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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 31, 2002

COMMISSION FILE NUMBER 0-24762

FIRSTSERVICE CORPORATION
(Exact name of Registrant as specified in its charter)

ONTARIO, CANADA NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)

FIRSTSERVICE BUILDING
1140 BAY STREET, SUITE 4000 M5S 2B4
TORONTO, ONTARIO, CANADA (Postal Code)
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: 416-960-9500

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
SUBORDINATE VOTING SHARES

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] or No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of Subordinate Voting Shares held by
non-affiliates of the Registrant as at May 14, 2002 was $313,466,000 U.S. The
number of the Registrant's Subordinate Voting Shares outstanding as at May 14,
2002 was 13,115,718 and the closing market price of such shares on that date was
$23.90 U.S. The number of Multiple Voting Shares outstanding on May 14, 2002 was
662,847.


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FIRSTSERVICE CORPORATION

ANNUAL REPORT ON FORM 10-K

MARCH 31, 2002

INDEX




PAGE

PART I

ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 16
ITEM 3. LEGAL PROCEEDINGS 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17

PART II

ITEM 5. MARKET FOR REGISTRANT'S SHARES AND
RELATED SHAREHOLDER MATTERS 18
ITEM 6. SELECTED FINANCIAL DATA 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21
ITEM 7A. FINANCIAL INSTRUMENTS - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 30
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 53


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 54
ITEM 11. EXECUTIVE COMPENSATION 56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 60
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 61


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K 62

SIGNATURES 64



Unless otherwise indicated, all dollar amounts in this Form 10-K are expressed
in U. S. Dollars.



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PART I

This annual report is prepared on Form 10-K and is filed by
FirstService Corporation, an Ontario company (hereinafter sometimes referred to
as the "Registrant"). The Registrant and its subsidiaries are referred to as
"FirstService" or the "Company". The Registrant is a "foreign private issuer" as
defined under Rule 405 of Regulation C under the Securities Act of 1933, as
amended. However, commencing with the year ended March 31, 2000, the Registrant
elected to file its annual, quarterly and current reports on forms designated
for U.S. domestic issuers.

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains or incorporates by reference
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company intends that such forward-looking
statements be subject to the safe harbors created by such legislation. Such
forward-looking statements involve risks and uncertainties and include, but are
not limited to, statements regarding future events and the Company's plans,
goals and objectives. Such statements are generally accompanied by words such as
"intend", "anticipate", "believe", "estimate", "expect" or similar statements.
The Company's actual results may differ materially from such statements. Among
the factors that could result in such differences are the impact of weather
conditions, increased competition, labor shortages, the condition of the U. S.
and Canadian economies, and the ability of the Company to make acquisitions at
reasonable prices. Although the Company believes that the assumptions underlying
its forward-looking statements are reasonable, any of the assumptions could
prove inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. The inclusion
of such forward-looking statements should not be regarded as a representation by
the Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved. The Company notes that past
performance in operations and share price are not necessarily predictive of
future performance.

ITEM 1. BUSINESS

OVERVIEW

FirstService is a leader in the rapidly growing service sector,
providing a variety of Property and Business Services to commercial and
residential customers in the following areas: Residential Property Management,
Integrated Security Services, Consumer Services and Business Services. Each
service line provides essential or near-essential services, generates a high
percentage of recurring revenues, has strong cash flows, generates high returns
on invested capital and can be leveraged through margin enhancement,
cross-selling or consolidation.

From the time of going public in 1993, the Company has posted a track
record of consistent growth in revenues and profitability by leveraging off the
expertise it has developed since the predecessor to the Company was founded by
Jay S. Hennick, Chairman and CEO, in


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1972. For the fiscal year ended March 31, 2002 ("Fiscal 2002"), revenues and
EBITDA 1 were $512.7 million and $57.1 million, respectively. Approximately
67% of the Company's revenues are generated in the United States, with the
balance in Canada. The Company is listed on both the NASDAQ National Market
(symbol: FSRV) and The Toronto Stock Exchange (symbol: FSV). Its Internet
address is www.firstservice.com.
---------------------

The Company's operations are conducted through two operating divisions
and four operating segments:

[GRAPHIC]


* Includes both franchised and Company-owned services



- ------------------------------------------- ------------------------------------------------------------------------------
REVENUES BY OPERATING SEGMENT YEARS ENDED MARCH 31
--------------- --------------- -------------- --------------- ---------------
(In thousands of U.S. Dollars) 2002 2001 2000 1999 1998
- ------------------------------------------- --------------- --------------- -------------- --------------- ---------------

Property Services Division
Residential Property Management $ 205,376 $ 181,730 $ 133,782 $ 90,649 $ 62,958
Integrated Security Services 95,507 81,007 61,539 52,827 46,984
Consumer Services 83,964 78,838 71,330 61,618 49,914
Business Services Division 127,478 82,346 73,198 58,162 36,615
Corporate 364 253 186 105 17
-------------- ---------------- -------------- -------------- --------------
TOTAL $ 512,689 $ 424,174 $ 340,035 $ 263,361 $196,488
============== ================ ============== ============== ==============


Note 17 to the consolidated financial statements included herein under
Part II contains further details regarding the operating profit, total assets
and long lived assets of the operating segments of the Company.


- -------------------------
1 EBITDA is defined as net earnings before extraordinary items, minority
interest share of earnings, income taxes, interest, depreciation and
amortization. EBITDA is a financial metric used by many investors to compare
companies on the basis of operating results, asset value and the ability to
incur and service debt. EBITDA is not a recognized measure for financial
statement presentation under United States generally accepted accounting
principles ("U.S. GAAP"). Non-U.S. GAAP earnings measures, such as EBITDA, do
not have any standardized meaning and are therefore unlikely to be comparable
to similar measures presented by other issuers.


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DESCRIPTION OF BUSINESS

PROPERTY SERVICES DIVISION
RESIDENTIAL PROPERTY MANAGEMENT

FirstService is the largest manager of private residential communities
in North America. Private residential communities include condominiums,
cooperatives, gated communities and a variety of other residential developments
governed by multiple unit residential community associations (collectively
referred to as "community associations"). In total, the Company manages more
than 375,000 residential units in 1,900 community associations in the States of
Florida, New Jersey, Arizona, New York, Virginia, Pennsylvania, Delaware,
Maryland, and the District of Columbia.

In Florida, the Company operates under the Continental Group, Prime
Management Group, Dickinson Management and Sterling Management brands. In the
mid-Atlantic region, the Company operates under the Wentworth Group, Armstrong
Management, Arco Management and Equity Management brands. The Company's Arizona
operations are conducted through Rossmar & Graham Community Association
Management.

In addition, through its subsidiary American Pool Enterprises, Inc.
("American Pool"), FirstService is the largest manager of commercial swimming
pools and recreation facilities in North America. American Pool currently serves
more than 1,400 commercial swimming pools and recreation facilities and more
than 5,500 residential swimming pools in ten states and in Canada, providing
recreational facility management, staffing, maintenance and restoration
services. The operations of American Pool, outside of the Florida and Arizona
markets, are seasonal in nature with the majority of revenues being earned in
the first and second fiscal quarters.

In the residential property management industry, there are two types of
professional property management companies: (i) traditional property managers,
and (ii) full-service property managers. Traditional property managers primarily
handle administrative property management functions such as collecting
maintenance fees, sourcing and paying suppliers, preparing financial statements
and contracting out support services. Full-service property managers provide the
same services as traditional property managers but also provide a variety of
other services under one exclusive contract. FirstService is a full-service
property manager and in many markets provides a full range of services including
grounds maintenance, landscaping, painting, restoration, pest control,
irrigation, real estate sales and leasing, heating, air conditioning, plumbing
and swimming pool management and maintenance.

The aggregate budget of the communities managed by FirstService is
approximately $700 million. The aggregate budget of all the community
associations in the United States is estimated to be $33 billion. Currently,
FirstService accesses approximately 20% of the aggregate budget of its
communities through the various services that it offers. The Company's strategy
is to continue to add communities under management while striving to earn a
greater percentage of the aggregate budget by introducing additional services
and products.

INTEGRATED SECURITY SERVICES

FirstService is one of North America's largest providers of integrated
security services, primarily to the commercial market, with operations in eleven
branches: seven in the United States and four in Canada. The Company operates
two security brands, Intercon (primarily in Canada) and SST (in the United
States).


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FirstService designs, installs, repairs and maintains integrated
electronic security systems including identification badging, access control and
closed-circuit television for office buildings, commercial and industrial
facilities, institutional campuses and multi-unit residential properties.
FirstService's customers include FORTUNE 1000 corporations, property management
companies, prominent hospitals and universities and all levels of government.
Revenues are derived from installation projects, ongoing service, branch and
head office upgrades, central station monitoring and maintenance-related work.

In executing its growth strategy to date, FirstService has focused on
the development of long-term customer relationships, providing complete
enterprise-wide electronic security solutions for all of its customers'
facilities and operations. Going forward, this growth strategy will be augmented
by acquisitions in key U.S. markets enabling FirstService to add strong regional
operators that are leaders in their markets, establish national service
capabilities and leverage its existing national account relationships and
supplier base.

In Canada, FirstService supplements its integrated electronic security
service offerings with a premium security officer service, providing highly
trained manpower on-site, via mobile patrol and in response to central station
calls. This full-service approach of providing both security systems expertise
and security officer services has been a key success factor in delivering growth
in the Canadian market, where commercial security clients often express a desire
for comprehensive security services.

CONSUMER SERVICES

In Consumer Services, FirstService provides a variety of residential
and commercial services through its network of 1,700 franchised and 15
Company-owned locations across North America and internationally. The principal
brands in the Consumer Services unit include California Closets, Paul Davis
Restoration, Certa ProPainters, College Pro Painters, ChemLawn Canada, Green
Lawn Care and Nutri-Lawn. Franchised brands are operated by The Franchise
Company, Inc. ("TFC") and Company-owned lawn care brands are operated by
Greenspace Services, Inc. ("Greenspace").

California Closets is the largest provider of installed closet and home
storage systems in North America. Headquartered in San Rafael, California,
California Closets has approximately 125 franchise territories in the United
States and Canada as well as master franchises in other countries around the
world. California Closets receives royalties from franchisees based on a
percentage of the franchisees' revenues.

Paul Davis Restoration is a Florida-based franchiser of residential and
commercial restoration services serving the insurance restoration industry in
the United States through 215 franchises. This company provides restoration
services for property damaged by natural or man-made disasters. Paul Davis
Restoration receives royalties from franchisees based on a percentage of the
franchisees' revenues.

Certa ProPainters is a residential and commercial painting franchise
system with approximately 250 franchises operating in major markets across the
United States and Canada as well as master franchises in other countries around
the world. Certa ProPainters focuses on high-end residential and commercial
painting and decorating work and other programs for property managers who have
portfolios of condominium and commercial properties. Franchisees pay Certa
ProPainters a fixed fee royalty, plus administrative fees for various ancillary
services.



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College Pro Painters is a seasonal exterior residential painting
franchise system operating in 24 states and across Canada with approximately 700
franchises. It recruits students and trains them to operate the business,
including price estimating, marketing, operating procedures, hiring, customer
service and safety. College Pro Painters receives a royalty from each franchisee
based on a percentage of revenue. College Pro Painters' operations are seasonal
with significant revenue and earnings in the Company's first and second quarters
followed by losses in the third and fourth quarters.

In addition to the franchise systems described above, the Company
operates Stained Glass Overlay, an Orange, California based franchiser of
decorative glass treatments and Action Window Cleaners, an Ontario-based
seasonal franchise system for students that offers residential window cleaning.

Franchise agreements are generally for a term of ten years, with the
exception of College Pro Painters and Action Window Cleaners, where the
agreements are for a term of one year.

FirstService currently owns and operates two California Closets
franchises located in Boston (acquired during fiscal 2001) and Seattle (acquired
in July 2001). These operations are referred to as "branchises". The purpose of
branchising is to reacquire well-established and profitable franchises located
in large territories to accelerate growth in these territories. TFC intends to
make several more branchising acquisitions as opportunities arise.

The Company provides Company-owned residential and commercial lawn care
and landscape services, primarily in Canada, under the ChemLawn, Green Lawn
Care, Natural Alternative and Sears Lawn Care brands, and franchised lawn care
services under the Nutri-Lawn brand. Services to residential customers include
fertilization, weed and pest control for lawns, trees and shrubs and lawn
aeration. The Company serves over 130,000 residential lawn care customers
through its Company-owned network of branches in Ontario, Quebec and Alberta and
is estimated to have a 40% market share among households who purchase lawn care
services, excluding mowing, in those provinces. Services to commercial customers
include all of the services provided to residential customers plus mowing,
landscaping, irrigation and other services comprising comprehensive grounds
maintenance. The Company's lawn care operations are seasonal in nature, with the
majority of revenue and operating profit earned during the summer months, offset
by operating losses during the winter months.

BUSINESS SERVICES DIVISION

FirstService's Business Services Division provides customer support and
fulfillment as well as business process outsourcing services to FORTUNE 1000
companies through 24 branches in the United States and Canada. The principal
Business Services operating subsidiaries are DDS Distribution Services, Ltd.
("DDS"), Herbert A. Watts Ltd. ("Watts") and BDP Business Data Services, Ltd.
("BDP").

Customer support and fulfillment services, offered by DDS and Watts,
include customer relationship management ("CRM"), order processing, inventory
management, warehousing, order assembly and shipping, rebating and client
profiling. The Company works with its clients to create fully integrated
customer support and fulfillment solutions, which can include ongoing technical
service or product support, order processing (including customized e-commerce
solutions), inventory management and fulfillment. Significant customer support
and fulfillment clients include Rogers AT&T Wireless, Best Buy, Merck, Readers
Digest, DaimlerChrysler, Pepsico, M&M Mars and TD Waterhouse.


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CRM services are provided through four state-of-the-art inbound
customer contact centers located in Canada with a total of 850 workstations. The
Company's March 2001 acquisition of Watts has greatly enhanced its capabilities
in CRM while adding a blue chip client base and incremental cross-selling
opportunities.

Fulfillment services are provided from 16 branches in the United States
and Canada, including significant facilities in Cleveland, Philadelphia,
Toronto, Los Angeles, Dallas, Chicago, and Mascoutah, Illinois. In aggregate,
the Company occupies 2.3 million square feet of dedicated fulfillment capacity,
utilizing bar coding and on-line inventory control systems.

BDP is FirstService's business process outsourcing unit. BDP's
objective is to be recognized as the best strategic partner to businesses and
governments in Canada for the outsourcing of labor-intensive, back-office
functions. BDP provides administrative functions that typically are not
strategic to an organization and can be more efficiently and cost-effectively
performed by third parties that specialize in such activities. BDP has developed
expertise in performing services that require significant labor in coordination
with technology, such as the management of loan portfolios, credit card and
affinity programs and the processing of drug and dental claims. BDP is the
second largest student loan processor in Canada. BDP provides its services from
four branches in Canada. Typical contracts vary in length from one to five
years. Significant customers include the Government of Canada, Bank of Nova
Scotia, Manulife Financial and Sun Life.

A key objective of the Company's Business Services Division is to
establish long-term relationships with clients and leverage such relationships
through the provision of additional services. DDS, Watts and BDP have similar
customer bases and the Company believes there are significant cross-selling
opportunities among these businesses.

INDUSTRY POSITION, COMPETITION AND CUSTOMERS

The following information is based solely on estimates made by
management of the Company and cannot be verified. In considering the Company's
industry and competitive position, it should be recognized that FirstService
competes with many other companies in the sale of its services, franchises and
products and that some of these competitors are larger and may have greater
financial and marketing strength than FirstService.

PROPERTY SERVICES DIVISION
RESIDENTIAL PROPERTY MANAGEMENT

Based on the most recent available industry data, the Company estimates
that: (i) more than 47 million Americans, representing approximately 18 million
households, live in condominiums, cooperatives, planned communities and other
residential developments governed by multiple unit residential community
associations; (ii) more than 50% of new homes currently being built in and
around major metropolitan areas in the United States are within these
categories; (iii) there are approximately 230,000 community associations in the
United States; and (iv) the total annual operating expenses for these community
associations are estimated to be $33 billion. The market is growing at a rate of
3-4% per year as a result of the 8,000-11,000 new community associations formed
each year. In addition, the growing trend from self-management to professional
management, currently almost 50% of the market, is believed to at least double
the effective growth rate for professional property management companies.


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Typically, owners of privately owned residential units are required to
pay quarterly or monthly fees to cover the expenses of managing the condominium
or homeowner association's business activities and maintaining community
properties. Historically, decision making for communities was delegated to
volunteer boards of directors elected by the owners. Increasingly, these
volunteer boards have outsourced the responsibility to manage the day-to-day
operation and maintenance of community property to professional property
management companies.

The residential property management industry is extremely fragmented
and dominated by numerous local and regional management companies. Only a small
number of such companies, however, have the expertise and capital to provide
both traditional property management services as well as the other support
services provided by full-service property managers. FirstService is the largest
full-service manager of private residential communities in the United States,
managing approximately 2% of the nation's approximately 16 million units in
community associations. FirstService enjoys a competitive advantage because of
its size, depth of financial and management resources, and operating expertise.

The Company's business is subject to regulation by the states in which
it operates. For example, the Florida Department of Professional Regulation
requires that property managers must be licensed, which involves certain
examinations and continuing education. In addition, the unit's real estate sales
and leasing operations are subject to regulation as a real estate brokerage by
the various states in which they operate.

INTEGRATED SECURITY SERVICES

U.S. security systems integration is a $3 billion industry and is
expected to grow at an annual rate of approximately 20% over the next five
years. Factors driving this growth include:

o THE TREND TOWARD CONSOLIDATION OF SECURITY FUNCTIONS AND REDUCING
COSTS: Corporate and institutional security embodies a variety of
independent functions (access control, physical security, employee/user
security, surveillance, etc.) operating concurrently. Integrating these
functions into one system is simpler, more efficient and requires fewer
people and resources to operate. An integrated system may also replace
a number of different legacy systems that were required to be managed
independently, improving functionality and reducing operating and
maintenance costs.

o CONTINUED DEVELOPMENT OF NETWORK AND INFORMATION TECHNOLOGY: Security
systems are highly reliant on modern computer and electronic technology
and have benefited from advancements in these technologies, becoming
increasingly more powerful, flexible and functional. Security systems
and information for multiple sites can be integrated and controlled
from a centralized location and administered remotely using advanced
network and communication technology, including LANs, WANs and
Web-based networking.

o INCREASED PUBLIC AWARENESS OF SECURITY ISSUES: Recent examples of
escalating violence have made security a priority in the workplace,
schools and other public facilities.

The industry is highly fragmented but undergoing consolidation. The
market is comprised of many small and medium-sized, and a few very large
competitors. Of the top 100 systems integrators compiled by SDM MAGAZINE for
2001, only the largest four had revenues over $100 million and the smallest 70
had revenues from ranging from $1 million to $12 million. FirstService is one of
the largest integrated security services providers in North America.


