DEFINING

SUSTAINED PROFITABLE GROWTH…

  annual report     CGI Group Inc.

  2007 

45 OF 50 TOP BANKS IN THE AMERICAS AND EUROPE  |  7 OF THE 
10 LARGEST GLOBAL TELECOM CARRIERS  |  11 OF THE 15  LARGEST 
GLOBAL PROPERTY AND CASUALTY INSURERS  |  LEADING GLOBAL 
MANUFACTURERS IN AEROSPACE, METALS & MINING, CHEMICALS, 
OIL & GAS  |  AND HUNDREDS OF GOVERNMENT AGENCIES CHOOSE CGI…
PROFITABLE IN EVERY LINE OF BUSINESS 
AND GEOGRAPHY  |  INDUSTRY LEADING MARGINS AND 
CASH FLOW  |  OUTPERFORMING PEERS ON VIRTUALLY 
ALL PERFORMANCE METRICS…
THAT’S
SUSTAINED
PROFITABLE
GROWTH.
      

Experience the Commitment | WE’RE IN THE BUSINESS OF SATISFYING CLIENTS.FOR OVER 30 YEARS, WE’VE OPERATED UPON THE PRINCIPLES OF SHARING IN OUR CLIENTS’ CHALLENGES AND DELIVERING QUALITY SERVICES TO ADDRESS THEM. A LEADING “IT” AND BUSINESS PROCESS SERVICES PROVIDER, CGI HAS APPROXIMATELY 26,000 PROFESSIONALS OPERATING IN 100+ WORLDWIDE OFFICES, GIVING US CLOSE PROXIMITY TO OUR CLIENTS. THROUGH THESE OFFICES, WE OFFER LOCAL PARTNERSHIPS AND A BALANCED BLEND OF GLOBAL DELIVERY OPTIONS TO ENSURE CLIENTS RECEIVE THE COMBINATION OF VALUE AND EXPERTISE THEY REQUIRE. CGI DEfiNES SUCCESS BY EXCEEDING CLIENTS EXPECTATIONS AND HELPING THEM ACHIEVE SUPERIOR PERFORMANCE.

Our Approach We understand it’s how we deliver our services that makes us a partner of choice. Whether clients want to increase customer satisfaction and grow revenue or reduce costs and minimize risk, our business approach puts clients and their results first.   Client-proximity business model—organizes operations around metro markets, allowing us to be deeply rooted within clients’ business communities and accountable for project success   Industry expertise—fuels our deep understanding of clients’ realities to implement solutions that transform their business environments   Global delivery options—combine onsite responsiveness through our local offices with the value of remote delivery through CGI’s onshore, nearshore and offshore centers of excellence   Quality processes—ISO 9001:2000-certified operations ensure highly satisfied relationships with clients, members and shareholders; and CMMI Levels 3 and 5-compliant global delivery centers provide agile, high-quality delivery  Our Services CGI has a comprehensive portfolio of services—including consulting, systems integration, full management of end-to-end IT and business functions, and 100+ proprietary solutions—enabling us to serve as our clients’ fullservice provider by improving all facets of their operations. Key service areas include:   Systems integration and consulting—strategic plans, design and implementation of business and technology solutions that solve clients’ business challenges   Application management—day-to-day maintenance and improvement of clients’ business applications, helping reduce costs and ensure faster delivery of new initiatives   Technology management—full infrastructure management capabilities that adapt to clients’ unique business requirements and priorities   Business process services—management of back-office business processes to streamline operations and to reach new levels of effectiveness and productivity Our Markets CGI offers its end-to-end services to a focused set of industries where we have developed deep expertise. This allows us to fully understand our clients’ business realities and to have the know-how and solutions needed to advance their business goals. Our targeted industries include:   Financial services—helping clients increase competitiveness by evolving complex environments and systems to support more integrated and customer-focused operations   Government and healthcare—assisting organizations in managing incremental change and undertaking large-scale, citizen-centric transformation   Telecommunications and utilities—helping providers deliver new revenue streams while improving productivity and customer service   Manufacturing—transforming clients’ operations and supply chains for enhanced profitability and global competitiveness   Retail and distribution—helping clients establish flexible and customer-centered operating models that build profitability and enhance loyalty

CGI at a Glance

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Our Growth Strategy  Organic growth and acquisitions are an integral part of our business strategy and both have contributed to our profitable growth over the years. In addition to operational breadth and depth, acquisitions bring critical mass and key client relationships, which qualify us for larger contracts.

ORGANIC GROWTH	Systems integration contracts and projects	Win new contracts and renewals
		Develop new client relationships
		Extend service offerings to existing clients
	Large outsourcing contracts	Pursue large outsourcing contracts with new and existing clients
		Grow pipeline of outsourcing proposals

ACQUISITIONS	Niche market acquisitions	Enhance vertical offerings
		Increase geographic presence
		Increase the richness of offerings
	Transformational acquisitions	Increase geographic presence
		Increase critical mass to qualify for large outsourcing proposals
		Ensure strategic fit and accretion to net earnings

Business Highlights based on fiscal 2007 revenue

Contract Types 55%  Management of IT and business functions (outsourcing) – IT services 42% – Business process    services 13% 45%  Systems integration and consulting	Geographic Markets 59% Canada 33% United States 8%   Europe and Asia Pacific	Targeted Verticals 33% Financial services 32% Government and healthcare 21% Telecommunications          and utilities 7%   Manufacturing 7%   Retail and distribution

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Financial Highlights

Revenue in billions of dollars	Net earnings from continuing operations in millions of dollars	Net earnings from continuing operations margin in percentage	Diluted eps from continuing operations in dollars

Contract backlog in billions of dollars	Cash provided by continuing operations activities in millions of dollars	Net debt to capitalization1 in percentage	Number of shares outstanding at year end in millions of shares

 1 The net debt to capitalization ratio represents the proportion of long-term debt, net of cash and cash equivalents, over the sum of shareholders' equity and long-term debt.

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YEARS ENDED SEPTEMBER 30	2007	2006	2005
(in thousands of Canadian dollars, except share data, ratios and percentages)	$	$	$
Financial performance
Revenue	3,711,566	3,477,623	3,685,986
Adjusted EBIT1	407,813	310,336	346,145
Adjusted EBIT margin1	11.0%	8.9%	9.4%
Net earnings from continuing operations	236,402	146,533	219,698
Net earnings from continuing operations margin	6.4%	4.2%	6.0%
Basic earnings per share from continuing operations	0.72	0.40	0.50
Diluted earnings per share from continuing operations	0.71	0.40	0.50
Net earnings	236,402	146,533	216,488
Net earnings margin	6.4%	4.2%	5.9%
Basic earnings per share	0.72	0.40	0.49
Diluted earnings per share	0.71	0.40	0.49
Net earnings (under US GAAP)2	239,247	149,176	237,782
Basic earnings per share (under US GAAP)2	0.73	0.41	0.54
Diluted earnings per share (under US GAAP)2	0.72	0.41	0.54
Cash flow from continuing operating activities	550,169	305,596	480,709
Financial position
Total assets	3,475,808	3,692,032	3,986,659
Shareholders’ equity	1,818,268	1,748,020	2,494,690
Shareholders’ equity per common share	5.60	5.27	5.79
Working capital	105,283	248,694	332,387
Current ratio	1.14	1.37	1.47
Long-term debt (current and long-term portions)	473,191	813,259	249,700
Net debt to capitalization ratio3	16.8%	27.2%	0.3%

	FISCAL 2007				FISCAL 2006
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Quarterly financial results
Revenue	922,846	933,318	951,342	904,060	845,820	866,504	866,836	898,463
Adjusted EBIT1	101,526	104,558	102,040	99,689	91,121	77,642	62,827	78,746
Adjusted EBIT margin1	11.0%	11.2%	10.7%	11.0%	10.8%	9.0%	7.2%	8.8%
Net earnings	65,577	64,433	62,711	43,681	39,532	35,944	14,149	56,908
Net earnings margin	7.1%	6.9%	6.6%	4.8%	4.7%	4.1%	1.6%	6.3%
Basic earnings per share	0.20	0.20	0.19	0.13	0.12	0.11	0.04	0.13
Diluted earnings per share	0.20	0.19	0.19	0.13	0.12	0.11	0.04	0.13
Cash flow from continuingoperating activities	120,396	134,637	128,962	166,174	51,823	107,595	82,550	63,628

1 Adjusted EBIT represents net earnings before restructuring costs related to specific items, interest on long-term debt, other income, net, gain on sale of assets, gain on sale & earnings from an investment in an entity subject to significant influence, non-controlling interest, net of income taxes, income taxes and discontinued operations. Adjusted EBIT margin is adjusted EBIT over revenue.

2 Reconciliation between US and Canadian generally accepted accounting principles is provided in Note 27 to the consolidated financial statements.

3 The net debt to capitalization ratio represents the proportion of long-term debt, net of cash and cash equivalents, over the sum of shareholders’ equity and longterm debt.

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Letter to Shareholders MICHAEL E. ROACH President and Chief Executive Officer SERGE GODIN Founder and Executive Chairman of the Board

80% CGIs powerful sense of ownership and accountability derives from a singular fact: more than 80 percent of our members are CGI shareholders, representing the largest single block of ownership.  

IN VIEW OF THE PAST YEAR’S RESULTS, TRACK RECORD AND LONG-TERM PERFORMANCE, WE’RE DELIGHTED TO AFFIRM THAT CGI IS ONE COMPANY THAT’S VERY GOOD TO KNOW. EXCEEDINGLY GOOD FOR OUR CLIENTS, OF COURSE. BUT EQUALLY GOOD TO KNOW FOR CGI’S SHAREHOLDERS, MEMBERS AND PARTNERS. FISCAL 2007 WAS, AS DEMONSTRATED BY JUST ABOUT EVERY METRIC—REVENUE, EBIT, NET EARNINGS AND EARNINGS PER SHARE—A RECORD BREAKING YEAR. WE GREW OUR MOMENTUM IN EVERY QUARTER, IN EVERY GEOGRAPHIC MARKET, AND IN EVERY LINE OF BUSINESS. FOUR WAYS TO BUILD GROWTH   We pursued four initiatives to build organic growth during fiscal 2007.   First, we focused on clients who already appreciate the value CGI adds to their business. We targeted our top clients, out of a roster of thousands, and, with discipline, we reviewed precisely why CGI is “good to know.” We reintroduced our broad portfolio of solutions, services and capabilities. And we explained how we could help to further drive value creation. The goal was to cross- and up-sell services—and it’s working. We expanded the program to other clients and prospects, generating a steady stream of new contracts, renewals and extensions.   Second, we focused on excellence in execution. This means delivering on time and on budget and striving to actually exceed client expectations. Based on our Client Partnership Management Framework, we measure client satisfaction regularly. We’re pleased to report

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GOOD RESULTS
ARE BETTER THAN
A LONG EXPLANATION.

that CGI continued to prioritize client satisfaction, obtaining a score of 8.8 out of 10 in fiscal 2007.

Third, we continued to expand our global delivery model to better serve clients while improving our competitive position. In a global business environment, clients now have more choices among onshore, offshore and nearshore service delivery. We believe that any business should be able to choose not just one of these options, but also any combination that suits their needs. This is why, over the past two years, we’ve added strategically located global delivery centers in Canada, the United States and Europe, which complement our two centers in Bangalore and Mumbai, India.

