on-line media planning and buying.
Examples of Envoy's e-marketing communications services activities include:

                  o                 Developing websites for BASF Canada
                           Incorporated, Clublink Corporation, Federal Express
                           Canada Inc., Lante Corporation, Lucent Canada,
                           Make-Up Artists Co. (d/b/a MAC), Microsoft Canada,
                           Ontario Hydro, Oxford Properties, Public Works and
                           Government Services Canada and Toshiba Canada./1

                  o                 Print advertising and television commercials
                           for National Discount Brokerage, an on-line brokerage
                           company.

                  o                 Print, outdoor and on-line advertising for
                           Microsoft hotmail.

                  o                 Print, outdoor and on-line advertising for
                           MSN, one of Canada's leading portals.

                  o                 On-line strategy and creative for CIBC.



----------
         /1 None of these clients contributed 10% or more to Envoy's gross
margin during the fiscal year ended September 30, 1999. Envoy has decided not to
rebid for the Microsoft Canada account. Envoy's contract with Microsoft Canada
ended on April 3, 2000.



                                       26
<PAGE>

                  o                 Network television commercials for CDNow, an
                           on-line retailer of music CDs and other products,
                           including original airing of commercials on the 1999
                           Grammys(C) television award show.

                  Envoy estimates that e-marketing communications services
represented 32% ($13.4 million) of Envoy's gross margin in fiscal 1999, a 28%
increase over 25% ($3.4 million) of Envoy's gross margin in fiscal 1998. A
substantial majority of these services are provided by means other than
interactive digital services. Envoy's business plan anticipates that the dollar
amount of its gross margin derived from e-marketing communications services will
continue to increase for the foreseeable future. Envoy's e-marketing
communications services are provided by means of its advertising services as
well as its other services.

                  Through its subsidiaries, Envoy provides integrated
advertising services, including creative concept development, branding, off-line
and on-line advertising production and the planning and buying of space and
airtime in off-line and on-line media. Envoy believes that it is one of the
largest purchasers of Internet advertising in Canada based upon publicly
available industry data as well as Envoy's own dealings with Canadian sellers of
Internet advertising space. Envoy's advertising services have been provided
primarily by the Communique Advertising division of its Communique Group. In the
case of many clients, the Communique Group is retained as the "Agency of
Record." The Communique Advertising division combined with the advertising group
of Promanad effective as of June 1, 1998. In addition, effective as of October
1, 1998, Envoy acquired Hampel Stefanides, an e-marketing communications
services and advertising company based in New York City. In addition to its
advertising and e-marketing communications services, Envoy provides event
marketing, including corporate meeting and conference planning, group travel and
incentive coordination through its Communique Live division; corporate identity,
branding and graphic design services through its Fusion division, which is the
combination of the design groups of the Communique Group and Promanad; public
relations services through its Communique Public Relations division, acquired as
part of the Promanad acquisition; and interactive digital communications
services, including multi-media development and Internet website design and
maintenance through Devlin, a website design and development company acquired by
Envoy effective as of January 1, 1999, which was combined with Envoy's
interactive division. Historically, substantially all Envoy's services have been
rendered in the Canadian marketplace. Envoy's clients include major Canadian
businesses and the Canadian operations of international corporations. Envoy
operates in one business segment located in Canada.


                  Revenues. Envoy's revenues represent amounts billable by Envoy
to clients, in respect of both agency and non-agency services, which include (i)
Envoy's compensation for its services as discussed below, and (ii) the recovery
of pass-through of costs (pass-through costs representing Envoy's cost of sales)
incurred on behalf of clients such as media and production costs as discussed
below. Under the terms of its contracts with most, but not all, of its clients,
Envoy pays for and passes through to its clients the costs of the clients' media
placements and related expenses, as described below; in such capacity Envoy is
providing agency services. Accordingly, the amount of Envoy's revenues depends
in large part, upon whether Envoy is to provide such services. Envoy's revenues
do not equate to "billings", a term commonly used to measure the size of
advertising agencies. For instance, "billings" generally includes all media
costs, including those paid for directly by the client.


                  Costs of Sales. Costs of sales represents costs incurred on
behalf of and passed through to clients primarily for (i) third party media
space or time for the client's advertisements


                                       27
<PAGE>

in cases where Envoy performs media buying services for the client, (ii)
external costs associated with the design and production of print advertisements
and broadcast commercials, and (iii) third party vendor costs in connection with
meetings, conferences and special events planned by Envoy including for talent,
catering, group travel and accommodations. Media placements costs have
historically comprised the largest component of costs of sales.


                  Gross Margin. Envoy's gross margin represents its compensation
for its services. A portion of Envoy's compensation from its agency or
advertising services is generated from non-refundable monthly agency fees and
the balance is from commissions. Envoy's compensation from its non-agency or
"project related" services are primarily generated from project fees and hourly
charges. Gross margin equals Envoy's revenues less its costs of sales.



                  Operating Expenses. Salaries and benefits and general and
administrative costs represent Envoy's two largest operating expenses. Salaries
and benefits expenses include salaries, employee benefits, incentive
compensation and other payroll related costs, which are expensed as incurred.
General and administrative costs include business development, office costs and
professional services.



                  Recognition Policies. In general, Envoy recognizes its
compensation for its services as follows. Fees earned for non-agency services
are recognized upon the performance of Envoy's services when Envoy earns a per
diem fee or, in the case of a fixed fee, upon substantial completion of Envoy's
services and acceptance by the client. Non-agency fees billed to clients in
excess of fees recognized as revenue are recorded as deferred revenue.
Non-agency fees earned but not yet billed are recorded in accounts receivable.



                  When Envoy's compensation for its agency services are
commission based, commissions earned from advertising placed with media are
recognized at the time the advertising appears or is broadcast or, in respect of
on-line advertising, either ratably over the period of time the advertising
appears or based on the actual impressions delivered at the contractual rate per
impression, depending on the terms of the arrangement. Commissions earned for
production expenditures are recognized upon completion by Envoy of its services
and acceptance by the client. When Envoy's compensation for its agency services
are fee based, non-refundable monthly agency fees are recognized in the month
earned.



                  In addition, revenue also includes the recovery of
pass-through costs incurred on behalf of clients, such as media and production
expenses, which are recognized in revenue in the case of media expenditures at
the time the advertisement appears or is broadcast, or in the case of on-line
advertising, either ratably over the period of time the advertising appears or
based on the actual impressions delivered, depending upon the terms of the
arrangement. In the case of production expenditures, the recovery of
pass-through costs are recognized as revenue upon completion by Envoy of the
services and acceptance by the client. Revenues are recognized only when the
collection of such revenue is considered probable. Pass-through costs related to
media are accrued and expensed in


                                       28
<PAGE>



cost of sales at the time the advertisement appears or is broadcast or in the
case of on-line advertising, either ratably over the period the advertising
appears or based on the actual impressions delivered, depending upon the terms
of the arrangement, for both being the time at which the related recovery of
pass-through costs are recognized in revenue. Those pass-through costs related
to production are accrued and recorded in work in process at the time the third
party suppliers render their services. Production pass-through costs are
expensed in cost of sales at the time the related recovery of such costs is
recognized in revenue. Billings for pass-through costs in excess of costs
incurred are included in deferred revenue. Work in process represents
pass-through costs incurred in excess of billings. Work in process does not
include internal salary costs as such costs are expensed as incurred.


                  Tax Matters. With respect to Envoy's 1997 and 1998 fiscal
years, Envoy had tax loss carryforwards sufficient to cover its Canadian income
tax liabilities. In 1999, Envoy fully utilized previous tax loss carryforwards
to reduce its Canadian income tax liability as set forth in Note 9 to the Notes
to the audited Financial Statements of Envoy.

Results of Operations

Year Ended September 30, 1999 compared to Year Ended September 30, 1998

                  Revenues. Revenues increased by 266% to $138.3 million from
$37.8 million. During fiscal 1999, Envoy completed three acquisitions: the
acquisition of Hampel Stefanides, a U.S. based advertising agency, effective as
of October 1, 1998; the acquisition of Devlin, a Toronto-based website design
and development company, effective as of January 1, 1999; and the acquisition of
the Watt Group, a Toronto-based provider of design, packaging and marketing
identity services to retailers, effective as of May 1, 1999. These acquisitions
were accounted for as purchases and Envoy's results of operations for fiscal
1999 include the acquired operations from the respective effective dates of the
acquisitions. In addition, Envoy completed the acquisition of Promanad, an
advertising agency, effective as of June 1, 1998. Envoy's results for fiscal
1999 include the acquired operations of Promanad although such acquired
operations are not included in Envoy's results for the first eight months of
fiscal 1998 which period ended prior to Promanad's effective acquisition date.
The acquired operations of Hampel Stefanides, Devlin and the Watt Group
accounted for approximately $84.2 million, or 84%, of the increase in revenues
in fiscal 1999.

                  Envoy's advertising business generated $117.8 million, or 85%,
of Envoy's revenues for fiscal 1999 compared to $32.4 million, or 86%, in fiscal
1998. The balance was generated from project related business.

                  Envoy's revenues increased due to both inclusion of revenues
from its business acquisitions as well as increased revenues from its existing
business in the advertising and project related areas, as to new accounts and
existing clients.


                  Envoy's accounts receivable increased by 153% to $27.2
million at September 30, 1999 from $10.8 million at September 30, 1998. Accounts
receivable represented 20% of revenue for the year ended September 30, 1999
compared to 19.2% of revenue for the year ended September 30, 1998, on a pro
forma basis after giving effect to the acquisition in June 1998 of Promanad. The
increase in accounts receivable is principally the result of the acquisition of
the Watt Group and Hampel Stefanides during fiscal 1999. As at September 30,
1999, accounts receivable in respect of Hampel Stefanides and the Watt Group
amounted to $10.7 million and



                                       29
<PAGE>



$4.1 million, respectively. Accounts receivable as a percentage of revenue for
the year ended September 30, 1999 is distorted by the fact that the Watt Group
was included only for the five month period of fiscal 1999 subsequent to its
acquisition. Had the Watt Group's results of operations been included in Envoy's
results of operations for the full fiscal year ended September 30, 1999, Envoy's
receivables as a percentage of revenue would have been approximately 18.6%.


                  Costs of Sales. Costs of sales increased as a percentage of
revenues to 70% in fiscal 1999 from 64% in fiscal 1998. The amount of the costs
of sales is dependent upon the nature of services provided by Envoy, in
particular whether or not such services include media buying. The amount of
media buying does not directly affect Envoy's gross margin.

                  Gross Margin. Gross margin increased by 210%, from $13.5
million in fiscal 1998 to $41.8 million in fiscal 1999. The acquired operations
of Hampel Stefanides, Devlin and the Watt Group accounted for approximately
$24.2 million, or 85%, of this increase in gross margin. The remaining increase
in gross margin was a result of an increase in gross margin in the advertising
business from existing operations by an amount equal to 18% of the overall gross
margin increase, offset by a decrease in gross margin in the project related
business from existing operations by an amount equal to 3% of the overall gross
margin increase. Increased gross margin in the advertising business from
existing operations was a product of expanded business from existing clients as
to 51%, and the effects of new accounts as to 49%.

                  Envoy's advertising business generated $28.4 million, or 68%,
of Envoy's gross margin in fiscal 1999, compared to $12.8 million, or 95%, in
fiscal 1998. The balance was generated from project related business.


                  Microsoft Canada represented 5.8% of Envoy's gross margin for
fiscal 1999 compared to 18% for fiscal 1998.


                  Operating Expenses. Operating expenses increased by 205% to
$36.3 million for fiscal 1999 from $11.9 million for fiscal 1998. As a
percentage of gross margin, operating expenses remained relatively constant at
87% for fiscal 1999 as compared to 88% for fiscal 1998. The primary reasons for
the increase in operating expenses was an increase in salaries and benefits of
$19.8 million, or 332%, an increase in general and administrative of $1.9
million, or 38%, an increase in occupancy costs of $1.5 million, or 353%, an
increase of depreciation of $981,000, or 212%, an increase of goodwill
amortization of $506,000, or 485%, and an increase in interest to $282,000 from
$20,000. The increase in salaries and benefits reflects staff of acquired
operations plus the additional management and client support personnel employed
to handle the continued growth and expanded operations throughout Envoy and
related recruiting and hiring costs. The additional general and administrative
expenses were largely due to expanded business development activities by Envoy's
existing business divisions as well as new and expanded business development
activity by the acquired businesses. Business development activities include new
business pitches to potential clients and existing clients with respect to new
products, services or their respective affiliates, client presentations,
advertising and promotion for Envoy, award entry fees and research. General and
administrative expenses decreased as a percentage of gross margin to 17% in
fiscal 1999 from 37% in fiscal 1998 largely due to operating synergies derived
from the combination of Envoy's existing business with its newly acquired
businesses. The additional depreciation was largely due to the depreciation of
the costs of Envoy's new office space into which it relocated during fiscal 1998
and depreciation of newly purchased capital equipment. The additional goodwill
amortization was largely due to



                                       30
<PAGE>


the increased amount of goodwill derived from acquisitions consummated during
fiscal 1999 and late fiscal 1998. The additional occupancy costs were largely
due to such relocation as well as the costs of offices of Hampel Stefanides and
Devlin. The additional interest was largely due to the credit facility
established by Envoy in October 1998 to fund the closing payments for the
acquisition of Hampel Stefanides.




                  Net Income. Primarily as a result of the foregoing factors,
net income increased by 91% to $2.9 million for fiscal 1999 from $1.5 million
for fiscal 1998.


Year Ended September 30, 1998 compared to Year Ended September 30, 1997

                  Revenues. Revenues increased by 61% to $37.8 million from
$23.4 million. During fiscal 1998, Envoy completed three acquisitions: the
acquisition of Promanad, an advertising agency, effective as of June 1, 1998;
the acquisition of 1300325 Ontario, Inc., operating as Infonautica, a digital
interactive services company, on June 30, 1998; and the acquisition of the
remaining 65% interest that Envoy had not owned in Vertex Communications
Limited, a digital interactive services company, on October 10, 1997. These
acquisitions were accounted for as purchases and Envoy's results of operations
for fiscal 1998 include the acquired operations from the respective effective
dates of the acquisitions. The acquired operations accounted for $9.3 million,
or 65%, of the increase of revenues in fiscal 1998. 61% of the increased
revenues from existing operations was derived from the advertising business, 25%
from corporate communications and conference planning and 14% from digital
communications.

                  Envoy's advertising business generated $28 million, or 74%, of
Envoy's fiscal 1998 revenues compared to $13.6 million, or 82%, of Envoy's
fiscal 1997 revenues. The balance was generated from revenues from its project
related areas, as to new accounts and existing clients.


                  Envoy's accounts receivable increased by 165% to $10.1 million
at September 30, 1998 from $3.8 million at September 30, 1997. Accounts
receivable represented 26% of revenue for the year ended September 30, 1998
compared to 16% for the year ended September 30, 1997. The increase in accounts
receivable was principally due to the acquisition of Promanad effective as of
June 1, 1998. On the date of acquisition, Promanad had approximately $6.0
million in accounts receivable. Had Promanad's results of operations been
included in Envoy's results of operations for the full fiscal year ended
September 30, 1998, Envoy's accounts receivable as a percentage of revenue would
have been approximately 17.6%, comparable to the percentage for 1997.


                  Costs of Sales. Costs of sales increased slightly as a
percentage of revenues to 64% in fiscal 1998 from 63% in fiscal 1997. The amount
of the costs of sales is dependent upon the nature of services provided by Envoy
and whether or not such services include media buying. The amount of media
buying does not directly affect Envoy's gross margin.

                  Gross Margin. Gross margin increased by 56% to $13.5 million
in fiscal 1998 from $8.7 million in fiscal 1997. The operations acquired in
fiscal 1998 accounted for $1.9 million, or 40%, of the increase in gross margin.
45% of the increased gross margin from existing operations was derived from the
advertising business and the balance from the project related area. Increased
gross margin in the advertising business from existing operations was a


                                       31
<PAGE>


product of expanded business from existing clients as to 36%, and the effects of
new accounts as to 64%.

                  Envoy's advertising business generated $7.6 million, or 56%,
of Envoy's fiscal 1998 gross margin, compared to $3.9 million, or 45%, in fiscal
1997.


                  Microsoft Canada represented 18% of Envoy's gross margin for
fiscal 1998 and fiscal 1997.


                  Operating Expenses. Operating expenses increased by 60% to $12
million for fiscal 1998 from $7.5 million for fiscal 1997. As a percentage of
gross margin, operating expenses increased to 89% for fiscal 1998 from 86% for
fiscal 1997. The primary reasons for the increase in operating expenses was an
increase in salaries and benefits of $3.3 million, or 122%, an increase in
general and administrative of $758,000, or 18%, an increase in occupancy costs
of $107,000, or 35%, and an increase of amortization of $350,000, or 165%. The
increase in salaries and benefits reflects the additional management and client
support personnel employed to handle the continued growth and expanded
operations throughout Envoy. The additional general and administrative expenses
were largely due to expanded business development activities. Business
development activities include new business pitches to potential clients and
existing clients with respect to new products, services or their respective
affiliates, client presentations, advertising and promotion for Envoy, award
entry fees and research. The additional occupancy costs and amortization were
largely due to the amortization of the costs of Envoy's new office space into
which it relocated during fiscal 1998.




                  Net Income. Primarily as a result of the foregoing factors,
net income increased by 27% to $1.5 million for fiscal 1998 from $1.2 million
for fiscal 1997.


Liquidity and Capital Resources

                  Envoy's principal capital requirements have been to fund
acquisitions and capital expenditures and for working capital purposes. Envoy
has met its liquidity needs in recent years through funds provided from
operating activities, equity offerings, and in connection with the acquisition
of Hampel Stefanides, from long-term borrowings as described below.

                  On May 11, 1999, Envoy issued 3,300,000 special warrants to
acquire common shares of Envoy for an aggregate purchase price of $18.2 million
Cdn. On August 12, 1999, each outstanding warrant was automatically exercised in
accordance with its terms for one Envoy common share for no additional
consideration. Of the proceeds (after deduction of agent's fee of $1.2 million
and expenses of the issue), $4.5 million was used to repay the credit facility
described below, $7.0 million was used to finance the acquisition of the assets
and business of Watt Design and the remainder is intended to be used for
acquisitions and general corporate purposes. See Item 1 "Description of Business
- Envoy - Development of Business" for a description of such acquisition.


                  Envoy had a working capital balance of $11.5 million and a
cash balance of $15.3 million at September 30, 1999 ($3.9 and $3.1 million,
respectively, at September 30, 1998). Net cash provided by operating activities
before any increase or decrease in non-cash operating working capital was $5.0
million for the year ended


                                       32
<PAGE>


September 30, 1999 and 2.1 million for the fiscal year ended September 30, 1998.


                  Hampel Stefanides has a letter of credit in the amount of
U.S.$250,000 to serve as a security deposit under the HSI Sublease. Such letter
of credit is secured by a restricted cash deposit. In addition, Envoy had other
restricted cash of $175,000 at September 30, 1999 ($0 at September 30, 1998)
representing customer deposits. See Note 3 to the audited Financial Statements
of Envoy.


                  In October 1998, Envoy established a $6 million credit
facility consisting of an operating facility with maximum credit available of $1
million and a $5 million term loan repayable over a three-year period. The
purpose of the credit facility was to supplement Envoy's working capital
position and assist with the acquisition of Hampel Stefanides. As of September
30, 1999, $3.5 million was outstanding under the credit facility. Additional
consideration of $1.7 million cash and 450,040 common shares was paid in
November 1999 in connection with the Hampel Stefanides acquisition based on its
results for fiscal 1999. Envoy may be required to pay additional cash
consideration in respect of the acquisition of Hampel Stefanides through
September 30, 2002 depending on the financial performance of Hampel Stefanides
for the fiscal years included therein.


                  Cash flow from operations as well as the availability of funds
under existing credit facilities and the net proceeds of its special warrant
offering are expected to provide Envoy with the liquidity to meet its current
foreseeable cash needs for at least the next year. Envoy intends to continue to
seek suitable businesses to acquire in furtherance of its expansion strategy.
Envoy may effectuate additional equity or debt financings to fund any such
acquisitions.

The Year 2000 Computer Risks

                  The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
Envoy's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. The failure to correct any such programs or hardware could result in
system failures or miscalculations causing disruptions of Envoy's operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. Envoy retained a
consultant to implement an assessment, remediation and testing program to ensure
that its information processing and other ancillary systems properly utilize
dates beyond December 31, 1999. Envoy has finished its remediation and
contingency planning and believes that its systems are year 2000 compliant.
Envoy has not experienced any material year 2000 related problems with its
systems to date.

                  Envoy conducts transactions and perform services that
interface directly with systems of its clients. There is no guarantee that the
systems of Envoy's clients or other companies on which Envoy's systems rely will
be timely converted and will not experience material business disruptions that
could affect Envoy as a result of the Year 2000 problem. Responses of clients
and third party suppliers to Envoy's inquiries indicated that they expected to
be compliant by the year 2000 based on their progress at the time of the
response. Although Envoy has not experienced any year 2000 related problems with
clients or third party suppliers to date, because of the uncertainty surrounding
third-party readiness there cannot be absolute assurance that the Year 2000
Issue will not materially and adversely impact Envoy's business operations.


                                       33
<PAGE>

Item 9A. Quantitative and Qualitative Disclosures About Market Risk

                  Except as described below, Envoy does not have any material
position or exposure with respect to any market risk sensitive instruments (as
defined in Item 9A in Form 20-F).

Interest Rates

                  Envoy's credit facility bears interest that is calculated at
floating rates. As a result, Envoy is vulnerable to changes in interest rates.