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Larger competitors are driving consolidation in response to customer
demands for comprehensive solution providers with national service capabilities.
Customers are moving away from developing and sourcing each of their security
systems separately from several different suppliers. System integrators must be
able to evaluate customer needs, design an integrated suite of systems and
products that is simple and effective, and provide quality installation and
service in multiple geographic locations. Critical mass and geographic reach
have become increasingly important success factors in this industry.

FirstService's strategy is to combine strong regional operators into a
national network, focusing on long-term relationships with customers that have
complex security needs. FirstService differentiates itself through superior
customer service and by designing and integrating open architecture systems
(versus proprietary or closed systems).

CONSUMER SERVICES

The consumer services industry is highly fragmented, consisting
principally of a large number of smaller, single-service or single-concept
companies. Due to the large size of the overall market for these services,
dominant market share is not considered necessary for becoming a major player in
the industry. However, because of the low barriers to entry in this segment, the
Company believes that brand name recognition among consumers is a critical
factor in achieving long-term success in the businesses in which it operates.

The Company believes that the largest franchise companies in North
America have been successful because of their ability to realize economies of
scale through the centralization and successful application of certain
administrative functions such as finance, marketing, purchasing, training and
support staffing.

Franchise businesses are subject to U.S. Federal Trade Commission
regulations and State and Provincial laws that regulate the offering and sale of
franchises. Presently, the Company is authorized to sell franchises in 49
states, in all Canadian provinces and in several other countries around the
world. In all jurisdictions, the Company endeavors to have its franchisees meet
or exceed regulatory standards.

The professional lawn care industry is estimated to be an $8 billion
market (including mowing) in North America, and despite some consolidation, is
still highly fragmented. Local and regional competitors, as well as
do-it-yourself homeowners, provide strong competition in the Canadian lawn care
industry.

Federal and provincial environmental laws are applicable in all
jurisdictions in which Greenspace operates. These regulations dictate which
products and methods may be used and require employees to be properly trained
and licensed in the use of pesticides and herbicides. These laws, together with
municipal bylaws, may limit or restrict the use of certain lawn care practices
and if such laws change, Greenspace's business may be adversely affected.

BUSINESS SERVICES DIVISION

The business services industry is diverse and comprised of distinct
sectors, including the areas in which FirstService participates: (i) customer
support and fulfillment and (ii) business process outsourcing. Competitors range
from large, sophisticated companies to smaller niche providers, with many
possessing adequate size and technical capabilities. Given the large size of the
market, significant growth can be achieved without significant market share.



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Corporations are increasingly concerned with focusing scarce resources
on core operations that provide the greatest competitive advantage and best
return on investment. As a result, non-core functions are being outsourced to
companies that can perform them better, cheaper and faster.

CUSTOMER SUPPORT AND FULFILLMENT: The outsourced portion of the $200 billion CRM
industry is estimated to be $25 billion and is currently growing at a rate of
about 10% per year. Outsourced fulfillment services are a $3.2 billion industry
and have grown at a rate of 9.7% annually since 1996.

The emergence of new technologies in conjunction with recent equity
market and venture capital liquidity has stimulated competition in this segment,
although many new entrants appear to lack significant industry experience. There
are many competitors of all sizes, including a number of public CRM companies.
FirstService is among a handful of successful competitors, none of which
dominates this large, diverse market segment.

Technology investment is the single largest factor driving change in
the customer support sector with sophisticated CRM software platforms,
high-speed redundant networking, and Web-enabled customer care systems quickly
becoming the standard. Outsourced fulfillment is evolving due to the adoption of
technologies such as Web-based ordering, real-time inventory, and bar code and
radio frequency warehouse systems that are forcing competitors to become larger
and more sophisticated to compete.

BUSINESS PROCESS OUTSOURCING: It is estimated that the outsourced "back office"
processing segment was approximately $23 billion in 2000, with an expected
five-year compound annual growth rate of about 13%. This segment is occupied by
some of the largest business services companies in the world, leveraging their
size to realize economies of scale on very large outsourcing contracts. BDP
tends to focus on certain niches, such as loan processing and credit and loyalty
card administration, where it can capitalize on its specialized expertise.

FirstService competes on the basis of providing competitively priced
value-added services, supported by strong operating efficiencies.

BUSINESS STRATEGY

OPERATING STRATEGY

The Company's objective is to increase the revenues, profitability and
market position of each operating company and subsequently acquired business,
while maintaining the highest level of service to its customers. Key elements of
the Company's operating strategy are:

SENIOR MANAGEMENT COMMITMENT: The Company strongly believes that management
ownership at each of its primary operating units has contributed significantly
to its ability to grow its businesses. As a result, the Company expects to
continue its practice of encouraging strong operators of newly acquired platform
businesses to retain or acquire a significant equity stake in the businesses
they operate, generally in the form of a non-transferable direct equity
ownership position. In all cases, the Company retains the right to purchase the
minority interest at a pre-determined formula price based on a multiple of
trailing twelve month EBITDA. These minority interests average approximately
15%. Management believes that its strategy of aligning the interests of
operating management with those of the Company provides a powerful incentive to
deliver superior financial performance.



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PERFORMANCE-BASED COMPENSATION: The Company uses performance-based compensation
programs throughout each of its businesses to attract, retain and motivate its
employees. In general, senior managers receive bonuses that are based on a
percentage of the amount by which their results exceed budgeted EBITDA. Lower
level managers' incentives are also linked to EBITDA targets, but may include
other measures deemed important for growing their business. The Company believes
these programs are effective incentives to operating management and employees to
deliver consistent, high-quality service in a cost-effective manner.

OPERATING EFFICIENCIES: The Company has been able to obtain significant
operating efficiencies through the implementation of a variety of "best
practices" and has achieved meaningful cost savings through certain economies of
scale. The Company attempts to identify and refine its best practices across all
of its businesses in order to benefit from the most innovative and effective
management techniques. The implementation of best practices has resulted in
improved labor management, customer service and service delivery routing. The
Company also achieves significant savings through the volume purchasing of
vehicles, insurance, group benefits, advertising and professional and financial
services.

MARKETING PENETRATION AND JOINT MARKETING: The Company capitalizes on the
complementary nature of its businesses by introducing new or additional services
to customers with which it already has long-term contractual relationships. The
complementary nature of the Company's property services businesses also provides
certain advantages when introducing a new service in a market where the Company
has existing operations. These advantages include significant market knowledge,
demographic information and the ability to share the established overhead of
existing operations. Because the Company provides a number of property services,
it is able to effectively utilize consolidated customer lists, in-house
telemarketing capabilities and other marketing data that is accumulated to
conduct cost-efficient customer referral, couponing and other direct mail
programs across its businesses.

ACQUISITION STRATEGY

The acquisition strategy of FirstService has been developed to
complement the internal growth strategies of its existing service lines and as a
component of the Company's overall growth strategy of building a significant,
diversified service business that generates recurring and predictable cash flows
and earnings. The acquisition strategy entails the systematic acquisition of
established, well managed, and profitable service companies operating in
fragmented industries that will:

o Enhance the market position of an existing service line, provide an
entry into a new geographic region/market, or introduce a new service
line; and

o Provide a return on invested capital that exceeds FirstService's
weighted average cost of capital.

Acquisitions are classified as "tuck-under" or "platform". The vast
majority of acquisitions that FirstService targets and completes are tuck-under
acquisitions. These acquisitions are generally smaller transactions completed
within an existing service line that strengthen its regional presence or
competitive position through increased market share or the addition of a
complementary service line. Platform acquisitions are larger transactions that
either establish an existing service line in a new geographic region or provide
a vehicle for FirstService to add a new service offering that can be leveraged
through cross-selling of services, sharing of best practices or other synergies
or through further consolidation. Each acquisition must meet strict criteria
that include the following:



-13-


o Strong, experienced management teams in place that are interested in
growing their businesses and in being rewarded through
performance-based compensation;

o History of consistent profitability, supported by significant
contractual revenues;

o Non-capital intensive operations with a variable cost structure;

o Leading positions in the markets served; and,

o In the case of platform acquisitions, one or more senior managers who
wish to retain a significant minority interest in the acquired company
in order to participate directly in its future growth and development
as part of FirstService.

In general, platform companies continue to operate on a stand-alone
basis in accordance with FirstService's operating strategy, while drawing on the
resources of FirstService to facilitate future growth. Most tuck-under
acquisitions are fully integrated into the operations of the service line making
the acquisition.

FirstService has historically paid approximately four times normalized
and sustainable EBITDA ("Valuation EBITDA") for its acquisitions. Usually,
consideration is paid with a combination of cash at closing and a contingent
note. Contingent notes are typically paid over a three-year period, subject to
achievement of the Valuation EBITDA on an averaged basis over the three-year
period subsequent to closing. In the event that the actual average EBITDA is
less than the Valuation EBITDA, the purchase price and contingent payments are
reduced by a multiple of the deficiency in EBITDA.

In executing acquisitions, the acquisition team works closely with
operating management of its service lines to identify, negotiate and complete
acquisitions. A majority of acquisitions are negotiated on an exclusive basis,
without the imposition of an intermediary-controlled auction process, thereby
facilitating a focused effort by FirstService to build a relationship with its
prospective partner and emphasize the appropriate balance of financial and
non-financial, as well as long-term and short-term attributes of the acquisition
to the vendor. Notwithstanding the varied acquisition opportunities available to
FirstService, management remains committed to a disciplined approach to
acquisitions, including a rigorous adherence to its strict acquisition criteria
and transaction structure. As well, FirstService only allocates its financial
and human resources to existing service lines for acquisitions if the management
team has the capacity to integrate the acquisition and the performance of
current operations is meeting or exceeding expectations.

The integration process is a critical component of all acquisitions
executed by FirstService. This process is initiated during due diligence, when
opportunities for integration, operational improvements and the sharing of best
practices are identified and an integration plan (the "Plan") is drafted by
FirstService. Post-closing, the Plan is reviewed with management of the acquired
company to ensure that it accurately captures and prioritizes the issues to be
addressed. Once a buy-in has been obtained, the Plan is finalized and a
timetable established for the execution of the Plan by the management of the
acquired company. This is a collaborative process with a high degree of
involvement from FirstService's integration team in overseeing the
implementation and in monitoring progress against the timetable.



-14-


RECURRING REVENUE

A common theme and key focus across FirstService is recurring,
contractual revenue. This is driven by the near-essential nature of the services
provided by the Property Services and Business Services Divisions.

Approximately 80% of the Company's revenue is contractual in nature. In
the Property Services Division, Residential Property Management contracts are
generally for terms of one to three years, and Integrated Security Services
contracts are generally one year in duration. Contracts with franchisees in
Consumer Services are primarily for ten-year periods. In the Business Services
Division, contracts have terms of one to five years, with larger contracts
having longer terms. Furthermore, FirstService has historically experienced
contract renewal rates in excess of 90%.

CURRENT YEAR DEVELOPMENTS

On June 29, 2001, the Company amended and restated its credit agreement
to allow for the issuance of additional debt. The new agreement provides a $140
million committed revolving credit facility, renewable and extendible in 364-day
increments, and if not renewed, a two-year final maturity. On April 25, 2002,
the facility was renewed to extend the final maturity to June 25, 2005. Also on
June 29, 2001, the Company completed a private placement of $100 million of
ten-year 8.06% Guaranteed Senior Secured Notes.

The Company completed four tuck-under acquisitions in its Property
Services Division during the year. In the Residential Property Management unit,
Community Pool Service, Inc., a Maryland provider of swimming pool management
services and Equity Management Group, Inc., a Manhattan-based property
management company, were acquired in April 2001 and May 2001, respectively. In
Consumer Services, FirstService acquired CC Seattle LLC in July 2001, the
Washington State franchisee of its California Closets franchise system. Also in
July 2001, the Integrated Security Services unit acquired VASEC Virginia
Security and Automation, Inc., a security systems integrator serving the U.S.
National Capitol Region.

In the Business Services Division, one tuck-under acquisition was
completed during the year. Right Choice Fulfillment ("Right Choice"), a rebate
processing and fulfillment business located in Illinois, was purchased by DDS in
February 2002. Right Choice generated revenue of $9.5 million and EBITDA of $1.0
million during the year ended December 31, 2001.

During the year, the Company purchased minority shareholdings from two
shareholders. In May 2001, the 10% of California Closet Company, Inc. not
previously owned by the Company was purchased. In January 2002, the Company
purchased an additional 7.2% of The Continental Group, Ltd. bringing its
ownership to 87.3%.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

Notes 12 and 17 to the consolidated financial statements, included
herein under Part II, contain information regarding revenues, earnings before
income taxes and minority interest, and total long-lived assets by geographic
region.


-15-


MINORITY SHAREHOLDERS OF SUBSIDIARIES

The Company owns a majority interest (on average, 85% of the equity) in
all of its subsidiaries, while the operating management of each non-wholly owned
subsidiary owns the remaining shares. This structure was designed to maintain
control by FirstService while providing significant incentives to management at
the operating companies. In all cases, the Company has the right to repurchase
management's shares at a predetermined formula price, usually payable at the
Company's option with any combination of Subordinate Voting Shares or cash. The
Company may also be obligated to acquire certain of these minority interests in
the event of the death, disability or cessation of employment of minority
shareholders or if minority shareholders exercise their right to require the
Company to repurchase their shares. These arrangements provide significant
flexibility to the Company in connection with management succession planning and
shareholder liquidity matters.

MAJOR CUSTOMERS

FirstService has no single customer that accounts for more than 2% of
its total revenues. No part of the Company's business is dependent on a single
customer or a few customers, the loss of which would have a material adverse
effect on the Company as a whole.

EMPLOYEES

The Company has approximately 10,500 full-time employees, rising to a
total of 14,000 with seasonal employees in the spring and summer months.


TRADEMARKS

FirstService's trademarks are important for the advertising and brand
awareness of all of its businesses and franchises. The Company takes precautions
to defend the value of its trademarks by maintaining legal registrations and by
litigating against alleged infringements, if necessary.

In the Company's Consumer Services unit, two franchise systems -
California Closets and Paul Davis Restoration - have trademarks to which value
has been ascribed in the consolidated financial statements. These two franchise
systems have franchises in every significant population center in the United
States. The value of these trademarks is derived from the recognition they enjoy
among the target audiences for closet system installations and disaster
restoration services. These trademarks have been in existence for many years,
and their prominence among consumers has grown over time through the addition of
franchisees and the ongoing marketing programs conducted by both franchisees and
the Company.


-16-


ITEM 2. PROPERTIES

The head office of the Registrant is a 20,000 square foot, owned
building located at 1140 Bay Street, Toronto, Ontario, Canada, M5S 2B4,
approximately three-quarters of which is leased to third party tenants.

BUSINESS SERVICES DIVISION

DDS leases approximately 1.7 million square feet of warehouse and
office space in connection with its fulfillment operations. Principal warehouse
locations include 360,000 square feet in Norristown, Pennsylvania; 360,000
square feet in Elyria, Ohio; 300,000 square feet in Strongsville, Ohio; 250,000
square feet in Dallas, Texas; 175,000 square feet in Toronto, Ontario; 116,000
square feet in Whittier, California; 98,000 square feet in Chicago, Illinois;
and 73,000 square feet in Mascoutah, Illinois.

Watts occupies approximately 106,000 square feet of owned and 373,000
square feet of leased space to house its customer support and fulfillment
operations. The owned space is comprised of its Saint John, New Brunswick and
two Prince Edward Island locations. Watts leases 292,000 square feet of space in
Toronto, Ontario; 40,000 square feet in Bridgewater, Nova Scotia; 26,000 square
feet in Delta, British Columbia and 15,000 square feet in Amherst, New York.

BDP leases approximately 115,000 square feet of office space,
consisting of 67,000 square feet in Toronto, Ontario; 27,000 square feet in
Orangeville, Ontario; and 21,000 square feet in Ottawa, Ontario.

PROPERTY SERVICES DIVISION

Within the Residential Property Management unit, FirstService owns a
38,000 square foot office and warehouse building located in Boca Raton, Florida,
which is occupied by Prime Management Group, Inc. and a 35,000 square foot
office and warehouse complex in Hollywood, Florida, which is occupied by The
Continental Group, Ltd. All other Residential Property Management operations are
housed in 55 locations totaling approximately 300,000 square feet in aggregate
located in the states where services are offered.

In Integrated Security Services, Intercon leases approximately 70,000
square feet of office space in Toronto, Ontario, Vancouver, British Columbia and
Oakbrook, Illinois. SST leases 34,000 square feet of space in five locations
within Pennsylvania, New York and New Jersey.

In Consumer Services, TFC leases approximately 77,000 square feet of
office and warehouse space in several locations across North America to house
its franchise systems. Lawn care services occupy approximately 135,000 square
feet of space in eight locations primarily in Ontario, Quebec and Alberta.

The Company believes its existing premises, as described above, are
sufficient to meet its current operating requirements. All significant leased
properties are held under long-term leases.


-17-


ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, FirstService may become involved in
legal proceedings with private or public parties. As at May 14, 2002, these
proceedings included several general liability actions, none of which are
material to the Company, and no environmental actions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the year ended March 31, 2002, no matters
were submitted to a vote of security holders.



-18-


PART II

ITEM 5. MARKET FOR REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS

The Registrant's Subordinate Voting Shares are traded on the NASDAQ
National Market ("NASDAQ") (symbol: FSRV) and The Toronto Stock Exchange ("TSE")
(symbol: FSV). The Registrant's Multiple Voting Shares are not traded on any
established public trading market.

The following table shows the highest and lowest closing prices of the
Registrant's Subordinate Voting Shares in each quarter of the two years ended
March 31, 2002 and 2001:




---------------------- -------------- --------------- -------------- ---------------
NASDAQ NASDAQ TSE TSE
QUARTERLY QUARTERLY QUARTERLY QUARTERLY
HIGH PRICE LOW PRICE HIGH PRICE LOW PRICE
QUARTER ($ US) ($ US) ($ CDN) ($ CDN)
---------------------- -------------- --------------- -------------- ---------------

FISCAL 2001 Q1 $ 12.75 $ 10.50 $ 19.20 $ 15.50
Q2 13.00 11.00 19.50 16.00
Q3 15.38 12.45 23.75 18.80
Q4 18.00 13.63 26.77 20.75

---------------------- -------------- --------------- -------------- ---------------
FISCAL 2002 Q1 23.30 15.63 35.00 24.75
Q2 24.29 18.95 37.77 30.77
Q3 28.12 20.66 44.93 32.35
Q4 28.09 21.13 44.80 33.52

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



As of May 14, 2002, in relation to the Subordinate Voting Shares, there
were approximately 300 shareholders of record and approximately 4,000 persons
who held shares in the names of nominees. One shareholder, the President and
Chief Executive Officer of the Company, held all of the Multiple Voting Shares.