The newest center, which opened in Bangalore in November 2007, can accommodate up to 5,000 members—and it is currently our intention to bring it to capacity. Our global recruitment drive is in high gear, attracting over 1,000 professionals in the past 12 months alone. We’re currently recruiting another 1,500—half in Canada and the remainder in the United States and Europe, in addition to recruiting 50-75 new members monthly in India. Meanwhile, during the past year, we also significantly increased our staff utilization rate and carefully managed our operational costs across the organization. The result? Better performance and record margins of 6.4 percent on net earnings of $236.4 million. This represents a 61 percent improvement over the previous year’s margins.

Fourth, we brought renewed rigor to fiscal management. Over the past 12 months, we strengthened our balance sheet by paying down $331 million on our long-term debt. Over the past 18months, we’ve cancelled 25 percent of our outstanding shares, including buying back more than 12 million shares in fiscal 2007.

The rigor with which we achieved our results is complemented by our transparency. We are pleased to have been recognized by the Canadian Institute of Chartered Accountants (CICA) with an Award of Excellence in corporate reporting.

HOW WE’RE GROWING SHAREHOLDER VALUE

Working in concert, these four initiatives achieved rapid results, as CGI’s stock price surged in value by over 50percent in fiscal 2007. As managers and shareholders, we’re certainly pleased by these results and believe the price is headed in the right direction. But we also believe there’s significant opportunity for additional value creation. Our price-to-earnings (P/E) ratio has reached the average of our peer group—and yet we perform significantly above average among our peers in such key metrics as net margin and cash flow.

Clearly, then, there’s a valuation gap between CGI’s share price and where we believe it should trade. We’ve therefore launched an aggressive investor relations campaign to tell our story, describe our strategy and set out CGI’s key differentiators. Focusing on the United States, home to more than 40 percent of CGI’s institutional shareholders, the campaign

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culminated in our first Investor Day held in New York City on November 16. Judging by the positive reactions and questions, the event was a success. We’re also making a compelling case for CGI to investors who hold stock in one or more of our competitors and who value strong fundamentals such as cash flow. CGI is actually one of the largest cash generators among its peers, producing $550 million, or $1.65 per share, during fiscal 2007.

SETTING “STRETCH” GOALS

The past 12months have been both eventful and satisfying. Our overarching goal is to continue building on this hard-won momentum to generate even more profitable and sustainable growth with our “build and buy” strategy. This is why we’ve set several “stretch” goals for the near to medium term.

Our chief goal—to profitably double CGI’s size over the next three to five years—hinges on our ability to grow revenue mainly from outside Canada. While our Canadian operations continue to grow, they currently account for 60percent of revenue, with the balance generated by U.S., European and Asian operations. We’re working to reverse this 60/40split, and to thereby broaden our global scope. Revenue from outside Canada continues to rise—a trend we are accelerating. More specifically, we’re targeting our growth in the United States and Europe to outpace our global growth in the coming years.

However, our success will depend on our ability to balance and serve the interests of three key stakeholders. CGI clients, members and shareholders must all feel—and understand—that they share in our company’s success.

Clients are CGI’s most important stakeholders. How we deliver on their expectations, and how we continue to outperform the competition, will determine how swiftly we achieve our goals. As the past year’s experience has shown, execution is essential to growing these all-important client relationships.

As for our professional staff (or “members”), their individual success is closely linked to CGI’s collective dream—as it always has been. We call our professionals “members” for reasons laid out in our original guiding dream—to create an environment in which members enjoy working together and, as owners, contribute to building a company they can be proud of. The dream’s core concept is ownership in every sense of the word. The financial rewards of ownership are important. But equally important are empowerment, accountability and, ultimately, work satisfaction. This powerful sense of ownership and accountability derives from a singular fact: more than 80percent of our members are CGI shareholders, representing the largest single block of ownership.

In order to best serve all our shareholders, who constitute CGI’s third set of stakeholders, our goal is to generate long-term sustainable value. To do this, we’re working to ensure that every decision we make generates a return. This is the mindset we have across the organization—we are owners, and we act like it. Everything, from our shared processes and methodologies to our structures and incentive plans, is geared toward achieving client satisfaction and, ultimately, our financial objectives. We believe this is the best way to create value for the short and long term.

HOLDING STEADY TO OUR “BUILD AND BUY” STRATEGY

From a strategic perspective, the year ahead will see us hold steady to our “build and buy” strategy. We will continue to “build” organic growth by cultivating new business from clients and prospects, and delighting them with the excellence of our execution.

As for the “buy” component of this strategy, or growth through acquisitions, we are in excellent financial shape. We have a strong balance sheet, and we have increased our credit line to $1.5billion, with a possible extension to $1.75billion, as required. In addition, the surging Canadian dollar encourages us to look aggressively for opportunities among publicly traded and private companies, especially in the United States and Europe. But, as always, any “buy” will be strictly contingent on strategic fit, synergies and the target company’s contribution to earnings and EPS in the first year.

FIVE REASONS WHY WE’RE GOOD TO KNOW

In an increasingly competitive global economy, the factors that clearly distinguish CGI from the competition will be critical to our continued success. In this respect, we’re confident of possessing the kind of attributes that make us not just good to know, but the best to know.

First differentiator: the sheer breadth and depth of our offerings. CGI is among the very few end-to-end IT and business process services firms operating and competing on a global scale. Today’s organizations are migrating more of their IT and business processes to the back office

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so they can better focus on front-line operations. That’s where CGI comes in. We have the expertise, track record and offering to manage that growing back office. Most competitors simply can’t match what we bring to the table.   Second differentiator: our global delivery model. Competitors offer onshore, nearshore or offshore services. We offer all three, crafting a delivery model matched to the client’s needs. Our unique global supply chain can serve clients anywhere in the world, yielding the best combination of quality, flexibility and cost.   Third differentiator: we’re local, and we need to be. It’s the reason we have over 100offices in major metropolitan areas in North America and Europe. Our members live and work alongside our clients to deliver a level of accountability, supported by global resources, that’s beyond the capacity of most competitors.   Fourth differentiator: our ability to leverage opportunities. We’ve enjoyed tremendous success in translating one-time projects into long-term relationships. From the sale of single proprietary solutions—particularly our Advantage and Momentum solutions in the United States—we’ve built several long-term hosting and management relationships. In other words, we’re very good at transforming discrete revenue into recurring revenue, and thereby helping our clients win and grow.   Fifth differentiator: the caliber of CGI’s management team and members. As our remarkably low attrition rate and high ownership participation suggest, CGI managers truly believe in this company. They invest significantly in and are fully committed to our company’s success. Given their long service and deep expertise, we believe they are the best management team in the industry.   Ever since its founding more than 30years ago, CGI has grown profitably and steadily. In 1976, we posted $138,000in revenue. Today, thanks to the support of our clients and members, we generate that amount in a few minutes. Our unbroken record of success suggests several things: strength in our management team, strength in strategy, and an abiding commitment to all our stakeholders.   For clients, members and investors, CGI is a company that is good to know—indeed great to know. For today, and especially for the future.   We wish to thank our clients and shareholders for their trust and confidence. And we would like to pay tribute to our members for their loyalty and dedication. We look forward to an exciting future together.  $550 million CGI is one of the largest cash generators among its peers, producing $550 million, or $1.65 per share, during fiscal 2007.

[signed]   SERGE GODIN Founder and Executive Chairman of the Board [signed]   MICHAEL E. ROACH President and Chief Executive Officer

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C A N A D A

NUMBER ONE "IT" EMPLOYER IN CANADA. GOOD TO KNOW.

STAYING ON TOP  |  DURING THE PAST THREE DECADES, CGI HAS EVOLVED INTO CANADA’S LEADING “IT” AND BUSINESS PROCESS SERVICES PROVIDER AND ONE OF THE COUNTRY’S LARGEST EMPLOYERS, WITH 16,500 PROFESSIONALS IN 35 LOCATIONS. AS THE ONLY PUBLICLY TRADED CANADIAN “IT” SERVICES COMPANY, CGI’S EXPERTISE IS RECOGNIZED THROUGHOUT THE BUSINESS AND “IT” DEPARTMENTS OF THE COUNTRY’S TOP COMPANIES AND GOVERNMENT AGENCIES. WE ARE THE ONLY GLOBAL PLAYER WHO HAS BUILT OUT CENTERS OF EXCELLENCE ACROSS CANADA IN SMALLER, LESS URBAN COMMUNITIES TO THE ADVANTAGE OF OUR CLIENTS, MEMBERS AND SHAREHOLDERS. BACKED BY OUR RICH HERITAGE AND LARGE PRESENCE, CGI IS A LEADER IN ADVANCING CANADA ON THE GLOBAL “IT” STAGE, PARTNERING WITH GOVERNMENT AND HIGHER EDUCATION ON NEW TECHNOLOGY INITIATIVES AND RECRUITING PROGRAMS.

Percentage of Global Revenue	Targeted Verticals
59%	Financial services
	Government and healthcare
	Telecommunications and utilities
	Manufacturing
	Retail and distribution

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5.5%     We continued to grow our Canadian business in 2007. In addition to renewals and additional work with clients such as Acxsys, PWGSC, National Bank of Canada and BDC, we added new clients to our roster, including a seven-year outsourcing contract with BRP.

DEVON CANADA

Devon Canada, EnCana, Husky Oil and Talisman Energy formed a co-venture with CGI in 2004 to develop a new industry solution for the highly complex area of Production Accounting. We selected CGI because of its deep industry knowledge, extensive development experience and flexibility. Devon was the first to go “live” with the new software in September 2007. The results have exceeded our expectations. As the first user of a very complex solution, we have not encountered any significant issues. And, more importantly, our user community is so enthusiastic that users are lobbying to be the next to convert.

Gerry Read  |  General Manager, Operations Accounting, Devon Canada Corporation

CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

Having become more complex, the investor’s profession relies more and more on high-tech systems and leading-edge technology. CGI is one of the Caisse’s long-standing strategic partners. We count on its high quality services and we benefit from the agility and flexibility that its professionals show by supporting us in reaching our objectives. A firm of the caliber of CGI is a precious ally in helping to make the Caisse an organization of reference among institutional fund managers.

Henri-Paul Rousseau  |  President and CEO, Caisse de dépôt et placement du Québec

Some of Our Clients			Locations
Bell Canada Bombardier Canada Post Cirque du Soleil Cott Desjardins	Manulife Financial National Bank of Canada Pfizer Purolator Rio Tinto Alcan	TD Bank Financial Group Telus Yellow Pages Group 10 provinces and territories 60+ municipalities	Burnaby, BC  Calgary, AB  Charlottetown, PE  Edmonton, AB  Fredericton, NB  Halifax, NS  Markham, ON  Mississauga, ON  Montréal, QC	Ottawa, ON  Québec City, QC  Regina, SK  Saguenay, QC  Saint John, NB  St. John’s, NL  Toronto, ON  Victoria, BC  Winnipeg, MB

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UNITED STATES  |  INDIA

SERVING 44 U.S. STATES AND OVER 100 FEDERAL AGENCIES. GOOD TO KNOW.