Foreign Exchange Rates

                  Effective as of October 1, 1998, Envoy acquired Hampel
Stefanides. As a result of this acquisition, a substantial portion of Envoy's
current income is earned in U.S. dollars. Moreover, effective as of January 1,
1999 and May 1, 1999, respectively, Envoy acquired Devlin and the Watt Group, a
significant portion of the clients of both of which are located in the U.S.
Therefore, Envoy's income is vulnerable to changes in the value of the U.S.
dollar relative to the Canadian dollar. In order to help reduce the risks
associated with this exposure, Envoy put into place a foreign exchange risk
management program during the third quarter of fiscal 1999. The objective of
this program is to hedge unwanted financial exposure arising from receipt of
revenues in U.S. dollars. This program consists of the purchasing of a series of
monthly forward foreign exchange contracts to sell U.S. dollars at specified
exchange rates. Envoy has chosen to hedge a significant portion, but not all, of
the expected U.S. cash flows, and therefore an exposure remains on the unhedged
portion. Significant fluctuations in relative currency values may adversely
affect Envoy's consolidated results of operations.

Item 10. Directors and Officers of Registrant

                  The following table sets forth certain information regarding
the directors and executive officers of Envoy as of January 31, 2000. Each
director is elected at the annual meeting of shareholders to serve until the
next annual meeting or until a successor is elected or appointed.


                                       34
<PAGE>

<TABLE>
<CAPTION>
                                                                    Positions
                     Name                                        Held with Envoy
                     ----                                        ---------------

<S>                                              <C>
Geoffrey B. Genovese                             President, Chief Executive Officer and Director

John H. Bailey/1, /2                             Secretary and Director

David Hull/1, /2                                 Director

Hugh Aird1                                       Director

Duncan Shirreff/2                                Director

Donald G. Watt                                   Director

Edwin B. Matthews                                Vice President, Integration

J. Joseph Leeder                                 Vice President and Chief Financial Officer
</TABLE>

------------------------------------------------

/1       Member of the Audit Committee.

/2       Member of the Compensation Committee.


                  The principal occupations and positions for the past five
years and, in certain cases, prior years of the directors and executive officers
of Envoy are as follows:

                  Geoffrey B. Genovese. Mr. Genovese founded The Incentive
Design Company Ltd., a business and marketing communications company, in 1981.
Envoy acquired IDC in July 1991. Mr. Genovese has been the President and Chief
Executive Officer of Envoy since October 1993 and a Director of Envoy since July
1991.

                  John H. Bailey. Mr. Bailey is a barrister and a solicitor who
has been in private practice since 1973. Mr. Bailey earned a Bachelor of
Commerce and a Bachelor of Laws degree from the University of Toronto and a
Master of Laws degree from York University. Mr. Bailey has been a Director of
Envoy since April 1994 and Secretary of Envoy since August 1997.

                  David Hull. Mr. Hull has been the President of Hull Life
Insurance Agencies Inc. since May 1991. Hull Life Insurance Agencies Inc.
specializes in estate planning and life and disability insurance. Prior thereto,
Mr. Hull served as Executive Vice President of Hull Life Insurance Agencies Ltd.
and Thomas I. Hull Insurance Ltd., members of The Hull Group of Companies. Mr.
Hull has been a Director of Envoy since January 1995.

                  Hugh Aird. Mr. Aird has been Chairman and Chief Executive
Officer of DRIA Capital Inc., a financial consulting company, since November
1998. From February 1995 to November 1998, Mr. Aird was the Vice-Chairman and a
Director of Merrill Lynch Canada Inc. (formerly Midland Walwyn Capital Inc.)
From February 1986 to 1996, Mr. Aird was President and Chief Executive Officer
of Trilon Securities Corporation, a securities firm. Mr. Aird


                                       35
<PAGE>


has been a Director of Envoy since August 1997. Mr. Aird has been a Director of
Invesprint Corporation, a label and packaging material manufacturer listed on
the TSE, since March 1996 and of Digital Processing Systems Inc., a designer,
manufacturer and marketer of electronic hardware and software listed on the TSE,
since May 1996.

                  Duncan Shirreff. Mr. Shirreff has been a Vice President of
Thomson Kernaghan & Co. Ltd., a full service brokerage firm, since September
1998. From March 1998 to September 1998, Mr. Shirreff was an investment banker
with Taurus Capital Markets, Ltd. and an investment banker with C.M. Oliver &
Company Limited from January 1994 to March 1998. Prior thereto Mr. Shirreff was
a Director of Deacon, Barclays, DeZoet, Wedd, a full service brokerage firm. Mr.
Shirreff has been a Director of Envoy since November 1998.

                  Donald G. Watt. Mr. Watt became a director of Envoy in June
1999. Mr. Watt founded the predecessor to Watt Design in 1966 and served as its
President from its inception until 1992 when it was acquired by Cott
Corporation, a supplier of retail branded beverages listed on the TSE and
Nasdaq. Mr. Watt served as Watt Design's Chairman from 1992 until the
acquisition of substantially all of Watt Design's assets by Envoy. In addition,
during the period from 1992 to 1995, Mr. Watt served as the President of Retail
Brands Corporation, the marketing arm of Cott Corporation. Mr. Watt has been
Chairman of the Watt Group since its acquisition by Envoy. Mr. Watt is also a
Director of Cott Corporation, The Forzani Group Limited, a retailer of sporting
goods company listed on the TSE and Montreal Stock Exchange, Indigo Books &
Music Inc., a retailer of books and music, GTR Group Inc., a supplier of
republished and previously played video games listed on the TSE, Aastra
Technologies Limited, a manufacturer of telecommunications equipment listed on
the TSE and Alberta Stock Exchange, and Partyco Holdings Ltd., a retailer of
party supplies listed on the Alberta Stock Exchange. See "Item 5 - Nature of
Trading Market" for discussion of a strategic alliance agreement between the
Watt Group and a company of which Mr.
Watt is the principal.

                  Edwin B. Matthews. Mr. Matthews joined Envoy as Vice
President, Integration in July 1998 upon Envoy's acquisition of Promanad. Mr.
Matthews is responsible for ensuring the offering and provision of Envoy's full
range of integrated services to its clients, including the services of its newly
acquired businesses, Promanad, Hampel Stefanides and Devlin. Mr. Matthews was
the President of Promanad from 1974 until its acquisition by Envoy. Mr. Matthews
is also a Director of Norwall Group Inc., a manufacturer of residential wall
coverings listed on the TSE.

                  J. Joseph Leeder. Mr. Leeder joined Envoy in November 1998 as
Vice President and Chief Financial Officer. Prior to joining Envoy, Mr. Leeder
was a partner of KPMG LLP in Canada, an accounting firm, and an executive vice
president of KPMG Corporate Finance Inc., a subsidiary of KPMG LLP.

                  The Ontario Business Corporations Act requires that a majority
of Envoy's directors be Canadian residents. There are no arrangements or
understandings between any director or executive officer of Envoy pursuant to
which he was selected as such.

Item 11. Compensation of Directors and Officers

                  The following table sets forth in Canadian dollars all
compensation for the fiscal year ended September 30, 1999 paid to the President
and Chief Executive Officer of Envoy, the


                                       36
<PAGE>


other executive officers of Envoy who earn in excess of $100,000 Cdn. per annum
and to all executive officers and directors of Envoy as a group.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                              Annual Compensation                Long Term Compensation              All Other
                                                      ------------------------------------------   Compensation
                                                                   Awards            Payouts            ($)
-----------------------------------------------------------------------------------------------------------------
                                                                        Restricted
                                              Other       Securities     Shares or
                                              Annual        Under       Restricted        LTIP
  Name and Principal     Salary    Bonus     Compen-     Option/SARs       Share        Payouts
       Position            ($)       ($)     sation($)   Granted (#)     Units ($)        ($)
-----------------------------------------------------------------------------------------------------------------
<S>                      <C>                  <C>           <C>              <C>         <C>           <C>
Geoffrey B. Genovese,    300,000      --      250,000       100,000/1        --          --            --
President and Chief
Executive Officer
-----------------------------------------------------------------------------------------------------------------
Edwin B. Matthews,       225,000      --           --          --            --          --            --
Vice President,
Integration
-----------------------------------------------------------------------------------------------------------------
J. Joseph Leeder,        131,250/2    --            --      200,000/3        --          --            --
Vice President and
Chief Financial Officer
-----------------------------------------------------------------------------------------------------------------
All directors and        656,250      --      250,000       395,000/4        --          --            --
executive officers as
a group (8 persons)
-----------------------------------------------------------------------------------------------------------------
</TABLE>


/1       Exercisable at $6.20 per common share to August 10, 2004.


/2       Mr. Leeder joined Envoy on November 15, 1998. Information is provided
         for the period beginning November 15, 1998 and ending September 30,
         1999.

/3       100,000 exercisable at $4.10 per common share to December 16, 2003, and
         100,000 exercisable at $6.20 per common share to August 10, 2004.

/4       25,000 options not referred to above in this table are exercisable at
         $3.62 per common share to December 16, 2002, 55,000 options not
         referred to above in this table are exercisable at $3.90 per common
         share to March 7, 2004 and 15,000 options not referred to above in this
         table are exercisable at $6.20 per common share to August 10, 2004.

                  Envoy does not provide any pension, retirement plan or other
remuneration for its directors or executive officers that constitutes an expense
to Envoy, nor are there any plans or other arrangements in respect of
compensation received or that may be received by executive officers in Envoy's
most recently completed or current financial year to compensate such officers in
the event of the termination of employment or a change in control of Envoy.

                                       37
<PAGE>

                  The following table sets forth options granted to executive
officers of Envoy and all executive officers and directors of Envoy as a group
in the most recently completed fiscal year (utilizing Canadian dollars):

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                  Stock Options Granted During 1999 Fiscal Year
-------------------------------------------------------------------------------------------------------------------
                                                                                    Market
                                                                                   Value of
                                      Percentage                                    Shares
                          Shares       of Total                                   Underlying
                          Under         Options                                   Options on
                          Options     Granted to                     Exercise      Date of
                          Granted     Employees/1 /                    Price        Grant
          Name               (#)          (%)       Date of Grant    ($/Share)    ($/Share)        Expiry Date
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>      <C>                 <C>          <C>        <C>
Geoffrey B. Genovese       100,000        9%       August 11, 1999      6.20         6.20        August 10, 2004
-------------------------------------------------------------------------------------------------------------------
J. Joseph Leeder           100,000        9%         December 17,       4.10         4.10       December 16, 2003
                           100,000        9%             1998           6.20         6.20        August 10, 2004
                                                   August 11, 1999
-------------------------------------------------------------------------------------------------------------------
All directors and          395,000        35%      October 1, 19982    3.622        3.622      December 16, 20022
executive officers as a                             March 8, 19993     3.903        3.903        March 7, 20043
group                                              August 11, 19994    6.204        6.204       August 10, 20044
(8 persons)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

/1 Includes options granted to non-employee directors and consultants.

/2 As to 25,000 not referred to above in this table.

/3 As to 55,000 not referred to above in this table.

/4 As to 15,000 not referred to above in this table.

                  The following table sets forth options exercised by executive
officers of Envoy and all executive officers and directors of Envoy as a group
in the most recently completed fiscal year (utilizing Canadian dollars):


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------

                                  Stock Options Exercised During 1999 Fiscal Year
--------------------------------------------------------------------------------------------------------------------
                                                                                                     Value in
                                                                                                   Unexercised
                                                                         Unexercised Options       in-the-Money
                                   Number of                                  at FY-End         Options at FY-end
                               Shares Acquired on     Aggregate Value        Exercisable/          Exercisable/
                                    Exercise             Realized           Unexercisable         Unexercisable
            Name                      (#)                   ($)                  (#)                   ($)
--------------------------------------------------------------------------------------------------------------------

<S>                                  <C>                  <C>              <C>                  <C>
All directors and executive          60,000               168,450          483,333/266,666      1,135,535/491,665
officers as a group (8
persons)
--------------------------------------------------------------------------------------------------------------------
</TABLE>


Employment Contracts and Termination Agreements

                  The Communique Group, an operating subsidiary of Envoy, has
entered into employment contracts with certain of the executive officers of
Envoy.

                  The employment agreement with Geoffrey B. Genovese provides
for Mr. Genovese to serve as Envoy's President and Chief Executive Officer at an
annual base salary of $150,000 Cdn., subject to discretionary annual increases
by the Board of Directors. Mr. Genovese's annual base salary as of the date of
this Form 20-F is $300,000 Cdn., plus performance bonuses up to a maximum bonus
of $325,000 Cdn. This agreement does not have a fixed term but provides for a
severance payment equivalent to his base salary for a period of 24 months if Mr.
Genovese's employment is terminated by Envoy other than for cause.

                                       38
<PAGE>

                  The employment agreement with Edwin B. Matthews provides for
Mr. Matthews to serve as Envoy's Vice President, Integration at an annual base
salary of $225,000 Cdn., subject to discretionary annual increases by the Board
of Directors. This agreement does not have a fixed term but provides for a
severance payment equivalent to his base salary for a period equal to the
greater of (a) 15 months and (b) one month for each year of employment, if Mr.
Matthews's employment is terminated by Envoy other than for cause.


                  The employment agreement with Joseph J. Leeder provides for
Mr. Leeder to serve as Envoy's Vice President and Chief Financial Officer, at an
annual salary base of $200,000 Cdn. subject to annual review by the President
and Chief Executive Officer of Envoy plus performance bonuses up to a maximum
bonus of $75,000 Cdn., subject to discretionary annual increases by the Board of
Directors. This employment arrangement does not have a fixed term but provides
for a severance payment equivalent to (a) three months of his base salary for
each full year of employment, to a maximum of six months, or notice, or (b) 12
months of his base salary, or notice, if there is a change in control of Envoy,
as defined in the agreement.


Compensation of Directors

                  There are no standard or other arrangements under which
directors of Envoy who are also officers of Envoy or otherwise have a business
relationship with Envoy were compensated by Envoy during the most recently
completed fiscal year for acting in their capacity as directors. Outside
directors, who have no business relationship with Envoy other than service as a
director, are entitled to receive an annual retainer for service as a director
and fees for attendance at meetings of the Board of Directors and committees
thereof. Except as set forth below, there are no arrangements under which
directors of Envoy were compensated by Envoy during the most recently completed
fiscal year for services rendered as consultants or experts. In the fiscal year
ended September 30, 1999, Envoy paid approximately $212,000 Cdn. to John H.
Bailey, Barrister & Solicitor, for legal services provided to Envoy, and
approximately $136,000 Cdn. to a company controlled by Hugh Aird for services
provided in connection with the special warrant offering by Envoy on May 11,
1999.

Directors' and Officers' Liability Insurance

                  Envoy maintains liability insurance with total annual coverage
of $10,000,000 Cdn. per incident for all its directors and officers in their
capacities as such. Item 12. Options to Purchase Securities from Registrant or
Subsidiaries

                  As of January 31, 2000, the options and other rights to
purchase common shares of Envoy consisted of options to purchase 1,902,667
common shares and other contingent rights to purchase up to 2,295,184 common
shares, all as described below.

Options

                  Stock Option Plan. Envoy has established a stock option plan
(the "Stock Option Plan"), pursuant to which options to purchase common shares
and stock appreciation rights ("SARs") may be granted to directors, officers,
employees or certain consultants to Envoy, as determined by the Board of
Directors, at a price to be fixed by the directors, subject to limitations
imposed by the TSE or any other Canadian stock exchange on which the common


                                       39
<PAGE>

shares may become listed for trading and any other regulatory authority having
jurisdiction in such matters. The common shares subject to each option shall
become purchasable at such time or times as may be determined by the directors.
SARs may only be granted in conjunction with an option and, when exercised,
entitle the holder to receive an amount equal in value to the excess of the
market value on the date of exercise of the common shares over the option price
of the related option. The excess amount is payable in common shares having a
market value equal to such excess. Options are non-assignable and
non-transferable by the option-holder and may only be exercised during the
option-holder's lifetime by the option-holder. SARs are non-transferable and
terminate when the related option terminates.


                  The maximum number of common shares reserved for issuance upon
exercise of options under the Stock Option Plan is 3,000,000. As at January 31,
2000, options to purchase 1,846,000 common shares and no SARs are outstanding
under the Stock Option Plan. The aggregate number of common shares issued to any
one Insider (as such term is defined in the Stock Option Plan) and to all
Insiders as a group under the Stock Option Plan and any other share compensation
arrangement within a one year period may not exceed 5% and 10%, respectively, of
the issued and outstanding common shares immediately prior to the issuance in
question. No optionee may hold options to purchase more than 5% of the
outstanding common shares of Envoy. The option price per share shall not be less
than the closing price of the common shares of Envoy on the TSE on the last
trading day prior to the option grant.


                  Envoy is required to enter into a written agreement with each
option-holder under the Stock Option Plan, which agreement shall set out the
option price and terms and conditions upon which such option may be exercised,
in accordance with the provisions of the Stock Option Plan.

                  Other Options. Prior to the adoption of the Stock Option Plan,
options to purchase common shares (the "Pre-Plan Options") were issued to
employees, directors and consultants of Envoy. Pre-Plan Options to purchase
56,667 common shares were outstanding as of January 31, 2000.

                                       40
<PAGE>

                  The following table describes the options to acquire common
shares that are outstanding pursuant to the Stock Option Plan or otherwise as of
January 31, 2000 (utilizing Canadian dollars):

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

                                           Number of
                                         Common Shares
                                         Under Options
          Class of Optionee                 Granted          Exercise Price             Date of Expiry
---------------------------------------------------------------------------------------------------------------------

<S>                                         <C>                 <C>                    <C>
Executive Officers and Directors (8)/1       56,6672            $3.35                  April 29, 2002
                                             230,000            $3.62                  December 16, 2002
                                             150,000            $3.75                  July 15, 2003
                                             100,000            $4.10                  December 16, 2003
                                              55,000            $3.90                  March 7, 2004
                                             215,000            $6.20                  August 10, 2004
---------------------------------------------------------------------------------------------------------------------
                                             200,000            $3.62                  December 16, 2002
Other                                         22,500            $4.10                  February 22, 2003
                                              75,000            $4.10                  July 22, 2003
                                             425,000            $4.00                  November 10, 2003
                                              35,000            $3.90                  March 7, 2004
                                              60,000            $4.70                  April 22, 2004
                                              22,500            $7.50                  May 10, 2004
                                             154,000            $6.20                  August 10, 2004
                                              82,000            $7.70                  November 23, 2004
                                              20,000            $7.50                  December 8, 2004
---------------------------------------------------------------------------------------------------------------------

Total                                      1,902,667
---------------------------------------------------------------------------------------------------------------------
</TABLE>

/1    Does not include other contingent rights to purchase up to 43,683 common
shares granted to an executive officer of Envoy in connection with the
acquisition of Promanad. See "- Other Rights" below.

/2    Pre-Plan Options.

Other Rights

                  Pursuant to the acquisition agreement in connection with
Envoy's acquisition of Promanad, certain former shareholders of Promanad have
the right to receive up to an additional 99,946 common shares in the aggregate
through May 31, 2000 (or within 60 days thereafter) dependent upon satisfaction
of predetermined performance targets for the transferred client relationships.

                  Pursuant to the acquisition agreements in connection with
Envoy's acquisition of Hampel Stefanides, certain executive officers of Hampel
Stefanides have the right to receive up to an additional 1,100,348 common shares
in the aggregate through September 30, 2002 depending upon the financial
performance of Hampel Stefanides for the fiscal years included therein.


                                       41
<PAGE>

                  Pursuant to the acquisition agreement in connection with
Envoy's acquisition of Devlin, the principal executive officer of Devlin has the
right to receive up to an additional 1,094,890 common shares through September
2002 dependent upon satisfaction of predetermined performance targets of Devlin.

Item 13. Interest of Management In Certain Transactions

                  Envoy paid to a company controlled by Hugh Aird, a director of
Envoy, a fee of $136,125 Cdn. for services provided in connection with the
special warrant offering by Envoy on May 11, 1999. Except as disclosed above, no
director or executive officer, and no relative or spouse of the foregoing
persons (or relative of such spouse) who has the same house as such person or is
an executive officer or director of any parent or subsidiary of Envoy, has, or
during the last fiscal year of Envoy had, any material interest, direct or
indirect, in any transactions, or in any proposed transaction, which in either
such case has materially affected or will materially affect Envoy. During the
last fiscal year of Envoy, no director, executive officer or associate of any
such person has been indebted to Envoy.


                                       42
<PAGE>

                                     PART II

Item 14. Description of Securities to be Registered

                  Not applicable.




                                      II-1


<PAGE>




                                    PART III

Item 15. Defaults Upon Senior Securities

         (a) There has been no material default in the payment of principal,
interest, a sinking or purchase fund installment, or any other material default
not cured within 30 days, with respect to any indebtedness of Envoy or any of
its significant subsidiaries.

         (b) There is no preferred stock of Envoy or any of its significant
subsidiaries and accordingly there has been no material arrearage in the payment
of dividends or any other material delinquency not cured within 30 days, with
respect to any class of preferred stock of Envoy or any of its significant
subsidiaries.

Item 16. Changes In Securities, Changes In Security For Registered Securities
         and Use of Proceeds

         (a) There have been no material modifications in the constituent
instruments defining any class of registered securities of Envoy.

         (b) There has been no material limitation or qualification of the
rights evidenced by any class of registered securities of Envoy by the issuance
or modification of any other class of securities of Envoy.

         (c) There has been no material withdrawal or substitution of assets
securing any class of registered securities of Envoy.

         (d) Not applicable.

         (e) Not applicable.



                                      III-1
<PAGE>


                                     PART IV

Item 17. Financial Statements

         Envoy has elected to provide financial statements pursuant to Item 18.

