STANLEY TECHNOLOGY GROUP

STANLEY TECHNOLOGY GROUP

A N N U A L • R E P O R T • 1 9 9 6

Brought to you by Global Reports

Financial Highlights 1

Corporate Profile 2

Mission Statement 4

Investments in the Community 5

Message to Shareholders 6

Operations Review:

Government 8

Industrial 12

Commercial / Institutional 16

International 20

Corporate Achievements 24

Management’s Discussion and Analysis 26

Management Report 29

Auditors’ Report 29

Consolidated Financial Statements 30

Directors and Corporate Officers 38

Member Companies 39

Corporate Information 40

RONALD BRUCESYLVAIN BRUNETREGULA BRUNIES

SUSAN BUCHANANBERNIE BUCHSDRUECKER

KENNETH BUCKGWENETH BUCKLAND

ANGELA BUGGWAYNE BURAK

DONALD BURGESSDAVID BURNS

GEORGE BURNSROBERT BURNSKATHY BUTLERROBERT BUTLERGEOFFREY BUTTNORA BUXTON

YINYIN CAICATHERINE CAIN

DOMENICO CALABRIAPATRICK CALLAGHAN

HEIDI CAMERONDONALD CAMPBELL

BRENT CARLSONLEAH CARLSON

RICHARD CARNDUFFBRUCE CARNEY

DORIS CARPENTERLORNE CARSE

JODY CARSWELLDALE CARTERNEAL CARTER

Z. CARTER-EDWARDSGRACE CARVALHODARLENE CASSIDY

EDMUND CETNARSKISIMON CHAN

LESLIE CHAPMANROBIN CHAPMAN

BRIAN CHARANDUKNEIL CHARLANDPAUL CHATTEN

ALAN CHEETHAMDENNIS CHENG

CATHERINE CHENIERDIANA CHERNENKO

DANIEL CHERNISHENKONORMAND CHEVALIER

CHRIS CHIERCHIOTIMOTHY CHMILIAR

STEVEN CHOKHALID CHOUDHARY

ROBERT CHRISTIEDON CHUTTER

ANTHONY CIMBAROGABRIELE CIMINI

ALAN CLARKBRADLEY CLARK

DIANE CLARKGLENN CLARK

THOMAS CLARKCARL CLAYTONLARRY CLEVEN

PAUL-ANDRE COLLINBRUCE COLPITTSSCOTT COMSTOCKJENNIFER CONY

DAVID COOKBYRON COOKDEAN COOPER

FORREST COOPERJASON COREAU

DONALD CORRIGANMAX COUPLANDMARK COURTNEY

BEN COXSHAUN CRANSTONJAY CRANSTONE

CHRISTOPHE CREDICOJAMES CRELLIN

KOREN CROMWELLKEVIN CRONIN

WARD CROSLANDDAVID CUI

ANDREA CULLIGANDONALD CUMMINGS

MARC CUMMINGSJUDY CUNNINGHAM

SHERI CURRIEKATHLEEN CUSHING

GREG DAJCZERBRIAN DANIEL

SHERI-ANN DAUKGEORGE DAVIDSONWENDY DAVIDSONLLOYD DAVIDUCKROBERT DAWSON

CINDY DAYJAMES DAYMAN

DAVID DE GROOTBINAY DE

ANNA DEAKDAVID DECK

COLIN DECLERCQWAYNE DEE

MARLENE DEERINGJOHN DEHOOP

DONALD DEKELVERARMAND DELAURIERKENNER DELICHTETERRY DEMARCO

GINGER DEMMERTKENNETH DENNISJOHN DENOMMEAUDREY DETERSPATRICK DEVAUX

EMIDIO DI PIETROGIOVANNI DI PIETROANGELO DI ZAZZO

ROBERT DICKIETHERESA DICKSON

PAUL DIEMERTMICHAEL DILIONE

VALENTINO DIMANNOENRICO DIMZON

KIM DINGLERROGER DINGMAN

MICHEL DIONHERMAN DIRSCHL

JAMES DIXONPHILIP DIXONTREVOR DIXON

MARIA DJERGOVICGREGORY DOHM

RAE DONALDJAMES DONALD

WILLIAM DONALDSONHENRY DOORNBERG

DORIS DORWARTRICHARD DORWARTDANIEL DOSZPODHARRY DOWHANMURIEL DOWLINGGERALD DOWNES

MARK DOYLEDONALD DRACKLEY

ROBERT DRAPERDESI DUBAJIC

JEAN-PIERRE DUBEMARC DUMOUCHELLASZLO DUNASZEGIKENNETH DUNCANJULIANNA DUNPHY

KIMBERLEY DUNSMOREFRANK DUSELSCOTT DUTTON

DANA DYCKNEAL EAGERLINDA EARL

KIMBERLEY ECKERTUDO EHRENBERGLAWRENCE EISLER

WESLEY ELIASLEIGH ELLESTADBLAKE ELLIOTT

REED ELLISBRUCE EMBERLEYDAVID EMERSONTHORD EMILSSON

ZEYNEP EMIRCAROLYN EMMETTMARTY EMMONSBENJAMIN ENG

COLLEEN ENTNERJOHN ERICKSONRYAN ERICKSON

DELANEY ERLENDSONJOHN EVANSPAT EVANS

CHERIL EWASIUKEDWIN EWASIUKTERESA EWASIUKCAMERON FABER

JAMES FAINKUJENDAVID FARLINGERSANDRA FEARONMARTA FECHETEBONNIE FEDAKBRIAN FEDAN

MALCOLM FERNANDESSTEVEN FERNER

JOE FETTERSBRAD FILIPIGWESLEY FILLO

LORETTA FILOMENOTRISHA FINLEY

JOHN FINNRENO FIORANTE

BEVERLEY FISHERWILLIAM FISHER

MICHAEL FISHMANFRANK FITHEN

TABLE OF CONTENTS JOAN HEINTZKHALED NABIL HELALI

DAVID HELMERALAN HENDERSON

BRANDT HENDERSONLEONARD HENDRICKS

TRAVIS HENKELDALE HERMAN

SUSAN HERMANNDONALD HICKEY

ELIZABETH HICKLINGRICHARD HICKS

CHARLES HIGGINSYVONNE HIGGINS

LORNE HILDEBRANDTLAURIE HILKEWICHRAUNO HILTUNEN

JOHN HITCHMOUGHROGER HNATIUK

JASON HOTAM HO

PHI HOANGJANE HOLMESOLAF HOMANN

SAM HONCHARIKKANG HONG

DOUGLAS HOODDAVID HOPPERDAVID HOPPERCHRIS HORNE

THOMAS HRYCAKGLORIA HSUROB HUBER

BRYAN HUDEMATERRY HUDEMAJAMES HUDYMAOWEN HUGHESSHEINA HUGHESGARY HUNTER

MELVIN HUNTSPONPAM HUOT

FERNAND HURTUBISEHANIF HUSSEIN

ALAN HUTCHINGSAMY HUTTONBRIAN HVAL

WALTER INGHAMCOLIN INNES

ROBERT INNESPETER IRELAND

CHERYL IRONSIDEANNE IRVIN

ARTHUR IRWINREGINA IVANICREED JACKSONTRENA JACKSON

PETER JARASHAMID JAVEDMESBAH JAVIDDAVID JEFFERS

MICHAEL JERCHELSAMUEL JEYANAYAGAM

ALLEN JOBSONROLF JOHANSSON

ERNEST JOHNSBRIAN JOHNSON

DONALD JOHNSONKATHLEEN JOHNSON

LORNE JOHNSONMICHAEL JOHNSONGORDON JOHNSTONWARREN JOHNSTON

VIRGINIA JOOSSELORI JOY-TRINCADEAN KAARDALMEHMET KARANJOHN KARMAN

JEFF KARTECHNERNAGITA KARUNARATNE

LARRY KASPERSKICOLLEEN KAVANAGHROBERT KAVANAGH

JAMES KEELINGROBERT KEEN

TIFFANY KEILLERROBERT KELLY

STANLEY KENNYJIM KENTELBRIAN KERR

PAMELA KERSLAKEBERNICE KHANWAHEED KHANWERNER KIEFER

TIM KIHNCATHERINE KINGDON

ANA MARIE KISSSUSAN KLUCINSKAS

DALE KNUTSONTHOMAS KOENEKAMP

MARK KOESTERBARBARA KOKOTOW

BARRY FITZSIMONSFILIPPO FLAMMIAMIHAELA FLOAREARUSSELL FLORES

LINDA FLYNNROBERT FLYNNDIETER FOESSEL

BRIGITTE FOK SEANGGORDON FORBES

SHERYL FORDLILIAN FORTIN

ROBERT FORTUINPAUL FOSS

BRIAN FOSTERANTHONY FRANCESCHINI

BRUNO FRANCOISSCOTT FRASER

WILLIAM FRASERBERNARD FREIHEITBRIAN FRIEDMAN

MARCIA FRIESEN FISCHERLINDA FROITZHEIMMITCHELL FUJINO

JACK FUJINOISABELLE GAGNONMICHEL GAGNONCLAIRE GAUDET

RICHARD GAUTHIERJOHN GAWLEY

RENPU GELAUREEN GEHL

DWAYNE GELOWITZGERALD GENEROUX

GEORGE GEORGOPOULOSRALPH GERBRECHT

ALAN GHANAMMICHAEL GIDZINSKITREVOR GILCHRIST

ROSS GILESJEFFERY GLASSERBETTY GLOUTNEYFERNAND GODINROBERT GOMESDOUGLAS GOODPETER GOODE

BARRIE GOODINGNORMAN GOODRICHDANIEL GOSHULAKDIANE GOSSELIN

MARCEL GOSSELINPAULA GOSSELIN

KOHEI GOTOROSE GRACA

WILLIAM GRACEJONATHAN GRAF

ROBERT GRAFFIUSRICHARD GRASHEL

JENNIFER GRAYROBERT GRAY

KATHLEEN GREENOUGHLAWRENCE GREENOUGH

DANYA GREIGKENNETH GRENDAHL

MURRAY GREYFRANK GRIGEL

JAMES GRIMSDALEKATHERINE GRIMSDALE

DUANE GRZYBSTEVEN GUAY

CECILIA GUILLERMOJING GUO

CAREY HAARMANNDOUG HACKBARTH

CARMEL HAINESDONALD HALLLYNDA HALLAM

JAMES HALLMANNASEEM HAMEER

ALEXANDER HAMILTONKEN HAMMAN

TRACY HAMMERJASON HANASYKJAMES HANLEYPAUL HANSEN

THOMAS HANSENSHERI HARDINGDONALD HARDT

WILLIAM HARGRAVETREVOR HARLEGLENN HARRIS

KEN HARRISJEFF HARROPJEFFREY HART

RAIMUND HASPELMARGARET HATFIELD

RITA HAWKINSLAURIE HAWKSHAW

CAMERON HAWRYLUKZHIWEI HE

EMELYN HEAPSBOYD HECKEL

KEN ABRAHAMBASEL ABUKHATER

KEN ADAMPATRICK ADAMS

EVA ADLERTERI ADLERPAUL AGATETIM AHERN

LAUREN AITKENSMARTHA ALECK

JOHN ALEXANDERWILLIAM ALEXANDERVLADIMIR ALEXEEV

BILAL ALI MOHAMADPETER ALLANSTEVEN ALLENHARVEY ALTON

ERNESTO AMANTEBERNIE AMELL

LESLIE AMUNDSONBRIAN ANDERSONCOLIN ANDERSONLYNN ANDERSONTERRY ANDREWSPETER ANNING

GHASSAN AOUADDANA ARASON

PIERRE ARCHAMBAULTMICHAEL ARIARATNAM

TAMMY ARMISTEADHELEN ASARIS

FRANK AU-YEUNGHEIDI AUCH

MARC AUDETTEISMAEL AUSMOLO

DON AYOTTETHOMAS BABADWAIN BABIAKMICHAEL BAKER

IAN BAKKERHERSCHEL BALDSING

CURTIS BALDWINCHRISTOPHER BALLENTINE

KEN BANNARDGEORGE BARAMDAGMAR BARBEENAOMI BARCLAY

THEODOR BARDASWILLIAM BARTELDSDIANE BASARICH

ROBIN BASSTONY BASSODAVID BAUER

BRENDA BAUMANROBERT BAUMGARDNER

KRISTA BEANRENE BEAUCHESNE

NORMAND BEAULIEUBART BECKER

HORACE BECKFORDRAYMOND BEDARD

APRIL BELAIRDAVID BENDICKBRIAN BENNETT

KATHLEEN BENNETTHOWARD BERGMAX BERRETTI

BERNARD BERTRANDLOUISE BERTRAND

ANN BERUBESYLVIE BERUBE

CINDY BICKERTONANDY BIELECKI

BEATA BIELKIEWICZSTEPHEN BISWANGERROBERT BLANCHARD

JAIME BOANGORDON BODIE

BERNARD BOILEAUDANIEL BOILEAUDEBRA BOISSELLE

JEAN BOLDUCFRANCINE BONDPIERRE BONINJEAN BOOMERRICK BORNN

ROB BOURDEAUJOHANNE BOURQUE

ROSS BOYDJOHN BOYLE

ROBERT BRADSHAWGARY BRADYMARIA BRADY

KEVIN BRAYFORDTONY BRCICJOHN BREENDAN BROOKS

MARC BROUSSEAUGARY BROWN

RICHARD BROWNWILLIAM BROWNBRIDGE

Front Cover and Above: The 13 km.Confederation Bridgelinks Prince Edward Island and New Brunswick.The last girder was installed on November 19, 1996 bythe Heavy Lift Vessel Svanen.