“IT” IS A KEY ENABLER OF TRANSFORMATION | OUR U.S. PRESENCE INCLUDES MORE THAN 50 OFFICES COVERING ALL MAJOR REGIONS AND METROPOLITAN AREAS. WITH MORE THAN 5,000 TALENTED PROFESSIONALS, BROAD CAPABILITIES AND A FLEXIBLE APPROACH, CGI HELPS CLIENTS ACHIEVE THEIR BUSINESS TRANSFORMATION. FROM OPTIMIZING OPERATIONS AND ENHANCING PERFORMANCE TO IMPROVING CUSTOMER SERVICE AND INCREASING COMPETITIVE ADVANTAGE, LEADING CORPORATIONS AND GOVERNMENTS ARE DISCOVERING HOW TRANSFORMATION CAN ADVANCE THEIR BUSINESS GOALS. OUR OFFERINGS ARE CUSTOMIZED TO MEET CLIENTS’ SPECIFIC GOALS AND ARE DELIVERED THROUGH A CLIENT-PROXIMITY BUSINESS MODEL THAT OFFERS LOCAL ACCOUNTABILITY AND RESPONSIVENESS, AND SUPPORTED BY A BALANCED BLEND OF GLOBAL DELIVERY OPTIONS TO PROVIDE CLIENTS WITH THE COMBINATION OF VALUE AND EXPERTISE THEY REQUIRE. THIS FLEXIBLE SERVICE DELIVERY MODEL COMBINED WITH OUR PROPRIETARY SOLUTIONS AND INDUSTRY EXPERTISE, PARTICULARLY AS A LEADING PLAYER IN THE PUBLIC SECTOR, BANKING AND INSURANCE VERTICALS, HELPED FUEL A 2007 CLIENT SATISFACTION RATING OF 9 OUT OF 10.

Percentage of Global Revenue	Targeted Verticals
33%	Financial services
	Government and healthcare
	Telecommunications and utilities
	Manufacturing
	Retail and distribution

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In 2007, our U.S. and India operations grew at near double-digit levels. Fiscal 2008 looks to continue this growth, with promising opportunities across large state and federal agencies and within the commercial space.     8.9%

CONSUMER SERVICES AGENCY

Under the direction of Governor Schwarzenegger, the Department of General Services led the California Strategic Sourcing Initiative to get the best products and services at the best prices, saving taxpayer dollars and modernizing the State’s procurement system. As the leader in delivering significant savings through its spend management offerings, CGI was a capable and committed partner in this initiative. Using strategic sourcing, CGI helped us achieve $170 million savings to date through streamlined procurement processes and better contracts without sacrificing services to our citizens. CGI’s tailored solutions have equipped the State to continue delivering savings through improved procurement practices.

Rosario Marin  |  Secretary, California State and Consumer Services Agency

OCÉ NORTH AMERICA

As a leading international provider of digital document management technology and services, Océ requires world-class information technology services capabilities to compete effectively in its markets today and in the future. CGI’s commitment to providing quality services and its well established delivery process will continue to enhance Océ’s infrastructure management, while providing increased stability and control of costs. CGI has proven that it can not only provide quality services, but that it is a true strategic partner, helping us win and grow.

Joseph D. Skrzypczak  |  President and CEO, Océ North America

Some of Our Clients		Locations
Arrow Electronics AT&T Bank of America Chicago Stock Exchange Dick’s Sporting Goods Equifax John Hancock Michelin Microsoft	Novelis PNC Bank Russell Investments Verizon Wells Fargo 100+ U.S. federal agencies 190+ state and local organizations	United States  Albany, NY  Andover, MA  Annapolis, MD  Atlanta, GA  Austin, TX  Baltimore, MD  Birmingham, AL  Boston, MA  Buffalo, NY  Canton, MA	Charlotte, NC  Chicago, IL  Cleveland, OH  Columbia, SC  Columbus, OH Dallas, TX  Denver, CO  Fairfax, VA  Fort Worth, TX  Frankfort, KY	Honolulu, HI  Houston, TX  Jefferson City, MO  Los Angeles, CA  New York, NY  Oakland, CA  Oklahoma City, OK  Philadelphia, PA  Phoenix, AZ  Plymouth, MN	Rancho Cordova, CA   Redwood City, CA  Richmond, VA  Roseland, NJ  Sacramento, CA  San Antonio, TX  San Diego, CA  Sarasota, FL  Seattle, WA  St. Louis, MO	Tampa, FL  Washington, DC  India  Bangalore  Mumbai

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Growth in our European and Asia Pacific operations led the company in 2007. Over the next three to five years, we expect growth to be steep, as CGI projects Europe and Asia Pacific to represent 20 percent or more of total revenue.     12.5%

66 OF CGI’S TOP 100 CLIENTS HAVE OPERATIONS IN EUROPE OR AUSTRALIA. GOOD TO KNOW.

ONGOING EXPANSION AND GROWTH | FOR 32 YEARS, CGI HAS FOLLOWED THE AMBITIONS OF ITS CLIENTS, SHADOWING THEIR EXPANSION AND GROWTH INTO NEW MARKETS. TODAY, WE HAVE OFFICES IN MOST EUROPEAN COUNTRIES AND A STRONG MARKET PRESENCE IN HIGH DEMAND SECTORS SUCH AS TELECOMMUNICATIONS, FINANCIAL SERVICES AND GOVERNMENT. WE ARE A KNOWN LEADER IN SEVERAL PRACTICE AREAS, INCLUDING SAP, COLLECTIONS MANAGEMENT, CUSTOMER RELATIONSHIP MANAGEMENT AND BUSINESS INTELLIGENCE, AND SERVE BLUE CHIP GLOBAL AND CONTINENTAL CLIENTS. EUROPE PLAYS A STRATEGIC ROLE IN CGI’S GLOBAL DELIVERY MODEL, WITH CENTERS OF EXCELLENCE IN POLAND AND SPAIN, AND OUR PRESENCE IN AUSTRALIA CONTINUES TO GROW, AS WE WORK WITH THE COUNTRY’S LARGEST HUMAN SERVICES AND TAX AGENCIES AND LEADING TELECOM FIRM.

Percentage of Global Revenue	Targeted Verticals
8%	Financial services
	Government and healthcare
	Telecommunications and utilities
	Manufacturing
	Retail and distribution

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EUROPE  |  AUSTRALIA

ALLIANZ POLAND

CGI has always been a reliable partner who has helped us to explore the full potential of our systems and contributed significantly to the success of IT within Allianz Poland. CGI is able to add business value to our operations due to its excellent technology competencies as well as its ability to leverage sector/industry experience gathered from other technology projects around the globe.

Thomas Ruedesheim  |  Chief Information Officer, Allianz Poland

TELE2 GERMANY

CGI initially assisted us with test management, helping us to build a test practice, and because of its excellent work, we expanded our business with the company. Over the past year and a half, CGI has supported us in other areas, including requirements management, business analysis, and systems enhancement, among others. Its team has improved the software quality of our IT system landscape, especially in terms of order management. Our order processes run much more smoothly now. We appreciate CGI for its commitment to our business and its willingness to go the extra mile to achieve our business goals.

Hermann Riedl  |  CEO, Tele2 Germany

Some of Our Clients		Locations
Air Liquide Alstom Australian and New Zealand Bank(ANZ) Axa BNP Paribas Casema Deutsche Bank	France Telecom Italcementi O2Germany Orange Schroders Société Générale Telstra Total Vodafone	EUROPE				AUSTRALIA
		BELGIUM  Brussels  ENGLAND  Basingstoke  Bristol  London  Stevenage	FRANCE  Paris  GERMANY  Düsseldorf  HUNGARY  Budapest  ITALY  Milan	NETHERLANDS  The Hague  POLAND  Warsaw  PORTUGAL  Lisbon	SPAIN  Madrid  Malaga  SWEDEN  Stockholm  SWITZERLAND  Zug	Canberra  Melbourne  Sydney

|  15

The CGI Constitution

Our Dream To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of. Our Mission To help our clients with professional services of outstanding quality, competence and objectivity, delivering the best solutions to fully satisfy client objectives in information technology, business processes and management. In all we do, we foster a culture of partnership, intrapreneurship, teamwork and integrity, building a world-class IT and business process services company. Our Vision To be a world-class IT and business process services leader helping our clients win and grow.

Our Values

Partnership and quality	For us, partnership and quality are both a philosophy and a way of life. We develop and follow the best management practices and we entrench these approaches into client relationships and service delivery frameworks in order to foster long-term and strong partnerships with our clients. We listen to our clients and we are committed to their total satisfaction in everything we do.
Objectivity and integrity	We exercise the highest degree of independent thinking in selecting the products, services and solutions we recommend to clients. In doing so, we adhere to the highest values of quality, objectivity and integrity. Consequently, strict rules of business and professional conduct are applied. We do not accept any remuneration from suppliers.
Intrapreneurship and sharing	Our success is based on the competence, commitment and enthusiasm of our members. Therefore, we promote a climate of innovation and initiative where we are empowered with a sense of ownership in supporting clients, thus ensuring the firm’s profitable growth. Through teamwork, sharing our know-how and expertise, we bring the best of CGI to our clients. As members, we share in the value we create through equity ownership and profit participation.
Respect	As a global company, we recognize the richness that diversity brings to the company and welcome this diversity while embracing the overall CGI culture. In all we do, we are respectful of our fellow members, clients, business partners and competitors.
Financial strength	We strive to deliver strong, consistent financial performance, which sustains long-term growth and rewards our members and shareholders. Financial strength enables us to continuously invest and improve services and business solutions to the benefit of our clients. To this end, we manage our business to generate industry superior returns.
Corporate social responsibility	Our business model is designed to ensure that we are close to our clients and communities. We embrace our social responsibilities and contribute to the continuous development of the communities in which we live and work.

16  |  2007 ANNUAL REPORT  |  CGI GROUP INC.