No dividends were declared by the Registrant during the two fiscal
years ended March 31, 2002 and 2001. The Company's agreements with its lenders
prohibit the Company from declaring dividends without the prior approval of the
lenders.

TAXATION

The following discussion summarizes certain tax considerations relevant
to an investment by individuals and corporations who, for income tax purposes,
are resident in the United States and not in Canada, hold shares as capital
property, and do not use or hold the shares in carrying on business through a
permanent establishment or in connection with a fixed base in Canada
(collectively "Unconnected U.S. Shareholders"). The Canadian tax consequences of
investment in the shares by investors who are not Unconnected U.S. Shareholders
may be expected to differ substantially from the tax consequences discussed
herein. This discussion is based upon the provisions of the Income Tax Act
(Canada) (the "Tax Act"), the Convention between Canada and the United States of
America with respect to taxes on income and capital (the "Convention") and the
published administrative practices of the Canada Customs and Revenue Agency and
judicial decisions, all of which are subject to change. This discussion does not
take into account the tax laws of the various provinces or territories of
Canada.



-19-


This discussion is intended to be a general description of the Canadian
tax considerations and does not take into account the individual circumstances
of any particular shareholder.

Any cash and stock dividends on the shares payable to Unconnected U.S.
Shareholders generally will be subject to Canadian withholding tax. Under the
Convention, the rate of withholding tax generally applicable to Unconnected U.S.
Shareholders is 15%. In the case of a U. S. corporate shareholder owning 10% or
more of the voting shares of the Company, the applicable withholding tax under
the Convention is 5%.

Capital gains realized on the disposition of shares by Unconnected U.S.
Shareholders will not be subject to tax under the Tax Act unless such shares are
taxable Canadian property within the meaning of the Tax Act. Shares will not be
taxable Canadian property to a holder unless, at any time during the five-year
period immediately preceding the disposition, the holder, or persons with whom
the holder did not deal at arm's length, or any combination thereof, owned 25%
or more of the issued shares of any class or series of the Company. If the
shares are considered taxable Canadian property to a holder, the Convention will
generally exempt Unconnected U.S. Shareholders from tax under the Tax Act in
respect of a disposition of shares, provided the value of the shares of the
Company is not derived principally from real property situated in Canada.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides summary information of the equity
compensation plans under which equity securities of the Registrant are
authorized for issuance:




- ------------------------------------------------- ---------------------- ------------------ --------------------------
NUMBER OF SUBORDINATE
NUMBER OF WEIGHTED-AVERAGE VOTING SHARES REMAINING
SUBORDINATE VOTING EXERCISE PRICE AVAILABLE FOR FUTURE
SHARES TO BE ISSUED OF OUTSTANDING ISSUANCE UNDER EQUITY
UPON EXERCISE OF OPTIONS, COMPENSATION PLANS
OUTSTANDING OPTIONS, WARRANTS AND (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS RIGHTS REFLECTED IN COLUMN A)

- ------------------------------------------------- ---------------------- ------------------ --------------------------
COLUMN A B C
- ------------------------------------------------- ---------------------- ------------------ --------------------------

Equity compensation plans approved by
security holders:

Amended Stock Option Plan #2 2,119,115 $13.20 154,530
($21.05 Cdn.)

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

Equity compensation plans not approved by security holders:

None. - - -

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


RECENT SALES OF UNREGISTERED SECURITIES

On June 29, 2001, FirstService sold $100 million of its 8.06%
Guaranteed Senior Secured Notes due 2011. The sole placement agent was Merrill
Lynch, Pierce, Fenner & Smith Inc. and the securities were sold to qualified
institutional buyers ("QIBs") within the meaning of Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act") and to institutional
accredited investors ("IAIs") within the meaning of Rule 501 of Regulation D of
the Securities



-20-


Act. The aggregate placement agent's fees and commissions were $1.35 million. As
the transaction involved sales solely to QIBs and IAIs, FirstService relied on
the exemption from the registration requirements of Section 5 provided by
Section 4(2) of the Securities Act, including Regulation D thereunder.

ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR FINANCIAL SUMMARY

(in thousands of U.S. Dollars, except per share amounts)




---------------------------------------- ------------ ------------ ------------ ------------ ------------
YEAR ENDED MARCH 31 2002 (1) 2001 2000 1999 1998
---------------------------------------- ------------ ------------ ------------ ------------ ------------
---------------------------------------- ------------ ------------ ------------ ------------ ------------

OPERATIONS

Revenues $ 512,689 $ 424,174 $ 340,035 $ 263,361 $ 196,488
EBITDA (2) 57,122 47,855 37,977 28,767 18,608
Operating profit (3) 45,043 35,926 27,870 20,622 13,331
Net earnings before extraordinary item 18,211 12,707 9,868 7,222 4,435
Net earnings 17,414 12,707 9,868 7,222 4,435

FINANCIAL POSITION

Total assets $ 358,205 $ 313,660 $ 230,887 $ 184,306 $ 126,019
Long-term debt (4) 160,488 149,374 102,177 84,516 38,163
Shareholders' equity 99,842 79,456 68,338 59,020 44,807
Book value per share 7.25 6.03 5.26 4.57 3.65

SHARE DATA

Net earnings per share before
extraordinary items

Basic $ 1.34 $ 0.97 $ 0.76 $ 0.57 $ 0.43
Diluted 1.25 0.92 0.72 0.54 0.41
Weighted average shares (thousands)

Basic 13,565 13,074 12,948 12,564 10,370
Diluted 14,600 13,841 13,708 13,475 10,936
Cash dividends per share - - - - -
---------------------------------------- ------------ ------------ ------------ ------------ ------------


NOTES

(1) Statement of Financial Accounting Standards No. 142 ("SFAS 142") was
adopted effective April 1, 2001, which resulted in a material decrease
in amortization expense and a material increase in net earnings. Fiscal
2001 net earnings, adjusted for SFAS 142, were $15,560 and net earnings
per share were $1.19 (basic) and $1.12 (diluted). Fiscal 2000 net
earnings, adjusted for SFAS 142, were $11,382 and net earnings per
share were $0.88 (basic) and $0.83 (diluted).

(2) Net earnings before extraordinary items, minority interest share of
earnings, income taxes, interest, depreciation and amortization.

(3) Net earnings before extraordinary items, minority interest share of
earnings, income taxes and interest.

(4) Excluding current portion of long-term debt and effect of interest rate
swap.



-21-


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS - YEAR ENDED MARCH 31, 2002

Consolidated revenues for Fiscal 2002 were $512.7 million, a 21%
increase from the $424.2 million reported for the year ended March 31, 2001
("Fiscal 2001"). Approximately $69.0 million of the increase resulted from the
acquisitions of Watts in March 2001, VASEC Virginia Security and Automation,
Inc. ("VASEC") in July 2001, several smaller tuck-under companies and the
full-year impact of other acquisitions completed in Fiscal 2001.

During Fiscal 2002, the value of the Canadian dollar deteriorated
3.9% relative to the value of the U.S. dollar, based on the average annual
exchange rates versus the prior year. During Fiscal 2002, 33% of the
Company's revenues were Canadian dollar denominated. Had the exchange rate
been held constant year-over-year, the Company's revenues would have been
approximately $6.9 million higher, EBITDA 1 would have been $0.6 million
higher and diluted earnings per share would have been $0.02 higher.

EBITDA increased 19%, to $57.1 million from $47.9 million in the prior
year, while EBITDA margins declined 15 basis points to 11.1% of revenue. The
decline in margin is the result of lower sales of higher-margin residential
property painting and restoration services, as well as reduced levels of
activity in the Business Services fulfillment operations, which typically carry
15% EBITDA margins.

Depreciation for the year ended March 31, 2002 was $11.4 million, up
48% from the previous year, mainly due to the acquisition of Watts. Effective
April 1, 2001, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("SFAS 142"), therefore,
no goodwill amortization was recorded during the fiscal year. Amortization of
intangibles was $0.7 million, compared to $0.8 million in the previous year.

Interest expense increased 19% over the prior year's level to $11.6
million, primarily as a result of increased borrowings related to the
acquisition of Watts completed in March 2001 and contingent acquisition payments
made during the year. The Company's average indebtedness during the year
increased $41 million or 34% relative to the prior year. Weighted average
interest rates were approximately 7.1% in Fiscal 2002 compared to 8.1% in Fiscal
2001, due to the combined effects of lower floating interest rates, the issuance
of the fixed-rate debt and the interest rate swap discussed below. In Fiscal
2001, the Company was subject to floating interest rates on the majority of its
debt. On June 29, 2001 the Company issued $100 million of 8.06% fixed-rate
Guaranteed Senior Secured Notes (the "Notes") and amended and restated its
credit agreement for a new $140 million committed senior revolving credit
facility (the "Credit Facility") bearing interest at 1.50% to 3.00% above
floating reference rates, depending on certain leverage ratios.


- --------------------------
1 EBITDA is defined as net earnings before extraordinary items, minority
interest share of earnings, income taxes, interest, depreciation and
amortization. EBITDA is a financial metric used by many investors to compare
companies on the basis of operating results, asset value and the ability to
incur and service debt. EBITDA is not a recognized measure for financial
statement presentation under United States generally accepted accounting
principles ("U.S. GAAP"). Non-U.S. GAAP earnings measures, such as EBITDA, do
not have any standardized meaning and are therefore unlikely to be comparable
to similar measures presented by other issuers.


-22-


On December 7, 2001, the Company entered into an interest rate swap
agreement in which the interest stream on $75 million of the fixed-rate 8.06%
Notes was exchanged for the variable interest rate of LIBOR + 2.505%. The swap
has a maturity matched to the underlying Notes due June 29, 2011. During the
four months the swap was in effect, interest savings of $0.6 million resulted.
This swap is being accounted for as a hedge in accordance with SFAS 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The swap is
carried at fair value on the balance sheet, with gains or losses recognized in
earnings. The carrying value of the hedged debt is adjusted for changes in fair
value attributable to the hedged interest rate risk; the associated gain or loss
is recognized currently in earnings.

The income tax provision for the year ended March 31, 2002 was
approximately 34% of earnings before taxes, compared with 40% in the prior year.
The decline in tax rate resulted from two major factors: (i) the increase in
pre-tax earnings resulting from the non-amortization of goodwill due to the
adoption of SFAS 142, which reduced the effective tax rate and (ii) continuing
leverage from the cross-border tax structure implemented in Fiscal 2000. The
Company anticipates that the Fiscal 2003 tax rate will approximate that
experienced during Fiscal 2002.

The minority interest share of earnings increased to $3.9 million or
17.5% of earnings before minority interest from $3.0 million, or 19.0%, in the
prior year. The $0.9 million increase reflects the increase in earnings
year-over-year, including the effects of the non-amortization of goodwill as per
SFAS 142, which impacted certain non-wholly owned subsidiaries with goodwill on
their balance sheets. The decline in minority interest as a percentage of
earnings before minority interest resulted from the acquisition of minority
interests during the year, including California Closet Company, Inc.
("California Closets") and The Continental Group, Ltd. ("Continental").

Net earnings before the extraordinary item were $18.2 million, a 17%
increase over the prior year (adjusted for SFAS 142), while diluted earnings per
share increased 12% to $1.25 (also adjusted for SFAS 142). The increase in
diluted earnings per share reflects a 3.8% increase in the weighted average
share count as a result of shares issued upon the exercise of stock options and
an increase in dilution caused by the 77% increase in the average market price
of the Company's shares relative to the prior year.

At the time of the issuance of the Notes and the completion of the
Credit Facility on June 29, 2001, the Company wrote off the financing fees
related to its previous debt arrangements. This resulted in an extraordinary
loss, net of taxes, of $0.8 million. Net earnings, after the extraordinary item,
were $17.4 million.

Revenues for the Property Services Division were $384.8 million, an
increase of $43.3 million or 13% over the prior year. Approximately $24.0
million of the revenue increase resulted from the acquisitions of several
tuck-under companies in Fiscal 2002 in addition to the full year impact of
acquisitions completed during Fiscal 2001. The balance of the increase resulted
from internal growth of 6% (adjusted for foreign exchange impact). Property
Services EBITDA grew 7% to $39.2 million or 10.2% of revenue. In the prior year,
the EBITDA margin was 10.7%.

Within Property Services, the Residential Property Management unit
generated $205.4 million of revenues for the year, up 13% over the prior year
due to internal growth and two small tuck-under acquisitions. Residential
Property Management EBITDA was $18.8 million, up 4% over the prior year. The
EBITDA margin was 9.2% compared to 9.9% in the prior year. The



-23-


decline in margin is attributable to the slowdown in painting and restoration
operations experienced in the second, third and fourth quarters.

The Integrated Security Services unit reported revenues of $95.5
million, representing growth of 18% over the prior year primarily due to the
acquisition of VASEC in July 2001, as well as the full-year impact of the
Security Services and Technologies ("SST") acquisition completed in July 2000,
combined with internal growth of 11%. EBITDA was $6.5 million, up 9% over the
prior year and EBITDA margins were 6.8% compared with 7.4% in Fiscal 2001. The
margin decline is primarily due to mix change resulting from stronger relative
revenue growth in the low margin security guard operations, particularly since
September 11, 2001.

Consumer Services revenues advanced to $84.0 million, up 7% over the
prior year due to the July 2001 acquisition of CC Seattle LLC, the Washington
State franchise of the Company's California Closets franchise system. EBITDA was
$13.8 million, up 10% over the prior year. EBITDA margins rose from 15.9% in the
prior year to 16.5% in Fiscal 2002 principally as a result of overhead
leveraging.

Revenues for the Business Services Division were $127.5 million, an
increase of 55% or $45 million over Fiscal 2001. Approximately all of the
revenue increase is attributable to the March 2001 acquisition of Watts and the
February 2002 acquisition of Right Choice. Internal growth was 2% after
adjusting for the impact of foreign exchange. Business Services EBITDA grew 41%
to $22.4 million, while margins fell to 17.6% from 19.3%. The margin decline was
primarily due to the inclusion of Watts, which carries margins of 13-14% due to
its lower-margin direct mail and customer contact operations. Margins at the DDS
fulfillment operations were also down year-over-year due to the slowdown in
clients' promotional activities experienced in the second, third and fourth
quarters.

Corporate expenses decreased to $4.5 million in Fiscal 2002 from $4.6
million last year, primarily as a result of lower bonuses at the executive
level.


RESULTS OF OPERATIONS - YEAR ENDED MARCH 31, 2001

Consolidated revenues for Fiscal 2001 were $424.2 million, a 25%
increase from the $340.0 million reported for the year ended March 31, 2000
("Fiscal 2000"). Approximately $44.0 million of the increase resulted from the
acquisitions of SST and Watts, several smaller tuck-under companies and the
full-year impact of acquisitions completed in Fiscal 2000. The balance resulted
from internal growth of approximately 12%.

EBITDA increased 26%, to $47.9 million from $38.0 million in the prior
year, while EBITDA margins increased 10 basis points to 11.3% of revenue.

Depreciation in Fiscal 2001 was $7.7 million, up 19% from the previous
year due largely to acquisitions. Amortization for the year was $4.2 million, up
17% over Fiscal 2000 due to the significant amount of goodwill that has resulted
from the acquisitions completed during the years ended March 31, 2001 and 2000.

Interest expense increased 24% over the prior year's levels to $9.8
million as a result of increased borrowings related to acquisitions completed
during Fiscal 2001 and 2000 and higher interest rates. Weighted average interest
rates were approximately 8.1% in Fiscal 2001



-24-


compared to 7.7% in Fiscal 2000. The change in rates is attributable to
increases in floating reference rates.

The income tax provision for the year ended March 31, 2001 was
approximately 40% of earnings before taxes, similar to the prior year.

Minority interest increased to $3.0 million or 19.0% of earnings before
minority interest from $2.2 million, or 18.0% in the prior year. The increase
reflects a change in the mix of earnings relative to the prior year as certain
operations having higher minority shareholdings contributed more to consolidated
earnings.

Net earnings were $12.7 million, a 29% increase over the prior year,
while diluted earnings per share increased 28% to $0.92. Diluted earnings per
share reflect a 1% increase in the weighted average number of shares outstanding
as a result of shares issued upon the acquisition of a minority shareholding and
as a result of the shares issued in connection with stock option exercises.

Revenues for the Property Services Division were $341.6 million, an
increase of $74.9 million or 28% over the prior year. Approximately $40.0
million of the revenue increase resulted from the acquisitions of SST and
several tuck-under companies in Fiscal 2001 in addition to the full year impact
of acquisitions completed during Fiscal 2000. The balance of the increase
resulted from internal growth. Property Services EBITDA grew 35% to $36.6
million or 10.7% of revenue compared to an EBITDA margin of 10.2% in the prior
year.

Within Property Services, the Residential Property Management unit
generated $181.7 million of revenues for the year, up 36% over the prior year
due to internal growth and several tuck-under acquisitions including Silver
Plumbing, Aquashield Corporation, and Dickinson Management, all completed during
Fiscal 2001. Residential Property Management EBITDA was $18.1 million, up 58%
over the prior year. The EBITDA margin was 9.9% compared to 8.5% in the prior
year, up due to productivity improvements and changes in the service mix due to
higher margin restoration and swimming pool management acquisitions completed
during the two years.

The Integrated Security Services unit reported revenues of $81.0
million, representing growth of 32% over the prior year fuelled by the
acquisitions of SST and Century Security. EBITDA was $6.0 million, up 20% over
the prior year and EBITDA margins were 7.4% compared with 8.2%. Fiscal 2000's
unusually high margin was due to several highly profitable special contracts
completed during that year.

Consumer Services revenues were $78.8 million, up 11% over the prior
year due to internal growth and the October 2000 acquisition of Creative
Closets, the Boston franchise of California Closets. EBITDA was $12.5 million,
up 16% over the prior year. EBITDA margins rose from 15.1% in the prior year to
15.9% in Fiscal 2001 as a result of operating efficiency improvements and the
mix change from the Creative Closets acquisition.

Revenues for the Business Services Division were $82.3 million, an
increase of 13% or $9.1 million over Fiscal 2000. Approximately $4.0 million of
the revenue increase is attributable to the March 1, 2001 acquisition of Watts
with the balance from internal growth of approximately 7%. Business Services
EBITDA grew 8.0% to $15.9 million, while margins fell to 19.3% from 20.1%. The
margin decline was primarily due to the inclusion of Watts, which



-25-


earned margins of approximately 13% due to its lower-margin direct mail and
customer contact operations.

Corporate expenses increased to $4.7 million in Fiscal 2001 from $4.0
million, primarily as a result of higher professional services fees relating to
income taxes and to the investigation of potential acquisitions that were not
completed.