For the year ended December 31(in thousands of dollars, except per share amounts) 1996 1995 1994 1993

Gross revenue $ 116,124 $ 94,425 $ 87,685 $ 84,877 Net revenue $ 79,281 $ 71,639 $ 60,960 $ 61,836 Net income $ 4,323 $ 3,363 $ 3,438 $ 1,057 Earnings per share $ 0.73 $ 0.57 $ 0.65 $ 0.28 Net cash position $ 1,063 $ 2,680 $ 7,444 $ 2,295Shareholders’ equity $ 26,288 $ 21,965 $ 18,602 $ 8,395

Weighted average number of shares outstanding 5,928,000 5,928,000 5,270,290 3,775,188

FINANCIAL HIGHLIGHTS

STANLEY TECHNOLOGY GROUP 1

Gross Revenue(millions of dollars)

100

1992 1993 1994 1995 1996

40

60

80

120

20

Net Revenue(millions of dollars)

80

1992 1993 1994 1995 1996

60

40

20

Net Income(millions of dollars)

5

4

1

1992 1993 1994 1995 1996

2

3

Shareholders' Equity(millions of dollars)

25

1992 1993 1994 1995 1996

10

15

20

30

5


CORPORATE PROFILE

2 STANLEY TECHNOLOGY GROUP

Stanley Technology Group provides a broad range of engineering and professional

consulting services to private and public sector clients inCanada, the United States and internationally, in a

coordinated, total service environment.

The principal services offered by the member companies ofStanley Technology Group include environmental consulting;

infrastructure design and development; industrial engineering; building and land development services;

dispute resolution; and planning and project management.The company also provides services for and participates in

design-build and turnkey infrastructure projects.

Founded in 1954, Stanley Technology Group has offices in 37 locations around the world,

and employs approximately 1,200 staff.

The corporate operating structure has been designed by grouping the member companies under fourbusiness units, as follows:

Government Business Unit

The Government Unit provides comprehensive consulting services on infrastructure and environmentalprojects for local, provincial, state and federal government agencies, principally in western Canada and in thesouthwest United States. Specialized proprietary computer software for infrastructure management studies andfor work management services, and advanced wastewater treatment consulting services are provided throughoutwestern North America and in select international markets.

The member companies of the Government Unit are:

Stanley Associates Engineering SFC Engineering CompanyIDG Stanley ITX StanleyStanley Environmental Sciences


CORPORATE PROFILE


Industrial Business Unit

The principal services provided by the Industrial Unit include industrial and facilities engineering,heavy mechanical, electrical and instrumentation engineering, and related structural and project managementservices. Other services, primarily for plants, facilities and utilities, include feasibility studies, environmentalanalysis and permitting, preliminary planning, detailed computer assisted design, field supervision andcomplete procurement, project management services, and dispute resolution consulting. The Boileau groupalso provides general and civil engineering services to non-industrial clients.

The member companies of the Industrial Unit are:

Stanley Industrial Consultants Gesmec StanleyWinkelaar, Howard & Associates *Lockerbie StanleySENTAR Consultants *Teshmont ConsultantsRevay and Associates *Simons-StanleyBoileau Associés Experts-conseils

Commercial/Institutional Business Unit

The Commercial/Institutional Unit provides services to four market segments: urban development,building services, structural services and information technology.

Urban development services include or relate to conceptual plans, zoning approval of designinfrastructure, transportation planning, traffic engineering, landscape architecture, urban planning, designconstruction review, and surveying. Building services provided include mechanical and electrical engineering,commissioning and testing of electrical and mechanical systems, structural engineering, interior design andproject facility management. Structural services include the design and project management of specializedstructural engineering projects such as bridges, highways, indoor arenas, above-ground and undergroundparking facilities, and large scale materials handling facilities. Information technology services include theprovision of financial, business and building management systems for utility, health care and associatedindustries.

The member companies of the Commercial/Institutional Unit are:

IMC Consulting Group SLG Stanley ConsultantsCheriton Engineering Morgan Dowhan EngineeringCoordinate Surveys Stanley Buildings GroupEnvirocorp Interior Design Group *Linnet Geomatics InternationalNorthwest Computer Services.

International Business Unit

The International Unit focuses on providing project management, engineering, financial, economic andsocio-economic services for projects and clients outside North America. Typical services include: environ-mental and infrastructure consulting; development and management services related to agriculture, fisheries,rural development and environmental protection; national and regional natural resources planning; andpavement management. The clients of the International Unit include most of the international fundingagencies.

The member companies of the International Unit are:

Stanley International Group SRD Sustainable Resource DevelopmentAgrodev Canada Prince Edward International

* affiliate company


The mission of Stanley Technology Group Inc.

is to provide value and excellence to our clients, and long-term profitable

returns for our shareholders,through the ownership and

strategic management of successful professional

consulting firms and relatedtechnologies in engineering,

planning, management and scientific services,

in Canada,the United States

and internationally.

MISSION STATEMENT



INVESTMENTS IN THE COMMUNITY


Stanley is proud to have supported many

community organizationsacross Canada throughoutthe year. In 1996, these

included organizations inthe areas of education,

environment, youth,health, social services

and sports.

Stanley realizes the importance of

being involved in communities in which they

operate and will continue to build and sustain these valuable

partnerships which are keyto enhancing

relationships among thecompany, its employees and

their communities.

The 1996 REACH Summer Science Camp inMontreal, Quebec.

Sponsorship of the University of Alberta engineering team whocompeted in the North America Propane Vehicle Challenge.

Stanley employees participated in the Richard Nuxoll MemorialRegatta in support of the Alberta Cancer Foundation.


Nineteen hundred and

ninety-six was a successful and

rewarding year for our firm.

Completing its third year as a

publicly traded company,

Stanley Technology Group

recorded net income of $4.3 mil-

lion, or $0.73 per share. This

represents a substantial 29%

increase over 1995 earnings of

$0.57 per share and on a fully

comparable basis was the sec-

ond highest in the company’s

history. Return on equity for

1996 was a very healthy 17.9%.

These strong financial results

added to our now standing record of 43 consecutive

years of profitability.

Gross revenue grew by nearly 23% to $116.1 mil-

lion in 1996, compared to $94.4 million in 1995, mark-

ing the first time the company’s gross revenue has

exceeded $100 million. Net revenue increased to $79.3

million from $71.6 million in 1995. Fourth quarter earn-

ings per share of $0.26 were 73% better than the $0.15

per share achieved in the comparable quarter in 1995.

All these results point to a strong recovery from

1995 levels where our earnings were adversely impacted

by one-time costs. Operational improvements, com-

bined with better performance from acquired companies,

resulted in an upward trend in earnings which began in

the second quarter of 1996 and continued through the

year. Measured against our peers in the public market-

place, I am pleased to note that our operational financial

performance ranks with the best in our industry - an

accomplishment that speaks

volumes for the consistent dedi-

cation and effort of the nearly

1200 Stanley personnel.

Once again during the

year, Stanley increased its diver-

sification of services and

strengthened its market position

through acquisition. Morgan

Dowhan Engineering Inc., spe-

cializing in electrical engineer-

ing in Edmonton, Calgary and

Vancouver, improved our capa-

bility in this important consult-

ing discipline. The acquisition

of DWL Engineering broadened

our transportation expertise in western Canada. Our

Arizona operations were strengthened by the acquisi-

tions of George V. Sabol Consulting Engineers and the

Arizona assets of NBS/Lowry, firms specializing in water

resource engineering and transportation, respectively.

Each of these additions has meaningfully enhanced our

ability to both win and successfully execute projects in

the mentioned geographic areas.

In 1997, we will continue to actively seek out

opportunities for expansion by acquisition. Our

industry continues to be highly fragmented with market

conditions generally promoting, if not requiring, the

consolidation of smaller firms. This trend clearly

provides Stanley with opportunities to pursue.

During 1996, Stanley Technology Group was

involved in a number of major and exciting projects; pro-

jects that define the breadth and scope of Stanley’s

capabilities.

MESSAGE TO SHAREHOLDERS


Ronald P. Triffo,President and Chief Executive Officer


Perhaps the highest profile completion of 1996

was the successful conclusion of our design assignment

on the soon to be opened Confederation Bridge, linking

New Brunswick and Prince Edward Island. Some 13 km

in length, this bridge is one of the longest in the world

across open ocean waters and, rightfully, will take its

place in future history books as one of the most impor-

tant nation-building pieces of infrastructure completed

in Canada.

As co-structural designer of the bridge, SLG

Stanley played a critical role in this project from con-

ception to completion. Their expertise was responsible

for the successful resolution of the requirement for a

100 year design service-life in a harsh marine environ-

ment. Stanley led the engineering team from the pro-

posal stage to the completion of the Closing Project

Design and was instrumental in designing a unique cost-

saving concept using gravity piers.

As usual, Stanley services in 1996 were provided

far beyond the shores of North America. International

projects were conducted in numerous locations includ-

ing Australia, China, Greece, Kuwait, Trinidad, Laos,

Federated States of Micronesia, Pakistan, Guyana, St.

Lucia, Hong Kong and Colombia. Representative work

included such diverse activities as the second phase of

the Asia Pacific Ocean Cooperation Project for marine

policy resolution, and consulting assistance for an envi-

ronmental impact assessment for the Nepal Planning

Commission. Other examples included a waste manage-

ment study in the Bahamas, a water supply project in

Laos, and the National Policy on Women project in

Cambodia.

A competitive advantage for our clients is the

quality of service delivered by the Stanley team. We are

proud to record that during 1996, our peers recognized

Stanley for its excellence of service through a number of

awards. Citations were received for a wide variety of

typical Stanley projects including a pedestrian bridge,

a four-mode transportation bridge, oxidation ditches,

a commuter rail station, forestry rehabilitation, a pulp

mill, and for assistance with the national policies of a

developing country.

Looking forward to 1997, we are encouraged by

the positive signs we see for continuing improvement in

the North American economy. Such improvement

translates into increased opportunities for our company.

Urban development prospects in our regions of activity

are expected to remain strong. Industrial activity in

western Canada is as solid as it has been in a number of

years. Aging infrastructure is again beginning to receive

consideration for improvement after several years of

neglect by deficit cutting governments. And, as always,

environmental needs cannot be left unattended - needs

for which the enhanced water and wastewater treatment

capabilities of our company are ideally suited to meet.

In closing, I would like to extend sincere appreci-

ation to our many staff and clients without whom we

could not have achieved our strong 1996 results.

I would also like to express the appreciation of the

Stanley organization to retiring Director John Breen who

will not be standing for re-election at this annual meet-

ing. John has been a member of the Board since 1993

and his wise counsel will be missed.

MESSAGE TO SHAREHOLDERS


R.P. Triffo, P.Eng.

