Canadian Tire:Value Under the HoodMay 2006

Pershing SquareCapital Management, L.P.

1

Disclaimer

Pershing Square Capital Management's ("Pershing") analysis and conclusions regarding Canadian Tire Corporation (“CTC” or the “Company”) are based on publicly available information. Pershing recognizes that there may be confidential information in the possession of the Company that could lead them to disagree with Pershing’s conclusions.

The analyses provided include certain estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the Company. Such statements, estimates, and projections reflect various assumptions by Pershing concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein.

Pershing manages funds that are in the business of trading - buying and selling - public securities. It is possible that there will be developments in the future that cause Pershing to change its position regarding the Company and possibly reduce, dispose of, or change the form of its investment in the Company.

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What is Canadian Tire?

Largest Canadian general merchandise retailer… in reality, a real estate and franchise business

Leading Canadian brand with an 84+ year operating history

FY ’06E Revenues of $8.3bn and EBITDA of $847mm (1)

Enterprise value of $6.3bn and equity value of $5.4bn

EV / ’07 EBITDA: 6.8x (1)

Price / ’07 EPS: 13.5x (1)

(1) Based on Pershing’s estimates. Assumes a $65 stock price for CTC.

Note: Throughout this presentation,all $ in Canadian.

Ticker: CTC/A CNExchange: TSXRecent price: $65

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Four Business Segments

Canadian Tire Retail

Financial Services

Marks Work Wearhouse

Canadian Tire Petroleum

■ Largest Canadian general merchandise retailer

■ Real estate and franchise business model

■ $3.3bn portfolio

■ 2nd largest MasterCard issuer in Canada

% Total EBITDA 66% 21% 10% 3%

■ Leading specialty apparel retailer

■ Favorable growth trends

■ Canada’s largest independent gas retailer

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Recent Trading Statistics and Multiples

$ in millions, except per share data

Note: Projections are based on Pershing’s estimates. (1) Maintenance FCF = Net Income + D&A – Maintenance capex

Summary Financial Data: FY'05A FY'06E FY'07EGross operating revenue $7,789 $8,287 $8,874

Adjusted EBITDA $770 $847 $924Margin 9.9% 10.2% 10.4%

Recurring EPS $3.84 $4.30 $4.80

Maintenance FCF per share (1) $4.93 $5.77 $6.42

Trading Statistics: FY'05A FY'06E FY'07EEV / EBITDA 8.2x 7.4x 6.8x

P / E 16.9x 15.1x 13.5x

P / Maint. FCF Yield 7.6% 8.9% 9.9%

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Five Year Stock Price Performance

18.0

28.0

38.0

48.0

58.0

68.0

5/22/01 4/22/02 3/22/03 2/22/04 1/22/05 12/22/05

Over the last five years, Canadian Tire’s stock price has increased 185%, while its business value has grown at an even higher rate.

Pershing recently began accumulating

shares of CTC.

Canadian TireRetail

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462 general merchandise stores operated by independent dealers across Canada

58 Partsource stores, a smaller format DIY auto parts retail chain with 50+ franchise locations

CTC owns the land and building at ~75% of its locations, with the balance principally under long-term leaseholds

Major retail categories include Automotive (parts and service), Home Products and Leisure Products

Canadian Tire Retail: Overview

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Canadian Tire Retail: Business Model

“Real Estate and Franchise” business model

Canadian Tire Corporation (“CTC”) owns the land and building which is leased to the Associate Dealer (franchisee) for a % of sales

Dealer buys all the store FFE and is responsible for all maintenance capex (net lease)

CTC’s Maint. Capex is less than its D&A, hence Maint. FCF is > NI

Dealer buys all of its inventory from CTC and prices subject to CTC maximum price

CTC books profit on sale of inventory to dealer

Dealer bears substantially all inventory risk

Unique business model is not readily evident in the Company’s financials, which appear to be like that of a “Traditional Retailer”

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Predominantly real estate and franchise revenues