Leadership Team

SERGE GODIN* Founder and Executive Chairman ofthe Board   ANDRÉ IMBEAU* Founder, Executive Vice-Chairman of the Board and Corporate Secretary     PAULE DORÉ Advisor to the Founder and Executive Chairman of the Board MICHAEL E. ROACH* President and Chief Executive Officer   DAVID ANDERSON* Executive Vice-President and Chief Financial Officer ANDRÉ BOURQUE* Executive Vice-President and Chief Legal Officer   LUC PINARD* Executive Vice-President, Chief Technology and Quality Officer   DANIEL ROCHELEAU* Executive Vice-President and Chief Business Engineering Officer

CANADA   HICHAM ADRA* Senior Vice-President and General Manager Ottawa and Western Canada   PAUL BIRON* Senior Vice-President and General Manager Technologies and Infrastructure   JOHN G. CAMPBELL* Senior Vice-President and General Manager Communication Services Business   WILLIAM CLARK Senior Vice-President Western Canada   CLAUDE MARCOUX Senior Vice-President Systems Integration and Consulting Services Québec   DOUG MCCUAIG* Senior Vice-President and General Manager Greater Toronto and Atlantic Canada MALCOLM SCOTT Senior Vice-President Insurance Business Services   CECIL SMITH Senior Vice-President Atlantic Canada   PIERRE TURCOTTE* Senior Vice-President and General Manager Québec     U.S. AND INDIA   DONNA MOREA* President U.S. and India   S. CHANDRAMOULI Vice-President India Operations   JAME COFRAN Senior Vice-President Banking and Investments   ROBERT HANNUM Senior Vice-President Public Sector U.S. Central and South PETER IHRIG Senior Vice-President Commercial U.S. Central and South   MICHAEL KEATING Senior Vice-President U.S. West   JOHN KELLY Senior Vice-President New York/New Jersey   PAUL RAYMOND* Senior Vice-President New England and Insurance Services   DONNA RYAN Senior Vice-President CGI Federal   GEORGE SCHINDLER* President CGI Federal   RICHARD SCHMITZ Senior Vice-President Healthcare and Government BPS   NAZZIC TURNER* Senior Vice-President and General Manager U.S. Central and South EUROPE AND AUSTRALIA   JOSEPH SALIBA* President Europe and Australia   JOSE CARLOS RODRIGUEZ ARROYO Vice-President Spain and Italy   GAVIN CHAPMAN Senior Vice-President and Managing Director Northern Europe   KLAUS ELIX Senior Vice-President CentralEurope   JACQUES LERAY Vice-President and General Manager France   JONATHAN LIGHT Vice-President Australia

* Member of the Management Committee

|  17

Board of Directors

CLAUDE BOIVIN^b,c Director since 1993 Lead Director and Chair of the Corporate Governance Committee, CGI Director of Companies   JEAN BRASSARD Director since 1978 Director of Companies   CLAUDE CHAMBERLAND^b Director since 1998 Director of Companies   ROBERT CHEVRIER^a,b Director since 2003 President, Roche Management Co. Inc. THOMAS D’AQUINO^c Director since 2006 Chief Executive and President Canadian Council of Chief Executives   PAULE DORÉ Director since 1995 Advisor to the Founder and Executive Chairman, CGI   SERGE GODIN Director since 1976 Founder and Executive Chairman ofthe Board, CGI ANDRÉ IMBEAU Director since 1976 Founder, Executive ViceChairman of the Board and Corporate Secretary, CGI   DAVID L. JOHNSTON^b Director since 1995 Chair of the Human Resources Committee, CGI President and Vice Chancellor University of Waterloo   EILEEN A. MERCIER^a Director since 1996 Chair of the Audit and Risk Management Committee CGI Director of Companies MICHAEL E. ROACH Director since 2006 President and Chief Executive Officer CGI   C. WESLEY M. SCOTT^a Director since 2001 Director of Companies   GERALD T. SQUIRE^a,c Director since 2003 Director of Companies   ROBERT TESSIER^c Director since 2003 Chairman of the Board Gaz Métro inc.

a   Member of the Audit and Risk Management Committee

b   Member of the Human Resources Committee

c   Member of the Corporate Governance Committee

International Advisory Council

The International Advisory Council’s role is to provide CGI’s management team with strategic counsel toward the Company’s vision of becoming a world-class IT and business process services leader. Council members are chosen for their track record as leaders of global corporations as well as their knowledge of CGI’s selected economic sectors and geographic markets, namely the United States, Europe, Canada and the Asia Pacific region.

The Council acts as an advisor for CGI’s development around the world, helping it better understand business needs, different cultures and business practices, as well as developing trends.

JACQUES BOUGIE Chairman of the International Advisory Council Former President and Chief Executive Officer of Alcan Aluminum Limited Director of Companies HARVEY GOLUB Former Chairman and Chief Executive Officer of American Express Director of Companies MICHAEL HEPHER Former Chairman and Chief Executive Officer of Lloyds Abbey Life and former Group Managing Director of British Telecommunications Director of Companies ARNOLD LANGBO Former Chairman and Chief Executive Officer of Kellogg Company Director of Companies

18  |  2007 ANNUAL REPORT  |  CGI GROUP INC.

PROVIDING THE BEST MIX OF

LOCAL AND GLOBAL DELIVERY

STRONG LOCAL PRESENCE	GLOBAL DELIVERY	COST + QUALITY = VALUE
With 26,000 members in 100+ offices across 16 countries, CGI adheres to the fundamental belief that having a strong local presence with clients is critical to our joint success.	Our growing and unique global delivery model comprises 11delivery centers across 5countries and 5,000members representing 20 percent of our total workforce.	Global delivery is not only about one country or one characteristic like labor rates. CGI is positioned to provide the best mix of local and global delivery sourcing.

Main Locations

CANADA	UNITED STATES			EUROPE		ASIAPACIFIC
Burnaby, BC Calgary, AB Charlottetown, PE Edmonton, AB Fredericton, NB Halifax, NS Markham, ON Mississauga, ON Montréal, QC Ottawa, ON Québec City, QC Regina, SK Saguenay, QC Saint John, NB St. John’s, NL Toronto, ON Victoria, BC Winnipeg, MB	Albany, NY Andover, MA Annapolis, MD Atlanta, GA Austin, TX Baltimore, MD Birmingham, AL Boston, MA Buffalo, NY Canton, MA Charlotte, NC Chicago, IL Cleveland, OH Columbia, SC Columbus, OH Dallas, TX Denver, CO Fairfax, VA	Fort Worth, TX Frankfort, KY Honolulu, HI Houston, TX Jefferson City, MO Los Angeles, CA New York, NY Oakland, CA Oklahoma City, OK Philadelphia, PA Phoenix, AZ Plymouth, MN Rancho Cordova, CA Redwood City, CA Richmond, VA Roseland, NJ Sacramento, CA San Antonio, TX	San Diego, CA Sarasota, FL Seattle, WA St. Louis, MO Tampa, FL Washington, DC	BELGIUM Brussels ENGLAND Basingstoke Bristol London Stevenage FRANCE Paris GERMANY Düsseldorf HUNGARY Budapest ITALY Milan	NETHERLANDS The Hague POLAND Warsaw PORTUGAL Lisbon SPAIN Madrid Malaga SWEDEN Stockholm SWITZERLAND Zug	AUSTRALIA Canberra Melbourne Sydney INDIA Bangalore Mumbai

For a complete list of CGI’s worldwide offices and contacts, please visit www.cgi.com.

|  19

Shareholder Information

GLOBAL HEADQUARTERS 1130 Sherbrooke Street West Montréal, QuébecH3A 2M8 Canada   Tel.:           514-841-3200 Fax:           514-841-3299   LISTING Toronto Stock Exchange, April 1992: GIB.A New York Stock Exchange, October 1998: GIB   Number of registered shareholders as of September 30, 2007: 2,819   Number of shares outstanding as of September 30, 2007: 290,545,715Class A subordinate shares 34,208,159Class B shares   High/low of share price from October 1, 2006, to September 30, 2007: TSX (CDN$): 12.24 / 6.50 NYSE (US$): 11.73 / 6.20   The certifications by CGI’s Chief Executive Officer and Chief Financial Officer concerning the quality of the Company’s public disclosure pursuant to Canadian regulatory requirements are filed in Canada on SEDAR (www.sedar.com). Similar certifications pursuant to Rule 13a-14 of the U.S. Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 are exhibits to our Form 40-F filed on EDGAR (www.sec.gov). The Company has also filed with the New York Stock Exchange the certification required by Section 303A.12 of the exchange’s Listed Company Manual.   CGI’s corporate governance practices do not differ in any significant way from those required of domestic companies under New York Stock Exchange listing standards and they are set out in the CGI Management Proxy Circular, which is filed with Canadian and U.S. securities authorities and is therefore available on SEDAR (www.sedar.com) and EDGAR (www.sec.gov), respectively, as well as on CGI’s Web site (www.cgi.com).   AUDITORS Deloitte & Touche LLP   TRANSFER AGENT Computershare Trust Company of Canada 100 University Avenue, 9th Floor Toronto, OntarioM5J 2Y1 Telephone: 1-800-564-6253   INVESTOR RELATIONS For further information about the Company, additional copies of this report or other financial information, please contact:   Investor Relations CGI Group Inc. 1130 Sherbrooke Street West Montréal, QuébecH3A 2M8 Canada Telephone: 514-841-3200   You may also contact us by sending an e-mail to ir@cgi.com or by visiting the Investors section on the Company’s Web site at www.cgi.com.   ANNUAL GENERAL MEETING OF SHAREHOLDERS Tuesday, February 5, 2008 at 11:00a.m. Omni Mont-Royal Hotel Salon Les saisons 1050 Sherbrooke Street West Montréal, Québec   CGI will present a live webcast of its Annual General Meeting of Shareholders at www.cgi.com. Complete instructions for viewing the webcast will be available on CGI’s Web site. To vote by phone or by using the Internet, please refer to the instructions provided in the CGI Management Proxy Circular.   This annual report is also available at www.cgi.com.   Le rapport annuel 2007 de CGI est aussi publié en français  

We would like to thank our CGI members who were photographed as part of this year’s annual report. The photos were taken at CGI offices throughout Montreal, except for photo on page 12.

Printed in Canada

Design: www.ardoise.com

20  |  2007 ANNUAL REPORT  |  CGI GROUP INC.

NUMBERS

  annual report     CGI Group Inc.

  2007 

	Contents
02	Financial Highlights
04	Management’s Discussion and Analysis of Financial Position and Results of Operations
28	Management’s and Auditor’s Reports
31	Consolidated Financial Statements
35	Notes to the Consolidated Financial Statements
64	Shareholder Information

Financial Highlights

Revenue in billions of dollars	Net earnings from continuing operations in millions of dollars	Net earnings from continuing operations margin in percentage	Diluted eps from continuing operations in dollars

Contract backlog in billions of dollars	Cash provided by continuing operations activities in millions of dollars	Net debt to capitalization1 in percentage	Number of shares outstanding at year end in millions of shares

 1 The net debt to capitalization ratio represents the proportion of long-term debt, net of cash and cash equivalents, over the sum of shareholders' equity and long-term debt.

02  |  2007 ANNUAL REPORT  |  CGI GROUP INC.

YEARS ENDED SEPTEMBER 30	2007	2006	2005
(in thousands of Canadian dollars, except share data, ratios and percentages)	$	$	$
Financial performance
Revenue	3,711,566	3,477,623	3,685,986
Adjusted EBIT1	407,813	310,336	346,145
Adjusted EBIT margin1	11.0%	8.9%	9.4%
Net earnings from continuing operations	236,402	146,533	219,698
Net earnings from continuing operations margin	6.4%	4.2%	6.0%
Basic earnings per share from continuing operations	0.72	0.40	0.50
Diluted earnings per share from continuing operations	0.71	0.40	0.50
Net earnings	236,402	146,533	216,488
Net earnings margin	6.4%	4.2%	5.9%
Basic earnings per share	0.72	0.40	0.49
Diluted earnings per share	0.71	0.40	0.49
Net earnings (under US GAAP)2	239,247	149,176	237,782
Basic earnings per share (under US GAAP)2	0.73	0.41	0.54
Diluted earnings per share (under US GAAP)2	0.72	0.41	0.54
Cash flow from continuing operating activities	550,169	305,596	480,709
Financial position
Total assets	3,475,808	3,692,032	3,986,659
Shareholders’ equity	1,818,268	1,748,020	2,494,690
Shareholders’ equity per common share	5.60	5.27	5.79
Working capital	105,283	248,694	332,387
Current ratio	1.14	1.37	1.47
Long-term debt (current and long-term portions)	473,191	813,259	249,700
Net debt to capitalization ratio3	16.8%	27.2%	0.3%

	FISCAL 2007				FISCAL 2006
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Quarterly financial results
Revenue	922,846	933,318	951,342	904,060	845,820	866,504	866,836	898,463
Adjusted EBIT1	101,526	104,558	102,040	99,689	91,121	77,642	62,827	78,746
Adjusted EBIT margin1	11.0%	11.2%	10.7%	11.0%	10.8%	9.0%	7.2%	8.8%
Net earnings	65,577	64,433	62,711	43,681	39,532	35,944	14,149	56,908
Net earnings margin	7.1%	6.9%	6.6%	4.8%	4.7%	4.1%	1.6%	6.3%
Basic earnings per share	0.20	0.20	0.19	0.13	0.12	0.11	0.04	0.13
Diluted earnings per share	0.20	0.19	0.19	0.13	0.12	0.11	0.04	0.13
Cash flow from continuing operating activities	120,396	134,637	128,962	166,174	51,823	107,595	82,550	63,628

1 Adjusted EBIT represents net earnings before restructuring costs related to specific items, interest on long-term debt, other income, net, gain on sale of assets, gain on sale & earnings from an investment in an entity subject to significant influence, non-controlling interest, net of income taxes, income taxes and discontinued operations. Adjusted EBIT margin is adjusted EBIT over revenue.