President & Chief Executive Officer


The Government Business Unit’s net revenuesfor 1996 grew by 12% to $32.4 million compared to$28.9 million in 1995.

The British Columbia operations of StanleyAssociates Engineering Ltd. continued with good per-formance despite a significant reduction in highwaydesign fees resulting from Provincial government cut-backs on highway projects. Business volume in theinterior and northeastern British Columbia was main-tained. The Vancouver area office continued to growfrom projects generated by cities in the lower main-land. During 1996, work continued on the multi-yearpotable water treatment design assignment for theGreater Vancouver Regional District (GVRD).

The Alberta and northern Canada operationsexperienced challenges from reduced governmentinvestment in public works infrastruc-ture. However, highway consultinghas increased significantly overprevious years due to the pri-vatization of this work bythe Alberta government.These project opportuni-ties are expected to con-tinue into the future.Stanley’s 10 year invest-ment in developing andenhancing advanced waterand wastewater treatment

technologies has resulted in new environmental infra-structure assignments for a number of communitiesin Alberta and Parks Canada.

The DWL Engineering acquisition broadenedStanley Associates client base and should improveperformance in the Province of Saskatchewan.During 1996, the City of Saskatoon’s advanced waste-water treatment plant, utilizing advanced BiologicalNutrient Removal (BNR) technology, was completed.As well, the City of Estevan wastewater treatmentplant, utilizing enhanced Modified Sequencing BatchReactor (MSBR™) technology, was fully commissioned.

Stanley continued to broaden its range of con-sulting services offered in Manitoba and northwestOntario through IDG Stanley Inc.

Stanley Environmental Sciences furtherstrengthened its client base in advanced

wastewater treatment. New BNRwastewater treatment projects were

secured in Howard County andHagerstown, Maryland, U.S.A.;

Noosa, Queensland, Australia;and Pine Rivershire,Queensland, Australia. Themulti-year wastewater treat-ment project for New YorkCity continued throughout1996.

OPERATIONS REVIEW


GovernmentBUSINESS UNIT

“The Government Unit has successfully broadened their client base and continued to focus on developing water,wastewater and infrastructure management technologies to

create new environmental opportunities.”

The West Coast Express Commuter Rail pedestrian overpass at Mission, BC,blends with the overall curved profile of the station.

Left: Intake at Rossdale Water Treatment Plant.


SFC Engineering Company and IMCConsulting Group Inc. performed well inPhoenix, Arizona. IMC’s land developmentactivities grew in response to the activehousing market.

SFC continued its strong activities in trans-portation, environmental infrastructure and planning,and building plan review.

Strategic acquisitions in Arizona of George V.Sabol Consulting Engineers and the Phoenix opera-tions of NBS Lowry have strengthened SFC’s capabili-ties in water resource engineering and transportationto meet client needs in the southwest United States.Several Arizona airport expansions are in progress,including two significant projects at PhoenixSkyharbor International Airport. Wastewater treat-ment projects continued in the Arizona communitiesof Glendale, Winslow and Cottonwood.

In 1996, the operations of PavementManagement Systems and ITX Technologies wereamalgamated under the name of ITX Stanley. ITX

Stanley provides proprietarycomputer software,

infrastructure data collection, and infrastructuremanagement services in North America and selectoverseas markets.

Multi-year and multi-million dollar con-tracts were secured for the United StatesFederal Highway Administration (FHWA) andfor the State of Kuwait.

Numerous awards were received throughout theyear by companies within the Government BusinessUnit for their work on various projects. StanleyAssociates Engineering Ltd. of Vancouver was a jointwinner, together with Reid Crowther & Partners andN.D. Lea Consultants, for the West Coast Expresscommuter rail stations project in British Columbia.Stanley Environmental Sciences was recognized for awastewater treatment retrofit project in Australia.Stanley Associates received an award for the StoneyFirst Nations Forestry Rehabilitation in Alberta andthe City of Penticton’s Water Treatment Plant project.SFC Engineering Company was honoured for thedesign of a water reservoir for the Bell Road District inArizona.


This water tank at Phoenix, Arizona was hidden by a perimeter barrier that blended into the desert landscape.



The outlook for theGovernment Business

Unit in 1997 is positive.Consulting business

within British Columbia,Saskatchewan

and Manitoba shouldremain at near current

levels. The trend to privatization and

outsourcing are expectedto increase consulting

fees in Alberta.Arizona’s economy and

housing market is anticipated to fuel an

active continuation of the consulting

environment.ITX Stanley

continues to expand itsinfrastructure manage-ment practice and this

trend is expected tocontinue into 1997

and beyond asgovernments try to

maximize thebenefits of their

expenditures oninfrastructurerehabilitation.

Top: The Stoney First Nations ForestryRehabilitation stabilized 5,700 hectares oflogged land on 152 individual sites.

Middle Left: Layering the water-proofing geofabric on the roof of the Oakmont Reservoirand Pump Station in St. Alberta, AB

Middle Right: The Water Pollution Control Centreretrofit in Logan City, Australia was accomplishedwithout disruption to related operations.

Bottom: Edmonton’s deep-water intake at theRossdale Water Treatment plant provides reliablewater quantity and improves raw water quality.

Background: The concrete pour sequence for theOakmont Reservoir was one of the largest madefor reservoir construction.


The Industrial Business Unit net revenues for1996 were $20.6 million compared with $18.8 millionin 1995, an increase of 10%.

The staff complement within the RTM energygroup more than doubled from 1995 in order to meetan increased demand in services for gas plants andunderground hydrocarbon storage facilities. Thefavourable conditions experienced in the energy sec-tor combined with concentrated marketing effortshave contributed significantly to the success ofthe energy group.

The forestry group and industrialprocess group continued to build andsustain client relationships that gener-ated numerous smaller projects.Typical projects included servicesinvolving structural modifica-tions, piping changes, electricaland instrumentation up-datesand project management formaintenance turn-around.Establishing credibility forquality services, indepen-dent of project size, hasresulted in on-going projectswithin these industries.

In 1996, StanleyIndustrial Consultants Ltd.

was recognized for its achievements in engineering,procurement, and construction management for theAlberta Pacific Pulp Mill project, the world’s largest-to-date $1.3 billion kraft pulp mill. This project contin-ues to be recognized for its significant contributionsto the forestry industry and has become synonymouswith engineering excellence.

The industrial process group’s solid perfor-mance with successful promotional efforts resulted in

major projects in the field of pharmaceuticalsmanufacturing and the agro-industrial sec-

tors. The design work for some of thesefacilities was completed in 1996 with

construction scheduled for 1997.These projects will also contribute

fees for construction supervisionin 1998.

The environmental grouphad a good year with its pene-tration into new markets suchas the oil and gas sector. Abreak-through project devel-opment for 1996 was theenvironmental managementand assessment services pro-vided to the Sherritt group ofcompanies. These environ-mental services progressed

OPERATIONS REVIEW


IndustrialBUSINESS UNIT

“ Successful promotional efforts, a continued commitment to building and sustaining client relationships, and

favourable market conditions have contributed to the overallsuccess of the Industrial Unit.”

Stanley Industrial has provided operation studies to improve Trans Gas plantefficiency for gas dehydrators.Left: Stanley Consulting Group designed

the Suncor transmission towers in Ft. McMurray, AB, servicing the new fluegas pollution recovery system.


into additional engineering analysis and design work,an ideal combination for Stanley expertise.

SENTAR Consultants Ltd. was instrumental inassisting Celanese Canada in negotiations for com-mon effluent treatment with a municipal plant. Thisconcept, initiated by Stanley, is an example of private-public partnership and effective use of capitalresources.

Revay and Associates Ltd. ended 1996 in anupward trend despite a challenging start to the year.The positive turn-around was influenced by opera-tional changes and the initiation of major projectsduring the year. International dispute resolution con-tracts for their North American clients in Hong Kong,China, Greece, and Colombia enhanced their exper-tise in dealing with international issues related todesign-build contracts.

Revay was successful in continuing theirdiversification from the traditional claimsbusiness, to adding more construction man-agement and cost evaluation services.

Notable contracts in this area involved assign-ments for the Toronto Airport Authority and ToyotaCanada Ltd.

Boileau Associés Experts-conseils Inc. contin-ued to focus on diversification from the gov-ernment sector, particularly for Quebecbased projects. It is expected thatwith the budget reductionsbeing contemplatedby the

Province of Quebec, there will likely be another yearof reduced government spending for infrastructure.This market is expected to rebound as the delayedinfrastructure projects age and more urgently requireupgrading and major repairs. Boileau also successful-ly secured a major international roadway project inTrinidad.

Lockerbie Stanley Inc. (LSI) has con-tributed significantly to the results of theIndustrial Business Unit. Design-build projectsinclude those previously obtained in Chinafor water and wastewater facilities, and afirst project in Canada involving a gasstripping plant.

New assignments were secured in the area ofperformance contracting as well as instrumentationand control. In 1997, Lockerbie-Stanley will searchfor a senior management team as the first step inestablishing permanent staff within LSI to align withthe increased demand for design-build services.

Simons-Stanley Inc., servicing the forest industry,ended the year in a stable position. Two benchmarkstudies related to paper making and pulp bleachingwere secured. In addition, two sizable detailedengineering projects, a chip-screening project and a

recycle fiber project neared completionby year end.


Gesmec Stanley was responsible for the mechanical, electrical and structural engineering for La Cité collégiale in Ottawa, ON.



The Industrial Unitanticipates 1997 will

present favourableproject opportunities

as major developmentprojects in the

resource sectorin western Canada

unfold.

Top: The Ottawa Airport Fit-up successfully reconciled the requirements of the franchise client,Transport Canada, and the Building Codes.

Middle Left: Concrete pour for the Syncrude NorthMine surge facility in Fort McMurray, Alberta.

Middle Right: Construction management serviceshave been provided for Wheat Pool silos.

Bottom: The Suncor transmission towers support a power feed and existing cables onto a polerequiring no supporting guy wires.

Background: Gas Dehydrator Operations for Trans Gas in Pierceland, Saskatchewan.



The Commercial/Institutional Business Unithad net revenues for 1996 of $21.4 million comparedto $19.2 million in 1995, an increase of 11%.

Overall performance within the commercial /institutional unit remained strong. The healthygrowth driven by the urban development market sec-tor represents almost half of the net revenues.Demand for development related infrastructure wasstrong in Edmonton and Calgary, the principalmarket areas in Alberta where urban land operationsare situated.

IMC Consulting Group Inc. was retainedby Intrawest Corporation, the owner of fourseasons destination mountain resorts inNorth America, to provide engineering,planning, landscape architecture andlegal survey consulting for thegolf course, ski facilities, andresidential units on thePanorama Resort in BritishColumbia. This major project isscheduled for continuous devel-opment over the next decade.

Coordinate Surveys Ltd.’s expertise in geomat-ics resulted in the completion of the Kemess Southproject in north central British Columbia involvingphotogrammetric mapping and route location for a380 km. 230 KV transmission line.

The acquisition of Morgan Dowhan EngineeringLtd. in 1996 has strengthened Stanley’s profile in elec-trical engineering and increased exposure in theVancouver, Calgary and Edmonton markets. Theiraddition to the Commercial / Institutional Unit hasadded an excellent complement to Stanley’s electrical

engineering consulting servicesto clients.

Stanley AssociatesEngineering Ltd. and SLG

Stanley completed work onthe Stoney Trail Bridge in

Calgary. This freeway bridge wasthe first in Canada to be con-structed at one end andlaunched across the piers to theother side until the structurewas complete.


CommercialInstitutional

BUSINESS UNIT

“Healthy growth was driven by increased development related infrastructure, demand for information technology

services and a broadened market presence resulting from selective acquisitions.”

OPERATIONS REVIEW

Students from the Canada Bridge Engineering Training Program inBeijing, China with their instructor, Dr. Reed Ellis of SLG Stanley.

Left: The Fox Hollow Pedestrian Bridge providesa distinctive gateway over the Deerfoot Trail inCalgary, Alberta.


To date, this is only the second time thislaunching method has been used in North America.The Stoney Trail Bridge is the longest and highestbridge in Calgary.

Other significant contracts secured during theyear have involved the Lethbridge Soccer Centre,Saskatoon Regional Psychiatric Centre, CalgaryConvention Centre, and the Foothills Hospital andShaganappi Golf Course, also in Calgary.