Item 18. Financial Statements



<TABLE>
         <S>           <C>                                                                                      <C>
         (a)           Envoy Communications Group Inc.                                                          F-1

             (i)       Auditors' Report on the financial statements for the year ended September 30, 1999       F-2

            (ii)       Auditors' Report on the financial statements for the years ended September 30, 1998      F-3
                       and 1997

           (iii)       Consolidated Balance Sheets as at September 30, 1998 and 1999                            F-4

            (iv)       Consolidated Statements of Operations for the years ended September 30, 1997, 1998       F-5
                       and 1999

             (v)       Consolidated Statements of Retained Earnings for the years ended September 30, 1997,     F-6
                       1998 and 1999

            (vi)       Consolidated Statements of Cash Flows for the years ended September 30, 1997, 1998 and   F-7
                       1999

           (vii)       Summary of Significant Accounting Policies                                               F-8

          (viii)       Notes to Consolidated Financial Statements                                               F-12

            (ix)       Schedule of Valuation Accounts for the years ended September 30, 1999, 1998, 1997        F-41
</TABLE>


Item 19. Financial Statements and Exhibits



         (1)  Envoy Communications Group Inc.


<TABLE>
          <S>     <C>
         (i)      Auditors' Report on the financial statements for the year ended September 30, 1999

         (ii)     Auditors' Report on the financial statements for the years ended September 30, 1998 and 1997

         (iii)    Consolidated Balance Sheets as at September 30, 1998 and 1999

         (iv)     Consolidated Statements of Operations for the years ended September 30, 1997, 1998 and 1999

         (v)      Consolidated Statements of Retained Earnings for the years ended September 30, 1997, 1998 and 1999

         (vi)     Consolidated Statements of Cash Flows for the years ended September 30, 1997, 1998 and 1999

         (vii)    Summary of Significant Accounting Policies

         (viii)   Notes to Consolidated Financial Statements

         (ix)     Schedule of Valuation Accounts for the years ended September 30, 1999, 1998, 1997
</TABLE>


                                      IV-1
<PAGE>


<TABLE>
         <S>      <C>               <C>
         (b)      Exhibit 1         By-Law No. 1 of Envoy (as amended on May 2, 2000).

                  Exhibit 2         Not Applicable.

                  Exhibit 3         Not Applicable.
</TABLE>


                                      IV-2

<PAGE>


                      Consolidated Financial Statements
                          (In Canadian dollars)

                      ENVOY COMMUNICATIONS
                      GROUP INC.

                      Years ended September 30, 1999, 1998 and 1997




                                      F-1


<PAGE>



AUDITORS' REPORT


To the Directors of Envoy Communications Group Inc.



We have audited the consolidated balance sheet of Envoy Communications Group
Inc. as at September 30, 1999 and the consolidated statements of operations,
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1999 and the results of its operations and its cash flows for the year then
ended in accordance with Canadian generally accepted accounting principles.

Accounting principles generally accepted in Canada vary in certain significant
respects from accounting principles in the United States. A description of
significant differences, as applicable to the Company, is included in note 16 to
the consolidated financial statements. Also in our opinion, the related
financial statement schedule of valuation accounts for the year ended September
30, 1999, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects the
information set forth therein.


/s/ KPMG

Chartered Accountants



Toronto, Canada

December 7, 1999


                                      F-2


<PAGE>


[BDO Logo]             BDO Dunwoody              60 Columbia Way Suite 400
                        Chartered Accountants     Markham Ontario Canada L3R 0C9
                                                  Telephone: (905) 946-1066
                                                  Telefax: (905) 946-9524


--------------------------------------------------------------------------------

                                                Auditors' Report

--------------------------------------------------------------------------------


To the Directors of
Envoy Communications Group Inc.

We have audited the consolidated balance sheet of Envoy Communications Group
Inc. as at September 30, 1998 and the consolidated statements of operations,
retained earnings and cash flows for the years ended September 30, 1998 and
1997. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at September 30,
1998 and the results of its operations and its cash flows for the years ended
September 30, 1998 and 1997 in accordance with generally accepted accounting
principles.

Accounting principals generally accepted in Canada vary in certain significant
respects from accounting principles in the United States. A description of
certain significant differences, as applicable to the company, is included in
note 16 to the consolidated financial statements. Also in our opinion, the
related financial statement schedule of valuation accounts for the years ended
September 30, 1998 and 1997, when considered in relation in the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects the information set forth therein.

/s/ BDO Dunwoody

Chartered Accountants
Toronto, Ontario
December 4, 1998


                                      F-3

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Consolidated Balance Sheets
(In Canadian dollars)

September 30, 1999 and 1998

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
--------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>                  <C>
Assets

Current assets:
     Cash                                                                 $    15,300,454      $     3,120,158
     Accounts receivable                                                       27,229,929           10,764,954
     Contract work in process                                                   3,392,111            1,139,807
     Prepaid expenses                                                           1,310,608              658,934
--------------------------------------------------------------------------------------------------------------
                                                                               47,233,102           15,683,853

Restricted cash (note 3)                                                          545,982                    -
Capital assets (note 5)                                                         7,869,486            4,531,550
Goodwill and other assets (note 6)                                             22,186,265            5,114,622
Deferred income taxes                                                             625,587                    -

--------------------------------------------------------------------------------------------------------------
                                                                          $    78,460,422      $    25,330,025
--------------------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable and accrued liabilities                             $    27,713,688      $    10,376,095
     Income taxes payable                                                       1,698,638              124,541
     Deferred revenue                                                           4,457,822            1,212,497
     Current portion of long-term debt (note 7)                                 1,827,086               77,554
     ---------------------------------------------------------------------------------------------------------
                                                                               35,697,234           11,790,687

Long-term debt (note 7)                                                         2,151,185              222,825

Shareholders' equity:
     Share capital (note 8)                                                    35,613,907           10,634,371
     Retained earnings                                                          5,492,940            2,682,142
     Cumulative translation adjustment                                           (494,844)                   -
     ---------------------------------------------------------------------------------------------------------
                                                                               40,612,003           13,316,513

Subsequent events (note 2(c))
Commitments (note 11)
Contingencies (notes 2 and 13)
Canadian and United States accounting policy differences (note 16)

--------------------------------------------------------------------------------------------------------------
                                                                          $    78,460,422      $    25,330,025
--------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


On behalf of the Board:

(Signed) Geoffrey B. Genovese              Director
-----------------------------------

(Signed) John H. Bailey                    Director
-----------------------------------

                                      F-4

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Consolidated Statements of Operations
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
--------------------------------------------------------------------------------------------------------------

<S>                                                 <C>                  <C>                   <C>
Revenue                                             $     138,330,909    $     37,844,485      $    23,444,317

Cost of sales                                              96,543,784          24,353,470           14,769,317
--------------------------------------------------------------------------------------------------------------

Gross margin                                               41,787,125          13,491,015            8,675,000

Operating expenses:
     Salaries and benefits                                 25,710,153           5,938,833            2,664,786
     General and administrative                             6,982,839           5,048,167            4,310,068
     Occupancy costs                                        1,878,090             414,278              307,030
     Depreciation                                           1,444,110             462,682              168,773
     Interest, net                                            282,141              20,000                    -
--------------------------------------------------------------------------------------------------------------
                                                           36,297,333          11,883,960            7,450,657
--------------------------------------------------------------------------------------------------------------

Income before income taxes and goodwill
   amortization                                             5,489,792           1,607,055            1,224,343

Income taxes (note 9)                                       2,002,995                   -                    -
--------------------------------------------------------------------------------------------------------------

Income before goodwill amortization                         3,486,797           1,607,055            1,224,343

Goodwill amortization, net of taxes of $11,000
   (1998 and 1997- nil)                                       610,034             104,256               45,000

--------------------------------------------------------------------------------------------------------------
Net income                                          $       2,876,763    $      1,502,799      $     1,179,343
--------------------------------------------------------------------------------------------------------------

Net income per share (note 8(h)):
     Basic                                          $            0.20    $           0.15      $          0.16
     Fully diluted                                               0.20                0.15                 0.12

Income per share before goodwill amortization:
     Basic                                                       0.24                0.16                 0.16
     Fully diluted                                               0.24                0.16                 0.12

--------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Consolidated Statements of Retained Earnings
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                              1999              1998               1997
--------------------------------------------------------------------------------------------------------

<S>                                                   <C>               <C>               <C>
Retained earnings (deficit), beginning of year        $  2,682,142      $  1,179,343      $  (9,886,961)

Reduction of capital applied to deficit (note 10)                -                 -          9,886,961

Loss on redemption of shares (note 8(g))                   (65,965)                -                  -

Net income                                               2,876,763         1,502,799          1,179,343

--------------------------------------------------------------------------------------------------------
Retained earnings, end of year                        $  5,492,940      $  2,682,142      $   1,179,343
--------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-6

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Consolidated Statements of Cash Flows
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
---------------------------------------------------------------------------------------------------------------

<S>                                                   <C>                 <C>                  <C>
Cash flows from operating activities:
     Net income                                       $     2,876,763     $     1,502,799      $     1,179,343
     Items not involving cash:
         Deferred income taxes                                 76,000                   -                    -
         Depreciation                                       1,444,110             462,682              168,773
         Goodwill amortization                                621,034             104,256               45,000
     Net change in non-cash working capital balances:
         Accounts receivable                               (6,061,408)           (447,621)          (2,763,501)
         Contract work in process                           3,165,910          (1,200,400)             147,670
         Prepaid expenses                                    (397,950)           (317,575)            (159,730)
         Accounts payable and accrued liabilities             229,132            (313,986)           1,817,764
         Income taxes payable                               1,794,028             124,541                    -
         Deferred revenue                                  (2,156,822)             21,589              768,989
         Other                                                 46,284             (69,935)              50,244
     ----------------------------------------------------------------------------------------------------------
     Net cash provided by (used in) operating
       activities                                           1,637,081            (133,650)           1,254,552

Cash flows from financing activities:
     Long-term debt                                         5,000,000             300,379                    -
     Long-term debt repayments                             (1,410,467)                  -                    -
     Issuance of common shares for cash                     1,361,172           2,401,846              244,275
     Redemption of common shares                              (65,965)                  -                    -
     Reduction in restricted cash                             187,718                   -                    -
     Net proceeds from special warrant issue               16,192,731           4,825,364                    -
     ----------------------------------------------------------------------------------------------------------
     Net cash provided by financing activities             21,265,189           7,527,589              244,275

Cash flows from investing activities:
     Acquisition of subsidiaries (net of cash
       acquired of $5,919,627; 1998 - $675,072;
       1997 - nil)                                         (8,416,977)         (2,639,960)             (15,000)
     Purchase of capital assets                            (2,017,796)         (3,128,519)            (988,005)
     Increase in other assets                                 (20,000)           (200,000)                   -
     ----------------------------------------------------------------------------------------------------------
     Net cash used in investing activities                (10,454,773)         (5,968,479)          (1,003,005)

Change in cash balance due to foreign exchange               (267,201)                  -                    -
---------------------------------------------------------------------------------------------------------------

Increase in cash                                           12,180,296           1,425,460              495,822

Cash, beginning of year                                     3,120,158           1,694,698            1,198,876
---------------------------------------------------------------------------------------------------------------
Cash, end of year                                     $    15,300,454     $     3,120,158      $     1,694,698
---------------------------------------------------------------------------------------------------------------

Cash flow from operations per share (note 8(h)):
     Basic                                            $          0.34     $          0.21      $          0.19
     Fully diluted                                               0.34                0.20                 0.14

---------------------------------------------------------------------------------------------------------------

Supplementary information:
     Interest paid                                    $       334,229     $        20,001      $             -
     Income taxes paid                                         68,774                   -                    -

---------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-7


<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


The Company, continued under the Business Corporations Act (Ontario), and its
subsidiaries provide integrated marketing communication services, including on-
and off-line advertising, corporate identity, retail package and environmental
design, and digital interactive services.


1.     Significant accounting policies:


       (a) Basis of presentation:


           The consolidated financial statements have been prepared in
           accordance with generally accepted accounting principles in Canada,
           which vary in certain significant respects from generally accepted
           accounting principles in the United States. A description of certain
           significant differences, as applicable to the Company, is included in
           note 16.


       (b) Principles of consolidation:


           The consolidated financial statements include the accounts of the
           Company and its subsidiaries, collectively known as Envoy
           Communications Group Inc.


           Significant subsidiaries are as follows:

           ---------------------------------------------------------------------
                                                         % of    Jurisdiction of
           Company                                  ownership      incorporation
           ---------------------------------------------------------------------

           Communique Incentives Inc.                     100            Ontario
           The Communique Group Inc.                      100            Ontario
           Promanad Communications Inc.                   100            Ontario
           Hampel Stefanides, Inc.                        100           Delaware
           Devlin Multimedia Inc.                         100            Ontario
           The Watt Group Inc.                            100            Ontario

           ---------------------------------------------------------------------


       (c) Use of estimates:


           The preparation of financial statements in conformity with generally
           accepted accounting principles requires management to make estimates
           and assumptions that affect the amounts reported in the financial
           statements and accompanying notes. Actual results could differ from
           those estimates.


                                      F-8

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------

1.     Significant accounting policies (continued):


       (d) Capital assets:


           Capital assets are recorded at cost and are depreciated over their
           estimated useful lives as follows:

<TABLE>
<CAPTION>
           ----------------------------------------------------------------------------------
           Asset                                Basis                                    Rate
           ----------------------------------------------------------------------------------

           <S>                                  <C>                        <C>
           Audiovisual equipment                Straight line                     2 - 5 years
           Computer equipment                   Declining balance                    30 - 50%
           Furniture and equipment              Declining balance                         20%
           Leasehold improvements                                          Over term of lease

           ----------------------------------------------------------------------------------
</TABLE>


       (e) Revenue recognition:


           Revenue represents gross amounts billable to clients in respect of
           both agency and non-agency services and is recognized only when
           collection of such revenue is probable. Agency services are those
           which require the Company to incur external media and production
           costs on behalf of its clients and for which it is entitled to pass
           through the costs for reimbursement from its clients. The Company's
           agency and non-agency projects are short term in nature.


           Fees earned for non-agency services are recognized either upon the
           performance of the Company's services when the Company earns a per
           diem fee, or in the case of a fixed fee, when the Company's services
           are substantially complete and accepted by the client. Fees earned
           but not yet billed are included in accounts receivable. Fees billed
           to clients in excess of fees recognized as revenue are classified as
           deferred revenue.


                                      F-9

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------

1.     Significant accounting policies (continued):


           When the Company's compensation for its agency services is based on
           commissions, revenue is comprised of (i) commissions earned from
           media expenditures, which are recognized at the time the advertising
           appears or is broadcast, or in respect of on-line advertising, either
           ratably over the period of time the advertising appears or based on
           the actual impressions delivered at the contractual rate per
           impression, depending upon the terms of the arrangement, (ii)
           commissions earned on expenditures for the production of
           advertisements, which are recognized upon the completion of the
           Company's services and acceptance by the client, being the time at
           which it has no further substantial obligations with respect thereto,
           and (iii) recovery of pass through costs, such as media and
           production expenditures incurred on behalf of and reimbursable from
           clients, which are recognized in revenue in the case of media, at the
           time the advertising appears or is broadcast or in respect of on-line
           advertising, either ratably over the period appears or based on
           actual impressions delivered, depending on the terms of the
           arrangement and, in the case of production expenditures, upon
           completion of the Company's services and acceptance by the client.


           When the Company's compensation for its agency services is fee based,
           revenue is comprised of (i) non-refundable monthly agency fees which
           are recognized in the month earned, and (ii) recovery of pass through
           costs, such as media and production expenditures incurred on behalf
           of and reimbursable from clients, which are recognized in revenue as
           described in (iii) above.


           Production expenditures are third party costs associated with the
           design, layout, printing and filming of advertisements and third
           party costs in connection with meetings, conference and special
           events.


           Cost of sales is comprised entirely of pass through costs. Pass
           through costs related to media are accrued and expensed in cost of
           sales at the time the advertisement appears or is broadcast or in the
           case of on-line advertising, either ratably over the period the
           advertising appears or based on the actual impressions delivered,
           depending upon the terms of the arrangement, for both being the time
           at which the related recovery of pass through costs are recognized in
           revenue. Those pass through costs related to production are accrued
           and recorded in work in process at the time the third party suppliers
           render their services. Production pass through costs are expensed in
           cost of sales at the time the related recovery of such costs is
           recognized in revenue. Billings for pass through costs in excess of
           costs incurred are included in deferred revenue. Work in process
           represents pass through costs incurred in excess of billings. Work in
           process does not include internal salary costs as such costs are
           expensed as incurred.

                                      F-10

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


1.     Significant accounting policies (continued):


       (f)  Goodwill:

            Goodwill, being the excess of purchase price over the fair values of
            net assets acquired, is initially stated at cost with amortization
            being provided on a straight-line basis over 25 years.

            Annually, the Company assesses the recoverability of the carrying
            value of its goodwill and the related amortization period. As part
            of the evaluation, the Company considers several factors, including
            the operating results and trends, movement in major clients and key
            client service personnel, changes in client relationships and
            general economic conditions. Significant changes in these factors
            could result in a permanent impairment of goodwill.

            Goodwill is considered to be impaired if the future anticipated
            undiscounted operating cash flows from the acquired businesses are
            less than the carrying value of the goodwill. These cash flow
            projections require management to make certain assumptions regarding
            future revenue and expenses. When impairment is determined, the
            related loss is charged to earnings and is measured by the excess of
            the carrying value of the goodwill over its fair value based on
            estimated discounted future operating cash flows. The impact of such
            write-downs on the amortization period is simultaneously assessed.

       (g)  Foreign currency translation:

            With the exception of translation of the Company's U.S. subsidiary,
            at the transaction date, each asset, liability, revenue and expense
            is translated into Canadian dollars by the use of the exchange rate
            in effect at that date. At the year-end date, monetary assets and
            liabilities are translated into Canadian dollars by using the
            exchange rate in effect at that date. The resulting foreign exchange
            gains and losses are included in income in the current year.

            The Company's U.S. subsidiary is classified as a self-sustaining
            operation and therefore, the Company uses the current rate method,
            whereby the assets and liabilities of such foreign operations are
            translated at the exchange rate in effect at the balance sheet date.
            Revenue and expenses are translated at the average exchange rate for
            the year. Translation gains or losses are deferred and included as a
            separate component of shareholders' equity.


                                      F-11

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


2.     Acquisition of subsidiaries:


       (a) Effective May 1, 1999, the Company, through its subsidiary The Watt
           Group Inc., acquired substantially all of the assets and the
           liabilities of The Watt Design Group Inc. ("Watt"), a packaging and
           retail environment design business, in exchange for cash
           consideration of $6,700,000. Costs associated with the acquisition of
           $470,000 were satisfied by the issuance of 100,000 common shares of
           the Company with a fair value of $470,000. The acquisition has been
           accounted for using the purchase method of accounting and the
           resulting goodwill is being amortized over 25 years. The fair value
           of the net assets acquired at May 1, 1999 was as follows:

           --------------------------------------------------------------------

           Non-cash working capital                                $  4,054,000
           Capital assets                                               939,000
           --------------------------------------------------------------------
           Net assets                                                 4,993,000

           Total consideration less cash acquired                     7,569,000

           --------------------------------------------------------------------
            Excess of purchase price over fair value
              of net assets acquired allocated to goodwill         $  2,576,000
           --------------------------------------------------------------------

       (b) Effective January 1, 1999, the Company acquired 100% of the
           outstanding shares of Devlin Multimedia Inc. ("Devlin"), an
           interactive communication services business, in exchange for initial
           cash consideration of $575,000 and the issuance of 225,060 common
           shares of the Company with a fair value of $925,000. The Company may
           be required to pay additional consideration, to a maximum of
           $4,500,000, based on Devlin's attainment of certain operating results
           over the next three years to December 31, 2001. However, management
           believes the likelihood of paying this contingent consideration is
           remote. The acquisition has been accounted for using the purchase
           method of accounting and the resulting goodwill is being amortized
           over 25 years. Future consideration, if any, will be accounted for as
           additional goodwill at the time it becomes payable.


                                      F-12

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


2.     Acquisition of subsidiaries (continued):


           The fair value of the net assets acquired at January 1, 1999 was as
follows:

           ---------------------------------------------------------------------

           Non-cash working capital                                $      9,000
           Capital assets                                               158,000
           Long-term debt                                               (88,000)
           ---------------------------------------------------------------------
           Net assets                                                    79,000

           Total consideration and bank indebtedness assumed          1,613,000

           ---------------------------------------------------------------------
           Excess of purchase price over fair value
             of net assets acquired allocated to goodwill          $  1,534,000
           ---------------------------------------------------------------------


       (c) Effective October 1, 1998, the Company acquired 100% of the
           outstanding shares of Hampel Stefanides, Inc. ("Hampel Stefanides"),
           a full-service advertising and commercial design agency operating in
           the United States, in exchange for initial cash consideration of
           $5,587,349 (U.S. $3,649,000) and the issuance of 581,395 common
           shares with a fair value of $2,296,800 (U.S. $1,500,000). Additional
           cash consideration of $917,125 (U.S. $625,000) is included in
           accounts payable and accrued liabilities as at September 30, 1999 and
           has been included as part of the total consideration.


           In September 1999, the Company determined that additional
           consideration was owing, in the form of cash and shares of the
           Company, based on Hampel Stefanides's operating results for the year
           ended September 30, 1999 and such amount has been recorded as at
           September 30, 1999. The aggregate consideration of $4,134,002 was
           paid on November 4, 1999 by way of a cash payment of $1,703,802,
           which is included in accounts payable and accrued liabilities, and
           the issuance of 450,040 common shares of the Company with a fair
           value of $2,430,200, which are included in share capital as at
           September 30, 1999, as shares to be issued (note 8(a)).


                                      F-13

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


2.     Acquisition of subsidiaries (continued):


           The Company may be required to pay additional consideration, to a
           maximum amount of $4,695,680 (U.S. $3.2 million) in cash and
           1,100,348 common shares, based on the attainment of operating results
           over the next three years to September 30, 2002. Future
           consideration, if any, will be accounted for as additional goodwill
           at the time it becomes payable.