2 Reconciliation between US and Canadian generally accepted accounting principles is provided in Note 27 to the consolidated financial statements.

3 The net debt to capitalization ratio represents the proportion of long-term debt, net of cash and cash equivalents, over the sum of shareholders’ equity and longterm debt.

2007 ANNUAL REPORT  |  CGI GROUP INC.  |  03

Management’s Discussion and Analysis of Financial Position and Results of Operations

For the year ended September 30, 2007

November 13, 2007

Basis of Presentation

Throughout this document, CGI Group Inc. is referred to as “CGI”, “we” , “our” or “Company”. This Management’s Discussion and Analysis of Financial Position and Results of Operations (“MD&A”) should be read in conjunction with the audited consolidated financial statements and the notes thereto for the years ended September 30, 2007, 2006, and 2005. CGI’s accounting policies are in accordance with Canadian generally accepted accounting principles (“GAAP”) of the Canadian Institute of Chartered Accountants (“CICA”). These differ in some respects from GAAP in the United States (“US GAAP”). All dollar amounts are in Canadian dollars unless otherwise indicated.

Forward-Looking Statements

All statements in this MD&A that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of that term in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and are “forward-looking information” within the meaning of sections 138.3 and following of the Ontario Securities Act. These statements and this information represent CGI’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, of which many are beyond the control of the Company. These factors could cause actual results to differ materially from such forward-looking statements or forward-looking information. These factors include and are not restricted to the timing and size of new contracts, acquisitions and other corporate developments; the ability to attract and retain qualified members; market competition in the rapidly-evolving IT industry; general economic and business conditions, foreign exchange and other risks identified in the MD&A, in CGI’s Annual Report or Form 40-F filed with the U.S. Securities and Exchange Commission (filed on EDGAR at www.sec.gov), the Company’s Annual Information Form filed with the Canadian securities authorities (filed on SEDAR at www.sedar.com), as well as assumptions regarding the foregoing. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan,” and similar expressions and variations thereof, identify certain of such forward-looking statements or forward-looking information, which speak only as of the date on which they are made. In particular, statements relating to future performance are forward-looking statements and forward-looking information. CGI disclaims any intention or obligation to publicly update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements or on this forward-looking information. You will find more information about the risks that could cause our actual results to significantly differ from our current expectations in the Risks and Uncertainties section.

Non-GAAP Measures

The Company reports its financial results in accordance with GAAP. However, in this MD&A, certain non-GAAP financial measures are used, which include:

1.	Earnings from continuing operations before restructuring costs related to specific items, interest on long-term debt, other income(net), gain on sale of assets, gain on sale and earnings from an investment in an entity subject to significant influence , non-controlling interest, and income taxes (“adjusted EBIT”) and
2.	Net earnings from continuing operations prior to restructuring costs related to specific items.

Adjusted EBIT is used by our management as a measure of our operating performance as it provides information that can be used to evaluate the effectiveness of our business from an operational perspective. A reconciliation of this item to its closest GAAP measure can be found on page 18.

Net earnings from continuing operations prior to restructuring costs related to specific items is used by our management as a measure of our operating performance excluding restructuring activities. A reconciliation of this item to its closest GAAP measure can be found on page 20.

Management believes that these non-GAAP measures provide useful information to investors regarding the Company’s financial condition and results of operations as they provide additional measures of its performance. They also provide investors with measures of performance to compare our results between periods without regards to specified items. These non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. They should be considered as supplemental in nature and not a substitute for the related financial information prepared in accordance with GAAP.

04 | 2007 annual report | CGI Group Inc.

Corporate Overview

Headquartered in Montreal, Canada, CGI provides end-to-end information technology services (commonly referred to as IT services) and business process services (“BPS”) to clients worldwide, utilizing a highly customized, cost efficient delivery model. The Company’s delivery model provides for work to be carried out onsite at client premises, or through one of its centers of excellence located in North America, Europe and India. We also have a number of leading business solutions that support long-term client relationships. Our services are generally broken down as:

· Consulting– CGI provides a full range of IT and management consulting services, including business transformation, IT strategic planning, business process engineering and systems architecture.

· Systems integration– CGI integrates and customizes leading technologies and software applications to create IT systems that respond to clients’ strategic needs.

· Management of IT and business functions (“outsourcing”)– Clients delegate entire or partial responsibility for their IT or business functions to CGI to achieve significant savings and access the best technology, while retaining control over strategic IT and business functions. As part of such agreements, we implement our quality processes and best-of-breed practices to improve the efficiency of the clients’ operations. We also integrate clients’ operations into our technology network. Finally, we may transfer   specialized professionals from our clients, enabling them to focus on mission critical operations. Services provided as part of an outsourcing contract may include development and integration of new projects and applications; applications maintenance and support; technology management (enterprise and end-user computing and network services); transaction and business processing, as well as other services such as payroll and document management services. Outsourcing contracts typically have terms from five to ten years and are renewable.

Our operations are managed through two lines of business (“LOB”), in addition to Corporate services, namely: IT services and BPS. The focus of these LOB’s is as follows:

· The IT services LOB provides a full range of services, including systems integration, consulting and outsourcing, to clients located in North America, Europe and Asia Pacific. Our professionals and centers of excellence facilities in North America, Europe and India also provide IT and business process services to clients as an integral part of our homeshore, nearshore and offshore delivery model.

· Services provided by the BPS LOB include business processing for the financial services sector, as well as other services such as payroll and document management services.

We take great pride in delivering services of the highest quality to our clients. To do so consistently, we have implemented and maintain a quality program under ISO (International Organization for Standardization). We firmly believe that by designing and implementing rigorous service delivery quality standards followed by continuous monitoring of conformity with those standards we are best able to satisfy our clients’ needs. As a measure of the scope of our ISO program, approximately 95% of our revenue was generated by business units having successfully obtained certification.

Competitive Environment

As a global provider of end-to-end information technology and business process services, CGI operates in a highly competitive and rapidly evolving global industry. Our competition comprises a variety of global players, from niche companies providing specialized services to other end-to-end service providers, mainly in the U.S., Europe and India, all of whom are competing for some or all of the services we provide. Because of CGI’s expanded capabilities, geographic presence and global delivery model, invitations to participate in larger, more complex opportunities are on the rise.

To compete effectively, CGI focuses on high-end systems integration, consulting and outsourcing where vertical industry knowledge and expertise are required. Our client proximity metro markets business model combined with our global delivery model results in highly responsive and cost competitive delivery. CGI’s global delivery model provides clients with a unique blend of onshore, nearshore and offshore delivery options that cater to their strategic and cost requirements.  CGI also has a number of leading business solutions that support long-term client relationships. Importantly, all of CGI’s business operations are executed based on the same management foundation, ensuring consistency and cohesion across the company.

There are many factors to winning and retaining IT and BPS contracts in today’s global market, including the following: total cost of services; ability to deliver; track record; vertical sector expertise; investment in business solutions; local presence; global delivery capability; and the strength of client relationships. CGI compares favorably with our competition with respect to all of these factors.

In summary, CGI’s competitive value proposition encompasses the following: end-to-end IT and BPS capability; expertise and proprietary business solutions in five industry sectors; global delivery model, which includes an industry leading nearshore services delivery capability; disciplined management foundation; and client focus, which is supported by our client proximity metro markets business model. Based on this value proposition and CGI’s growing critical mass in our three main markets—Canada, the U.S. and Europe—we are in a position to compete effectively on a global scale and win large contracts.

 2007 annual report | CGI Group Inc. | 05

Vision, Mission, and Strategy

Most companies begin with a business vision, but CGI began with a dream. In 1976, CGI founder Serge Godin, then 26 years old, had a dream to create an environment in which members enjoy working together and, as owners, contribute to building a company they can be proud of. That dream led to CGI’s vision of being a world-class IT and BPS leader, helping its clients win and grow, and to its overall mission:

. . . to help our clients with professional services of outstanding quality, competence and objectivity, delivering the best solutions to fully satisfy client objectives in information technology, business processes and management. In all we do, we foster a culture of partnership, intrapreneurship, teamwork and integrity, building a world-class IT and BPS company.

Through a four-pillar growth strategy that combines organic growth and acquisitions, CGI has become a consolidator in the IT services industry. The first pillar of this strategy focuses on generating organic growth through contract wins, renewals and extensions in the areas of outsourcing and systems integration and consulting (“SI&C”). We are significantly growing our outsourcing and SI&C sales funnels across all of our geographic markets.

The second pillar of the strategy involves the pursuit of new large outsourcing contracts, leveraging our end-to-end services, global delivery model and critical mass. CGI’s global delivery model offers a unique blend of onshore, nearshore and offshore delivery options that result in highly responsive and cost effective delivery. Further, based on the Company’s growth rate over the last several years, we have the critical mass required to bid on large and complex opportunities in North America and Europe.

The third pillar of our growth strategy focuses on the acquisition of smaller firms or niche players. We identify niche acquisitions through a strategic mapping program that systematically searches for targets that will strengthen our vertical market knowledge or increase the richness of our service offerings.

The fourth pillar involves the pursuit of transformational acquisitions focused on expanding our geographic presence and critical mass. This approach further enables us to strengthen our qualifications to compete for large outsourcing contracts.

Throughout its history, CGI has been highly disciplined in following this four-pillar growth strategy, with an emphasis on earnings accretion and maximizing shareholder value. Currently, our key growth targets are the U.S. and Europe.

Developments in 2007

Our efforts to reduce our cost structure in 2006 had the desired impact, and our profit margin strengthened considerably in line with our expectations. Two trends characterized CGI’s subsequent performance in fiscal 2007: steady organic growth across all of our geographic markets and stronger profit margins supported by operational excellence. We pursued a business development visibility program we called our Full Offering Strategy, designed to systematically, and with discipline, visit targeted new and existing clients to inform and educate them on CGI’s complete end-to-end offering. The strategy was a catalyst for new contracts, extensions and renewals. With this strong focus on fundamentals, we made only one niche acquisition, Codesic Consulting (“Codesic”), and established control over Conseillers en informatique d’affaires (“CIA”). Additionally, we invested our cash, taking advantage of what we viewed as low valuations, and actively repurchased shares on the open market under the terms of our Normal Course Issuer Bid. We also made substantial debt repayments.