In November 1996, SLG Stanley ConsultantsInc. completed structural design work on theConfederation Bridge linking Prince Edward Islandwith New Brunswick.

SLG Stanley played a critical role in thisproject and has been involved from conceptionto completion, with the official opening sched-uled for mid 1997.

SLG Stanley’s expertise materially assisted theproject team in providing a 100 year design service-life for the bridge that would withstand a harshmarine environment, high ice and wind loadings, yethave a minimized impact on the environ-ment. Stanley was instrumental indesigning a cost saving con-cept using gravity piers to support the spans.At 13 km inlength,

Confederation Bridge is one of the world’s longestbridges over salt water.

In May 1996, the acquisition of the operatingassets of DWL Engineering, a transportation consult-ing firm, contributed to increased revenues in thissector. Completed transportation sector projectsinclude the upgrading of the Belvedere and ClareviewLRT stations in Edmonton and the St. Thomas,Ontario Transportation Master Plan.

As well, SLG Consultants in Edmonton success-fully completed work on the High Level Bridge reha-bilitation.

The unique complexity of this project hasbecome recognized throughout the industry,and is being used as a model for other potentialbridge rehabilitation projects.

Northwest Computer Services’ financial perfor-mance improved over last year. This success isrepresented by a customer driven demand for infor-mation technology services from the energy sector inAlberta, and by project work on assignments such asa major utility billing system contract for the Guyana

Electric Corporation.


The Trails Master Plan was developed to attract attention and improve usage of the Welland Canals Parkway.


The outlook for 1997is positive in

all market segments.Housing starts are

expected to be strongin the primary

market areas of western Canada

and the southwest

United States.A modest expansion

is also expected in the buildings

services sector asactivity is increased in

the Vancouver area. Top: The rehabilitation project extended thelife of the High Level Bridge in Edmonton by50 years.

Middle Left: The Village of Port Burwell MarketSquare provides for informal and organizedsports and events.

Middle Right: Confederation Bridge Yards -The 44 gravity foundation piers weredesigned to withstand high wind loads andlarge ice forces.

Bottom: Mackenzie Town in Calgaryre-introduces traditional town planning intothe local community.

Background: Confederation Bridge, Yards



The International Business Unit had a net rev-enue for 1996 of $4.8 million maintaining the level of$4.8 million in 1995. Companies grouped under theInternational Business Units are Stanley InternationalGroup and Agrodev Canada along with its relatedcompanies, SRD Sustainable Resource Developmentand Prince Edward International. Additional interna-tional revenue is accounted for under separatespecialty companies that have their own mandate.

The year was characterized by a mix of suc-cesses and challenges. Increased competition anddeferred projects impacted anticipated earnings.However, many of these challenges were overcome bysuccessfully obtaining several other interna-tional projects throughout the year.

Agrodev Canada Inc. was contract-ed by the Canadian InternationalDevelopment Agency (CIDA) tobecome the Canadian Coordi-nating Agency and financialmanager of the second phaseof the Asia Pacific OceanCooperation Project. This is amajor capacity developmentand training project aimed atpromoting ocean relatedissues such as the implemen-tation of the UN Convention

on the Law of the Sea, marine resource management,oceans policy and navigational safety for this region.

In mid 1996 senior officials from theBalochistan province of Pakistan attended an Agrodevorganized study tour of key environmental institu-tions in Canada, the United States and Brazil. Thepurpose was to provide delegates an opportunity tolearn about advancements that have been made in theconservation and re-use of resources through envi-ronmental technologies and institutions. As a resultof the knowledge gained from this successful studytour, Agrodev was awarded a Natural ResourceManagement contract.

Another major international initiativewas the Women in Development Project in

Cambodia. This unique project started in1995 and focused on developing and

defining national policies, strengthen-ing institutions, and the provision

of training equipment to helpCambodian women rebuildtheir lives and their countryafter the devastation of longyears of war. The success ofthe initial stages of this pro-ject resulted in the contractbeing continued through tothe second phase.

OPERATIONS REVIEW


InternationalBUSINESS UNIT

“The International Unit continuesto reinforce its presence on the world stage as clients

increasingly look to Stanley for solutions tailored to theirdistinct requirements.”

Agrodev is developing an ocean governance plan with countries sharing themarine resources of the Southeast Asian Seas.

Left: Eco tourism thrives in South Seas Islands.


In 1996, Agrodev was presented one offive prestigious Canadian Awards recognizingthe company for its ground-breaking work inthis national “Women in Development” policy.

The International Unit’s ongoing consultingassistance to the Asian Development Bank resulted inBank approval to lend some $14 million to the gov-ernment of the Federated States of Micronesia toimplement a water supply and sewerage project iden-tified by Stanley.

SRD Sustainable Resource Development Inc.completed a technical assistance project in 1996 forthe Nepal National Planning Commission and theAsian Development Bank. SRD helped design a uni-form procedure for environmental impact assess-ments and assisted in the preparation of environmen-tal guidelines for various sectors of the government.SRD also contributed to the development and admin-istration of training programs and preparationof a human resources development planto support the national environmentalimpact assessment process.

The successfully completed Bahamaswaste management study was extended toimplement elements of the recommended planon Bimini and Eleuthera.

Implementation of the major Nassau and GrandBahamas recommendations are expected to proceedearly in 1997. A further project extension was alsonegotiated in Laos carrying work on the water supplysystems into 1997.

A locally registered joint venture company wasestablished in Trinidad between Stanley Internationaland Planning Associates Ltd. of Trinidad. Based on anestablished 18 year working relationship, this compa-ny is expected to pursue new opportunities availablein the area. A major contract for water supplyrehabilitation commenced in November, and thecompany has submitted several other proposals andpre-qualifications.


Water filtration plant in Yap, Federated States of Micronesia (FSM).


The 1997 outlook forthe International Unit

is optimistic.With global working

experience in 80different countries,

extensive opportunitiesexist in the internationalsector with appropriateinvestment in technical

expertise, marketingand management.

In order to maximizethese opportunities,

a new planning effortwill be undertaken early

in 1997 to review andrealign the focus

of the internationaloperations.

Top: Baby giant clams at an aquaculturefarm in Kosrae, FSM.

Middle: Solid waste management in theBahamas has improved the landscapeand benefits the quality of water at nearby beaches.

Bottom: The Caribbean area has beenthe location of many Stanley projects.

Bottom Right: In Cambodia, Stanleyhelped women’s groups develop anational policy that defined their needs.

Background: Aerated sludge section of asewage treatment plant.



Keeping with the tradition of a commitment to excellence, Stanley Technology Group and its membercompanies were honoured in 1996 for their consulting contributions on numerous projects. These outstanding

achievements continue to exemplify the reputation for which Stanley is recognized.

Award of Merit for Outsourcing and for Infrastructure - Consulting Engineers of AlbertaProject - Fox Hollow Pedestrian Bridge in Calgary, Alberta

by SLG Stanley Consultants Ltd.Designed and constructed a unique and aesthetically pleasing pedestrian bridge over the Deerfoot Trail

and met functional and budgetary requirements

Award of Merit for Infrastructure - Consulting Engineers of AlbertaProject - High Level Bridge Rehabilitation in Edmonton, Alberta

by SLG Stanley Consultants Ltd.Provided a detailed assessment and prescribed a rehabilitation program for the High Level Bridge for the City of Edmonton.

Award of Merit, Integrated Systems - Association of Consulting Engineers of CanadaProject - West Coast Express Stations in British Columbia

by Stanley Associates Engineering Ltd. of Vancouver together with Reid Crowther & Partners and N.D. Lea Consultants was recognized for their exceptional joint contributions

to the West Coast Express commuter rail stations project for British Columbia Transit.

Valley Forward Award - recognizing organizations for outstanding contributions to the quality of life in the Arizona ValleyProject - Bell Road Water Reservoir in Phoenix, Arizona

by SFC Engineering Company

Arizona Building IndustrySFC Engineering Company honoured as the number one environmental consulting company in Phoenix, Arizona.

Award of Merit, International - Consulting Engineers of AlbertaProject - Advanced Wastewater Treatment Plant in Logan City, Australia

by Stanley Environmental SciencesRetrofit of one of four existing oxidization ditches for Logan City, Australia.

Award of Merit, Forestry, - Consulting Engineers of AlbertaProject - Stoney First Nations Forestry Rehabilitation in Alberta

by Stanley Associates Engineering Ltd.Executed a forestry stabilization program on 5,700 logged hectares on the Morley, Big Horn, and Eden Valley Reserves.

Award of Excellence, Forestry - Consulting Engineers of Alberta Project - Alberta-Pacific Pulp Mill in Athabasca, Alberta.

by Stanley Industrial Consultants Ltd.The Alberta Pacific Forest Industries Inc. selected Simons-Stanley for engineering, procurement,

and construction management for the world’s largest, $1.3 billion, kraft pulp mill.

Canadian International Development Award - Canadian Exporters AssociationProject - Women in Development Project in Cambodia

by Agrodev Canada Inc.Developed a national policy for women in Cambodia to help rebuild the country after long years of war.

It was based on a 1995 project on behalf of the Asian Development Bank, involving the defining of policies,strengthening of institutions and provision of training and equipment.

Public Works Association of British Columbia Project of the YearProject - City of Penticton Water Treatment Plant

by Stanley Associates Engineering Ltd.Designed a new water treatment plant to treat 60 million litres of water per day and provide protection against bacteria.

CORPORATE ACHIEVEMENTS



CORPORATE ACHIEVEMENTS


Fox Hollow Pedestrian Bridge, Calgary, Alberta. Water Treatment Plant, Penticton, British Columbia.

Oxidization Ditches, Logan City, Australia Stoney First Nations Forestry Rehabilitation, AlbertaA controlled burn of debris.

Alberta-Pacific Pulp Mill, Athabasca, Alberta.“Women in Development Policy” Project in CambodiaHigh Level Bridge Rehabilitation, Edmonton, Alberta.

Bell Road Water Reservoir under construction in Phoenix, Arizona.

West Coast Express Stations, British Columbia.

L to R - Back: Albert Carson, City of Edmonton Public Works; Peter Wilson, City of Calgary Corporate Properties, Structures & Facilities; Eric Tromposch, SLG Stanley; Marcel Boutet, Indian & Northern Affairs Canada; Bob Blair, Agra Pulp Management Ltd.L to R - Front: Alec McDougall, Stanley Associates; Reed Ellis, SLG Stanley; Bob Kavanagh, Stanley Industrial; Ben Novak, Stanley Technology Group



MANAGEMENT’S DISCUSSION AND ANALYSIS

This management discussion and analysisshould be read in conjunction with the Messageto Shareholders and the consolidated financialstatements and related notes.

General

Net Revenue, Direct Payroll Costs and Gross Margin.

Stanley’s core business is the provision of profes-sional engineering, planning, management and scientificconsulting services, principally under “fee for service”agreements with clients. In performing its services, theCompany incurs certain direct costs for sub-consultants,equipment purchases and other items. The Company isgenerally reimbursed for these expenses by its clients. TheCompany’s Gross revenue includes the amount of thesedirect costs billed to clients. The Company deducts theseamounts from Gross revenue to arrive at Net revenue. TheCompany believes that Net revenue is more representativethan Gross revenue of the services provided and revenueearned directly by the Company.

Direct payroll costs include the cost of salaries andrelated fringe benefits for labour hours directly associatedwith the completion of projects. Costs of salaries and relat-ed fringe benefits for labour hours not associated with thecompletion of projects are included in Administrative andmarketing expenses.

Gross margin is calculated as Net revenue less Directpayroll costs. Gross margins are affected by the size of pro-jects, generally with larger projects spanning a number ofyears providing lower margins and smaller, shorter-termprojects providing higher margins. The extent of competi-tion and general economic conditions in various marketsegments and geographic regions also affect project pricingand gross margins.

The Company enters into both cost-plus contractsand fixed-price contracts. Under its cost-plus contracts,the Company estimates total labour hours and disburse-ment costs and negotiates a profit component, which canbe either a fixed amount or a percentage of the total costs.If the actual total number of labour hours on a project islower than estimated, revenue from that project will belower than estimated. If the actual total number of labourhours is higher than estimated, the Company must seekand obtain a contract modification in order to receive pay-ment for that overage.