           The acquisition has been accounted for using the purchase method of
           accounting and the resulting goodwill is being amortized over 25
           years. The fair value of the net liabilities acquired on October 1,
           1998 and consideration accounted for to date, was as follows:

           ---------------------------------------------------------------------
           Non-cash working capital deficiency                     $ (6,171,687)
           Capital assets                                             1,676,664
           Restricted cash                                              765,600
           ---------------------------------------------------------------------
           Net liabilities                                           (3,729,423)

           Initial consideration less cash acquired                   3,341,959
           Additional consideration:
                Cash                                                  1,703,802
                Issuance of 450,040 common shares                     2,430,200
           ---------------------------------------------------------------------
           Total consideration less cash acquired                     7,475,961

            --------------------------------------------------------------------
            Excess of purchase price over fair value
              of net assets acquired allocated to goodwill         $ 11,205,384
            --------------------------------------------------------------------

       (d) Effective June 1, 1998, the Company acquired 100% of the outstanding
           shares of Promanad Communications Inc. ("Promanad"), a full service
           advertising agency, in exchange for initial cash consideration of
           $2,937,142 and the issuance of 119,047 common shares of the Company
           with a fair value of $500,000.


           In June 1999, the Company determined that additional consideration
           was payable based on Promanad's operating results for the twelve
           months ended May 31, 1999. The consideration was comprised of cash of
           $661,675 and the issuance of 52,514 common shares of the Company with
           a fair value of $367,598. The Company may be required to pay
           additional consideration depending on Promanad's operating results
           for the fiscal year ending May 31, 2000. The maximum amount payable
           for 2000 is capped at approximately $1.3 million. This amount will be
           satisfied by payment of 75% in cash and 25% in shares.

                                      F-14

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


2.     Acquisition of subsidiaries (continued):


           This acquisition was accounted for using the purchase method of
           accounting and the resulting goodwill is being amortized over 25
           years. Future consideration, if any, will be accounted for as
           additional goodwill at the time it becomes payable.


           The fair value of the net liabilities acquired at June 1, 1998 and
           consideration accounted for to date was as follows:

           ---------------------------------------------------------------------

           Non-cash working capital deficiency                     $   (954,000)
           Capital assets                                               522,000
           ---------------------------------------------------------------------
           Net liabilities                                             (432,000)

           Initial consideration, net of cash acquired                2,948,142
           Additional consideration:
                Cash                                                    661,675
                Issuance of 52,514 common shares                        367,598
           ---------------------------------------------------------------------
           Total consideration less cash acquired                     3,977,415

           ---------------------------------------------------------------------
           Excess of purchase price over fair value of
             net assets acquired allocated to goodwill             $  4,409,415
           ---------------------------------------------------------------------


       (e) On June 30, 1998, the Company acquired 100% of the outstanding shares
           of 1300325 Ontario Inc., operating as Infonautica, for a cash
           consideration of $132,506. This transaction was accounted for using
           the purchase method of accounting. Goodwill arising on the
           transaction was $132,506 and is being amortized over 25 years.


                                      F-15

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


2.     Acquisition of subsidiaries (continued):


       (f) On September 1, 1996, the Company acquired a 35% interest in Vertex
           Communications Limited for $40,000 and accounted for this purchase
           using the equity method. The Company's share of losses to September
           30, 1997 was $1,384.


           On October 10, 1997, the Company acquired the remaining 65% interest
           in Vertex. This acquisition was accounted for by the purchase method
           as summarized below and the results of operations are included from
           the effective date of this acquisition. The net assets acquired at
           fair value, are summarized as follows:

<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------
                                                                                     (Unaudited)

           <S>                                                                      <C>
           Net working capital (deficiency)                                         $  (47,330)
           Capital assets                                                               81,683
           -------------------------------------------------------------------------------------

           Net assets                                                                   34,353

           Consideration represented by:
                Cash                                                                   245,384
                Issuance of 37,974 common shares                                       149,997
                Prior investment on the equity method                                   38,616
                --------------------------------------------------------------------------------
                                                                                       433,997

           -------------------------------------------------------------------------------------
           Excess of purchase price over fair value of net assets
             acquired allocated to goodwill                                         $  399,644
           -------------------------------------------------------------------------------------
</TABLE>

       (g) On April 3, 1997, the Company acquired the remaining 25% interest in
           Communique Business Communications Inc. and increased its interest to
           100%. The acquisition was satisfied by the issuance of 48,858 common
           shares valued at $170,028. This transaction was accounted for using
           the purchase method of accounting. Goodwill arising from the
           acquisition was $170,028 and is being amortized over 25 years.


       (h) In December 1996, the Company acquired the remaining 20% interest in
           Turnstyle Design Inc. and increased its interest to 100%. The
           transaction was accounted for using the purchase method of
           accounting. Goodwill arising from the acquisition was $15,000.


                                      F-16

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


3.     Restricted cash:


       Restricted cash includes the following:


       (a) $371,002 (U.S. $250,000) bank certificate of deposit pledged against
           a letter of credit for a building lease of Hampel Stefanides.


       (b) A trust account established for Communique Incentives Inc. for
           customer deposits of $174,980 (1998 - nil).


4.     Related party transactions:


       Certain management and administrative costs and costs relating to
       acquisitions totalling $250,000 (1998 - $175,000; 1997 - $75,000) were
       paid during the year to a company controlled by a director and are
       recorded at the exchange amount, being the amount agreed to by the
       related parties.


5.     Capital assets:

<TABLE>
<CAPTION>
       -----------------------------------------------------------------------------------------
                                                                   Accumulated          Net book
       1999                                            Cost       depreciation             value
       -----------------------------------------------------------------------------------------

       <S>                                    <C>                 <C>               <C>
       Audiovisual equipment                  $     780,918       $    727,323      $     53,595
       Computer equipment                         3,469,173          1,783,760         1,685,413
       Furniture and equipment                    2,828,225          1,569,315         1,258,910
       Leasehold improvements                     4,671,562          1,235,742         3,435,820
       Assets under construction                  1,435,748                  -         1,435,748

       -----------------------------------------------------------------------------------------
                                              $  13,185,626       $  5,316,140      $  7,869,486
       -----------------------------------------------------------------------------------------


       -----------------------------------------------------------------------------------------
                                                                   Accumulated          Net book
       1998                                            Cost       depreciation             value
       -----------------------------------------------------------------------------------------

       Audiovisual equipment                  $     497,133       $    356,150      $    140,983
       Computer equipment                           708,042            270,507           437,535
       Furniture and equipment                    2,226,276          1,138,125         1,088,151
       Leasehold improvements                     3,119,408            254,527         2,864,881

       -----------------------------------------------------------------------------------------
                                              $   6,550,859       $  2,019,309      $  4,531,550
       -----------------------------------------------------------------------------------------
</TABLE>



                                      F-17

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


6.     Goodwill and other assets:

<TABLE>
<CAPTION>
       --------------------------------------------------------------------------------------------
                                                                            1999               1998
       --------------------------------------------------------------------------------------------

       <S>                                                         <C>                 <C>
       Goodwill, net of accumulated amortization
         of $1,316,387 (1998 - $695,353)                           $  21,916,265       $  4,864,622
       Mortgage receivable (i)                                           200,000            200,000
       Other                                                              70,000             50,000

       --------------------------------------------------------------------------------------------
                                                                   $  22,186,265       $  5,114,622
       --------------------------------------------------------------------------------------------
</TABLE>


       (i) Mortgage receivable:


           The Company holds a non-interest bearing, second mortgage receivable
           from one of its senior officers. The mortgage receivable has the
           following repayment schedule:

<TABLE>
           ----------------------------------------------------------------------------------------

           <S>                                                                           <C>
           2000                                                                          $        -
           2001                                                                               8,000
           2002                                                                               8,000
           2003                                                                              12,000
           2004                                                                              12,000
           Thereafter                                                                       160,000

           ----------------------------------------------------------------------------------------
                                                                                         $  200,000
           ----------------------------------------------------------------------------------------
</TABLE>


                                      F-18

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


7.     Long-term debt:


       The long-term debt is secured by a registered general security agreement
       guarantee. Under the terms of the term loan, the Company is required to
       maintain certain financial ratios.

<TABLE>
<CAPTION>
       -----------------------------------------------------------------------------------------------
                                                                                  1999            1998
       -----------------------------------------------------------------------------------------------

       <S>                                                                 <C>             <C>
       Term loan, prime plus 1.5% per annum, due
         October, 2002, repayable in monthly principal
         installments of $138,889, plus interest                           $ 3,472,222     $         -
       Loan payable to landlord, 0.925% per annum,
         due July 31, 2002, repayable in monthly
         installments of $6,667 principal and interest                         260,380         300,379
       Loan payable to landlord, 3.5% per annum,
         when fully drawn due July 1, 2009, repayable
         in monthly installments of $7,408 principal and interest              200,000               -
       Promissory note, prime plus 1.75% per annum,
         due December 1, 2001, repayable in monthly
         principal installments of $1,700, plus interest                        45,669               -
       -----------------------------------------------------------------------------------------------
                                                                             3,978,271         300,379

       Less current portion                                                  1,827,086          77,554

       -----------------------------------------------------------------------------------------------
       Long-term portion                                                   $ 2,151,185     $   222,825
       -----------------------------------------------------------------------------------------------


       Principal repayments for the next four fiscal years are as follows:

       -----------------------------------------------------------------------------------------------

       2000                                                                                $ 1,827,086
       2001                                                                                  1,848,487
       2002                                                                                    280,728
       2003                                                                                     21,970

       -----------------------------------------------------------------------------------------------
                                                                                           $ 3,978,271
       -----------------------------------------------------------------------------------------------
</TABLE>


                                      F-19

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


8.     Share capital:


       (a) Authorized:

               50,000,000 common shares without par value (1998 - 50,000,000;
               1997 - 50,000,000)

           Issued:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                              1999                         1998                       1997
---------------------------------------------------------------------------------------------------------------------
                                      Number                       Number                     Number
                                    of shares       Amount       of shares       Amount     of shares       Amount
---------------------------------------------------------------------------------------------------------------------

<S>                                <C>          <C>               <C>         <C>            <C>        <C>
Balance, beginning of year         13,231,618   $  10,634,371     7,604,635   $  2,757,164   7,245,777  $ 12,229,822
Reduction of capital
  applied to deficit (note 10)              -               -             -              -           -    (9,886,961)
---------------------------------------------------------------------------------------------------------------------
                                   13,231,618       10,634,371    7,604,635      2,757,164   7,245,777     2,342,861

Common shares issued for:
    Cash pursuant to:
       Special warrants
         exercised                  3,300,000       17,111,620    1,633,382      4,825,364           -             -
       Stock options
         exercised                    273,000          873,810      205,000        243,925     310,000       244,275
    Warrants exercised                135,378          487,362    3,631,580      2,157,921           -             -
    Acquisitions                      958,969        4,076,544      157,021        649,997      48,858       170,028
---------------------------------------------------------------------------------------------------------------------
                                   17,898,965       33,183,707   13,231,618     10,634,371   7,604,635     2,757,164
---------------------------------------------------------------------------------------------------------------------

Shares to be issued in
  respect of contingent
  consideration (note 2(c))           450,040        2,430,200            -              -           -             -

---------------------------------------------------------------------------------------------------------------------
Balance, end of year               18,349,005    $  35,613,907   13,231,618   $ 10,634,371   7,604,635  $  2,757,164
---------------------------------------------------------------------------------------------------------------------
</TABLE>


(b)  Private placement transaction:

     On May 11, 1999, the Company issued 3,300,000 special warrants in a private
     placement for cash consideration of $5.50 per special warrant and aggregate
     proceeds of $18,150,000. Net proceeds recorded as share capital, after
     deducting issue costs of $1,957,269 and the related tax recovery of
     $918,889, were $17,111,620. On July 30, 1999, the Company filed a final
     prospectus with certain securities commissions in Canada to qualify
     3,300,000 common shares which were issued on the exercise of the special
     warrants.


                                      F-20

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


8.     Share capital (continued):

       (c) Stock option plans:

            The Company has reserved 2,450,000 common shares under its stock
            option plans. Under the plans, the options are exercisable for one
            common share and the exercise price of the option must equal the
            market price of the underlying share at the grant date. Options
            granted after November 1997 have vesting periods ranging from date
            of grant and up to five years. Options granted prior to November
            1997 vested upon grant. Once vested, options are exercisable at any
            time until expiry. Expiry dates range between 1999 and 2004.

            Details of the options are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                                                  Weighted
                                                                                   average
                                                                                  exercise
                                                                Number           price per
                                                              of options             share
------------------------------------------------------------------------------------------

           <S>                                                 <C>               <C>
           Options outstanding, September 30, 1996               520,000         $    0.81
           Options granted                                       495,000              3.08
           Options exercised                                    (310,000)             0.79
           Options cancelled                                     (50,000)             1.41
------------------------------------------------------------------------------------------
           Options outstanding, September 30, 1997               655,000              2.51
           Options granted                                     1,240,000              3.79
           Options exercised                                    (205,000)             1.19
           Options cancelled                                    (135,000)             2.94
------------------------------------------------------------------------------------------
           Options outstanding, September 30, 1998             1,555,000              3.60
           Options granted                                     1,116,500              4.86
           Options exercised                                    (273,000)             3.20
           Options cancelled                                    (322,000)             3.75

------------------------------------------------------------------------------------------
           Options outstanding, September 30, 1999             2,076,500         $    4.30
------------------------------------------------------------------------------------------

           Options exercisable, September 30, 1999               638,333         $    4.64

------------------------------------------------------------------------------------------

           Options exercisable, September 30, 1998               600,000         $    3.45

------------------------------------------------------------------------------------------
</TABLE>


                                      F-21

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


8.     Share capital (continued):


           The range of exercise prices for options outstanding and options
           exercisable at September 30, 1999 are as follows:

<TABLE>
<CAPTION>
           ---------------------------------------------------------------------------------------------
                                   Weighted
                                    average                Weighted             Number            Number
           Range of                exercise                 average         of options        of options
           exercise price             price        contractual life        outstanding       exercisable
           ---------------------------------------------------------------------------------------------

           <S>                      <C>                  <C>                 <C>                 <C>
           $  3.35 - 4.70           $  3.82              3.50 years          1,675,000           412,500
              6.20 - 7.50              6.31              4.84 years            401,500           225,833

           ---------------------------------------------------------------------------------------------
</TABLE>


       (d) Shares issued for acquisition:


           In connection with the 1998 acquisition of Promanad, 99,946 shares of
           the Company are being held in escrow which may only be released to
           the vendors if certain future conditions are met (note 2(d)). The
           maximum number of shares that may be issued under those conditions
           are 77,381 shares. These shares held in escrow have not been included
           in the purchase price of the subsidiary and have not been reflected
           in the number of issued shares noted in the table above nor included
           in the calculation of earnings per share.


       (e) Special warrants:


           Pursuant to an agency agreement dated December 18, 1997, the Company
           issued 1,633,382 special warrants at a price of $3.35 per special
           warrant for aggregate gross proceeds to the Company of $5,471,830 and
           net proceeds of $4,825,364. These special warrants were exercised
           during 1998, resulting in the issuance of 1,633,382 common shares.


           In addition, the Company has granted to its agents, compensation
           options to acquire, for no additional consideration, an aggregate
           number of broker warrants equal to 10% (163,338) of the number of
           common shares issuable on the exercise of the special warrants sold.
           Fifty percent of the broker warrants (81,669) were exercisable at a
           price of $3.60 per common share any time prior to December 18, 1998
           and the balance are exercisable at a price of $3.60 per common share
           prior to December 18, 1999. There are 747 broker warrants which are
           outstanding at September 30, 1999 which are exercisable for one
           common share each.


                                      F-22

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


8.     Share capital (continued):


       (f) Common share purchase warrants:



           In 1996, pursuant to two private placement transactions, the Company
           issued 2,631,580 common share purchase warrants, having an exercise
           price of $0.44 to January 29, 1998 and 1,000,000 common share
           purchase warrants having an exercise price of $0.85 to September 12,
           1997 and $1.00 thereafter to September 30, 1998. During 1998, all of
           the 3,631,580 warrants were exercised at prices ranging from $0.44
           per share to $1 per share and an equivalent number of common shares
           were issued for aggregate cash proceeds of $2,157,921.



       (g) Loss on redemption of shares:


           During 1999, the Company paid $65,965 to an employee upon the
           surrender and cancellation of 97,000 vested stock options. The cash
           payment represented the excess of the fair value of the options of
           $332,040 over the aggregate exercise price of $266,075 and has been
           charged to retained earnings as a loss on redemption of shares.


       (h) Net income and cash flow from operations per share:


           Earnings and cash flow figures per share are based on the weighted
           average number of basic common shares outstanding during the year of
           14,750,247 (1998 - 10,075,366; 1997 - 7,430,587) and fully diluted
           common shares outstanding of 14,750,247 (1998 - 10,653,351; 1997 -
           10,492,584).


           Basic and fully diluted cash flow from operations per share have been
           calculated using the cash flows from operating activities, excluding
           net changes in non-cash working capital balances.



                                      F-23



<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


9.     Income taxes:


       The income tax expense in the consolidated statement of operations varies
       from the amount that would be computed by applying Canadian statutory
       rates to earnings before income taxes and goodwill charges.


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                   1999                     1998                   1997
------------------------------------------------------------------------------------------------------------------------------

       <S>                               <C>             <C>     <C>              <C>    <C>             <C>
       Income taxes at statutory rates   $  2,448,447    44.6%   $   716,746      44.6%  $  546,057      44.6%
       Increase (decrease) in income
         taxes resulting from:
           Expenses deducted in the
              accounts which have no
              corresponding deduction
              for income taxes                215,548     3.9%        16,000       1.0%      27,000       2.2%
           Utilization of previous years'
              losses                         (721,000)  (13.1)%     (742,000)    (46.2)%   (511,000)   (41.8)%
           Other                               60,000     1.1%         9,254       0.6%     (62,057)    (5.0)%

------------------------------------------------------------------------------------------------------------------------------
                                         $  2,002,995    36.5%   $         -         -   $        -         -%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


10.    Reduction of capital:


       During 1997, the share capital of the Company was reduced by $9,886,961
       pursuant to a special resolution of the shareholders dated August 15,
       1997. The reduction in share capital was applied against the opening
       deficit of $9,886,961.


11.    Commitments:


       The Company has entered into operating lease agreements for office
       premises and equipment with minimum annual lease payments over the next
       five years as follows:


<TABLE>
------------------------------------------------------------------------------------------------------------------------------

       <S>                                                                                      <C>
       2000                                                                                     $    1,452,397
       2001                                                                                          1,127,256
       2002                                                                                            674,223
       2003                                                                                            112,715
       2004                                                                                              9,448

------------------------------------------------------------------------------------------------------------------------------
                                                                                                $    3,376,039
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-24

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


12.    Financial instruments:


       (a) The carrying value and estimated fair values of the Company's
           financial instruments are as follows:


           (i)   The carrying amounts of cash, restricted cash, accounts
                 receivable and accounts payable and accrued liabilities
                 approximate their fair values due to the short-term nature of
                 these instruments.


           (ii)  The fair value of the mortgage receivable cannot be determined.


           (iii) The fair values of the Company's term loan and promissory note
                 payable approximate their carrying values that bear interest at
                 current market rates. The carrying values of the loans payable
                 approximate their fair values based on the Company's current
                 borrowing rate.


           (iv)  The fair value of foreign currency contracts are estimated by
                 obtaining quotes of the amount that the Company would have to
                 pay counterparties to terminate agreements.


                 The carrying amounts of the contracts are nil and the fair
                 value as at September 30, 1999 was $16,928.


       (b) Risk management activities:


           (i)   Currency risk:


                 During 1999, the Company entered into foreign currency
                 contracts to manage its exposure to foreign currency risk. The
                 Company has provided as security all of Watt's assets to
                 support these financial instruments. As at September 30, 1999,
                 the Company had outstanding foreign exchange contracts to sell
                 U.S. $3,839,000 in exchange for Canadian dollars over a period
                 of 12 months at a weighted average exchange rate of Cdn. $1.47.

                                      F-25

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


12.    Financial instruments (continued):


           (ii)  Credit risk:


                 The Company manages its credit risk with respect to accounts
                 receivable by acting as an agent for its customers, by dealing
                 primarily with large creditworthy customers and by billing
                 whenever possible in advance of rendering services. As at
                 September 30, 1999, the Company has one customer which
                 represents 15.4% of accounts receivable.


                 The Company is exposed to credit risk in the event of
                 non-performance by counterparties in connection with its
                 foreign currency contracts. The Company does not obtain
                 collateral or other security to support financial instruments
                 subject to credit risk but mitigates this risk by dealing only
                 with financially sound counterparties and, accordingly, does
                 not anticipate loss for non-performance.


13.    Uncertainty due to the Year 2000 Issue:

       The Year 2000 Issue arises because many computerized systems use two
       digits rather than four to identify a year. Date-sensitive systems may
       recognize the year 2000 as 1900 or some other date, resulting in errors
       when information using year 2000 dates is processed. In addition, similar
       problems may arise in some systems which use certain dates in 1999 to
       represent something other than a date. The effects of the Year 2000 Issue
       may be experienced before, on, or after January 1, 2000 and, if not
       addressed, the impact on operations and financial reporting may range
       from minor errors to significant systems failure, which could affect an
       entity's ability to conduct normal business operations. It is not
       possible to be certain that all aspects of the Year 2000 Issue affecting
       the Company, including those related to the efforts of customers,
       suppliers, or other third parties, will be fully resolved.

                                      F-26

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


14.    Segmented information:

       The Company provides integrated marketing communication services to its
       clients. While the Company has subsidiaries in Canada and the United
       States, it operates as a global business and has no distinct operating
       segments.

       The tables below set out the following information.