New Contracts, Extensions, and Renewals

During fiscal 2007, CGI booked $3.3 billion of new contracts, extensions and renewals including but not limited to the following:

· October 4, 2006: Five-year US$65 million contract renewal for hosting and application maintenance and operations for the Commonwealth of Virginia’s eVA procurement portal solution.

· October 11, 2006: Five-year US$22.6 million managed services contract to host and operate its AMS Advantage® ERP system for the State of Wyoming.

· November 13, 2006: Five-year $100 million plus extension of an IT outsourcing contract with the Laurentian Bank of Canada to June 2016.

· January 26, 2007: Seven-year $23.6 million contract to provide multi-level IT services and technology outsourcing for the Acxsys Corporation.

· March 6, 2007: Two-year $9.7 million contract to provide systems integration support services to Public Works and Government Services Canada’s Financial Systems Transformation Project.

· March 29, 2007: Two-year extension with National Bank of Canada to provide payroll services to the bank’s corporate clients until 2016.

· May 4, 2007: 34-month US$16.1 million contract with the Washington State Children’s Administration to deliver critical services to families.

· May 9, 2007: Six-year US$84 million contract with Los Angeles County for the next phase of its ERP system project.

· May 11, 2007: Four-year contract renewal with the BDC (Business Development Bank of Canada) plus an option of three supplemental one year periods, to provide services including hosting, printing and insertion, system environment management, internet bandwidth and business continuity planning.

· May 14, 2007: Five-year $9 million contract with the Calgary Health Region which makes CGI the primary IT services provider to design, build, implement, and operate the Alberta Provincial Health Information Exchange.

06 | 2007 annual report | CGI Group Inc.

· August 22, 2007: Five-year contract renewal agreement with the Groupement des assureurs automobiles covering the operational aspects of the Fichier central des sinistres automobiles in Quebec for the processing and distribution of motor vehicle claims records in Quebec.

· August 29, 2007: Agreement with The Commerce Group, Inc. to extend their personal and commercial automobile policy processing services agreement through December 31, 2011.

· September 14, 2007: Seven-year IT outsourcing contract with BRP (Bombardier Recreational Products Inc.) to manage the company’s SAP infrastructure support, business intelligence applications, websites, as well as the e-commerce application that allows retailers and distributors to do business with BRP around the world.

· September 19, 2007: Two-year US$27 million renewal to administer multi-family housing payments in the state of Ohio for the U.S. Department of Housing and Urban Development.

· September 20, 2007: Five-year US$17.5 million contract with Orange County to upgrade its finance and purchasing information systems.

 · September 24, 2007: One-year US$8.5 million renewal with the U.S. Department of Housing and Urban Development in Northern California to provide contract administration and payment services for site-based multi-family housing assistance payments.

Acquisition

On May 3, 2007, we completed the acquisition of privately held Codesic Consulting, an IT services firm located in Seattle, Washington, for an aggregate consideration of $24.0 million. Codesic assisted clients in the management of strategic initiatives, integrating technology with business and supporting critical computing environments.

Control over Conseillers en informatique d’affaires (CIA)

On April 19,2007, following changes to the shareholders’ agreement, CGI established control of Conseillers en informatique d’affaires. CIA is a provider of IT services primarily in the government and financial sectors. The previous agreement was amended to remove limits to CGI’s representation on the Board of Directors. The Company holds three of the five board positions, with a 64.7% ownership stake.

Share Repurchase Program

On January 30, 2007, the Company’s Board of Directors authorized the renewal of a Normal Course Issuer Bid and the purchase of up to 10% of the public float of the Company’s Class A subordinate shares during the period ending February 4, 2008 . The Company received approval from the Toronto Stock Exchange for its intention to make an Issuer Bid that allows CGI to purchase on the open market up to 29,091,303 Class A subordinate shares for cancellation.

During fiscal 2007, the Company repurchased 12,339,400 of its Class A subordinate shares for $126.4 million at an average price of $10.25 including commissions under the current and previous Normal Course Issuer Bid.

Amended Credit Facility

On August 13, 2007, the Company amended its existing five-year unsecured credit facility to increase the amount to $1.5 billion with the possibility to increase it further to $1.75 billion.  The new credit facility, syndicated through 20 international financial institutions, has a five-year term expiring in August 2012 and can be extended on an annual basis.  The applicable interest rate charged under the credit facility is based on the Company’s indebtedness ratio and the form of borrowing chosen by the Company. Please see Note 8 to the consolidated financial statements for more information on our credit facilities.

Competitive Position Strengthening Program

As announced on March 29, 2006, the Company has taken measures to reduce the overall cost structure and accelerate the expansion of its global delivery model partially due to lower than expected revenue from BCE. In line with this plan, approximately 1,150 positions were eliminated, primarily located in Montreal and Toronto, of which half were related to BCE. The remaining headcount reduction stemmed from other adjustments to CGI’s cost base and included reductions in global and corporate functions.

The expansion of the global delivery model created new positions in our centers of excellence in Atlantic Canada, Southwest Virginia, and India which partially offset the headcount reductions. This exercise allowed the Company to further reduce its overhead and increase the overall utilization rate of its workforce.

In the first quarter of 2007, we completed our Competitive Position Strengthening Program.  The objectives of the program have been successfully met.  A total pre-tax provision of $90.3 million was taken for the program with $67.3 million taken in fiscal 2006 and $23.0 million taken in 2007.  Please refer to Note 14 to the consolidated financial statements for more information on our Competitive Position Strengthening Program.

2007 annual report | CGI Group Inc. | 07

Overview of the Year

Selected Annual Information

										Change			Change
Years ended September 30	2007			2006			2005			2007/2006			2006/2005
Backlog1(in millions of dollars)		12,042			12,722			12,863			-5.3	%		-1.1	%
Bookings (in millions of dollars)		3,276			3,997			3,573			-18.0	%		11.9	%
Revenue
Revenue (in '000 of dollars)		3,711,566			3,477,623			3,685,986			6.7	%		-5.7	%
Year-over-year growth prior to foreign currency impact		7.1	%		-2.8	%		20.5	%
Profitability
Adjusted EBIT2 margin		11.0	%		8.9	%		9.4	%
Net earnings prior to restructuring costs
related to specific items3 margin		6.8	%		5.5	%		5.9	%
Net earnings margin		6.4	%		4.2	%		5.9	%
Basic EPS from continuing operations (in dollars)		0.72			0.40			0.50			79.6	%		-20.0	%
Diluted EPS from continuing operations (in dollars)		0.71			0.40			0.50			77.0	%		-20.0	%
Basic EPS from continuing operations prior to
restructuring costs related to specific items (in dollars)		0.76			0.53			0.50			44.0	%		6.0	%
Diluted EPS from continuing operations prior to
restructuring costs related to specific items (in dollars)		0.75			0.52			0.50			44.6	%		4.0	%
Balance sheet (in '000 of dollars)
Total assets		3,475,808			3,692,032			3,986,659			-5.9	%		-7.4	%
Total long-term liabilities before clients' funds obligations		745,440			1,121,739			583,594			-33.5	%		92.2	%
Cash generation / Financial structure
Cash provided by operating activities (in '000 of dollars)		550,169			305,596			480,709			80.0	%		-36.4	%
Days sales outstanding4		44			52			48			15.3	%		-8.3	%
Net debt to capitalization ratio5		16.8	%		27.2	%		0.3	%

1:	Backlog includes new contract wins, extensions and renewals, partially offset by the backlog consumed during the year as a result of client work performed and adjustments related to the volume, cancellation and/or the impact of foreign currencies to our existing contracts. Backlog incorporates estimates from management that are subject to change from time to time.
2:	Adjusted EBIT is a non-GAAP measure for which we provide a reconciliation to its closest GAAP measure on page 18.
3:	Net earnings prior to restructuring costs is a non-GAAP measure. A reconciliation to its closest GAAP measure is provided on page 20.
4:	Days sales outstanding (“DSO”) is obtained by subtracting deferred revenue and tax credits receivable from accounts receivable and work in progress; the result is divided by the fourth quarters’ revenue over 90 days.

5: The net debt to capitalization ratio represents the proportion of long-term debt net of cash and cash equivalents over the sum of shareholders’ equity and long-term debt.

08 | 2007 annual report | CGI Group Inc.

Financial Review of 2007, 2006 and 2005

Revenue

Revenue Variation and Revenue by LOB

The following table provides a summary of our revenue growth, in total and by LOB, separately showing the impacts of foreign currency variations between 2007 and 2006.  The 2006 and 2005 revenue by LOB are recorded reflecting the actual foreign exchange rates of each respective year.

Years ended September 30	2007			2006			2005			Change 2007/2006			Change 2006/2005
(in '000 of dollars except for percentage)
Revenue		3,711,566			3,477,623			3,685,986			6.7	%		-5.7	%
Variation prior to foreign currency impact		7.1	%		-2.8	%		20.5	%
Foreign currency impact		-0.4	%		-2.9	%		-3.5	%
Variation over previous year		6.7	%		-5.7	%		17.0	%
IT services revenue prior to foreign
currency impact		3,262,258			3,011,741			3,194,598			8.3	%
Foreign currency impact		(9,876	)		-			-
IT services revenue		3,252,382			3,011,741			3,194,598			8.0	%		-5.7	%
BPS revenue prior to foreign
currency impact		463,242			465,882			491,388			-0.6	%
Foreign currency impact		(4,058	)		-			-
BPS revenue		459,184			465,882			491,388			-1.4	%		-5.2	%
Revenue		3,711,566			3,477,623			3,685,986			6.7	%		-5.7	%

For fiscal 2007, revenue was $3,711.6 million, an increase over both 2006 and 2005. On a constant currency basis, revenue increased by 7.1% from last year. The impact of foreign currency was -0.4%, where unfavourable US dollar fluctuations were partly offset by favourable gains from the euro and pound sterling.  From a client perspective, revenue growth on a constant currency basis was 6% for Canada, 9% for U.S. and 13% for Europe and Asia.

For fiscal 2006, revenue decreased by 2.8% on a constant currency basis when compared to 2005 and was further impacted by -2.9% due to currency fluctuations with the resulting total revenue change for fiscal 2006 being -5.7%.

IT Services

In fiscal 2007, on a constant currency basis, revenue from IT services increased by 8.3% or $250.5 million when compared to 2006. This increase is the result of additional business from new and existing clients during the year. The Company experienced strong growth in all of its geographic markets and targeted verticals.

When comparing 2006 to 2005, revenue decreased by $182.9 million. This was a direct result of less than expected work volumes from BCE during 2006, as well as the ramping-down and termination of isolated contracts not meeting our profitability standards.  Foreign currency fluctuations unfavourably impacted revenue by $95.5 million. These decreases were partly offset by additional business won from new and existing clients and two niche acquisitions made in fiscal 2006.