Under its fixed-price contracts, the Companyreceives a fixed or determinable amount negotiated inadvance for the agreed scope of work. No payment adjust-ments are due if the Company over or under-estimates the

resources necessary to complete the project unless there isa change in the scope of work. Accordingly, the Company’sgross margin will increase to the extent that project labourand other costs are below the estimated amounts and thegross margin will decrease to the extent that project labourand other costs exceed the estimates.

Results of operations

Gross revenue for 1996 increased 23.0% from $94.4million in 1995 to $116.1 million. Net revenue increasedby $7.7 million or 10.7% to $79.3 million from the 1995level of $71.6 million. The 1996 growth in net revenueresulted from acquisitions completed in 1995 and 1996($5.6 million) as well as internally-generated growth ($2.1million).

Net income for the year was $4.3 million or $0.73per share based on an average of 5,928,000 shares out-standing. This represents an increase of 29% over the 1995net income of $3.4 million or $0.57 per share. Fourth-quarter earnings per share were $0.26, an increase of 73%over the $0.15 reported in the same quarter of 1995. Netincome in the fourth quarter of 1995 was negatively affect-ed by operational adjustments related to an acquisition inthat year. Those operational adjustments were complete bythe end of 1995 and had no effect on 1996 net income.

Gross margins increased by $4.4 million over 1995.As a percentage of net revenue, gross margin was 51.9% in1996, compared to 51.4% in 1995 and compared to theCompany’s five year average of 51.6%.

Administrative and marketing expenses rose to$31.4 million in 1996 from $28.9 million in 1995, primari-ly due to the additional costs (including administration andmarketing labour) associated with companies acquired dur-ing 1995 and 1996. As a percentage of net revenue,

Earnings Per Common Share(dollars)

1993 1994 1995 1996

0.40

0.70

0.60

0.50

0.30

0.20

0.10

0.80

Gross Margin(percentage)

50%

1992 1993 1994 1995 1996

20 %

30%

40%

60%

10 %




administrative and marketing expenses fell to 39.6% in1996 from 40.3% in 1995 partly as a result of theCompany’s focus on improving the staff utilization rate (thepercentage of total hours spent on projects) and partlybecause the comparative 1995 costs included costs of elim-inating excess office space and reducing overstaffing in oneof the 1995 acquisitions.

Net interest expense grew from $0.1 million in 1995to $0.2 million in 1996 as the company used all cash gen-erated internally during the year to complete acquisitions,to finance additional working capital arising from thegrowth in revenues and to redeem the Class 2 specialshares.

The effective tax rate in 1996 was 45.5% comparedto 46.8% in 1995. This moderation in rates was due pri-marily to the utilization of prior year loss carry-forwardsand to additional income from associated companiesaccounted for on the equity basis.

Financial Condition and Liquidity

Effective January 1, 1996, in accordance with therecommendations of The Canadian Institute of CharteredAccountants, the Company has changed the classificationand the resulting accounting for the Class 2 special shares.Prior to the adoption of this new standard these shareswere treated as equity in the financial statements in accor-dance with their legal form. Under the new standard, suchshares are treated as liabilities because the Company iscontractually required by the attributes of the shares to set-tle the instrument in cash upon maturity. The effect on thefinancial statements of this change in accounting policy isexplained in Note 2 to the consolidated financial statements.

Cash provided by operating activities was $4.0 mil-lion in 1996 compared to $1.4 million in 1995. Theincrease was due to the Company’s higher 1996 earnings,along with a realization of certain deferred tax assets.Current assets increased during the year by $6.3 millionand current liabilities increased by $5.6 million. Theseincreases were related to the growth in revenues and to theincreased activity of joint ventures in which the Companyis involved.

Cash used in investing activities was $3.1 million in1996 compared to $6.4 million in 1995. During 1996, $1.0million was invested in acquisitions, while $2.3 million wasinvested in capital assets.

Cash used in financing activities was $2.6 million in1996 compared to cash provided of $0.2 million in 1995.Class 2 special shares bearing dividends at 7% wereredeemed for $2.6 million during the year in order to uti-lize lower cost operating funds.

The Company has an available line of credit with amajor Canadian chartered bank in the amount of $15.0

million, of which only $15,000 had been drawn atDecember 31, 1996. This compares to $10.0 million avail-able in 1995, of which $705,000 had been drawn atDecember 31, 1995.

Long term debt decreased to $2.7 million in 1996from $5.5 million in 1995 reflecting the redemption of theClass 2 Special Shares.

Net income of $4.3 million resulted in an increase intotal shareholders’ equity to $26.3 million at the end of1996 compared to $22.0 million at the end of 1995.

Risk Management

In the normal course of its business, Stanley isexposed to a number of risks that can affect its perfor-mance. These risks, and the actions taken to minimizethem, are discussed below.

The Company is engaged in highly competitive mar-kets and has numerous competitors for most of the servicesit offers. The Company competes with both large and smallfirms, although no single firm is dominant in any of theCompany’s primary service areas. Historically, competi-tion has been based primarily on the quality and timelinessof service. However, as the fee-for-service consulting indus-try continues to mature, the Company believes that pricewill become an increasingly important competitive factor.The Company believes that its operating structure, itstechnology, and the breadth of its professional services dif-ferentiates it from other engineering and professional con-sulting firms. The Company believes that providing adiverse portfolio of services to clients in various industriesand sectors of the economy, both private and public, willminimize its exposure to or dependency on any particularindustry or economic sector.

The Company’s consulting and engineering servicesinvolve professional judgments with respect to various mat-ters. Losses to the Company’s clients can occur as a con-sequence of professional judgments for which the Companymay be liable. The Company maintains insurance coveragefor its operations, including professional liability insurance.The maximum coverage under its professional liabilityinsurance is generally $10 million per claim and perannum. Project specific insurance for larger projects is alsoobtained from time to time.

The Company’s operations are inherently free ofmaterial environmental impairments, although environ-mental services, including those involving water and waste-water treatment require professional judgments as notedabove.

The Company’s operating results are reported inCanadian dollars. A portion of the Company’s revenuesand expenses are generated or incurred in U.S. dollars. Theexchange rate between the Canadian and U.S. dollar has




varied significantly over the past five years. To the extentthat U.S. dollar fees are greater than U.S. dollar expenses ina strengthening U.S. dollar environment, there will be apositive impact on the Company’s income from operations.Conversely, to the extent that U.S. dollar fees are greaterthan U.S. dollar expenses in a weakening U.S. dollar envi-ronment, there will be a negative impact on the Company’sincome from operations. The exchange rate risk, on anannual basis, primarily reflects theimpact of fluctuating exchange rates onthe net difference between total U.S.dollar professional fees and U.S. dollarexpenses. It is anticipated that this willbe a continuing risk in the future as theCompany continues to expand in theUnited States.

A key component of the compa-ny’s growth strategy is the acquisition ofestablished firms. Although there is noguarantee that appropriate firms will beavailable for sale at reasonable prices inthe target markets of the Company, theprofessional consulting services indus-tries in which the Company competesare highly fragmented and industrytrends to consolidation continue to cre-ate acquisition opportunities.

Business Unit Performance

Government

Net revenue increased by $3.6million in 1996 over 1995 due partly tothe inclusion of a full year of results forthe I.D. Group, which was acquired in1995. Gross margins as a percentage ofnet revenue declined slightly, butreductions in administrative and mar-keting expenses resulted in increasedoperating income. The outlook for1997 is positive. The trend to privatiza-tion and outsourcing should increaseconsulting fees in Alberta, while the restof western Canada should see revenueremaining at current levels and Arizonashould continue its current active pace.ITX Stanley continues to expand itsinfrastructure management practiceand this trend is expected to continue into 1997 andbeyond as governments try to maximize the benefits oftheir expenditures on infrastructure rehabilitation.

Industrial

Net revenue increased by $1.8 million in 1996 over1995 due to a significant project for the detailed engineer-ing design of the materials handling systems at Syncrude’sNorth Mine and to the inclusion of a full year of results forthe Boileau operations which were acquired in 1995. Grossmargins improved due to increased demand for the servicesof this business unit. Administrative and marketing

expenses as a percentage of net revenuealso declined, resulting in a significantincrease in operating income. Althoughcompetition, particularly in Alberta, isexpected to increase in 1997, and thepool of talented, available people isshrinking, significant opportunities existin 1997 for the Industrial unit.

Commercial / Institutional

Net revenue increased by $2.2million in 1996 over 1995 due primarilyto the acquisition of Morgan DowhanEngineering in 1996. Gross margins as apercentage of net revenue improved andthe percentage of administrative andmarketing expenses declined, resultingin improved operating income. The out-look for 1997 is positive in all the mar-ket segments served by this businessunit. Housing starts are expected to bestrong in the primary market areas ofwestern Canada and the southwestUnited States, affecting the urban landdevelopment group. Modest expansionis also expected in the Buildings servicessector as activity is increased in theVancouver area.

International

Net revenue remained at thesame level in 1996 as in 1995. Grossmargins as a percentage of net revenuedeclined due to additional costs beingincurred on projects without additionalmatching revenue. Administrative andmarketing expenses were reduced, butas a percentage of net revenue werehigher in 1996 than in 1995, resulting inlower operating income. There are

extensive opportunities in the international sector, butgrowth will require increased investment in technicalexpertise, marketing and management staff. Managementis in the process of re-examining the focus of theInternational operations.

Net Revenue by Location(percentage)

Canada

International

78%

16%

6%

United States

Net Revenue by Business Unit(percentage)

Commercial / Institutional

IndustrialGovernment

International



MANAGEMENT REPORT

AUDITORS’ REPORT

The Annual Report, including the consolidatedfinancial statements, is the responsibility of the manage-ment of the Company. The consolidated financial state-ments were prepared by management in accordance withgenerally accepted accounting principles. When alterna-tive accounting methods exist, management has chosenthose it considers most appropriate in the circumstances.The significant accounting policies used are described inNote 1 to the consolidated financial statements. Theintegrity of the information presented in the financial state-ments, including estimates and judgments relating to mat-ters not concluded by year end, is the responsibility ofmanagement. Financial information presented elsewherein this Annual Report has been prepared by managementand is consistent with the information in the consolidatedfinancial statements.

Management is responsible for the development andmaintenance of systems of internal accounting and admin-istrative controls of high quality. Such systems aredesigned to provide reasonable assurance that the financialinformation is accurate, relevant and reliable and that theCompany’s assets are appropriately accounted for and ade-quately safeguarded.

The Board of Directors is responsible for ensuringthat management fulfills its responsibilities and for finalapproval of the annual consolidated financial statements.The Board appoints an audit committee comprised of three

To the Shareholders of Stanley Technology Group Inc.

We have audited the consolidated balance sheetsof Stanley Technology Group Inc. as at December 31, 1996and 1995 and the consolidated statements of income anddeficit and changes in financial position for the years thenended. These financial statements are the responsibility ofthe company’s management. Our responsibility is toexpress an opinion on these financial statements based onour audits.

We conducted our audits in accordance with gener-ally accepted auditing standards. Those standards requirethat we plan and perform an audit to obtain reasonableassurance whether the financial statements are free ofmaterial misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclo-sures in the financial statements. An audit also includesassessing the accounting principles used and significant

directors, none of whom is an officer or employee of theCompany or its subsidiaries. The Audit Committee meetsat least four times each year to discharge its responsibilitiesunder a written mandate from the Board of Directors. TheAudit Committee meets with management and with theindependent auditors to satisfy itself that they are proper-ly discharging their responsibilities, reviews the consolidat-ed financial statements and the Auditors’ Report, andexamines other auditing and accounting matters. The con-solidated financial statements have been reviewed by theAudit Committee and approved by the Board of Directors ofStanley Technology Group.

The consolidated financial statements have beenexamined by the shareholders’ auditors, Ernst & Young,Chartered Accountants. The Auditors’ Report outlines thenature of their examination and their opinion on the consol-idated financial statements of the Company. The indepen-dent auditors have full and unrestricted access to the AuditCommittee, with and without management being present.

estimates made by management, as well as evaluating theoverall financial statement presentation.