       (a) The Company's external revenue and gross margin by geographic region
           based on the region in which the customer is located is as follows:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                      <C>                   <C>                   <C>
           Revenue:
                Canada                              $      54,983,918     $    37,844,485       $   23,444,317
                United States                              83,346,991                   -                    -

------------------------------------------------------------------------------------------------------------------------------
                                                    $     138,330,909     $    37,844,485       $   23,444,317
------------------------------------------------------------------------------------------------------------------------------

           Gross margin:
                Canada                              $      19,153,216     $    13,491,015       $    8,675,000
                United States                              22,633,909                   -                    -

------------------------------------------------------------------------------------------------------------------------------
                                                    $      41,787,125     $    13,491,015       $    8,675,000
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


       (b) The Company's identifiable assets for each geographic area in which
           it has operations are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                            <C>                   <C>
           Capital assets:
                Canada                                                    $     6,772,417       $    4,531,550
                United States                                                   1,097,069                    -

------------------------------------------------------------------------------------------------------------------------------
                                                                          $     7,869,486       $    4,531,550
------------------------------------------------------------------------------------------------------------------------------

           Goodwill:
                Canada                                                    $    10,357,020       $    4,864,622
                United States                                                  11,559,245                    -

------------------------------------------------------------------------------------------------------------------------------
                                                                          $    21,916,265       $    4,864,622
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


       (c) In 1999, the Company had one customer which represented 10.3% of
           gross margin and in 1998 and 1997 a different customer represented
           18% of gross margin.

                                      F-27

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


15.    Comparative figures:


       Certain of the comparative figures have been reclassified to conform with
       the current year's financial statement presentation.


16.    Reconciliation to United States generally accepted accounting principles:


       These consolidated financial statements have been prepared in accordance
       with generally accepted accounting principles ("GAAP") as applied in
       Canada. Set out below are the material adjustments to net earnings for
       the years ended September 30, 1999, 1998 and 1997 required in order to
       conform to U.S. GAAP.



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

       <S>                                            <C>                  <C>                  <C>
       Net income:
           Net income for the year based
              on Canadian GAAP                        $     2,876,763      $    1,502,799       $    1,179,343
           Adjustment to income tax provision (a)            (721,000)           (711,000)           1,432,000
           Stock-based compensation expense (b)              (226,965)                  -                    -

------------------------------------------------------------------------------------------------------------------------------
       Net income for the year based on
         U.S. GAAP                                    $     2,155,798      $      791,799       $    2,384,343
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-28

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


15.    Comparative figures:


       Certain of the comparative figures have been reclassified to conform with
       the current year's financial statement presentation.


16.    Reconciliation to United States generally accepted accounting principles:


       These consolidated financial statements have been prepared in accordance
       with generally accepted accounting principles ("GAAP") as applied in
       Canada. Set out below are the material adjustments to net earnings for
       the years ended September 30, 1999, 1998 and 1997 required in order to
       conform to U.S. GAAP.



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

       <S>                                            <C>                  <C>                  <C>
       Net income:
           Net income for the year based
              on Canadian GAAP                        $     2,876,763      $    1,502,799       $    1,179,343
           Adjustment to income tax provision (a)            (721,000)           (711,000)           1,432,000
           Stock-based compensation expense (b)              (226,965)                  -                    -

------------------------------------------------------------------------------------------------------------------------------
       Net income for the year based on
         U.S. GAAP                                    $     1,928,798      $      791,799       $    2,611,343
------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      F-29

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


       Condensed consolidated balance sheets as at September 30, 1999 and 1998
       prepared in accordance with U.S. GAAP are as follows:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                             Canadian                                     U.S.
       September 30, 1999                                        GAAP         Adjustments                 GAAP
------------------------------------------------------------------------------------------------------------------------------

       <S>                                           <C>                   <C>                   <C>
       Assets

       Current assets:
           Accounts receivable                       $     27,229,929      $    3,392,111 (e)
                                                                               (2,712,008)(d)    $  27,910,032
           Contract work in process                         3,392,111          (3,392,111)(e)                -
           Other current assets                            16,611,062                               16,611,062
------------------------------------------------------------------------------------------------------------------------------
                                                           47,233,102                               44,521,094
------------------------------------------------------------------------------------------------------------------------------

       Deferred income taxes                                  625,587                                  625,587
       Other non-current assets                            30,601,733                               30,601,733

------------------------------------------------------------------------------------------------------------------------------
       Total assets                                  $     78,460,422                            $  75,748,414
------------------------------------------------------------------------------------------------------------------------------

       Liabilities and Shareholders' Equity

       Current liabilities:
           Deferred revenue                          $      4,457,822      $   (4,457,822)(d)    $           -
           Amounts collected from
              customers in excess of pass                                       4,457,822 (d)
              through costs incurred                                -          (2,712,008)(d)        1,745,814
           Other current liabilities                       31,239,412                               31,239,412
------------------------------------------------------------------------------------------------------------------------------
                                                           35,697,234                               32,985,226

       Long-term debt                                       2,151,185                                2,151,185

       Shareholders' equity:
           Share capital                                   35,613,907           9,886,961 (j)
                                                                                  161,000 (b)       45,661,868
           Retained earnings (deficit)                      5,492,940          (9,886,961)(j)
                                                                                 (161,000)(b)       (4,555,021)
           Cumulative translation adjustments                (494,844)                                (494,844)
------------------------------------------------------------------------------------------------------------------------------
                                                           40,612,003                               40,612,003

------------------------------------------------------------------------------------------------------------------------------
       Total liabilities and shareholders' equity    $     78,460,422                            $  75,748,414
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-30

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                             Canadian                                     U.S.
       September 30, 1998                                        GAAP         Adjustments                 GAAP
------------------------------------------------------------------------------------------------------------------------------

       <S>                                           <C>                   <C>                  <C>
       Assets

       Current assets:
           Accounts receivable                       $     10,764,954      $    1,139,807 (e)
                                                                               (1,212,497)(d)   $   10,692,264
           Contract work in process                         1,139,807          (1,139,807)(e)                -
           Other current assets                             3,779,092                                3,779,092
------------------------------------------------------------------------------------------------------------------------------
                                                           15,683,853                               14,471,356

       Deferred income taxes                                        -             721,000 (a)          721,000
       Other non-current assets                             9,646,172                                9,646,172

------------------------------------------------------------------------------------------------------------------------------
       Total assets                                  $     25,330,025                           $   24,838,528
------------------------------------------------------------------------------------------------------------------------------

       Liabilities and Shareholders' Equity

       Current liabilities:
           Deferred revenue                          $      1,212,497      $   (1,212,497)(d)   $            -
           Amounts collected from
              customers in excess of pass                                       1,212,497 (d)
              through costs incurred                                -          (1,212,497)(d)                -
           Other current liabilities                       10,578,190                               10,578,190
------------------------------------------------------------------------------------------------------------------------------
                                                           11,790,687                               10,578,190

       Long-term debt                                         222,825                                  222,825

       Shareholders' equity:
           Share capital                                   10,634,371           9,886,961 (j)       20,521,332
           Retained earnings (deficit)                      2,682,142             721,000 (a)
                                                                               (9,886,961)(j)       (6,483,819)
------------------------------------------------------------------------------------------------------------------------------
                                                           13,316,513                               14,037,513

------------------------------------------------------------------------------------------------------------------------------
       Total liabilities and shareholders' equity    $     25,330,025                           $   24,611,528
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-31


<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


       Summary of accounting policy differences:


       The areas of material difference between Canadian and U.S. GAAP and their
       impact on the consolidated financial statements of the Company are set
       out below:


       (a) Income taxes:


           U.S. GAAP requires that deferred income taxes be accounted for under
           the liability method, whereas Canadian GAAP requires the use of the
           deferral method.


           Under Canadian GAAP, the Company must be virtually certain of the
           realization of income tax loss carryforwards and unclaimed future tax
           deductions at the time they arise in order to recognize the related
           tax benefit in its accounts. This condition of virtual certainty did
           not exist when the losses arose and, therefore, the related deferred
           income tax assets were not recorded at that time and are being
           recognized in income only when they are realized.


           U.S. GAAP requires the Company to record the deferred tax benefit
           associated with tax loss carryforwards and future tax deductions if
           the realization of amounts is more likely than not, and accordingly
           these amounts were recorded for U.S. GAAP purposes in 1997. As a
           result, the realization of these tax losses in the years ended
           September 30, 1999 and 1998 for Canadian GAAP purposes must be
           reversed under U.S. GAAP.


           The tax effects of temporary differences that give rise to
           significant portions of the deferred tax assets are presented below:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                              <C>                  <C>
           Deferred tax assets:
                Share issue costs                                           $     688,958        $           -
                Net operating loss carryforwards                                        -              514,000
           Less:
                Capital assets, being excess of book over tax basis                63,371             (207,000)

------------------------------------------------------------------------------------------------------------------------------
            Net deferred tax asset                                          $     625,587        $     721,000
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-32



<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


           The Company's income tax expense consists of the following:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                        <C>                  <C>                  <C>
           Net income before income taxes
              based on U.S. GAAP                      $     4,641,793      $    1,502,799       $    1,179,343

------------------------------------------------------------------------------------------------------------------------------

           Computed tax expense (recovery)
              at basic tax rate of 44.6%              $     2,070,000      $      670,000      $       526,000
           Increase (decrease) in income taxes
              resulting from:
                Utilization of loss carryforwards not
                  previously recognized                             -                   -             (511,000)
                Non-deductible goodwill
                  amortization                                265,000              46,000               20,000
                Non-deductible stock-based
                  compensation                                101,000                   -                    -
                Other expenses deducted in the
                  accounts which have no
                  corresponding deduction for
                  income taxes                                217,000               8,000                7,000
                Other                                          60,000             (13,000)             (42,000)
                Reduction in valuation allowance                    -                   -           (1,432,000)

------------------------------------------------------------------------------------------------------------------------------
                                                      $     2,713,000      $      711,000      $    (1,432,000)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


       (b) Stock-based compensation expense:


           U.S. GAAP requires that the excess of the fair value of options
           repurchased by the Company over their aggregate exercise price be
           recorded as compensation expense. Under Canadian GAAP, the excess of
           $65,965 is charged to retained earnings and, accordingly, there is no
           adjustment required to shareholders' equity under U.S. GAAP.


           In addition, during 1999, the Company granted stock options to
           non-employees as compensation for services rendered. U.S. GAAP
           requires that the Company measure compensation cost for these options
           based on their fair value at the grant date, whereas Canadian GAAP
           does not require the recognition of compensation expense for such
           options. The fair value of these options is estimated to be $161,000.


                                      F-33

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)


Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


       (c) Revenue:


           U.S. GAAP does not permit pass through costs to be included in
           revenue or costs of sales in respect of agency services. Accordingly,
           the amounts disclosed as revenue, cost of sales and gross margin
           under Canadian GAAP would not be permitted to be disclosed as such
           under U.S. GAAP. Under U.S. GAAP, the Company's total revenues for
           the year ended September 30, 1999 would be $41,787,125 (1998 -
           $13,491,015; 1997 - $8,675,000).



       (d) Deferred Revenue:

           Under Canadian GAAP, deferred revenue as at September 30, 1999 and
           1998 is comprised entirely of amounts billed to clients for pass
           through costs in excess of costs incurred. Under U.S. GAAP, such
           amounts do not represent deferred revenue and they would be presented
           separately as a current liability. In addition, under U.S. GAAP, to
           the extent that such amounts billed to clients for pass through costs
           in excess of costs incurred have not yet been collected from clients,
           they should not be presented as a liability nor as accounts
           receivable. Accordingly, under U.S. GAAP, both accounts receivable
           and amounts billed for pass through costs in excess of costs incurred
           as at September 30, 1999 must be reduced by $2,712,008 (1998 -
           $1,212,497) to adjust for amounts not yet collected.


           Under Canadian GAAP, fees billed in advance of such fees being earned
           are recorded as accounts receivable and deferred revenue. Under U.S.
           GAAP, only those fees collected in advance of such fees being earned
           are permitted to be recorded as deferred revenue. As at September 30,
           1999 and 1998 the Company had no advance billing of fees.


       (e) Accounts receivable:

           Under U.S. GAAP, unbilled pass through costs must be classified as
           unbilled receivables, rather than being presented as work in process
           under Canadian GAAP. Accounts receivable under U.S. GAAP are
           comprised of the following:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                            <C>                  <C>
           Accrued revenue                                                $     2,140,203      $       704,303
           Unbilled pass through costs                                          3,392,111            1,139,807
           Billed receivables                                                  22,377,718            8,848,154

------------------------------------------------------------------------------------------------------------------------------
                                                                          $    27,910,032      $    10,692,264
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-34

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------

16.    Reconciliation to United States generally accepted accounting principles
       (continued):


       (f) Business combinations:

           U.S. GAAP requires the disclosure of the unaudited pro forma U.S.
           GAAP consolidated results of operations giving effect to the
           acquisition of Promanad as if it had occurred as of October 1, 1996
           which are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                            <C>                  <C>
           Revenue                                                        $    56,113,177      $    48,405,214
           Gross margin                                                        17,511,092           14,025,610
           Net income                                                           1,060,199            3,140,591
           Basic net income per share                                                0.11                 0.42
           Diluted net income per share                                              0.10                 0.30

------------------------------------------------------------------------------------------------------------------------------
</TABLE>

           U.S. GAAP requires the disclosure of the unaudited pro forma U.S.
           GAAP consolidated results of operations giving effect to the
           acquisition of Watt as if it had occurred as of October 1, 1997 which
           are as follows:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                            <C>                  <C>
           Revenue                                                        $   147,359,909      $    50,409,137
           Gross margin                                                        49,286,614           24,024,264
           Net income                                                           1,684,125              502,512
           Basic net income per share                                                0.11                 0.05
           Diluted net income per share                                              0.10                 0.05

------------------------------------------------------------------------------------------------------------------------------
</TABLE>


           U.S. GAAP requires the disclosure of the unaudited pro forma U.S.
           GAAP consolidated results of operations giving effect to the
           acquisition of Devlin as if it had occurred as of October 1, 1997
           which are as follows:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                            <C>                  <C>
           Revenue                                                        $   138,498,469      $    38,691,364
           Gross margin                                                        41,932,376           14,084,384
           Net income                                                           1,853,251              694,587
           Basic net income per share                                                0.13                 0.07
           Diluted net income per share                                              0.11                 0.07

------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-35
<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


           U.S. GAAP requires the disclosure of the unaudited pro forma U.S.
           GAAP consolidated results of operations giving effect to the
           acquisition of Hampel Stefanides as if it had occurred as of October
           1, 1997 which are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                                          1998
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                                                <C>
           Revenue                                                                            $    135,880,252
           Gross margin                                                                             32,187,996
           Net income                                                                                  169,250
           Basic net income per share                                                                     0.02
           Diluted net income per share                                                                   0.02

------------------------------------------------------------------------------------------------------------------------------
</TABLE>


       (g) Net income per share:


           Income per common share amounts in accordance with U.S. GAAP are
           based on U.S. GAAP net income. The calculation of basic income per
           share is the same under both Canadian and U.S. GAAP. However, for
           purposes of calculating diluted net income per share, the dilutive
           effects of outstanding options and warrants is computed by applying
           the treasury stock method under U.S. GAAP, which is not permitted
           under Canadian GAAP.


           Basic net income per share under U.S. GAAP for the year ended
           September 30, 1999 is $0.13 (1998 - $0.08; 1997 - $0.35). Diluted net
           income per share under U.S. GAAP for the year ended September 30,
           1999 is $0.12 (1998 - $0.08; 1997 - $0.25).

           The diluted weighted average number of shares outstanding is
           calculated as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                             <C>                 <C>                  <C>
           Weighted average basic number
              of shares outstanding                        14,750,247          10,075,366            7,430,587
           Dilutive effect of:
                Special warrants                              786,575                   -                    -
                Warrants                                        8,885              17,402            2,964,061
                Options                                       682,732             186,085              173,255

------------------------------------------------------------------------------------------------------------------------------
            Weighted average diluted number
              of shares outstanding                        16,228,439          10,278,853           10,567,903
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-36

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):

       (h) Stock-based compensation disclosures:

           The Company measures compensation expense relating to employee stock
           option plans for U.S. GAAP purposes using the intrinsic value method
           specified by APB Opinion No. 25, which in the Company's circumstances
           would not be materially different from compensation expense as
           determined under Canadian GAAP, except as disclosed in 16(b).


           Had the Company determined compensation costs based on the fair value
           at the grant date of its stock options consistent with the method
           prescribed under Financial Accounting Standards Board ("FASB")
           Statement of Financial Accounting Standards No. 123 ("SFAS 123"), the
           Company's net earnings and earnings per share would have been
           reported as the pro forma amounts indicated below:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                        <C>                   <C>                 <C>
           Net earnings in accordance with
              U.S. GAAP as reported                   $     1,928,798       $     791,799       $    2,611,343
           Pro forma net earnings                           1,335,046             606,018            2,323,458
           Pro forma basic earnings per share                    0.09                0.06                 0.31
           Pro forma diluted earnings per share                  0.08                0.06                 0.22

------------------------------------------------------------------------------------------------------------------------------
</TABLE>


           Pro forma net earnings reflect only those options granted during the
           four years ended September 30, 1999. Therefore, the full impact of
           calculating compensation costs for stock options under SFAS 123 is
           not reflected in the pro forma net earnings amounts presented above
           because compensation cost is reflected over the expected lives of the
           options and the compensation cost for options granted prior to
           October 1, 1995 is not considered. The notional compensation expense
           associated with the Company's options is not deductible for Canadian
           income tax purposes. Accordingly, the full amount of compensation
           expense is reflected in the pro forma figures above, without any
           related tax recovery.


           The weighted average estimated fair value at the date of the grant,
           as defined by SFAS 123, for options granted in fiscal 1999 was $1.20
           per share (1998 - $0.73; 1997 - $0.58).


                                      F-37

<PAGE>

ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):

           The fair value of each option granted was estimated on the date of
           the grant using the Black-Scholes fair value option pricing model
           with the following assumptions:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                                  <C>                 <C>                  <C>
           Risk-free interest rate                              4.70%               4.70%                4.47%
           Dividend yield                                          -                   -                    -
           Volatility factor of the future expected
              market price of the Company's
              common shares                                       40%                 22%                  43%
           Weighted average expected life of the
              options                                      2.50 years          1.75 years               1 year

------------------------------------------------------------------------------------------------------------------------------
</TABLE>


           The Black-Scholes option valuation model was developed for use in
           estimating the fair value of traded options which have no vesting
           restrictions and are fully transferable. In addition, option
           valuation models require the input of highly subjective assumptions,
           including the expected price volatility. Because the Company's
           employee share options have characteristics significantly different
           from those of traded options, and because changes in the subjective
           input assumptions can materially affect the fair value estimate, in
           management's opinion, the existing models do not necessarily provide
           a reliable single measure of the fair value of its employee share
           options.

           For the purposes of pro forma disclosures, the estimated fair value
           of the options is amortized to expense over the options' vesting
           period on a straight-line basis.

       (i) Comprehensive income:

           The Company's comprehensive income represents U.S. GAAP net income
           plus the change in the cumulative translation adjustment account, in
           respect of foreign operations as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                1998                 1997
------------------------------------------------------------------------------------------------------------------------------

           <S>                                        <C>                   <C>                 <C>
           Net income for the year in
              accordance with U.S. GAAP               $     1,928,798       $     791,799       $    2,611,343
           Less increase in cumulative translation
              adjustment account                             (494,844)                  -                    -

------------------------------------------------------------------------------------------------------------------------------
                                                      $     1,433,954       $     791,799       $    2,611,343
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-38

<PAGE>



ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):

       (j) Reduction of capital:

           In 1997, the share capital of the Company was reduced by $9,886,961,
           pursuant to a special resolution of its shareholders and was applied
           against the deficit. This reduction in capital is not permitted under
           U.S. GAAP. While the adjustment has no impact on shareholders'
           equity, under U.S. GAAP, capital stock would be increased by
           $9,886,961 and retained earnings would be decreased by $9,886,961 as
           at September 30, 1999 and 1998.

       (k) Statement of cash flows:

           The Company has disclosed cash flow from operations per share, which
           is not permitted under U.S. GAAP.

        (l) Other disclosures:

           U.S. GAAP requires the Company to disclose the following items, for
           which disclosure is not required under Canadian GAAP:

            (i)   The allowance for doubtful accounts as at September 30, 1999
                  was $285,570 (1998 - $92,267).


            (ii)  Rent expense under operating leases for the year ended
                  September 30, 1999 amounted to $1,187,989 (1998 - $626,874;
                  1997 - $254,855).

            (iii) As at September 30, 1999, the Company had a $1,000,000 (1998 -
                  $1,000,000) unused line of credit.

            (iv)  U.S. GAAP requires the disclosure of accrued liabilities.
                  Accrued liabilities included in accounts payable and accrued
                  liabilities as at September 30, 1999 were $7,031,774 (1998 -
                  $2,960,558). At September 30, 1999, accrued liabilities
                  include $2,620,927 related to additional consideration for the
                  acquisition of Hampel Stefanides (note 2(c)). At September 30,
                  1998, there were no accrued liabilities that exceeded 5% of
                  current liabilities.


            (v)   The Company has disclosed both net income before goodwill
                  amortization and net earnings per share before goodwill
                  amortization, which are not permitted disclosures under U.S.
                  GAAP.


                                      F-39

<PAGE>


ENVOY COMMUNICATIONS GROUP INC.
Notes to Consolidated Financial Statements (continued)
(In Canadian dollars)

Years ended September 30, 1999, 1998 and 1997

--------------------------------------------------------------------------------


16.    Reconciliation to United States generally accepted accounting principles
       (continued):


       (m) Recent accounting pronouncements:

           The CICA in Canada has issued a pronouncement entitled "Income Taxes"
           which the Company is required to adopt in the first quarter of its
           year ending September 30, 2001. The FASB in the United States has
           issued a pronouncement entitled "Accounting for Derivative
           Instruments and Hedging Activities," which the Company is required to
           adopt in the first quarter of its year ending September 30, 2001. The
           Company has not determined the impact of these pronouncements on its
           consolidated financial statements.