97% franchised

Maintenance capital is the responsibility of the Franchisee

Restaurants run by entrepreneurs

Substantial real estate assets

Strong growth opportunity in US expansion

Trades at 12.5x 2007E EBITDA

Not Your Typical Retailer

Predominantly real estate and franchise revenues

100% franchised

Maintenance capital is the responsibility of the Dealer

Stores run by entrepreneurs

Substantial real estate assets

Strong, low-risk growth opportunity in “20/20” conversions

Trades at 6.8x 2007E EBITDA

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Canadian Tire Retail: Real Estate

The Company owns substantial real estate

“Best-in-class” retail real estate, given the Company’s 84-year old history

Owns land and building at ~ 75% of store locations, with the balance principally under long-term leaseholds

20+ “strategic sites” with higher/better use that are being sold or developed

e.g., owns 2 sites totaling 5mm sq ft of FAR of fully-entitled, developable land in Toronto, currently generating no income

~58% of Canadian Tire petroleum stations, often co-located with Canadian Tire Retail stores

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Historical Financial Performance

EBITDA growth has been driven by a steady mix of comparable sales growth, square footage growth and margin expansion.

FY 2002 FY 2003 FY 2004 FY 2005

Operating Data:

Comparable store sales 1.4% 3.2% 3.4% 3.0%Ending net retail footage growth 3.1% 3.1% 5.2% 4.9%

Financial Data:

Revenue $4,339 $4,641 $4,899 $5,108Growth 3.7% 7.0% 5.6% 4.3%

Adjusted EBITDA $386 $404 $472 $523Margin 8.9% 8.7% 9.6% 10.2%

Growth 6.3% 4.7% 16.8% 10.8%

$ in millions

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Growth Acceleration and Margin Opportunity

High return square footage expansion opportunities

Management plans to expand retail square footage by ~9% per year via converting current store base to the “20/20” format

Expands selling space of a typical store by ~20% by converting non-productive warehouse space to retail space

Pre-tax unlevered returns on investment of approximately 20%

Yet, Wall Street analysts have lowered near-term estimates due to short-term sales and earnings disruption associated with the expansion plan, resulting in a recent stock price decline

Overseas outsourcing opportunity

In 2005, ~35% of product sold in Canadian Tire was made outside of North America. The Company is targeting ~50% by 2009

Canadian TireFinancial Services

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Canadian Tire Financial Services: Overview

Core Financial Services Products

~$3.3bn of ending managed receivables (primarily Canadian Tire MasterCard)

2nd largest MasterCard issuer in Canada – represents 5% of Canadian bank card market

Loans funded primarily in the securitization market

Expanding into other products (loans, mortgages, home equity)

Ancillary Businesses

Canadian Tire Automotive Assistance

Other Warranty & Credit Insurance

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$2,066

$3,042

$2,573

FY 2003 FY 2004 FY 2005

$1,164

$1,698

$1,449

FY 2003 FY 2004 FY 2005

Strong Receivables Growth

Gross Average Receivables Avg. Balance per Account

Growth in receivables and earnings has been driven by increasing average balances per account

$ in millions $ in millions

21% CAGR21% CAGR

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$123

$171

$144

FY 2003 FY 2004 FY 2005

Financial Services Adjusted EBITDA

18% CAGR ’03 – ’05$ in millions

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Further increases in average balances

Balance growth driven by private label to MasterCard conversion

CTC’s customers currently have average balances of $1,619 versus the Canadian credit card average balance of ~$2,450

Expand new businesses

Personal term loans

Mortgage origination

CDs

Grow Warranty & Credit Insurance businesses

Growth Opportunities

Marks Work Wearhouse

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334 specialty apparel stores across Canada selling work and industrial clothing/footwear

Low fashion content and associated risk

~75% of sales are private label

Since FY 2002, EBITDA has grown from $34mm to $82mm in FY 2005

CTC acquired Marks for just $112mm in 2002

Marks Work Wearhouse: Overview

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Strong Same Store Sales

Strong same store sales growth has led to substantial EBITDA growth

FY 2003 FY 2004 FY 2005

Same store sales 6.6% 15.1% 17.1%

Revenues 458 546 684Growth 19.2% 25.3%

Adjusted EBITDA 41 54 82Margin 9.0% 9.9% 12.0%Growth 31.7% 51.9%

$ in millions

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Continued same store sales growth due to category expansion