In our opinion, these consolidated financial state-ments present fairly, in all material respects, the financialposition of the company as at December 31, 1996 and 1995and the results of its operations and the changes in itsfinancial position for the years then ended in accordancewith generally accepted accounting principles.

Chartered AccountantsEdmonton, Canada

February 18, 1997

R.P. Triffo, P.Eng.

President & Chief Executive Officer

February 18, 1997

D.W. Wilson, C A

Vice President, Finance & Administration and Chief Financial Officer



CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT

Years ended December 31 (in thousands of dollars) 1996 1995(restated)

Income

Gross revenue [Note 15] $ 116,124 $ 94,425Less: direct expenses 36,843 22,786

Net revenue 79,281 71,639Direct payroll costs 38,105 34,842

Gross margin 41,176 36,797

Administrative and marketing expenses 31,375 28,864Depreciation and amortization 1,699 1,406

33,074 30,270

Operating income 8,102 6,527Net interest expense [Note 5] (212) (143)Share of income (loss) from associated companies 49 (64)

Income before income taxes 7,939 6,320

Income taxes [Note 8]Current 3,093 3,411Deferred 523 (454)

3,616 2,957

Net income for the year 4,323 3,363Deficit, beginning of year (7,817) (11,180)

Deficit, end of year $ (3,494) $(7,817)

See accompanying notes



CONSOLIDATED BALANCE SHEETS

As at December 31 (in thousands of dollars) 1996 1995(restated)

Assets [Note 4]

Current assetsCash and short-term investments $ 1,063 $ 2,680Accounts receivable 29,554 23,236Work in progress 8,278 6,272Prepaid expenses 425 653Deferred income taxes 225 395

39,545 33,236

Capital assets [Notes 3&5] 7,645 6,370

Investment in associated companies 2,453 2,327Investments - other 319 383Goodwill 2,060 1,908Deferred income taxes 1,015 1,761

5,847 6,379

$53,037 $45,985

Liabilities and Shareholders’ Equity

Current liabilitiesAccounts payable and accrued liabilities 18,474 15,336Deferred revenue 4,461 2,368Income taxes payable 1,147 845Current portion of notes and mortgages payable [Note 5] 786 708

24,868 19,257

Notes and mortgages payable [Note 5] 1,881 4,763

Commitments and contingencies [Notes 10&11]

Shareholders’ equityShare capital [Note 9] 28,530 28,530Contributed surplus 1,252 1,252Deficit (3,494) (7,817)

26,288 21,965

$53,037 $45,985


On behalf of the Board:

Director

Director



CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

Years ended December 31 (in thousands of dollars) 1996 1995(restated)

Cash Provided By (Used In) Operating Activities

Net income for the year $ 4,323 $ 3,363Add (deduct) items not affecting cash:

Depreciation and amortization 1,699 1,406Deferred income tax 523 (454)Gain on dispositions of investments and capital assets (195)Other (85) 59

Net change in operating working capital [Note 12] (2,218) (2,993)

Cash provided by operating activities 4,047 1,381

Cash Provided By (Used In) Investing Activities

Acquisitions [Note 6] (1,048) (5,261)Decrease in investment in associates 65Decrease in investments - other 101Proceeds on disposal of investments in associates 20Purchase of capital assets (2,330) (1,188)Proceeds on disposal of capital assets 150

Cash used in investing activities (3,107) (6,384)

Cash Provided By (Used In) Financing Activities

Repayment of mortgages payable and notes (578) (920)Issue of promissory note payable [Note 6] 146 725Current tax benefit of financing costs 434 434Redemption of shares [Notes 2&5] (2,559)

Cash provided by (used in) financing activities (2,557) 239

Decrease in cash and short-term investments during the year (1,617) (4,764)

Cash and short-term investments,less bank indebtedness, beginning of the year 2,680 7,444

Cash and short-term investments, end of the year $ 1,063 $ 2,680




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note1. Summary of Significant Accounting Policies

The consolidated financial statements have been pre-pared by management in accordance with accountingprinciples generally accepted in Canada. Because the pre-cise determination of many assets and liabilities is depen-dent upon future events, the preparation of financial state-ments for a period necessarily involves the use of esti-mates and approximations which have been made usingcareful judgment. Actual results could differ from thoseestimates. The financial statements have, in manage-ment’s opinion, been properly prepared within reasonablelimits of materiality and within the framework of theaccounting policies summarized below.

Basis of consolidationThe consolidated financial statements include the

accounts of the Company and its subsidiary companies,all of which are wholly owned. The results of operationsof subsidiaries acquired during the year are included fromtheir respective dates of acquisition.

Associated companies are the Company’s investmentsin entities which are not consolidated and over which theCompany is able to exercise significant influence. Theseinvestments are accounted for using the equity method,which reflects the Company’s investment at original costplus its share of earnings net of dividends received.

Joint ventures are accounted for on the proportionateconsolidation basis which results in the Company record-ing its pro rata share of the assets, liabilities, revenues andexpenses of each of the joint ventures.

Other investments are recorded at cost.

Foreign currency translationFinancial statements of foreign subsidiaries included in

the consolidated financial statements are translated asfollows: monetary items at the rate of exchange in effect atthe balance sheet date; non-monetary items at historicalexchange rates; and revenue and expense items (exceptdepreciation) at the average exchange rate for the year.Any resulting gains or losses are included in income.

Accounts receivableThe Company provides services to diverse clients in

various industries and sectors of the economy and theyear-end balance of the accounts receivable is not concen-trated in respect of any particular industry, economic orgeographic sector.

Work in progressWork in progress is unbilled work valued at the lower

of cost and net realizable value, cost being defined asdirect salary and related costs and direct expenses exclud-ing any allowance for administrative expenses or fees.

Revenue recognitionFor all projects, revenue is recognized when a billing is

issued except in cases where amounts are billed and costs

have not been incurred, in which case, revenue is deferred.Anticipated losses on contracts are fully provided for.

Capital assetsDepreciation and amortization are calculated at

annual rates designed to write off the costs of the assetsover their estimated useful lives as follows:

Engineering equipment 20% - 30% declining balanceOffice equipment 20% - 30% declining balanceAutomotive equipment 30% declining balanceLeasehold improvements straight-line over term of

lease plus one renewal period Buildings 5% declining balance

GoodwillGoodwill is recorded at cost and is being amortized

over 25 years on a straight-line basis. The carrying valueof the goodwill is reviewed annually by assessing the valueof the discounted future cash flows on an entity basis. Ifit is determined that a decline in value is other than tem-porary, goodwill is written down to fair value.At December 31, 1996 the Company had recorded$2,228,390 of goodwill and $168,432 of accumulated amort-ization ($1,989,934 and $82,221 at December 31, 1995).

Income taxesThe Company follows the deferred method of tax allo-

cation accounting for income taxes whereby the incometax provision is based on the income reported in theaccounts. Under this method, the Company makes fullprovision for income taxes deferred as a result of claimingrevenues and expenses for income tax purposes on adifferent basis than for accounting purposes.

Non-interest bearing debtNon-interest bearing notes payable are carried at their

present value using discount rates based on bank primeprevailing at the time the notes were issued.

Note 2. Change In Accounting Policies

Effective January 1, 1996, in accordance with therecommendations of The Canadian Institute of CharteredAccountants, the Company has changed the classificationand the resulting accounting for the Class 2 special shares.Prior to the adoption of this new standard these shareswere treated as equity in the financial statements in accor-dance with their legal form. Under the new standard, suchshares are treated as liabilities because the Company iscontractually required by the attributes of the shares tosettle the instrument in cash upon maturity. Dividendson these shares (1996 - $40,224; 1995 - $154,703) arecharged to earnings. On March 22, 1996, 255,850 Class 2special shares, being all such shares, were redeemed.


Note 3. Capital Assets

Capital assets include the following:

(in thousands of dollars) 1996 1995

Accumulated AccumulatedCost depreciation Cost depreciation

Engineering equipment $ 8,943 $ 5,979 $ 7,652 $ 5,240Office equipment 5,729 3,970 5,152 3,796Automotive equipment 1,216 613 905 483Leasehold improvements 1,214 702 1,062 562Buildings 1,389 128 1,319 55Land 546 416

$ 19,037 $ 11,392 $ 16,506 $ 10,136

Net book value $ 7,645 $ 6,370


Note 2. Change In Accounting Policies (cont.)

This change in accounting policy has been applied on aretroactive basis. As a result of this change in policy, theCompany’s Class 2 special shares have been classified as

notes and mortgages payable. The overall effect of thischange was to decrease shareholders’ equity and increasetotal liabilities by $2,558,500 as at December 31, 1995 andto decrease net income for the year ended December 31,1996 and 1995 by $40,224 and $154,703 respectively.

In 1996, depreciation on the capital assets was recordedin the amount of $1,613,398 (1995 - $1,352,080).

Note 4. Bank Line of Credit

The Company has a line of credit with a Canadianchartered bank in the amount of $15,000,000 (1995 -$10,000,000). At December 31, 1996 the Company has

drawn $15,000 on this line of credit (1995 - $705,000).All assets of the Company are held as collateral under ageneral security agreement.

Notes payable are non-interest bearing and have beendiscounted to their present value at rates prevailing atthe time the note was issued. If the non-interest bearingnotes were discounted at interest rates in effect at

December 31, 1996, the fair value of the notes would havebeen $286,000. The following summarizes the due datesof each of the non-interest bearing notes, the discountrate applied and the amount due.

Note 5. Notes and Mortgages Payable


Notes payable $ 1,263 $ 1,263Discount 1,066 1,092

Carrying value 197 171Promissory note payable 931 1,312Mortgages payable 1,539 1,429Class 2 special shares [Note 2] 2,559

2,667 5,471Less current portion 786 708

$ 1,881 $ 4,763




Note 5. Notes and Mortgages Payable (cont.)

Due Date Discount Rate Amount

July 1, 2001 20.00 % $ 140,000July 1, 2001 16.50 % 140,000October 1, 2010 11.00 % 50,000November 1, 2027 9.75 % 933,113

$ 1,263,113


The promissory notes payable bear interest at ratesfrom 0% to 7% and are due at various times from 1997 to1999. At December 31, 1996 the fair value of the promis-sory notes payable approximates the carrying value.

The mortgages bear interest at rates from 6.125% to12% and are due at various times from 1997 to 2000 andare supported by first and second mortgages against landand buildings of the Company. At December 31, 1996,the fair value of the mortgages payable approximates thecarrying value.

In 1996 interest of $278,789 (1995 - $331,751) wasincurred on the Class 2 special shares and the notes andmortgages payable.

Principal repayments on the promissory notes andmortgages payable in each of the next four years are asfollows:(in thousands of dollars)

1996 $ 7861997 5771998 1,1021999 5

$ 2,470

Note6. Business Acquisition

During 1996, the Company acquired the shares andbusiness of Morgan Dowhan Engineering Ltd. (April 4, 1996)and the net assets and business of DWL Engineering Inc.(May 31, 1996), George V. Sabol Consulting Engineers,Inc. (October 28, 1996), and NBS/Lowry, Incorporated(December 11, 1996).

During 1995, the Company acquired the shares andbusiness of the I.D. Group of Companies (August 22, 1995),

and the net assets and business of the Boileau Group ofCompanies (June 29, 1995 effective March 31, 1995).

These acquisitions have been accounted for under thepurchase method of accounting and the results of earningssince the respective dates of acquisition have been includ-ed in the consolidated statement of income. Details of theaggregate consideration given and the fair values of netassets acquired are as follows:


Cash consideration $ 557 $ 2,514Promissory note [Note 5] 146 725

Purchase price $ 703 $ 3,239

Net assets acquired at fair values:Non-cash working capital 346 314Capital assets 609 2,645Investment in associated companies 2 2,182Deferred income taxes 40 544Goodwill 238 1,630

1,235 7,315Long-term debt (187) (2,054)

1,048 5,261Cash acquired (bank indebtedness assumed) (345) (2,022)

Net assets acquired $ 703 $ 3,239

On March 22, 1996, 255,850 Class 2 special shares,being all such shares, were redeemed.