                                      F-40

<PAGE>


                         SCHEDULE OF VALUATION ACCOUNTS

                          YEAR ENDED SEPTEMBER 30, 1999


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                            Balance at Beginning                                                              Balance at end of
Description                 of Period                    Additions       Acquisitions       Deductions        Period
--------------------------------------------------------------------------------------------------------------------------------

<S>                             <C>                     <C>              <C>                <C>                  <C>
Allowance for doubtful
accounts                        $92,267                 $15,057(1)       $343,658(2)        $165,412(3)          $285,570
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


-----------------
1. Represents the increase in the allowance for doubtful accounts charged to
   expenses.
2. Represents the allowance for doubtful accounts of the acquired business on
   the date of acquisition.
3. Represents the accounts receivable written-off against the allowance for
   doubtful accounts.








                                      F-41



<PAGE>


                         SCHEDULE OF VALUATION ACCOUNTS

                          YEAR ENDED SEPTEMBER 30, 1998



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                            Balance at Beginning                                                              Balance at end of
Description                 of Period                    Additions       Acquisitions       Deductions        Period
--------------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                    <C>              <C>                <C>                  <C>
Allowance for doubtful
accounts                          $20,825                       -         $71,442(1)                -             $92,267
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


-----------------
1. Represents the allowance for doubtful accounts of the acquired business on
   the date of the acquisition.







                                      F-42


<PAGE>


                         SCHEDULE OF VALUATION ACCOUNTS

                          YEAR ENDED SEPTEMBER 30, 1997



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                            Balance at Beginning                                           Balance at end of
Description                 of Period                    Additions       Deductions        Period
------------------------------------------------------------------------------------------------------------

<S>                               <C>                    <C>              <C>                 <C>
Allowance for doubtful
accounts                          $28,601                       -         $7,776(1)           $20,825
------------------------------------------------------------------------------------------------------------
</TABLE>


-----------------
1. Represents the accounts receivable written-off against the allowance for
   doubtful accounts.







                                      F-43



<PAGE>


                                   EXHIBIT 1



<PAGE>


                                  BY-LAW NO. 1


  A by-law relating generally to the transaction of the business and affairs of

              ENVOY COMMUNICATIONS GROUP INC. (the "Corporation").


BE IT ENACTED as a By-law of the Corporation as follows:


1. Definitions and Interpretation

1.01 Definitions.

(1)      In this by-law, unless there is something in the subject-matter or
         context inconsistent therewith,

         (a)      "Act" means the Business Corporations Act, R.S.O. 1990, c.
                  B.16, as amended or re-enacted from time to time, and includes
                  the regulations made pursuant thereto;

         (b)      "affiliate" means an affiliated body corporate, and one body
                  corporate shall be deemed to be affiliated with another body
                  corporate if, but only if, one of them is the subsidiary of
                  the other or both are subsidiaries of the same body corporate
                  or each of them is controlled by the same person;

         (c)      "Articles" means the following as are from time to time in
                  effect in respect of the Corporation, namely, the original or
                  restated articles of incorporation, articles of amendment,
                  articles of amalgamation, articles of arrangement, articles of
                  continuance, articles of dissolution, articles of
                  reorganization, articles of revival, letters patent,
                  supplementary letters patent, a special Act and any other
                  instrument by which the Corporation is incorporated;

         (d)      "Auditor" means the auditor of the Corporation;

         (e)      "Board" means the board of directors of the Corporation;

         (f)      "by-law" means a by-law of the Corporation;


<PAGE>


                                     Page 2


         (g)      "Chairman of the Board", "President", "Vice-President",
                  "Secretary", "Treasurer", "Managing Director", "General
                  Manager", "Assistant Secretary", "Assistant Treasurer" or any
                  other officer means such officer of the Corporation; (1)

         (h)      "Committee" means a committee appointed pursuant to Section
                  4.01 of this by-law;

         (i)      "director" means a director of the Corporation;

         (j)      "day" means a clear day and a period of days shall be deemed
                  to commence the day following the event that began the period
                  and shall be deemed to terminate at midnight of the last day
                  of the period except that if the last day of the period falls
                  on a Sunday or holiday the period shall terminate at midnight
                  of the day next following that is not a Sunday or holiday;

         (k)      "employee" means an employee of the Corporation;

         (l)      "number of directors" means the number of directors set out in
                  the Articles or, where a minimum and maximum number of
                  directors is set out in the Articles, the number of directors
                  as shall be determined from time to time by special resolution
                  or, if a special resolution empowers the directors to
                  determine the number, by resolution of the directors;

         (m)      "officer" means an officer of the Corporation;

         (n)      "person" includes an individual, sole proprietorship,
                  partnership, unincorporated association, unincorporated
                  syndicate, unincorporated organization, trust, body corporate,
                  and a natural person in his capacity as trustee, executor,
                  administrator or other legal representative;

         (o)      "resident Canadian" means an individual who is,

                  (i)      a Canadian citizen ordinarily resident in Canada,

                  (ii)     a Canadian citizen not ordinarily resident in Canada
                           who is a member of a class of persons prescribed by
                           the Act for the purposes of the definition of
                           "resident Canadian", or

                  (iii)    a permanent resident within the meaning of the
                           Immigration Act, R.S.C. 1985, c. I-2, and ordinarily
                           resident in Canada, except a permanent resident who
                           has been ordinarily resident in Canada for more than
                           one year after the time at which he first became
                           eligible to apply for Canadian citizenship;


<PAGE>


                                     Page 3


         (p)      "shareholder" means a shareholder of the Corporation;

         (q)      "special resolution" means a resolution that is

                  (i)      submitted to a special meeting of the shareholders of
                           the Corporation duly called for the purpose of
                           considering the resolution and passed, with or
                           without amendment, at such meeting by at least
                           two-thirds of the votes cast, or

                  (ii)     consented to in writing by each shareholder of the
                           Corporation entitled to vote at such a meeting or his
                           attorney authorized in writing;

         (r)      "subsidiary" means in relation to another body corporate, a
                  body corporate which

                  (i)      is controlled by

                           (A)      that other,

                           (B)      that other and one or more bodies corporate
                                    each of which is controlled by that other,
                                    or

                           (C)      two or more bodies corporate each of which
                                    is controlled by that other, or

                  (ii)     is a subsidiary of a body corporate that is that
                           other's subsidiary;

         (s)      "Unanimous shareholder agreement" means

                  (i)      a written agreement among all the shareholders or
                           among all the shareholders and one or more persons
                           who are not shareholders that restricts in whole or
                           in part the powers of the directors to manage or
                           supervise the management of the business and affairs
                           of the Corporation, or

                  (ii)     a written declaration made by a person who is the
                           beneficial owner of all the issued shares of the
                           Corporation that restricts in whole or in part the
                           powers of the directors to manage or supervise the
                           management of the business and affairs of the
                           Corporation.

(2)      Subject to the foregoing, the words and expressions herein contained
         shall have the same meaning as corresponding words and expressions in
         the Act.

1.02 Interpretation. In each by-law and resolution, unless there is something in
the subject-matter or context inconsistent therewith, the singular shall include
the plural and the plural shall include the singular and the masculine shall
include the feminine. Wherever reference is made in this or


<PAGE>


                                     Page 4


any other by-law or in any special resolution to any statute or section thereof,
such reference shall be deemed to extend and refer to any amendment to or
re-enactment of such statute or section, as the case may be.

1.03 Headings and table of contents. The headings and table of contents in this
by-law are inserted for convenience of reference only and shall not affect the
construction or interpretation of the provisions of this by-law.

2. General

2.01 Registered office. The Corporation may by resolution of the directors
change the location of its registered office within the municipality or
geographic township specified in the Articles.

2.02 Corporate Seal. The Corporation may have a corporate seal which shall be
adopted and may be changed by resolution of the directors.

2.03 Financial Year. The directors may by resolution fix the financial year end
of the Corporation and the directors may from time to time by resolution change
the financial year end of the Corporation.

2.04 Execution of Documents.

(1)      Instruments in writing requiring execution by the Corporation may be
         signed on behalf of the Corporation by

         (a)      the Chairman of the Board,

         (b)      the President, or

         (c)      any two persons, one of whom holds the office of Managing
                  Director, Vice-President or director, and the other of whom
                  holds one of the said offices or the office of Secretary,
                  Assistant Secretary, Treasurer, or Assistant Treasurer, and
                  all instruments in writing so signed shall be binding upon the
                  Corporation without any further authorization or formality.
                  The board may from time to time by resolution appoint any
                  officer or officers or any other person or persons on behalf
                  of the Corporation either to sign instruments in writing
                  generally or to sign specific instruments in writing.

(2)      The corporate seal of the Corporation (if any) may be affixed to
         instruments in writing signed as aforesaid by any person authorized to
         sign the same or at the direction of any such person.


<PAGE>


                                     Page 5


(3)      The term "instruments in writing" as used herein shall include deeds,
         contracts, mortgages, hypothecs, charges, conveyances, transfers and
         assignments of property, real or personal, immovable or movable,
         agreements, releases, receipts and discharges for the payment of money
         or other obligations, cheques, promissory notes, drafts, acceptances,
         bills of exchange and orders for the payment of money, conveyances,
         transfers and assignments of shares, instruments of proxy, powers of
         attorney, stocks, bonds, debentures or other securities or any paper
         writings.

(4)      Subject to the provisions of Section 11.04, the signature or signatures
         of an officer or director, person or persons appointed as aforesaid by
         resolution of the directors, may, if specifically authorized by
         resolution of the directors, be printed, engraved, lithographed or
         otherwise mechanically reproduced upon all instruments in writing
         executed or issued by or on behalf of the Corporation and all
         instruments in writing on which the signature or signatures of any of
         the foregoing officers, directors or persons shall be so reproduced, by
         authorization of a resolution of the directors, shall be deemed to have
         been manually signed by such officers or persons whose signature or
         signatures is or are so reproduced and shall be as valid as if they had
         been signed manually and notwithstanding that the officers, directors
         or persons whose signature or signatures is or are so reproduced may
         have ceased to hold office at the date of the delivery or issue of such
         instruments in writing.

2.05 Resolutions in writing.

(1)      A resolution in writing, signed by all the directors entitled to vote
         on that resolution at a meeting of directors or a committee of
         directors, is as valid as if it had been passed at a meeting of
         directors or such committee of directors.

(2)      Subject to the Act, a resolution in writing signed by all the
         shareholders entitled to vote on that resolution at a meeting of
         shareholders is as valid as if it had been passed at a meeting of the
         shareholders.

(3)      Where the Corporation has only one shareholder, or only one holder of
         any class or series of shares, the shareholder present in person or by
         proxy constitutes a meeting.

2.06 Divisions. The board may cause the business and operations of the
Corporation or any part thereof to be divided into one or more divisions upon
such basis, including, without limitation, types of business or operations,
geographical territories, product lines or goods or services, as the board may
consider appropriate in each case. From time to time the board or any person
authorized by the board may authorize, upon such basis as may be considered
appropriate in each case:

         (a)      the further division of the business and operations of any
                  such division into sub-units and the consolidation of the
                  business and operations of any such divisions or sub-units;

<PAGE>


                                     Page 6


         (b)      the designation of any such division or sub-unit by, and the
                  carrying on of the business and operations of any such
                  division or sub-unit under, a name other than the name of the
                  Corporation; and

         (c)      the appointment of officers for any such division or sub-unit,
                  the determination of their powers and duties, and the removal
                  of any such officer so appointed without prejudice to such
                  officer's rights under any employment contract or in law,
                  provided that any such officer shall not, as such, be an
                  officer of the Corporation.

3. Directors

3.01 General. Subject to any unanimous shareholder agreement, the directors
shall manage or supervise the management of the business and affairs of the
Corporation.

3.02 Qualification.

(1)      The following persons are disqualified from being a director:

         (a)      a person who is less than eighteen years of age,

         (b)      a person who is of unsound mind and has been so found by a
                  court in Canada or elsewhere,

         (c)      a person who is not an individual, and

         (d)      a person who has the status of bankrupt.

(2)      Unless the Articles otherwise provide, a director is not required to
         hold shares issued by the Corporation.

(3)      Unless the Corporation is a non-resident corporation, a majority of the
         directors shall be resident Canadians but where the Corporation has
         only one or two directors, that director or one of the two directors,
         as the case may be, shall be a resident Canadian.

3.03 Election. Subject to the provisions of the Act the directors shall be
elected at the first meeting of shareholders and at each succeeding annual
meeting of the shareholders.

3.04 Fixing number of directors. If the Articles provide for a minimum and
maximum number of directors, the number of directors of the Corporation and the
number of directors to be elected at the annual meeting of the shareholders
shall be such number as shall be determined from time


<PAGE>


                                     Page 7


to time by special resolution or, if a special resolution empowers the directors
to determine the number, by resolution of the directors.

3.05 Term of office. Subject to the provisions of the Articles, the term of
office of a director not elected for an expressly stated term shall commence at
the close of the meeting of shareholders at which he is elected and shall
terminate at the close of the first annual meeting of shareholders following his
election. If an election of directors is not held at the proper time the
incumbent directors continue in office until their successors are elected.

3.06 Ceasing to Hold Office. A director ceases to hold office when


         (a)      he dies or, subject to the Act, he resigns;

         (b)      he is removed from office in accordance with the provisions of
                  the Act or the by-laws; or

         (c)      he becomes disqualified from being a director under the Act or
                  by-laws.

3.07 Resignation of a Director. Subject to the Act, a director may resign his
office as a director by giving to the Corporation his written resignation, which
resignation shall become effective at the later of

         (a)      the time at which such resignation is received by the
                  Corporation, or

         (b)      the time specified in the resignation.

3.08 Removal. Subject to the provisions of the Act, the shareholders may by
resolution at an annual or special meeting of shareholders remove any director
or directors from office and may by resolution at such meeting elect any person
to fill the vacancy created by the removal of such director, failing which the
vacancy created by the removal of such director may be filled by the directors.

3.09 Vacancies.

(1)      Subject to the provisions of the Act, a quorum of directors may fill a
         vacancy among the directors, except a vacancy resulting from

         (a)      an increase in the number of directors or in the maximum
                  number of directors, as the case may be, or


<PAGE>


                                     Page 8


         (b)      a failure to elect the number of directors required to be
                  elected at any meeting of shareholders.

(2)      A director appointed or elected to fill a vacancy holds office for the
         unexpired term of his predecessor.

(3)      If there is not a quorum of directors, or if there has been a failure
         to elect the number of directors required by the Articles or by Section
         3.04, the directors then in office shall forthwith call a special
         meeting of shareholders to fill the vacancy and, if they fail to call a
         meeting or if there are no directors then in office, the meeting may be
         called by any shareholder.

(4)      Subject to the Articles, where there is a vacancy or vacancies on the
         board, the remaining directors may exercise all the powers of the board
         so long as a quorum of the board remains in office.


3.10 Remuneration. Subject to the articles and any unanimous shareholder
agreement, the directors may fix the remuneration of the directors, officers and
employees of the Corporation.

3.11 Power to borrow. Unless the Articles or a unanimous shareholder agreement
otherwise provide, the directors may without authorization of the shareholders
from time to time

         (a)      borrow money upon the credit of the Corporation;

         (b)      issue, reissue, sell or pledge debt obligations of the
                  Corporation;

         (c)      subject to the Act, give a guarantee on behalf of the
                  Corporation to secure performance of an obligation of any
                  person; and

         (d)      mortgage, hypothecate, pledge or otherwise create a security
                  interest in all or any property of the Corporation owned or
                  subsequently acquired, to secure any obligation of the
                  Corporation.

3.12 Delegation of power to borrow. Unless the Articles or a unanimous
shareholder agreement otherwise provide, the directors may by resolution
delegate any or all of the powers referred to in Section 3.11 of this by-law to
a director, a committee of directors or an officer.


<PAGE>


                                     Page 9


4. Committees

4.01 Appointment. Subject to the Act and the Articles, the directors may appoint
from their number one or more committees and may by resolution delegate to any
such committee any of the powers of the directors.

4.02 Canadian membership. Except as allowed by the Act, a majority of the
members of any committee appointed by the directors shall be resident Canadians.

4.03 Provisions applicable. The following provisions shall apply to any
committee appointed by the directors:

         (a)      unless otherwise provided by resolution of the directors, each
                  member of a committee shall continue to be a member thereof
                  until the expiration of his term of office as a director;

         (b)      the directors may from time to time by resolution specify
                  which member of a committee shall be the chairman thereof and,
                  subject to the provisions of Section 4.01 of this by-law, may
                  by resolution modify, dissolve or reconstitute a committee and
                  make such regulations with respect to and impose such
                  restrictions upon the exercise of the powers of a committee as
                  the directors think expedient;

         (c)      the meetings and proceedings of a committee shall be governed
                  by the provisions of the by-laws of the Corporation for
                  regulating the meetings and proceedings of the board so far as
                  the same are applicable thereto and are not superseded by any
                  regulations or restrictions made or imposed by the directors
                  pursuant to the foregoing provisions hereof;

         (d)      subject to subsection (e), no business shall be transacted at
                  any meeting of a committee unless a majority of the members of
                  such committee present are resident Canadians;

         (e)      business may be transacted at any meeting of a committee where
                  a majority of resident Canadian directors is not present if,

                  (i)      a resident Canadian director who is unable to be
                           present approves in writing or by telephone or other
                           communications facilities the business transacted at
                           the meeting; and

                  (ii)     a majority of resident Canadian directors would have
                           been present had that director been present at the
                           meeting;


<PAGE>


                                    Page 10


         (f)      the members of a committee as such shall be entitled to such
                  remuneration for their services as members of a committee as
                  may be fixed by resolution of the directors, who are hereby
                  authorized to fix such remuneration;

         (g)      unless otherwise provided by resolution of the board, the
                  Secretary of the Corporation shall be the secretary of any
                  committee;

         (h)      subject to the provisions of Section 4.02 of this by-law, the
                  directors shall fill vacancies in a committee by appointment
                  from among their number; and

         (i)      unless otherwise provided by resolution of the board, meetings
                  of a committee may be convened by the direction of any member
                  thereof.

5. Meetings of Directors

5.01 Place of meetings. Meetings of the board and of any committee may be held
at any place inside or outside Ontario. In any financial year of the
Corporation, a majority of the meetings of the board and a majority of the
meetings of any committee need not be held within Canada.

5.02 Calling of meetings. A meeting of the board may be called at any time by
the Chairman of the Board, the President (if he is a director), a Vice-President
(if he is a director) or any two of the directors and the Secretary shall cause
notice of a meeting of directors to be given when so directed by any such person
or persons.

5.03 Notice of meetings.

(1)      Notice of any meeting of the board specifying the time and, except
         where the meeting is to be held as provided for in Section 5.06 of this
         by-law, the place for the holding of such meeting shall be given in
         accordance with the terms of Section 15.01 to every director not less
         than two days before the date of the meeting.

(2)      Notice of an adjourned meeting of the board is not required to be given
         if the time and place of the adjourned meeting is announced at the
         original meeting.

(3)      Meetings of the board may be held at any time without formal notice if
         all the directors are present or if all the directors who are not
         present, in writing or by cable, telegram or any form of transmitted or
         recorded communication, waive notice or signify their consent to the
         meeting being held without formal notice. Notice of any meeting or any
         irregularity in any meeting or in the notice thereof may be waived by
         any director either before or after such meeting. Attendance of a
         director at a meeting of the board is a waiver of notice of the


<PAGE>


                                    Page 11


         meeting, except where a director attends a meeting for the express
         purpose of objecting to the transaction of any business on the grounds
         that the meeting is not lawfully called.

5.04 Regular meetings. The board may by resolution fix a day or days in any
month or months for the holding of regular meetings at a time and place
specified in such resolution. A copy of any resolution of the board specifying
the time and place for the holding of regular meetings of the board shall be
sent to each director at least two days before the first of such regular
meetings and no other notice shall be required for any of such regular meetings.

5.05 First meeting of new board. For the first meeting of the board to be held
immediately following the election of directors at an annual or other meeting of
the shareholders or for a meeting of the board at which a director is appointed
to fill a vacancy in the board, no notice need be given to the newly elected or
appointed director or directors.

5.06 Participation by telephone. If all the directors present at or
participating in the meeting consent, a meeting of the board or of a committee
may be held by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously, and a director participating
in such a meeting by such means is deemed to be present in person at that
meeting for the purposes of the Act and this by-law.

5.07 Chairman. The chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and who is present at the meeting: Chairman of the Board, Managing
Director, President or a Vice-President. If no such officer is present, the
directors present shall choose one of their number to be chairman.

5.08 Quorum.

(1)      Subject to the Articles and subsection 5.08(2) of this by-law, a
         majority of the number of directors or minimum number of directors
         required by the Articles constitutes a quorum at any meeting of the
         board, but in no case shall a quorum be less than two-fifths of the
         number of directors or minimum number of directors, as the case may be.

(2)      Where the Corporation has fewer than three directors, the director or
         both directors, as the case may be, must be present at any meeting of
         the board to constitute a quorum.

(3)      Subject to subsection 5.08(4), directors, other than directors of a
         non-resident corporation, shall not transact business at a meeting of
         directors unless a quorum of the board is present and a majority of the
         directors present are resident Canadians, or where the Corporation has
         fewer than three directors, one of the directors present is a resident
         Canadian.


<PAGE>


                                    Page 12


(4)      Directors may transact business at a meeting of directors where a
         majority of resident Canadian directors is not present if,

         (a)      a resident Canadian director who is unable to be present
                  approves in writing or by telephone or other communications
                  facilities the business transacted at the meeting, and

         (b)      a majority of resident Canadian directors would have been
                  present had that director been present at the meeting.

5.09 Voting. All questions arising at any meeting of the board shall be decided
by a majority of votes. In case of an equality of votes, the chairman of the
meeting shall have, in addition to his original vote, a second or casting vote.

5.10 Auditor. The auditor shall be entitled to attend at the expense of the
Corporation and be heard at meetings of the board on matters relating to his
duties as auditor.