QUARTERLY RESULTS - YEARS ENDED MARCH 31, 2002 AND 2001
(in thousands of U.S. Dollars, except per share amounts)




- ------------------------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 YEAR
- ------------------------------------------------------------------------------------------------------------------

FISCAL 2002 (1)

Revenues $ 136,575 $ 140,468 $ 117,809 $ 117,837 $ 512,689
EBITDA (2) 18,760 22,012 9,215 7,135 57,122
Operating profit (3) 15,804 19,112 6,175 3,952 45,043
Net earnings before extraordinary item 7,090 8,838 1,737 546 18,211
Net earnings per share before extraordinary item:
Basic $ 0.53 $ 0.65 $ 0.13 $ 0.04 $ 1.34
Diluted 0.49 0.61 0.12 0.04 1.25

FISCAL 2001
Revenues $ 105,391 $ 118,165 $ 96,957 $ 103,661 $ 424,174
EBITDA (2) 14,457 19,448 7,739 6,211 47,855
Operating profit (3) 11,739 16,534 4,779 2,874 35,926
Net earnings before extraordinary item 4,679 6,938 1,055 35 12,707
Net earnings per share before extraordinary item:
Basic $ 0.36 $ 0.53 $ 0.08 $ 0.00 $ 0.97
Diluted 0.34 0.50 0.08 0.00 0.92

Fiscal 2001 adjusted for SFAS 142:

Net earnings before extraordinary item $ 5,417 $ 7,721 $ 1,869 $ 553 $ 15,560
Net earnings per share before extraordinary
item:
Basic $ 0.42 $ 0.59 $ 0.14 0.04 $ 1.19
Diluted 0.40 0.56 0.13 0.04 1.12
- ------------------------------------------------------------------------------------------------------------------


NOTES

(1) SFAS 142 was adopted effective April 1, 2001, which resulted in a material
decrease in amortization expense and a material increase in net earnings.
Fiscal 2001 net earnings, adjusted for SFAS 142, are shown below the
Fiscal 2001 figures.

(2) Net earnings before extraordinary items, minority interest share of
earnings, income taxes, interest, depreciation and amortization.

(3) Net earnings before extraordinary items, minority interest share of
earnings, income taxes and interest.

RECONCILIATION OF EBITDA TO OPERATING PROFIT

EBITDA does not include depreciation and amortization expenses, while
operating profit does include those expenses. The sum of operating profit, as
reported in Note 17 to the consolidated financial statements, and depreciation
and amortization, also reported in Note 17, is EBITDA.

SEASONALITY AND QUARTERLY FLUCTUATIONS

Certain segments of the Company's operations, which in the aggregate
comprise approximately 15% of revenues, are subject to seasonal variations.
Specifically, the demand for lawn care services, exterior painting services and
swimming pool maintenance in the northern United States and Canada is highest
during late spring, summer and early fall and very low during winter. As a
result, these operations generate a large percentage of their annual revenues
between April and September. The Company has historically generated lower
profits or net losses during its third and fourth fiscal quarters, from October
to March. Residential Property



-26-


Management, Integrated Security Services, Business Services and most of the
franchised Consumer Services generate revenues approximately evenly throughout
the fiscal year.

The seasonality of the lawn care, painting and swimming pool
maintenance operations results in variations in quarterly EBITDA margins.
Variations in quarterly EBITDA margins can also be caused by acquisitions that
alter the consolidated service mix. The Company's non-seasonal businesses
typically generate a consistent EBITDA margin over all four quarters, while the
Company's seasonal businesses experience high EBITDA margins in the first two
quarters, offset by negative EBITDA in the last two quarters. As non-seasonal
revenues increase as a percentage of total revenues, the Company's quarterly
EBITDA margin fluctuations should be reduced.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations and bank borrowings have historically been
the primary funding sources for working capital requirements, capital
expenditures and acquisitions. Net cash provided by operating activities for
Fiscal 2002 was $25.0 million, up 12% over the prior year, approximately in line
with the annual increase in earnings. Management believes that funds from these
sources and proceeds from capital stock issues will remain available and are
adequate to support ongoing operational requirements and near-term acquisition
growth.

On June 29, 2001, the Company amended and restated its credit agreement
to allow for the issuance of additional debt. The amended and restated agreement
provides $140 million of committed revolving credit facility that is renewable
and extendible in 364-day increments, and if not renewed, a two-year final
maturity. The Credit Facility was most recently renewed and extended on April
25, 2002. The Credit Facility bears interest at 1.50% to 3.00% over floating
reference rates, depending on certain leverage ratios. Also on June 29, 2001,
the Company completed a private placement of $100 million of 8.06% Guaranteed
Senior Secured Notes. The Notes have a final maturity of ten years, with equal
annual principal repayments beginning at the end of the fourth year, resulting
in a seven-year average life. Covenants and other limitations within the amended
credit agreement and the Notes are similar to those contained in the prior
credit agreement. As at March 31, 2002, the Company has drawn $56.2 million U.S.
and was in compliance with all covenants. Net borrowings increased by $13.3
million from March 31, 2001 to March 31, 2002.

FirstService's previous credit agreement provided six-year committed
revolving credit facilities of $50 million Cdn. and $130 million U.S. to fund
acquisitions. Outstanding indebtedness bore interest at a rate based on
competitive floating reference rates, as selected by the Company, such as LIBOR,
plus a margin of 1.00% to 1.50% per annum, depending on certain leverage ratios.
The agreement required the Company to meet specific financial ratios and placed
certain limitations on additional borrowing and the ability to pay dividends or
sell assets. This agreement was terminated on June 29, 2001, and resulted in the
write-off of deferred financing fees totaling $0.8 million, net of taxes.

During Fiscal 2002, capital expenditures totaled $15.6 million
comprising approximately $1.4 million for land and buildings, $4.0 million in
expenditures on production equipment, $2.0 million on vehicles, $7.6 million on
computer equipment and software and $0.6 million for leasehold improvements. The
Property Services Division incurred $9.2 million of capital expenditures, the
Business Services Division $5.9 million and Corporate $0.5 million.



-27-


During the year, the Property Services Division purchased a 12,000
square foot building in Hollywood, Florida at a total cost of $1.4 million.
Separately, it also relocated its leased northern New Jersey and Phoenix
offices. The Business Services Division relocated its DDS Dallas operation to a
larger and more efficient facility. Business Services also completed several
software projects including phases of a multi-year warehouse management system
upgrade and accounting software upgrades.

Looking forward to Fiscal 2003, capital expenditures are expected to be
significantly lower than Fiscal 2002 levels. Property Services will continue to
invest in productivity-enhancing software and hardware. In Business Services,
the Company intends to continue with its warehouse management system upgrade. No
major facilities moves or expansions are planned.

Acquisition expenditures during the year totaled $20.0 million,
comprised of $7.7 million for initial acquisition payments, $7.7 million of
contingent acquisition liability payments, and $4.6 million related to the
acquisition of minority interests of subsidiaries. All of the acquisition
consideration was in the form of cash.

In relation to acquisitions completed during the past three years, the
Company has contingent acquisition liabilities totaling $21.3 million that are
not recorded on the balance sheet. The payment of these amounts is contingent on
the acquired businesses meeting pre-determined earnings targets. Any payments,
when and if made, would be in cash and would result in an increase in the
purchase price for such acquisitions and, as a result, additional intangible
assets or goodwill.

In those operations where operating managements are also minority
owners, the Company is party to shareholders' agreements. These agreements allow
the Company to "call" the minority position for a predetermined formula price,
which is usually equal to the multiple of earnings paid by the Company for the
original acquisition. Minority owners may also "put" their interest to the
Company at the same price, with certain limitations. The total value of the
minority shareholders' interests was approximately $30.0 million at March 31,
2002. While it is not management's intention to acquire outstanding minority
interests, this step would materially increase net earnings. On an annual basis,
the impact of the acquisition of all minority interests would increase interest
expense by $1.3 million, reduce income taxes by $0.4 million and reduce minority
interest share of earnings by $3.9 million, resulting in an approximate net
increase to net earnings of $3.0 million.

The following table summarizes the Company's contractual obligations as
at March 31, 2002:



- ------------------------------------------------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD
--------------------------------------------------------------------------------
(In thousands of U.S. Dollars) LESS THAN 1
TOTAL YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------

Long-term debt $ 162,479 6,045 14,918 71,632 69,884
Capital lease obligations 3,132 1,148 1,739 245 -
Operating leases 55,841 13,011 20,958 11,581 10,291
Unconditional purchase obligations - - - - -
Other long-term obligations - - - - -
----------- ------------ ------------ ------------ ------------

Total contractual obligations $ 221,452 $ 20,204 $ 37,615 $ 83,458 $ 80,175
- ------------------------------------------------------------------------------------------------------------------------


At March 31, 2002, the Company had commercial commitments totaling $2.2
million comprised of letters of credit outstanding due to expire within one
year.



-28-


DISCUSSION OF CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that management deems to be most
important to the portrayal of the Company's financial condition and results, and
that require management's most difficult, subjective or complex judgments, due
to the need to make estimates about the effects of matters that are inherently
uncertain. The Company has identified two critical accounting policies: goodwill
and indefinite life intangible assets impairment testing and acquisition
purchase price allocations.

The annual goodwill and indefinite life intangible assets impairment
testing required under SFAS 142 requires judgment on the part of management.
Goodwill and indefinite life intangible assets impairment testing involves
making estimates concerning the fair value of reporting units and then comparing
the fair value to the carrying amount of each unit. If fair values were to
decline dramatically, due to a prolonged economic downturn or changes in the
business environment, it is possible that conditions for impairment of goodwill
and indefinite life intangible assets could exist.

Acquisition purchase price allocations require use of estimates and
judgment on the part of management, especially in the determination of
intangible assets acquired relative to the amount that is classified as
goodwill. For example, if different assumptions were used regarding the
profitability and expected lives of acquired customer contracts and
relationships, different amounts of intangible assets and related amortization
could be reported.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The Company adopted SFAS 141 and 142, BUSINESS COMBINATIONS AND
GOODWILL AND OTHER INTANGIBLES, during the year. With respect to SFAS 142, the
Company elected early adoption effective April 1, 2001. SFAS 141 was adopted
effective July 1, 2001. Note 3 to the consolidated financial statements
describes the impact of these standards.

In August 2001, the FASB issued SFAS 143, ACCOUNTING FOR RETIREMENT
OBLIGATIONS, effective for years beginning after June 15, 2002. SFAS 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or normal operation of a long-lived asset, except for certain obligations of
lessees. The Company expects that SFAS 143 will not have a material impact on
its results of operations or financial condition.

In August 2001, FASB issued SFAS 144, ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS, effective for the Company's fiscal year ending
March 31, 2003. The standard addresses the accounting for long-lived assets (i)
to be held and used; (ii) to be disposed of by sale; and (iii) to be disposed of
other than by sale. The Company expects that SFAS 144 will not have a material
impact on its results of operations or financial condition.

In April 2002, FASB issued SFAS 145, RESCISSION OF SFAS 4, 44 AND 64,
AMENDMENT OF SFAS 13 AND TECHNICAL CORRECTIONS AS OF APRIL 2002. This new
standard impacts the reporting of gains and losses from extinguishment of debt
and accounting for leases, and is effective for the Company's fiscal year
beginning April 1, 2004. Had SFAS 145 been in effect during the year ended March
31, 2002, the extraordinary loss on early retirement of debt of $0.8 million



-29-


(net of income tax benefit of $0.6 million) would have been reported as interest
expense of $1.4 million and a reduction of income tax expense of $0.6 million.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
intends that such forward-looking statements be subject to the safe harbors
created by such legislation. Such forward-looking statements involve risks and
uncertainties and include, but are not limited to, statements regarding future
events and the Company's plans, goals and objectives. Such statements are
generally accompanied by words such as "intend", "anticipate", "believe",
"estimate", "expect" or similar statements. The Company's actual results may
differ materially from such statements. Among the factors that could result in
such differences are the impact of weather conditions, increased competition,
labor shortages, the condition of the U.S. and Canadian economies, and the
ability of the Company to make acquisitions at reasonable prices. Although the
Company believes that the assumptions underlying its forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in such forward-looking
statements will be realized. The inclusion of such forward-looking statements
should not be regarded as a representation by the Company or any other person
that the future events, plans or expectations contemplated by the Company will
be achieved. The Company notes that past performance in operations and share
price are not necessarily predictive of future performance.

ITEM 7A. FINANCIAL INSTRUMENTS - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

The Company has identified two market risks that may impact its
earnings and cash flows: interest rate risk and foreign currency risk. The
Company uses sensitivity analyses as its primary analytical technique to
evaluate the hypothetical effects of market risks on future earnings and cash
flows, and sensitivity analyses are provided below.

INTEREST RATE RISK

FirstService's exposure to market risk for changes in interest rates
comes from two sources: (i) its revolving Credit Facility which bears interest
at floating reference rates, primarily LIBOR, plus a spread that is variable
depending on certain leverage ratios, and (ii) its $75 million variable for
fixed interest rate swap arrangement. On March 31, 2002, the amount drawn on the
revolving Credit Facility was $56.2 million, bearing interest at a rate of 4.2%.
The variable interest rate under the terms of the swap was approximately 4.4% as
at March 31, 2002. The Company may from time to time use derivative instruments
to manage its interest rate risk, and as at March 31, 2002, only one such
instrument, described above, was held.

A 10% increase in floating reference rates, or 20 basis points, would
increase interest expense by approximately $0.3 million, and decrease net
earnings by $0.2 million, over a full year. A 10% increase in the Company's
total debt to EBITDA leverage ratio would result in a 75 basis point increase in
the interest rate spread over floating reference rates, increasing interest



-30-


expense by approximately $0.4 million and reducing net earnings by $0.3 million,
over a full year.

FOREIGN CURRENCY RISK

Approximately 33% of FirstService's operations are conducted in foreign
currencies, principally in Canadian dollars. FirstService monitors its foreign
currency exposure. The Company may from time to time use derivative instruments
to manage its foreign currency risk, and as at March 31, 2002, no such
instruments were held.

FirstService has mitigated, and expects to continue to mitigate, a
portion of its currency exposure through the decentralized nature of its
organization, where, in each business unit, generally both revenue and the
related costs are local currency based. FirstService has the ability to borrow
funds under its revolving Credit Facility in either or both U.S. and Canadian
currencies. This allows the Company to effectively match the currency of
earnings with the currency of principal and interest payments, which also
mitigates some foreign currency risk.

A 3% ($0.02 U.S.) change in the value of the Canadian dollar would have
the impact of changing revenue by $5.1 million and net earnings by approximately
$0.3 million, over a full year. A decline in the value of the Canadian dollar
relative to the U.S. dollar would have the impact of reducing the revenue and
earnings of FirstService.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Set forth below is the report of PricewaterhouseCoopers LLP dated May
10, 2002, the consolidated balance sheets of FirstService Corporation as at
March 31, 2002 and 2001, the consolidated statements of earnings, shareholders'
equity and cash flows for each year in the three year period ended March 31,
2002 and the notes to the consolidated financial statements.



-31-


REPORT OF INDEPENDENT ACCOUNTANTS

To the shareholders of FirstService Corporation:

We have audited the consolidated balance sheets of FirstService Corporation as
at March 31, 2002 and 2001 and the consolidated statements of earnings,
shareholders' equity and cash flows for each year in the three-year period ended
March 31, 2002. These consolidated financial statements and the financial
statement schedules listed in the index appearing under Item 14 on page 62 are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.

We conducted our audits in accordance with United States 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. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 2002
and 2001 and the results of its operations and cash flows for each year in the
three-year period ended March 31, 2002 in accordance with United States
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above present fairly, in all material
respects, the information set forth herein when read in conjunction with the
related consolidated financial statements.

As discussed in Note 3 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and intangible assets effective
April 1, 2001.

We also reported separately on May 10, 2002, to the shareholders of the Company
on our audit, conducted in accordance with Canadian generally accepted auditing
standards, where we expressed an opinion without reservation on the March 31,
2002 and 2001 consolidated financial statements, prepared in accordance with
Canadian generally accepted accounting principles.


PRICEWATERHOUSECOOPERS LLP

Chartered Accountants

Toronto, Ontario
May 10, 2002



-32-


FIRSTSERVICE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands of U.S. Dollars, except per share amounts) - in accordance with
United States generally accepted accounting principles




For the years ended March 31 2002 2001 2000
- -------------------------------------------------------------------- ----------------- -------------- ---------------

Revenues $ 512,689 $ 424,174 $ 340,035

Cost of revenues 343,415 284,474 226,154
Selling, general and administrative expenses 112,152 91,845 75,904
Depreciation and amortization 12,079 11,929 10,107
Interest 11,616 9,767 7,849
- -------------------------------------------------------------------- ----------------- -------------- ---------------
Earnings before income taxes and minority interest 33,427 26,159 20,021
Income taxes (note 12) 11,355 10,464 7,989
- -------------------------------------------------------------------- ----------------- -------------- ---------------
Earnings before minority interest 22,072 15,695 12,032
Minority interest share of earnings 3,861 2,988 2,164
- -------------------------------------------------------------------- ----------------- -------------- ---------------
Net earnings before extraordinary item 18,211 12,707 9,868
- -------------------------------------------------------------------- ----------------- -------------- ---------------
Extraordinary loss on early retirement of
debt, net of income tax benefit of $578 797 - -
==================================================================== ================= ============== ===============
NET EARNINGS $ 17,414 $ 12,707 $ 9,868
==================================================================== ================= ============== ===============

EARNINGS PER SHARE (NOTE 13)
Net earnings before extraordinary item:

Basic $ 1.34 $ 0.97 $ 0.76

Diluted 1.25 0.92 0.72

Net earnings:

Basic 1.28 0.97 0.76
Diluted 1.19 0.92 0.72
==================================================================== ================= ============== ===============


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.