Note7. Joint Ventures

A summary of the assets, liabilities, revenues and expenses included in the consolidated financial statements related tothe joint ventures is as follows:


Current assets $ 6,014 $ 1,670

Current liabilities 5,437 1,195Retained earnings 577 475

6,014 1,670

Fees billed 17,435 3,492Direct expenses 16,267 2,992Administrative 393 252

Income before income taxes 775 248Income tax expense 222

Net Income 553 248Retained earnings, opening 475 379Profit distribution (451) (152)

Retained earnings, closing 577 475

Cash provided by operating activities $ 1,505 $ 414

Note8. Income Taxes

The effective income tax rate in the consolidated statement of income differs from the statutory Canadian tax rates asa result of the following:


Amount % Amount %

Income tax expense at statutory Canadian rates $ 3,542 44.6 $ 2,818 44.6 Increase (decrease) resulting from:Application of prior year losses carried forward (126) (1.6) (77) (1.2)Income (loss) from associated companies accounted on the equity basis (29) (.4) 21 .3Rate differential on foreign income (55) (.7) (31) (.5)Non-deductible expenses 189 2.4 157 2.5Other 95 1.2 69 1.1

Income tax expense $3,616 45.5 $ 2,957 46.8

As at December 31, 1996, loss carryovers of approxi-mately $4,603,000 are available to reduce taxable incomeof certain Canadian and U.S. subsidiaries. These lossesexpire as set out below:

1998 157,0001999 318,0002000 442,0002001 953,0002002 1,083,0002003 1,027,0002007 623,000

$ 4,603,000

Of these losses, $623,000 relates to U.S. subsidiaries.U.S. income tax law imposes limitations on the availabilityof the loss carryovers as a consequence of a change inownership in 1994. The losses which may be utilized forU. S. Federal purposes are limited to $103,000 annually.The future benefit of $2,632,000 of losses has beenreflected in these financial statements.


Note13. Related Party Transactions

The Company paid rent to a limited partnershipamounting to $1,386,120 in 1996 and $1,338,515 in 1995.The Company is a 25% partner; other partners includeofficers of the Company as well as outside interests.

Note14. Earnings Per Share

1996 1995

Basic $ .73 $ .57Fully diluted $ .71 $ .55

Earnings per share are calculated using the weightedaverage number of shares outstanding during the year(1996 and 1995 - 5,928,000).

Fully diluted earnings per share reflect the effect of the291,977 options outstanding at December 31, 1996(1995 - 200,954).



Note9. Share Capital

Authorized

Unlimited Common sharesUnlimited Preferred shares issuable in series

Common shares are fully participating voting shares.The Company has issued options to acquire 291,977

Common shares at exercise prices ranging from $6.75 to$11.00 per share with expiration dates between April 29,1997 and March 16, 2006.

Issued and outstanding

1996 1995

5,928,000 Common shares $ 28,530 $ 28,530

Note10. Commitments

Commitments for annual basic rent under long-termleases for the next five years are as follows:1997 - $3,586,824; 1998 - $2,952,834; 1999 - $2,176,198;2000 - $850,760 and 2001 - $403,433.

Note11. Contingencies

In the normal conduct of the operations of the Companythere are pending claims by and against the Company.It is the opinion of management, based on the advice andinformation provided by counsel, that the final determina-tion of these claims will not materially effect the consoli-dated financial position or results of operations. Claimsrelated to professional services are covered by insurance.

The Company has issued letters of credit totalling$2,782,512.

Note12. Net Changes in Working Capital

The changes in net working capital are determined as follows:


Accounts receivable $ (6,318) $ (3,868)Work in progress (2,006) (445)Prepaid expenses 228 (355)Accounts payable and accrued liabilities 3,138 1,761Deferred revenue 2,093 1,191Income taxes payable 302 (1,591)

(2,563) (3,307)Working capital acquired on acquisition 345 314

$ (2,218) $ (2,993)

Note15. Segmented Information

The Company operates in a single industry segment,the provision of professional consulting services. Grossrevenues include amounts earned outside Canada and theUnited States of $22,194,861 in 1996 and $11,041,301 in1995 (primarily to clients in Southeast Asia, the MiddleEast, the Caribbean and Africa.)



OFFICERS

(1) Chairman of the Board(2) Member of Audit Committee

(3) Member of Compensation Committee(4) Member of Corporate Governance & Nominating Committee

Ronald P. Triffo (3)

President and Chief Executive Officer,Stanley Technology Group Inc.

Edmonton, Alberta

Robert J. Bradshaw (1,4)

Chairman,Contor Industries Limited

Toronto, Ontario

David L. Emerson (2)

President and Chief Executive Officer,Vancouver International Airport Authority

Vancouver, British Columbia

E. John (Jack) Finn (3)

Corporate Director,Madison, Connecticut

Anthony P. FranceschiniVice-President,

Stanley Technology Group Inc.Edmonton, Alberta

John B. Breen (2,3)

Managing Partner,MWI & PartnersToronto, Ontario

Robert E. Flynn (4)

Senior Advisor,CSC Index, Management Consultants

Chicago, Illinois

William D. Grace (2,4)

Corporate Director,Edmonton, Alberta

Stephen D. Lister (2,3)

Managing Partner,Imperial Capital Corporation

Toronto, Ontario

Robert J. Bradshaw Chairman

Ronald P. TriffoPresident and Chief Executive Officer

Frank J. DuselVice-President

Donald W. WilsonVice-President,

Finance & Administration,and Chief Financial Officer

Jeffrey S. LloydSecretary & General Counsel

Anthony P. FranceschiniVice-President

Frank W. GrigelVice-President

Benno E. NovakVice-President

BOARD OF DIRECTORS



MEMBER COMPANIES

Stanley TechnologyGroup Inc.10160 - 112 St.Edmonton, AB T5K 2L6Tel: (403) 917-7000Fax: (403) 917-7330

Stanley AssociatesEngineeringCalgary, ABCambridge, ONEdmonton, ABKamloops, BCKelowna, BCLethbridge, ABLondon, ONNanaimo, BCPrince George, BCRed Deer, ABRegina, SKSaskatoon, SKSummerland, BCSurrey, BCVictoria, BCWhitehorse, YTYellowknife, NT

IDG StanleyWinnipeg, MB

Stanley EnvironmentalSciencesEdmonton, ABSurrey, BC

SFC Engineering CompanyPhoenix, AZ

ITX TechnologiesAmherst, NYCalgary, ABCambridge, ONChicago, ILLake Forest, CAPhoenix, AZ

Stanley IndustrialConsultantsCalgary, ABEdmonton, ABSaskatoon, SKSurrey, BC

Winkelaar, Howard &AssociatesEdmonton, AB

SENTAR ConsultantsCalgary, ABEdmonton, ABRegina, SKSaskatoon, SKWinnipeg, MB

Revay and AssociatesCalgary, ABMontreal, PQOttawa, ONToronto, ONVancouver, BC

Boileau AssociésExperts-conseilsGatineau, PQ

Gesmec StanleyGatineau, PQGloucester, ON

Lockerbie StanleyAffiliate companyEdmonton, AB

Teshmont ConsultantsAffiliate companyWinnipeg, MB

Simons-Stanley Affiliate companyEdmonton, AB

IMC Consulting GroupCalgary, ABCambridge, ONEdmonton, ABLondon, ONPhoenix, AZ

Cheriton EngineeringCalgary, ABEdmonton, ABLondon, ON

Coordinate SurveysCalgary, ABEdmonton, AB

Envirocorp InteriorDesign GroupEdmonton, AB

Northwest ComputerServicesCalgary, ABEdmonton, AB

SLG Stanley ConsultantsBorden, PECalgary, ABEdmonton, ABSurrey, BCWinnipeg, MB

Morgan Dowhan EngineeringCalgary, ABEdmonton, ABVancouver, BC

Stanley Buildings GroupEdmonton, AB

Linnet GeomaticsInternationalAffiliate companyWinnipeg, MB

Stanley InternationalGroupBahamasBarbadosEdmonton, ABGuyanaLao PDRSt. Lucia

Planning & StanleyEngineering AssociatesAffiliate companyTrinidad

Agrodev CanadaEdmonton, ABOttawa, ONSummerland, BCVancouver, BCIslamabad, PakistanPhnom Penh, Cambodia

SRD Sustainable ResourceDevelopmentOttawa, ONKathmandu, NepalMuzaffarabad, Pakistan

Prince EdwardInternationalCharlottetown, PE



CORPORATE INFORMATION

Transfer AgentThe R-M Trust Company

P.O. Box 2517Calgary, AlbertaCanada T2P 4P4

AuditorsErnst & Young

Chartered AccountantsEdmonton, Alberta, Canada

Principal BankCanadian Imperial Bank of Commerce

Securities Exchange ListingStanley shares are listed on the Toronto Stock Exchange

under the ticker symbol STG.

Shareholder and Investor InformationCorporate Communications

Stanley Technology Group Inc.10160 - 112 StreetEdmonton, AlbertaCanada T5K 2L6

Tel:(403) 917-7000Fax:(403) 917-7330

e-mail: [email protected]

Annual MeetingMay 15, 1997

10:00 a.m.Sheraton Grande Edmonton Hotel

10235 - 101 StreetEdmonton, Alberta, Canada


ROSS SNYEROWEN SOENEN

ROBERT SOLODZUKJOHN SOLTYS

CARRIENE SOMERSJAMES SOSIAKPETER SPAANSFRANK SPEERSCLARK SPENCERDAVID SPENCERCHARLES SPURRDOUG STAFFORDMICHAEL STAINESLEONARD STAMM

