1. Canada 1 Positive Business Climate Canada understands the importance of its business community and has created an environment to encourage its success. Canadian laws are among the best in the world at promoting fair competition. Source: The Economist (EIU), August 24th, 2001 Source: World Competitiveness Yearbook 2001

2. Canada’s strong fiscal situation C Canada's fiscal situation has turned around dramatically: -In 1994, Canada’s deficit (as a percentage of GDP) was 6.7%, the third highest in the G-7 and significantly above the U.S. rate. -However, by 1997, Canada became the first G-7 country to post a surplus in the 1990s, and is the only G-7 nation to project three straight financial surpluses from 2001-2003. -Federal government spending (as a % of GDP) reached a 50-year low in 2000-01, the key source of the Canadian fiscal turnaround. * Includes federal, provincial/state and local ** Projections Source: OECD Economic Outlook, April 2002, Preliminary Edition Total Government Surplus* The Institute for Management Development ranked Canada as the best fiscally managed country in the G-7 in 2000 Federal Budgetary Balance Public Accounts Basis Canada 2 Source: Finance Canada 0.0 -3.0 -6.0 % of GDP 1992-931993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-012001-02 Surplus Deficit + Federal Program Spending Public Accounts Basis 1993-94 1994-95 1995-96 1996-97 1997-981998-89 1999-00 2000-012001-02 2002-03 2003-04 10 12 14 16 % of GDP Projected 1994199519961997199819992000 2001 2002** 2003** 0 2 4 6 8 10 -2 -4 -6 -8 % of GDP

3. Canada A Strong Fiscal Surplus 3 From 2001-2002, Canada had the highest government surplus of any G-7 country. The same projection is expected to continue into 2003. Total G-7 Government Surplus (%) 2001-2003 Source: OECD Economic Outlook, April 2002, Preliminary Edition 2002 2001 2003 Canada France Germany Italy Japan U.K. U.S. 0 2 4 -2 -4 -6 -8 -10

4. Canada Low Inflation and Low Interest Rates 4 Canada’s targeted inflation rate is locked between 1% to 3%. -Over the past five years, Canadian inflation averaged 1.9% — 30% lower than the U.S. rate. Sources: Statistics Canada and the Federal Reserve Bank of St. Louis Inflation Long-Term Interest Rates 1994 1995 1996 1997 1998 1999 20002001 0 1 2 3 4 Year-Over-Year % Change Canada's excellent fiscal situation and low inflation are reflected in low domestic interest rates. Source: Bank of Canada, Government long-term bond. U.S. Treasury, Constant Maturity long-term bond. Last data points plotted: Canada – May 31, 2002; U.S. – June 10, 2002 199419951996199719981999200020012002 3 5 8 10 %

5. Canada A Growing Domestic Economy 5 Canada’s GDP grew at an annual rate of 6.0% in the first quarter, the best performance among the G-7. -The OECD and IMF both forecast Canada to lead the G-7 in economic growth in 2002 and 2003. Real GDP Growth Projections 2002-2003 (%) 2003 2002 2.5 1.4 2.0 2.3 1.4 0.9 3.6 3.0 2.8 3.4 2.9 2.7 0.8 U.S. Canada France Italy Germany U.K. Japan 0 2 4 2003 2002 3.2 1.4 1.9 2.5 1.5 0.7 -0.7 4.0 3.0 2.8 3.5 2.8 2.5 0.3 U.S. Canada France Italy Germany U.K. Japan 0 2 4 Source: International Monetary Fund, May 2002 Source: OECD Economic Outlook, April 2002, Preliminary Edition

6. Canada Canada Welcomes Foreign Investment Source: Statistics Canada 2001 6 Foreign direct investment in Canada has more than doubled since 1990. Increasingly more investment goes to knowledge-based industries in high-tech manufacturing and services sectors. The U.S. is the dominant source of foreign capital. - In 2001, the U.S. share of foreign direct investment (FDI) in Canada was 67%. Machinery & Transportation $321 Billion Distribution of Foreign Direct Investment by Industry 1990 $131 Billion Distribution of Foreign Direct Investment by Region/Country Source: Statistics Canada 2001 Gilles P. Ouimet, President and CEO Pratt & Whitney Canada Inc. "A knowledge based workforce, a competitive R&D tax structure, government support programs such as Technology Partnerships Canada, and well established infrastructure in Canada: these attributes make Canada the top choice for Pratt & Whitney Canada in considering future R&D investments in the ever increasing competitive world of aerospace."