-33-


FIRSTSERVICE CORPORATION
CONSOLIDATED BALANCE SHEETS



(in thousands of U.S. Dollars) - in accordance with United States generally accepted accounting principles

As at March 31 2002 2001
- --------------------------------------------------------------------------------- ---------------- --------------


ASSETS
CURRENT ASSETS

Cash and cash equivalents $ 7,332 $ 5,115
Accounts receivable, net of an allowance of $4,084 (2001 - $4,123) 88,587 79,473
Inventories (note 5) 9,078 9,627
Prepaids and other (note 5) 13,303 10,757
Deferred income taxes (note 12) 2,571 1,136
- --------------------------------------------------------------------------------- ---------------- --------------
120,871 106,108

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

Other receivables (note 6) 4,908 5,092
Fixed assets (note 7) 45,367 40,741
Other assets (note 7) 5,411 4,026
Deferred income taxes (note 12) 972 1,472
Intangible assets (note 8) 29,422 25,557
Goodwill (note 9) 151,254 130,664
- --------------------------------------------------------------------------------- ---------------- --------------

237,334 207,552
- --------------------------------------------------------------------------------- ---------------- --------------
$ 358,205 $ 313,660
================================================================================= ================ ==============
LIABILITIES
CURRENT LIABILITIES

Accounts payable $ 20,587 $ 22,220
Accrued liabilities (note 5) 38,269 34,001
Income taxes payable 2,259 2,436
Unearned revenue 9,654 9,505
Long-term debt - current (note 10) 7,193 3,050
Deferred income taxes (note 12) 583 558
- --------------------------------------------------------------------------------- ---------------- --------------
78,545 71,770

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

Long-term debt less current portion (note 10) 158,418 149,374
Interest rate swap (note 15) 2,070 -
Deferred income taxes (note 12) 7,881 4,236
Minority interest 11,449 8,824
- --------------------------------------------------------------------------------- ---------------- --------------
179,818 162,434

- --------------------------------------------------------------------------------- ---------------- --------------
SHAREHOLDERS' EQUITY

Capital stock (note 11) 57,712 54,863
Issued and outstanding 13,112,418 (2001 - 12,505,393)
Subordinate Voting Shares and 662,847 (2001 - 662,847)
convertible Multiple Voting Shares

Receivables pursuant to share purchase plan (note 11) (2,630) (3,196)
Retained earnings 45,386 27,972
Cumulative other comprehensive loss (626) (183)
- --------------------------------------------------------------------------------- ---------------- --------------
99,842 79,456
- --------------------------------------------------------------------------------- ---------------- --------------
$ 358,205 $ 313,660
================================================================================= ================ ==============


Commitments and contingencies (note 16)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

Signed on behalf of the Board

Director Director




-34-


FIRSTSERVICE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY




(in thousands of U.S. Dollars) - in accordance with United States generally accepted accounting principles

Issued and Receivables Cumulative
outstanding Capital pursuant to other Total
shares stock share Retained comprehensive shareholders'
(note 11) (note 11) purchase plan earnings earnings (loss) equity
- --------------------------------------------- --- ------------- -------------- --- ----------- ---------------- ---------------

- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Balance, March 31, 1999 12,919,055 $ 53,654 $ (3,294) $ 6,168 $ 2,492 $ 59,020
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Comprehensive earnings:
Net earnings - - - 9,868 - 9,868
Foreign currency
translation
adjustments - - - - (323) (323)
-----------
Comprehensive earnings 9,545
-----------

Subordinate Voting Shares:
Stock options exercised 132,475 465 - - - 465
Purchased for
cancellation (62,000) (270) - (422) - (692)
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Balance, March 31, 2000 12,989,530 53,849 (3,294) 15,614 2,169 68,338
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Comprehensive earnings:
Net earnings - - - 12,707 - 12,707
Foreign currency
translation
adjustments (note 14) - - - - (2,352) (2,352)
-----------
Comprehensive earnings 10,355
-----------
Subordinate Voting Shares:
Issued for purchase
of minority interest 69,360 649 - - - 649

Stock options exercised 158,850 580 - - - 580
Purchased for
cancellation (49,500) (215) - (349) - (564)
Cash payments on share
purchase plan - - 98 - - 98
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Balance, March 31, 2001 13,168,240 54,863 (3,196) 27,972 (183) 79,456
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Comprehensive earnings:
Net earnings - 17,414 17,414
Foreign currency
translation
adjustments - (443) (443)
-----------
Comprehensive earnings 16,971
-----------
Subordinate Voting Shares:
Stock options exercised 607,025 2,849 2,849
Cash payments on share
purchase plan - 566 566
- ------------------------------- ------------- --- ------------- -- ----------- --- ----------- -- ------------- --- -----------
Balance, March 31, 2002 13,775,265 $ 57,712 $ (2,630) $ 45,386 $ (626) $ 99,842
=============================== ============= === ============= == =========== === =========== == ============= === ===========


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.



-35-


FIRSTSERVICE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS



(in thousands of U.S. Dollars) - in accordance with United States generally accepted accounting principles

For the years ended March 31 2002 2001 2002
- -------------------------------------------------------------- ---------------- ---------------- ---------------

CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES

Net earnings $ 17,414 $ 12,707 $ 9,868
Items not affecting cash:
Depreciation and amortization 12,079 11,929 10,107
Deferred income taxes 489 1,056 1,087
Minority interest share of earnings 3,861 2,988 2,164
Write-off of financing fees on early debt retirement 1,375 - -
Other 471 451 446
Changes in operating assets and liabilities:

Accounts receivable (7,043) (5,235) (2,080)
Inventories 782 (450) (949)
Prepaids and other (3,051) (1,270) (1,360)
Accounts payable (2,047) 3,304 (1,395)
Accrued liabilities 279 (4,103) 686
Income taxes payable 489 2,520 1,698
Unearned revenue (133) (1,607) (599)
- -------------------------------------------------------------- ---------------- ---------------- ---------------
Net cash provided by operating activities 24,965 22,290 19,673
- -------------------------------------------------------------- ---------------- ---------------- ---------------
INVESTING ACTIVITIES

Acquisitions of businesses, net of cash acquired (15,363) (40,583) (22,069)
Purchases of minority shareholders' interests (4,623) (4,070) -
Purchases of fixed assets (15,611) (10,502) (8,824)
Proceeds from sale of business and other assets - - 105
Purchases of other assets (470) (91) (1,038)
Decrease (increase) in other receivables 80 (705) (980)
- -------------------------------------------------------------- ---------------- ---------------- ---------------
Net cash used in investing activities (35,987) (55,951) (32,806)
- -------------------------------------------------------------- ---------------- ---------------- ---------------
FINANCING ACTIVITIES

Increases in long-term debt 168,817 43,374 23,056
Repayments of long-term debt (155,246) (7,006) (10,706)
Financing fees paid (3,030) - (545)
Proceeds received on exercise of stock options and
share purchase plan 2,849 580 465
Repayment of receivables pursuant to share purchase plan 566 98 -
Repurchases of Subordinate Voting Shares - (564) (692)
Dividends paid to minority shareholders of subsidiaries (139) (475) (190)
- -------------------------------------------------------------- ---------------- ---------------- ---------------
Net cash provided by financing activities 13,817 36,007 11,388
- -------------------------------------------------------------- ---------------- ---------------- ---------------
Effect of exchange rate changes on cash (578) (528) 415
- -------------------------------------------------------------- ---------------- ---------------- ---------------
Increase (decrease) in cash and cash equivalents
during the year 2,217 1,818 (1,330)

Cash and cash equivalents, beginning of year 5,115 3,297 4,627
- -------------------------------------------------------------- ---------------- ---------------- ---------------

Cash and cash equivalents, end of year $ 7,332 $ 5,115 $ 3,297
============================================================== ================ ================ ===============


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.



-36-


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of U.S. Dollars, except per share amounts) - in accordance with
United States generally accepted accounting principles

1. DESCRIPTION OF THE BUSINESS

FirstService Corporation (the "Company") is a provider of property and
business services to residential, corporate and public sector customers
in the United States and Canada. The Company's operations are conducted
through two operating divisions, Property Services and Business
Services. The Property Services Division includes Residential Property
Management, Integrated Security Services and Consumer Services, which
represent approximately 75% of the Company's revenues for the year
ended March 31, 2002. The Business Services Division provides customer
support and fulfillment and business process outsourcing services to
corporations and government agencies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. The most significant
estimates are related to indefinite life intangible assets and
goodwill. Actual results could be materially different from these
estimates. Significant accounting policies are summarized as follows:

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany transactions and accounts
are eliminated on consolidation.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments, which are
readily convertible into cash and have original maturities of three
months or less.

INVENTORIES

Inventories are carried at the lower of cost and net realizable value.
Cost is determined by the weighted average or first-in, first-out
methods. The weighted average and the first-in, first-out methods
represent approximately 30% and 70% of total inventories, respectively.
Finished goods and work-in-progress include the cost of materials,
direct labor and manufacturing overhead costs.

FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation and
amortization. The cost of additions and improvements are capitalized,
while maintenance and repairs are expensed as incurred. Fixed assets
are depreciated and amortized over their estimated useful lives as
follows:

Buildings 5% declining balance and 40 years
straight-line
Vehicles 3 to 10 years straight-line
Furniture and equipment 20% to 30% declining balance and 3 to
10 years straight-line
Computer equipment and software 20% declining balance and 3 to 5 years
straight-line
Enterprise system software 5 to 10 years straight-line
Leasehold improvements term of the leases to a maximum of
10 years

The Company reviews the carrying value of fixed assets for impairment
whenever events and circumstances indicate that the carrying value of
an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. In cases
where undiscounted expected future cash flows are less than the
carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets.




-37-

FINANCIAL INSTRUMENTS

The Company uses an interest rate swap to hedge its interest rate
exposure. The swap is carried at fair value on the balance sheet, with
gains or losses recognized in earnings. The carrying value of the
hedged debt is adjusted for changes in fair value attributable to the
hedged interest rate risk; the associated gain or loss is recognized
currently in earnings.

FINANCING FEES

Financing fees related to the credit facility are amortized to interest
expense on a straight-line basis over the term of the associated debt.
Financing fees related to the notes are amortized to interest expense
using the effective interest method.

GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets are accounted for in accordance with
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 141, BUSINESS COMBINATIONS, ("SFAS
141") and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("SFAS
142").

In accordance with SFAS 142, effective April 1, 2001, goodwill and
indefinite life intangible assets are not subject to amortization.
Instead, goodwill is tested annually for impairment.

Amortizable intangible assets are amortized using the straight-line
method over their estimated useful lives as follows:

Management contracts and other over life of contract
Customer lists and relationships 3 to 10 years
Franchise rights 15 to 40 years

The Company reviews the carrying value of amortizable intangible assets
for impairment whenever events and circumstances indicate that the
carrying value of an asset may not be recoverable from the estimated
future cash flows expected to result from its use and eventual
disposition. In cases where undiscounted expected future cash flows are
less than the carrying value, an impairment loss is recognized equal to
an amount by which the carrying value exceeds the fair value of assets.

The indefinite-life franchise intangible assets, comprised of
trademarks and trade names and franchise rights, are tested for
impairment annually or more frequently if events or changes in
circumstances indicate the asset might be impaired, in which case the
carrying value of the asset is written down to fair value in accordance
with SFAS 142.

REVENUE RECOGNITION AND UNEARNED REVENUE

(a) Company-owned Property Services and Business Services

Revenues from Residential Property Management, Company-owned Consumer
Services, Integrated Security Services and Business Services are
recognized at the time the service is rendered or the product is
shipped. Revenues from Integrated Security Services installation
contracts and Residential Property Management painting and restoration
contracts in process are recognized on the percentage of completion
method, generally in the ratio of actual costs to total estimated
contract costs. Amounts received from customers in advance of services
being provided are recorded as unearned revenue when received.

(b) Franchised Consumer Services

The Company's franchised Consumer Services are conducted principally
through subsidiaries California Closet Company, Inc., Paul Davis
Restoration, Inc., Certa ProPainters Ltd. and College Pro Painters Ltd.
Royalties are charged as a percentage of revenue, as defined, where
reported by the franchisees except for Certa ProPainters Ltd., where
the franchisees are charged a fixed monthly amount. Revenue from
administrative and other support services, as applicable, is recognized
as the services are provided.



-38-

ADVERTISING COSTS

Advertising costs are expensed as incurred except for prepaid
direct-response advertising, which is recorded as a current asset and
is amortized over the period of expected sales revenue resulting from
such advertising.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the Company's subsidiary operations that are
measured in a functional currency other than the U.S. Dollar are
translated into U.S. Dollars at the exchange rates prevailing at
year-end and revenues and expenses at the weighted average exchange
rates for the year. All exchange gains and losses on translation are
shown as a separate component of shareholders' equity.

INCOME TAXES

Income taxes have been provided using the asset and liability method
whereby deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in
the financial statements or tax returns. Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable
income in the years in which temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in earnings in the period in
which the change occurs.

Income taxes are not provided on the unremitted earnings of U.S.
subsidiaries because it has been the practice and is the intention of
the Company to reinvest these earnings in the U.S. businesses.

STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board ("APB") Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations
in accounting for its stock option plan. No compensation expense is
recognized when shares or stock options are issued to employees or
directors. Any consideration paid on the exercise of stock options is
credited to share capital. However, the Company discloses pro forma
earnings and earnings per share to reflect compensation costs in
accordance with the methodology prescribed under SFAS 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION.

3. ADOPTION OF NEW ACCOUNTING STANDARDS

In April 2001, the Company elected early adoption of SFAS 142, GOODWILL
AND OTHER INTANGIBLE ASSETS. SFAS 141, BUSINESS COMBINATIONS, was
adopted on July 1, 2001. SFAS 141 addresses financial accounting and
reporting for business combinations and replaces APB 16, BUSINESS
COMBINATIONS. SFAS 141 requires the use of the purchase method of
accounting for acquisitions and provides new recognition criteria for
intangible assets. SFAS 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets and
replaces APB 17, INTANGIBLE ASSETS. SFAS 142 also addresses how
intangible assets should be accounted for upon their acquisition and
after they have been initially recognized in the financial statements.
These new standards provide specific guidance on measuring goodwill for
impairment annually using a two-step process.

As at April 2001, the Company identified those intangible assets that
remain separable under the provisions of SFAS 142 and those that are to
be included in goodwill. The comparative consolidated balance sheet has
been restated to reclassify intangible assets from goodwill. In
applying SFAS 142, the Company re-evaluated the useful lives of these
separable intangible assets. The amount reclassified April 1, 2001 was
$24,649. The reclassification includes net indefinite-life intangible
assets of $21,460, net amortizable franchise rights of $2,280 and net
customer lists and relationships of $909.

In the year of adoption, SFAS 142 requires the first step of the
goodwill impairment test to be completed within the first six months
and the second step to be completed within twelve months of adoption.
The first step of the test was completed during the quarter ended
September 30, 2001 and no indications of goodwill impairment were
found, therefore the second step was not applicable. Intangible assets
were tested for impairment during the quarter ended June 30, 2001 and
no indications of impairment were found to exist.



-39-

Had the provisions of SFAS 142 been applied for the years ended March
31, 2001 and 2000, the Company's comparative earnings and earnings per
share would be as follows:


2002 2001 2000
----------- ----------- -----------

Reported net earnings before extraordinary item $ 18,211 $ 12,707 $ 9,868
Goodwill amortization, net of income taxes - 3,126 2,050
Minority interest - (273) (536)
----------- ----------- -----------
Adjusted net earnings before extraordinary item $ 18,211 $ 15,560 $ 11,382
=========== =========== ===========

Reported net earnings $ 17,414 $ 12,707 $ 9,868
Goodwill amortization, net of income taxes - 3,126 2,050
Minority interest - (273) (536)
----------- ----------- -----------
Adjusted net earnings $ 17,414 $ 15,560 $ 11,382
=========== =========== ===========

NET EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEM:
BASIC
Reported $ 1.34 $ 0.97 $ 0.76
Goodwill amortization, net of income taxes - 0.24 0.16
Minority interest - (0.02) (0.04)
----------- ----------- -----------
Adjusted $ 1.34 $ 1.19 $ 0.88
=========== =========== ===========

DILUTED
Reported $ 1.25 $ 0.92 $ 0.72
Goodwill amortization, net of income taxes - 0.22 0.15
Minority interest - (0.02) (0.04)
----------- ----------- -----------
Adjusted $ 1.25 $ 1.12 $ 0.83
=========== =========== ===========

NET EARNINGS PER SHARE:
BASIC
Reported $ 1.28 $ 0.97 $ 0.76
Goodwill amortization, net of income taxes - 0.24 0.16
Minority interest - (0.02) (0.04)
----------- ----------- -----------
Adjusted $ 1.28 $ 1.19 $ 0.88
=========== =========== ===========

DILUTED
Reported $ 1.19 $ 0.92 $ 0.72
Goodwill amortization, net of income taxes - 0.22 0.15
Minority interest - (0.02) (0.04)
----------- ----------- -----------
Adjusted $ 1.19 $ 1.12 $ 0.83
=========== =========== ===========


4. SIGNIFICANT BUSINESS ACQUISITIONS

2002 ACQUISITIONS:

On July, 2001, an 80% owned subsidiary of the Company (Security
Services and Technologies ("SST")) acquired an 80% voting equity
interest of VASEC Virginia Security and Automation, Inc. ("VASEC") of
Springfield, Virginia. VASEC is a provider of integrated security
services.

On February 1, 2002, an 87.5% owned subsidiary of the Company (DDS
Distribution Services Ltd. ("DDS")) acquired 100% of the assets of the
Fulfillment Division of Right Choice Services, Inc. ("Right Choice") of
Mascoutah, Illinois. Right Choice is a rebate processing and
fulfillment business.

In addition, the Company and its subsidiaries acquired three other
businesses and acquired minority shareholdings in two subsidiaries.

2001 ACQUISITIONS:
On July 1, 2000, the Company acquired an 80% interest in SST,
headquartered in Norristown, Pennsylvania. SST is an integrated
security services provider.

On March 1, 2001, the Company acquired an 82.15% interest in Herbert A.
Watts Limited ("Watts") headquartered in Toronto, Ontario. Watts is a
customer support and fulfillment company.



-40-

2000 ACQUISITIONS:
On June 1, 1999, the Company acquired an 80% interest in American Pool
Enterprises, Inc. ("American Pool") headquartered in Beltsville,
Maryland. American Pool provides commercial swimming pool management
services.

On July 1, 1999, DDS, at the time an 89% owned subsidiary of the
Company, acquired 100% of Southwest Distribution Services Group ("DDS
SW"), a Texas-based textbook fulfillment business.

Details of 2002 acquisitions are as follows:


2002
--------------------------------------------------
AGGREGATE
RIGHT CHOICE VASEC OTHER
--------------- ------------- --------------

Current assets $ 2,212 $ 841 $ 441
Long-term assets 219 86 433
Current liabilities (1,992) (539) (1,044)
Long-term liabilities - (191) (2,293)

Minority interest - (78) 710
--------------- ------------- --------------

439 119 (1,753)
--------------- ------------- --------------
Note consideration - - 1,720
Cash consideration 3,300 1,700 7,287
--------------- ------------- --------------

Acquired intangibles $ 527 $ 286 $ 3,084
=============== ============= ==============
Acquired goodwill $ 2,334 $ 1,295 $ 7,676
=============== ============= ==============

Contingent consideration
at date of acquisition $ 3,300 $ 860 $ 1,985
=============== ============= ==============


Factors contributing to the goodwill on the above-noted acquisitions
include operating synergies between the acquired businesses and the
Company's existing operations, customer services capabilities, expanded
geographic reach of Company service lines and skilled assembled
workforces.