6. Standard of Care of Directors and Officers

6.01 Standard of care. Every director and officer, in exercising his powers and
discharging his duties, shall,

         (a)      act honestly and in good faith with a view to the best
                  interests of the Corporation; and

         (b)      exercise the care, diligence and skill that a reasonably
                  prudent person would exercise in comparable circumstances.

6.02 Liability for acts of others. Subject to the provisions of Section 6.01 of
this by-law, no director or officer shall be liable for the acts, receipts,
neglects or defaults of any other director or officer or employee or for any
loss, damage, or expense happening to the Corporation through the insufficiency
or deficiency of title to any property acquired by order of the board for or on
behalf of the Corporation or for the insufficiency or deficiency of any security
in or upon which any of the moneys of or belonging to the Corporation shall be
placed out or invested or for any loss or damage arising from the bankruptcy,
insolvency, or tortious act of any person, firm or corporation with whom or
which any moneys, securities or effects of the Corporation shall be lodged or
deposited or for any loss occasioned by any error of judgment or oversight on
his part, or for any other loss, damage or misfortune whatsoever which may
happen in the execution of the duties of his respective office or trust or in
relation thereto, unless the same are occasioned by his own wilful neglect or
default; provided that nothing herein shall relieve any director or officer from
the duty to act in accordance with the Act and the regulations thereunder or
from liability for any breach thereof.


<PAGE>


                                    Page 13


7. For the Protection of Directors and Officers

7.01 Indemnification by Corporation.

(1)      The Corporation shall indemnify a director or officer, a former
         director or officer or a person who acts or acted at the Corporation's
         request as a director or officer of a body corporate of which the
         Corporation is or was a shareholder or creditor, and his heirs and
         legal representatives, against all costs, charges and expenses,
         including an amount paid to settle an action or satisfy a judgment,
         reasonably incurred by him in respect of any civil, criminal or
         administrative action or proceeding to which he is made a party by
         reason of being or having been a director or officer of the Corporation
         or such body corporate, if

         (a)      he acted honestly and in good faith with a view to the best
                  interests of the Corporation; and

         (b)      in the case of a criminal or administrative action or
                  proceeding that is enforced by a monetary penalty, he had
                  reasonable grounds for believing that his conduct was lawful.

The Corporation may from time to time enter into agreements pursuant to which
the Corporation agrees to indemnify one or more persons in accordance with the
provisions of this section.

(2)      The Corporation shall, subject to the approval of the Ontario Court
         (General Division), indemnify a person referred to in subsection
         7.01(1) of this by-law in respect of an action by or on behalf of the
         Corporation or body corporate to procure a judgment in its favour, to
         which he is made a party by reason of being or having been a director
         or an officer of the Corporation or body corporate, against all costs,
         charges and expenses reasonably incurred by him in connection with such
         action if he fulfills the conditions set out in clauses 7.01(1)(a) and
         7.01(1)(b) of this by-law.

(3)      Notwithstanding anything in this Article, a person referred to in
         subsection 7.01(1) of this by-law is entitled to indemnity from the
         Corporation in respect of all costs, charges and expenses reasonably
         incurred by him in connection with the defence of any civil, criminal
         or administrative action or proceeding to which he is made a party by
         reason of being or having been a director or officer of the Corporation
         or body corporate, if the person seeking indemnity

         (a)      was substantially successful on the merits in his defence of
                  the action or proceeding, and

         (b)      fulfills the conditions set out in clauses 7.01(1)(a) and
                  7.01(1)(b) of this by-law.


<PAGE>


                                    Page 14


7.02 Insurance. The Corporation may purchase and maintain insurance for the
benefit of any person referred to in subsection 7.01(1)of this by-law against
any liability incurred by him

         (a)      in his capacity as a director or officer, except where the
                  liability relates to his failure to act honestly and in good
                  faith with a view to the best interests of the Corporation, or

         (b)      in his capacity as a director or officer of another body
                  corporate where he acts or acted in that capacity at the
                  Corporation's request, except where the liability relates to
                  his failure to act honestly and in good faith with a view to
                  the best interests of the body corporate.

7.03 Directors' expenses. The directors shall be reimbursed for their
out-of-pocket expenses incurred in attending board, committee or shareholders'
meetings or otherwise in respect of the performance by them of their duties and
no confirmation by the shareholders of any such reimbursement shall be required.

7.04 Performance of services for Corporation. Subject to Article 8 of this
by-law, if any director or officer shall be employed by or shall perform
services for the Corporation otherwise than as a director or officer or shall be
a member of a firm or a shareholder, director or officer of a body corporate
which is employed by or performs services for the Corporation, the fact of his
being a director or officer shall not disentitle such director or officer or
such firm or company, as the case may be, from receiving proper remuneration for
such services.

8. Interest of Directors and Officers in Contracts

8.01 Disclosure of interest. A director or officer who,

         (a)      is a party to a material contract or transaction or proposed
                  material contract or transaction with the Corporation; or

         (b)      is a director or an officer of, or has a material interest in,
                  any person who is a party to a material contract or
                  transaction or proposed material contract or transaction with
                  the Corporation, shall disclose in writing to the Corporation
                  or request to have entered in the minutes of meetings of
                  directors the nature and extent of his interest.

8.02 Time of disclosure by director. The disclosure required by Section 8.01 of
this by-law shall be made, in the case of a director,

         (a)      at the meeting at which a proposed contract or transaction is
                  first considered;


<PAGE>


                                    Page 15


         (b)      if the director was not then interested in a proposed contract
                  or transaction, at the first meeting after he becomes so
                  interested;

         (c)      if the director becomes interested after a contract is made or
                  a transaction is entered into, at the first meeting after he
                  becomes so interested; or

         (d)      if a person who is interested in a contract or transaction
                  later becomes a director, at the first meeting after he
                  becomes a director.

8.03 Time of disclosure by officer. The disclosure required by Section 8.01 of
this by-law shall be made, in the case of an officer who is not a director,

         (a)      forthwith after he becomes aware that the contract or
                  transaction or proposed contract or transaction is to be
                  considered or has been considered at a meeting of directors;

         (b)      if the officer becomes interested after a contract is made or
                  a transaction is entered into, forthwith after he becomes so
                  interested; or

         (c)      if a person who is interested in a contract or transaction
                  later becomes an officer, forthwith after he becomes an
                  officer.

8.04 Time of disclosure in extraordinary cases. Notwithstanding Sections 8.02
and 8.03 of this by-law, where Section 8.01 of this by-law applies to a director
or officer in respect of a material contract or transaction or proposed material
contract or transaction that, in the ordinary course of the Corporation's
business, would not require approval by the directors or shareholders, the
director or officer shall disclose in writing to the Corporation or request to
have entered in the minutes of meetings of directors the nature and extent of
his interest forthwith after the director or officer becomes aware of the
contract or transaction or proposed contract or transaction.

8.05 Voting by interested director. A director referred to in Section 8.01 of
this by-law shall not vote on any resolution to approve the contract or
transaction unless the contract or transaction is,

         (a)      an arrangement by way of security for money lent to or
                  obligations undertaken by him for the benefit of the
                  Corporation or an affiliate;

         (b)      one relating primarily to his remuneration as a director,
                  officer, employee or agent of the Corporation or an affiliate;

         (c)      one for indemnity or insurance pursuant to the provisions of
                  the Act; or

         (d)      one with an affiliate.


<PAGE>


                                    Page 16


8.06 Nature of disclosure. For the purposes of this Article, a general notice to
the directors by a director or officer disclosing that he is a director or
officer of or has a material interest in a person and is to be regarded as
interested in any contract made or any transaction entered into with that
person, is a sufficient disclosure of interest in relation to any contract so
made or transaction so entered into.

8.07 Effect of disclosure. Where a material contract is made or a material
transaction is entered into between the Corporation and a director or officer of
the Corporation, or between the Corporation and another person of which a
director or officer of the Corporation is a director or officer or in which he
has a material interest,

         (a)      the director or officer is not accountable to the Corporation
                  or its shareholders for any profit or gain realized from the
                  contract or transaction; and

         (b)      the contract or transaction is neither void nor voidable, by
                  reason only of that relationship or by reason only that the
                  director is present at or is counted to determine the presence
                  of a quorum at the meeting of directors that authorized the
                  contract or transaction, if the director or officer disclosed
                  his interest in accordance with Sections 8.02, 8.03, 8.04 or
                  8.06 of this by-law, as the case may be, and the contract or
                  transaction was reasonable and fair to the Corporation at the
                  time it was so approved.

8.08 Confirmation by shareholders. Notwithstanding anything in this Article, a
director or officer, acting honestly and in good faith, is not accountable to
the Corporation or to its shareholders for any profit or gain realized from any
such contract or transaction by reason only of his holding the office of
director or officer, and the contract or transaction, if it was reasonable and
fair to the Corporation at the time it was approved, is not by reason only of
the director's or officer's interest therein void or voidable, where,

         (a)      the contract or transaction is confirmed or approved by
                  special resolution at a meeting of the shareholders duly
                  called for that purpose; and

         (b)      the nature and extent of the director's or officer's interest
                  in the contract or transaction are disclosed in reasonable
                  detail in the notice calling the meeting or in the information
                  circular required pursuant to the provisions of the Act. (1)

9. Officers

9.01 Officers. Subject to the Articles, by-laws and any unanimous shareholder
agreement, the board shall, annually or as often as may be required, by
resolution appoint a President or Chairman of the Board and a Secretary. In
addition, the board may from time to time by resolution appoint


<PAGE>


                                    Page 17


such other officers as the board determines to be necessary or advisable in the
interests of the Corporation, which officers shall, subject to the Act, have
such authority and perform such duties as may from time to time be prescribed by
resolution of the board. None of the said officers, other than the Chairman of
the Board, need be a member of the board. Any two or more offices of the
Corporation may be held by the same person, except those of President and
Vice-President. If the same person holds both the office of Secretary and the
office of Treasurer, he may be known as Secretary-Treasurer.

9.02 Appointment of President or Chairman of the Board and Secretary. At the
first meeting of the board after each annual meeting of shareholders, the board
shall appoint a President or Chairman of the Board and a Secretary. In default
of such appointment, the then incumbent shall hold office until his successor is
appointed.

9.03 Remuneration and removal of officers. The remuneration of all officers
shall be determined from time to time by the board. The fact that any officer is
a director or shareholder shall not disqualify him from receiving such
remuneration as may be so determined. All officers shall be subject to removal
by resolution of the board at any time.

9.04 Duties of officers may be delegated. In case of the absence or inability to
act of the Chairman of the Board or the President, or any other officer of the
Corporation, or for any other reason that the board may deem sufficient, the
board may delegate the powers of such officer to any other officer or to any
director for the time being.

9.05 Chairman of the Board. The Chairman of the Board shall, if present, preside
at all meetings of directors and shareholders. He shall sign all instruments
which require his signature and shall perform all duties incident to his office,
and shall have such other powers and perform such other duties as may from time
to time be prescribed by resolution of the board.

9.06 President. The President shall sign all instruments which require his
signature and shall perform all duties incident to his office, and shall have
such other powers and perform such other duties as may from time to time be
prescribed by resolution of the board.

9.07 Managing Director. Subject to the Act, Articles and by-laws, the directors
may appoint from their number a Managing Director who is a resident Canadian,
and may delegate to such Managing Director any of the powers of the directors.
The Managing Director shall have such other powers and perform such other duties
as may from time to time be prescribed by resolution of the board.

9.08 General Manager. The General Manager shall have such authority to manage
the business of the Corporation and perform such duties as may from time to time
be prescribed by resolution of the board.


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                                    Page 18


9.09 Vice-President. During the President's absence or inability or refusal to
act, the President's duties may be performed and his powers may be exercised by
the Vice-President, or if there are more than one, by the Vice-Presidents in
order of seniority or designation (as determined by the board), except that no
Vice-President shall preside at a meeting of the board unless he is a director.
A Vice-President shall also have such other authority and perform such other
duties as may from time to time be prescribed by resolution of the board.

9.10 Secretary. The Secretary shall give, or cause to be given, all notices
required to be given to Shareholders, directors, auditors and members of any
committee. He shall enter or cause to be entered in the books kept for that
purpose minutes of all proceedings at meetings of directors and of shareholders.
He shall be the custodian of the seal (if any) of the Corporation and of all
books, papers, records, documents and other instruments belonging to the
Corporation. The Secretary shall have such other authority and perform such
other duties as may from time to time be prescribed by resolution of the board.

9.11 Treasurer. The Treasurer shall have the care and custody of all the funds
and securities of the Corporation and shall deposit the same in the name of the
Corporation in such bank or banks or with such depositary or depositaries as the
board may by resolution direct. He shall at all reasonable times exhibit his
books and accounts to any director upon application at the office of the
Corporation during business hours. He shall sign or countersign such instruments
as require his signature and shall perform all duties incident to his office or
that are properly required of him by resolution of the board. He may be required
to give such bond for the faithful performance of his duties as the board in its
uncontrolled discretion may require but no director shall be liable for failure
to require any bond or for the insufficiency of any bond or for any loss by
reason of the failure of the Corporation to receive any indemnity thereby
provided. The Treasurer shall also have such other authority and perform such
other duties as may from time to time be prescribed by resolution of the board.

9.12 Assistant Secretary and Assistant Treasurer.

(1)      During the Secretary's absence or inability or refusal to act, the
         Assistant Secretary shall perform all the duties of the Secretary. The
         Assistant Secretary shall also have such other authority and perform
         such other duties as may from time to time be prescribed by resolution
         of the board.

(2)      During the Treasurer's absence or inability or refusal to act, the
         Assistant Treasurer shall perform all the duties of the Treasurer. The
         Assistant Treasurer shall also have such other authority and perform
         such other duties as may from time to time be prescribed by resolution
         of the board.


<PAGE>


                                    Page 19


9.13 Delegation of board powers. In accordance with the by-laws and subject to
the provisions of the Act, the board may from time to time by resolution
delegate to any officer or officers power to manage the business and affairs of
the Corporation.

9.14 Vacancies. If any office of the Corporation shall for any reason be or
become vacant, the directors by resolution may appoint a person to fill such
vacancy.

9.15 Variation of powers and duties. Notwithstanding the foregoing, the board
may from time to time and subject to the provisions of the Act, add to or limit
the powers and duties of an office or of an officer occupying any office.

9.16 Chief Executive Officer.

(1)      The board may by resolution designate any one of the officers
         (including the Chairman of the Board, if any) as the Chief Executive
         Officer of the Corporation and may from time to time by resolution
         rescind any such designation and designate another officer as the Chief
         Executive Officer of the Corporation.

(2)      The officer designated as the Chief Executive Officer of the
         Corporation pursuant to subsection (1) of this section shall exercise
         general supervision over the affairs of the Corporation.

10. Meetings of Shareholders

10.01 Calling of meetings. A meeting of shareholders may be called at any time
by resolution of the board or by the Chairman of the Board or by the President,
and the Secretary shall cause notice of a meeting of shareholders to be given
when directed so to do by resolution of the board or by the Chairman of the
Board or by the President.

10.02 Annual meeting. Subject to the provisions of the Act, the Corporation
shall hold an annual meeting of shareholders not later than eighteen months
after the Corporation comes into existence and subsequently not later than
fifteen months after holding the last preceding annual meeting for the purpose
of considering the financial statements and the auditor's report, electing
directors and appointing auditors.

10.03 Special meeting. Subject to the provisions of the Act, a special meeting
of shareholders may be called at any time and may be held in conjunction with an
annual meeting of shareholders.

10.04 Place of meetings. Subject to the Articles and any unanimous shareholder
agreement, a meeting of shareholders shall be held at such place in or outside
Ontario as the directors determine or, in the absence of such a determination,
at the place where the registered office of the Corporation is located.

10.05 Notice. Notice of the time and place of each meeting of shareholders shall
be given in the manner provided in Section 15.01 in this by-law, in the case of
an offering Corporation, not less


<PAGE>


                                    Page 20


than twenty-one days, and in the case of any other Corporation, not less than
ten days, but, in either case, not more than fifty days, before the date of the
meeting to each director, to the auditor and to each shareholder entitled to
vote at such meeting. A notice of a meeting is not required to be sent to
shareholders who were not registered on the records of the Corporation or its
transfer agent on the record date determined under subsection 10.09(1) of this
by-law but failure to receive a notice does not deprive a shareholder of the
right to vote at the meeting.

10.06 Contents of notice.

(1)      The notice of a meeting of shareholders shall state the day, hour and
         place of the meeting, and shall state or be accompanied by a statement
         of

         (a)      the nature of any special business to be transacted at the
                  meeting in sufficient detail to permit a shareholder to form a
                  reasoned judgment thereon, and

         (b)      the text of any special resolution or by-law to be submitted
                  to the meeting.

(2)      For the purposes of this section "special business" includes all
         business transacted at a special meeting of shareholders and all
         business transacted at an annual meeting of shareholders, except
         consideration of the minutes of an earlier meeting, the financial
         statements and auditor's report, election of directors and
         reappointment of the incumbent auditor.

10.07 Waiver of notice. A shareholder and any other person entitled to attend a
meeting of shareholders may in any manner and at any time waive notice of a
meeting of shareholders, and attendance of any such person at a meeting of
shareholders is a waiver of notice of the meeting, except where he attends a
meeting for the express purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called.

 10.08 Notice of adjourned meetings.

(1)      If a meeting of shareholders is adjourned for less than thirty days, it
         is not necessary to give notice of the adjourned meeting other than by
         announcement at the earliest meeting that is adjourned.

(2)      If a meeting of shareholders is adjourned by one or more adjournments
         for an aggregate of thirty days or more, notice of the adjourned
         meeting shall be given as for an original meeting.

10.09 Record date for notice.

(1)      The directors may by resolution fix in advance a time and date as the
         record date for the determination of the shareholders entitled to
         receive notice of a meeting of the shareholders, which record date
         shall not precede by more than fifty days or by less than twenty-one
         days



<PAGE>


                                    Page 21


the date on which the meeting is to be held. Where no such record date for the
determination of the shareholders entitled to notice of a meeting of the
shareholders is fixed by the directors as aforesaid, such record date shall be,

         (a)      at the close of business on the day immediately preceding the
                  day on which notice of such meeting is given, or

         (b)      if no notice is given, the day on which the meeting is held.

(2)      If a record date is fixed pursuant to subsection (1) of this section,
         unless notice of the record date is waived in writing by every holder
         of a share of the class or series affected whose name is set out in the
         securities register at the close of business on the day the directors
         fix the record date, notice thereof shall be given, not less than seven
         days before the date so fixed, in accordance with Section 13.03.

10.10 Omission of notice. Subject to the provisions of the Act, the accidental
omission to give notice of any meeting of shareholders to any person entitled
thereto or the non-receipt of any notice by any such person shall not invalidate
any resolution passed or any proceedings taken at any meeting of shareholders.

10.11 List of shareholders.

(1)      The Corporation shall prepare a list of shareholders entitled to
         receive notice of a meeting, arranged in alphabetical order and showing
         the number of shares held by each shareholder, which list shall be
         prepared,

         (a)      if a record date is fixed under subsection 10.09(1) of this
                  by-law not later than ten days after such record date; or

         (b)      if no record date is fixed,

                  (i)      at the close of business on the day immediately
                           preceding the day on which notice is given, or

                  (ii)     where no notice is given, on the day on which the
                           meeting is held.

(2)      A shareholder may examine the list of shareholders,

         (a)      during usual business hours at the registered office of the
                  Corporation or at the place where its central securities
                  register is maintained, and

         (b)      at the meeting of shareholders for which the list was
                  prepared.


<PAGE>


                                    Page 22


10.12 Shareholders entitled to vote.

(1)      Where the Corporation fixes a record date under subsection 10.09(1) of
         this by-law, a person named in the list prepared under Section 10.11 of
         this by-law is entitled to vote the shares shown opposite his name at
         the meeting to which the list relates, except to the extent

         (a)      that the person has transferred any of his shares after the
                  record date; and

         (b)      that the transferee of those shares,

                  (i)      produces properly endorsed share certificates, or

                  (ii)     otherwise establishes that he owns the shares, and
                           demands, not later than ten days before the meeting,
                           that his name be included in the list before the
                           meeting,

                  in which case the transferee is entitled to vote such shares
                  at the meeting.

(2)      Where the Corporation does not fix a record date under subsection
         10.09(1) of this by-law a person named in the list prepared under
         Section 10.11 is entitled to vote the shares shown opposite his name at
         the meeting to which the list relates, except to the extent that,

         (a)      the person has transferred any of his shares after the date on
                  which the list referred to in Section 10.11 of this by-law is
                  prepared; and

         (b)      the transferee of those shares,

                  (i)      produces properly endorsed share certificates, or

                  (ii)     otherwise establishes that he owns the shares, and
                           demands, not later than ten days before the meeting,
                           or such shorter period before the meeting as the
                           by-laws of the Corporation may provide, that his name
                           be included in the list before the meeting, in which
                           case the transferee is entitled to vote such shares
                           at the meeting.

10.13 Persons entitled to be present. The only persons entitled to attend a
meeting of shareholders shall be those entitled to vote thereat and the
President, the Secretary, the directors, the scrutineer or scrutineers and the
auditor and others who, although not entitled to vote, are entitled or required
under any provision of the Act or the Articles or the by-laws to be present at
the meeting. Any other person may be admitted only on the invitation of the
chairman of the meeting or with the consent of the meeting.


<PAGE>


                                    Page 23


10.14 Proxies.

(1)      Every shareholder entitled to vote at a meeting of shareholders may by
         means of a proxy appoint a proxyholder, or one or more alternate
         proxyholders, who need not be shareholders, as his nominee to attend
         and act at the meeting in the manner, to the extent and with the
         authority conferred by the proxy.

(2)      A proxy shall be executed by the shareholder or his attorney authorized
         in writing or, if the shareholder is a body corporate, by an officer or
         attorney thereof duly authorized and shall conform with the
         requirements of the Act.