Women’s

Uniforms

Healthcare

Square footage growth

New stores

Expanding square footage of existing stores

Growth Opportunities

Canadian TirePetroleum

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Owns/controls 259 gas stations across Canada

Operated by independent agents

FY’05 Revenues of $1.3bn / only $22mm of EBITDA

Negative free cash flow

FY’05 EBITDA – Capex of ($7)mm

Asset value based on ownership of 58% of locations

Strategic value in a sale / joint venture transaction

Canadian Tire Petroleum

Pershing’s View of Canadian Tire

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Trades at 6.8x ’07E EBITDA, despite its real estate / franchise business model

Cheapest real estate/franchise business of which we are aware

Component parts are clearly worth more 6.8x EBITDA

High return internal growth opportunities

“20/20” store conversions

Strong same store sales growth at Mark’s

Shareholder friendly management w/ strong execution history

Several “embedded options” for value creation…

Why Do We Like Canadian Tire?

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Monetization of credit card portfolio

Sale leaseback of core real estate

Sale of “higher/better use” properties

Canadian income trust conversion

“Embedded Options” for Value Creation

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Rationale for Credit Card Portfolio Monetization

Monetizing the credit card portfolio through an alliance with a major bank would allow CTC to:

Sell receivables at a premium to book

Maintain a substantial portion of cash flows associated with thecredit card business

Participate in future credit card income growth

Improve balance sheet and credit rating

Pursue share buybacks using an estimated $1.3bn in proceeds plus incremental leverage from improved rating

Banks are willing to pay a high premium, given their funding advantages and the scarcity of any remaining large portfolios

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Highly Accretive Transaction

Canadian Tire could monetize its Credit Card Receivables in a highly accretive transaction

After monetizing its Credit Card Portfolio, Canadian Tire could still retain

High margin Warranty and Credit Insurance businesses, which are discrete from the Credit Card business

Direct relationships with customers afforded by Credit Card business

A significant portion of existing Credit Card income and participation in future Credit Card business growth

Most major retailers have sold their portfolios in highly accretive transactions

Canada

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Case Study: Sears Canada Credit Card Sale

Based on our estimates, we believe Sears Canada monetized its Credit Card Portfolio for a 27x EBIT multiple.

$ in millions

Managed receivables at sale $2,524

Adjusted pre-tax proceeds (1) $3,320Premium 31.5%

LTM Credit EBIT (2) $182Less: EBIT retained by SCC (60)

Equals: EBIT acquired by JP Morgan Chase $122

Pre-tax proceeds $3,320

EBIT acquired by JP Morgan Chase 122

Transaction Multiple 27.2x

(1) See Sears Canada 2005 annual report, p 26.(2) LTM Credit Operating EBIT (Q3’05), adjusted for $20mm of EBIT recorded in merchandising segment.

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FY 2007E Comments

2007E EBITDA less Financial Services $735

Plus: EBITDA from Insurance & Warranty businesses 50 Based on Pershing's estimate of $160-$180mm in revenue

Royalties from recurring Credit Arrangement 50 In line with Sears Canada residual EBITDA contribution

Pro Forma EBITDA $835

Current Enterprise Value 6,290

Less: After Tax Credit Proceeds (1,226) Assumes 20% premium to gross receivables

Pro Forma Enterprise Value 5,064

Pro Forma EV/EBITDA (After Proceeds) 6.1x

Appropriate Multiple 8.0x

Incremental Value Created $1,615

Incremental Value/Share $19.42

Pro Forma Share Price $84.42Percent Upside to Current Price 29.9%

Credit Card Monetization: Value Creation

Assuming a 20% premium to book (versus SCC transaction at 32%), $50mm of retained credit income and a pro forma 8x EV/EBITDA multiple, the monetization of the Credit Card portfolio could result in ~30% upside for the stock.