Details of prior year acquisitions are as follows:


2001 2000
---------------------------- --------------------------
American DDS
Watts SST Pool SW
------------ ----------- ----------- -----------

Net assets acquired, at fair
market value:
Tangible assets, net
of liabilities $ 139 $ 792 $ (6,444) $ 673
Minority interest (25) (158) - -
------------ ----------- ----------- -----------

114 634 (6,444) 673
------------ ----------- ----------- -----------

Cash consideration 10,865 7,500 4,755 8,711
------------ ----------- ----------- -----------

Acquired goodwill $10,751 $ 6,866 $ 11,199 $ 8,038
============ =========== =========== ===========
$ 16,515Cdn.
============
Contingent consideration
at date of acquisition $ 10,424 $ 4,250 $ 2,800 $ 3,000
============ =========== =========== ===========
$ 16,012Cdn.
============


In 2001, in addition to the individual acquisitions disclosed above,
the Company made various other acquisitions and acquired certain
minority interests for total consideration of $16,183 (2000 - $5,730)
comprised of cash of $15,534 (2000 - $5,730), and capital stock of $649
(2000 - $nil) to acquire net tangible assets of $3,391 (2000 - $1,040)
resulting in goodwill of $12,792 (2000 - $4,690).



-41-

In fiscal 2002, the Company finalized the allocation of the purchase
price with respect to the March 2001 Watts acquisition. The final
adjustment to this purchase equation and the purchase equations on
other acquisitions resulted in additional goodwill and accrued
liabilities in the amount of $1,860, net of income taxes, principally
to reflect costs to restructure operations of one of the acquired
subsidiaries.

In 2000, the Company disposed of business assets of subsidiaries with
a net book value of $209 for net proceeds of $105.

Certain vendors, at the time of acquisition, are entitled to receive
contingent consideration if the acquired businesses exceeded certain
financial thresholds during the two to four-year period following the
date of acquisition. As at March 31, 2002, there was contingent
consideration outstanding of up to $21,300 payable during the period
extending to June 2005. In addition, vendors are entitled to receive
interest on the principal amount of each contingent payment, to the
extent payable, which interest is calculated from the acquisition date
to the payment date at interest rates ranging from 7% to 9%. These
amounts have been treated as contingent consideration and any resulting
payments will be recorded as intangible assets or goodwill to the
extent that the contingencies are determined payable. Contingent
consideration paid or accrued during the year ended March 31, 2002 was
$7,425, net of deferred income tax of $273 (2001 - $11,715) (2000 -
$6,570).

The acquisitions referred to above were accounted for by the purchase
method of accounting for business combinations. Accordingly, the
accompanying consolidated statements of earnings do not include any
revenues or expenses related to these acquisitions prior to these
respective closing dates. The cash portions of the acquisitions were
financed through available cash and borrowings from the Company's
revolving credit facility.

Following are the Company's unaudited pro forma results assuming the
acquisitions of Right Choice, VASEC, Watts and SST occurred on April 1
on the respective year of acquisition. The year immediately prior to
the year of each respective acquisition also includes the pro forma
results of that respective acquisition.



2002 2001
------------- -------------

Pro forma revenue $ 522,216 $ 485,256
Pro forma net earnings 18,017 15,478

Pro forma earnings per share:
Basic $ 1.33 $ 1.18
Diluted 1.23 1.12


These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of results of
operations that would have actually resulted had the combinations been
in effect at the beginning of each year or of future results of
operations.

5. COMPONENTS OF WORKING CAPITAL ACCOUNTS


2002 2001
--------------- -------------

INVENTORIES
Supplies and other $ 3,143 $ 3,422
Finished goods 4,642 4,574
Work-in-progress 1,005 1,380
Small equipment 288 251
------------- -------------
$ 9,078 $ 9,627
============= =============

PREPAIDS AND OTHER
Advertising $ 2,467 $ 3,222
Insurance 2,562 1,240
Security deposits 1,216 1,120
Other 7,058 5,175
------------- -------------
$ 13,303 $ 10,757
============= =============




-42-



2002 2001
------------- -------------

ACCRUED LIABILITIES
Accrued payroll and benefits $ 15,360 $ 14,567
Customer advances 14,838 13,295
Other 8,071 6,139
------------- -------------
$ 38,269 $ 34,001
============= =============


6. OTHER RECEIVABLES

Other receivables are comprised of:

(a) $1,426 (2001 - $1,094) of secured interest and non-interest bearing
loans due from minority shareholders of four (2001 - three)
subsidiaries;

(b) $1,682 (2001 - $2,130) of long-term receivables, certain of which are
interest bearing, relating to painting, restoration and integrated
security systems installation projects conducted by the Company's
Property Services Division; and

(c) $1,800 (2001 - $1,868) of interest bearing franchise fees receivable
from franchisees in the Company's Consumer Services unit.

7. FIXED ASSETS AND OTHER ASSETS



Accumulated
2002 depreciation/ NET
Cost amortization 2002
----------------- --------------- --------------

FIXED ASSETS
Land $ 2,209 $ - $ 2,209
Buildings 6,790 834 5,956
Vehicles 15,153 9,169 5,984
Furniture and equipment 33,430 19,476 13,954
Computer equipment and software 20,349 11,184 9,165
Enterprise system software 4,377 1,669 2,708
Leasehold improvements 10,034 4,643 5,391
----------------- --------------- --------------
Total $ 92,342 $ 46,975 $ 45,367
================= =============== ==============

OTHER ASSETS
Funds held in trust $ 1,892 $ - $ 1,892
Investments 850 - 850
Financing fees 3,030 361 2,669
================= =============== ==============
Total $ 5,772 $ 361 $ 5,411
================= =============== ==============




Accumulated
2001 depreciation / Net
Cost amortization 2001
---------------- --------------- --------------

FIXED ASSETS

$ $
Land 1,812 $ - 1,812
Buildings 5,901 647 5,254
Vehicles 13,388 8,069 5,319
Furniture and equipment 29,375 14,430 14,945
Computer equipment and software 13,647 7,924 5,723
Enterprise system software 3,921 1,136 2,785
Leasehold improvements 9,451 4,548 4,903
---------------- --------------- --------------
Total $ 77,495 $36,754 $40,741
================ =============== ==============
OTHER ASSETS
Funds held in trust $ 1,904 $ - $ 1,904
Investments 647 - 647
Financing fees 2,897 1,422 1,475
================ =============== ==============
Total $ 5,448 $ 1,422 $ 4,026
================ =============== ==============





-43-

Included in fixed assets are vehicles under capital lease at a cost of
$5,697 (2001 - $4,460) with a net book value of $2,542 (2001 - $2,282),
furniture and equipment under capital lease at a cost of $743 (2001 -
$nil) and net book value of $435 (2001 - $nil) and computer equipment
and software under capital lease at a cost of $757 (2001 - $2,441) with
a net book value of $604 (2001 - $1,187).

8. INTANGIBLE ASSETS


Gross carrying Accumulated NET
2002 amount amortization 2002
---------------- -------------- --------------

AMORTIZED INTANGIBLE ASSETS
Management contracts and other $ 2,376 $ 1,639 $ 737
Customer lists and relationships 2,536 733 1,803
Franchise rights 2,653 315 2,338
---------------- -------------- --------------
7,565 2,687 4,878
---------------- -------------- --------------
INDEFINITE-LIFE FRANCHISE INTANGIBLE ASSETS
Trademarks and trade names 11,327 - 11,327
Franchise rights 13,217 - 13,217
---------------- -------------- --------------
24,544 - 24,544
---------------- -------------- --------------
$ 32,109 $ 2,687 $ 29,422
================ ============== ==============




Gross carrying Accumulated Net
2001 amount amortization 2001
---------------- -------------- --------------

AMORTIZED INTANGIBLE ASSETS
Management contracts and other $ 2,307 $ 1,477 $ 830
Customer lists and relationships 1,383 309 1,074
Franchise rights 25,254 1,601 23,653
---------------- -------------- --------------
$ 28,944 $ 3,387 $ 25,557
================ ============== ==============


During the year ended March 31, 2002, the company acquired the
following intangible assets:


Weighted average
amortization
Amount period in years
---------------- ------------------

AMORTIZED INTANGIBLE ASSETS
Management contracts and other $ 88 5
Customer lists and relationships 1,179 5
Franchise rights 198 15
----------------
1,465 6
----------------
INDEFINITE-LIFE FRANCHISE INTANGIBLE ASSETS
Trademarks and trade names 1,450 -
Franchise rights 1,634 -
----------------
3,084 -
----------------
$ 4,549 -
================


The following is the estimated annual amortization expense for each of
the next five years ending March 31:

2003 $ 798
2004 718
2005 527
2006 307
2007 229





-44-


9. GOODWILL



Property Property
Services - Services - Property
Residential Integrated Services -
Property Security Consumer Business
Management Services Services Services Corporate Consolidated

Balance, April 1, 2001 $ 48,268 $ 21,774 $ 14,968 $ 45,654 $ - $ 130,664
------------- ------------- ------------ ----------- --------- -------------
Goodwill resulting from
adjustments to purchase
price allocations 101 (166) (255) 2,180 - 1,860
Goodwill resulting from
contingent acquisition
payments 3,363 1,853 - 2,209 - 7,425
Goodwill resulting from
purchases of minority
shareholders' interests 2,143 - 2,056 - - 4,199
Goodwill acquired during year 1,608 1,351 1,775 2,372 - 7,106
------------- ------------- ------------ ----------- --------- -------------
Balance, March 31, 2002 $ 55,483 $ 24,812 $ 18,544 $ 52,415 $ - $ 151,254
============= ============= ============ =========== ========= =============



10. LONG-TERM DEBT


2002 2001
--------------- --------------


Revolving credit facility of $140,000 U.S., of which up to $40,000 U.S.
may be drawn in Canadian funds, $14,000 U.S. due June 25, 2004
and the balance due June 25, 2005 $ 56,160 $ -
Revolving credit facility of $130,000 U.S. and $50,000 Cdn. due June
1, 2004 - 142,812
8.06% Guaranteed Senior Secured Notes due June 29, 2011 100,000 -
Adjustment to Guaranteed Senior Secured Notes resulting from
interest rate swap (2,070) -
Obligations under capital leases bearing interest ranging primarily
from 6% to 9%, maturing at various dates through 2006 3,132 2,409
Other long-term debt bearing interest primarily at 8%, maturing at
various dates through 2008 8,389 7,203
--------------- --------------
165,611 152,424
Less: current portion 7,193 3,050
--------------- --------------
$ 158,418 $ 149,374
=============== ==============


The revolving credit facility at March 31, 2002 is comprised of
borrowings of $44,681 U.S. and $18,300 Cdn. ($11,479 U.S.) (2001 -
$120,045 U.S. and $35,887 Cdn. ($22,767 U.S.)).

Included in capital leases at March 31, 2002 and 2001 are obligations
in Canadian dollars of $2,263 ($1,420 U.S.) and $1,561 ($990 U.S.),
respectively.

Included in other long-term debt at March 31, 2002 and 2001 are
obligations in Canadian dollars of $6,202 ($3,891 U.S.) and $5,921
($3,756 U.S.), respectively.

At March 31, 2002, the estimated aggregate amount of principal
repayments on long-term debt required in each of the next five fiscal
years and thereafter to meet the retirement provisions are as follows:

2003 $ 7,193
2004 1,380
2005 15,277
2006 57,530
2007 14,347
Thereafter 69,884

On June 29, 2001, the Company amended and restated its credit agreement
to allow for the issuance of additional debt. The amended and restated
agreement provides a $140,000 committed senior revolving credit
facility (the "Credit Facility") renewable and extendible in 364-day
increments, and if not renewed, a



-45-

two-year final maturity. The Credit Facility was most recently renewed
and extended on April 25, 2002. The Credit Facility bears interest at
1.50% to 3.00% over floating reference rates, depending on certain
leverage ratios. At March 31, 2002, the Company had drawn $56,160 on
the Credit Facility, and had $83,840 of available un-drawn credit.

Also on June 29, 2001, the Company completed a private placement of
$100,000 of 8.06% fixed-rate Guaranteed Senior Secured Notes (the
"Notes"). The Notes have a final maturity of ten years, with seven
equal annual principal repayments beginning at the end of the fourth
year, resulting in a seven-year average life. On December 7, 2001, the
Company entered into an interest rate swap agreement on $75,000 of the
8.06% Notes for a variable rate of LIBOR + 250.5 basis points. The term
of the swap matches the term of the Notes (see note 15 for swap
accounting).

The Credit Facility and the Notes rank equally in terms of security.
The Company has granted these lenders various security including the
following: an interest in all of the assets of the Company including
the Company's share of its subsidiaries, an assignment of material
contracts and an assignment of the Company's "call rights" with respect
to shares of the subsidiaries held by minority interests.

The covenants and other limitations within the Credit Facility and the
Note agreement are substantially the same. The covenants require the
Company to maintain certain ratios including leverage, fixed charge
coverage, interest coverage and net worth. Other limitations include
prohibition from paying dividends, and without prior approval, from
undertaking certain mergers, acquisitions and dispositions.

11. CAPITAL STOCK

The authorized capital stock of the Company is as follows:

An unlimited number of preference shares, issuable in series;
An unlimited number of Subordinate Voting Shares having one vote per
share; and
An unlimited number of Multiple Voting Shares having 20 votes per
share, convertible at any time
into Subordinate Voting Shares at a rate of one Subordinate
Voting Share for every Multiple Voting Share outstanding.

The following table provides a summary of total capital stock:



SUBORDINATE VOTING SHARES MULTIPLE VOTING SHARES Total Total
Number Amount Number Amount Number Amount
------------- ---------- --------- ----------- ------------ ----------

Balance, March 31, 2000 12,326,683 $ 53,476 662,847 $ 373 12,989,530 $ 53,849
Balance, March 31, 2001 12,505,393 54,490 662,847 373 13,168,240 54,863
Balance, March 31, 2002 13,112,418 57,339 662,847 373 13,775,265 57,712


On May 17, 2000, the Company purchased shares of its subsidiary, The
Franchise Company, Inc., from a minority shareholder. As consideration,
69,360 Subordinate Voting Shares with a value of $971 Cdn. ($649 U.S.)
were issued.

The Company has $2,630 ($3,714 Cdn.) (2001 - $3,196 ($4,513 Cdn.)) of
secured interest bearing loans related to the purchase of 412,500
Subordinate Voting Shares (2001 - 492,500 shares). The loans, which are
secured by the shares issued, have a five- or ten-year term from the
grant date, however, they are open for repayment at any time. The
maturities of these loans are as follows, for the years ending March
31:




2003 $ 196
2004 286
2005 -
2006 -
2007 916
2008 467
2009 765
---------------
$ 2,630
===============


The Company has a stock option plan for officers, key full-time
employees and directors of the Company and its subsidiaries. At March
31, 2002, a total of 3,850,000 Subordinate Voting Shares were reserved
and approved by the shareholders of the Company for issuance pursuant
to stock options of which 3,695,470



-46-


have been granted resulting in 154,530 options available for future
grants. Each option vests over a four-year term and expires five years
from the date granted and allows for the purchase of one Subordinate
Voting Share. Options are exercisable in either U.S. or Canadian
Dollars. At March 31, 2002, there were 2,119,115 options outstanding to
70 employees and directors at prices ranging from $5.80 to $23.14
($8.00 to $36.89 Cdn.) per share, expiring on various dates through
January 2007.

The number of Subordinate Voting Shares issuable under options and the
average option prices per share are as follows:



SHARES ISSUABLE UNDER OPTIONS WEIGHTED AVERAGE PRICE PER SHARE ($U.S.)
------------------------------------------ ----------------------------------------
2002 2001 2000 2002 2001 2000
----------- ----------- ----------- ---------- ---------- -----------

Shares issuable under
options - Beginning
of year 2,119,640 1,879,200 1,342,675 $ 8.57 $ 8.02 $ 5.37
Granted 625,000 419,790 669,000 20.93 12.69 11.97
Exercised for cash (607,025) (158,850) (132,475) 4.70 3.69 3.51
Expired or forfeited (18,500) (20,500) - 7.25 10.28 -
----------- ----------- ----------- --------- ---------- ---------

Shares issuable under
options - End of year 2,119,115 2,119,640 1,879,200 $ 13.20 $ 8.57 $ 8.02
=========== =========== =========== ========= ========== =========
Options exercisable -
End of year 925,498 1,117,624 896,803
=========== =========== ===========




WEIGHTED AVERAGE PRICE PER SHARE ($CDN.)
-------------------------------------------
2002 2001 2000
----------- ----------- ------------

Shares issuable under
options - Beginning
of year $ 13.52 $ 11.62 $ 8.10
Granted 32.77 19.08 17.61
Exercised for cash 7.35 5.55 5.17
Expired or forfeited 11.35 15.46 -
----------- ----------- ------------

Shares issuable under
options - End of year $ 21.05 $ 13.52 $ 11.62
=========== =========== ============


The weighted average fair value of options granted in 2002, 2001 and
2000 was $6.59 ($10.31 Cdn.), $4.84 ($7.28 Cdn.) and $4.54 ($6.68 Cdn.)
per share, respectively.

The options outstanding as at March 31, 2002 to purchase Subordinate
Voting Shares are as follows:



OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- -------------------------------
Weighted Weighted Weighted
average average average
remaining exercise exercise
Range of exercise prices Number contractual price Number price
($U.S.) outstanding life (years) ($U.S.) exercisable ($U.S.)
---------------------------- ------------ ------------- ------------- ------------- -------------

$5.80 to $11.04 598,615 1.22 $ 7.81 471,973 $ 7.30
$11.20 to $14.62 895,500 2.72 11.67 391,025 11.43
$15.70 to $23.14 625,000 4.51 20.55 62,500 20.55
------------ ------------- ------------- ------------- -------------
2,119,115 2.67 $ 13.20 925,498 $ 9.94
============ ============= ============= ============= =============




OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- -------------------------------
Weighted Weighted Weighted
average average average
remaining exercise exercise
Range of exercise prices Number contractual price Number price
($Cdn.) outstanding life (years) ($Cdn.) exercisable ($Cdn.)
---------------------------- ------------ ------------- ------------- ------------- -------------


$8.00 to $16.00 598,615 1.22 $ 12.45 471,973 $ 11.64
$16.47 to $22.50 895,500 2.72 18.61 391,025 18.22
$25.00 to $36.89 625,000 4.51 32.77 62,500 32.77
------------ ------------- ------------- ------------- -------------
2,119,115 2.67 $ 21.05 925,498 $ 15.85
============ ============= ============= ============= =============




-47-

SFAS 123 requires pro forma disclosures of earnings and earnings per
share as if the fair value method of accounting for employee stock
options had been applied. Compensation cost is based on the fair value
of the award using the Black-Scholes option-pricing model. The
disclosures in the table below show the company's earnings and earnings
per share after including the effect of the compensation cost.