BPS

Revenue in our BPS line of business decreased by 0.6% on a constant currency basis in fiscal 2007 driven by the lower volume of claims processed in our insurance business throughout the year, as well as the reduction of revenue resulting from the sale of our electronic switching assets in the first quarter of fiscal 2006. This decline was partially offset by additional work with existing clients, predominantly in our U.S. government and healthcare sector and document management services.

When comparing 2006 to 2005, we experienced a decrease of $25.5 million primarily attributable to the sale of our electronic switching assets, the termination of a contract not meeting our profitability standards, and unfavourable foreign currency impacts of $10.9 million, partly offset by new work in our government and healthcare and financial services sectors of the U.S. market.

2007 annual report | CGI Group Inc. | 09

Revenue Distribution

The following tables provide additional information regarding our revenue mix:

     

Contract Types	Geographic Markets	Targeted Verticals
55%  Management of IT and business functions (outsourcing)    -  IT services 42%    -  BPS 13% 45%.  Systems integration and consulting 45%	59%  Canada 33%  U.S.   8%  Europe and Asia Pacific	33%  Financial services 32%  Government and healthcare 21%  Telecommunications and utilities 7%  Manufacturing 7%  Retail and distribution

Client Concentration

In fiscal 2007, our revenue from BCE and its subsidiaries, our largest client, represented 11.6% of our revenue, compared to 11.9% in fiscal 2006 and 14.3% in fiscal 2005.

Operating Expenses

Years ended September 30	2007		2006		2005		As a percentage of revenue 2007			As a percentage of revenue 2006			As a percentage of revenue 2005
(in '000 of dollars except for percentage)
Costs of services, selling and
administrative		3,126,105		2,996,521		3,151,558		84.2	%		86.2	%		85.5	%
Amortization
Capital assets		33,808		35,138		41,420		0.9	%		1.0	%		1.1	%
Contract costs related to transition costs		19,476		14,914		14,502		0.5	%		0.4	%		0.4	%
Finite-life intangibles and other long-term
assets		124,364		119,717		125,095		3.4	%		3.4	%		3.4	%
Impairment of contract costs and
finite-life intangibles		-		997		18,266		0.0	%		0.0	%		0.5	%
Total amortization		177,648		170,766		199,283		4.8	%		4.9	%		5.4	%

Costs of Services, Selling and Administrative

Building on the momentum we’ve created in streamlining our operations through our Competitive Position Strengthening Program, we have driven down costs of services, selling and administrative expenses as a percentage of revenue from 86.2% in fiscal 2006 to 84.2% in fiscal 2007, trending down further from the 85.5% reported in 2005. This demonstrates our ongoing commitment to effectively manage our cost structure through the improved efficiencies of our workforce and reduced overhead expenses. During fiscal 2007, fluctuations in foreign currencies favorably impacted our costs by $11.4 million significantly offsetting the impact of the currency related revenue reduction noted in the previous section.

When comparing fiscal 2006 to 2005, the decrease in our services, selling and administrative expenses is largely related to the rapid reduction of the BCE work program adversely impacting our cost structure.  This led the Company to undertake the Competitive Position Strengthening Program at the end of the second quarter of fiscal 2006 to improve utilization rates and reduce overhead.

10 | 2007 annual report | CGI Group Inc.

Amortization

The variation in finite-life intangibles and other long-term assets amortization expense for 2007 as compared to 2006 was mainly due to the amortization associated with a business solution for our oil and gas clients in Western Canada which became commerically available in the fourth quarter of 2007. This increase was partially offset by lower amortization associated with certain software and other intangibles having been fully amortized in the year.

The increase in amortization relating to contract costs is due to the ramp-up and full year impact of transition cost amortization associated with new clients and contracts.

Additionally, the decline in amortization of capital assets for 2007 as compared to 2006 is attributable to a reduction of amortization for computer equipment and furniture due to certain equipment having been fully amortized.  This is offset partially by increases in amortization for leasehold improvements due to the initiative taken to consolidate and optimize our real estate space.

When comparing fiscal 2006 to 2005, the decrease in overall amortization expense of $28.5 million was mainly related to impairment charges taken against contract costs and finite-life intangibles in 2005, specifically a $9.6 million impairment charge related to our Canadian credit union business and additional impairment charges of $8.7 million takenon certainunprofitable contracts and finite-life intangibles. Additionally, amortization of capital assets decreased due to certain computer equipment having been fully amortized and the non-recurring cost of disposed assets during 2005.  Amortization of finite-life intangible and other long-term assets decreased due to certain software having been fully amortized partly offset by additional amortization related to our business solutions for the brokerage industry.

Adjusted EBIT by LOB

Years ended September 30	2007			2006			2005
(in '000 of dollars except for percentage)
IT services		411,636			334,137			361,338
As a percentage of IT services revenue		12.7	%		11.1	%		11.3	%
BPS		59,055			55,114			69,442
As a percentage of BPS revenue		12.9	%		11.8	%		14.1	%
Corporate		(62,878	)		(78,915	)		(84,635	)
As a percentage of revenue		-1.7	%		-2.3	%		-2.3	%
Adjusted EBIT		407,813			310,336			346,145
Adjusted EBIT margin		11.0	%		8.9	%		9.4	%

IT Services

For the year ended September 30, 2007, adjusted EBIT increased by $77.5 million over 2006, representing an increase from 11.1% to 12.7% of revenue primarily due to growth across our geographies, the benefits from our Competitive Position Strengthening Program and improved margins on new and existing contracts.

When comparing 2006 and 2005, the decrease in adjusted EBIT of $27.2 million resulted mainly from the decrease in work volumes with BCE, partly offset by additional work from new and existing clients, savings yielded from the competitive position strengthening program initiated in March 2006, and improved profitability stemming from our U.S. operations.

BPS

In fiscal 2007, adjusted EBIT increased by $3.9 million, while as a percentage of revenue, our margin improved from 11.8% in 2006 to 12.9% in 2007. This increase was mainly driven by the profitability of new contracts, partly offset by the impact of a lower volume of claims processed in our insurance business.

When comparing 2006 and 2005, the adjusted EBIT decreased by $14.3 million, mainly due to the  sale of our electronic asset switching business during the first quarter of 2006, as well as the amortization and maintenance costs related to a business solution for the brokerage industry, which became commercially available at the beginning of fiscal 2006.

For each of the fiscal years 2007, 2006 and 2005, the decrease in corporate expenses as a percent of revenue was mainly due to on-going cost reduction initiatives to improve our competitiveness.

2007 annual report | CGI Group Inc. | 11

Earnings From Continuing Operations Before Income Taxes

The following table provides, for the periods indicated, a reconciliation between our adjusted EBIT and earnings from continuing operations before income taxes which is reported in accordance with Canadian GAAP:

Years ended September 30	2007			2006			2005			As a percentage of revenue 2007			As a percentage of revenue 2006			As a percentage of revenue 2005
(in '000 of dollars except for percentage)
Adjusted EBIT		407,813			310,336			346,145			11.0	%		8.9	%		9.4	%
Restructuring costs related to specific items		(23,010	)		(67,266	)		-			-0.6	%		-1.9	%		0.0	%
Interest on long-term debt		(41,818	)		(43,291	)		(24,014	)		-1.1	%		-1.2	%		-0.7	%
Other income, net		9,262			7,252			7,156			0.2	%		0.2	%		0.2	%
Gain on sale of assets		700			10,475			-			0.0	%		0.3	%		0.0	%
Gain on sale and earnings from an investment
in an entity subject to significant influence		-			-			4,537			0.0	%		0.0	%		0.1	%
Non-controlling interest, net of income taxes		(251	)		-						0.0	%		0.0	%		0.0	%
Earnings from continuing operations before
income taxes		352,696			217,506			333,824			9.5	%		6.3	%		9.1	%

Restructuring Costs Related to Specific Items

The Company recorded its final charge of $23.0 million related to its Competitive Position Strengthening Program in the first quarter of fiscal 2007.  Further details of the program are discussed on page 9 of the MD&A and in Note 14 to the consolidated financial statements.

Interest on Long-Term Debt

The decrease in interest expense in fiscal 2007 is a direct result of debt repayments. Interest expense includes interest paid on the debt used to finance the purchase of 100 million Class A subordinate shares from BCE in January 2006 for consideration of $866.0 million including related costs. The increase in 2006 over 2005 is directly related to the debt incurred to finance the purchase of these shares from BCE. Please refer to Note 8 to the consolidated financial statements for additional information on our outstanding debt obligations.

Other Income, Net

The majority of the increase over 2006 and 2005 relates to interest earned on research and development claims received in the year.

Gain on Sale of Assets

In fiscal 2006, we recorded a $10.5 million gain on the sale of our electronic switching assets.

Gain on Sale and Earnings from an Investment in an Entity Subject to Significant Influence

The 2005 gain in the sale of our interest in Nexxlink Technologies Inc. had yielded a pre-tax gain of $4.2 million.

Non-Controlling Interest

During the third quarter of 2007, we began using the consolidation method to account for our interest in CIA. Previously, this operation qualified as a joint venture and was proportionally consolidated in the financial statements (please refer to page 9 of the MD&A for further details and Note 18 to the consolidated financial statements).

Income Taxes

Income taxes expense was $116.3 million for the year ended September 30, 2007. This represents a $45.3 million increase when compared to the fiscal 2006 expenses of $71.0 million. The increase is directly related to the increase in earnings before income tax during the period. The tax impact of the restructuring charges recorded during fiscal 2007 was $8.3 million. The income tax rate was 33.0% up from 32.6% last year as the 2006 rate was impacted by the revaluation of future income tax balances resulting from a statutory rate decrease in Canada starting in 2008 which was enacted on June 22, 2006.

When comparing fiscal 2006 and 2005, the reduction in income tax expense was primarily related to the impact of the restructuring charges recorded in fiscal 2006, while the reduction in the income tax rate of 1.6% was the result of the previously noted revaluation of future income tax balances enacted in 2006, recovery of unbooked prior years’ losses and the benefits arising from investments in subsidiaries.

12 | 2007 annual report | CGI Group Inc.

Net Earnings

The following table includes a reconciliation between net earnings from continuing operations prior to restructuring costs related to specific items and net earnings from continuing operations which is reported in accordance with Canadian GAAP:

Years ended September 30	2007			2006			2005			Change 2007/2006			Change 2006/2005
(in '000 of dollars unless otherwise indicated)
Net earnings from continuing operations prior
to restructuring costs related to specific items		251,081			191,267			219,698			31.3	%		-12.9	%
Margin		6.8	%		5.5	%		6.0	%
Restructuring costs related to specific items		23,010			67,266			-			-65.8	%		-
Tax impact of restructuring costs related to
specific items		(8,331	)		(22,532	)		-			-63.0	%		-
Net earnings from continuing operations		236,402			146,533			219,698			61.3	%		-33.3	%
Margin		6.4	%		4.2	%		6.0	%
Net loss from discontinued operations		-			-			(3,210	)
Net earnings		236,402			146,533			216,488			61.3	%		-32.3	%
Margin		6.4	%		4.2	%		5.9	%
Weighted average number of Class A
subordinate shares and Class B shares (basic)		329,016,756			362,783,618			439,349,210			-9.3	%		-17.4	%
Weighted average number of Class A
subordinate shares and Class B shares (diluted)		333,876,564			364,706,656			441,573,512			-8.5	%		-17.4	%
Basic earnings per share from continuing
operations prior to restructuring costs related
to specific items (in dollars)		0.76			0.53			0.50			44.0	%		6.0	%
Diluted earnings per share from continuing
operations prior to restructuring costs related
to specific items(in dollars)		0.75			0.52			0.50			44.6	%		4.0	%
Basic earnings per share (in dollars)		0.72			0.40			0.49			79.6	%		-18.4	%
Diluted earnings per share (in dollars)		0.71			0.40			0.49			77.0	%		-18.4	%

For the fiscal period ended September 30, 2007, net earnings from continuing operations increased by 61.3% ($89.9 million) over the prior year. The favourable variance in net earnings resulted mainly from our revenue growth in IT services and the benefits realized from our competitive position strengthening program completed in the first quarter of 2007.