$ in millions, except per share data

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FY 2007E Comments

PF Enterprise Value after Credit Sale $6,679 Assumes 8x EV/EBITDA Multiple

Assumed pre tax Real Estate Value 2,500 Premium to Net Book Value of ~ $1.8 Billion

Less: Cash taxes 126 Assumes 18% Capital Gains Tax Rate

After-tax cash proceeds 2,374

Enterprise Value PF for Real Estate sale $4,305

EBITDA pre Sale Leaseback 835

Less: Rent expense at 7.0% cap rate (175) 7.0% cap rate based on current market

Adjusted EBITDA 660

Pro Forma EV/EBITDA (after proceeds) 6.5x

Appropriate Multiple 8.0x

Incremental value created 974

Incremental Equity Value per share $11.71

Assumed share price after credit card sale $84.42

Plus: Incremental value per share $11.71

Pro Forma share price $96.13Percent upside to current price 47.9%

Sale Leaseback of Core Real Estate

Assuming a 7% cap rate, a sale leaseback transaction could create an additional $12 of equity value per share for Canadian Tire. In January 2006, the Company completed a $230mm sale leaseback transaction.

$ in millions, except per share data

Note: Pre-tax real estate value based on Pershing’s estimates.

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Alternative Use Real Estate: Value Creation

Based on our estimates, a sale of its fully-entitled non-income generating properties could add an incremental $4 per share of equity value. The Company has recently hired advisors to sell two of its largest such properties.

(1) Based on Pershing’s estimate of $350mm - $450mm of value.

$ in millions, except per share data

Development Projects Description

Sheppard Avenue 4 million sq ft40 acres of Residential / mixed use

Dundas and Kipling 1 million sq ftResidential / mixed use

Southdown and Lakeshore 300,000 sq ftResidential / mixed use

~20 Additional Properties

Mid point of Estimate (1)

Total Value $400After-tax value per share $3.94

Share price post credit card sale / sale leaseback $96.13Plus: Incremental value per share $3.94Pro Forma share price $100.08

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Income Trust Conversion Rationale

Well known brand with strong retail following

Stable, real estate and franchise-based cash flows with limited maintenance capex

Reasonable market cap for Trust Market

Given current investment opportunities, trust conversion would make most sense when the Company has reached a higher degree of maturity

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FY 2007E CommentsPF Enterprise Value @ 8.0x EBITDAafter Credit Card sale / Sale Leaseback $5,279

`Core EBITDA $660Less: Maintenance Capital Expenditures (100) Distriubution/IT maintenance capitalLess: Interest Expense (119) Assumes 3x Debt/EBITDA at 6%Pre-Tax Free Cash Flow $441% Distribuatble 90.0%Distributable FCF 397Assumed Yield 7.0% Appropriate yield given comparablesImplied TEV 7,655 Assumes 7% yield with 3x Debt/EBITDA leverage

Incremental Value Created 2,376Incremental Equity Value Per Share $28.57

Share price post alternatives $100.08 Post credit card sale, sale leaseback, excess RE salePlus: Incremental value per share $28.57

Pro Forma share price $128.64Percent upside to current price 97.9%

Income Trust Conversion: Value Creation

Assuming a 7% FCF yield and 90% FCF payout ratio, an income trust conversion could add an incremental $29 per share of equity value to Canadian Tire.

$ in millions, except per share data

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Value Creation Potential

$60

$70

$80

$90

$100

$110

Sale of credit card portfolio

Sale leaseback

transaction

Trustconversion

Sale of excess real

estate

Recent: $65

Canadian Tire Potential Stock Price

$8430%

$96 48%

$10054%

$12998%

98%

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Investment Takeaways

Opportunity to nearly double your money in a low leveraged $5.4bn market cap company

Company trades at 6.8x ’07E EBITDA but its component parts are worth significantly more

Segment Description

Canadian Tire Retail Real estate / franchise business model

Financial Services Credit card and warranty businesses

Marks Work Wearhouse Growth retailer

Canadian Tire Petroleum Asset value exceeds its cash flow generating value

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Concluding Thoughts

Several catalysts for value maximization

Pershing has met with CTC Management, including the recently appointed CEO…

Management is receptive to shareholder value enhancing initiatives