2002 2001 2000
------------- ------------ -------------

Pro forma net earnings $ 16,270 $ 11,737 $ 9,164
Pro forma net earnings per share:
Basic $ 1.20 $ 0.90 $ 0.71
Diluted 1.11 0.85 0.67

Assumptions
Risk-free interest rate 5.0% 5.5% 5.5%
Expected life in years 4.0 4.5 4.5
Volatility 30% 35% 35%
Dividend yield 0.0% 0.0% 0.0%



12. INCOME TAXES

Income taxes differ from the amounts that would be obtained by applying
the statutory rate to the respective years' earnings before taxes.
These differences result from the following items:



2002 2001 2000
------------- -------------- -------------

Income tax expense using combined statutory rates of
approximately 41% (2001 - 44%; 2000 - 45%) $ 13,705 $ 11,509 $ 9,009
Non-deductible expenses:
Amortization of goodwill and intangibles - 1,085 397
Loss not tax effected 443 - -
Other 250 210 185
Foreign tax rate reduction (3,043) (2,340) (1,602)
------------- -------------- -------------
Provision for income taxes as reported $ 11,355 $ 10,464 $ 7,989
============= ============== =============



Earnings before income taxes and minority interest by tax jurisdiction
comprise the following:


2002 2001 2000
------------- -------------- -------------

Canada $ 12,537 $ 7,494 $ 9,132
United States 20,890 18,665 10,889
------------- -------------- -------------
Total $ 33,427 $ 26,159 $ 20,021
============= ============== =============


The provision for income taxes comprises the following:



2002 2001 2000
------------- -------------- -------------

Current
Canada $ 4,004 $ 2,664 $ 3,414
United States 6,862 6,744 3,488
------------- -------------- -------------
10,866 9,408 6,902
------------- -------------- -------------
Deferred
Canada (1,130) 633 143
United States 1,619 423 944
------------- -------------- -------------
489 1,056 1,087
------------- -------------- -------------
Total $ 11,355 $ 10,464 $ 7,989
============= ============== =============





-48-


The significant components of deferred income taxes are as follows:



2002 2001

-------------- --------------
Deferred income tax assets
Expenses not currently deductible $ 1,100 $ 790
Provision for doubtful accounts 507 107
Inventory and other reserves 427 84
Loss carry-forwards 1,509 1,536
Capital stock underwriting expenses - 91
-------------- --------------
3,543 2,608
-------------- --------------
Deferred income tax liabilities
Depreciation and amortization 6,919 3,933
Prepaid and other expenses deducted for tax purposes 583 558
Financing fees 962 303
-------------- --------------
8,464 4,794
-------------- --------------
Net deferred income tax liability $ (4,921) $ (2,186)
============== ==============


Cumulative undistributed earnings of U.S. subsidiaries approximated
$31,699 as at March 31 (2001 - $22,305).

13. SHARES OUTSTANDING FOR EARNINGS PER SHARE CALCULATIONS



2002 2001 2000
-------------- ------------ -------------


Shares issued and outstanding at beginning of year 13,168,240 12,989,530 12,919,055
Weighted average number of shares:
Issued in the year 397,077 117,728 33,617
Repurchased in the year - (33,396) (4,623)
-------------- ------------ -------------

Weighted average number of shares used in
computing basic earnings per share 13,565,317 13,073,862 12,948,049
Assumed exercise of stock options, net of shares
assumed acquired under the Treasury Stock Method 1,034,551 767,134 759,689
-------------- ------------ -------------
Number of shares used in computing diluted earnings
Per share 14,599,868 13,840,996 13,707,738
============== ============ =============



14. OTHER SUPPLEMENTAL INFORMATION



2002 2001 2000
------------- -------------- -------------

PRODUCTS AND SERVICES SEGMENTATION
Revenue
Products $ 75,337 $ 54,091 $ 28,670
Services 437,352 370,083 311,365
------------- -------------- -------------
Total 512,689 424,174 340,035
------------- -------------- -------------

Cost of revenue
Products 46,060 36,557 22,545
Services 297,355 247,917 203,609
------------- -------------- -------------
Total 343,415 284,474 226,154
------------- -------------- -------------
Net $ 169,274 $ 139,700 $ 113,881
============= ============== =============

FRANCHISED OPERATIONS
Revenue $ 54,173 $ 55,661 $ 51,541
============= ============== =============
Operating profit $ 9,283 $ 7,999 $ 6,861
============= ============== =============
Initial franchise fee revenue $ 2,951 $ 4,157 $ 3,224
============= ============== =============




-49-



2002 2001 2000
------------- -------------- -------------

CASH PAYMENTS MADE DURING THE YEAR
Income taxes $ 10,649 $ 4,308 $ 4,571
============= ============== =============
Interest $ 9,633 $ 9,616 $ 7,992
============= ============== =============

NON-CASH FINANCING ACTIVITIES
Increases in capital lease obligations $ 1,965 $ 1,170 $ 1,186
============= ============== =============
Issuance of Subordinate Voting Shares to acquire
minority interest $ - $ 649 $ -
============= ============== =============

DEPRECIATION AND AMORTIZATION EXPENSE
Fixed assets $ 11,394 $ 7,708 $ 6,486
Goodwill - 3,402 2,755
Intangible assets 685 819 866
------------- -------------- -------------
$ 12,079 $ 11,929 $ 10,107
============= ============== =============

OTHER EXPENSES
Advertising expense $ 9,582 $ 8,264 $ 7,056
============= ============== =============
Rent expense $ 13,943 $ 10,599 $ 9,359
============= ============== =============


The foreign currency translation adjustment for the year ended March
31, 2001 is net of current income taxes of $444 on realized exchange
gains for income tax purposes.


15. FINANCIAL INSTRUMENTS

CONCENTRATION OF CREDIT RISK
The company is subject to credit risk with respect to its accounts
receivable and other receivables. Concentrations of credit risk with
respect to these receivables are limited due to the large number of
entities comprising the Company's customer base and their dispersion
across many different service lines in two countries.

INTEREST RATE RISK
The Company maintains an interest rate risk management strategy that
uses interest rate swaps to lower the long-term cost of borrowed funds.
The Company's specific goals are to (i) manage interest rate
sensitivity by modifying the characteristics of some of its debt and
(ii) lower the long-term cost of its borrowed funds. Fluctuations in
interest rates create an unrealized appreciation or depreciation in the
market value of the Company's fixed-rate debt when that fair value is
compared with the cost of the borrowed funds. The effect of this
unrealized appreciation or depreciation in market value, however, will
generally be offset by the gain or loss on the interest rate swaps that
are linked to the debt.

On December 7, 2001, the Company entered into an interest rate swap
agreement to exchange the fixed rate on $75,000 of its 8.06% Notes for
a variable rate of LIBOR + 250.5 basis points. The term of the swap
matches the term of the Notes with a maturity of June 29, 2011. This
swap is being accounted for as a fair value hedge in accordance with
SFAS 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
The swap is carried at fair value on the balance sheet, with gains or
losses recognized in earnings. The carrying value of the hedged debt is
adjusted for changes in fair value attributable to the hedged interest
rate risk; the associated gain or loss is recognized currently in
earnings. The fair value of the swap is determined based on the present
value of the estimated future net cash flows using implied rates in the
applicable yield curve as of the valuation date. Due to changes in the
yield curve, the fair value of the swap fluctuates and at March 31,
2002, the fair value represented a loss of $2,070.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents, funds held in
trust, accounts receivable, accounts payable and accrued liabilities
approximate fair values due to the short maturity of these instruments,
unless otherwise indicated.




-50-



2002 2001
------------------------------ ------------------------------
CARRYING Carrying
AMOUNT FAIR VALUE amount Fair value
------------ ------------- ------------- -------------

Cash and cash equivalents $ 7,332 $ 7,332 $ 5,115 $ 5,115
Other receivables 4,908 4,829 5,092 5,004
Long-term debt including current portion 165,611 168,941 152,424 152,424
Interest rate swap (2,070) (2,070) - -



16. COMMITMENTS AND CONTINGENCIES

(a) LEASE COMMITMENTS

Minimum operating lease payments are as follows:



Year ending March 31
2003 $ 13,011
2004 11,540
2005 9,418
2006 7,075
2007 4,506
Thereafter 10,291


(b) SHAREHOLDER AGREEMENTS

The Company has shareholder agreements with the minority owners of its
subsidiaries. These agreements allow the Company to "call" the minority
position for a predetermined formula price, which is usually equal to
the multiple of net earnings before extraordinary items, minority
interest share of earnings, income taxes, interest, depreciation, and
amortization paid by the Company for the original acquisition. The
minority owners may also "put" their interest to the Company at the
same price subject to certain limitations. The purchase price may, at
the option of the Company, be paid primarily in Subordinate Voting
Shares. Acquisitions of these minority interests would be accounted for
using the purchase method.

(c) CONTINGENCIES

The Company is involved in legal proceedings and claims primarily
arising in the normal course of its business. In the opinion of
management, the Company's liability, if any, would not materially
affect its financial condition or operations.

17. SEGMENTED INFORMATION

OPERATING SEGMENTS
Within the Property Services Division, three operating units
(Residential Property Management, Integrated Security Services and
Consumer Services) provide a variety of services to residential and
commercial customers. The Business Services Division provides customer
support and fulfillment and business process outsourcing services to
corporate and institutional clients.




-51-



2002 Property Property
Services - Services - Property
Residential Integrated Services -
Property Security Consumer Business
Management Services Services Services Corporate Consolidated


Revenues $ 205,376 $ 95,507 $ 83,964 $ 127,478 $ 364 $ 512,689
--------------- -------------- ------------- -------------- ------------ --------------
Depreciation and
amortization 3,716 1,377 1,906 4,964 116 12,079
--------------- -------------- ------------- -------------- ------------ --------------
Segment operating profit 15,118 5,158 11,940 17,412 (4,585) 45,043
--------------- -------------- ------------- -------------- ------------
Interest expense (11,616)
Income taxes (11,355)
Minority interest (3,861)
--------------
Net earnings before extra-
ordinary items $ 18,211
==============
Total assets $ 106,268 $ 57,515 $ 69,336 $ 117,874 $ 7,212 $ 358,205
=============== ============== ============= ============== ============ ==============
Total additions to
long-lived assets $ 13,237 $ 5,154 $ 8,984 $ 13,365 $ 478 $ 41,218
=============== ============== ============= ============== ============ ==============





2001 Property Property
Services - Services - Property
Residential Integrated Services -
Property Security Consumer Business
Management Services Services Services Corporate Consolidated


Revenues $ 181,730 $ 81,007 $ 78,838 $ 82,346 $ 253 $ 424,174
--------------- -------------- ------------- -------------- ------------ --------------
Depreciation and
amortization 4,505 1,371 2,555 3,397 101 11,929
--------------- -------------- ------------- -------------- ------------ --------------
Segment operating profit 13,546 4,654 9,947 12,491 (4,712) 35,926
--------------- -------------- ------------- -------------- ------------
Interest expense (9,767)
Income taxes (10,464)
Minority interest (2,988)
--------------
Net earnings $ 12,707
==============
Total assets $ 84,332 $ 42,033 $ 55,295 $ 124,580 $ 7,420 $ 313,660
=============== ============== ============= ============== ============ ==============
Total additions to
long-lived assets $ 15,652 $ 10,194 $ 8,535 $ 25,796 $ - $ 60,177
=============== ============== ============= ============== ============ ==============





2000 Property Property
Services - Services - Property
Residential Integrated Services -
Property Security Consumer Business
Management Services Services Services Corporate Consolidated


Revenues $ 133,782 $ 61,539 $ 71,330 $ 73,198 $ 186 $ 340,035
-------------- ------------- ------------- ------------- ------------ --------------
Depreciation and
amortization 3,511 887 2,847 2,801 61 10,107
-------------- ------------- ------------- ------------- ------------ --------------

Segment operating profit 7,903 4,143 7,933 11,874 (3,983) 27,870
-------------- ------------- ------------- ------------- ------------
Interest expense (7,849)
Income taxes (7,989)
Minority interest (2,164)
--------------
Net earnings $ 9,868
==============

Total assets $ 73,518 $ 25,282 $ 50,953 $ 74,476 $ 6,658 $ 230,887
============== ============= ============= ============= ============ ==============
Total additions to long-
lived assets $ 23,909 $ 3,175 $ 3,735 $ 10,923 $ 97 $ 41,839
============== ============= ============= ============= ============ ==============





-52-

GEOGRAPHIC SEGMENTS
Revenues in each geographic segment are reported by customer location.




CANADA

2002 2001 2000
------------- ------------ ------------

Revenues $ 168,669 $ 119,372 $ 109,410
============= ============ ============
Total long-lived assets $ 53,082 $ 49,651 $ 31,970
============= ============ ============





UNITED STATES
2002 2001 2000
------------- ------------ ------------

Revenues $ 344,020 $ 304,802 $ 230,625
============= ============ ============
Total long-lived assets $ 172,961 $ 147,311 $ 115,218
============= ============ ============





CONSOLIDATED

2002 2001 2000
------------- ------------ ------------

Revenues $ 512,689 $ 424,174 $ 340,035
============= ============ ============
Total long-lived assets $ 226,043 $ 196,962 $ 147,188
============= ============ ============



18. COMPARATIVE AMOUNTS

Certain comparative amounts in the consolidated balance sheets and notes to the
consolidated financial statements have been reclassified to conform with the
current year's presentation.

19. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, FASB issued SFAS 143, ACCOUNTING FOR RETIREMENT OBLIGATIONS,
effective for years beginning after June 15, 2002. SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. It applies
to legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or normal operation
of a long-lived asset, except for certain obligations of lessees. The Company
expects that SFAS 143 will not have a material impact on its results of
operations or financial condition.

In August 2001, FASB issued SFAS 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL
OF LONG-LIVED ASSETS, effective for the Company's fiscal year ending March 31,
2003. The standard addresses the accounting for long-lived assets (i) to be held
and used; (ii) to be disposed of by sale; and (iii) to be disposed of other than
by sale. The Company expects that SFAS 144 will not have a material impact on
its results of operations or financial condition.

In April 2002, FASB issued SFAS 145, RESCISSION OF SFAS 4, 44 AND 64, AMENDMENT
OF SFAS 13 AND TECHNICAL CORRECTIONS AS OF APRIL 2002. This new standard impacts
the reporting of gains and losses from extinguishment of debt and accounting for
leases, and is effective for the Company's fiscal year beginning April 1, 2004.
Had SFAS 145 been in effect during the year ended March 31, 2002, the
extraordinary loss on early retirement of debt of $797, net of income tax
benefit of $578, would have been reported as interest expense of $1,375 and a
reduction of income tax expense of $578.




-53-


ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.




-54-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The Directors of the Company stand for re-election each year. The
Directors as at May 14, 2002 were as follows:



----------------------- ------ ------------------------------- ---------------------------------------
NAME AGE PRESENT POSITION AND TENURE BUSINESS EXPERIENCE DURING
LAST FIVE YEARS
----------------------- ------ ------------------------------- ---------------------------------------

Michael H. Appleton 61 Director since 1994 and Managing Partner, Fogler, Rubinoff LLP
Secretary (Toronto law firm)

David R. Beatty 60 Director since May 2001 Corporate Director; Director of
Clarkson Center for Business Ethics

Brent S. Belzberg 51 Director since May 2002 Managing Partner, TorQuest Partners
(merchant bank); Former President and
Chief Executive Officer, Harrowston,
Inc. (Canadian publicly traded
holding company)

Brendan Calder 55 Director since 1996 Entrepreneur in Residence,
Rotman School of Management,
University of Toronto; Corporate
Director;
Former Chairman and Chief Executive
Officer, CIBC Mortgages Inc.
(subsidiary of a Canadian chartered
bank)

Peter F. Cohen 49 Director since 1990 President, Dawsco Capital Corp.
(Ontario-based holding company);
Former Chairman and Chief Executive
Officer, Centrefund Realty Corp.
(Canadian publicly traded real estate
company)

Jay S. Hennick 45 President, Chief Executive President and Chief Executive Officer
Officer and Director

Samuel Hennick 71 Director since 1993 Chairman and Chief Executive Officer,
Stargems Inc. (Toronto-based
jewellery manufacturing company)

Steven Rogers 46 Director since 1989 President and Chief Executive
Officer,
The Franchise Company, Inc.
(subsidiary of FirstService)

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


Mr. Samuel Hennick is the father of Mr. Jay S. Hennick.

AUDIT COMMITTEE

The Audit Committee is composed of three non-management members. The
committee reviews the quarterly and annual consolidated financial statements
intended for circulation among shareholders and reports upon these to the Board.
In addition, the Board may refer to the Audit Committee on other matters and
questions relating to the financial position of the Company. The Audit Committee
members are Messrs. Appleton, Calder and Cohen.

COMPENSATION COMMITTEE

The Compensation Committee is composed of three non-management members
and makes recommendations to the Board on, among other things, the compensation
of the Chief Executive Officer including grants of options under the Company's
Stock Option Plan to the




-55-


Chief Executive Officer. The Compensation Committee members are Messrs.
Appleton, Calder and Cohen.

DIRECTORS' COMPENSATION

During Fiscal 2002, each Director who was not a full-time employee of
the Company or any of its subsidiaries received an annual retainer of $1,600
plus a fee equal to $480 for each meeting of the Board of Directors or Committee
thereof attended by such Director in person and $225 for each meeting held by
telephone. During Fiscal 2002, the Company paid the Directors aggregate fees
totaling $16,225.

In addition, most Directors have received stock option grants under the
Company's stock option plan. During Fiscal 2002, the following directors were
granted options: Mr. Appleton - 10,000; Mr. Calder - 25,000; Mr. Cohen - 20,000;
Mr. Jay S. Hennick - 200,000 and Mr. Rogers - 5,000.

EXECUTIVE OFFICERS

The following shows the names and ages, as at May 14, 2002, of the
present executive officers of the Registrant, all positions presently held by
each officer, and the year each person became an officer. The executive officers
do not have a fixed term of office.



---------------------- ------ ------------------------------------------------ --------------
FIRST BECAME
NAME AGE PRESENT POSITION WITH THE COMPANY AN OFFICER
---------------------- ------ ------------------------------------------------ --------------

Jay S. Hennick 45 President, Chief Executive Officer and Director 1988

D. Scott Patterson 41 Senior Vice President and Chief Financial 1995
Officer

Timothy J. Greener 50 Senior Vice President, Integration 1996

John B. Friedrichsen 40 Senior Vice President, Acquisitions 1998

Richard Oller 48 Senior Vice President, Development 2002

Douglas G. Cooke 42 Corporate Controller and Treasurer 1995
---------------------- ------ ------------------------------------------------ --------------


Mr. Hennick is the founder of the Company and has been President and
Chief Executive Officer since its inception.

Mr. Patterson has held his current position since February 1995. Mr.
Patterson is a Chartered Accountant.