7. Canada Sound Financial Institutions 7 According to Moody’s Financial Strength ratings, Canadian Banks rank 1 st among the G-7 in terms of their intrinsic credit worthiness. EE+DD+CC+B Japan France Italy Germany U.K. U.S. Canada Average Bank Financial-Strength Rating B= strong intrinsic financial strength C= good D= adequate E= very weak Source: The Economist, March 2000 Statement of the IMF Mission on Canada, January 31, 2001 “Canada has a highly advanced financial system that is among the soundest in the world. The profitability, asset quality, and capitalization levels of Canadian financial institutions remain high.”

8. Canada …A Good Environmental Record 8 Canada ranks highest among the G-7 countries in terms of the level of impact the environment has in shaping economic policies. Perfect=100 Country rank based on five criteria of environmental sustainability Source: Yale Center for Environmental Law and Policy, 2001 Environmental Sustainability Index* 2001

9. Canada Solid Microeconomic Policies 9 According to The Economist, Canada ranks 2nd among 21 countries in a Lehman Brothers study pertaining to the effectiveness of microeconomic or structural policies. These rankings are based on three micro-policy categories: policies that increase an economy’s long-term potential growth rate. For example, spending on education and R&D. policies that affect labour market performance or reduce the lowest rate of unemployment at which inflation is stable (NAIRU). policies that increase product market competition. Economic Health* Index of structural policies, 0=worst, 10=best Source: The Economist, March 17th, 2001 *Based on a study of 21 countries.

10. Canada Less Paperwork for New Businesses 10 Canada makes it easier to set up a new business, with less paperwork than any other country. Canada is the most efficient place to pull together worldwide research or production teams. Total Number of Business Start-up Procedures* Source: The World Bank and Harvard University, taken from The Globe and Mail, November 14, 2000 *Procedures divided into five major categories: Safety & Health, Environment, Taxes, Labour, and Screening.

11. Canada Forward-Looking Framework Policies 11 The economic policies of the government of Canada are focused on making Canada a world leader in the global knowledge-based economy of the 21st century. Commitments include: -Making Canada the most connected Government to its citizens by 2004. -Making high-speed broadband access available to Canadians in all communities by 2005. -Becoming one of the top five countries for research and development by 2010. -Shaping a "National System of Innovation“; and -Providing marketplace frameworks/services benchmarked against the best in the world. Government Policies/Programs Aimed at Building the Knowledge Infrastructure  21st Century Chairs for Research Excellence  Networks of Centres of Excellence  Canadian Foundation for Innovation  Canadian Institute for Health Research  Telecommunications Policy  Technology Partnerships Canada  Granting councils (NSERC, MRC, SSHRC)  Communications Research Centre  Industrial Research Assistance Programme (NRC)  Co-operative sectoral research programs (PAPRICAN)  Canadian Network for the Advancement of Research, Industry and Education (CANARIE)  SR&ED (Scientific Research & Experimental Development) tax credit for private sector research and development  Leading edge information systems: Strategis; CISTI (NRC); Cdn. Technology Network; Sector Competitive Frameworks

12. J. David O'Blenis, President, Honeywell Aerospace Canada "Aerospace is truly a global business and these wins [move of Power Management and Generating systems to Toronto, expansion of plants in Montreal and Summerside, and investment of more than $50 million in a new headquarters, engineering and manufacturing facility] for Canada were made possible by the excellent business climate here: sound fiscal management in the public sector, attractive R&D tax incentives, and unique opportunities to partner with Governments to achieve growth. It is clear to me that the decisions taken at the Corporate level of our global business to focus our growth here show great confidence in Canada." Canada Offers Much Canada 12 Canada's economic fundamentals are excellent — government policies are geared toward competitiveness. Canada provides assured access to the world's richest economy, in addition to having a large and growing domestic market of its own. Canada provides a cost-competitive and future-oriented environment for business: -quality, productive workers; -a competitive tax system; -prime locations for R&D activities; -abundant energy at low prices; and -an excellent infrastructure. Canada is an outstanding place to live, invest and do business.