DAVE STASIUKEDWARD STEACY

JOHN STEILGARY STEIN

KAREN STEPHENSBENJAMIN STEVENSON

DAVID STEWARTJAMES STEWARTROBERT STEWARTRYAN STINSON

SHIRLEY STINSONJEFF STOCKDALE

GLENN STOWKOWYWAYNE STRACHAN

TIM STRATTONPAUL STRUTHERSALISON STUART

DOUGLAS STUBBSJOHN STUTTAFORDANTHONY STYLER

MICHAEL SUE-PINGGREGORY SUMMERSPAUL SUNDERLAND

ANGUS SUTHERLANDCRISTIAN SUVAGAUROBERT SVOBODADONNA SWAYNE

MARK SWEETRAYMOND SWIFT

KEVIN SYDORTONY SYDORENKO

TOM SYVENKYJAN SZENDZIELORZCHAMPAK TAILOR

JOHN TAKEMICHELLE TALBOTPETER TAMBLYNFREDERICK TAMSDEAN TARASOFF

BARBARA TAUNTONSHIRLEY TEITELBAUM

WANDA TERLECKISCOTT TERRY

BRUCE THOMPSONDOUGLAS THOMPSON

ANTONY THORPEROBERT THORSENPETER TIMPANYFRANK TINANA

THOEDORE TINDALLRUSSEL TOLLEFSON

DANIEL TOMIECHRISTOPHER TONN

LOREN TONNCORRINE TOURAND

ALAIN TOWNERNHIEN TRANSANG TRANTINA TRAN

HAROLD TRATLIEBRUCE TRAVISSUSAN TRAVISLAURIE TRENT

RONALD TRIFFOTREVOR TRIFFO

ERIC TROMPOSCHDAN TROTTER

JACQUES TRUDEAULORNE TRUEMANFRED TRUSSELL

DEBORAH TURNBULLDARRYL TURNERTHOMAS TURTON

DEAN TUTTLEMARK UGUCCIONI

SIGMUND UNDHEIMMIN UYEDA

ZUZANA VAJSABELRAMON VALENCIAJOHN VAN BERKEL

STEVEN VAN BERKELANGELA VAN BUSSELCHRIS VAN BUSSEL

ANTHONY VAN DEN CAMPDEVON VAN DER MEULEN

LOREN VAN DYKEROBERT VAN DYKE

ANDY VAN ESCHKAREN VAN STEENIS

ALBERT VANDEN BOERANDREW VANDERTOL

CARLOS VARGASSANDRA VARGAS

BORIS VELCICJEFFREY VENABLESMARK VERMETTEGARRY VISSCHER

JAMES VOGTBARBARA VOTHJEFFREY WADEGARY WAGNER

BRADLEY WAKELINALAN WALDIE

TIM WALKDEN-BROWNCAROL WALKER

WILLIAM WALKERBRIAN WALLACERALPH WALTERSJARVIN WANGJIANG WANG

KENT WAREHAMHUGH WARRENLINDA WARREN

LYNDA WARRINGJIM WASALASKOCALVIN WATKINS

RICHARD WATSONSTEPHEN WATSON

NORMAN WEATHERLYBRAD WEBB

LORNE WEBERPETER WEBERCOREY WEIR

JOHN WENINGERBRYAN WERSTINENED WESENBERGDELWYN WHALEN

ALEXANDER WHEADONMICHAEL WHEELER

JAMES WHITEMATTHEW WHITNEYGERALDINE WHITTLE

DWIGHT WIBERGJOANNA WICHERS

ERIC WIENSDOUGLAS WILDING

CHERYL WILFLINGSIDERBEATRIJS WILLIAMS

IAN WILLIAMSSTEWART WILLOUGHBY

THERESA WILMONKATHRYN WILNEFFDONALD WILSONKATHY WILSON

GARY WINTHROPDAVID WIPPEL

MARINA WIRRIESMICHAEL WIRRIES

ERIC WISNETHRUSS WLAD

PAUL WOELFLESUANN WOLF

ROBERT WOLFEPETER WOLOSCHINIWSKY

PAK CHUNG WONGYEE MIN WONGHENRY WOODSHAWN WOOD

TAMMY WOOLGARCATHERINE WRIGHT

SUSAN WRIGHTWEIGUO WU

RANDY WUNDERLICKJEFF WYDEVENMARK WYNKERHESHAM YAGHISUZANNE YEE

THOMAS YEUNGDENISE YOUNG

LIXIN YUDAVID YUE

DIANE ZACHARUKWOJCIECH ZALEWSKI

WALID ZEINPETER ZELL

ROBERT ZICAFOOSELIDIA ZIELINSKIDAVID ZIMMER

AUDREY ZIMMERMANKENNETH ZONDERVAN

PETER ZRYMIAK

MALCOLM RICHARDSONPETER RICHARDSON

DAN RICHERTANTONIO RIGOR

VANESSA RISTLEIGH RITCHIEMARC RIVARD

LYNN ROBERTSONEDMOND ROBINSONMICHAEL ROBSONYVES ROCHELEAUMURRAY RODDIS

KLAAS RODENBURGNICOLA ROE

BRIAN ROGERSCHERYL ROMACH

GARRY ROMANETZSTEVEN ROOT

TIMOTHY ROOTSMARLENE ROSSTERRENCE ROSSVICTORIA ROSS

MICHEL ROSSIGNOLTERESA ROTH

CARMAN ROULEAUIDA ROWAT

VINCENT ROWEBARBARA ROWNTREE

RITA ROYER-ROSSROLAND RUESGENROBERT RUTBERG

ALEX RUTKAALLEN SADBERRYALAN SADOWSKY

ALBERT SAGEDAVID SALISBURY

VICTOR SALYMICHAEL SAMER

ELIZABETH SAMSONGARRY SANDEN

IAN SANDERKENNETH SANDERSON

JAMES SANDISONPAUL SANDORI

CHRISTINE SANDQUISTTRACY SAVAGEPAULA SAWICKIROBERT SCACE

KEITH SCHADECKJOSEPH SCHLACHTERBRENDA SCHLOSSER

BRUCE SCHMIDTDARRYL SCHMIDTFRANK SCHNEIDERROLF SCHOENERT

KEN SCHULTZANGELA SCOTT

DOUGLAS SCOTTELISABETH SCOTT

CATHY SEARSKATHY SEIFERT

LARRY SEMENIUKCATHRYN SENIORDARWIN SENUM

KELLY SERBUGERRY SHANDPETER SHAND

PATRICIA SHANDROCURT SHANK

CATHERINE SHANLEYORVILLE SHAW

ROBERT SHELASTKEVIN SHERBURNE

LESLIE SHERSTOBITOFFMICHAEL SHEWCHUK

NEIL SHEWCHUKEDWARD SHEWEN

KEITH SHILLINGTONKEVIN SHIPPBERYL SHMYR

GRANT SHOMODYKELVIN SHUVERASTANLEY SIEMENS

WILLIAM SIEROLAWSKIROLANDO SILVEIRATODD SIMENSON

CHRIS SIMKODOUG SIMPSON

RON SINDENDILAN SINGARAJA

HELEN SIRMANBRENDA SIVERSMURRAY SLEZAKTIMOTHY SMETSEDWARD SMITHDAVID SMITHJANICE SMITH

STEPHEN SMITHTAMMY SMITHCHERYL SMYTHJOHN SNYDER

ELISE OBERLEBASIL OLANSKY

WILLIAM OLDHAMKIRSTEN OLESEN

PAMELA OLMSTEADJOHN OLSONSUSAN OLSONMARLEY ONESSWALTER ORR

GERALD ORTEGONDAVID OSINGA

JEAN-GUY OUELLETTEJOHN OWENSOWEN OWENSWES PAETKAUANGELA PAGE

GEOFFREY PAGEMARC PAGE

CHIN-MING PAIGERALD PALICHUK

WAYNE PALTZATCLAUDIO PALUMBO

KIRK PANGUSRON PANTZER

JEAN MARC PAQUETTEROGER PARIS

GLENN PARKERALANA PARRENTJANINE PASCHKEVALERIE PASULASUSAN PATON

JOHN PATTERSONGEORGE PATTONCATHERINE PAULSCOTT PEARCE

STEPHEN PEDERSENJOHN PELLAND

ROLANDO PEREZ-PARADAHAROLD PERRIN

MARK PERRYBRENDA PETERSHELMUT PETERSWILLIAM PETERS

BEN PETTITBRUCE PEVERIL

HAI PHAMPHAT PHAMHANG PHAN

WILLIAM PHANGDARRELL PHILLIPS

ANDY PHUONGJAMES PICKELL

FRANCIS PIERRARDLAWRENCE PINTER

JOSEF PITTNERJOHN PLASTIRAS

RANDY PLETTHEIDI POHOLKO

ANNE POOLRICHARD POOLROSITA POON

IQBAL POPATIASUSAN POTTS

CAROLINE POUSSARTHUGH POWELLJAMES POWELL

LISA POWERDONALD PREFONTAINESHANNON PRESZCATOR

CHRIS PRIMEAUJAMES PRINGLEGLENN PROSKOMELVIN PROSKO

EDGAR PRUD’HOMMEANITA PUDDICOMBE

HERB PUTZJADWIGA PYLKODARRELL QUISTJEFFREY RADLEYSAMAYA RAHME

ANNMARIE RAMAIRAMDEO RAMNARACE

BROCK RAMSAYROBERT RAMSAYDREW RAMSDALE

ED RASKOKAREN RAWLYK

GWEN REALEIGH REDDING

STEPHEN REDMANGORAN REDZEPOVIC

DENNIS REIDHEATHER REID

PETER REIDDEBORA REPCHUKSTEPHEN G. REVAYSTEPHEN O. REVAY

CHRIS REYNOLDSONGEORGE REYNOLDSON

JON RICENORMAN RICHARDS

DOUGLAS MARSHALLJASON MARUNIAKJERRY MASLANKA

SCOTT MASONKATHRYN MASSEY

JONATHAN MASTERSDUANE MATHERSANDRE MATHIEU

BARBARA MATSUBAROBERT MATTHEWS

NORM MATTSONJASON MAURERBRAD MAUROPAT MCAULEY

DAVID MCCABEROBERT MCCAMONDAVID MCCARTNEY

HOWARD MCCAUSLANDADAM MCCAW

PAUL MCDONALDALEC MCDOUGALLGERALD MCENIRY

GEORGE MCGEACHIEJANET MCINTOSH

DEBORAH MCKELVEYBRIAN MCKINLEYJEAN MCKINLEY

ANDREA MCKINNONBRUCE MCKINNONNANCY MCLARENWILLIAM MCLEANKAREN MCNABBCHUCK MCNUTTGREG MCPHEE

ANGEL MCVITTIELORI MEADS

ALDEN MEAKINDONNA MEEN

ERNIE MEHERIUKPIERRE MEILLEUREDWARD MEINEARVID MELAND

MATTHEW MELBYDONALD MENARD

PAUL MERCERKEVIN METCALFEIWONA METYCHFRANCIS MEYERDORIS MIARS

PETER MICHALSKIROBERT MICKELSON

JERRY MICKOWILLIAM MIDDAGHMICHAEL MILLARZVONIMIR MILLERKENNETH MILLS

DEIDRE MITCHELLJIM MITCHELL

MICHAEL MITCHELLSHARON MITCHELLDENIS MONGEON

JOHANNE MONGEONMICHAEL MONTGOMERY

LORI MOORENORMA MOORES

DENNIS MORAWSKIBRENDA MORENALBERT MORGANPETER MOROSO

RAYMOND MORRISGILBERT MOURANTALFRED MUELLERKAREN MUELLER

ADMIR MULAHUSICDONALD MULDERJAN MULLIGAN

ANDREW MUNRODONNA MUNROROBERT MURPHYDIANE MURRAY

JOHN NABOZNIAKRYAN NABOZNIAKLARRY NADWORNYSTEWART NELSONVICTOR NEUFELDEARLE NEWSONLARRY NEWTON

PANG NGCHAU NGUYEN

MATTHEW NICHOLASJANICE NICHOLSBRENT NIEHAUSLARRY NIELSENMARK NIKKEL

ERICA NORDQUISTBENNO NOVAKNINA NOVAK

MARIE-F. NSENGIYUMVACHARLES NUNOONORM NUTTALLNINO NUZZO

MARCELLA KOLODYLESZEK KOLODZIEJCZYK

DOUG KOLOTGLENN KOLOT

YOSHIKI KOMORIDAVID KORCHINSKI

DONALD KORZENOWSKYNICOLE KOSHUTA

KAREN KOSIRGORDON KOSMENKOMYRON KOSTELNYK

ROBERT KOVACSPENNY KOWALCHUK

DEBORAH KOZAKSONIA KRADJIANKARA KROEKERPETER KRUGER

DAVID KRYWIAKJERZY KUCHARZOW

ALLAN KULAYKWOK-KIN KUNG

JOAO KUPPERGERALDINE KURTENACKER

ALBERT KWANSONNY KWAN

BERNIE LAFLECHELUCIEN LAFLEURMICHEL LAFONDJOHN LANDRY

MANON LANDRYPAUL LANGOHR

MICHELLE LAPERRIEREANNETTE LAPOINEROBERT LARKIN

YVES LAROCHELLEPATRICIA LARSON

WAYNE LATAMDORIS LAU

ROSE-MARIE LAUDERJULIE LAUZON

DOUGLAS LAVALLEYCOLIN LEDGER

JACQUES LEDUCJOSEPH LEE

DANIEL LEFAIVRECLAUDINE LEMAIRECHARLES LEONARDEMERIC LEONARD

EDWARD LESSWINGWILLIAM LESTERMARTIN LEVEQUESHERRI LEVESQUE

ANDERS LINDSTROMTIM LINES

GEORGE LINHARTKENNETH LINNEN

GEOFFREY LIOGIERALFRED LIP

STEPHEN LISTERXIAOYING LIUJEFFREY LLOYDTODD LOCKIEERIC LOEWENHOLLY LOFTUSJOHN LOGAN

JERROLD LOUREIRODAVID LOWRY

DEAN LUBARSKYKEN LUCAS

MAIRE LUOMAKATHY MA

KAREN MACDONALDLAWRENCE MACDONALD

SCOTT MACDONALDMACIEJ MACIEJEWSKIKAREN MACKENZIE

RUSSELL MACKENZIEPATRICK MACKIE

ELIZABETH MACKINLEYHEATHER MACLEOD

IAN MACLEODCESAR MACPHERSON

DONALD MACPHERSONKEN MADDOX

MITCHELL MADILLEVA MAH BORSATOLESLEY MAHONEY

HONG MAIPETER MAIDMENTBERNARD MAIMERARBIND MAINALI

CRAIG MALCOVISHJAMES MALLETTESTHER MALTAIS

VAL MAMERDARLENE MANDRYK

GREG MANNANTHONY MARANDOBRENT MARJERISONCHRISTINE MAROLLY

VILKO MAROTI


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