Mr. Greener was president of a subsidiary of the Company until October
1996, at which time he assumed his present position.

Mr. Friedrichsen was Vice President, Corporate Finance with Ernst &
Young Corporate Finance Inc. prior to becoming Vice President, Acquisitions in
January 1998. Mr. Friedrichsen is a Chartered Accountant.

Mr. Oller was president of a subsidiary of the Company until March
2002, at which time he assumed his present position.

Mr. Cooke has held his current position since June 1995. Mr. Cooke is a
Chartered Accountant.




-56-


ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by,
or paid to the Chief Executive Officer and the four next most highly compensated
executive officers in respect of Fiscal 2002. Each of the listed persons held
the office indicated on the table on March 31, 2002.



- ------------------------------------------------------------------------------------------------------------------------
SUMMARY
COMPENSATION TABLE LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------------------------------------------------------------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMP- STOCK UNDERLYING LTIP COMP-
NAME AND PRINCIPAL FISCAL SALARY BONUS ENSATION AWARDS OPTIONS PAYOUTS ENSATION
POSITION YEAR ($ US) ($ US) ($ US) ($ US) (#) ($ US) ($ US)
- ------------------------------------------------------------------------------------------------------------------------

Jay S. Hennick, 2002 $ 495,000 $ 433,700 - - 200,000
President and Chief 2001 475,400 660,000 - - 62,100 - -
Executive Officer 2000 442,000 736,700 - - 150,000 - -
- ----------------------- --------- ----------- ------------- ----------- ------------ ------------ ---------- ----------
D. Scott Patterson,
Senior Vice President 2002 159,600 92,700 50,000
and Chief Financial 2001 146,300 203,200 - - 81,150 - -
Officer 2000 136,000 226,700 - - 75,000 - -
- ----------------------- --------- ----------- ------------- ----------- ------------ ------------ ---------- ----------
Timothy J. Greener, 2002 190,000 83,600 40,000
Senior Vice 2001 180,000 220,000 - - 37,460 - -
President, Integration 2000 175,000 145,800 - - 25,000 - -
- ----------------------- --------- ----------- ------------- ----------- ------------ ------------ ---------- ----------
John B. Friedrichsen, 2002 118,200 52,000 40,000
Senior Vice President, 2001 109,700 91,400 - - 60,770 - -
Acquisitions 2000 91,800 76,500 - - 50,000 - -
- ----------------------- --------- ----------- ------------- ----------- ------------ ------------ ---------- ----------
Douglas G. Cooke, 2002 86,300 15,500 10,000
Corporate Controller 2001 86,400 30,000 - - 18,310 - -
& Treasurer 2000 78,200 32,600 - - 15,000 - -
- ----------------------- --------- ----------- ------------- ----------- ------------ ------------ ---------- ----------


The following table summarizes the number and terms of the stock
options granted during Fiscal 2002 to the executive officers.



- ----------------------- ---------------------------------------------------------- -----------------------------
OPTION GRANTS IN POTENTIAL REALIZED VALUE AT
FISCAL 2002 ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE
GRANTED IN FISCAL ($ US PER 5% 10%
NAME (#) 2002 SHARE) EXPIRATION DATE ($ US) ($ US)
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------

Jay S. Hennick 100,000 16.0% $ 16.94 May 3, 2006 468,000 1,034,000
100,000 16.0 23.14 January 30, 2007 639,000 1,413,000
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------
D. Scott Patterson 50,000 8.0 23.14 January 30, 2007 320,000 707,000
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------
Timothy J. Greener 40,000 6.4 23.14 January 30, 2007 256,000 565,000
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------
John B. Friedrichsen 40,000 6.4 23.14 January 30, 2007 256,000 565,000
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------
Douglas G. Cooke 10,000 1.6 23.14 January 30, 2007 64,000 141,000
- ----------------------- -------------- ------------ ----------- ------------------ --------------- -------------


NOTE

One option entitles the holder to purchase one Subordinate Voting Share. All
options listed in the table above vest in the following manner: 10% on grant
date, 15% on the first anniversary, 20% on second anniversary, 25% on third
anniversary and 30% on the fourth anniversary of the grant date. The
expiration date is the fifth anniversary of the grant date.



-57-


The following table summarizes the exercises of stock options during
Fiscal 2002 by the executive officers and the number of, and the spread on,
unexercised options held by such officers on March 31, 2002.



---------------------------------------------------------------------------------------------------
AGGREGATED OPTION NUMBER OF SECURITIES VALUE OF UNEXERCISED
EXERCISES IN FISCAL UNDERLYING IN-THE-MONEY
2002 AND YEAR-END UNEXERCISED OPTIONS OPTIONS AT
OPTION VALUES AT MARCH 31, 2002 MARCH 31, 2002
(#) ($ US)
---------------------------------------------------------------------------------------------------
SHARES VALUE
ACQUIRED ON REALIZED EXERCISABLE / EXERCISABLE /
NAME EXERCISE (#) ($ US) UNEXERCISABLE UNEXERCISABLE
---------------------------------------------------------------------------------------------------

Jay S. Hennick 200,000 $ 2,760,000 305,525 / 331,575 $ 3,857,000 / $ 2,223,000
----------------------- ------------- ------------ ---------------------- --------------------------
D. Scott Patterson 100,000 2,460,000 160,288 / 158,363 2,016,000 / 1,220,000
----------------------- ------------- ------------ ---------------------- --------------------------
Timothy J. Greener 25,000 468,000 60,115 / 82,345 716,000 / 490,000
----------------------- ------------- ------------ ---------------------- --------------------------
John B. Friedrichsen 20,000 185,000 62,193 / 113,578 677,000 / 826,000
----------------------- ------------- ------------ ---------------------- --------------------------
Douglas G. Cooke 20,000 489,000 25,828 / 32,483 315,000 / 255,000
----------------------- ------------- ------------ ---------------------- --------------------------



EMPLOYMENT AGREEMENT

The Company has an employment agreement with Jay S. Hennick, the
President and Chief Executive Officer of the Company, made as of April 1, 1998
having a term of five years, with one-year renewals at the option of Mr.
Hennick. In the event of a change of control of the Company, or in the event the
Company terminates Mr. Hennick's employment without cause after March 31, 2003,
Mr. Hennick will be entitled to:

(a) Payment of 300% of the aggregate of: (i) Mr. Hennick's then current
salary; (ii) the benefits and other payments paid pursuant to the
agreement in the previous fiscal year; and (iii) an amount equal to
the bonus paid to Mr. Hennick in the previous fiscal year;
(b) Certain job relocation expenses; and
(c) At Mr. Hennick's option, an amount equal to the difference between the
exercise price of any rights or options to purchase shares of the
Company that he owned, or was entitled to receive, and the market
value of such shares.

COMPENSATION COMMITTEE INSIDER PARTICIPATION

The Directors who served on the Compensation Committee during Fiscal
2002 were Messrs. Appleton, Calder and Cohen. None of the persons who served as
members of the Compensation Committee in Fiscal 2002 was an officer or employee
of the Company or any of its subsidiaries during Fiscal 2002 and none of such
persons was formerly an officer of the Company or any of its subsidiaries.




-58-

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

COMPENSATION POLICY

When determining the compensation of executive officers, the Committee
considers the objectives of: (i) retaining executives critical to the success of
the Company and the enhancement of shareholder value; (ii) providing fair and
competitive compensation; (iii) balancing the interests of management and
shareholders of the Company; (iv) rewarding performance, both on an individual
basis and with respect to the business in general; and (v) ensuring the
recognition of the fact that the Company carries on business with a small number
of executives relative to other public companies of similar size. In order to
achieve these objectives, the compensation paid to the executive officers
consists of three components:

(a) Base salary;
(b) Annual bonus incentive; and
(c) Long-term incentive in the form of stock options granted in accordance
with the Company's stock option plan.

BASE SALARY

The base salary of each executive officer is determined by an
assessment by the Committee of such executive's performance, a consideration of
competitive compensation levels in corporations similar to the Company and a
review of the performance of the Company as a whole and the role the executive
officer played in such performance.

ANNUAL BONUS INCENTIVE

Annual cash bonus incentive awards are earned based entirely on a
formula that relates to earnings per share growth of the Company over the
previous year. No bonuses are paid to executives if earnings per share growth is
less than 10%. This form of annual bonus incentive establishes a direct link
between executive compensation and the Company's operating performance relative
to the prior year.

LONG-TERM INCENTIVE

The Company provides a long-term incentive by granting stock options to
the executive officers. The options permit each executive officer to acquire
Subordinate Voting Shares of the Company at an exercise price equal to the
market price of such shares under option at the date the option was granted. The
objective of granting options is to encourage each executive officer to acquire
an increased ownership interest in the Company over a period of time, which acts
as a financial incentive for each executive officer to consider the long-term
interests of the Company and its shareholders.



-59-

PERFORMANCE GRAPH

The following graph compares the five-year cumulative total return to
shareholders of the Company with the five-year cumulative total return of the
Russell 2000 Index and The ServiceMaster Company.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN ON $100 INVESTED AMONG
FIRSTSERVICE CORPORATION, THE RUSSELL 2000 INDEX AND THE SERVICEMASTER COMPANY*


[GRAPH]



* $100.00 invested on March 31, 1997 in stock or index, assuming reinvestment of
dividends.



- ----------------------------------------------------------------------------------------------------
AS AT MARCH 31 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----

FirstService Corporation $ 100.00 $ 211.56 $ 222.11 $ 187.59 $ 267.86 $ 376.70

Russell 2000 Index 100.00 140.32 116.08 157.37 131.52 147.85

The ServiceMaster Company 100.00 142.56 209.90 117.21 118.59 146.89
- ----------------------------------------------------------------------------------------------------







-60-


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial shareholders of more
than 5% of any class of shares known to the Registrant as of May 14, 2002.



----------------------- ---------------------------- --------------------- ----------------------
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF CLASS
NAME OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED OWNED
----------------------- ---------------------------- --------------------- ----------------------

Multiple Voting Shares Jay S. Hennick 662,847 100.0%
1140 Bay Street
Suite 4000
Toronto, Ontario
M5S 2B4
----------------------- ---------------------------- --------------------- ----------------------



The table below sets forth, as of May 14, 2002, the beneficial
ownership of the Company's shares with respect to the Company's directors,
executive officers and the Company's directors and officers as a group.



- -------------------------- -------------------------- -------------------- --------------- -------------------
NAME OF NUMBER OF SHARES EXERCISABLE PERCENTAGE OF
NAME OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED OPTIONS CLASS OWNED(1)
- -------------------------- -------------------------- -------------------- --------------- -------------------

Multiple Voting Shares Jay S. Hennick 662,847 - 100.0%
- -------------------------- -------------------------- -------------------- --------------- -------------------
Subordinate Voting Shares Michael H. Appleton 4,500 13,000 0.1%
-------------------------- -------------------- --------------- -------------------
David R. Beatty 2,000 6,250 0.0%
-------------------------- -------------------- --------------- -------------------
Brent S. Belzberg - 2,500 0.0%
-------------------------- -------------------- --------------- -------------------
Brendan Calder - 6,250 0.0%
-------------------------- -------------------- --------------- -------------------
Peter F. Cohen 30,000 10,000 0.3%
-------------------------- -------------------- --------------- -------------------
Douglas G. Cooke 22,500 25,828 0.4%
-------------------------- -------------------- --------------- -------------------
John B. Friedrichsen 30,000 62,193 0.7%
-------------------------- -------------------- --------------- -------------------
Timothy J. Greener 141,643 60,115 1.6%
-------------------------- -------------------- --------------- -------------------
Jay S. Hennick 575,887 305,525 6.7%
-------------------------- -------------------- --------------- -------------------
Samuel Hennick 187,790 17,500 1.6%
-------------------------- -------------------- --------------- -------------------
Richard Oller 10,000 21,500 0.3%
-------------------------- -------------------- --------------- -------------------
D. Scott Patterson 48,800 160,288 1.6%
-------------------------- -------------------- --------------- -------------------
Steven Rogers 91,485 28,750 0.9%
-------------------------- -------------------- --------------- -------------------
All directors and
officers as a group (13 1,144,605 719,699 14.2%
persons)
- -------------------------- -------------------------- -------------------- --------------- -------------------


NOTE

(1) Percentage ownership is calculated using as a denominator the total number
of shares of the class outstanding plus the number of shares of the class to
which the beneficial owner indicated has a right to acquire pursuant to options
currently exercisable or exercisable within 60 days.




-61-


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The legal firm of Fogler, Rubinoff, of which Mr. Appleton is a partner,
received fees from the Company during the year for legal services performed.

INDEBTEDNESS OF MANAGEMENT

Executive officers were indebted to the Company in connection with the
purchase of the Company's Subordinate Voting Shares. This indebtedness is
secured by the Subordinate Voting Shares acquired. The indebtedness has a five
to ten year term from the grant date, is interest bearing and is open for
repayment at any time. The following table lists the indebtedness of each
executive officer:



----------------------- ------------- ------------- -------------------- ----------------------
LARGEST NUMBER OF
AMOUNT AMOUNT FINANCIALLY SUBORDINATE VOTING
OUTSTANDING OUTSTANDING ASSISTED SHARES HELD IN TRUST
DURING AS AT MAY SECURITIES BY COMPANY AS
FISCAL 2002 14, 2002 PURCHASES DURING SECURITY FOR
NAME ($ US) ($ US) FISCAL 2002 INDEBTEDNESS
----------------------- ------------- ------------- -------------------- ----------------------

Jay S. Hennick $ 2,148,400 $ 2,148,400 - 365,000
----------------------- ------------- ------------- -------------------- ----------------------
D. Scott Patterson 549,800 - - -
----------------------- ------------- ------------- -------------------- ----------------------
Timothy J. Greener 127,500 127,500 - 10,000
----------------------- ------------- ------------- -------------------- ----------------------
John B. Friedrichsen 283,200 283,200 - 30,000
----------------------- ------------- ------------- -------------------- ----------------------
Douglas G. Cooke 93,500 70,800 - 7,500
----------------------- ------------- ------------- -------------------- ----------------------


No executive officer had any other indebtedness to the Company in
excess of $60,000 at any time during the year.




-62-


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

1. Financial statements

The documents listed below are included herein under Part II and are
also contained in the FirstService Annual Report to Shareholders for
2002:

- Report of Independent Accountants;

- Consolidated Statements of Earnings for the three years
ended March 31, 2002, 2001 and 2000;

- Consolidated Balance Sheets as at March 31, 2002 and 2001;

- Consolidated Statements of Shareholders' Equity for the
three years ended March 31, 2002, 2001 and 2000;

- Consolidated Statements of Cash Flows for the three
years ended March 31, 2002, 2001 and 2000; and

- Notes to the Consolidated Financial Statements.

2. Financial statement schedules

- Schedule - Amounts receivable from related parties and
underwriters, promoters and employees other than related
parties: Item 13

- Included in Part IV of this report: Schedule II - Valuation
and Qualifying Accounts

3. Exhibits

Included in Part IV of this report:

- List of Exhibits

- Exhibit 21 - Subsidiaries of the Registrant

(b) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF FISCAL 2002

None.




-63-


FIRSTSERVICE CORPORATION

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(in thousands of U.S. Dollars)



- ------------------------------------ --------------- ---------------- --------------- ---------------- ---------------
DEDUCTIONS DUE
ADDITIONS TO
BALANCE AT ADDITIONS FROM WRITE-OFFS OF BALANCE AT
BEGINNING OF CHARGED TO BAD ACQUISITIONS UNCOLLECTIBLE END OF
DESCRIPTION YEAR DEBT EXPENSE OF BUSINESSES ACCOUNTS YEAR
- ------------------------------------ --------------- ---------------- --------------- ---------------- ---------------

ALLOWANCE FOR DOUBTFUL ACCOUNTS
RECEIVABLE (CURRENT):

Year ended March 31, 2002 $ 4,123 2,040 - (2,079) $ 4,084

Year ended March 31, 2001 $ 3,273 2,303 728 (2,181) $ 4,123
- ------------------------------------ --------------- ---------------- --------------- ---------------- ---------------








-64-


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereto duly authorized.

FIRSTSERVICE CORPORATION
Registrant



/s/ D. SCOTT PATTERSON
--------------------------------
Date: May 14, 2002 D. Scott Patterson
Senior Vice President and
Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in their capacities and on the date indicated.




NAME AND SIGNATURE TITLE DATE


/s/ JAY S. HENNICK President, Chief Executive May 14, 2002
- ------------------------------------ Officer and Director
Jay S. Hennick (PRINCIPAL EXECUTIVE OFFICER)


/s/ D. SCOTT PATTERSON Senior Vice President and May 14, 2002
- ------------------------------------ Chief Financial Officer
D. Scott Patterson (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)


/s/ MICHAEL H. APPLETON Director May 14, 2002
- ------------------------------------
Michael H. Appleton


/s/ DAVID R. BEATTY Director May 14, 2002
- ------------------------------------
David R. Beatty






-65-





/s/ BRENT S. BELZBERG Director May 14, 2002
- ------------------------------------
Brent S. Belzberg


/s/ BRENDAN CALDER Director May 14, 2002
- ------------------------------------
Brendan Calder


/s/ PETER F. COHEN Director May 14, 2002
- ------------------------------------
Peter F. Cohen


/s/ SAMUEL HENNICK Director May 14, 2002
- ------------------------------------
Samuel Hennick


/s/ STEVEN ROGERS Director May 14, 2002
- ------------------------------------
Steven Rogers







-66-


LIST OF EXHIBITS




EXHIBIT # DESCRIPTION


3.1 Articles of Incorporation and Amendment. Incorporated by reference to
Form 10-Q for the period ended June 30, 1999, filed on August 12, 1999.

3.2 By-Laws and Amendments. Incorporated by reference to Form 10-Q for the
period ended June 30, 1999, filed on August 12, 1999.

10.1 Credit Facility dated April 1, 1999 among the Company and a
syndicate of bank lenders. Incorporated by reference to Form 10-Q for
the period ended June 30, 1999, filed on August 12, 1999.

10.2 FirstService Corporation Amended Stock Option Plan #2. Incorporated by
reference to Form 10-K for the year ended March 31, 2000, filed on
June 29, 2000.

10.3 FirstService Corporation Amended Share Purchase Plan #2. Incorporated
by reference to Form 10-K for the year ended March 31, 2000, filed on
June 29, 2000.

10.4 Amended and Restated Credit Agreement dated June 21, 2001 among the
Company and a syndicate of bank lenders. Incorporated by reference to
Form 10-Q for the quarter ended June 30, 2001 filed on August 14, 2001.

10.5 Note and Guarantee Agreement - $100 million U.S. 8.06% Guaranteed
Senior Secured Notes due 2011. Incorporated by reference to Form 10-Q
for the quarter ended June 30, 2001 filed on August 14, 2001.

21 Subsidiaries of FirstService Corporation. Included herein.