When comparing 2006 to 2005, net earnings from continuing operations decreased by $73.2 million or 33.3%. This decline was primarily caused by the restructuring costs incurred in fiscal 2006 as part of our Competitive Position Strengthening Program taken in response to a reduction in work volumes with BCE.

CGI’s basic and diluted weighted average number of shares outstanding at the end of the 2007 was down by 9.3% and 8.5% respectively compared with 2006, due to the repurchase of shares on the open market as part of the Normal Course Issuer Bid, the repurchase of 100 million Class A subordinate shares from BCE in January 2006, and partly offset by the issuance of shares upon the exercise of stock options.

Liquidity

CGI’s growth is financed through a combination of our cash flow from operations, borrowing under our existing credit facilities, the issuance of debt, and the issuance of equity. One of our primary financial goals is to maintain an optimal level of liquidity through the active management of our assets and liabilities as well as our cash flows.

As at September 30, cash and cash equivalents were $88.9 million for 2007 compared to $115.7 million in 2006. The following table illustrates the main activities for the last three fiscal years.

										Change			Change
Years ended September 30	2007			2006			2005				2007/2006			2006/2005
(in '000 of dollars)
Cash provided by continuing operating activities		550,169			305,596			480,709			244,573			(175,113	)
Cash used in continuing investing activities		(156,640	)		(135,392	)		(106,277	)		(21,248	)		(29,115	)
Cash used in continuing financing activities		(416,793	)		(294,080	)		(329,188	)		(122,713	)		35,108
Effect of foreign exchange rate changes on cash and
cash equivalents		(3,586	)		(854	)		(6,167	)		(2,732	)		5,313
Net (decrease) increase in cash and cash equivalents from continuing operations		(26,850	)		(124,730	)		39,077			97,880			(163,807	)

 2007 annual report | CGI Group Inc. | 13

Cash Provided by Operating Activities

Cash provided by continuing operating activities was $550.2 million or 14.8% of revenue for 2007, compared with $305.6 million last year. The year-over-year increase of $244.6 million resulted from improved profitability along with improvements to our working capital incorporating an eight day improvement in our days sales outstanding (“DSO”) along with the timing of income tax installments and payments for employee compensation partly offset by certain payments made to third party vendors.

When comparing 2006 versus 2005, the decline in cash provided by continuing operating activities resulted mainly from lower earnings from operations as discussed above and the timing of large client payments which were partially offset by lower integration payments related to acquisitions.

Cash Used in Investing Activities

During 2007, a total of $156.6 million was invested, an increase of $21.2 million compared with the $135.4 million last year. The investments were primarily in the development of business solutions, software licenses, contract costs, capital assets as well as our acquisition of Codesic.

Investments in finite-life intangibles and other long-term assets were $66.3 million in 2007 compared to $68.0 million in 2006. These investments were primarily comprised of business solutions of $37.3 million and software licenses of $14.5 million which were purchased as part of the outsourcing services provided to our clients.  The amounts are comparable to the investments made in 2006.

The $53.3 million invested in capital assets was $12.2 million higher than in 2006 due mainly to the purchase of computer equipment to support our contracts.  Computer equipment additions were $32.7 million as compared to $14.5 million in 2006 as we purchased certain computer equipment that would have previously been financed by operating leases as the combination of income tax and interest rates made their financing less attractive.  Leasehold improvement additions were $16.7 million for 2007 which are lower than 2006 by $3.3 million.  During the year, we continued to invest in our facilities primarily in our India and U.S. offices.

In fiscal 2007, we spent $17.3 million in business acquisitions predominately for the initial installment of Codesic. This compares to 2006 when $25.6 million was disbursed mainly relating to Plaut Consulting SAS and Pangaea Systems Inc.  In fiscal 2005, $66.2 million was disbursed when we acquired AGTI Consulting Services Inc., MPI Professionals and Silver Oak Partners Inc.

Research expenses were $35.7 million as compared to $27.9 million for 2006 and are accounted for within our costs of services, selling and administrative expenses. We seek new technology applications, or conceptually formulate and design possible prototypes or process alternatives that could potentially lead to new solutions for either existing or new clients. The combined gross research and development spending, both capitalized and expensed, was $73.1 million compared with $68.9 million last year.

The investment of $24.2 million in contract costs was mainly related to transition costs for new outsourcing contracts.  The investment is comparable to the prior years’ investment levels.

The $30.1 million in proceeds from sale of assets and businesses in fiscal 2006 mainly pertains to the disposal of our electronic switching assets.

Cash Used in Financing Activities

In 2007, financing activities consumed $416.8 million. This includes repayments of $353.6 million on our credit facilities further reducing our net debt to capitalization ratio to 16.8%. As well, we purchased $128.5 million in CGI stock under the current and previous Normal Course Issuer Bid,  while the issuance of shares upon the exercise of stock options generated $42.7 million in proceeds.

In fiscal 2006, financing activities consumed $294.1 million.  We repurchased $926.1 million of our shares which included consideration and related costs of $866.0 million for the repurchase of 100 million Class A subordinate shares from BCE.  This repurchase was partially financed through $738.6 million from our credit facilities.  In addition, $60.1 million was used to repurchase shares under the Normal Course Issuer Bid program .  During the year, we repaid $172.0 million of our debt. Additionally, we generated proceeds from the issuance of shares of $58.0 million mainly from the exercise of warrants by Desjardins, BCE, and the majority shareholders.  Since June 30, 2006, the Company has had no warrants outstanding.

14 | 2007 annual report | CGI Group Inc.

Contractual Obligations
			Payments Due by Period
			Less than 1		2nd and 3rd		4th and 5th		Years		After
Commitment Type	Total		year		years		years		6 to 10		10 years
(in '000 of dollars)
Long-term debt		464,547		7,396		88,090		349,434		19,627	-
Capital lease obligations		8,644		2,419		4,543		1,682		-	-
Operating leases
Rental of office space1		933,304		120,390		214,639		151,029		278,422		168,824
Computer equipment and other		114,019		66,522		41,857		4,408		1,232		-
Automobiles		5,244		2,308		2,536		400		-		-
Long-term service agreements1		140,738		33,459		74,088		26,523		6,668		-
Total contractual obligations		1,666,496		232,494		425,753		533,476		305,949		168,824

1: Included in these obligations are $41.6 million of office space leases from past acquisitions and $1.2 million of long-term service agreements which are recorded in accounts payable and accrued liabilities, accrued integration charges and other long-term liabilities and long-term debt.

We are committed under the terms of contractual obligations with various expiration dates, primarily for the rental of premises, computer equipment used in outsourcing contracts and long-term service agreements in the aggregate amount of $1,666.5 million.  In 2007, total contractual obligations decreased by $551.2 million, due to our repayments of long-term debt and rent payments made in the normal course of our operations.

In addition, following changes to the shareholders’ agreement of CIA, CGI was committed to purchase the remaining 39.3% of shares of CIA by October 1, 2011.  As of September 30, 2007, 35.3% of shares of CIA remain to be purchased.  The purchase price of the remaining shares will be calculated by a formula as defined in the shareholders’ agreement.

Capital Resources

	Total commitment		Available at  September 30, 2007		Outstanding at  September 30, 2007
(in '000 of dollars)		$		$		$
Cash and cash equivalents		-		88,879		-
Unsecured committed revolving facilities 1		1,500,000		1,219,542		280,458	2
Lines of credit and other facilities 1		25,000		25,000		-
Total		1,525,000		1,333,421		280,458	2

1: Excluding any existing credit facility under non-majority owned entities.

2: Consists of drawn portion of $265.0 million and Letters of Credit for $15.5 million.

Our cash position and bank lines are sufficient to support our growth strategy. At September 30, 2007, cash and cash equivalents were $88.9 million, none of which were in asset backed commercial paper products. Cash equivalents typically include commercial papers, money market funds and term deposits as well as bankers’ acceptances and bearer deposit notes issued by major Canadian banks, all with an initial maturity of less than three months.

The $1.5 billion credit facility is composed of a $1.3 billion Canadian revolving facility and US$200 million revolving facility.  Upon our request, the amount of the revolving facilities could be apportioned differently.  The Canadian revolving facility is available in Canadian dollars, by way of Prime Rate Loans or the issuance of Banker’s Acceptance, in U.S. dollars by way of U.S. Base Rate Loans or Libor Loans and in sterling and euros, by way of Libor Loans and by way of issuance of Letters of Credit. The U.S. revolving facility is available in U.S. dollars by way of U.S. Prime Rate Loans or Libor Loans, in sterling and euros, by way of Libor Loans and by way of issuance of Letters of Credit.

The revolving period of the credit facilities is five years and could be extended annually.  The facility also includes an accordion feature providing that at any time during the revolving period, we may request to increase the facility by $250 million.  The increase is only subject to obtaining additional commitment from the bank group or from other participants.  The facility contains covenants that require the Company to maintain a leverage ratio, an interest and rent coverage ratio and a minimum net worth.  The renegotiation of these ratios of the facility has increased the flexibility of the Company to complete large acquisitions.  At September 30, 2007, CGI was in compliance with the covenants of its long-term debt.

At September 30, 2007, the amount available under the credit facility amounted to $1,219.5 million with $25 million available under another demand line of credit.

As of September 30, 2007, the facility was bearing interest at Banker’s Acceptance (B.A.) plus 0.625%.  The interest on the facility is subject to the leverage ratio and goes from B.A. or Libor plus 0.625% to B.A. or Libor plus 1.35%.  The unused portion of the facility is subject to a stand-by fee of 0.10% as of September 30, 2007, and could increase up to 0.35% depending of the leverage ratio.

2007 annual report | CGI Group Inc. | 15

Total long-term debt decreased by $340.1 million to $473.2 million at September 30, 2007, compared with $813.3 million at September 30, 2006. The variation resulted primarily from the net reimbursement of $323.5 million of our credit facility and the impact from the fluctuations of foreign currencies against the Canadian dollar.

Annually, our Board of Directors evaluates whether or not to pay a dividend, as well as whether to renew the share repurchase program. In fiscal 2007, we did not pay a dividend.

Selected Measures of Liquidity and Capital Resources

	As at			As at			As at
	September 30,			September 30,			September 30,
	2007			2006			2005
Net debt to capitalization ratio		16.8	%		27.2	%		0.3	%
Days sales outstanding (in days)		44			52			48
Return on invested capital 1		11.1	%		6.6	%		8.7	%

1:  The return on invested capital ratio represents the proportion of the after-tax adjusted EBIT net of restructuring costs related to specific items over the last four quart