10.15 Revocation of proxies. A shareholder may revoke a proxy

         (a)      by depositing an instrument in writing executed by him or by
                  his attorney authorized in writing,

                  (i)      at the registered office of the Corporation at any
                           time up to and including the last business day
                           preceding the day of the meeting, or any adjournment
                           thereof, at which the proxy is to be used, or

                  (ii)     with the chairman of the meeting on the day of the
                           meeting or an adjournment thereof; or

         (b)      in any other manner permitted by law.

10.16 Deposit of proxies. The directors may by resolution fix a time not
exceeding forty-eight hours, excluding Saturdays and holidays, preceding any
meeting or adjourned meeting of shareholders before which time proxies to be
used at that meeting must be deposited with the Corporation or an agent thereof,
and any period of time so fixed shall be specified in the notice calling the
meeting.

10.17 Joint shareholders. Where two or more persons hold shares jointly, one of
those holders present at a meeting of shareholders may in the absence of the
others vote the shares, but if two or more of those persons are present, in
person or by proxy, they shall vote as one on the shares jointly held by them.

10.18 Chairman and Secretary.

(1)      The chairman of any meeting of shareholders shall be the first
         mentioned of such of the following officers as have been appointed and
         who is present at the meeting: Chairman of the Board, President,
         Managing Director or, in the absence of the aforesaid officers, a
         Vice-President who is a director. If there is no such officer or if at
         a meeting none of them is present within fifteen minutes after the time
         appointed for the holding of the meeting the shareholders present shall
         choose a person from their number to be the chairman.


<PAGE>


                                    Page 24


(2)      The Secretary shall be the secretary of any meeting of shareholders,
         but if the Secretary is absent, the chairman shall appoint some person
         who need not be a shareholder to act as secretary of the meeting.

10.19 Scrutineers. The chairman of any meeting of shareholders may appoint one
or more persons to act as scrutineer or scrutineers at such meeting and in that
capacity to report to the chairman such information as to attendance,
representation, voting and other matters at the meeting as the chairman shall
direct.

10.20 Votes to govern. At all meetings of shareholders every question shall,
unless otherwise required by law, the Articles, the by-laws, or a unanimous
shareholder agreement, be determined by the majority of the votes duly cast on
the question. In case of an equality of votes, the chairman presiding at the
meeting shall have a second or casting vote in addition to the vote or votes to
which he may be entitled as a shareholder.

10.21 Show of hands. At all meetings of shareholders, every question submitted
to the meeting shall be decided by a show of hands unless a ballot thereon is
required by the chairman or is demanded by a shareholder or proxyholder present
and entitled to vote. Upon a show of hands every person present who is either a
shareholder entitled to vote or the duly appointed proxyholder of such a
shareholder shall have one vote. Before or after a vote by a show of hands has
been taken upon any question, the chairman may require, or any shareholder or
proxyholder present and entitled to vote may demand, a ballot thereon. Unless a
ballot is demanded, an entry in the minutes of a meeting of shareholders to the
effect that the chairman declared a motion to be carried is admissible in
evidence as prima facie proof of the fact without proof of the number or
proportion of the votes recorded in favour of or against the motion.

10.22 Ballots. If a ballot is required by the chairman of the meeting or is duly
demanded by any shareholder or proxyholder and the demand is not withdrawn, a
ballot upon the question shall be taken in such manner and at such time as the
chairman of the meeting shall direct.

10.23 Votes on ballots. Unless the Articles otherwise provide, upon a ballot
each shareholder who is present in person or represented by proxy shall be
entitled to one vote for each share in respect of which he is entitled to vote
at the meeting and the result of the ballot shall be the decision of the
meeting.

10.24 Adjournment. The chairman presiding at a meeting of shareholders may, with
the consent of the meeting and subject to such conditions as the meeting
decides, adjourn the meeting from time to time and from place to place and,
subject to the provisions of the Act and subsection 10.08(2) of this by-law, no
notice of such adjournment or of the adjourned meeting need be given to the
shareholders. Subject to the provisions of the Act, any business may be brought
before or


<PAGE>


                                    Page 25


dealt with at any adjourned meeting which might have been brought before or
dealt with at the original meeting in accordance with the notice calling such
meeting.

10.25 Quorum. At any meeting of shareholders, two individuals present in person,
each of whom is either a shareholder entitled to attend and vote at such meeting
or the proxyholder of such a shareholder appointed by means of a valid proxy,
shall be a quorum for the choice of a chairman (if required) and for the
adjournment of the meeting. For all other purposes, a quorum for any meeting of
shareholders (unless a greater number of shareholders and/or a greater number of
shares are required by the Act or by the Articles or the by-laws) shall be two
individuals present in person, each of whom is either a shareholder entitled to
attend and vote at such meeting or the proxyholder of such a shareholder
appointed by means of a valid proxy, holding or representing by proxy not less
than 5% of the total number of the issued shares of the Corporation for the time
being enjoying voting rights at such meeting. No business shall be transacted at
any meeting of shareholders while the requisite quorum is not present. (Amended
May 2, 2000)

10.26 Only one shareholder. Where the Corporation has only one shareholder, or
only one holder of any class or series of shares, that shareholder present in
person or by proxy constitutes a meeting.

11. Shares and Transfers

11.01 Issuance. Subject to the provisions of the Act, the Articles and any
unanimous shareholder agreement, shares of the Corporation may be issued at such
time and to such persons and for such consideration as the directors may by
resolution determine, but no share shall be issued until it is fully paid in
money or in property or past service that is not less in value than the fair
equivalent of the money that the Corporation would have received if the share
had been issued for money.

11.02 Commissions. The directors may from time to time authorize the Corporation
to pay a reasonable commission to any person in consideration of his purchasing
or agreeing to purchase shares of the Corporation from the Corporation or from
any other person, or procuring or agreeing to procure purchasers for any such
shares.

11.03 Lien on shares. Subject to the provisions of the Act, the Corporation has
a lien on a share registered in the name of a shareholder or his legal
representative for a debt of that shareholder to the Corporation. Such lien may
be enforced by the Corporation in any manner permitted by law.

11.04 Share certificates.

(1)      Every shareholder is entitled at his option to a share certificate or
         to a non-transferable written acknowledgment of his right to obtain a
         share certificate from the Corporation,


<PAGE>


                                    Page 26



         stating the number and class of shares and the designation of any
         series of shares held by him.

(2)      Share certificates and acknowledgments of a shareholder's right to a
         share certificate, respectively, shall (subject to compliance with the
         provisions of the Act) be in such form as the directors may from time
         to time by resolution approve and, unless otherwise provided by
         resolution of the board, such certificates and acknowledgments shall be
         signed by

         (a)      the Chairman of the Board, the President or a Vice-President,
                  and

         (b)      the Secretary or an Assistant Secretary holding office at the
                  time of signing,

         and notwithstanding any change in the persons holding such offices
         between the time of actual signing and the issuance of any certificate
         or acknowledgment and notwithstanding that the Chairman of the Board,
         the President, Vice-President, Secretary or Assistant Secretary signing
         may not have held office at the date of the issuance of such
         certificate or acknowledgment, any such certificate or acknowledgment
         so signed shall be valid and binding upon the Corporation.

(3)      Notwithstanding the provisions of Section 2.04 of this by-law, the
         signature of the Chairman of the Board, the President or a
         Vice-President may be printed, engraved, lithographed or otherwise
         mechanically reproduced upon certificates and acknowledgments for
         shares of the Corporation, and certificates and acknowledgments so
         signed shall be deemed to have been manually signed by the Chairman of
         the Board, the President or a Vice-President whose signature is so
         printed, engraved, lithographed or otherwise mechanically reproduced
         thereon and shall be as valid as if they had been signed manually.
         Where the Corporation has appointed a transfer agent pursuant to
         subsection 11.05(1) of this by-law the signature of the Secretary or
         Assistant Secretary may also be printed, engraved, lithographed or
         otherwise mechanically reproduced, and when countersigned by or on
         behalf of a transfer agent, share certificates and acknowledgments so
         signed shall be as valid as if they had been signed manually.

11.05 Transfer agent.

(1)      For each class of securities and warrants issued by it, the Corporation
         may, from time to time, appoint or remove

         (a)      a trustee, transfer agent or other agent to keep the
                  securities register and the register of transfers and one or
                  more persons or agents to keep branch registers; and


<PAGE>


                                    Page 27


         (b)      a registrar, trustee or agent to maintain a record of issued
                  security certificates and warrants; and the person or persons
                  appointed pursuant to this subsection shall be referred to in
                  this by-law as a "transfer agent".

(2)      Subject to compliance with the provisions of the Act, the directors may
         by resolution provide for the transfer and the registration of
         transfers of shares of the Corporation in one or more places. A
         transfer agent shall keep all necessary books and registers of the
         Corporation for the registration and transfer of such shares of the
         Corporation. All share certificates issued by the Corporation for
         shares for which a transfer agent has been appointed as aforesaid shall
         be countersigned by or on behalf of the said transfer agent.

11.06 Transfer of shares. Subject to the restrictions on transfer set forth in
the Articles, shares of the Corporation shall be transferable on the books of
the Corporation in accordance with the applicable provisions of the Act.

11.07 Defaced, destroyed, stolen or lost certificates. Where the owner of a
share or shares of the Corporation claims that the certificate for such share or
shares has been lost, apparently destroyed or wrongfully taken, the Corporation
shall issue a new share certificate in place of the original share certificate
if such owner

         (a)      so requests before the Corporation has notice that shares
                  represented by the original certificate have been acquired by
                  a bona fide purchaser;

         (b)      files with the Corporation an indemnity bond sufficient in the
                  Corporation's opinion to protect the Corporation and any
                  transfer agent from any loss that it or any of them may suffer
                  by complying with the request to issue a new share
                  certificate; and

         (c)      satisfies any other reasonable requirements imposed by the
                  Corporation.

11.08 Joint shareholders. If two or more persons are registered as joint holders
of any share or shares, the Corporation is not bound to issue more than one
share certificate in respect thereof and delivery of a share certificate to one
of such persons is sufficient delivery to all of them.

11.09 Deceased shareholders. In the event of the death of a holder, or of one of
the joint holders, of any share, the Corporation shall not be required to make
any entry in the securities register or register of transfers in respect thereof
or to make payment of any dividends thereon except upon production of all such
documents as may be required by law and upon compliance with the reasonable
requirements of the Corporation or any of its transfer agents.


<PAGE>


                                    Page 28


12. Dividends

12.01 Declaration of dividends. Subject to the provisions of the Act and the
Articles, the directors may from time to time declare and the Corporation may
pay dividends to the shareholders according to their respective rights and
interests in the Corporation. Dividends may be paid in money or property or by
issuing fully paid shares of the Corporation or options or rights to acquire
fully paid shares of the Corporation.

12.02 Joint shareholders.

(1)      In case several persons are registered as joint holders of any share or
         shares of the Corporation, the cheque for any dividend payable to such
         joint holders shall, unless such joint holders otherwise direct, be
         made payable to the order of all such joint holders and if more than
         one address appears on the books of the Corporation in respect of such
         joint holding, the cheque shall be mailed to the first address so
         appearing.

(2)      In case several persons are registered as the joint holders of any
         share or shares of the Corporation, any one of such persons may give
         effectual receipts for all dividends and payments on account of
         dividends on such shares and/or payments in respect of the redemption
         of such shares.

12.03 Dividends from funds derived from operations. Subject to the provisions of
the Act, the Corporation may, if

         (a)      for the time being it carries on as its principal business the
                  business of operating a producing mining, gas or oil property
                  owned and controlled by it;

         (b)      at least 75% of its assets are of a wasting character; or

         (c)      it was incorporated for the purpose of acquiring the assets or
                  a substantial part of the assets of a body corporate and
                  administering such assets for the purpose of converting them
                  into cash and distributing the cash among the shareholders;
                  declare and pay dividends out of the funds derived from its
                  operations notwithstanding that the value of the net assets of
                  the Corporation may be thereby reduced to less than its stated
                  capital of all classes if the payment of the dividends does
                  not reduce the value of its remaining assets to an amount
                  insufficient to meet all the liabilities of the Corporation,
                  exclusive of its stated capital of all classes.


<PAGE>


                                    Page 29


13. Record Dates

13.01 Fixing record dates. For the purpose of determining shareholders

         (a)      entitled to receive payment of a dividend;

         (b)      entitled to participate in a liquidation or distribution; or

         (c)      for any other purpose except the right to receive notice of or
                  to vote at a meeting,

the directors may fix in advance a date as the record date for such
determination of shareholders, but such record date shall not precede by more
than fifty days the particular action to be taken.

13.02 No record date fixed. If no record date is fixed pursuant to Section
13.01, the record date for the determination of shareholders for any purpose
other than to establish a shareholder's right to receive notice of a meeting or
to vote shall be at the close of business on the day on which the directors pass
the resolution relating thereto.

13.03 Notice of record date. If a record date is fixed, unless notice of the
record date is waived in writing by every holder of a share of the class or
series affected whose name is set out in the securities register at the close of
business on the day the directors fix the record date, notice thereof shall be
given, not less than seven days before the date so fixed,

         (a)      by advertisement in a newspaper published or distributed in
                  the place where the Corporation has its registered office and
                  in each place in Canada where it has a transfer agent or where
                  a transfer of its shares may be recorded; and

         (b)      by written notice to each stock exchange in Canada on which
                  the shares of the Corporation are listed for trading.

13.04 Effect of record date. In every case where a record date is fixed pursuant
to Section 13.01 in respect of the payment of a dividend, the making of a
liquidation distribution or the issue of warrants or other rights to subscribe
for shares or other securities, only shareholders of record at the record date
shall be entitled to receive such dividend, liquidation distribution, warrants
or other rights.


<PAGE>


                                    Page 30


14. Corporate Records and Information

14.01 Keeping of corporate records.

(1)      The Corporation shall prepare and maintain, at its registered office or
         at such other place in Ontario designated by the directors:

         (a)      the Articles and the by-laws and all amendments thereto, and a
                  copy of any unanimous shareholder agreement known to the
                  directors;

         (b)      minutes of meetings and resolutions of shareholders;

         (c)      a register of directors in which are set out the names and
                  residence addresses, including the street and number, if any,
                  of all persons who are or have been directors with the several
                  dates on which each became or ceased to be a director;

         (d)      a securities register in which are recorded the securities
                  issued by the Corporation in registered form, showing with
                  respect to each class or series of securities

                  (i)      the names, alphabetically arranged, of persons who,

                           (A)      are or have been within six years registered
                                    as shareholders and the address, including
                                    the street and number, if any, of every such
                                    person while a holder, and the number and
                                    class of shares registered in the name of
                                    such holder,

                           (B)      are or have been within six years registered
                                    as holders of debt obligations of the
                                    Corporation and the address, including the
                                    street and number, if any, of every such
                                    person while a holder, and the class or
                                    series and principal amount of the debt
                                    obligations registered in the name of such
                                    holder, and

                  (ii)     the date and particulars of the issue of each
                           security and warrant.

(2)      In addition to the records described in subsection (1) of this section,
         the Corporation shall prepare and maintain adequate accounting records
         and records containing minutes of meetings and resolutions of the
         directors and any committee. The records described in this subsection
         shall be kept at the registered office of the Corporation or at such
         other place in Ontario as is designated by the directors and shall be
         open to examination by any director during normal business hours of the
         Corporation.


<PAGE>


                                    Page 31


(3)      The Corporation shall also cause to be kept a register of transfers in
         which all transfers of securities issued by the Corporation in
         registered form and the date and other particulars of each transfer
         shall be set out.

14.02 Access to corporate records. Shareholders and creditors of the Corporation
and their agents and legal representatives may examine the records referred to
in subsection 14.01(1) of this by-law during the usual business hours of the
Corporation and may take extracts therefrom, free of charge. If the Corporation
is an offering corporation, any other person may examine such records during the
usual business hours of the Corporation and may take extracts therefrom upon
payment of a reasonable fee.

14.03 Copies of certain corporate records. A shareholder is entitled upon
request and without charge to one copy of the Articles and by-laws and of any
unanimous shareholder agreement.

14.04 Report to shareholders. A copy of the financial statements of the
Corporation, a copy of the auditor's report, if any, to the shareholders and a
copy of any further information respecting the financial position of the
Corporation and the results of its operations required by the Articles, the
by-laws or any unanimous shareholder agreement which are to be placed before an
annual meeting of shareholders pursuant to the Act shall be sent to each
shareholder not less than ten days before such annual meeting of shareholders
(or, if the Corporation is an offering corporation, not less than twenty-one
days) or before the signing of a resolution in accordance with the Act in lieu
of such annual meeting, except to a shareholder who has informed the Corporation
in writing that he does not wish to receive a copy of those documents.

14.05 No discovery of information. Except as specifically provided for in this
Article, and subject to all applicable law, no shareholder shall be entitled to
or to require discovery of any information respecting any details or conduct of
the Corporation's business which in the opinion of the directors would be
inexpedient or inadvisable in the interests of the Corporation to communicate to
the public.

14.06 Conditions for inspection. The board may from time to time by resolution
determine whether and to what extent and at what times and place and under what
conditions or regulations the accounts and books of the Corporation or any of
them shall be open to the inspection of shareholders, and no shareholder shall
have any right to inspect any account or book or document of the Corporation,
except as specifically provided for in this Article or as otherwise provided for
by statute or as authorized by resolution of the board.



<PAGE>


                                    Page 32


15. Notices

15.01 Method of giving. Any notice, communication or other document to be sent
or given by the Corporation to a shareholder, director, officer or auditor of
the Corporation under any provision of the Act, the Articles or by-laws shall be
sufficiently sent and given if delivered personally to the person to whom it is
to be given or if delivered to his last address as shown in the records of the
Corporation or its transfer agent or if mailed by prepaid ordinary mail or air
mail in a sealed envelope addressed to him at his last address as shown on the
records of the Corporation or its transfer agent or if sent by any means of wire
or wireless or any other form of transmitted or recorded communication. The
Secretary may change the address on the records of the Corporation of any
shareholder in accordance with any information believed by him to be reliable. A
notice, communication or document so delivered shall be deemed to have been sent
and given when it is delivered personally or delivered at the address aforesaid.
A notice, communication or document so mailed shall be deemed to have been sent
and given on the day it is deposited in a post office or public letter box and
shall be deemed to be received by the addressee on the fifth day after such
mailing. A notice sent by any means of wire or wireless or any other form of
transmitted or recorded communication shall be deemed to have been given when
delivered to the appropriate communication corporation or agency or its
representative for dispatch.

15.02 Shares registered in more than one name. All notices or other documents
with respect to any shares of the Corporation registered in the names of two or
more persons as joint shareholders shall be addressed to all of such persons and
sent to the address or addresses for such persons as shown in the records of the
Corporation or its transfer agent but notice to one of such persons shall be
sufficient notice to all of them.

15.03 Persons becoming entitled by operation of law. Subject to the provisions
of the Act, every person who by operation of law, transfer or by any other means
whatsoever shall become entitled to any share or shares of the Corporation shall
be bound by every notice or other document in respect of such share or shares
which previous to his name and address being entered on the records of the
Corporation shall have been duly given to the person or persons from whom he
derives his title to such share or shares.

15.04 Deceased shareholder. Any notice or document delivered or sent by mail or
left at the address of any shareholder as such address appears on the records of
the Corporation shall, notwithstanding that such shareholder is then deceased
and whether or not the Corporation has notice of his death, be deemed to have
been duly given or served in respect of the shares whether held solely or
jointly with other persons by such shareholder until some other person is
entered in his stead on the records of the Corporation as the holder or one of
the joint holders thereof and such service of such notice shall for all purposes
be deemed a sufficient service of such notice or document on his heirs, legal
representatives, executors or administrators and on all persons, if any,
interested with him in such shares.


<PAGE>


                                    Page 33


15.05 Signature to notice. The signature, if any, to any notice to be given by
the Corporation may be written, stamped, typewritten, printed or otherwise
mechanically reproduced in whole or in part.

15.06 Proof of service. A certificate of the Chairman of the Board, the
President, a Vice-President, the Secretary or the Treasurer or of any other
officer in office at the time of the making of the certificate or of a transfer
officer of any transfer agent or branch transfer agent of shares of any class of
the Corporation as to facts in relation to the delivery or mailing or service of
any notice or other document to any shareholder, director, officer or auditor or
publication of any notice or other document shall, in the absence of evidence to
the contrary, be proof thereof.

15.07 Computation of time. Where a given number of days' notice or notice
extending over any period is required to be given, the number of days or period
shall be computed in accordance with the definition of "day" contained in
Section 1.01 of this by-law.

15.08 Waiver of notice. Any shareholder (or his duly appointed proxyholder),
director, officer, auditor or member of a committee may at any time waive any
notice, or waive or abridge the time for any notice, required to be given to him
under any provisions of the Act, the Articles, the by-laws or otherwise and such
waiver or abridgement shall cure any default in the giving or in the time of
such notice, as the case may be. Any such waiver or abridgement shall be in
writing except a waiver of notice of a meeting of shareholders or of the board
which may be given in any manner.

16. Effective Date

16.01 Effective date of by-law. This by-law shall come into force when enacted
by the directors, subject to the provisions of the Act.


ENACTED by the Board this 17th day of December, 1997.




 /s/ G.B. Genovese                                      /s/ John Bailey
 ------------------------                              ------------------------
       President                                               Secretary



<PAGE>


                        Consent of Independent Auditors


We consent to the use of our report dated December 7, 1999 with respect to the
financial statement of Envoy Communications Group Inc. (the "Company") for the
year ended September 30, 1999 included in the Annual Report (Amendment No. 1 to
the Form 20-F).





                                                       /s/ KMPG LLP
                                                       Chartered Accountants


May 12, 2000
Toronto, Ontario


<PAGE>

                                   SIGNATURES


                  Pursuant to the requirements of Section 12 of the Securities
and Exchange Act of 1934, the registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this amendment to the
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.



                                   Envoy Communications Group Inc.

Date:    May 15, 2000              /s/ Geoffrey B. Genovese
                                   -------------------------------------------
                                   Name:  Geoffrey B. Genovese
                                   Title: President and Chief Executive Officer